Samsung and Korea’s Copy Culture

Everyone talks about China as the principle threat to the U.S. economy, but South Korean giants like Samsung have systematically stolen our intellectual property, copied our products, illegally fixed prices, and played our courts against us to dominate lucrative markets for years.

This is no deep dark secret. Besides Apple’s epic patent war with Samsung over its iPhone rip-off, the Seoul-based conglomerate has been embroiled in high-profile intellectual property theft and price fixing cases over wireless 3G and CDMA technology; CRT, LCD, and plasma displays; and DRAM memory chips, among others.

While others have used the same “countersuit, delay, appeal, and finally settle at the last minute” legal tactics in patent cases, Samsung has raised the practice to a fine art. As the court cases drag on, Samsung bombards customers with lower-priced versions of its competitor’s products. And while it usually loses the legal battle, it inevitably wins the market war.

It’s no coincidence that Samsung now dominates global markets for mobile phones, smartphones, LCD displays, OLED displays, TVs, and memory chips. Its leading share of these high-growth markets has made Samsung Electronics the world’s largest technology company and Samsung Group the seventh biggest company in the world, by revenue.

Granted, Samsung Electronics has 326,000 employees churning out plenty of patents of their own. But when faced with a competitor’s technology or product breakthrough, the company has a long track record of methodically reverse engineering and copying without a second thought about the patents it might be violating.

Having worked closely with several high-tech companies that were victims of this insidious strategy, the sad truth is that, after many failed attempts to get Samsung to sign license deals, most choose not to fight. They either lack the necessary war chest for protracted litigation or come to realize that, even if they win in court, they’ll lose in the end.

Meanwhile, last year the Obama administration rolled out a sweeping set of executive actions and legislative recommendations in support of the Leahy-Smith America Invents Act of 2011. While they were intended to protect innovators from frivolous patent litigation, an unintended consequence is that the actions hurt American companies that are being ripped off by foreign rivals.

The regulations actually make it harder for technology firms to use the International Trade Commission as leverage in negotiating license agreements with infringing offshore companies. And the President’s actions also make it easier to challenge patent holders in the U.S. Patent and Trademark Office.

While our own laws, regulations, and court system seem to provide equal protection for foreign and domestic companies, the Korean government does things a little bit differently.

When I first visited Korea on business more than twenty years ago, I couldn’t believe my eyes. Most of the sedans on the road looked like knockoffs of Lexus, Infiniti and other luxury brands. And yet, just about every car was a Korean make – primarily Hyundai or Daewoo.

Besides the sort of obvious design copying, I came to learn that Korea was essentially a closed automotive market. The Korean government had implemented high tariffs and other restrictive practices that were so cost-prohibitive that nobody could afford import cars.

To this day, imports still comprise a tiny percent of the Korean automobile market and, until recently, Japanese cars were flat-out banned.

While Samsung makes up a whopping 17% of Korea’s gross domestic product – so its impact on our economy and our technology companies is the biggest issue here – Korea clearly has a copy culture that has little regard for intellectual property and integrity.

Move over China and Russia. With friends like Korea, who needs enemies? A better question is: why does the United States government let its allies – that we actually protect – so blatantly harm our corporations and our economy?