Qualcomm patents hindering gov`t-funded R&D project

The patents of American telecommunications company Qualcomm are known to be a stumbling block to an R&D project funded by the Korean government.

The large-scale project into which Seoul will inject 69.1 billion won (63.5 million U.S. dollars) to foster future growth engines seeks to develop a baseband modem chip, a key component for the fourth-generation mobile communication network dubbed the Long Term Evolution.

Samsung Electronics and LG Electronics have competed against each other to win the project, and in the process, their contracts with Qualcomm are posing an obstacle.

The contracts require Qualcomm approval if either company wants to export modem chips after developing them.

The LG-led consortium that won the project said it can resolve the issue soon. The latest development, however, shows that the two Korean companies, which have emerged as global IT device producers, remain dependent on key patents of Qualcomm.

The Knowledge Economy Ministry’s R&D strategy planning team led by former Samsung Electronics President Hwang Chang-kyu selected on May 31 companies that will conduct R&D projects aimed at developing growth engine technologies. The technologies include those related to LTE parts, solar cells, electric cars and natural drugs.

One such project is to develop baseband modem chips. The project, which was awarded to LG, gained huge attention from related industries because of the duel between Samsung and LG, the country’s top electronics manufacturers.

Prior to the selection, the Samsung-led consortium questioned the viability of the project by making public a provision of patent agreements sealed between domestic mobile handset manufacturers and Qualcomm.

The provision says mobile handset manufacturers are prohibited from developing or outsourcing the production of parts such as baseband modem chips that use Qualcomm’s patents. This means neither Samsung nor LG can sell new modem chips overseas without the American company`s consent.

The global leader in telecommunications research and development has obtained patent rights for numerous mobile communication source technologies.

Because of this, Samsung will allow smaller companies in the consortium to take the lead in the development unlike LG, which expressed its willingness to lead the whole development process as the organizer of the consortium.

On the Knowledge Economy Ministry’s demand that the consortium organizer purchase new chips to build a market, LG agreed but Samsung did not for fear of breaching its patent contract with Qualcomm.

So judges of the ministry’s R&D strategy planning team gave a high grade to LG in the criteria of the organizer`s will to participate.

On the question raised by Samsung, the ministry and civilian judges belatedly noticed the problem related to Qualcomm’s patents and asked LG for a solution as recently as last month.

On this, LG promised to send the ministry a document that proves Qualcomm’s consent within this week, saying, “We can obtain consent from Qualcomm on modem chip development and production through negotiations.”

Industry sources say the incident is a sobering reminder of Korea’s dependence on overseas patents of source technologies. Korean companies have used the CDMA technology they purchased in 1995 from Qualcomm as a key technology for the 3G mobile communication network.

According to the government, Qualcomm earned more than 5 trillion won (4.6 billion dollars) in patent royalties in Korea from 1995 through last year.

sukim@donga.com