Great! Government Intervention Part 2

The Ministry of Information and Communication in Korea has established the standard for government intervention in high-tech industries such as broadband and telecommunications.

On the other hand, for some reason it is apparently SME-driven in a way that runs counter to market principles. The reasons for this intervention on the behalf of SMEs would be the existence of "market failure", although it remains to be seen whether dangers of "government failure" would be realized.

In a previous posting, the establishment of a new body [English translation of name forthcoming] which has as one of its functions the support of IP transfers to SMEs. That previous posting noted that it was unclear as yet whether competitive principles would apply in such an arrangement.

Part of the context for the establishment of this body, is the large financial assistance provided by the Ministry of Information and Communications to SMEs. Around six months ago, a press release was issued by the Ministry announcing $15 billion Won (approx. $US 15 million) of financial assistance to Korean SMEs in high-tech industries.

Examining the details of this policy makes it abundantly clear that the Ministry is engaged in "picking winners", more formally known as supporting infant industries. The 59 projects supported include a project to develop 'chipsets for mobile WiMax terminal,' 'small WiBro base station'. These were selected from a total of 138 projects proposed by small and medium sized IT venture companies.

This support for high-tech SMEs is based on the '2006 IT Industry Competitiveness Enhancement Project Plan' announced in January 2006 and falls under the IT839 strategy and other high-technology related projects. Projects to 'enhance the competitiveness of the IT industry' were started in 1999 by the Ministry to support projects to develop industrial technology, where technological value and industrial innovation capabilities are large.

As for the criteria for selection: "The selected projects were also in the field where demand from businesses is high. For instance, in the digital contents, software solution, BcN, information security, DTV/Broadcasting and next-generation mobile telecommunication sector."

Ministry grantees enter into a Project Implementation Agreement with the IITA (Institute of Information Technology Assessment).

Click on the link below and you will find the press release dated Jun 1, 2006:

http://eng.mic.go.kr/eng/index.jsp

Antitrust Limits to Patent Settlements

The Ministry of Information and Communications should consider the work of Carl Shapiro on patent settlements in moving ahead with horizontal cooperation in the five target industries where patent disputes are (apparently) blocking innovation.

In his article published in the RAND Journal of Economics in Summer 2003, Shapiro argues that patents settlements can stifle competition and harm consumers. Shapiro proposes a specific antitrust rule limiting such settlements - a settlement must leave consumers at least as well off as they would have been from ongoing patent litigation.

In other words, the Ministry of Information and Communications should give the foremost consideration to consumer welfare if it decides to intervene in patent settlements in the five target industries. In this regard, I suggest that it has the obligation to consult with the KFTC lest the Ministry becomes involved in anti-competitive patent settlements that harm Korean consumers.

Great! Government Intervention!

{this is a draft version of this blog}
Collaboration in terms of patent pools and cross-licensing is generally pro-competitive.

The direct involvement of the Ministry of Information and Communications in high-tech patent disputes (covering five areas of patents - GSM mobiles, DMB, RFID/USN, intellegent robots, WiBro), however, is not exactly encouraging for competition given the past role of government agencies in (knowingly or unknowingly) implementing policies that have facilitated cartels.

http://epic.kdi.re.kr/epic_attach/2006/R0612101.pdf

While the proposal requires further consideration, there may be antitrust concerns with patent settlements and government intervention is unlikely to be appropriate, at first glance anyway.

Why is the KFTC not on the committee?

Also, the transfer (or sale) - the language used is non-specific - of patents to SMEs gives one the distinct impression of stronger government involvement than would meet the eye.

Who knows, "free" licenses of government patents may just start falling from the sky in Korea...