April 26, 2024

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[THE INVESTOR] South Korean companies are expected to face a series of lawsuits from US companies over local taxation of their patent income as a Seoul court ruled in favor of an American patent management firm in a drawn-out case, watchers said on Dec. 26.

In a landmark ruling on Dec. 9, the Seoul Administrative Court ordered the National Tax Service to return US$1.84 million in taxes on patent royalties it collected from NTP, a U.S.-based non-practicing entity. Also known as a “patent troll,” NPEs refer to entities that generate profits from licensing or enforcing patents.

In July 2010, NTP filed lawsuits with a US court against Samsung Electronics and LG Electronics over their alleged infringement of its wireless email patent. NTP then reached an out-of-court settlement with Samsung and LG, which paid the American patent troll a combined $12.3 million in royalties.

South Korean tax authorities collected a sum amounting to 15 percent of the royalties in taxes from NTP, which then submitted a request to refund the money entirely. Based in Richmond, Virginia and founded in 1992, NTP lodged a suit with the administrative court as the Seoul government refused to accept its demand.

Local tax officials said they are keeping close tabs on whether NTP’s win in the court battle may lead to an avalanche of tax refund requests from American companies.

(theinvestor@heraldcorp.com)