Non-practicing entities filed 7 of the 9 U.S. semiconductor patent suits brought against Korean companies this year — 77.8% — as patent litigation targeting Korean chipmakers hit a record high, according to Korea Institute of Intellectual Property Protection data obtained on October 6 by The Seoul Economic Daily.

Over the five years from 2022 through the end of July, NPEs were plaintiffs in 17 of 24 such suits, or 70.8%. The wave tracks the chip industry's upturn: with Samsung Electronics (005930) and SK hynix (000660) expected to post record operating profits, NPEs have targeted the two companies.

Who is suing whom?

SK hynix faced a suit in U.S. federal court in May over high-bandwidth memory (HBM). The plaintiff, Monolithic 3D — not a rival chipmaker but an NPE — claimed SK hynix used its patented technologies without permission, including a three-dimensional vertical stacking structure and transistor layout. Monolithic 3D had already sued SK hynix once before, in February.

Samsung Electronics followed in June, when NPE Mare Infinitus filed suit over HBM-related patents. The patents at issue across both cases cover the 3D vertical stacking structure and through-silicon via (TSV) technology — both regarded as core HBM technologies.

Mid-sized players have been drawn in as well. In February, Taiwan's Everlight Electronics, an LED maker, sued Seoul Semiconductor (046890) in the United States. It is the first time Seoul Semiconductor has faced a semiconductor patent suit. Everlight did not base its case on its own developments but on patents purchased from other companies — a notable case of a Taiwanese firm confronting a Korean firm in a U.S. court.

Why are NPEs pressing now?

NPEs hold no production facilities. They buy patent rights and generate revenue by enforcing them — alleging unauthorized use and collecting settlements, damages and royalties. They typically accuse large companies with the financial capacity to pay.

Kim Yong-sun, head of the Intellectual Property Office of Korea, a newly created prime-minister-level IP policy body distinct from the Korean Intellectual Property Office, said in a recent interview: "The bigger semiconductors loom in Korean industry, the more we see overseas NPEs stirring up chip-related patent disputes."

U.S. policy has reinforced the trend. Since President Donald Trump took office, the administration has strengthened protection of domestic companies' patent rights. The U.S. Patent and Trademark Office has more frequently declined to institute inter partes review (IPR) — a key defense tool for companies facing suits. Backed by that stance, U.S. NPEs have grown more aggressive.

What makes NPE suits hard to fight?

NPEs enforce patents but make and sell nothing. In disputes between manufacturers, a defendant can countersue using its own patents. Against an NPE, even a large firm's patent portfolio is useless as a weapon. Industry officials say companies facing such suits often settle regardless of whether infringement occurred, out of concern over litigation costs and damage to corporate image.

The scope of the disputes is widening. The targeted 3D stacking and TSV technologies are used not only in HBM but also in products such as NAND flash. The industry is watching whether the litigation spreads to other product lines.

Can Korean firms hit back?

Some do. Korean companies filed nine U.S. semiconductor patent suits this year, a considerable number brought by Korean NPEs. As intellectual property rights grow in importance, an NPE industry is emerging in Korea: domestic NPEs increasingly buy patent rights from small and mid-sized companies or research institutes and enforce them against foreign firms.

What is the worst-case risk?

The sharpest concern is U.S. export restriction. Some suits go before the U.S. International Trade Commission, which can issue an exclusion order barring imports of infringing products — restricting import and distribution in the U.S. market. A worst-case ITC ruling braking chip exports to the United States cannot be ruled out.

Noh Jae-il, chairman of the Korea Intellectual Property Management Association, said: "An ITC exclusion order could shake our industry's entire semiconductor supply chain." He added: "It is now time to treat semiconductor patent disputes as a trade issue for a strategic industry."

Sung Yun-mo, chairman of the steering committee of the Intellectual Property Strategy Forum and former minister of trade, industry and energy, argued Korea's domestic framework needs an overhaul first. "In the United States, federal policies that support the legitimate exercise of patent rights and state-level policies that curb indiscriminate patent litigation are developing together," he said. Korea, he added, has not sufficiently discussed support measures to help key industries avoid patent infringement or systems to back patent monetization at home and abroad. He proposed that "the government and the private sector should work together to devise a new framework."