Sep 2, 2014

The Death of Samsung by Tom Coyner

Recently, there has been a great deal of press about the unexpected downturns in Samsung Electronics profits. Commonly and correctly, the disappointments have been traced to increased Chinese competition. But I dare say that the Korean media has covered just half of the real story. That is, even highly respected Samsung Electronics may be caught in a Korean mentality.

Consequently, it could take more time and effort than outsiders may imagine for the company to free itself to be able to move out and up in the international arena. During my decades in high tech sales and marketing, including in Korea and including selling to Samsung companies, one of the most striking aspects of doing business in Korea was - and still remains - the fixation on price over value. This is not to say that Korean managers and executives are unable to understand a reasonable value proposition. They often do. But for major decisions, individual understanding is subordinated to systemic review that often apparently cares less about value than price.

Sources of this mentality are several. But just to name a few, paperwork for almost everything crosses several desks of often neurotic middle managers who are anxious about the future of their careers as they approach their mid to late 50s. These men (and almost always they are men) worry about whether they will be forced into early retirement the coming December. Furthermore, given the annual or biannual department rotations, often these middle to senior managers have, at best, only a cursory understanding of major purchases, product sales, etc. But two things they clearly understand are price and cost. And that is what they focus on in both purchasing and selling.

Moving from the micro to the macro, Korean products tend to be sold from a Korean buyer’s perspective - namely being extremely price competitive. This approach is often applied to overseas marketing strategies. And offering good to excellent quality at very competitive pricing, of course, is not a bad strategy. But there are some very real drawbacks.

To implement this strategy means operating on very thin margins, which means cutting costs in areas such as sophisticated marketing. This is a game that the Chinese, too, fully understand. And for now, they can undercut Korean price marketing strategies. The problem is the Chinese are doing to the Koreans what the Koreans were doing to their Japanese and Western competitors. So, what can be done? Consider Apple, which operates on smaller sales volumes with vastly greater gross margins that allow it to funnel significantly more money into marketing, including distribution, to cultivate a buzz among consumers and pundits.

Furthermore, it is easier to come down in price when strategically required. But it is almost impossible to move up, once a company has established its brand and products at specific low price points. To justify significant price increases, the company must either offer truly extra value or do something extraordinarily innovative.

To date, no Korean company has created a product that has defined a product category, such as Kleenex, Xerox, Walkman, etc. Not to knock Korean companies, they often provide the best value alternatives to the market trendsetters. However, while Korean companies’ boasts about selling the most units may be commendable, those claims are subordinate to other companies’ claims of leading the marketplace and, of course, garnishing the largest net profits. Finally, not even the Japanese have ever really gotten over their software weakness compared to their superior hardware products.

Outside of gaming software, both the Japanese and Koreans do much better in developing hardware. The difference in software and hardware innovation mentalities begs a separate essay, but for now, let’s assume there is definitely a cultural issue working against development labs in this part of the world. But to get back to the central challenge of Samsung Electronics, the company must find the means to come up with much better product and marketing innovation. They might somehow do that internally - or have the confidence to do it externally from outside Korea by allowing non-Koreans in foreign markets, be they on the payroll or on outside contracts - to assume greater control of product marketing. Samsung, like other Korean companies, has long recognized this. And it has taken some measures along those lines, but usually only superficially.

More often than not, even when they are able to access superior external talent, Korean executive confidence has faltered, favoring central office decision making and overruling external recommendations. At the same time, Korean automobile manufacturers have proven more adept at applying innovative product marketing schemes, such as shocking the industry with “ridiculously generous” product warranties or by adding expensive “options” as standard equipment. In other words, someone - Korean or of another nationality - came up with the classic maneuver of not competing by playing the same old game but beating out much of the competition by changing the game. The name of Samsung has rightfully risen to international prominence.

But, in the face of Chinese and eventually other developing countries’ cheap products, if the company cannot adopt more sophisticated marketing fast enough, the name Samsung may be eventually be regarded as “Same Sung,” as if it belongs with other developing countries’ short-term miracle companies. Other Korean companies have demonstrated that need not be the case. I’m sure Samsung will find a new path for yet greater success.

But the clock is ticking.

by Tom Coyner.  Senior Advisor for IPG and Managing Director of Softlanding Korea.

Aug 29, 2014

Suing the Korean Government in Court Abroad: The Ashley Madison Saga Begins

Avid Life Media is suing the Korean Government and the Korea Communications Standards Commission for blocking its Ashley Madison website in Korea in a Canadian Federal Court.  If it intends to enforce the judgment in Korea - Good Luck.

Avid Life Media runs the Ashley Madison dating site.  The site motto is "Life is Short. Have an Affair." Seemingly, the Korean Government blocked the site, since the site is believed to facilitate adultery.

Avid Life Media is arguing that the case may be heard in a Canadian court, since the the shutting down of the website, in Korea, will decrease the likelihood of the site being used by Korean-Canadian and Asian-Canadians because of the global nature of people's lives.

Additionally, the plaintiff notes that like sites, owned by Koreans, have not been blocked, thus, the Korean government is engaging in "anti-competitive" practices.

The plaintiff is claiming an unspecified amount of damages and a order to unblock the site.  

 Sean Hayes may be contacted at: Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.

Aug 28, 2014

Korea Parallel Imports: How to Protect Your Brand in Korea: The Korean Courts May not be the Answer

The Korean Courts have been very reluctant to enforce prohibitions on the imports of non-counterfeit/grey market products into the Republic of Korea.  The following case is one example.

Don't fret, proactive counsel can be utilized to assist in developing strategies to protect your brand and distributor, agent, dealer or subsidiaries business in the Korean market.  Some of the strategies are obvious and some come from the unique experience gained from doing business in Korea.   

In Case No. 2009Ga Hap 125399 (Simmons Korea  vs. Karahan) Decided 12/10/2010, the Seoul Central District Court ruled that Simmons Korea could not prohibit the import of beds from parallel importer Karahan.  Karahan was importing Simmons beds from abroad.  Simons Korea was manufacturing beds in Korea under the Simmons name (licensed from Simmons to Simmons Korea).  Simons USA did not have an equity stake in the Simmons Korea entity.

The court reasoned that the regulation entitled: Notice on Treatment of Import and Export for the Protection of Intellectual Property of the Custom Service of Korea notes that the parallel import of non-counterfeit goods into Korea does not infringe the trademark of the trademark holder if:

1.  The Korean trademark registrant and foreign trademark registrant are the same entity, an affiliated entity and/or an agent of the holder.  Except in the case when an exclusive licensee manufacturers the goods by itself domestically.

2.  The Korean trademark registrant and foreign trademark registrant are not the same, but when the domestic registrant or an exclusive licensee imports and sells only genuine goods manufactured by the foreign trademark registrant. 

The Seoul Central District Court held that the parallel import of Simmons beds from the United States does not infringe the trademark even though it seems to neatly fit into to: " Except in the case when an exclusive licensee manufacturers the goods by itself domestically" exception to the general rule.

The Seoul Central District Court reasoned that:
  • Simmons Korea did not gain independent techniques in creating the "pocket springs."
  • Simmons Korea products are similar in quality to the U.S. products.
  • Even though Simmons Korea is a separate legal entity with no ownership by Simmons USA of Simmons Korea, the Court opined that a relationship regarding the "division" of the trademark rights exists - thus not satisfying the exception.
  • Simmons Korea is treated as one in the same as Simmons USA by Korean consumers. 
The Korean Courts have, also, been willing to impose sanctions for attempting to prohibit the import of grey market goods into Korea under Korean Antitrust/Competition laws.
Sean Hayes may be contacted at:

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.

Starting a Business in South Korea

We wrote many posts on this Korean Law Blog on entering the Korean market.  However, the list is getting so large that many people have requested that we make a list of the posts that we feel are the most useful for those entering the Korean Market.  Thus, here we go.  More posts will be added to this list.
Please, also, take a look at the labels to the right and, also, click through to the other articles noted within the articles above.  We are, presently, attempting to compile are blog posts into a more usable format, however, with over 700 posts - it is a task that is not as easy as we first imagined.  

Thanks for reading and if you are interested in any specific topic - please advise.  

Sean Hayes may be contacted at:

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.

Aug 26, 2014

Liquidated Damages Clauses Upheld by Korean Courts

When drafting an agreement with a Korean party, it is, generally, advisable in a case when a breach is not easy to quantify (e.g. Damages for violation of IP Rights) to include a liquidated damages clause.

Liquidate damages are monetary awards where a violation is agreed to be, at a minimum, a certain sum of money.  Thus, a liquidated damage clause may note that revealing of the intellectual property shall result in damages that will not be less than USD 100,000.

Korean Civil Act Article 398 (1)- (4)
(1) The parties may determine, in advance, the amount of damages payable in the event of the non-performance of an obligation.

(2) Where the amount of damages determined in advance is unduly excessive, a court may reduce the amount to a more reasonable and appropriate sum.

(3) The determination in advance of the amount of damages shall not affect the obligee's demand for performance or rescission of the contract.

(4)The agreement of a penalty is presumed to be determined in advance of the amount of damages.

Thus, Korean Law allows a court to reduce a sum of liquidated damages if the agreed sum is "unduly excessive."  The likelihood of enforcement is increased with arbitration in Hong Kong or Singapore.

Sean Hayes may be contacted at:

 Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.

U.S. Imposes Steel Tariff on Korean Imports

An article in the Wall Street Journal notes an issue that will increase tension between the U.S. and Korea.

We have handled matters against electronic companies and others leading exporters that led to the imposition of tariffs. We have worked on these issues with American law firms filing cases with the ITC.

Simply, Korea companies are dumping, many, products on the U.S. market.  Dumping does not need to be the selling of products at a loss.  Korean companies, rarely, sell products at a loss.  The issue in the dumping law, in short, is selling products below the price the product is sold in the home market.

Agreement on Implementation of Article VI of the General Agreement on Tariff & Trade notes that: "For the purpose of this Agreement, a product is to be considered as being dumped, i.e.  introduced into the commerce of another country at less than its normal value, if the export price of the product exported from one country to another is less than the comparable price, in the ordinary course of trade, for the like product when destined for consumption in the exporting country."

The Wall Street Journal article may be found at: Wall Street: South Korea Vows Action Against U.S. Steel Tariffs.

Sean Hayes may be contacted at: Sean Hayes is co-chair of the Korea Practice Team at IPG Legal.

He is the first non-.Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.

Aug 24, 2014

IPG's Labor & Employment Law Practice: Proactive, Efficient & Unconflicted

Introduction to the Korean Labor & Employment Law Practice Group

One our largest practices is our Labor & Employment Law Practice in Korea.  We handle matters, mainly, for foreign companies and foreign executes working for Korean conglomerates.  We are, chosen, over the ubiquitous Korean law firms, often, because of our proactive and unconflicted practice of law.  We are, intentionally, different from the crowd.

For example:
  • We have, recently, worked on a post M & A matter caused by a lack of proactive representation  related to the potentiality of assuming the liabilities for severance payments of dispatched workers.  Sad case - led to the termination of the manager in charge of the merger. Obvious matter-  Dispatched workers pose a risk relating to severance and employment security.  Proper M & A structure is required or this risk passes with the sale of the Company; and
  • We, also, worked on a criminal matter related to a military contractor that led to the jailing of one employee of the Company.  We were hired, immediately, and with a little proactive representation - the individual was released within one week for medical reasons.  All company employees were found not guilty.  
We were proud, before recent additions, of being a small firm that has successfully handled matters for Fortune 500 companies, SMEs and individuals in an efficient and proactive manner - with a straight-forward street savvy approach to the practice of law.

However, we can't pretend to be small anymore, but we are still boutique in practice, still efficient and proactive and the street savvy approach will not be lost as long as Sean Hayes is working with us.

We handle, nearly exclusively, international business transactions and contentious matters for foreign companies and foreigners in Asia.  Most of our teams are led by lawyers that are ranked by leading international lawyer rating services.

For example, Sean Hayes is ranked by LawAsia as one of only two non-Korean lawyers as a Top Attorney in Korea.  The Firm is, also, ranked by numerous publications as a leading International Law Firm in Asia.

Areas of Expertise in Korea
  • Korean Labor Relations & Strategy
    • Collective Bargaining Agreements
    • Redundancy Strategy
    • Multiple Trade Union Issues
    • Korea Labor Management Committee Formation
    • Work with a preeminent former HR Manager that has successful mitigated labor relations issues in Korea & China for leading international companies.
  • Korean Employment Screening
    • Employment Screening Tests
    • Employment Screening & Background Checks
  • Safety & Health
    • Health Insurance
    • Industrial Accident Insurance
    • Workplace Safety & Health Audit
  • Korean Labor Law Compliance
    • Appoint/Remove Representative Directors
    • Employment Agreements
    • Severance Calculations
    • Fixed-term Workers, Dispatched Workers & Non-Regular Workers
  • Visas in Korea
    • Korean Investment Visas
    • Korean Work Visa
    • Korean Administrative Court Dispositions
  • Korean Compensation, Severance & Benefits
    • Salary Analysis
    • Ordinary Wages vs. Average Wage
    • Severance Payment
    • Bonus Structure
    • Salary Surveys
  • Employment Rules/Policies in Korea
    • Employment Rules
    • Employee Handbooks
    • Privacy Policies
    • Trade Secret Protection & Enforcement
  • Korean Government Enforcement
    • Labor Commission Actions
    • District, High, Supreme & Constitutional Court of Korea
    • Unfair/Wrongful Dismissals
    • Wage Disputes
    • Sexual Harassment
  • Korean Human Resource Audits
    • Embezzlement
    • Breach of Trust
    • Violation of Company Rules
    • Trade Secret Enforcement
    • Sex Harassment & Discrimination
  • Termination/Separation of Employees in Korea
    • Redundancies
    • Termination based on "cause"
    • Termination based on "urgent managerial" necessity
    • Separation Agreements
    • Non-Competition & Non-solicitation Agreements
Sean Hayes may be contacted at:

Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.

Aug 22, 2014

Unfair/Wrongful Dismissal of Foreign Executives under Term Contract with Korean Chaebols

Expat executives in Korea are typically hired by Korean conglomerates based on two or three year contracts. These employment contracts often have three to six-month at-will termination clauses. In many cases, these contracts are in violation of the Korean Labor Standards Act.

Many foreign executives, recently, have been pushed out of these Korean conglomerates with nothing more than a few months salary and a bitter taste in their mouth.

These actions are giving Korea a bad image amongst potential foreign employees and foreign employees are too often letting the conglomerates get away with these actions because of ignorance of Korean law. I was told by an employee-side executive recruiter that he always advises clients to choose China over Korea, since he believes that, in Korea, you have a far greater chance of not completing your contract.

We are normally on the business-side of litigation for foreign companies, but the increase in these actions by the Korean big fish has led many foreign executives to our doors and in an unusual stance by my team (me), we have warmly welcomed suits against the big fish Korean employers.

Korea is in need of foreign executives and in need of Korean companies that will not prejudice Korea in the eyes of potential foreigner employees. If President Lee’s vision of a globalized Korea is to come to be – the government and attorneys must give these companies a wake-up call.

If the foreign executive is an “employee” under Korean labor law, the termination clause will, in most cases, be deemed in violation of Korean labor law, thus, allowing the employee to continue employment until the termination of the agreement if no cause exists to terminate. In some cases, the employee may even be entitled to employment until retirement.

Additionally, even if the agreement does not provide for severance, the employer is required to pay severance in most cases, where an individual is deemed an employee.

Even representative directors and directors may be protected by Korean labor law.
Korean labor law, in most cases, deems a representative director, director or general manager as an “employer,” thus, not providing the majority of protections afforded by Korean labor law. Numerous exceptions apply. The case law on this matter has been well settled by the Korean Supreme Court. A recent Supreme Court case has detailed the settled principles:
Even when a person is registered as a representative director of a corporation, in exceptional cases when his status as a representative director is only formal/nominal - that he holds no power to execute internal business operations of the company, and also the external business operations are only being executed under his name for the sole reason that he is the one who holds the registered name and that there is an actual manager other than him who actually makes the decisions in such business operations, and that the nature of his payment is compensation to his labor itself rather than his managerial achievements or business performance since he only provides labor under the specific individuals instruction/supervision of the actual manager, such person shall be classified as an “employee” as defined in Industrial Accident Compensation Insurance Act.” (The Industrial Accident Compensation Insurance Act and the Labor Standards Act share identical definitions of “employee.”)
Additionally, the Supreme Court has noted that the form of an agreement is of little concern in determining if an individual is an “employee”:
Whether a person shall be classified, as an “employee” as defined in the Labor Standards Act shall be decided substantially - that is regardless of the form of the contract, in accordance to whether the person has been providing his labor to the employer under a subordinate relationship for the purpose of receiving wages.

Aug 14, 2014

Choice of Law Issues in Employment Disputes in Korea

Choice of law/jurisdiction issue often arise in Korea when an agreement chooses a law/jurisdiction for resolution of a dispute other than Korea, internal conflicts in the agreement exist (yes this happens) or no choice of law/jurisdiction clause was chosen and the agreement seems to be better handled by a foreign court, or by the law of the foreign jurisdiction, because of, inter alia, the locale of witnesses and the subject matter of the agreement. 

Choice of law/jurisdiction issues are governed in Korea mainly by Korea's Private International Act (KPIA).  However, other acts often trump the KPIA, or else the courts use built-in "public policy" arguments to allow Korean law to trump the non-Korean chosen law.

For example, in the majority of employment law disputes, Korea courts have invalidated choice of the law and jurisdiction clauses that note law and jurisdiction other than Korea.  

For example, if a employer hiring someone for work to be performed primarily in Korea places into an employment agreement, NY Law with resolution in a NY state court, the Korean courts will likely invalidate this clause and apply Korean law and apply the Korean law in the Korean court. 

Sean may be contacted at: Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He has, recently, been ranked as one of only two non-Korean attorneys as a Top Attorney working in Korea by AsiaLaw.

Aug 13, 2014

Smuggling in Korea (밀수출입죄)

The Offense of Smuggling, in Korea, is proscribed by Article 269 of the Custom Act - along with various other Korean acts.

Article 269(2) notes that: "Any of the following persons shall be punished by imprisonment for not more than five years, or by a fine equivalent to ten times the amount of custom duties or the cost of the relevant goods, whichever is lower."

In order not to violate the law, please fill out a Customs Declaration under Article 241 (1) and (2) or 244 of the Customs Act if the items you are importing are not personal items. Essential.

We are dealing with a smuggling charge at this time and the ramifications for not filing out this form are jail and, potentially, a fine that you will be unable to pay.

Sean Hayes may be contacted at: Sean Hayes is co-chair of the Korea Practice Team at IPG Legal. He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty. He is ranked, for Korea, as one of only two non-Korean attorneys as a Top Attorney by AsiaLaw.

Aug 11, 2014

Criminal Lawyers in Korea: Defense Lawyer to Hire and Not to Hire?

In all cases, in Korea, where you are accused of a crime and you fear that you may be sentenced to time in jail, may be deported or the conviction may harm your future, hire, quickly, an experienced and proactive Korean criminal attorney prior to any interrogations by the Korean police or prosecution.

Sadly, few lawyers, in Korea, are useful for criminal matters, since few lawyers are proactive when it comes to matters concerning the Korean government, experienced in criminal matters for foreigners or willing to upset the status quo (aggressively engage the prosecutor and court).

Please do your future a favor,  forgo any options provided at no or low cost unless you have no other options.

If you can't afford an attorney, the Korean court, normally will appoint an attorney to assist you.  In most cases, the appointment of the Korean government-appointed attorney will be useless for your defense/sentence, since the appointment will be after interrogations, after the decision of the prosecutor to indict and often is an attorney that will only be going through the basic processes necessary for him to complete the matter and go on to the dozens of other matters that he has in front of him/her.

If you are in the U.S. military, the military will appoint you an attorney.  Also, the attorney will be appointed too late in the investigation stage.   The attorney appointed, overwhelmingly, in the cases that I have seen will simply go through the motions.

The handful of attorneys picked by the military are some of the least proactive attorneys I have seen in Korea and want, in the majority of the cases, to simply be on the good graces of their bread-and-butter (a Korean employee of the U.S. military).  If you are convicted of a crime, you will be discharged from the military.   This was not true a decade ago, but the military, even for "minor" violations of law have been quick to discharge soldiers.

Signs that you May Have Hired the Wrong Korean Lawyer
  • Your Korean lawyer is not operating based on a contingency fee (success fee: not guilty/no time served in jail etc.).   The best arrangement is a discounted hourly fee combined with a success fee, since you will receive a bill noting what the attorney is doing and the attorney will be motivated to do work on the matter even when the chance of "success" is slim.
  • Your Korean lawyer is too young (Early 30s) or too old (70s).  The lawyer will, likely, not have the experience necessary to handle the matter or will, simply, not be handling the matter.
  • Your Korean lawyer is directing you, consistently, to talk with a less experienced lawyer.  The less experienced lawyer is likely, only, doing the work and the more experienced lawyer is simply a rainmaker.
  • Your Korean lawyer has poor English language skills.  Without someone fluent in English, you run the risk of never getting your side of the story heard. 
  • Your Korean lawyer has few non-Korean clients.  Handling criminal matters for foreigners is vastly different than handling a typical criminal matter for a Korean.  Often, deals can be obtained with the prosecutor in non-violent crimes for foreigners, that are unavailable to Koreans.  Also, violent and public crimes, often, need to be handled with a decree of media and cultural savvy, since judges and prosecutors are heavily affected when the victim is a Korean and the perpetrator of the crime is a foreigner. 
  • Your lawyer never speaks.  A lawyer that never speaks is, typically, not a proactive lawyer.  Criminal cases are best handled with strategy and a proactive counsel willing to engage the police investigators, prosecutor and judge.  If your lawyer won't speak to you, he won't be speaking to anyone else and will likely simply go through the process, receive a guilty verdict and the typical sentence.
  • Your lawyer seems not to be listening.  Too often, lawyers, ignore clients.  Great defense lawyers  in Korea develop great defenses by listening and responding to clients.  If you have a lawyer that is not listening, he will likely just go through the process, receive a guilty verdict and the typical sentence.
  • Your lawyer in Korea has too many cases.  If he seems too busy he probably is too busy.  Criminal cases, often, need a great deal of time.  If the lawyer is not able to spend the time to talk with you, you may never be able to get the attorney to provide the time necessary to handle the matter.
  • Your lawyer in Korea hates you.  Koreans are passionate people.  If the lawyer hates you, he will likely take your money and do nothing for you.    Passion, too often, can lead Korean lawyers to be less than reasonable.   As we know, this is not only a Korean trait.
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What do you think?
NY attorney Sean Hayes is the only non-Korean to have worked as a government attorney for the Korean court system.  He leads the Korea Practice Team at IPG