Lack of Office Space in Seoul
By Sean Hayes (Korea Times 11-26-2008)
Korea, in this global economic turmoil, must become a more attractive location for foreign investors. The answer to attracting more foreign capital is obviously to improve the overall investment climate.
Along with the ubiquitous mention of tax reductions, regulatory revisions, and an improved living environment; Korea also must reduce expenses in doing business in the country including access to affordable office space.
The access to affordable office space may be as important for the short- and long-term development of the economy and the nation's goal of becoming the hub of Asia as many of the regulatory, legal, political, and economic reforms that have been proposed by the Lee Myung-bak administration.
For example, a few of my clients mentioned that one of the major obstacles to expanding their presence in Korea is the lack of office space. One, in particular, is simply unable to find office space near their present address and is forced to delay recruitment.
I have also heard, over the years, from many medium size companies shocked at finding the price of quality real estate, in Seoul, to be on par with their foreign headquarters.
The situation is also troubling for local companies. My law firm leases four floors in a prime building in Samseong-dong that is 100 percent occupied. The firm is salivating at the chance that they may be able to rent a part of a floor within the next couple of months.
The situation is well represented in Colliers International estimates, in its last report, that the vacancy rate in Seoul's central business district, the Gangnam business district, and the Yeouido business district of prime buildings is 0.36 percent, 0.53 percent, and 0.82 percent respectively and the net effective price per 3.3 square meters, in these same areas, respectively, is 220,000 won, 217,000 won, and 170,000 won.
This low vacancy rate and high price places Korea at or near the top of lists of cities with the highest office occupancy rates and high amongst lists of the most expensive office rental rates.With President Lee's experience in the construction industry, successful leadership of the Seoul metropolitan government, and proactive style, hopefully, he will set his staff in motion to address a problem that is pushing some foreigner companies to forego investment in Korea and encouraging others, already in Korea, to not increase investment in human capital.
Korea, accordingly, must increase the supply of quality office space in the three major business districts and also attempt to curb price increases.
Some of the issues that the administration should address in order to achieve this goal is how to expedite zoning and inspection procedures, and ensure access to government guarantees to the experienced, innovative, but now cash strapped developers. Additionally, it must promote the conversion of underutilized retail space to prime office space, convert lower quality office developments into higher quality prime office spaces, and reduce the tax and regulatory obligations on landowners.
If Korea, during these difficult times, is able to make itself more attractive than its neighboring investment locales it will overcome this crisis with a net gain. Hopefully, the administration will look outside the box and consider the total investment costs associated with doing business in Korea including the lack of affordable quality office space in Seoul.
_____
SeanHayes@ipglegal.com
Friday, November 28, 2008
Sunday, November 23, 2008
Patent Bullies vs. Samsung
Patent Bullies
By Sean Hayes (Korea Times 11/24/08)
Samsung is embroiled in one of the world's largest patent infringement suits. Most large profitable companies, from Apple to GE, are facing increasing exposure to such suits.
These companies must take a more aggressive stance by engaging in more concerted efforts, creating systematic internal mechanisms to handle disputes and aggressively defend, in court, against attacks that are without merit.Without such efforts from our companies, patent bullies and patent trolls will gain at the expense of consumers, employees, and our most successful companies.
For example, Samsung, for the benefit of its reputation and its bottom-line, needs to devise a coherent, transparent, and yet aggressive, legal structure and system to deal with patent infringement suits, while engaging in more cross-licensing schemes.
The answer to Samsung's problems must come from a revamping of the role of in-house and outside counsel. If Samsung, the lifeblood of the Korean economy, is not willing to adapt to the realities in the intellectual property realm, I fear that its brand image and eventually its bottom-line will be negatively affected.
This, of course, will have lasting effects on all of Korean society.The most recent battle facing Samsung is over two suits filed by Spansion, the third largest maker of flash memory chips, behind Samsung and Toshiba, for infringing on Spansion's patents. In an aggressive posture, it filed a complaint at the U.S. International Trade Commission (ITC) for exclusion of the allegedly infringing products from entry.
Spansion also filed, in a federal district, a case requesting an injunction and Treble damages. If the ITC complaint prevails, it would effect the import of over 100 million gadgets, including phones, MP3 players, cameras, and digital recorders. The ITC usually takes little less than one and a half years to make a disposition.
If Spansion's case at the district court prevails, an injunction against the sale and import of the infringing products could be ordered, along with damages not specifically alleged in the filing, which, based on Samsung sales, could reach a sum of over $20 billion. A decision at the district court could take multiple years to reach.
Over the past two decades, Samsung has been investigated and has initiated investigations at the ITC on almost two-dozen occasions. In the vast majority of completed investigations, a settlement was reached before a relevant disposition. In a recent case, Samsung reached a settlement with Renesas Technology Japan.
Both Renesas and Samsung claimed violation of their respective patents.Samsung is also no stranger to actions in U.S. district courts and has also been willing to settle matters prior to disposition in the district court.
If the past is a sign of the future, Samsung again will settle the case.We will likely hear more of Spansion in the future. Spansion recently purchased an Israeli semiconductor company with numerous ``high-level" patents.
Spansion seems to be transforming itself from a producer of flash memory chips into an intellectual property licensing house.Spansion, in the future, may make little in the way of tangible products and rely on its thousands of patents for revenues.
Its first foray into large-scale complex intellectual property litigation may be simply a tool to increase awareness, stock value, and get their hands in the deep pockets of one of the world's most profitable companies. The outcome, if Samsung follows its not so distant past, is a settlement with a little gravy in the hands of a possible emerging patent bully.
Samsung, if the Spansion claims are not valid, must fight this case to the end in order to avoid the increasing number of patent bullies and trolls pursuing the deep pockets of our most successful companies.
_____
SeanHayes@ipglegal.com
By Sean Hayes (Korea Times 11/24/08)
Samsung is embroiled in one of the world's largest patent infringement suits. Most large profitable companies, from Apple to GE, are facing increasing exposure to such suits.
These companies must take a more aggressive stance by engaging in more concerted efforts, creating systematic internal mechanisms to handle disputes and aggressively defend, in court, against attacks that are without merit.Without such efforts from our companies, patent bullies and patent trolls will gain at the expense of consumers, employees, and our most successful companies.
For example, Samsung, for the benefit of its reputation and its bottom-line, needs to devise a coherent, transparent, and yet aggressive, legal structure and system to deal with patent infringement suits, while engaging in more cross-licensing schemes.
The answer to Samsung's problems must come from a revamping of the role of in-house and outside counsel. If Samsung, the lifeblood of the Korean economy, is not willing to adapt to the realities in the intellectual property realm, I fear that its brand image and eventually its bottom-line will be negatively affected.
This, of course, will have lasting effects on all of Korean society.The most recent battle facing Samsung is over two suits filed by Spansion, the third largest maker of flash memory chips, behind Samsung and Toshiba, for infringing on Spansion's patents. In an aggressive posture, it filed a complaint at the U.S. International Trade Commission (ITC) for exclusion of the allegedly infringing products from entry.
Spansion also filed, in a federal district, a case requesting an injunction and Treble damages. If the ITC complaint prevails, it would effect the import of over 100 million gadgets, including phones, MP3 players, cameras, and digital recorders. The ITC usually takes little less than one and a half years to make a disposition.
If Spansion's case at the district court prevails, an injunction against the sale and import of the infringing products could be ordered, along with damages not specifically alleged in the filing, which, based on Samsung sales, could reach a sum of over $20 billion. A decision at the district court could take multiple years to reach.
Over the past two decades, Samsung has been investigated and has initiated investigations at the ITC on almost two-dozen occasions. In the vast majority of completed investigations, a settlement was reached before a relevant disposition. In a recent case, Samsung reached a settlement with Renesas Technology Japan.
Both Renesas and Samsung claimed violation of their respective patents.Samsung is also no stranger to actions in U.S. district courts and has also been willing to settle matters prior to disposition in the district court.
If the past is a sign of the future, Samsung again will settle the case.We will likely hear more of Spansion in the future. Spansion recently purchased an Israeli semiconductor company with numerous ``high-level" patents.
Spansion seems to be transforming itself from a producer of flash memory chips into an intellectual property licensing house.Spansion, in the future, may make little in the way of tangible products and rely on its thousands of patents for revenues.
Its first foray into large-scale complex intellectual property litigation may be simply a tool to increase awareness, stock value, and get their hands in the deep pockets of one of the world's most profitable companies. The outcome, if Samsung follows its not so distant past, is a settlement with a little gravy in the hands of a possible emerging patent bully.
Samsung, if the Spansion claims are not valid, must fight this case to the end in order to avoid the increasing number of patent bullies and trolls pursuing the deep pockets of our most successful companies.
_____
SeanHayes@ipglegal.com
Labels:
Korean IP Law,
Korean Litigation
Friday, November 14, 2008
Radical Liberals Rule
Radical Liberals Rule
By Sean Hayes (Korea Times on 11/14/2008)
The Lee Myung-bak administration's bold ``747 Vision'' of achieving 7 percent growth over 10 years, a per capita GDP of $40,000 by 2017 and turning Korea into the seventh largest economy in the world has been stymied by vocal interest groups with often radically liberal ideologies.
The President's highly anticipated reforms have nearly universally been moderated or abandoned so the President will avoid further conflict with these interest groups. The only losers in this battle are the Korean people.
A good example of the effectiveness of the actions of these interest groups is the recent tax law proposals by the administration. The measures, if approved, are to come into effect on Jan. 1, 2009.
The proposals include a modest reduction in the corporate tax rate. The corporate tax rate for companies with a tax base of over 200 million won will be reduced, under the proposal, by 3 percentage points, in fiscal year 2009, to 22 percent exclusive of the 10 percent resident surtax.
The rate is still notably high compared to other Asian economies such as Hong Kong, Malaysia, Thailand, and Singapore and on an effective rate basis will still be higher than most nations of the world. Before the proposed deduction Korea had the sixth highest effective corporate tax rate amongst the wealthiest 79 nations in the world.
The reduction in tax rate, coupled with other modest changes, will only drop the effective tax rate by percentages that will have little effect on Korea's global competitiveness.
The modest reduction is welcomed by companies presently in Korea, but will have only a marginal effect on encouraging additional investment in Korea and will encourage few companies in Korea, because of the only modest tax savings, to further invest in Korea.
The proposals also include a token reduction in personal income tax rates. For tax payers earning more than 88 million won, which includes the largest percentage of individuals that invest in the Korean stock market and who own and invest in small and medium business, the rate will be reduced, in the proposal, by one percent to 34 percent and the foreign worker flat tax will be reduced by two percent to 15 percent.
Such a modest reduction will have little influence in encouraging more investment and will motivate few foreign company employees to choose Korea over more taxpayer friendly Asian locales such as Hong Kong and Singapore.
The proposals also include an extension of the tax loss carry-forward period from five to 10 years, measures to reduce the tax burden on foreign individuals and corporations including an exclusion, in some cases, of most foreign source income for foreign workers, a 5 percent reduction in the interest and dividend withholdings paid by Korean companies to foreign companies or non-residents and the possibility of excluding a higher percentage of R&D expenditures from taxes.
The proposals, as a whole, are steps in the right direction, but until the Korean people allow the radically liberal to have a voice only equal to their numbers we will never see the real reforms needed to move Korea down the path to further economic, social, and political development.
If the President and his advisors had their way we would most likely see a drastic cut in corporate and personal income tax rates which would lead, according to the vast majority of the world's economists including Christina and David Romer, professor of economics at the University of California at Berkeley, to ``very large and persistent positive output effects.'' Studies, nearly universally, show that lower taxes will increase growth and tax revenues.
Hopefully, Korea can settle the difficulties with this vocal minority by standing behind the President and allowing him to lead the nation down the path towards his ``747 Vision.''
_____
SeanHayes@ipglegal.com
By Sean Hayes (Korea Times on 11/14/2008)
The Lee Myung-bak administration's bold ``747 Vision'' of achieving 7 percent growth over 10 years, a per capita GDP of $40,000 by 2017 and turning Korea into the seventh largest economy in the world has been stymied by vocal interest groups with often radically liberal ideologies.
The President's highly anticipated reforms have nearly universally been moderated or abandoned so the President will avoid further conflict with these interest groups. The only losers in this battle are the Korean people.
A good example of the effectiveness of the actions of these interest groups is the recent tax law proposals by the administration. The measures, if approved, are to come into effect on Jan. 1, 2009.
The proposals include a modest reduction in the corporate tax rate. The corporate tax rate for companies with a tax base of over 200 million won will be reduced, under the proposal, by 3 percentage points, in fiscal year 2009, to 22 percent exclusive of the 10 percent resident surtax.
The rate is still notably high compared to other Asian economies such as Hong Kong, Malaysia, Thailand, and Singapore and on an effective rate basis will still be higher than most nations of the world. Before the proposed deduction Korea had the sixth highest effective corporate tax rate amongst the wealthiest 79 nations in the world.
The reduction in tax rate, coupled with other modest changes, will only drop the effective tax rate by percentages that will have little effect on Korea's global competitiveness.
The modest reduction is welcomed by companies presently in Korea, but will have only a marginal effect on encouraging additional investment in Korea and will encourage few companies in Korea, because of the only modest tax savings, to further invest in Korea.
The proposals also include a token reduction in personal income tax rates. For tax payers earning more than 88 million won, which includes the largest percentage of individuals that invest in the Korean stock market and who own and invest in small and medium business, the rate will be reduced, in the proposal, by one percent to 34 percent and the foreign worker flat tax will be reduced by two percent to 15 percent.
Such a modest reduction will have little influence in encouraging more investment and will motivate few foreign company employees to choose Korea over more taxpayer friendly Asian locales such as Hong Kong and Singapore.
The proposals also include an extension of the tax loss carry-forward period from five to 10 years, measures to reduce the tax burden on foreign individuals and corporations including an exclusion, in some cases, of most foreign source income for foreign workers, a 5 percent reduction in the interest and dividend withholdings paid by Korean companies to foreign companies or non-residents and the possibility of excluding a higher percentage of R&D expenditures from taxes.
The proposals, as a whole, are steps in the right direction, but until the Korean people allow the radically liberal to have a voice only equal to their numbers we will never see the real reforms needed to move Korea down the path to further economic, social, and political development.
If the President and his advisors had their way we would most likely see a drastic cut in corporate and personal income tax rates which would lead, according to the vast majority of the world's economists including Christina and David Romer, professor of economics at the University of California at Berkeley, to ``very large and persistent positive output effects.'' Studies, nearly universally, show that lower taxes will increase growth and tax revenues.
Hopefully, Korea can settle the difficulties with this vocal minority by standing behind the President and allowing him to lead the nation down the path towards his ``747 Vision.''
_____
SeanHayes@ipglegal.com
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