The Trump administration's expressed intentions on international commerce, immigration and other matters have caused uncertainty among traditional U.S. trading partners.
While this posturing may benefit the U.S. in trade negotiations with most nations, Korea is unlike most nations. Korea, its technology firms, its universities and its independent inventors have an intangible advantage that is not well understood. Now may be a good time to take stock of the related assets.
Over the last 20 years, Korean firms, universities and inventors have invested in product innovation, process automation and overall productivity.
Beyond the success that these investments have earned for Korean firms in market share and revenue gains, these investments have secured a mostly hidden advantage.
This hidden advantage is not typically discussed at the highest levels of government (U.S. or Korea) or at the top levels of private firms. While its meaning has been ascending over time, the significance of this hidden Korean advantage relative to U.S.-based firms remains in the shadows.
This advantage is embodied in the growing portfolio of Korean-owned intellectual property. Yes, Korean firms have excellent intellectual property. And more importantly, much of the associated intangible value is based on patents granted by the government of the United States.
The high quality of Korean intellectual property is significant because of the contemporary media narrative about claims of Samsung illegally copying Apple, Hyundai and Kia copying a hybrid vehicle inventor, LG copying AMD, etc.
Such media narratives, independent of their validity, ignore important facts about Korea based innovations as objectively measured through patent data.
The supporters of Trump reading such narratives may be inclined to react to these legal claims, hence their backing for currency- and/or trade-related policies that may mitigate any advantage to be realized through copying. But are Korean firms succeeding only by copying and cost-based competition?
Not according to the United States Patent and Trademark Office (USPTO).
In calendar year 2015 Samsung Electronics generated more patent documents (applications plus grants) in the USPTO than any other applicant, according to sources. This was the first time in many decades where a non-U.S. based firm actually had more USPTO activity than domestic entities such as IBM, Apple, Qualcomm, Intel, Microsoft and Google.
Another objective measure of native Korean inventiveness is the number of U.S. patent grants to Korea-based universities.
USPTO data indicates KAIST and Yonsei University earned more U.S. patent grants than many top-tiered global research institutions such as the University of Pennsylvania and Yale from the Ivy League, Northwestern University (my own institution) and the University of Tokyo.
Overall, four Korea-based universities were amongst the top 30 academic recipients of U.S. patent grants in 2015.
While counting U.S. patent activity is an approach to measure inventiveness, more scientific, objective measures of patent quality have emerged over the past 10 years.
By aggregating multinational patent statistics, firms like PatentSight in Germany are generating robust, global measures of invention quality. The uniqueness of their approach leverages the judgment of patent examiners, unaligned third parties who make assessments regarding the relevance of patents.
The PatentSight approach also measures the size of markets covered by patent families. This objective methodology, vetted in the scientific literature, facilitates the indexing of individual inventions through measures such as Competitive Impact. The overall relative value of patent portfolios may be benchmarked through measures such as the Patent Asset Index.
R&D-intensive multinational firms such as BASF, Siemens, Phillips, Caterpillar, Dow, Novartis and Sumitomo Chemical are already using the power of such patent analytics to improve their internal decision-making and, importantly, to advance their standing in the capital markets.
Government authorities such as the European Competition Commission are also adopting these analysis tools to better understand competitive advantage in their own markets.
So how do Korean inventors stack up against those from other nations?
Since 2006 the average Competitive Impact for inventors residing in Korea has improved 94 percent, outgrowing its Asian neighbors. Interestingly, U.S.- and German-based inventors have seen a decline in average quality of their inventions over the same period. Overall, however, the U.S. and Germany remain powerhouses of innovation in terms of high-quality patent portfolios.
Back to the storyline about Korea's intangible advantage. High-quality patents like those being granted to Koreans as per above have strong litigation power. That means they do well in court.
An excellent place to bring competitive pressures to bear against U.S. firms is the U.S. legal system. Note that the Mexican government is considering how they may use the U.S. immigration courts to confound current U.S. immigration enforcement plans. If Koreans so decided, they could use the U.S. legal system (judicial infrastructure paid for by U.S. taxpayer) to add competitive pressures to U.S. firms both large and small.
As the quality of Korean patent activities across the world improves, the negotiating power associated with owning such U.S.-based intellectual property rights may enter into currency- and trade-related conversations and bring the inventiveness of Koreans out of the shadows.
James Conley serves on the faculty of both the Kellogg School of Management and the McCormick School of Engineering at Northwestern University in Evanston, Illinois. He is a faculty contributor in the Kellogg Center for Research in Technology and Innovation and serves as a Faculty Fellow at the Segal Design Institute (NU IDEA). He can be reached via email@example.com