In April 2022, LG Electronics (“LG”) announced its 2022 first quarter earnings, which exceeded market expectations. In the first quarter of 2022, LG posted 21,111.4 billion KRW in sales and 1,880.5 billion KRW in business profit, which are increases of 18.5% and 6.4%, respectively, compared to the first quarter of 2021. Both the sales and business profit are at all-time highs.
LG announced that a temporary increase in patent revenue has a positive effect on the overall business profit but did not announce the amount of its patent revenue due to the confidentiality clause in the agreement.
The industry estimates that the patent revenue is generated from mobile and communication-related patents owned by LG. At the end of 2021, LG signed a global patent license agreement for “LTE Communication Standard Essential Patents” with Tino in China, which is the parent company of Wiko, a European mobile phone company. This is a result of reaching an agreement three days before the commencement of litigation for permanent injunction filed by LG against Wiko in Germany. In 2018, LG filed lawsuits for patent infringement on three LTE essential standard patents against Wiko with the Mannheim Regional Court in Germany. In 2019, the regional court rendered favorable decisions LG and the higher court affirmed the regional court’s decisions.
In March 2022, during LG’s general meeting of shareholders, "licensing up intellectual property rights such as patents" was added to its business purposes. Previously, during a conference call for second quarter earnings of 2021, LG announced that "the Mobile Communications (MC) Business Division has approximately 24,000 communication-related patents and plans to actively utilize its core IP assets for smart home appliances, Internet of Things (IoT) and infotainment." and "we are reviewing a new business model that utilizes patent assets."
The securities industry is also paying attention to LG’s patent revenue. The securities industry mentioned that it would be difficult to calculate the exact amount of the patent revenue but estimated the amount to be approximately 400 to 800 billion KRW. The securities industry also predicted that since the revenue is not generated by selling patents, the relevant additional revenue may be generated, and evaluated the revenue to be significant as the first achievement of commercializing the patent assets.
In 2021, LG closed the mobile business but is still developing next-generation communication technologies, such as 6G, which is expected to be commercialized in 2029. LG established the “LG-KAIST 6G Research Center” with the KAIST in 2019 and is accelerating to secure core 6G technologies by strengthening collaboration with Keysight, a global manufacturer of wireless communication test and measurement equipment, in the beginning of 2022. Recently, the patent center of LG, which establishes strategies for patent-related litigation and licensing, has started recruiting patent personnel for litigation against Non-Practicing Entities (NPEs).
An insider of LG said that "we plan to develop core technologies relating to future businesses and actively monetize IP assets by securing core IP assets in respective fields, including communication technologies."
Although LG has possessed valuable patents, LG was passive in monetizing its patents assets. However, since LG started actively monetizing its patent assets, current competitor as well as startups in the business of IoT and infotainment will need to carefully monitor to LG’s patent application filing strategy.