AI chip boom puts South Korean chipmakers in patent trolls’ crosshairs

South Korea’s chipmakers are riding an AI-fueled boom. But industry watchers warn the upside comes with a growing legal risk: patent trolls.

Non-practicing entities (NPEs), often called patent trolls, do not manufacture products. Instead, they generate revenue by licensing patents and filing infringement lawsuits. According to industry watchers, South Korean semiconductor firms are becoming increasingly attractive targets as the AI boom reshapes the global chip market.

The concern comes as Samsung Electronics and SK Hynix post record earnings and expand their presence across key overseas markets, particularly the United States. That success, industry watchers say, raises the incentive for NPEs to pursue litigation.

AI boom puts chipmakers in the spotlight

The global semiconductor industry is in the middle of what many describe as a supercycle. Demand for high-performance chips used in AI systems has surged, lifting revenues for major memory and logic chip suppliers.

For South Korean firms, the boom has reinforced their position as critical players in AI infrastructure. But it has also increased their exposure. Industry watchers note that companies with strong cash flows, large patent portfolios, and US operations tend to draw attention from NPEs looking for licensing fees or settlements.

Unlike traditional competitors, patent trolls face little downside risk. They do not produce goods, nor employ large engineering teams, or depend on market reputation. Instead, they pursue lawsuits aggressively, with the goal of extracting a settlement rather than proving technical infringement.

US patent rules raise concerns

Much of the unease centers on changes to the US patent enforcement environment. Under the Obama administration in 2011, the US introduced the inter partes review (IPR) system. The mechanism allows companies to challenge the validity of patents before they are enforced in court, helping limit abusive litigation.

However, industry watchdogs say that safeguards built into the system have weakened in the current Trump administration. In particular, eligibility rules for initiating reviews have become more restrictive, making it harder to challenge patents and reducing IPR’s effectiveness as a defense against questionable patent claims.

Sources indicate that the impact has been substantial. While the share of cases denied review was once estimated at around 30 percent, that figure reportedly surged to nearly 90 percent after leadership changes at the US Patent and Trademark Office (USPTO).

In fact, the US Patent Trial and Appeal Board (PTAB) has recently rejected two petitions filed by SK hynix seeking to invalidate patents held by an NPE.

Innovation at risk

Industry watchers warned that lawsuits filed by NPEs could weigh heavily on South Korean chipmakers’ research spending and long-term competitiveness.

“The future of the semiconductor sector, which is the nation’s key industry, faces not just technology competition but external headwinds, such as intellectual property policies,” an industry watcher said.

Industry voices are also calling for a more proactive response to the growing threat posed by patent trolls. According to watchers, South Korea needs to engage more directly with policymakers and international partners to address the issue before it escalates further.

“We should not be taken advantage of by patent trolls,” the industry watcher said.

“We need to deliver our voices to the US government and the international community and prepare practical countermeasures promptly.”

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