In the midst of serious living difficulties and an unemployment crisis among the young in their 20s and 30s, establishing a business of one’s own is emerging as an important alternative for young people. However, most young entrepreneurs start up a business with little capital in the harsh business environment, where large enterprises and franchise businesses are all over. Some of them may succeed after countless trials and errors but many have to face the reality and drop to their knees before the monopolistic market.
Lim Chae-woon, a professor at Sogang University (Dept. of Business Administration), said, “Business failure rates among individual businessmen in Korea reach 80 percent. There are no official statistics on the business failure rates among young individual entrepreneurs, but it is assumed that it would be much more than 80 percent. According to ‘Analysis on the present condition of establishment and removal of enterprises in Korea 2004-2009’ by Statistics Korea, about 600,000 enterprises are newly established and 580,000 enterprises disappeared annually. To simply compare the two numerical values, it can be then said that newly established businesses go bankrupt immediately.”
Such failures of business start-ups by young entrepreneurs are often regarded as merely the result of a lack of abilities in the young. However, recently, established organizations from small and medium-sized franchises to large enterprises are stealing young businessmen’s ideas and techniques which are the bases of their businesses and threatening them in the business field. The problem is that there is no adequate rule or law to prevent market monopolization by chain and large enterprises and to protect the enterprises of young businessmen. At this point, it almost seems there is no point in blaming only the large enterprises for killing the businesses of the young, when the problem is rather on the government which turns a blind eye to this tyranny of the haves.
Tears of Strawberry Mochi
On July 28, one young entrepreneur’s story, titled ‘Tears of Strawberry Mochi’ was spread abroad through the TV program ‘Sisa Magazine 2580.’ According to the program, Kim Min-soo went to Osaka, Japan 4 years ago and there he had the chance to eat strawberry mochi, which gave him an idea to set up his own business. He learned the recipe for the mochi and began doing business in partnership with Ahn Hong-sung, who had been selling strawberry mochi in Myeongdong. The business was a huge success. Kim’s strawberry mochi soon became very popular as it was broadcast on several TV shows. However, only 10 days after the business began to prosper, partner Ahn suddenly claimed cancellation of their contract. As Ahn did not even return the investment, Kim posted his story on the internet and began staging a one-man demonstration. Kim argues that he is a victim of ‘the tyranny of the haves.’ According to him, Ahn had been planning to do chain business with Daewoong Holdings Co., Ltd when Ahn cancelled the contract with him and Kim was continuously threatened to renounce his business rights.
▲ On Kim’s banner, it reads “I put my heart and soul into learning the techniques for makingstrawberry mochi, flying to Japan numerous times. I cannot stop the tyranny of thehaves who try to steal these techniques with their “money” and “power” by myself. I ameven being threatened by the conglomerates. This is unfair. Please help me out!”
Netizens who heard the story were in a rage, criticizing Daewoong Holdings for being responsible for such tyranny. One netizen commented on the Sisa Magazine 2580 website, “Was it really Daewoong Holdings that tried to steal the young man’s idea? There are a lot of enterprises that are so conscienceless in Korea. Stealing the ideas of the have-nots or the weak and selling them as if they were theirs in the first place? They are just dead wrong.” There was also a signature collection campaign to help Kim on Daum Agora, with the title ‘The conglomerate’s power and threat destroyed the talented young man’s hope and dreams.’ A total of 27,408 netizens had signed when the campaign finished. On the other hand, Kim’s partner Ahn wrote on his blog a long rebuttal, claiming that Kim’s argument is not true.
Daewoong Holdings also maintained that it only concluded a consulting contract regarding the business but never planned a merger or acquisition at all. Regardless of the subject to blame, however, this controversy which was aroused just about two months ago, shows well how much young people’s newly set-up businesses are susceptible to being affected by major enterprises and chain businesses under no protection by any laws. If Kim’s argument is true, Kim had his business item stolen and thus cannot continue his business any longer. There is no other choice but Kim has to abandon his business and start a new one, and to do so he will have to put the same amount of investment, time and effort, if not more, as he did with his previous business but he is not given any compensation.
▲ 27,408 people signed on the campaign on Daum Agora to support Kim
In fact, Kim is not the first case that aroused controversy between young businessmen and conglomerates. On Feb. 26, Oh Se-rin, the CEO of BonGousse Bob Burger, wrote a long letter of plea and posted it on Facebook. His writing soon received over 200,000 likes and 8,000 comments. Oh Se-rin started his writing saying, “I began my business on the streets with only 100,000 won but I succeeded in setting up my own business.” He continued saying that since BonGousse Bob Burger was originally set up as a chain business for small-scale businessmen with little capital, he did not care when similar kinds of enterprises were established. Then a similar chain business called Chef’s Bob Burger was set up a while ago. The CEO of Chef’s Bob Burger is a professional franchiser businessman, who once was the CEO of a named chicken franchise, and more importantly, a parent of the owner at one of the BonGousse Bob Burgers’ subsidiaries. Oh claimed that he even witnessed the owner working at his parent’s store and said, “The parent of the owner at one of my subsidiaries stole the brand-name and recipes with capital strength and set up a new Bob Burger franchise business on their own.” He then added, “This is burglary and larceny.”
Chef’s Bob Burger is also strongly refuting Oh’s statement saying, “We are not a big capitalist. We opened the first Chef’s Bob Burger just last Thursday. There are many other enterprises selling Bob Burgers and we just tried to follow the trend.” However, Oh also rebuts that Chef’s menu is almost the same as BonGousse’s and there is evidence that they used a mold on which the name ‘BonGousse’ is stamped.
Recently, as there were an increased number of cases in which a franchiser exploited or oppressed its’ franchisees, the law to protect business rights of franchisees has been strengthened. Nonetheless, a case where the opposite is true, as in BonGousse’s Bob Burger’s case, is not common and thus, there is no adequate law or regulation set up to be applied. Although the dispute was resolved after Oh withdrew a complaint against Chef’s and they tried to reach an agreement, it would have been much more time-consuming and complicated if they had dealt with it according to the law. Oh also pointed out this fact in his letter of plea on Facebook saying, “To resolve this dispute through the law, it takes about three years. In the meanwhile, what if the people who had a trust in me to set up their businesses with little capital go bankrupt?”
▲ Oh Se-rin, a CEO of BonGousse Bob Burger, posted a letter of plea on Facebook with a photo of him knelt down to ask for the public’s support
The bottom line is that who is right or wrong is not important in this case. The controversy may not have been aroused in the first place if BonGousse’s Bob Burger’s menu and recipes were protected well by patent law or if there was at least a prescription on to which extent ‘similar businesses’ are allowed in terms of menu, recipe, operating system and others. In addition, even though Oh felt that it was unreasonable to have his menu and recipes ‘stolen’ and tried to do something about it, there was nothing he could actually do ? he could not even turn to the law. Regardless of the truth behind all of these disputes, it shows how young businessmen are always being challenged by large enterprises and big franchisers, and this certainly calls for the need of an immediate reinforcement on patent law and on other relevant rules.
Reality of the Incompetent Patent System
As seen from the previous examples, young businessmen’s enterprises are largely dependent on ‘ideas,’ particularly on new and original recipes in restaurant businesses. Recipes are, however, difficult to be protected by patent law because the slightest change in a recipe can evade the law to nullify the validity of the patent right, and this property of the patent law makes it vulnerable to infringement. According to Patent and Business, a global intellectual property corporation, the patent system is susceptible to having three weaknesses: the protest of invalidity, the protest of no violation, and the protest of free technology. The protest of invalidity argues that the patent technology itself is invalid, and thus infringement is erroneously alleged. The protest of no violation, on the other hand, acknowledges the patent but denies its violation due to difference in composition. Among the three, the protest of free technology is the most disputable because it argues that the patent technology could be easily recreated while not imitating the original method. Difficult to be proven otherwise, the protest of free technology remains a loophole in the patent system.
In addition, it is difficult to expect proper compensation for infringement of intellectual property. First, it takes a long time to file a lawsuit which, in the meantime, has an unclear outcome. In fact, patentees in Korea depend on a 25 percent chance of winning the lawsuit while consuming considerable time and money which is hard on small-scale enterprises. Second, the compensation for violation is insufficient to serve as punishment and as prevention to future violations of patents. The average amount of money charged to infringers in Korea is about 50 million won because Korean law forbids charges that make a example of infringers. Because the amount is too low large-scale corporations become prone to disregard of the patent right, and cases like BonGousse Bob Burger or strawberry mochi repeat themselves.
For the youth’s enterprises to prosper, it seems the current Korean patent system needs new measures to protect them. To begin with, the Korean patent system should consider adopting exemplary damages in addition to compensatory damages. Compensatory damages which pay only for the harm suffered by the patentee has an impact on neither the infringer nor the society. By implementing exemplary damages and thus imposing a larger fine, it will serve as retribution and deterrence to future infringement of intellectual property. Some states in the U.S. set an example of exemplary damages by charging the infringers up to three times the damages done.
To compare the compensation charged for damages in the U.S. and in Korea, one can give an example of the lawsuit between Apple and Samsung. While the U.S. court charged Samsung 1.2 trillion won for infringement of Apple’s patent design, the Korean court sentenced 25 million won for the same infringement. Professor Shim Yeong-taek of the School of Law from Seoul National University pointed out that Korean patent valuation is one two-thousandth of U.S. patent valuation and said, “Who in their right mind would invest in research and development and apply for patents when they can use other’s patents for only ten or more million won?” Strict law enforcement like that in the U.S. could certainly bring a positive change to the current tendency of Korean people to devalue intellectual property protected by patents.
Furthermore, exclusive patent legal services should be multiplied so that professional aid can be reached easily with no delay to the ones whose intellectual property is infringed. It is a current trend that intellectual properties are valued; it was shown in the research done by Patent and Business that the number of patent lawsuits in 2010 has increased from 1,070 to 1,129 in one year. Customized service in the patent system can not only secure the innovative ideas as accepted property but also respond to possible infringements of them with immediacy. Expanded services also give advantages to patentees to win. For instance, the U.S. has a 50 percent possibility for patentees to win in lawsuits, which is twice as much as that of Korean lawsuits.
Unfortunately, the business field in Korea has been too harsh of a place for young entrepreneurs to grow their own enterprises and dreams so far. However, once infrastructure and support for youth’s businesses are expanded and ensured, it is possible to secure sufficient power to resolve such a bitter reality. The infrastructure to found the base for those establishments would be an improved patent law system in Korea. The current law system is incapable of protecting youth’s enterprises that are exposed to the violations of large enterprises. Now more than ever, youth with innovative ideas and passion to found businesses requires active encouragement and support from the concerned authorities and institutions. As Park Won-soon, the Mayor of Seoul, once said, young businessmen’s enterprises are the future of Korea, and government and large-scale enterprises should help them in the market. There should not be any second-strawberry mochi or second-BonGousse Bob Burger cases in which a young businessman’s ideas and intellectual property are infringed by the conglomerates again. The tyranny of the haves should end now with a reinforced systematic patent law that supports young entrepreneurs.