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Kakao Suffers from Series of Lawsuits
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Kakao Suffers from Series of Lawsuits
  • By Cho Jin-young
  • September 2, 2016, 01:45
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Kakako is battling legally with NHN Entertainment Corp over a patent infringement of “friend application programming interface,” or friend API.
Kakako is battling legally with NHN Entertainment Corp over a patent infringement of “friend application programming interface,” or friend API.

 

Kakako will a second legal battle with the nation’s top online game developer NHN Entertainment Corp. on the 8th over a patent infringement of “friend application programming interface,” or friend API.

Kakao Corp., South Korea’s biggest instant messaging service provider that seeks to expand its mobile-based innovative service business as well as various online-to-offline (O2O) service businesses, such as finance, transportation, and lifestyle services including beauty, parking and house cleaning and maid services., are suffering from a series of lawsuits. Since the company has developed new businesses in numerous sectors, it is locked in small and large legal battles with competitors that are already present in the market.

According to industry sources and the data from the Financial Supervisory Service (FSS) on September 1, Kakao and its subsidiaries has had 20 ongoing and new lawsuits from January to the end of June and their litigation costs has totaled 3.7 billion won (US$3.3 million).

There are seven lawsuits left, including one global litigation, when excluding lawsuits that were completed within the first half of the year and filed by Kakao or its subsidiaries.

In particular, Kakako will have a second legal battle with the nation’s top online game developer NHN Entertainment Corp. on the 8th over a patent infringement of “friend application programming interface,” or friend API. In May, K-Innovation, a patent management subsidiary of NHN Entertainment, filed a damage suit against Kakao, accusing the company’s gaming service “Kakao Game” of unlicensed use of its patented friend API technology. The technology encourages users to play more games by allowing them to see the list of their friends who are playing games and to compare their game scores and rankings through connected social media services such as Kakao Talk and Line. As Kakao filed a request for the patent invalidation to Korean Intellectual Property Office (KIPO), a tense legal fight between the two companies is expected at the second trial on the 8th.

Kakao also faces a series of suits with individual users. The company is scheduled to be sentenced in October after a user, surnamed Sohn, brought a suit to collect some 1.6 billion won (US$1.43 million) in damages for illegally posting individual works on the portal site. Moreover, it will shortly set a date to plead a case in which 24 people, including one surnamed Chung, filed a compensation suit against the former Daum Kakao in 2014 for providing personal information to the government under its seizure and search warrant.

What makes the matter worse, Kakao is caught up in a battle with a global patent troll. In May and June, a global non-practicing entity (NPE) called UNILOC filed a lawsuit at the Eastern District of Texas against Kakao. It indicated on its suit that a voice talk through Kakao Talk, which is Kakao’s mobile messenger, invaded its patents. Some industry sources say that it will be difficult for Kakao to win the case since UNILOC is a patent troll. It seems that this lawsuit is going to take at least two to three years.

In this regard, a Kakao spokesperson said, “We don’t think the lawsuits would have major adverse effects on company management.” However, the outcome of the litigations will affect the company as it is suffering from a series of suits at the moment when it is unlikely to improve performance due to rising costs caused by the expansion of new businesses, according to industry watchers.

Meanwhile, Kakao posted 26.6 billion won (US$23.7 million) in operating profit in the second quarter but the figure stood at as low as 8.6 billion won (US$7.66 million) when excluding that of its subsidiary Loen Entertainment.