Startups Ministry to carry out tech mediation on Lotte, Algocare

South Korea’s Ministry of SMEs and Startups said Wednesday it will carry out a mediation on a technological theft dispute between Lotte Healthcare and Algocare.

The ministry plans to form a coordination group composed of three to five lawyers and other experts as early as this week to hold a technological dispute resolution proceeding for the two companies.

Algocare, a local health care startup, recently raised suspicions over Lotte Healthcare’s showcase of an automatic nutritional supplement dispenser similar to its own at the Consumer Electronics Show in Las Vegas in January.

It argued that Lotte copied a key feature of its dispenser, which uses separate cartridges to mix and dispense nutritional supplements for users. In September 2021, the two signed a memorandum of understanding when Lotte vowed to invest in Algocare’s automatic dispenser and form a business partnership. However, the investment was never made.

The startup claimed that Lotte Healthcare demanded information on how the product works, its marketing strategies and intellectual property including the patent on the dispenser during that period.

Lotte Healthcare refuted the claim, stressing that a supplement dispenser is a universally used product and that it had looked into the product even before its with Algocare.

In 2020, Israel-based Nutricco presented a health care business model using a dispenser to distribute vitamins and other supplements at the time set by the user, it argued, implying that Algocare’s dispenser is not a one-of-a-kind product.

“The issue here is whether Algocare’s product uses a widely known technology that cannot be protected by patent. In that case, Lotte is likely to win,” Kim Kil-hae, CEO at startup accelerating company TechBI told The Korea Herald. Kim previously served as a member of the Startups Ministry’s technological dispute resolution committee.

Algocare has to prove that Lotte Healthcare stole its unique technology with economic value, Kim added.

“If the ministry’s mediation fails to satisfy either party, the case will likely go to court and it may take years for a ruling. During that time, the startup might go bankrupt,” he said. “So far, South Korea lacks active reimbursement or other remedies for small companies suffering technological theft or patent infringement.”

Last month, the Fair Trade Commission launched an investigation into Lotte Group and its two affiliates -- Lotte Healthcare and Canon Korea, who produced the dispenser in question -- after Algocare reported the technological theft.

Algocare plans to bring the case to the Korean Intellectual Property Office and carry out both civil and criminal suits against Lotte.