Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Will SK, LG reach last-minute settlement over patent dispute in US?
Headquarters of LG Group and SK Group in Seoul / Yonhap
By Baek Byung-yeul
USTIC rules in favor of LG in 2-year-long battery dispute
Volkswagen, Ford urge two Korean firms to settle dispute ASAP
By Baek Byung-yeul
With the U.S. International Trade Commission (USITC) siding with LG Energy Solution (LGES) in its intellectual property battle against SK Innovation (SKI), all eyes are on whether the two Korean electric vehicle (EV) battery makers can reach a settlement with each other.
The USITC ruled in favor of LGES on Feb. 10, backing the company's claim that SKI infringed on trade secrets for developing EV batteries by hiring ex-employees of LG Chem, ending the two-year dispute. LG Chem spun off its EV battery division last year to form LGES, which has continued the legal battle in its place.
The USITC issued a limited exclusion order to SKI, banning the company from importation, domestic production and sales of EV batteries in the U.S. for 10 years. However, the commission also permitted SKI to import components needed to produce EV battery packs for Volkswagen for two years and for Ford for four years.
U.S. President Joe Biden has 60 days to review the USITC's exclusion order. Unless the president exercises his veto powers, the ruling becomes final after 60 days.
At this point, industry analysts said there are two possibilities for SKI ― one is that Biden exercises his right to veto the USITC's decision before the end of the 60-day presidential review period, and the other is reaching a settlement with LGES.
SKI said it will continue looking for ways “to protect our clients' interests during the presidential review period and afterwards.”
Georgia State Governor Brian Kemp also backed SKI, calling on President Biden to overhaul the USITC's ruling as the decision against SKI could hurt the company's battery-making plant being built in the state. SKI is currently building two battery production factories in Georgia, and will complete the construction of the first one in the first half of this year. SKI has said its plant will create around 2,600 local jobs.
Automotive companies selling their cars in the U.S. expressed their hopes that the two Korean battery companies would settle the case as soon as possible at a time when achieving a rapid transition to EVs is integral.
On Friday, Volkswagen called itself an “unintended victim” in the legal tussle between LG and SK and urged the U.S. government to extend a reprieve to at least four years to “give an adequate transition period,” according to Reuters. The German carmaker also expressed its hope that the “two suppliers will settle this dispute outside of the courtroom.”
Ford CEO Jim Farley also encouraged the two Korean battery makers to reach a settlement as the USITC only granted four years to SKI to import components for domestic production of lithium-ion batteries for Ford's F-150 EV.
“A voluntary settlement between these two suppliers is ultimately in the best interest of U.S. manufacturers and workers,” the CEO noted on Twitter, Thursday. He added: “ITC ruling makes way for @Ford to bring to market our groundbreaking electric F-150.”
In the global EV battery industry, LGES has been competing for the top spot with China's CATL while latecomer SKI is seeking to improve its presence by expanding its battery plants. According to data by market researcher SNE Research, LGES had the second-largest market share with 23.5 percent in 2020, 0.5 percentage points smaller than the leader CATL. SKI was the sixth with a 5.4 percent share following Samsung SDI with 5.8 percent.
It seems the dispute between the two Korean battery makers has also become a headache for the Korean government, which aims to nurture EV batteries as one of the country's core export items, following semiconductors.
In January, Prime Minister Chung Sye-kyun urged LGES and SKI to settle their dispute before the USITC ruling, saying “I hope the two settle the issue immediately and join forces for the global market.”
It remains to be seen whether SKI will offer enough compensation to satisfy LGES and reach a settlement. According to sources directly involved with the issue, LGES was asking SKI to pay a "few billion dollars," while SKI was offering to pay a "few million."
“After the USITC announcement its ruling, we urged SKI to accept the ruling and come to the negotiating table with a compromise that can satisfy its shareholders and investors,” an LGES official said.