Biden's intellectual property drive impacts SK-LG dispute

USITC headquarters in Washington D.C. /Yonhap

By Kim Yoo-chul

U.S. President Joe Biden is expected to review a final ruling by the United States International Trade Commission (USITC) in favor of LG Energy Solution (LGES) in a multi-billion dollar battle with Korean rival SK Innovation (SKI) over the alleged misappropriation of intellectual property on electric vehicle (EV) batteries.

The USITC imposed the full 10-year ban requested by LGES on SKI. But the commission also granted SKI a “grace period” to supply batteries to Ford for four years and to Volkswagen for two years. That ruling will take effect if the U.S. president formally accepts the commission's ruling.

But two factors seem to be at play affecting Biden's ultimate decision.

He could veto the ruling if administration officials believe it could hurt the best interests of American consumers. But the U.S. president could also accept the ruling to set a precedent supporting his hardline stance on China's alleged intellectual property abuses.

Given the USITC's decision to allow SKI to sell its products for “certain periods,” the prospect of Biden accepting the commission's final ruling seems to be more likely, according to observers.

“Biden is better known as a strong opponent of [U.S. President Donald] Trump's trade policies. However, considering Biden's repeated focus on protecting intellectual property, the Biden administration is widely expected to continue its hardline stance against China's alleged abuses, while asking Washington's allies to join this agenda,” a patent expert in Seoul said by telephone.

From that standpoint, the LGES-SKI battle is becoming complicated, as it involves “political issues” between Beijing and Washington rather than being a dispute between two companies. Trump failed to see progress toward a “Phase Two Agreement.” But Biden's focus on the importance of intellectual property is unlikely to change during the next round of trade talks between the world's two economic powerhouses.

There have been two cases in which U.S. presidents intervened in conflicts between private firms: Samsung Electronics' victory against Apple, back in 2013, when the Korean tech giant clinched a “patent-infringement victory” over Apple, and another Samsung case in 1987 when then U.S. President Ronald Reagan vetoed a ruling involving Samsung's DRAM chips, which could have disrupted the entire PC market. The rationale behind those decisions was based on the belief that the rulings would hurt the “public interest.”

But the landscape has changed due to the U.S.-China trade dispute initiated by former U.S. President Donald Trump, who said China's intellectual property violations had a significant impact on U.S. companies. The Washington-Beijing “Phase One Trade Agreement” signed in January of last year covered some intellectual property issues, including the “normalization of China's systems for ntellectual property and its enforcement.”

Plus, a recent report released by the Congressional Research Service said China's failure to protect and enforce intellectual property rights is “harming U.S. IP rights holders.”

SKI has the option of bringing the issue to the U.S. Court of Appeals for the Federal Circuit. But both LGES and SKI are Korea's top-tier manufacturing companies which are aggressively foraying into the highlylucrative and promising EV business. As a result, patent experts said a compromise would be a mutually acceptable solution.

Both SKI and LGES are contributing a lot to the regional economies of the U.S. SKI is investing billions of dollars into EV plants in the U.S. state of Georgia, some of which are under construction, while LGES has been operating EV plants in the U.S. states of Michigan and Ohio with the U.S. government providing various tax and administrative incentives.

SKI said it would begin discussions with LGES for a possible settlement before and after the presidential assessment interval; while LGES also said it does not want to see the dispute escalating into the “worst-case scenario.”