SK-LG feud in spotlight ahead of Biden ascendancy

Corporate logos of LG and SK are seen in this file photo, Sunday. Korea Times file

By Kim Yoo-chul

Intellectual property (IP) rights have recently come to the fore as the main cause of industrial disputes.

President-elect Joe Biden's administration is also expected to double down on the protection of IP rights especially in the wake of the ongoing trade dispute between the U.S. and China. Many foreign investors, companies and even individuals are expected to raise issues about the implementation of expected policies under the new U.S. government and their possible consequences.

The U.S. federal authorities have aggressively been describing the threat of economic espionage by foreign companies as one of the looming threats to the economic vitality of the United States, a trend that has been leading to an increase in investigations. While the Chinese government and its state-controlled companies are currently considered the primary threat, other foreign entities also represent concerns as well.

These changes have made industry watchers take a fresh look at ongoing patent disputes between Korea's leading battery manufacturers ― LG Energy Solution and SK Innovation (SKI) ― as the United States International Trade Commission (USITC) is set to give a final ruling in the alleged misappropriation of trade secrets by SKI.

In 2019, LG Energy Solution, a company spun off from LG Chem, filed a lawsuit against SKI with the USITC accusing the latter of gaining illegal access to trade secrets by hiring former researchers. LG believes SKI used these in developing its battery technology, which led to it winning more orders from major car manufacturers. SKI denied the allegation, however, the USITC issued a preliminary ruling in favor of LG saying SKI might have been involved in the destruction of documents, which was widespread throughout its organization.

In the U.S., if an entity willfully destroys documents to get rid of evidence in a litigation case, it faces further penalties. While the USITC didn't imply that possibility, SKI may face an additional lawsuit in a Delaware court, where the battle started, and if the U.S. agency rules in favor of LG.

"Given SKI's repeated commitment in terms of spending more on its plants in the State of Georgia, SKI may have attempted to resolve the issue politically by appealing to senior U.S. government officials that the firm's contribution to the regional economy is huge. However, things have changed after the victories by Jon Ossoff and Rev. Raphael Warnock, both Democrats, in Georgia because their victory solidified Georgia's political transformation. Now, SKI has to think about an exit strategy in the LG issue quite smartly and thoroughly," a patent expert in Seoul said, Sunday. Georgia was once considered a core Republican base.

Among remedial action against SKI, LG was seeking a permanent injunction on SK products, however, it sought "adequate compensation for the infringement" of its IPs to settle the case. LG is said to have asked SKI to pay a "few billion dollars," while the latter apparently offered a "few million dollars," sources directly involved with the issue said.

"If the USITC gives a final ruling in favor of LG ruling by accepting all its claims, then the case could be expanded to both criminal and civil suits. In the worst-case scenario, SKI might have to pay about $5 billion in compensation if it was finally found to have been involved in willful infringement," said an industry official.

While LG has offered no comment on the matter, sources told The Korea Times that its top management "doesn't want to see the worst-case scenario," implying that LG will close the issue once conditions are met.

SKI could take the issue to the United States Trade Representative (USTR) hoping to win a veto, which would lead to reduced compensation; but this is seen as risky, given its contribution and leadership both in South Korea and the United States.

Its battery business is on track to rise thanks to huge demand from car manufacturers ― SKI could become a supplier for Hyundai Motor's E-GMP project. Plus, Chairman Chey Tae-won is set to lead the country's most-influential business lobby group, the KCCI, thanks to group-wide efforts to promote societal values on multiple fronts.

"I would say a practical settlement agreement is needed between LG and SK as I've heard LG does not expect SK to pay a few billions. Rather, it was hoping to settle all differences once and for all in accordance with statutory remedies for IP infringement," another patent expert said. "It's time for SKI to accept LG's olive branch."

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