Input 2021.01.29 11:08
LG demands trillions of dollars as settlement money… SK offers several hundred billion won
“SK and LG should concession one step at a time to achieve an agreement and fulfill the main business”
Prime Minister Jeong Sye-gyun SK innovation (096770)Interest is focused on whether this will affect the negotiations between the two companies as they urge an agreement on an electric vehicle battery lawsuit. The industry is also concerned that’K Battery’ will lose its status in the global market while leading domestic companies are fighting a’house fight’.
The final decision of the US International Trade Commission (ITC) is two weeks away, so the two companies must sit face to face at the negotiating table in order to reach an agreement. However, it is unclear whether the two sides will find a point of agreement due to disagreements over the size of the settlement amount and the method of calculating the settlement amount. The fact that the local atmosphere in the US, which has been favorable for LG Energy Solutions so far, has changed in favor of SK Innovation after the Biden government was established, is an obstacle to the agreement between the two companies.
It is unusual for the final decision to be postponed three times, so there is a prospect that ITC will issue a decision this time. An industry insider said, “It is judged that the ITC has delayed the judgment of this lawsuit to the Biden government. It is still in the early days of the Biden government, so the final ruling may not come out on the 10th of next month. Sooner or later, the Biden government’s decision was made. Judgment will be made.”
The proceedings of the lawsuit are unpredictable, so negotiations must resume next week in order for the two companies to reach an agreement.
April 2019 LG Chem (051910)After filing a lawsuit against SK Innovation to infringe trade secrets with ITC, the two companies are having several disputes at home and abroad. With a preliminary ruling in favor of LG Energy Solutions, if SK Innovation’s alleged infringement of trade secrets is finally admitted, the electric vehicle battery business in the US will become virtually difficult.
Prior to that, in February of last year, the ITC ruled against the alleged infringement of SK Innovation’s trade secrets on the grounds of’destruction of evidence’. At that time, LG Energy Solutions insisted that “Sk Innovation destroyed the evidence, such as deleting related data while the lawsuit was in progress,” and the court accepted this and made an early decision. Early judgment is a decision made by the ITC’when it finds a matter of great importance to the point where it is no longer necessary to proceed with a trial.’ However, afterwards, SK Innovation raised an objection, and the court admitted it again, and the final decision was passed.
In the investment banking (IB) industry, it is estimated that only costs related to litigation by both sides will reach 1 trillion won each. If SK Innovation finally loses, tangible assets such as US factories are treated as impairment losses in accounting, resulting in an astronomical increase in litigation costs. It is bound to be a big bad news not only for SK Innovation, but also for the domestic electric vehicle battery industry.
When Prime Minister Chung called for an agreement between the two companies by writing intensive expressions such as’Good things for others’ and’Isn’t it embarrassing,’ LG Energy Solutions and SK Innovation announced that they would endeavor to achieve an amicable agreement. However, until now, the two companies only checked differences of opinion every time they sat at the negotiating table and left the table with their feelings hurt.
The biggest disagreement is the amount of settlement money. Although the settlement amount proposed by the two sides is not known, it is said that LG Energy Solution offered trillions of won and SK Innovation offered less than 1 trillion won. LG is known to have calculated the settlement amount by adding the cost of purchasing patents to the litigation cost, taking into account the US Federal Secret Protection Act and recent precedents. On the other hand, it is reported that SK Innovation did not acknowledge the infringement of trade secrets and presented only the expenses related to the lawsuit as settlement money.
The difficulty in predicting the outcome of the lawsuit also acts as an obstacle to negotiations between the two companies. ITC has already decided to lose SK Innovation in the preliminary judgment. In general, the ITC’s preliminary judgment is rarely overturned in the final judgment.
However, analysts say that ITC’s continued postponement of the final ruling is favorable to SK Innovation. SK Innovation is building an electric vehicle battery plant in Georgia, USA. As US President Joe Biden is highly interested in the eco-friendly energy industry, SK Innovation’s US plant construction is also drawing attention. SK Innovation’s U.S. subsidiary (SKBA) was also selected as a case of ‘Excellent U.S. investment company’ by the US Department of State (DoS).
The President of the United States has the power to reject the ITC’s ruling within 60 days. If the President of the United States exercises the veto, the verdict becomes invalid and the lawsuit begins again. If President Biden exercised his veto when SK Innovation lost, it should be considered that he actually gave SK Innovation’s hand.
In the end, it can be seen that ITC’s postponing the final ruling three times has passed the judgment to the Biden government. Lee Ji-yeon, a researcher at Shin Young Securities, said, “It seems that the ITC’s final results have been postponed due to the inauguration of Biden.” In the end, it is an analysis that the current situation, where the outcome of the lawsuit cannot be predicted, is leading to a confrontation with the’strong river’ that both companies will watch the lawsuit until the end.
In related industries, the opinion that an immediate agreement between the two companies is needed is dominant as competition in the global electric vehicle battery market is becoming more intense. This is because even if either side loses, the domestic electric vehicle battery industry can be hit and the partner companies can suffer a lot of damage. Recently, Chinese electric vehicle battery companies are making progress, and US and European automakers are entering the market through joint ventures.
An industry insider said, “If SK Innovation gives a huge settlement money, it is a form of acknowledging the infringement of trade secrets. For this reason, it seems that they are trying to reduce the size of the settlement money.” You have to reach an agreement and stick to your job.”