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The final decision of the U.S. International Trade Commission (ITC) on the lawsuit for infringement of battery trade secrets between LG Energy Solutions and SK Innovation (planned on the 10th local time) is 10 days ahead. Until recently, the two companies said, “We will do our best to agree,” but it is known that the difference in position is still not narrowing. In the industry on the 31st, the agreement between the two companies is unlikely to be easy, but the’fire’ for a dramatic agreement seems to be alive. There is a high possibility that the two companies will reach a full-scale agreement after the final ITC decision. The biggest issue is the size of the consensus. Recently, according to the industry, LG is claiming 2 to 3 trillion won and SK hundreds of billions of won in terms of the settlement amount, but this is also controversial. LG is in a position that it is difficult to say that the amount presented by SK is several hundred billion won. The settlement amount gap is very large. With the ITC decision approaching ten days in the future, an urgent check is made on future scenarios.
① Cited ITC `SK Early Loss Judgment`
It is a scenario in which the early defeat judgment (preliminary decision) that ITC made to SK Innovation in February last year is quoted as it is in the final decision. According to recent ITC statistics (1996-2019), in the case of trade secret infringement, all cases in which the ITC administrative judge admitted the infringement in the preliminary decision have remained as the final decision of the ITC committee. For this reason, it is considered as the most likely scenario in reality. The Joe Biden administration is also paying attention by revealing the trend of strengthening intellectual property rights. On January 19 (local time), former Federal Reserve Chairman Janet Yellen, who was appointed as the first finance minister, at a hearing on the same day, addressed the issue of intellectual property rights in China and emphasized that “we must fight against unfair and illegal practices in China.” did.
When SK finally loses, the impact is expected to be enormous. SK Innovation will be banned from importing batteries and related parts to the US. SK Innovation’s battery plant in Georgia, USA, is virtually impossible to operate. In this case, SK should also bear the burden of reimbursement to the automaker due to the failure to deliver. Currently, SK’s orders in the US are known to be about 20 trillion won.
② `Reconsideration` or `President veto`
It can also be assumed that the ITC committee instructs the ITC administrative judge to review it. From the standpoint of SK Innovation, this is the best scenario, and SK expects, “There is a possibility.”
If the ITC instructs a full review, this is likely to be a decision to ‘research the facts’. As administrative judges are no longer able to make the same decisions as before, the litigation will face a new phase. Although it is a favorable situation for SK, many experts cannot generalize it, but analyzes that the probability itself is not high based on past ITC statistics. In addition, there is a possibility that the ITC will admit early judgment, but investigate the’public interest’. Even if SK Innovation loses in ITC, the US president can exercise the veto. This is a scenario in which President Joe Biden exercised his veto power in consideration of the impact of SK Innovation’s operation of the Georgia plant in the US on the local jobs and economy. This is also an advantageous scenario for SK Innovation. SK is expected to use the exercise of the veto as a lever to lower the settlement amount. However, there has never been a single veto for infringement of ITC trade secrets.
After that,’reading’ becomes somewhat complicated. However, even if the presidential veto is allowed to import SK batteries to the US, it does not change the situation until the ITC confirmed that the’trade secret infringement’ was confirmed. Global order-taking activities are expected to be disrupted. In particular, LG is expected to take steps to raise the amount of damages as much as possible by filing a civil suit with the Delaware Federal District Court based on the final ITC decision. SK still faces the burden of paying damages to LG.
③ Delaware District Court Civil Procedure
If the two companies do not reach an agreement after the final ITC decision, it will eventually lead to a civil lawsuit in the Federal District Court of Delaware. Some argue that if LG’s allegation is admitted in a civil lawsuit in Delaware state, a ruling may be issued to pay compensation over 6 trillion won to SK. This claim is △The point that SK’s global order volume reached about 40 to 50 trillion won during the period (2017-2019) that LG claimed to have been damaged by SK. It is based on the unfair profit taken △ future damage that LG will suffer from electric vehicle batteries with a high future business value. The US Federal Trade Secret Protection Act usually calculates compensation based on damages and unfair gains, future value, and punitive damages related to trade secret infringement.
The maximum legal limit for punitive damages that can be imposed in federal district court is 200%. It is known that the amount of settlement amount LG requested to SK is up to KRW 3 trillion, and the industry estimates that this amount is the amount of damage in the past and the future, and punitive damage compensation has not been considered. If LG applies a total of 3 trillion won for past and future damages and 100% (3 trillion won) for punitive damages, the total amount of compensation for SK will be 6 trillion won. An SK official said, “SK did not infringe on its trade secrets,” and said, “If LG discloses the damaged trade secrets in detail, SK will make a reasonable compensation accordingly.”
④ After the ITC ruling, the touch to enter agreement
In the business world, the prospect that the two companies will enter into an agreement after the ITC decision is predominant. An official said, “The two companies are unable to narrow down their disagreements, but after the final decision of the ITC on the 10th, they will come up with a full-fledged plan and start talking.” An expert in the field of intellectual property rights said, “In most cases of IPR lawsuits, most of them will be agreed.”
Even if ITC quotes SK’s early defeat judgment on the 10th, there is no problem with the agreement between the two companies in the future. Since ITC is a civil lawsuit, SK’s sanctions on US imports can be lifted if the two companies reach an agreement. However, if SK loses, it is certain that LG’s bargaining power will increase and the demand will be higher than the existing settlement amount.
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