LG and SK headquarters in Seoul on the 11th. yunhap news
LG Energy Solutions and SK Innovation’s agreement on the infringement of battery trade secrets between LG Energy Solutions and SK Innovation, which ran parallel looking at the final decision of the US International Trade Commission (ITC), has entered a new phase. This is because the US ITC recognized SK’s trade secret infringement and imposed a ’10 year import ban’.
According to the industry on the 11th, the amount of the settlement amount proposed by both companies is 3 trillion won for LG and up to 800 billion won for SK, which is a large gap. Ahead of the ITC’s final decision, Prime Minister Jeong Sye-gyun even wrote expressions such as “I’m embarrassed” and “I only let others do good things,” calling for an agreement between the two companies, but this is why the discussion could not proceed.
However, due to this ITC decision, SK has only obtained a grace period of two years for Volkswagen and four years for the import ban, and SK is forced to proceed with appeals and other agreements at the same time. If the settlement fails again this time, it is necessary to see the results of the lawsuit for damages in the US Federal Court of Delaware.
Researchers are checking battery products at the LG Energy Solution battery factory. LG energy solution provided
LG and SK “Take serious negotiations”… Up to 6 trillion won or more in case of punitive damages compensation
The part that LG requires in the negotiations is’sincerity’. It is to admit the infringement of trade secrets and present a reasonable settlement amount. LG Energy Solutions revealed the terms of the agreement in a conference call related to the final ITC decision on the same day. Jang Seung-se, executive director of management strategy at LG Energy Solutions, explained, “The most important reason we have not reached an agreement in the negotiations is because SK Innovation has been negotiating with an attitude that does not admit infringement of trade secrets. Regarding the size and payment method of settlement money, he said, “We have been negotiating with standards in accordance with the US Trade Secret Protection Act.” “Before the details of the payment method, the total amount must be close to a certain level before further discussions can be made. As it came out, if the eye level of the total amount is correct, the payment method will be easily discussed.”
According to the U.S. Federal Trade Secret Protection Act (DTSA), which LG claims, the damage verification and calculation takes into account the actual damage suffered by the plaintiff, the unfair gains taken by the victim, and the expected future damage. In particular, the United States has a’punitive damage compensation system’, so if the perpetrator intentionally infringes the trade secret, the amount is added for punishment and prevention of recurrence. Therefore, LG insists that the maximum compensation will be 6 trillion won or more if a civil lawsuit in the Delaware federal court proceeds.
Researchers are showing battery products at SK Innovation’s battery factory. Provided by SK Innovation
The largest fine lawsuit was also settled at 285 billion won… SK “Let’s find a reasonable settlement money”
Even if SK admits that it has infringed on trade secrets and agrees with LG’s claim to be’sincerely’, SK argues that LG’s claim on the size of the settlement amount is not reasonable. On the day of receiving the ITC ruling, Lim Soo-gil, head of SK Innovation’s Value Creation Center, emphasized, “Under reasonable conditions, we will always negotiate for an agreement.”
The biggest issue is the calculation of damages according to the future business value of electric vehicle batteries. According to the industry, the operating profit of the three battery companies for electric vehicles is around 50 billion won to minus 400 billion won per year. Shinyoung Securities estimated LG Energy Solution’s electric vehicle battery operating profit of 51 billion won last year, and Kyobo Securities predicted that Samsung SDI will record an operating loss of 109 billion won. SK Innovation’s operating loss is KRW 425.6 billion. Despite such a rosy outlook for the electric vehicle market, battery makers still have to invest enormous amounts of money for the next few years, and it is difficult to predict future business value because they have to prepare damage provisions in advance for fires.
SK also argues that the settlement amount of KRW 3 trillion that LG requires is a ridiculously high amount based on the fact that the average amount of fines as a result of the top 10 lawsuits in the U.S. infringement lawsuits infringing on trade secrets so far is around KRW 254.9 billion. According to industry sources, the largest penalty in the United States for infringement of trade secrets was a lawsuit between DuPont and Kolon in 2011 over aramid, a high-tech textile material, and the Federal Court of Virginia imposed a fine of about 1,139 trillion won. However, it also agreed to about 285 billion won in 2015 after going through the process of destruction and repatriation.
As disagreements on the size of the settlement fund have not been narrowed, some opinions suggest that the problem may be resolved through a group of experts. Cha-ho Jeong, a professor at Sungkyunkwan University Law School, said in a recent contribution, “The settlement is difficult to compensate for excessive or undercompensation,” and argued that “a group of more than 9 arbitrators must be formed and completed quickly within one month through intensive hearing.”
However, LG is in a negative position on the formation of arbitrators. Han Woong-jae, executive director of the legal department of LG Energy Solutions, said, “The most objective and well-informed institution in this case is the US ITC and the court.” “It is time and expense to go through a third arbitration procedure with an objective organization.” “It’s going to be doubled.” He added, “If an agreement is reached, it should be made between the parties. If a third party or people who do not know the facts intervene, it will interfere with the agreement.”
Kim Kyung-jun reporter [email protected]
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