An official from SK Innovation said on the 15th, “It is somewhat regrettable about the result of the lawsuit for infringing battery technology trade secrets, but it is not necessary to pay compensation right now.”
However, the majority of opinions inside and outside the company say that there is no choice but to materialize related discussions sooner or later. Since April 2019, SK Innovation has filed an import ban lawsuit against LG Energy Solutions (formerly LG Chem’s Battery Division) regarding the infringement of electric vehicle battery trade secrets. However, this risk was not reflected in the financial statements.
This is a big difference from the fact that large corporations generally estimate the amount of compensation in advance and set it as a provision for a case in which a lawsuit is being filed for financial risk management. Provisions mean that a company preemptively accounts for costs that it is likely to spend in the future as losses. If there is no need to pay compensation, it can be converted back into profits.
This attitude has been maintained even after the US International Trade Commission (ITC) issued a Default Judgment to SK Innovation in February last year for incompletely fulfilling its obligation to preserve evidence. In the final ruling, SK Innovation has revealed that it will not accumulate provisions, saying there is a possibility that the related decision could be overturned.
However, on the 10th (local time), as ITC confirmed the previous ruling of early defeat that LG Energy Solutions gave as a final decision, SK Innovation cannot postpone recognizing the related risks anymore.
This is because SK Innovation is in a situation where it is necessary to proceed with an agreement on a lawsuit with LG Energy Solution. In order to operate SK Innovation’s first and second plants in Georgia, the United States without problems in the future, it is necessary to hurry to resolve the import ban.
In addition, civil suits, which are expected to resume in the Delaware Federal District Court sooner or later, are also considered an unsettling factor that makes it impossible to postpone the settlement.
If the ITC determines whether or not the trade secret is infringed, the Delaware court will determine the amount of damages. As LG Energy Solutions won ITC, the possibility of winning the Delaware Court increased. If SK Innovation loses in civil lawsuits, it is highly likely that the amount of compensation will increase, so it is more efficient to agree before that.
This is not irrelevant to the business community’s emphasis on the need for rational discussions and prompt conclusions between the two companies. It is in the judgment that the competitiveness and status of the global top-level domestic battery industry may be greatly shaken depending on the result of the lawsuit. This is why it is pointed out that both companies need a majestic perspective.
[사진=SK이노베이션 제공]
The problem is that SK Innovation’s financial soundness is not good even when provisions for lawsuits have not been accumulated. The company’s debt-to-equity ratio has deteriorated 71.7 percentage points in three years from 77.3% at the end of 2017 to 149% at the end of last year. During the same period, the amount of borrowings from 5,5779 billion won has more than doubled to 13,636.7 billion won.
SK Innovation plans to make trillions of investments in the electric vehicle battery business, which has been selected as a future growth engine. Additionally, if financial soundness deteriorates, difficulties in financing and future investment will inevitably increase. It is not unrelated to this that SK Innovation has delayed the time to reflect the lawsuit provisions as much as possible, unlike other companies.
An industry insider said, “With SK Innovation’s financial structure getting worse and worse, setting a large-scale provision for battery litigation would have been financially burdensome.” I think I came.”
SK Group’s Seorin-dong office building where SK Innovation is located.[사진=석유선 기자]