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EV batteries

SK under increasing pressure for costly settlement with LG

By Feb 14, 2021 (Gmt+09:00)

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SK under increasing pressure for costly settlement with LG

SK Innovation Co. may brace for a billion-dollar settlement with LG Energy Solution Co., after it lost a lengthy legal battle with its hometown rival over alleged trade secret infringement for electric vehicle batteries.  

In its final verdict over the civil case, the US International Trade Commission (ITC) ruled in favor of LG Energy last week. The commission banned the SK Group’s unit from importing some lithium-ion batteries and its components to the US over the next 10 years.

The ITC's decision will end a series of lawsuits filed by the two South Korean companies against each other since 2019, and will make it almost impossible for SK to run its battery plants in Georgia.

SK may be able to invalidate the verdict if it settles the case with LG, although the ruling gave LG the upper hand in negotiations. Previously, LG had demanded 2.8 trillion won ($2.5 billion) to settle the legal action. But SK rejected it, saying it won't pay LG in the trillion-won range for a settlement.

Still, SK may have some time to make efforts to invalidate the ruling, given that the ITC decision is subject to approval by President Joe Biden. The US president could veto the ruling for policy reasons, after a 60-day review period.

SK Innovation said in a statement that the US commission failed to prove any trade secret infringement. To avoid disruptions to its US battery production, the company will try to bring the US government's attention to its EV battery plants under construction in Georgia and their contribution to the development of eco-friendly vehicles in line with US policy efforts, as well as creating housands of high-quality jobs.

Its two battery plants are scheduled for completion in Jackson County, Georgia in 2023.
SK Innovation's first EV battery plant under construction in Georgia
SK Innovation's first EV battery plant under construction in Georgia

But chances are slim for Biden to reject the ITC decision, analysts said, given that SK already received a grace period of two to four years by the ITC to continue to supply EV batteries to Volkswagen and Ford, respectively. Ford Motor's Chief Executive Jim Farley on Thursday publicly encouraged both LG and SK to reach a settlement over the trade case, according to Reuters.

In April 2019, LG Chem, the parent company of LG Energy, filed a lawsuit against SK Innovation on alleged infringement of trade secrets to the ITC and the District Court of Delaware, after discovering 76 core employees of LG Chem’s battery division had moved to the rival company.

But SK Innovation had refuted the allegation, saying that the ex-LG Chem employees voluntarily applied to its company and underwent normal hiring processes required for experienced workers.

NEW PLANTS IN HUNGARY, CHINA

The ITC decision came as SK Innovation was preparing to issue green bonds to raise up to 1 trillion won to fund its second battery plant construction in Georgia. 

Last month, SK Innovation also announced a plan to build its third EV battery plant in Hungary for $2.3 billion, in addition to the planned construction of its third battery plant in China. SK ranked sixth last year in the EV battery market, according to SNE Research. It is aiming to jump to third place in three years, overtaking Panasonic.

“Given the fast technological development in the battery industry and fierce competition for facility expansion, if they lag in investment, they cannot overtake frontrunners,” said an EV battery industry source. “SK Innovation, busy with raising money for investments, is now forced to raise an additional money for a settlement with LG.”

SK, a refinery-cum-battery company, has 3.6 trillion won ($3.3 billion) in cashable assets as of the end of September 2020. Last year, it logged an operating loss of 2.6 trillion won due to the poor refining business, hit hard by the global pandemic.

LG welcomed the ruling which analysts said would help LG reinforce its footing in the US market. Further, EV producers could exclude SK from its suppliers’ list on concerns about a possible disruption to supplies, they cautioned.

“When SK took the whole battery order from Ford for the F-150, LG was shocked,” said the industry source. “That is the reason why LG fought desperately in this case against SK Innovation.” 

Ford is the No. 1 supplier in the US pick-up truck market.

LG Energy said the ITC upheld its intellectual rights built over the past 30 years for several billions of dollars.

“Now SK Innovation needs to admit infringing on our trade secrets and show a sincere attitude to wrap up this litigation,” LG said in a statement.

TIMELINE OF LG's LEGAL BATTLE  WITH SK OVER EV BATTERIES:


-- In April 2019: LG Chem filed a lawsuit against SK Innovation on allegations of misappropriating trade secrets to the US International Trade Commission (ITC) and the District Court of Delaware.

-- In May 2019: LG Chem filed another patent infringement lawsuit against SK Innovation.

-- In Sept. 2019: SK Innovation sued LG Chem on alleged patent infringement with the ITC and the US federal court.

-- In Oct. 2019: SK Innovation took the patent infringement case filed by LG Chem to the Seoul Central District Court to determine its validity.

-- In Feb. 2020: the ITC made a default judgment in favor of LG Chem.

-- In Aug. 2020: the Seoul Central District Court ruled in favor of LG Chem in a patent infringement case in the US against SK Innovation CO. in its first verdict in the case.

-- In Dec. 2020: LG Energy Solution was launched.

-- In Jan. 2021: LG Energy Solution hired KB Securities and Morgan Stanley as the lead managers for its initial public offering on the Korea Exchange.

Write to Man-Su Choe at bebop@hankyung.com

Yeonhee Kim edited this article.

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