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An announcement of a default judgment against SK Innovation on charges of trade secrecy infringement filed by LG Chem posted on the website of the US International Trade Commission (ITC).

The US International Trade Commission (ITC) delivered a default judgment against SK Innovation on charges of trade secrecy infringement filed by LG Chem. The decision means that ITC has sided with claims made by LG Chem when it requested a default judgment against SK Innovation in November of last year, claiming that SK had attempted to destroy large volumes of evidence, including orders for the deletion of key documents related to the case. SK Innovation said it plans to pursue the legally established objection procedures, but it appears likely to face major setbacks for its battery operations in the US going forward.

On Feb. 14, the ITC published an initial determination on its website for the SK Innovation default judgment in connection with the two companies’ case concerning infringements of trade secrecy in connection with rechargeable batteries. Once a default judgment has been made, only a final judgment remains to be made, with none of the normal argument procedures. The final judgment is scheduled to come on Oct. 5. ITC statistics show that for all trade secrecy cases for which a default judgment was made between 1996 and last year, the eventual final decision was the same.

On Apr. 29 of last year, LG Chem filed suit against SK Innovation with the ITC and a US district court in Delaware, accusing it of violating rechargeable battery trade secrets. The following Nov. 5, it requested a default judgment from the ITC, claiming that SK had sent a company email ordering the deletion of evidence related to the case shortly after the suit was filed, and that it had not properly complied with an ITC forensic order to restore the deleted information. On Nov. 15, the ITC-affiliated Office of Unfair Import Investigations (OUII) submitted an opinion concluding that it was “reasonable to see that SK destroyed the evidence and did not comply with the ITC's forensic order” and that “some of these actions appear intentional.” The situation was turning decisively in LG Chem’s favor.

Besides the rechargeable battery trade secrecy case, LG Chem and SK Innovation currently have a total of six legal cases under way in South Korea and the US, including competing patent infringement suits. Three of the suits are being heard by the ITC and the Delaware district court. Trial procedures for the case in Delaware, which includes charges related to violation of trade secrecy, are currently suspended and are set to resume after a determination by the ITC -- evidence of how an ITC decision can impact other legal action in the US.

If the ITC does finalize the default judgment on trade secrecy violations by SK Innovation, a ban will go into effect on the US importation of SK battery cells, modules, packs, and related components and materials. If the Delaware district court arrives at the same ruling, SK will no longer be able to engage in consignment production in the US, and it faces a serious likelihood of having to pay a large amount of compensation to LG Chem. This would mean a major hit to absorb for SK Innovation, which is currently building a large-scale rechargeable battery factory in the US state of Georgia.

Battery industry observers are predicting that SK will request a settlement from LG before the final judgment. Pursuing the Delaware case to the end would pose a considerable burden not just on SK Innovation but also on LG Chem, with legal costs estimated in the billions of won and as long as two years or more before a final ruling is reached. The two South Korean companies are particularly concerned about souring public opinion as the conflict drags on.

“We plan to follow the remaining legal procedures through to the end in a proactive and diligent manner,” LG Chem said.

“We will continue strengthening our production and protection of rechargeable battery-related intellectual property rights to establish leadership in the global electric vehicle battery market,” it added.

SK Innovation said, “Our relationship with LG Chem is one of good-faith competition, but we also think of them as partners with whom we should be cooperating for the development of the industry ecosystem.”

By Kim Eun-hyeong, staff reporter

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