LG, SK reach settlement in battery patent dispute

Posted on : 2021-04-12 17:12 KST Modified on : 2021-04-12 17:12 KST
The agreement in the companies’ dispute came just one day ahead of the expiration of US President Joe Biden’s veto powers

The battery dispute between SK and LG has finally come to an end.

Two years after LG brought its case against SK before the US International Trade Commission (ITC) in April 2019, it has inked an agreement with SK. Coming amid active mediation efforts and pressure from the US government, the deal included the payment of compensation amounting to some 2 trillion won (US$1.77 billion).

The settlement lays the groundwork for a new step forward for SK, a company that had previously been in danger of losing its entire battery unit. Now the two companies stand prepared to let bygones be bygones and venture into a global battery war spanning the finished automobile and battery industries.

The agreement in the companies’ dispute came just one day ahead of the expiration of US President Joe Biden’s veto powers. In a statement Sunday, Biden welcomed the agreement, hailing it as a “win for American workers and the American auto industry.”

According to a joint press release Sunday by LG and SK, LG Energy Solution will be receiving a settlement of 2 trillion won from SK Innovation. One trillion won is to be paid in cash, while the remaining one trillion won is to be received in royalties for battery technology.

In terms of the timeline for the royalties’ payment, the companies said only it would take place through “agreed-upon methods.”

At the same time, the two companies agreed to put an end to various legal disputes that had been underway, including a patent infringement lawsuit currently pending with the ITC. They also pledged a moratorium on additional legal action for the next 10 years.

Both sides emphasized the importance of “friendly cooperation.”

“We agreed to pursue healthy competition and friendly cooperation for the advancement of the South Korean and US electric vehicle battery industries,” said LG Energy Solution President Kim Jong-hyun and SK Innovation CEO Kim Jun.

“In particular, we will be working together on the Biden administration’s battery supply chain strengthening efforts and the eco-friendly policies based on that,” they added.

The agreement was reported in the US press ahead of the two companies’ official announcement. A senior official closely acquainted with the settlement process explained that there had been “intensive mediation by the US Trade Representative and others ahead of the Biden administration’s deadline for exercising veto authority.”

The Washington Post was first to report on the settlement, which it called a “victory for President Biden” that came just ahead of the expiration of his veto powers. The newspaper saw Biden as having killed two birds with one stone — contributing to eco-friendly industry and job creation while also protecting intellectual property rights.

LG and SK competed to win over Biden

The US has been the chief battleground for the two companies’ desperate battery battle. This is borne out by the all-out lobbying efforts both sides have been expending with the US.

According to figures from the OpenSecrets website operated by the US non-profit civic group Center for Responsive Politics, the two companies spent over 1.3 billion won (US$1.15 million) lobbying the US government last year alone, including both houses of Congress, the White House and the Commerce Department.

In late March of this year, Kim Jun traveled to the US to provide direction on the front lines for SK Innovation’s battery conflict. He was still in the US when the final settlement was reached with LG.

For a little over a month, Kim has ignored other issues to go “all in” on the battery agreement issue. Also attracting attention was Kim Jong-hoon, the chairman of SK Innovation’s board, who departed for the US alongside Kim Jun in March. Kim Jong-hoon previously served as South Korea’s representative in negotiations on its free trade agreement with the US as Minister for Trade under the Roh Moo-hyun administration.

The two companies’ lobbying efforts over the past two to three months can be summed up as having the aim of winning over Biden. Indeed, the course of his administration’s policies since his inauguration in January had crossed paths with the two sides’ battery conflict.

The Biden administration is making a major policy priority of electric vehicles (EVs) and other eco-friendly businesses and the creation of associated jobs. He has also hoped to establish an EV value chain within the US, extending from batteries to finished vehicles.

It’s been good news for SK, which has been investing large amounts in expanding its factory in the state of Georgia. SK’s decision to bring attorney Sally Yates — a Georgian who previously served as deputy attorney general during the Barack Obama administration — onto its legal team was similarly motivated.

At the same time, the Biden administration has also taken a hard line on intellectual property theft.

Like the Donald Trump administration before it, it has been on the alert over China’s pursuit in the area of technology — and the technology pilfering that has taken place in the process. This meant Biden was not in a position to readily exercise his veto powers on a case that the ITC deemed to be a violation of trade secrecy.

It’s been referred to as “Biden’s dilemma.” LG appeared to have the administration’s dilemma in mind when it fought back last month by announcing plans to potentially acquire SK’s plant in Georgia or build a new one in the state.

By Kim Kyung-rak, staff reporter

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