LG and SK Step Back... How Did the 2 Trillion Won Settlement Amount Come About?

LG initially proposed 3 trillion and SK 1 trillion, negotiations at a standstill
Sudden agreement reached one day before the President's veto deadline

Kim Jun, President of SK Innovation / Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Choi Dae-yeol] LG Energy Solution and SK Innovation, who decided to conclude years of battery disputes, announced on the 11th that they reached a settlement at around 2 trillion won. The settlement amount of 2 trillion won offered by SK Innovation is reported to be the largest not only in the battery industry but also in global trade secret-related cases.

Initially, the industry believed that during the negotiation process, LG demanded an amount exceeding 3 trillion won, while SK proposed around 1 trillion won, making the negotiations difficult to progress. From this perspective, it is interpreted that both companies made concessions to reach an agreement. The two companies did not disclose specific details about the payment method or timing of cash or royalties. Regarding royalties, it is known that the total amount was set by taking a certain percentage from global sales as per convention and paid over a certain period.

LG had demanded about 3 trillion won, citing that its R&D expenditure exceeded 5 trillion won, and that in cases of trade secret infringement in botulinum toxin or walkie-talkie fields?whose market size is less than one-tenth of the electric vehicle battery market?they had settled for about 400 to 450 billion won. The U.S. International Trade Commission (ITC) concluded that trade secrets were infringed and mentioned that if such infringement had not occurred, SK's market entry would have been delayed by 10 years, which was also used as a basis.

As the U.S. government declared the expansion of electric vehicle adoption, the local battery market was expected to grow rapidly. It was explained that under the U.S. Federal Trade Secrets Act, the settlement amount could include actual damages suffered, anticipated future damages, punitive damages up to twice the amount, and attorney fees.

Shin Hak-cheol, Vice Chairman of LG Chem

LG took an aggressive stance in negotiations, as it was recognized as a victim according to the ITC's final ruling. Although LG stated that the door for settlement negotiations was open, it maintained a firm position that SK must admit wrongdoing and take a proactive approach. When SK even raised the option of withdrawing from the U.S., LG gave media interviews suggesting that they could operate SK's plant instead.

For SK, the Georgia plant, a business base in the U.S., had just started operations, so they argued that a settlement amount in the trillions of won was impossible. SK Innovation, considered a relatively latecomer, began construction of the Georgia plant in 2019, completed it earlier this year, and is currently at the prototype stage. While sales can be generated within this year, it will take several more years to achieve profitability. They also cited that the largest punitive damages awarded in past federal court cases were around 1 trillion won.

SK is reported to have offered several hundred billion won in cash, royalties linked to domestic and overseas battery sales, and some shares of SK IE Technology, which is soon to be listed, as part of the settlement. While offering royalties is common in patent or trade secret infringement settlements, offering subsidiary shares is rare. This subsidiary manufactures separators, one of the core materials for electric vehicle batteries. The shares of this subsidiary were not included in this settlement.

This content was produced with the assistance of AI translation services.