[Opinion] An Era of Rapid Increase in Cases of Companies Being Sued in the US

As US Market Entry Increases, Lawsuit Cases Rise
Company Fate Hinges on Outcomes
Must Assess and Prepare for Real Risks

In 2019, LG Chem filed a complaint with the United States International Trade Commission (ITC), alleging that SK Innovation infringed on LG Chem's trade secrets during the expansion of its battery business. In the same year, Medytox also filed a complaint with the ITC, accusing Daewoong Pharmaceutical of infringing on trade secrets related to botulinum strains and manufacturing processes. Samsung Electronics and LG Electronics have also been sued by American companies at the ITC and have undergone investigations related to patent infringement allegations in recent years.

Disputes over intellectual property rights using the US ITC continue to increase, and notably, disputes between Korean companies are being conducted on the US ITC stage, a foreign jurisdiction. What is the reason for this? It is due to the flexibility of jurisdiction, strong remedial measures, and the faster procedural progress compared to court litigation.

The ITC is a quasi-judicial independent federal agency in the United States that, under Section 337 of the US Tariff Act, can investigate whether there has been an "unfair competition method" or "intellectual property infringement" related to the importation of goods into the US or the sale of imported goods within the US. If infringement is confirmed as a result of the investigation, the ITC can issue orders to ban the importation of the relevant goods or to cease the infringement.

With the ITC actively and swiftly exercising such strong administrative order powers, not only American companies but also domestic companies are knocking on the ITC's door to secure an advantage in intellectual property disputes despite bearing astronomical US litigation costs.

Another advantage of the ITC is the convenience of evidence acquisition through the "Discovery" procedure. The "Discovery" procedure, which is also conducted in US litigation, imposes strong monetary and non-monetary sanctions if parties fail to comply with obligations such as preserving or disclosing evidence. Non-monetary sanctions include deeming admissions, considering non-compliance as unfavorable to the non-complying party, and early summary judgment. The electronic discovery system, "E-Discovery," has also been introduced, obliging parties to preserve electronic materials such as emails.

Speedy procedures are also a major advantage. While US court litigation takes an average of 2.5 years from filing to the first hearing, the ITC generally completes investigations within 15 months, and the absence of a jury allows for expert adjudication, which is positive. Once the ITC issues a final determination, the President may exercise a veto within 60 days, and if 60 days pass, the ITC's final determination becomes the conclusive decision. If there is an objection to the result, an appeal can be filed with the court within 60 days from the final determination date or the end of the President's review period.

Additionally, the ITC has the authority to investigate whether imports of foreign goods have caused injury to the "domestic industry" in relation to trade remedy measures such as anti-dumping duties, countervailing duties, or safeguards. Recently, the number of ITC import injury investigations against Korean companies has surged.

Moreover, the number of investigations into Korean companies for violations of US antitrust laws is also increasing. These fall under the jurisdiction of the US Department of Justice and the Federal Trade Commission (FTC). Representative cases involving Korean companies include LCD panel price-fixing, air cargo freight rate collusion, DRAM price-fixing, and military fuel supply cases. If antitrust violations are confirmed, the companies may face civil lawsuits seeking injunctions to stop illegal conduct in federal district courts or criminal prosecutions.

As the number of Korean companies entering the US market or trading with US companies increases, cases of Korean companies being investigated by quasi-judicial bodies such as the ITC and FTC or being sued in US courts will also rise. Litigation outcomes will significantly influence not only the US, a major market for Korean companies, but also their business activities in other countries, directly or indirectly affecting the fate of the companies.

However, except for some large corporations, domestic companies generally lack prior knowledge or practical experience with US litigation procedures. Therefore, Korean companies conducting or planning to conduct business in the US should seek the assistance of legal experts to assess and prepare for the practical risks related to US judicial procedures. We have now entered an era where corporate legal risks transcend national borders.

Kim Ki-dong, Chief Attorney, Law Firm Robax

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