The dispute between LG Chem and SK Innovation over electric vehicle (EV) battery patents is reaching a climax, after the former filed a complaint with the prosecution in Korea.
The move is seen as an attempt to raise its leverage before the US International Trade Commission (USITC) hands down its final determination on whether SK Innovation stole battery secrets from LG Chem, according to industry officials, Thursday.
Last week, LG Chem filed a criminal complaint with the Seoul Central District Prosecutorsâ€™ Office against SK Innovation, accusing it of stealing trade secrets on EV batteries. LG said it did so to get a â€œfaster investigation of the truth,â€ referring to a complaint filed with the Seoul Metropolitan Police Agency in May last year on the same accusation.
LG Chemâ€™s move came before a USITC final determination which is expected in October. Since April last year, the US watchdog has been looking into LG Chemâ€™s complaint and came out in favour of the company by granting a default judgment in an interim ruling in February.
If the USITC upholds this in its final determination, SK Innovation will face a ban on exporting batteries to the US Thus, the SK Group unit is destined for a pricey settlement with the LG affiliate.
Reportedly, efforts to reach a settlement are at a stalemate, as LG Chem is demanding a â€œsincere apologyâ€ before moving forward with the talks, while SK Innovation is seeking to end the dispute with a relatively small amount of compensation.
â€œLG Chemâ€™s stance is that SK Innovation must deliver a sincere apology and promise to prevent a recurrence as a prerequisite for any settlement,â€ a senior executive having knowledge of the dispute said. â€œIf these conditions are met, LG Chem will advance settlement talks including a plan to possibly sign a comprehensive licensing agreement, in which LG Chem can receive royalties from SK Innovationâ€™s US-bound EV batteries for years.â€
The two sides are reportedly also locking horns over royalties. Though it is uncertain how much LG Chem will demand from SK Innovation, industry officials pointed to a separate USITC resolution of a dispute between LG Chem and Chinaâ€™s ATL as a reference.
In 2017, LG Chem filed a patent lawsuit with the USITC against ATL, claiming the Chinese company had infringed on three of its battery separator patents. Last year, they reached a settlement on a licensing agreement, in which ATL pays 3 percent of its sales of the safety-reinforced separator.
Given SK Innovation had 955.3 billion won in sales in batteries last year and its growth outlook, the amount is expected to start in the hundreds of billions of won and climb to up to the trillion-won-level.
Another factor in pushing the two companies to reach an agreement is President Moon Jae-in who identified EVs and hydrogen fuel-cell vehicles as one of the countryâ€™s next growth engines under his Korean New Deal initiative. The government hopes to nurture Korea as one of the powerhouses for eco-friendly mobility, by making it home to 1.13 million EVs by 2025.
In a response to this plan, Hyundai Motor Group Executive vice Chair Chung Euisun pledged to the President and the public that the carmaker will â€œcooperate with Samsung, LG and SK on batteriesâ€ to lead the global EV market, dropping hints at forming an alliance with the Korean battery makers.
With the government picking the growth of the EV battery industry as a matter of national interest, officials said this is interpreted as an â€œindirect messageâ€ calling for a settlement between the two companies.
In a press briefing after the announcement of the Korean New Deal, presidential spokesman Kang Min-seok quoted Moon stressing the importance of reaching a compromise between contradicting interests.