[Report File] LGES vs. SKI, Stars' Battery War... Who is the final winner?

● US Trade Commission (ITC), “SKI invades LGES' trade secrets”

LG Energy Solutions (LGES) and SK Innovation (SKI) are on the brink of infringement on trade secrets related to the manufacturing method of electric vehicle batteries, one of the next-generation flagship industries. There is a confrontation.

The U.S. Trade Commission (ITC) decided on February 10, 2021 that SK Innovation infringed 22 trade secrets of LG Energy Solutions, and requested the U.S. Trade Representative (USTR) to review the president.

On March 4th, the decision for publication of the six ITC members was also published.

ITC stated in the decision, "Even though SK Innovation infringes LG Energy Solution's trade secrets for electric vehicle battery manufacturing, in order to hide the infringement, it willful and in bad faith broadly "The evidence was deleted to prevent ITC from investigating unfair trade practices."

On February 14, 2020, ITC's Administrative Law Judge (ALJ) finally confirmed the initial Determination (ID: Initial Determination) made by SK Innovation.

At the request of SK Innovation, ITC initiated a review of the administrative judge's preliminary decision on April 17, 2020, and reviewed the related matters for 10 months.

SK Innovation argued that the emails they deleted were not related to the trade secrets of LG Energy Solutions, and that the trade secrets that LG Energy Solutions alleged infringement were too broad and ambiguous, but it was not accepted.

In its final decision, the ITC stated that SK Innovation used the related technology along with a 10-year Limited Exclusion Order (LEO) for automotive batteries manufactured by using LG Energy Solutions' 22 trade secrets unfairly. It issued a cease and desist order (CDO).

However, to prevent damage to the U.S. electric vehicle industry and consumers, SK Innovation has already signed a supply contract to produce batteries for the electric vehicle F-150 of the U.S. Ford Motor Company for 4 years, and Volkswagen America started production for the North American market. For the MEB platform electric vehicle batteries that are being promoted, a two-year grace period for import exclusion was given.

Kia Motors' Soul and Niro electric vehicle maintenance batteries that were imported and distributed in the US with SK Innovation's batteries were also allowed to be imported.

In response, SK Innovation said, "Even though LG Energy Solutions' car battery trade secrets were not violated, the ITC decided on the basis of procedural defects without substantial verification." I asked (USTR).

If the U.S. Trade Representative (USTR), commissioned by the U.S. President, reviews and recommends the ITC's decision, the U.S. President announces the veto within 60 days of the ITC decision.

If there is no veto by U.S. President Joe Biden by April 10, ITC's decision will remain.

In this case, SK Innovation can appeal to the US Federal Court of Appeals (CAFC).

Korean conglomerate SK Innovation and LG Energy Solutions, who even went to Prime Minister Jeong Sye-gyun and called for a compromise, urged a compromise on electric vehicle battery trade secrets. Why they are fighting an international battle in the US market, and the US President vetoed the ITC decision. Find out if you want to exercise it and what is the desired solution.

In the final decision released on March 4, the ITC announced that SK Innovation's flagrant, willful, and deceptive (in bad faith) and serious legal responsibility (culpable) during the discovery process. (Extraordinary) The act of destroying evidence was revealed, and the injunction and default judgment were justified.

Then, why did ITC decide to lose to SK Innovation by using all kinds of modifiers that can be mobilized?

The legal battle between LG Energy Solution and SK Innovation over electric vehicle battery manufacturing technology dates back to October 2017.

LG Energy Solutions (at the time, LG Chem) sent a letter to SK on October 23 demanding that the core personnel of LG Energy Solutions fuel cells be suspended, and the Daejeon District Court against the five employees who have violated the regulation on job transfer and transferred to SK Innovation. Filed a lawsuit for injunction banning the former job.

The Supreme Court ruled in January 2019 that the five employees of LG Energy Solutions were banned from changing their jobs for two years.

On April 8, 2019, LG Energy Solutions sent a warning letter to SK Innovation to stop the infringement of trade secrets, and on April 29, the US Trade Commission (ITC) and the Delaware Federal Court of Justice had trade secrets against SK Innovation. Filed an infringement lawsuit.

"SK Innovation is conspiring with the employees of LG Energy Solutions (at the time, LG Chem) from 2016 to 2018, and widely stealing the trade secrets related to electric vehicle battery manufacturing, so please do not do this."

On June 4, 2019, the U.S. Trade Commission (ITC) decided to initiate an investigation into whether SK Innovation infringed on trade secrets at the request of LG Energy Solutions, and LG Energy Solutions and SK Innovation asked each other to submit related data. And initiated a discovery process to secure it.

On September 23, 2019, LG Energy Solutions announced that SK Innovation has deleted documents and e-mails necessary for collecting evidence and is not responding to requests for data submission. I asked ITC to do it.

On October 3, the ITC's administrative judge (ALJ), who was in charge of the case, accepted LG's forensic request.

On November 5, 2019, LG Energy Solutions issued a default judgment against SK Innovation for violating the administrative judge's order 13, claiming that SK Innovation has not sincerely responded to the ALJ's forensic order (Order no. 13). Asked for.

Even if SK Innovation made 75 Excel sheets with a list of deleted files, only the data contained in one Excel sheet responded to the forensics.

On February 14, 2020, ITC's administrative judge issued a preliminary judgment (ID) and a default judgment ordering SK Innovation to prohibit the infringement of LG Energy Solutions' trade secrets.

On March 3, 2020, SK Innovation requested ITC for a hearing on the preliminary decision (ID), and on April 17, the ITC began reviewing the preliminary decision.

ITC is a private organization with car industry officials such as Ford Motor Company and Volkswagen America, which have signed an electric vehicle battery supply contract with SK Innovation, as well as lawmakers from Georgia-Ohio-Michigan-Tennessee, where LG and SK are conducting car battery business. Representatives were invited to hear their opinions on the impact of the import exclusion decision on the US auto industry, consumers and markets.

On February 10, 2021, the ITC concluded the hearing on the preliminary decision, and for 10 years, the Limited Exclusion Order for EV battery products made by misappropriating the trade secrets of LG Energy Solutions to SK Innovation and the U.S. Final decision was made on the Cease and Desist Order.

It is believed that it will take 10 years for SK Innovation to develop its own electric vehicle battery at the same level as currently developed without violating the trade secrets of LG Energy Solutions.

SK claimed that it could develop related technologies in one year, but it was not accepted.

In a ruling released on March 4, ITC said that SK Innovation, at the order of a high-ranking senior, had extensively deleted e-mails, interfering with the investigation, ignoring the administrative judge's forensic order and trying to hide related evidence.

It was also noted that SK Innovation was able to develop electric vehicle batteries at low cost using the trade secrets of LG Energy Solutions, and at a low price, it was able to conclude a contract to sell electric vehicle batteries between Ford Motors and Volkswagen.

SK Innovation argued that deleting emails was a regular memory cleanup by the IT department that was not related to LG Energy Solutions' trade secrets, and that it did not damage LG Energy Solutions' electric vehicle battery business.

In response, ITC said,'SK claims that the information they have deleted is not LG's trade secret, but the responsibility for proof lies with the SK who deleted the file, and SK has not proved that their actions did not harm.' .

In addition,'Rather, LG convincingly proves that the file deleted by SK is related to LG's trade secret, and the information deleted by SK includes price information on LG's products. As much as it was able to enter the market, this provides ample grounds for damaging LG.'

ITC is an independent committee that makes decisions upon receiving requests for exclusion of imports of goods and services that damage US industries or infringe on US intellectual property rights.

The ITC's decision must be finalized by the President, and if disagreeable, it may be appealed to the Federal Court of Appeals (CAFC).

The advantage is that you can get a decision quickly in 12-18 months, much shorter than a court case.

The 6-member Trade Commission ITC made a decision to initiate an investigation pursuant to Article 337 of the U.S. Customs Code, and an initial decision (ID: Initial) made by an Administrative Judge (ALJ) based on an investigation by the Office of Unfair Import Investigation (OUII). Final Determination (FD) is made for Determination.

If a party applies for a re-examination of the ID, the administrative judge's preliminary decision is reviewed.

The President can veto the ITC's decision within 60 days.

If the veto is not exercised, the ITC's decision is finalized.

It is reported that the U.S. Trade Representative (USTR), currently commissioned by the President, received opinions from LG Energy Solutions and SK Innovation, and initiated a final review on whether to recommend US President Joe Biden to exercise the veto.

The deadline for exercising the presidential veto on the infringement of trade secrets that LG Energy Solutions and SK Innovation is taking on in the US market is coming April 10.

SK, which received an order to exclude imports from ITC, is betting on President Biden's veto exercise.

SK said, “SK Innovation's exclusion of electric vehicle battery imports and suspension of production and sales of electric vehicle batteries made by ITC limits the choice and market competition of US consumers by disrupting the production of electric vehicles, and damaging the US electric vehicle industry. This is an eco-friendly electric vehicle. It argues that it will have a negative impact on the implementation of policies of the Biden administration, which reduce emissions to curb climate change and improve the health of the people.”

SK and LG are discussing patent infringement lawsuits filed against ITC and the Delaware Federal Court, and claiming that SK has not infringed trade secrets and does not need to do so, as SK has its own technology.

The intellectual property industry believes that it is unlikely that US President Joe Biden will veto SK Innovation's order to exclude battery imports.

“ITC's decision is based on Article 337 of the Customs Act, which aims to protect industry in the US,” said Attorney A, who is well versed in US law. “SK and LG are both foreign companies. The president even vetoed the ITC's decision. There seems to be no reason to override: ITC has delayed its final decision twice, and believes it has already sufficiently reviewed its impact on the US domestic industry and consumers. There is no change in the judgment, only a deferral measure for exclusion of imports for Ford Motor Company and Volkswagen America was added. If two battery suppliers become one, there will be an impact on consumers. "There seems to be no reason to change the decision that the Trump administration has changed to the Biden administration."

, according to the provisions of Article 337

Customs Act, the President of the United States has issued ITC remedies: 1) Public health and welfare 2) Competitive conditions in the US market 3) Production of competitive products in the US 4) US consumers 5) US foreign relations You can exercise your veto, taking into account the impact on your organization.

So far, only six cases have been vetoed by the President of the US ITC's remedy.

The most recent veto was a remedy for a telecommunication standard patent (SEP) infringement case filed by Samsung Electronics against Apple in 2013, eight years ago.

The ITC decided that Apple's iPhone and iPad violated Samsung Electronics' wireless communication standard patents and decided to restrict imports (LEO) and prohibit manufacturing and sales in the United States (CDO), but President Barack Obama granted the veto. Exercised.

ITC decided that Apple did not actively negotiate the use of technology for Samsung Electronics' patents and steal the patents, but the USTR did not respond to the fair and non-discriminatory (FRAND) licensing negotiations for Samsung Electronics, which holds communication standard patents. It overturned the ITC's decision, saying that it could provide too much benefit to standard patent holders created by private voluntary agreements and could seriously impede innovation and economic development.

In the case of a DRAM memory semiconductor patent infringement lawsuit filed by 19 companies including Samsung Electronics and Hitachi in 1987 against Texas Instruments, ITC's limited import exclusion (LEO) and US production and sales ban (CDO) were critical to the US industry. At the time, President Ronald Reagan vetoed that it could cause damage.

The six vetoes of the ITC's remedy that has been made so far have caused serious damage to related industries in the United States by excluding the import of the product, or the remedy impedes innovation and economic development, conflicts with other policies or related policies. It was decided if this was not confirmed.

The act of knowingly breaching a contract in order to obtain more profits from economic activity is called an efficient breach.

If a contract is signed to sell a house for 100 million won with a down payment of 10 million won, but when a person who wants to buy it for 150 million won appears when paying the balance, the contract will be canceled even if a penalty of 10 million won is charged. It is an act to obtain an additional profit of 40 million won by selling it.

Even in an intellectual property dispute, even if the infringement is paid for damages for violating the rules, if the profits from the infringement are much greater, you can choose an efficient infringement that knowingly violates the rules while knowing that the rules are violated.

Many IP industry officials are tilting their heads over SK Innovation's decision to request the president's veto without choosing an agreement when ITC determined that trade secret infringement was obvious during the discovery process.

Some observers say that SK has chosen'effective infringement'.

SK, which chose the fuel cell business as the next major industry, is trying to solidify its position in the US electric vehicle battery market by making time through lawsuits.

Samsung Electronics, a latecomer in the smartphone field, also filed a lawsuit against Apple, and eventually settled in the market.

As the saying, "There is nothing new under the sky," there is no 100% original technology, and there are claims that car batteries can open up new paths if they earn time as technology advances rapidly from lithium-ion to all-solid batteries.

If they succeed in developing new technologies, they can create other companies and continue the battery business.

However, it is predicted that it will not be easy for SK to get a friendly ruling in US courts with the ITC announced that widespread and enterprise-wide evidence destruction was revealed in the discovery process.

If a judgment is made for punitive damages in court, you may have to pay astronomical compensation.

Professor B, who specializes in intellectual property, said, "To prevent efficient infringement, there is a punitive damages compensation system in the United States. In case of intentional and malicious infringement, three times the amount of damage is compensated. ITC in the opinion document infringes SKI's trade secrets. Even though you know that, it may be difficult to do business in the US due to the stigma effect as if it was judged that Ford Motor Company, which signed the contract, was also wrong.In particular, infringement of trade secrets is theft of someone else's technology, which is higher in punishment than patents, and DuPont As Kolon, who infringed on Dupont's trade secrets for manufacturing specialty textiles, received a $900 million in compensation and agreed upon, there is no place in US courts to destroy evidence during the discovery process.”

LG Energy Solution and SK Innovation are also filing patent lawsuits in the United States, claiming that each other has infringed on a patent related to an electric vehicle battery.

If SK loses in this patent lawsuit, it is predicted that SK may have difficulties in carrying out the automobile battery business in the US market.

Conversely, some analyzes say that if the patents owned by LG, a leader in the US market, are judged invalid or infringed, LG will not only pay enormous compensation, but also damage its patent portfolio.

Electric vehicle battery business is growing by storm, internal combustion engine vehicles will be retired to museums within 10 years, and fuel cell vehicles based on electricity are expected to become the mainstream.

The battle between LG and SK, a mega-sized company, for infringing battery trade secrets is likened to a war of stars over such a super-sized market.

Even if SK charges hundreds of billions of won in lawyers' fees and trillions of won in compensation, SK is in a situation where it has to endure in the future food battery market.

The analysis that ITC issued a Limited Exclusion Order rather than a General Exclusion Order, which allowed the supply of batteries to electric vehicle companies in the U.S. for a limited time, but left a string of hope for SK. Comes out.

As a leader in the electric vehicle battery field, LG should secure its position in the US, the home of the battery market, while minimizing the risks and uncertainties that may arise in the future, and secure a position as a dominant business in the global battery market such as the EU.

In relation to the LG Energy Solution's lawsuit against SK Innovation for infringing the trade secrets of electric vehicle batteries, LG demands compensation of around 3 trillion won, while SK is known to offer compensation of 400 billion won.

Experts in the intellectual property industry diagnosed that the purpose of the lawsuit over infringement of patents or trade secrets is to continue the business and maximize profits rather than destroy one company in the end, so it is the best solution for both sides to reach an agreement at a reasonable level. have.