As SK Innovation decided to compensate LG Energy Solution for 2 trillion won ($1.8 billion) in settlement money due to business secrets infringement, the two companies reached a dramatic agreement over the two-year-long battery dispute.
The 2 trillion won settlement was the highest among the settlements for a trade secret infringement dispute, which was reached a day before the deadline for U.S. President Joe Biden to exercise his veto.
The agreement will nullify the import ban on SK Innovation decided by the U.S. International Trade Commission (ITC), allowing SK Innovation to pursue its business in the U.S. in the future.
On April 11, SK Innovation and LG Energy Solution each held an emergency board meeting to approve the agreement due to the battery dispute. The 2 trillion won settlement, which SK decided to compensate LG, will be paid 1 trillion won by paying technology royalties to LG whenever SK batteries are sold, including 1 trillion won in cash.
The agreement was made on the condition that all technical disputes, including patent infringement lawsuits that have been underway at home and abroad since 2019, in addition to the existing business secrets infringement, were completely closed. In addition, they have decided not to engage in legal disputes for the next 10 years.
SK Innovation CEO Kim Joon and LG Energy Solution CEO Kim Jong-hyun stressed the "healthy competition and friendly cooperation for the development of the electric vehicle battery industry in Korea and the United States," saying, "We jointly work on strengthening battery supply chain and eco-friendly policies."
The agreement came a day before the deadline for President Biden's veto on April 11 (local time). On February 10, the U.S. ITC decided to ban imports from SK for 10 years in the U.S., citing its alleged infringement of LG trade secrets.
Eventually, the two companies came to a compromise ahead of the deadline for President Biden's veto. Although the two companies' settlement amount of 2 trillion won falls short of LG's proposed 3 trillion won, the amount is twice the 1 trillion won SK set as the upper limit, which exceeds the industry's expectations.
It is known that 1 trillion won in cash will be paid in installments twice this year and next year, and 1 trillion won in royalties will be paid for eight years from 2023 to 2030.
As the two-year confrontation between the two companies ends with a grand agreement, Korea is expected to maintain its leadership in the global electric vehicle battery market.
Both companies will be able to eliminate business uncertainties due to prolonged lawsuits and establish their positions in the fast-growing U.S. market.
First of all, SK has been able to "normal operation" of its battery plant in Georgia, the U.S. SK decided to invest 3 trillion won in Georgia to build two factories in 2018 under the condition of providing free factory sites and tax benefits. The two plants have a total production capacity of 21.5 GWh, second only to Tesla's Giga Factory.
SK plans to supply goods to Ford and Volkswagen from the Georgia plant, first. At the same time, it will also make efforts to secure additional automotive manufacturers with electric vehicle plants in the U.S. as its customers.
SK said, "We are planning to actively pursue additional investments at home and abroad not only for the U.S. but also for the development of global electric vehicle industries and the creation of ecosystems."
LG is also accelerating its investment in the U.S. LG said it invested 5 trillion won last month to secure an additional 70GWh of battery production capacity by 2025.
Through Altium Cells, a joint venture with GM, it agreed to operate a 35GWh battery plant and build similar two plants at the end of this year. When these plants are completed, the goal is to become the largest battery operator in the U.S. with a total production capacity of 145 GWh per year.
