South Korean battery rivals LG Energy Solution and SK Innovation reached a 2 trillion won ($1.78 billion) settlement in their two-year-long legal dispute over battery technologies, the two companies announced Sunday.

SK will pay 1 trillion won in cash and 1 trillion in royalties to the rival as compensation for its theft of lithium-ion battery technologies. LG, in exchange, will drop all legal action against SK both in Korea and abroad. This allows SK to avert a punishment by a US court that would have devastated its American business.

“For development of the battery industries of both Korea and the US, the two companies have decided to compete in a sound manner and cooperate in a cordial manner,” the two companies said in a statement announcing the deal. “The two companies will make joint efforts especially for the Biden administration’s battery supply chain reinforcement and green policies.”

The joint statement also said they had agreed to end all their legal disputes currently unfolding in the United States and not to file any new legal action against each other for the next 10 years, considering the critical timing of the global battery industry’s development and market growth.

The announcement was made with the approval of the respective company boards.

For SK, the deal has cleared up a major source of business uncertainty. Currently in the process of building a second battery plant in Georgia, the firm plans to supply electric vehicle batteries to the US operations of US automaker Ford and Germany’s Volkswagen.

In February the US International Trade Commission slapped SK with a 10-year business ban in its final decision on a trade secret theft case filed by LG. Sunday was the deadline for US President Joe Biden to overturn the ITC ruling or let it take effect.

Although the rivals had fought before over battery technologies, the latest battle marks their largest, most high-profile and ugliest to date. It began in early 2019 when LG, the country’s leading battery provider, found out that more than 100 of its former employees had moved to SK’s battery business during the period between 2017 and 2019. SK was a latecomer in the electric vehicle battery market.

LG had sought an apology from SK through a domestic injunction first. But in the face of SK’s refusal, it took the case to the USITC in April 2019.

SK responded by filing a patent infringement suit against LG in Delaware in August 2019.

The ITC, independently set up to protect US markets from unfair trade practices, issued the import ban on SK batteries Feb. 10, ruling in its final judgment that SK had stolen 22 trade secrets from LG by poaching hundreds of former LG employees to make batteries for electric vehicles. It gave Ford and Volkswagen up to four years to look for other battery suppliers.

The settlement also removed a major headache for both the Korean and US governments.

For the Biden administration, SK batteries were definitely needed to establish a solid supply chain for components and to push for its EV plan. But on the other side of the fence, SK’s misappropriation of trade secrets conflicted with Biden’s position on the protection of intellectual property.

It was reported that on behalf of the White House, the US trade representative had examined the possibility of a presidential veto, while urging the two Korean firms to resolve the issue.

The Korean government had also called on the two domestic companies to settle the dispute for the sake of the country’s competitiveness in the global battery market.

But what led the two to settle appears to have been the immense costs of the dispute, which was a burden for both companies amid the fast-changing EV market.

“The likelihood of getting Biden’s veto seemed really low, and SK would face massive costs of withdrawing its US facilities and relocating them as well as compensating its customers,” an industry insider said. “For LG, too, continuing the fight would have wasted a lot of resources that otherwise would have been put into other productive work for some more years.”

Both companies expressed gratitude in the joint statement for the Korean and US government officials who had worked toward the settlement and promised further US investment.

“SK Innovation will take greater responsibilities in the US to support the government’s green policies and create new jobs in Georgia,” the company said in a separate statement. “By starting to supply batteries for Ford and Volkswagen in 2022, the company will make efforts to develop its partnership with the customers based on trust.”

“While pledging to speed up completion of the second plant in Georgia and work to establish stable battery supplies in the US, the company will actively make additional investments in the US to support the country’s EV industry growth,” it said.

LG underscored how meaningful the latest dispute was for the company with regard to intellectual property for batteries.

“What we kept as our principles were fair competition and co-prosperity,” LG said. “The company will continue its efforts to lead the growth of the global EV market as a leading battery provider with aggressive and preemptive investments.”

By Song Su-hyun (song@heraldcorp.com)