[Exclusive] LG Electronics Partially Loses Lawsuit Claiming Employee Invention Compensation

Lost 2 Lawsuits Claiming Compensation for Employee Inventions
Sold 29 Technology Patents
Court: "LG Electronics Must Pay Compensation"

LG Electronics has been confirmed to have been sued in multiple trials for failing to properly pay employee compensation for inventions related to numerous patented technologies. The patented technologies developed were sold to other companies, but the developers themselves were not given appropriate financial treatment. LG Electronics countered by calling them "unused technologies" and argued that "there was no practical benefit even if transferred." However, courts have recently ruled against LG Electronics one after another, holding the company responsible for not paying the compensation for employee inventions.

According to the legal and industry circles on the 8th, the 63rd Civil Division of the Seoul Central District Court (Presiding Judge Park Chan-seok) ruled in the first trial in May on a lawsuit filed by former LG Electronics researcher Mr. A against LG Electronics claiming compensation for employee inventions. The court ordered LG Electronics to pay Mr. A "(compensation) approximately 34.66 million KRW and delayed interest," partially ruling in favor of the plaintiff. Although the court recognized only part of the 100 million KRW compensation originally claimed by Mr. A, it clearly acknowledged LG Electronics' obligation to pay compensation to Mr. A, the original developer, for the sale of patented technology.

According to the judgment, Mr. A worked as a researcher in the OLED team at LG Electronics Technology Institute from 1997 to 2008 and was the first to develop the "electroluminescent device (a display technology using the principle of electron field emission in a vacuum)." The technologies he developed obtained patents not only in South Korea but also in the United States, Japan, China, and other countries. LG Electronics, which succeeded the rights to these technologies, signed a contract in March 2015 to transfer 29 patents, including five invented by Mr. A, to a company managing intellectual property (IP) for a major overseas big tech company M. As compensation, LG Electronics paid hundreds of billions of KRW for a 40% reduction on the 2013 royalties for the use of this big tech's patented technology, which had been paid annually since 2011. Mr. A filed a lawsuit claiming that LG Electronics did not pay compensation under the "Employee Invention Compensation System" stipulated in Article 15 of the Invention Promotion Act, despite benefiting from the royalty reduction under the contract.

The trial focused on whether LG Electronics actually gained profits through the transfer contract. Mr. A argued that LG Electronics should pay compensation and delayed interest based on the profits earned by the company and its affiliates from the 40% reduction in royalties, as well as the internal compensation regulations implemented since September 2006. LG Electronics countered that there was virtually no profit from this transfer contract and that the transferred patents were "unused patents (worthless patents)," thus denying any obligation to pay compensation.

However, the court ruled in favor of Mr. A, stating, "Unless there are special circumstances, LG Electronics has an obligation to pay compensation for employee inventions to Mr. A." While accepting most of Mr. A's claims regarding his contribution to development, the court did not fully recognize all the compensation claimed by Mr. A, judging that the profits earned by affiliates under the transfer contract could not be regarded as LG Electronics' profits.

LG Electronics also lost another lawsuit related to the contract with MTL. The 22-2 Division of the Patent Court (Presiding Judge Lee Hye-jin) ruled last month in the second trial of a compensation claim lawsuit filed by former LG Electronics senior researcher Mr. B, ordering LG Electronics to pay Mr. B 138.93 million KRW and delayed interest. Although the amount of compensation was somewhat reduced compared to the first trial, the court's judgment that LG Electronics is responsible for paying compensation to Mr. B was the same as in the first trial. Mr. B worked as a senior researcher at LG Electronics from 2002 to 2011 in the mobile communications research lab and was the first to develop six technologies. When LG Electronics signed a contract to transfer these technologies to MTL in 2015, Mr. B filed a lawsuit with the same intent as Mr. A. The second trial court also stated, "LG Electronics has an obligation to pay compensation within a reasonable scope." An LG Electronics official explained, "We provide compensation according to internal regulations for employee inventions," adding, "There is no insufficiency or problem with the compensation system compared to other companies."