60 Lawsuits Filed Over Employee Invention Compensation Against LG Electronics
Background of the 'Smartphone Business' Closed in 2021
Patent Technology Sold Through 'Cross License'
Smartphone Development Employees File Lawsuits One After Another
According to a report compiled by Asia Economy on the 9th, a total of 60 lawsuits have been filed against LG Electronics in domestic courts claiming compensation for employee inventions. While LG Electronics states that "the number is not that high," the legal community views it differently. Compared to competitors in the same industry, this is considered a significant number. It is also unusual for the same type of lawsuit to be concentrated against a single company. Kim Min-jin, lead attorney at Plan Law Office, said, "Samsung Electronics also has ongoing lawsuits claiming compensation for employee inventions, but they amount to only about 10% of LG Electronics' cases."
LG Electronics smartphones displayed at a telecommunications store in Seoul in 2018. Photo by Yonhap News
‘Patent Trading’ During the Smartphone Business
Company insiders and lawyers in Seocho-dong unanimously point to LG Electronics' smartphone business from 1995 to 2021 as the reason for the increase in lawsuits. During that time, LG Electronics sold many patents related to smartphone technology, and among the employees involved in the technology development, a consensus formed that "proper compensation should be received," leading to a series of lawsuits.
At the time, LG Electronics reportedly sold smartphone-related technology patents to other companies through a ‘cross-license’ method. Instead of exchanging cash, the payment was made by exchanging ‘licenses’?the rights to use patented technology. For example, when LG Electronics transferred patent rights to overseas big tech companies, it received partial exemptions from the royalties it had to regularly pay for the operating system (OS) installed on smartphones it developed. Since LG Electronics lacked the technology to develop its own OS and had to continue paying OS royalties, this was a good way to reduce costs.
LG Electronics Did Not Notify Employees
While selling the technology patents was acceptable, the problem came afterward. It is reported that LG Electronics did not inform most of the related development team employees about the sale of the technology patents. This is the main reason employees filed lawsuits claiming compensation for employee inventions. Attorney Kim explained, "Compensation is a secondary issue, but once the company disposes of patented technology, it has a legal obligation to inform the relevant employees of the outcome, which it did not do. Many employees were angered by the company's deliberate concealment of patent sales and attempts to avoid compensation, leading them to file lawsuits."
More than half of the lawsuits are reportedly filed by employees who left LG Electronics following the withdrawal from the smartphone business. These employees were unaware of the patent sales during their tenure and only learned about the sales later through current colleagues, prompting them to file lawsuits belatedly. According to the current Invention Promotion Act, if a company profits from technology invented during work, it must provide monetary or non-monetary compensation to the inventing employees. This profit includes royalties from patent usage. Accordingly, employees argue in lawsuits that LG Electronics should consider the royalty reductions received as compensation for patent sales to other companies as profits and provide appropriate compensation based on this. On the other hand, LG Electronics counters by disparaging the sold patents as ‘obsolete technology’ with no value and claims that the company did not gain any profit from the sales, thus denying any responsibility for compensation under the employee invention compensation system.
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