[Invest&Law] 100 Billion Won 'Electronic Cigarette Invention Fee' Lawsuit, First Trial on the 17th

Former Researcher Gwak Claims Development Compensation from KT&G
KT&G States "Payment Was Sufficient... Not the Original Developer"

A former KT&G researcher who claimed to have "invented the world's first heated tobacco product technology but did not receive compensation" is set to begin the first trial of a civil lawsuit against the company. The scale of the lawsuit could potentially increase to trillions of won during the trial process.

According to the legal community on the 15th, the Daejeon District Court Civil Division 12 (Presiding Judge Ham Seok-cheon) is scheduled to hold the first hearing of the first trial on the 17th for the compensation claim lawsuit filed by Mr. Kwak against KT&G.

Previously, as a KT&G researcher, Mr. Kwak began developing an electric heating type heated tobacco product in 2005, and in July of that year, he created a prototype equipped with a heating element that directly heats the tobacco and filed the first patent. Subsequently, he filed patents for devices that automatically control the heating state of the heating element.

No follow-up research was conducted. Mr. Kwak's side claimed, “The company did not accept the proposal, and in 2010, I left due to restructuring.” KT&G, which succeeded Mr. Kwak's work-related inventions, filed some patents but did not secure rights for most of them.

In April, Mr. Kwak filed a complaint with the Daejeon District Court, citing that he was the first to develop the ‘internally heated heated tobacco product’ but did not receive compensation. Mr. Kwak's side appealed, “There was no compensation for the work-related invention. From March 2021 for one year, the only payments received were an advance of 20 million won and a monthly salary of 6.25 million won as a technical advisor contract fee.”

The amount of compensation requested was determined considering the disadvantages caused by the failure to secure overseas patents for Mr. Kwak's technology. Mr. Kwak's side pointed out, “KT&G did not obtain patents overseas, allowing other global foreign companies to launch internally heated electronic cigarettes domestically from 2017 and generate profits.”

On the other hand, KT&G argued, “We paid Mr. Kwak appropriate compensation, and he agreed not to raise additional issues,” and “The patents Mr. Kwak claims are not applied to the products currently made by KT&G, nor are the technologies used in products sold by global companies,” countering the claims.

The amount involved in this lawsuit is reported to be the largest individual claim amount in South Korean judicial history, excluding collective or group lawsuits. The initial lawsuit amount stated in the complaint submitted by Mr. Kwak's side was 100 billion won, and the court fees (fees for court services) alone amounted to over 300 million won. The lawsuit amount corresponds to 1.08% of KT&G’s consolidated equity capital of approximately 9.2949 trillion won as of the end of last year.

Mr. Kwak's side plans to increase the claim amount up to trillions of won depending on the progress of the lawsuit. If the claim amount rises to 2.8 trillion won, it would reach 30% of the equity capital. However, there is also a possibility that the court will attempt to resolve the dispute through mediation procedures without a separate judgment. If mediation fails, the court may impose compulsory mediation by its own authority. Mr. Kwak’s legal representation has been handled by the law firm Jaeyu since the complaint filing stage, and KT&G also formed a legal team through the law firm Sejong in June and has begun preparing for the trial in earnest.