[Inves&law]Will the LS and Daehan Electric Wire Dispute Become the First K-Discovery Case?

Allegations of Submarine Cable Technology Leakage
LS Expected to Pursue Civil Lawsuit
Damages Lawsuit May Expand Significantly...
Discovery System Introduction Under Review
Could Become the First Case Applied If Legislated Next Year

The issue of "technology leakage" between LS Cable & System and Daehan Cable, which has become the most prominent topic in the domestic cable industry, is showing signs of escalating into a large-scale damages lawsuit. Amidst this, LS Cable & System, which claims to have suffered damages due to the technology leak, is reportedly considering filing a damages suit in line with the introduction of the Korean-style evidence discovery system (K-Discovery). As a result, both the industry and legal circles are paying close attention to whether this case will become the first in which the new system is applied in practice.

Submarine cables produced at LS Cable & System's Donghae factory are being loaded onto a laying vessel. LS Cable & System

On October 29, an industry insider familiar with the circumstances of the technology leakage case between LS Cable & System and Daehan Cable told The Asia Business Daily, "LS Cable & System is currently preparing a civil lawsuit against Daehan Cable and is also closely monitoring the introduction of the discovery system." Another source commented, "Once discovery is introduced, the timing of its application and whether it will be retroactively applied to previous cases will be determined, and there is a high possibility that the lawsuit will be filed accordingly."

Daehan Cable is currently under investigation by the Industrial Technology Security Investigation Unit of the Gyeonggi Nambu Provincial Police Agency on suspicion of leaking LS Cable & System's submarine cable technology. According to LS Cable & System, Gawon Architects & Engineers, which previously designed LS Cable & System's submarine cable plant, was also commissioned to design Daehan Cable's new plant, resulting in the transfer of LS Cable & System's proprietary plant design know-how. The police have reportedly summoned related individuals for questioning based on materials obtained through a search and seizure of Daehan Cable. Once the full circumstances of the case are clarified, the police are expected to announce the investigation results and refer the case to the prosecution with a recommendation for indictment or non-indictment. If the investigation extends beyond September next year, the case may have to be transferred to the prosecution at that time.

LS Cable & System has stated that it will proceed with a civil lawsuit after confirming the investigation's outcome. There is also talk that the company hopes the lawsuit will proceed under the discovery system. This is because it would facilitate the collection of evidence and allow for a higher claim for damages based on the collected materials. Discovery is a system in which both parties mutually disclose evidence and documents and clarify the issues before the trial formally begins. Multiple related bills have already been submitted to the National Assembly, and last month, relevant government ministries announced a "Comprehensive Plan to Eradicate Technology Theft," which includes the introduction of a Korean-style discovery system, making its adoption a foregone conclusion. Only the method and timing remain to be decided. The legal community widely expects that, rather than the Anglo-American model where parties collect each other's evidence directly, the German model will be adopted, in which the court assigns expert investigators to selectively collect evidence. The judiciary also holds a positive view on the introduction of discovery, so it is expected that the system could be legislated as early as next year. If it is introduced next year, concerns about the statute of limitations for LS Cable & System's right to file a civil lawsuit (three years from the date of knowledge of the damage and perpetrator, or ten years from the date of the illegal act) will be alleviated, and the company's litigation strategy to utilize discovery is likely to become a reality.

LS Cable & System completed the construction of Submarine Building 5 in Donghae City, Gangwon Province, establishing one of the largest HVDC cable production capacities in Asia. LS Cable & System

Exterior view of Daehan Cable Plant in Dangjin. Daehan Cable

If discovery is implemented, it is widely expected that parties to lawsuits will be able to collect evidence that was previously difficult to obtain, allowing them to present their case more effectively in court. In the past, victims were rarely provided with police criminal records, mainly to protect the rights of suspects. As a result, even if victims wanted to file a damages suit using criminal records as evidence, there were limitations. However, lawsuits filed after the introduction of discovery could be different. LS Cable & System appears to have taken this into consideration as well. It will also be possible to claim the maximum amount of damages. A senior executive in the cable industry stated, "If LS Cable & System proceeds with a civil lawsuit, it is expected to become a legal battle on the scale of the LG Chem-SK Innovation trade secret leakage case that took place from 2019 to 2021." LG Chem and SK Innovation fought in the United States over allegations that battery technology was leaked due to personnel moving from LG to SK, and in February 2021, SK concluded the case by paying a settlement of 2 trillion won.