ITC Sides With LG Chem In SK Innovation Patent Infringement Case

In 2019, LG Chem filed a complaint with the US International Trade Commission against SK Innovation, claiming SKI stole trade secrets from it and used them to create a battery manufacturing business in the US. After 2+ years of legal wrangling, the ITC last week ruled in favor of LG Chem, which has spun off its battery manufacturing business into a new division known as LG Energy Solution. As a remedy, the ITC banned SKI from the US market for 10 years from the date of the order.

Artist’s rendering of the SK Battery America site in Georgia. Image courtesy of SK Innovation.

The problem is, SKI is building a $2.6 billion battery factory in Georgia and has signed contracts with Ford to supply batteries for its upcoming electric F-150 and Volkswagen for its soon to commence production of the ID.4 compact SUV, the larger ID.6 7 passenger SUV, and the long awaited ID. 7/Buzz at its new EV assembly plant in Tennessee. The commission’s order allows SKI to continue to supply Ford for 4 years and VW for 2 years, but offers no explanation why it thinks VW will be able to find another supplier sooner than Ford can.

In a press release following the ITC ruling, LG Energy Solution was exultant. Here’s what it had to say:

LG Energy Solution, the global leader in pouch-type lithium-ion battery technology, prevailed Wednesday over SK Innovation and SK Battery America in a multi-billion dollar trade secret dispute at the U.S. International Trade Commission. Today’s Commission decision blocks the importation, domestic production, and sale of SK Innovation batteries for electric vehicles that unlawfully rely on LG Energy Solution’s trade secrets.

“SKI’s total disregard of our warnings and intellectual property rights gave us no choice but to file this case and we are grateful to the International Trade Commission for protecting our innovations and significant economic investments in the United States,” said Jong Hyun Kim, CEO of LG Energy Solution. “As a global leader and technology innovator, we will further strengthen the protection of intellectual property rights going forward.” …..

Citing a record that proved SKI extensively and intentionally destroyed evidence of its trade secret theft, an administrative law judge issued an initial determination that imposed a default judgment in favor of LG Chem in February 2020. That decision, which found SKI had acted in bad faith to hinder the court’s investigation and administration of justice, was upheld today by the full Commission.

The Commission’s final determination provides two significant remedies to SKI’s theft, including imposing a ten-year long exclusion order to stop any importation of batteries, battery cells, battery modules, battery packs. The Commission also imposed a complementary cease and desist order to prevent SKI from making or selling any such products in the US. The Commission provided a limited exception to allow SKI to supply Ford with electric batteries for its EV F-150 pick-up trucks for four years and to Volkswagen for its MEB line for the North America Region for two years, after which the full force and effect of the exclusion and cease-and-desist orders will remain in place. The order also allows for the repair or replacement of batteries for Kia vehicles sold by the date of the order and originally equipped with SKI batteries, as agreed by LGES and the Commission staff.

Using LG Energy Solution’s stolen technology, SKI improperly secured lucrative contracts with US auto manufacturers, whose orders totaled in the billions, and negotiated historic subsidies and incentives from state and local governments to build a new manufacturing facility in Georgia. SKI’s new Georgia plant would have relied on LG Energy Solution’s stolen trade secrets, and the ITC’s ruling has definitively prohibited use of LG Energy Solution’s misappropriated technology.

The Fallout

Having won on the legal side, SK Innovation is now moving the dispute to the political sphere. The issue, of course, is jobs. The state of Georgia is understandably upset that an important new factory that will add an estimated 2,600 new jobs to its economy is now under a cloud. It is silly to think SKI will complete the factory, only to leave it underused or idle or 6 to 8 years until the ban imposed by the ITC expires.

The Associated Press reports that Georgia governor Brian Kemp, who was opposed to federal interference before he was for it, has appealed to the Biden administration to review the ITC decision and hopefully overturn or substantially modify it to allow SKI to proceed with building its factory. President Biden has 60 days to review or block the ruling. “President Biden and his administration also have the opportunity to support thousands of hardworking Georgians — and their communities — who would benefit from SK Innovation’s continued success in our state,” said Kemp on Friday. In other words, ethics and abiding by the law should take a back seat if there is a political advantage to be gained.

For its part, SK Innovation says it has “serious concerns about the commercial and operational implications of this decision for the future of our EV-battery facility in Commerce, Georgia.” The state gave $300 million in free land, cash and other incentives for the factory, which is now partially built and is supposed to open in 2022.

The company also raised another concern, one that impacts Biden’s goal of speeding the adoption of electric vehicles to lower carbon emissions. Battery factories don’t grow on trees and the US has very few of them. Forcing VW and Ford to seek other suppliers probably means looking to Chinese or European suppliers, which rather undercuts Biden’s Buy American initiatives.

In a statement reported by Inside EVs, SK Innovation said, “Our facility in Commerce will add thousands of new jobs up and down the supply chain in the region. We are hopeful that the Biden administration will take seriously the negative economic and environmental impact of this decision and reverse it so that we can continue to operate. We know that EV battery production is increasingly viewed a part of the critical national security infrastructure and domestic production of these batteries is a top priority.”

The Takeaway

There seems to be little doubt that SK Innovation cheated. And as usual, the coverup was worse than the original offense, reminding one of the extraordinary lengths Volkswagen went to in order to disguise the extent of its diesel cheating scandal. The ITC ruling presents the Biden administration with a prickly situation. On the one hand, it should not be seen as undercutting the authority of the International Trade Commission. On the other hand, building domestic battery factories is crucial to moving the EV revolution forward in America.

Which way will the administration go? Stay tuned.