Opinion: What Korean battery companies' fight for trade secrets means for auto industry

I think we can all agree that rule of law is an important principle in any healthy, mutually beneficial international trade relationship.

Right now, two subsidiaries of Korean global conglomerates are engaged in a bitter intellectual property (IP) theft dispute before the United States International Trade Commission (ITC).

LG Chem has accused SK Innovation of stealing trade secrets pertaining to its lithium-ion battery technology and then leveraging these trade secrets to secure lucrative contracts in the United States, most notably for the much-anticipated production platform for the electric version of Ford’s iconic F-150 truck line.

The evidence against SK Innovation is so damning that the ITC already issued a preliminary default judgment. In an attempt to cover up the theft, SK Innovation facilitated the destruction of approximately 34,000 files and emails. Furthermore, according to LG Chem, when attempting to hire former LG Chem employees, SK Innovation would require candidates to provide core manufacturing technology — that is, the exclusive IP of LG Chem — during the course of the interviews and hiring process.

In November 2018, SK Innovation received a highly contested multi-billion-dollar contract from Volkswagen and a few months later from Ford. These contracts were awarded solely on the ability to provide specific lithium-ion battery technologies, which SK Innovation could do only by having stolen LG Chem’s intellectual property.

LG Chem has a significant footprint in the central United States, having opened a battery cell technology manufacturing facility in Holland, Michigan, that created 450 jobs while announcing in 2017 an increased investment in the plant with a 100,000-square-foot expansion that is projected to add 150 jobs. In addition, the company has announced plans to build a second plant near Lordstown, Ohio, in collaboration with General Motors. This is part of a $2.3 billion investment that is expected to generate more than 1,100 new jobs for Ohioans.

SK Innovation has now committed to spending more than $2.6 billion for the construction of a battery production plant in Georgia and has forecasted creating over 2,600 U.S. jobs as a result. The State of Georgia and local jurisdictions agreed to approximately $300 million in grants, tax breaks, and free land to seal the deal. The company seems to be betting that the ITC and other courts will overlook the company’s allegedly wrongful actions in order not to jeopardize the economic stimulus the company has promised to provide.

Despite the promises made, SK Innovation has been more than loose in its dealings with Georgia and federal officials. As of September, the factory that was promised to create 2,600 jobs employed only 60 U.S. workers last fall. In addition, it became common knowledge that South Korean laborers were brought in to work illegally on site. In May, agents from the United States Customs and Border Protection stopped 33 Korean Nationals attempting to enter the United States in Atlanta using fraudulent employment documents. Furthermore, in September, 13 additional Korean workers employed at the construction site were detained by immigration authorities. Local officials then reported over 200 foreign workers who were undergoing training at a farm several miles from the SK Innovation construction site.

All told, this is not a good start or track record in terms of SK Innovation living up to its economic commitments and IP obligations under U.S. law.

Yet, redemption is available. SK Innovation can protect all of the jobs it promised Georgia by producing at its plant batteries that are not based on the trade secrets stolen from LG Chem, or SK Innovation can come to a workable legal and financial agreement with LG Chem, and a solution will be found to produce the specific battery technologies in Georgia. 

If SK Innovation does not take one of these options, it will have to roll the dice and possibly be excluded from manufacturing the F-150 batteries in the United States. Ford has a sophisticated global supply chain and is not without options or alternative suppliers.

While the ITC has delayed a final ruling until February, it is becoming increasingly clear that one party, LG Chem, has played by the rules, and the other, SK Innovation, has not. And the latter should not get a pass on IP theft based on economic commitments it hasn’t even lived up to. SK Innovation should take responsibility and find a workable solution, respectful of IP laws, for all parties involved or suffer the full consequences of doing business improperly and illegally in the U.S. 

Kent Kaiser, Ph.D., is executive director of the Trade Alliance to Promote Prosperity. More information is available at www.promote-trade.org.