(2nd LD) ITC backs LG Energy in trade secret dispute, issues 10-year import ban on SK

February 12, 2021

A U.S. trade panel on Wednesday ruled in favor of South Korean battery maker LG Energy Solution Ltd. in a trade secret case and issued a 10-year import ban on some lithium-ion battery products by SK Innovation Co.

The U.S. International Trade Commission (ITC) affirmed a preliminary ruling delivered in February 2020 to support LG Energy’s claims that SK Innovation used stolen trade secrets to develop its electric vehicle (EV) batteries.

The ITC issued “a limited exclusion order” for 10 years to ban import of some lithium-ion batteries and its components by SK Innovation, but permitted shipment of components for domestic production of its clients, including Ford Motor Co., Volkswagen AG and Kia Corp., considering “public interests.”

The order permits SK Innovation to import components for domestic production of lithium-ion battery products for Ford Motor for four years and for Volkswagen for two years to allow them to transition to new domestic suppliers, the ITC said in the ruling.

It also allows SK Innovation to import articles for the repair and replacement of EV batteries for Kia vehicles that had been sold to U.S. customerThis file image depicts the legal dispute between LG Energy Solution Ltd. and SK Innovation Co. (Yonhap)

The ITC’s ruling is expected to deal a blow to SK Innovation’s plan to grab a bigger share of the growing EV battery market with a new factory on U.S. soil but allowed it to avoid delivery failures to its clients.

But the ruling looks set to affect Ford and Volkswagen’s plans to ramp up production of EVs.

SK Innovation has been building a factory in Georgia, to be completed by 2022, to provide EV batteries to Volkswagen and Ford and is building its second plant at the site. It has pledged to hire 2,600 people by 2024.

The commission’s decision could jeopardize SK’s promises to create American jobs and complicate U.S. President Joe Biden’s push to expand EV adoption under his Green New Deal initiative.

The Biden administration has 60 days to review the ruling. Unless Biden vetoes the ruling, it becomes final.

SK Innovation said it will continue efforts to prevent the ITC’s ruling from disrupting its U.S. production plan by promoting the importance of its EV battery supply chain and jobs to be created at the Georgia plant during the presidential review.

“We will explore ways to protect our clients’ interests during the presidential review period and afterwards,” SK Innovation said in a statement.

LG Energy, wholly owned by LG Chem Ltd., said the ITC’s ruling acknowledged its claim that SK Innovation stole its trade secret related to rechargeable batteries and caused damage to the company.

The world’s No. 2 EV battery maker supplies batteries to Tesla Motors Inc., General Motors Co., Volkswagen, Hyundai Motor Co. and a number of other automakers. It already produces batteries in a plant in Michigan and is building another factory in Ohio to supply Utlium Cells, its battery joint venture with GM.

LG Energy urged SK Innovation to accept the final decision and come to the negotiating table with a compromise that can satisfy its shareholders and investors.

“If (SK Innovation) does not provide a compromise that corresponds to misappropriation of the trade secret and that can satisfy our shareholders and investors, we will sternly engage in ongoing legal proceedings at home and abroad,” LG Energy said in a statement.

LG and SK are mired in tit-for-tat battery patent infringement disputes filed in the U.S. in 2019. LG has accused SK of stealing its battery-making trade secrets.

LG could take advantage of its ITC ruling at the Federal District Court in Delaware, which can order the plaintiff to pay compensation for actual damages and higher punitive damages.

The two Korean companies have faced growing pressure from South Korean policymakers and politicians in Georgia to resolve the prolonged legal issues, but they have failed to reach a compromise due to a big gap on the settlement amount.

LG demanded nearly 3 trillion won (US$2.7 billion) in compensation, but SK offered less than 1 trillion won, according to industry sources.

In an online press conference, LG warned that SK will have difficulties in winning future car battery deals unless it comes forward and makes compensation for the unlawful acts.

The company also said it’s possible to file similar suits against LG in Europe and elsewhere and it will decide whether to take legal action depending on SK’s stance toward the ITC ruling.

As for compensation, SK said it hopes to wrap up the car battery-related lawsuits and it is ready to negotiate with LG under “reasonable” conditions.