SK Innovation will stand firm in bringing the truth to light.
Litigations between SK Innovation(“SKI”) and LG Chem(“LGC”) started back in April 2019 when LGC suddenly filed lawsuits against our company in the US International Trade Commission, commonly called the ITC, and in the US Federal District Court for the State of Delaware for trade secret misappropriation.
Of these, the litigation at the ITC is currently the main dispute between the two companies. The ITC is an administrative agency that deals with trade issues in the US. It decides whether an imported product violates the complaining party’s intellectual property rights and has injured the US industry. If a violation is found, the ITC ordinarily will issue an exclusion order and other remedies prohibiting importation or sales after importation of the accused products.
LGC filed for a lawsuit to utilize this authority of the ITC in order to block the importation into the US by SKI and SK Battery America Inc. (“SKBA”, SKI’s subsidiary in the US for battery manufacturing) of products that allegedly used LGC’s trade secrets and therefore caused harm to LGC’s US operation.
Meanwhile, SKI filed its own lawsuits against LGC and LG Electronics(“LGE”) on 9/3/2019 in the ITC and Delaware alleging that products that LGC exports to the US infringe SKI’s 3-side sealing pouch patent.
However, LGC again filed a lawsuit against SKI on 9/26/2019 in the ITC and Delaware Federal District Court claiming that SKI infringed LGC’s cathode material and separator patent. There are currently a total of 10 disputes ongoing in Korea and in the US
LGC is claiming that SKI obtained sizable orders from Ford and Volkswagen in the US by utilizing LGC trade secrets.
This is a baseless claim. SKI has years of experience in developing its own electric vehicle battery manufacturing technology and has been successful in obtaining sizable orders..
The most important material for batteries is cathode material, NCM which is made of Nickel (Ni), Cobalt (Co), and Manganese (Mn). If the amount of Nickel (Ni) is increased, then mileage and performance are improved, in turn reducing Cobalt (Co) proportion, resulting in decreased cost due to the high cost of Cobalt (Co). Thus, using high Nickel (Ni) based NCM is a proof of an advanced battery technology.
SKI succeeded in mass production of high Nickel based EV battery for the first time in the world such as Ni 60% (Hyundai Motors) in 2014, Ni 80% (Kia Motors) in 2018 and Ni 83% (BAIC) this year. Also, Ni 90% based EV battery will be mass produced in 2022 and will be used for Ford’s electric vehicle, again the first in the world.
Even for battery separator, a core material for batteries, SKI developed the world’s first ‘consecutive biaxial progress’ technology in 2007. In short, SKI has developed its own world-class battery technology, leaving no interest for SKI to infringe LGC’s trade secrets in winning orders from global automakers
Also, the statements submitted to ITC by Ford and Volkswagen clearly show that no other supplier will be able to replace SKI in supplying EV battery for both Ford and Volkswagen. Thus, LGC’s claim that SKI misappropriated trade secrets and caused harm to LGC’s US business has absolutely no basis.
Unlike the competitor who produces various small to large size batteries, SKI concentrates on the development and production of high energy density batteries for electric vehicles.
Through this choice and concentration, SKI has shown outstanding growth compared to the competitors in the following aspects: ① development of high energy density battery applying high Nickel cathode material; ② mass production process technology where electrode alignment is uniform; ③ reduction in the occurrence of low battery voltage phenomenon which is a symbol of an improved impurity management; and ④ minimizing the occurrence of battery ignition in the field.
As a result, the performance, stability, reliability and safety of the electric vehicle batteries produced by SKI have been getting high praise from automobile companies, and this has given SKI a secure footing in winning consecutive orders for next generation electric vehicle projects that are recently being ordered by the automobile companies.
A number of secondary battery patents that are being asserted by the LGC relate to small size batteries that SKI does not design, manufacture or otherwise offer for sale. In other words, LGC is attempting to compare items that cannot be properly compared, solely to influence public opinion in a misleading way.
Based on the technological prowess described above and projects won on that basis, SKI’s battery production capacity grew 5 fold from 0.2GWh in 2012 to 1.1GWh in 2016, and is currently rapidly growing by 20 times to 22GWh in 2020.
No. LGC has argued that some of its former employees, in the course of applying to SKI for employment, included confidential information in their resumes, and presentation documents they developed to present for their interviews. LGC now claims that it constitutes alleged trade secrets. But the former LGC employees submitted general descriptions to SKI about their prior work at LGC simply in order to explain their experience levels.
Lateral career position hiring is different from hiring new recruits, in that one needs to check the applicant’s work capability and consider suitable placement. In order to do this, SKI asks applicants to present their previous work experience for evaluation. This is not for the purpose of acquiring trade secrets (as LGC has asserted), but is instead a standard procedure designed to identify applicants’ experience, expertise and capabilities.
Moreover, in order to avoid any potential misunderstandings, SKI has been notifying applicants that they must comply with all obligations they may have to their current or prior employer(s) to maintain the confidentiality and trade secret status of any information that they may possess.
This is a standard procedure used by many global companies when hiring lateral career position employees, and LGC’s claim that SKI used abnormal hiring practices in order to misappropriate LGC trade secrets has no basis in fact.
Also, LGC has been complaining that SKI hired 76 key personnel from LGC over the two-year period starting in 2017 through “excessive personnel taking.” Notably, however, SKI did not specifically target or induce any LGC employee to change jobs and accept employment with SKI.
All lateral career positions were available for public at the SKI’s career site and were transparently processed. Anyone who met the appropriate requirements could apply for a given position, and SKI fairly and equally considered each qualified applicant without regard to the company for which he/she works. It is also worth noting that while 750 employees voluntarily left LGC in 2017 and 2018 (based on LGC’ business report), SKI hired only 76 former LGC employees (or a mere 10% of the employees who left LGC).
In order for there to be an order of import prohibition based on trade secret misappropriation, there needs to be 1) the existence of a trade secret that is alleged to have been misappropriated, 2) misappropriation of the alleged trade secrets, and 3) injury suffered within the US by the trade secret owner’s domestic (US) industry due to the alleged misappropriation. The ITC administrative law judge (ALJ) gave an early decision that is equal to a default judgment on 2/14/2020 even though above conditions were not proved in the substantive fact-finding investigation, and this is because of the decision that evidence was destroyed due to document destruction.
Therefore, the applicable ruling is a ruling that has the same effect as having the conditions proven, but the ALJ did not conclude that those conditions have been proven through factual grounds, and the actual truth has not yet been sorted out during this litigation process.
In order to give a procedural judgment based on alleged document deletion as done by the ALJ, it has to be established that;
1) there existed a duty to preserve the documents at the time of deletion,
2) files were deleted in bad faith, and
3) the deleted documents were relevant to the facts of the case.
LGC is asserting in this litigation that it sent a notification to SKI before the suit was filed that in effect asked SKI not to hire LGC’s employees, and that the moment SKI received this notification was when the duty to preserve documents was created. Following from that, LGC was able to elicit a default judgment by defining SKI’s periodic document security inspection activity as unjust document deletion.
The assertion that SKI’s duty to preserve documents was created before the litigation started due to the notice that in effect requested SKI not to hire lateral workers in itself is problematic, but the bigger issue is that the document security inspection that occurred due to normal business activity that is unrelated to the litigation has been unduly identified as unjust document deletion; and, the condition for the procedural judgment, which is comparing relevance between deleted files and alleged facts or between misappropriation of trade secret and injury, was not properly proven.
SKI has filed a Petition for Review to the ITC Commission in order to point out this problem, reverse the default judgment, and ultimately uncover the truth through fair investigation of substantive facts.
It’s regrettable that the default judgment accepted LGC’s assertion, but because 5 commissioners from the ITC Commission that has the final decision making power unanimously decided to reexamine the default judgment, we are expecting that the decision regarding this will be made properly.
It’s regrettable that that the ALJ entered a default judgment against this company, but the ITC Commission that has the final decision making power thankfully decided on a full reexamination of the default judgment on 4/17/2020. While deciding to conduct the reexamination, the ITC asked LGC and our company what is the relevance between deleted files and misappropriation of trade secret, and what is the relevance between deleted files and injury, as well as to specify the trade secrets that are the subject of the dispute as claimed by LGC.
When considering together the questions being asked and the unanimous decision by the ITC Commission to reexamine the default judgment in its entirety, one can speculate that the ITC may be troubled by at least some aspects of the default judgment.
In fact, the above requests by the ITC Commission are the same questions SKI has been asking LGC from the beginning of the litigation, but LGC has not given clear answers. The final decision by the ITC Commission is scheduled to be done by late October, and we are expecting a favorable outcome.
In July 2019, SKI dismantled and analyzed an LGC battery used in electric vehicles sold by global automakers and confirmed that the LGC battery in that product infringes our company’s patent. The applicable patent relates to the basic structure and assembly of battery cell; hence it is a patent technology that cannot be designed around in a short period of time.
The applicable patent is a patent that is being applied to a currently sold product, thus we think that infringement is clear.
In December 2011, LGC filed a patent infringement lawsuit against SKI in Korea relating to ceramic coated separators. At the time, SKI pointed out that SKI’s separator technology did not infringe LGC’s applicable patent and initiated a patent invalidation trial at the Intellectual Property Trial and Appeal Board, claiming that LGC’s said patent on separators did not meet the requirements of a legitimate patent.
In August 2012, the Intellectual Property Trial and Appeal Board ruled that LGC’s patent be cancelled. LGC objected to this ruling, but subsequently in April 2013, the Patent Court of Korea also decided that LGC’s patent was invalid. Furthermore, in February 2014, the panel at the initial trial of the patent infringement lawsuit raised by LGC ruled in favor of SKI.
As such, SKI won all litigations relating to this issue against LGC. LGC, upon raising a patent infringement lawsuit against SKI with no grounds whatsoever but only with an intent to undermine the growth of the SKI battery business, was put in a situation where the patent for its core technology could be invalidated.
Consequently, in September 2013, LGC modified its patent by partially reducing the scope of the said patent claim. The Supreme Court then sent the case back to the Patent Court of Korea in November 2013, citing that since the underlying patent itself has changed, the Patent Court of Korea should make a decision again upon reviewing it anew.
While LGC was able to temporarily prevent their patent from being nullified, there was no certainty that the Patent Court of Korea would reverse its initial ruling as the underlying patent remained unchanged; and in February 2014, the panel at the initial trial of the patent infringement lawsuit ruled that even considering the fact that LGC’s said patent is modified, SKI’s product does not infringe upon the patent.
In order to resolve the dire situation, LGC reached out to SKI several times hoping to clear up hard feelings and in May 2014 withdrew the appeal on the patent infringement lawsuit that they had initially filed. In response, in November 2014, SKI decided to close all ceramic coated separator-related lawsuits and disputes that had been ongoing since 2011 for the sake of long-term growth and development of both companies and agreed with LGC not to pursue litigation related to ceramic coating separator patents for ten years at home and abroad.
Despite the specific agreement that the parties made in good faith, LGC has once again filed a patent infringement lawsuit against SKI in the US, alleging that this patent is not subject to the previous settlement since it was registered in the US. However, such claim is simply absurd when the details of the patent are identical.
We predict there to be three possible final ITC decision scenarios, which are 1) decision to remand ITC’s default judgment, 2) approval of the default judgment and request for additional investigation concerning the effect of that decision on the public interest, and 3) SKI’s final loss. Of these, SKI sees that the remand scenario is most likely.
On February 2020, ITC entered a default judgment due to document deletion activity that occurred as a result of our company’s document security inspection without properly dealing with the question of whether there was misappropriation of trade secrets.
However, in April 2020, all five Commissioners of the ITC Commission unanimously decided on reexamination in its entirety. Thus, if a decision to remand the ITC’s default judgment is made, then this would in fact mean the case, which was just weeks away from trial when the default judgment was entered in April, would proceed to trial and LGC would have to prove its misappropriation and injury claims.
Thus far, the competitor has been asserting that the ITC entered a default judgment because it has reviewed SKI’s alleged evidence destruction as well as trade secret misappropriation, and that default judgments have never been reversed during the final decision, and that the reexamination decision in April is just a standard procedure.
However, if the ITC orders a remand, then LGC can likely no longer rely on procedural effect of document deletion, and will have to prove that its data are trade secrets, which trade secret was misappropriated, how it was misappropriated, and what damage was incurred. If the litigation reverts to a search for actual truths, then SKI will diligently participate in the litigation, including by proving its independent technology development process.
For a while, SKI has maintained its position that it is interested in settlement if the competitor is willing to participate in a reasonable conversation for the betterment of domestic battery business competitiveness and considering the waste of expenses coming from meaningless litigations.
The reason for our company leaving the door open to settlement is to keep our promise to the customers and to minimize the customer’s risk, and is not because SKI is acknowledging that trace secrets were misappropriated.
Our company’s position regarding settlement has not changed. However, it would be difficult to mediate a settlement, if the LGC continues to argue for trade secret misappropriation and tries to hinder SKI’s battery business growth. We would like to emphasize again that SKI’s willingness for settlement is to resolve the dispute quickly and to use our resources and efforts in a constructive manner.
Many interested parties are concerned regarding the prolonged litigation between SKI and LGC Production of electric vehicles is exploding due to the focus on low carbon, green growth all over the world, and right now is the most important time to decide whether the battery business can become our country’s bread and butter industry.
At a time where it’s already difficult enough just to compete fairly and try to increase presence together in the world market, this fight that drags both companies down must stop.
Also, due to the involvement of many people in the litigation process, there is a worry that valuable technology could leak.
There is active investment in the battery business worldwide, and leading automobile companies are reviewing the possibility of producing batteries internally in order to decrease their reliance on battery companies. Thus the global market environment around the battery industry is not easy. If we continue to drag each other down and muddy the water, the beneficiary will not be LGC but other competitors.
There are many issues ahead of us that need to be resolved for advancement of K-Batteries such as training a sufficient workforce and fostering vendors in order to strengthen industry competitiveness. It is time to end unnecessary and meaningless litigation between SKI and LGC, and is time to have a constructive discussion as top competitors and as partners in creating an ecosystem for K-Battery industry.
Aside from the litigation process, SKI has been preparing for the future according to its plan step by step. SKI has won large size battery orders from companies such as Ford and Daimler based on its differentiated technology, and is planning on continuing to invest into expanding production facilities.
In addition, not only is SK seeking to become a Top-Player when it comes to battery production and sales, but to advance its goal of Green Balance 2030 through expanding into BaaS (Battery-as-a-Service), ESS, aviation, and watercraft batteries that contribute value to the ESG side by utilizing virtuous cycle structure during the first half of battery’s lifecycle.
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