Huge Korean battery plant faces critical ruling in trade-secret fight

Aerial photo shows SK Innovation's $2.6 billion construction site in Commerce on Wednesday, September 30, 2020. The 2.4 million-square-foot plant, located next to Interstate 85 in Jackson County, could eventually employ up to 2,600 workers. Georgia gave SK one of the biggest incentive packages in state history to locate there, including $300 million in grants, tax breaks and free land. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

Credit: HYOSUB SHIN / AJC

SK Innovation’s $2.6 billion factory in Commerce to make batteries for electric cars

A trade-secret dispute may imperil the state’s biggest economic-development project, a $2.6 billion factory in northeast Georgia designed to manufacture batteries for the burgeoning electric vehicle market.

Two South Korean companies are locked in a multipronged legal battle over the rights to technologies behind the batteries. SK Innovation, which is building the plant, has been accused by rival LG Chem of stealing its trade secrets in a lawsuit filed at the U.S. International Trade Commission.

Initial rulings from the ITC this year have largely gone against SK. The commission is expected to make a decision this month, though the decision can be appealed to another court.

At stake is the 2.4 million-square-foot factory under construction near Commerce on I-85, the 2,600 jobs it would bring, $300 million in incentives that Georgia offered SK to locate here, and production of electric vehicles by SK customers Ford and Volkswagen.

The state Department of Economic Development in an April letter warned the trade commission that penalties against SK would threaten Georgia’s economy.

“The State and Jackson County could lose thousands of jobs and billions of dollars in investment,” Commissioner Pat Wilson said in the letter. “The State of Georgia stands to be a casualty as a result of a legal proceeding that has nothing to do with it.”

In the worst-case scenario, SK could be forced to abandon plans to make lithium-ion batteries in Commerce, according to elected officials and attorneys for LG.

SK says it developed the technologies. It is separately suing LG for patent infringement on its battery designs.

“SK Innovation will vigorously defend ourselves in this matter to ensure a robust, innovative EV battery industry in the U.S.,” the company said in an emailed statement.

SK Innovation's $2.6 billion construction site in Commerce on Wednesday, September 30, 2020. The 2.4 million-square-foot plant, located next to Interstate 85 in Jackson County, could eventually employ up to 2,600 workers. Georgia gave SK one of the biggest incentive packages in state history to locate there, including $300 million in grants, tax breaks and free land. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

Credit: HYOSUB SHIN / AJC

In legal briefs issued this spring, ITC investigators determined that SK likely destroyed evidence relevant to the case and that an order restricting SK’s ability to import battery parts into the U.S. was warranted. In one brief, an ITC judge said that SK destroyed so much evidence that it may be impossible to determine whether trade secrets were stolen.

The commission’s final determination is due Oct. 26 and is subject to review and approval by President Donald Trump. If a decision goes against SK, it could appeal to the U.S. Court of Appeals for the Federal Circuit and the U.S. Supreme Court.

SK and LG could also avoid the disputes and settle the cases, a common outcome in trade-secret disputes, said Jeffrey Ginsberg, an intellectual-property attorney at Patterson Belknap in New York who isn’t involved in the litigation.

In 2018, Apple and Samsung reached a financial settlement to a years-long dispute over patents used in smartphones.

Ginsberg said state officials should be concerned that the ITC appeared to confirm LG’s allegations that SK stole its trade secrets by hiring about 100 LG employees, including engineers and marketing executives. A judicial ruling in favor of LG could give them leverage to force SK to settle, Ginsberg said.

“You don’t ever want to be accused of destroying evidence,” he said. “That’s why SK seems to be in a difficult position right now.”

U.S. Rep. Doug Collins, who represents the district where the factory is located, said state taxpayers could be the victims of SK’s alleged trade-secrets theft and also the company’s potential involvement in hiring illegal workers.

There have been two rounds of arrests of illegal Korean workers by immigration authorities this year, the most recent on Sept. 23. SK blamed construction firms for the hirings.

“There’s no doubt SK needs to get their act together…if they want to continue doing business in Georgia,” Collins said in an emailed statement on Wednesday.

A spokesman for Gov. Brian Kemp referred questions to the state Department of Economic Development, which said state incentives are specific to new jobs and that tax credits will only be available once the project is operating and Georgians are employed.

Construction remains on schedule, with the first phase to be finished at the end of this year and production starting next year, a company spokesman said.

The dispute could also impact the U.S. electric car market.

An SK setback could help LG Chem’s customers, Tesla and General Motors. LG Chem plans to spin off its electric-vehicle battery business to take advantage of soaring demand, according to media reports.

SK agreed to sell Georgia-made batteries to Ford and Volkswagen, but adverse rulings could delay the car makers' introduction of new models, said Lea Malloy, head of research and development at Cox Automotive Mobility.

Cox Automotive and The Atlanta Journal-Constitution are both owned by Cox Enterprises.

“A stable supply of lithium-ion cells helps (manufacturers) meet new model-launch commitments,” Malloy said.

Both Ford and Volkswagen submitted comments to the ITC in support of letting SK make batteries in Georgia, saying that only SK can meet their specific needs for vehicle batteries.

Electric vehicle "batteries cannot simply be swapped like batteries in a flashlight,” Ford said in a May letter to the ITC.

LG’s attorneys acknowledged that, if they prevail and the plant is shut down, it could hurt Georgia’s economy. They noted that LG Chem’s U.S. headquarters are in Buckhead. However, they said they have no choice but to defend LG’s property.

“We’re not focused on stopping the plant," said Song Jung, a Washington-based attorney representing LG. “All we want is to stop our technology from being used there.”

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