Two South Korean competitors are locked in a heated battle over alleged theft of trade secrets relating to electric vehicle (“EV”) lithium-ion battery technology which is an industry expected by experts to generate over $23 billion in revenues by 2027.
The story starts back in April when LG Chem brought a lawsuit against SK Innovation in Delaware federal court and a parallel action before the United States International Trade Commission (“ITC”) alleging trade secret misappropriation based on SK’s hiring of over 100 former LG employees including 70 engineers who were purportedly asked to disclose confidential information during the recruitment process and downloaded 1,900 confidential documents from LG’s database. LG alleges that SK profited from this misappropriation based on a 14 fold increase in the value of its EV battery contracts during this time period. SK denies the allegations, claiming that its hiring was done through an open application process, that former LG employees were a large proportion of the applicant pool, and that SK hired only 10% of LG applicants of whom 95% held low managerial positions without access to the highly confidential information at issue. In May, in response to LG’s request to block US imports of SK’s lithium-ion batteries and related manufacturing equipment, the ITC instituted an investigation and plans to issue a determination in October 2020, which, if adverse, could block SK from importing equipment to outfit its new Georgia-based battery plant which in turn could jeopardize contracts with EV manufacturers like Volkswagen.
The battle heated up in June when SK brought a suit against LG in Korean court for defamation seeking over $800,000 in damages that could be even higher depending on the impact of the LG-lawsuit allegations. SK went on the offensive again in August, filing parallel patent infringement actions at the ITC against LG Chem and its US subsidiary, LG Chem Michigan, and Delaware federal court against LG Chem and LG Electronics. SK claimed it owned patents for core EV battery technologies at issue for a decade longer than LG given its work on large-size EV batteries in the early 1990’s but notably SK holds only 1,135 registered patents compared to LG’s 16,685 patents.
Another counterattack was launched on September 17, 2019 when Korean authorities conducted a raid of two SK facilities in Seoul and Daejeon on the same day that LG made a press release revealing that in early May it brought a criminal complaint against SK, several of SK’s human resources managers, and several former LG employees for alleged violations of domestic law which prohibit “divulgence and protection of industrial technology.” A few weeks later, on September 26, 2019, LG filed a second set of complaints against SK at the ITC and Delaware federal court, alleging SK infringed five of its patents.
The escalation of this trade secrets dispute reflects both the intense competition among South Korea’s largest EV battery manufacturers who seek control of the burgeoning EV lithium-ion battery market and evidences a larger trend as companies attempt to protect trade secrets at the international level. Both sides claim they have the upper hand with LG arguing that if “does not react strongly . . . global competitors will take advantage of trade secret leaks in the long run” and SK stating that it is taking firm action against LG’s attempts to harm national interests, consumer interests, fair competition, and innovation and growth by ensnaring both parties in litigation at a time when ongoing R&D is critical, and competition from around the world including Europe is growing.
Who will emerge victorious remains to be seen…