The future is electric, and Georgia has spent a great deal of energy— and hundreds of millions in development incentives— to secure its position in the economy of tomorrow as a high-tech manufacturing corridor.
Thanks to a historic $300 million subsidies package, the state convinced in 2019 Korean electric battery maker SK Innovation to build a $2.6 billion manufacturing facility in north Georgia. The company had previously said it would employ 2,600 workers by 2024, but a decision last week by a federal trade agency that it stole a competitor’s trade secrets has prompted concerns that the plant could have the plug pulled.
That speculation makes for sensational headlines and interesting watercooler talk, but it’s just not true: the federal government is not going to close the plant, not now, not ever; only SK Innovation can do that by refusing to make amends.
At issue is a complicated legal dispute between SK and rival LG Energy Solution, another electric battery maker. For the last two years, the US International Trade Commission was investigating claims that SK had stolen its competitor’s trade secrets. Last week, the agency sided with LG and issued a ten-year exclusion order blocking the importation, domestic production, and sale of SK batteries that unlawfully relies on stolen technology.
Crucially, however, the ITC provided a four-year term in which SK can still produce batteries at its Georgia plant for one of its customers. That exception is important because it ensures no interruption in America’s electric vehicle market— electric car batteries aren’t exactly D Cells, after all, but specialized components that require bespoke engineering— and provides time for the two companies to settle the dispute.
All ITC decisions are subject to a 60-day review by the president. Already, Gov. Brian Kemp, who deserves credit for shepherding the largest jobs deal in the state’s history, has urged President Joe Biden to veto the decision or for the two companies to settle.
Understand: while a veto of the ITC decision might allow SK to operate the plant pending further litigation in the courts, it would almost certainly chase away future opportunities. Settling is the only course that secures the SK plant while fostering a business climate in which other companies will want to operate.
Imagine a foreign firm stole the closely guarded Coca-Cola formula— a trade secret worth billions— and used that information to underwrite a massive new plant in South Carolina. Imagine Coke went to court and won a decisive victory that prevented the thief from using the syrup formula unless fairly compensated. Now, imagine folks in South Carolina urging that theft be excused because the company has promised to create jobs.
That’s a devil’s bargain, and the devil always gets his due.
As long as there is continued demand for electric vehicles, there will be a need to manufacture electric batteries at that plant, whether under SK Innovation’s name or another battery manufacturer. But SK Innovation’s illegal acts, which include obstruction of justice, deserve serious penalties. Selfishly, they would have you believe that this is a binary choice between economic development and intellectual property protection, that Georgia can either have jobs or justice can be served. The people of Georgia understand that’s bunk.
Quite the opposite, economic development that is not fundamentally undergirded by intellectual property protection is not sustainable because innovators large and small will go elsewhere. Companies need confidence that their secrets cannot be stolen no matter how well-connected or well-lobbied the culprit.
Trade secret theft isn’t a victimless crime. In this case, there are about 2,600 victims: all the Georgians that SK Innovation promised to employ. Their future singularly depends on SK’s willingness to pay for what they stole.
More than stealing its rival’s intellectual property, SK Innovation betrayed Georgia’s trust and taxpayers, who provided one of the biggest subsidy packages in the state’s history to a company we believed would do right by us.
Unrepentant thieves don’t deserve massive tax breaks when schools and roads could use those funds. SK Innovation needs to do right by its victims, all of its victims, and do what is necessary to keep the plant open: pay for what you stole.
Gordon Giffin is the former U.S. Ambassador to Canada under President Bill Clinton and Eric Tanenblatt is the former chief of staff to Gov. Sonny Perdue. They serve as advisors to LG Energy Solution.
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 workerswho 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.
Today, only a handful of companies hold the disruptive technologies needed to unleash the potential of electric vehicles. One of those companies has made investments in Ohio and should serve as a long-term economic and employment anchor for area workers, small businesses, and families.
Global battery manufacturer LG Chem’s battery spinoff is known as LG Energy Solution. In partnership with General Motors, it has established a sizable footprint in Ohio. In 2019, LG announced plans to construct a facility in Northeast Ohio as part of a $2.3 billion investment that is expected to generate well over 1,000 new local jobs.
GM is slated to produce 20,000 electric trucks in Ohio in 2021, and eventually 420,000 vehicles a year.
As Lordstown Motors continues construction, it last week announced an agreement with LG Energy Solution for battery cells as it prepares to start production on its all-electric pickup, The Endurance, in September of this year.
The key factor behind the technology that is driving these investments and jobs is intellectual property (IP). Unfortunately, in the case of LG, the intellectual property has been under assault under the actions of a more recent entrant into the U.S. electric vehicle (EV) sector: a South Korean company named SK Innovation. At the center of the dispute is that SK Innovation plans to build a plant in Georgia and manufacture a battery design that LG says is based on trade secrets and IP stolen from them.
The dispute is currently before the U.S. International Trade Commission. An ITC administrative law judge issued a default judgment a year ago siding with LG after reviewing evidencethat SK Innovation destroyed at least 34,000 files and emails to cover up the alleged theft.
Furthermore, LG accuses SK Innovation, while attempting to recruit and hire former LG employees, of requiring candidatesto provide core manufacturing technology – that is, the exclusive intellectual property of LG Chem.
By the way, SK Innovation has also been found on multiple occasions to be using illegal labor at the plant under construction in Georgia. Last year, U.S. Customs and Border Protection stopped several Korean nationals using fraudulent employment documents in an attempt to enter the United States illegally, and some without proper paperwork were found to be employed at the site and subsequently detained by immigration authorities, all while local officials reported more than 200 foreign workers were undergoing training at a farm several miles away. These were jobs that local leaders were led to believe would go to workers and communities in Georgia.
Now, under a darkening cloud of allegations, SK Innovation is attempting to circumvent the courts in the hopes of finding a political solution in Washington, D.C. Doing so would come at the expense of good actors like LG that have made investments, lived up to their commitments, created union-based jobs, and played by the rules.
We must make sure the investments made by committed technology-driven companies like LG are secured by ironclad IP protections.
Any efforts by Washington politicians to allow SK Innovation off the hook would send exactly the wrong message. Let’s hope Ohio’s elected officials in Congress agree.
LG Energy Solution counsel Dave Callahan issued the following statement in response to Georgia Governor Brian Kemp:
“LG Energy Solution remains committed to negotiating a fair settlement for the theft of its trade secrets, for which the US International Trade Commission’s decision provides years to accomplish. But the reasonable accommodations provided to SKI’s victims, including Georgia and its customers, should not undermine lawful remedies for willful violations of our trade law.
“The Commission’s decision should not be vetoed because it does not imperil SK’s Georgia facility or the jobs the company has promised to create. In fact, it specifically gives the parties a lengthy window of time to resolve their dispute, during which SKI’s factory will be allowed to operate, employing Georgians to build batteries for VW and Ford. The only obstacle to resolving this matter and securing the plant’s long-term future is SKI’s refusal to acknowledge its wrongdoing and make amends. The President should not veto this decision; to do so would be turning a blind eye to SKI’s wrongful actions in detriment of LGES, an innovator that deserves the protection of the law.”