US election becomes inflection point for LG-SK battery feud

Electric vehicle battery cells of LG Chem and SK Innovation

By Nam Hyun-woo

The looming U.S. presidential election is becoming an inflection point for the legal battle between LG Chem and SK Innovation over patents for electric vehicle (EV) batteries at the U.S. International Trade Commission (USITC), as the case comes with heavy consequences for the country's automotive industry and the jobs in Georgia.

Industry officials said the clash between the two battery giants is now becoming a political issue, as Georgia, the state where SK Innovation is building its battery plants, is increasingly classified as a "swing state" in the election. If SK Innovation loses the battle, the USITC can put a stop to the plants' operation, but the U.S. president, who will be elected on Nov. 3, can step in and veto the decision, meaning the battle now largely hinges on the outcome of the election.

According to LG Chem and SK Innovation, the USITC delayed its decision until Dec. 10 on LG Chem's 2019 complaints that SK Innovation had stolen trade secrets. In the complaints, LG Chem sought the U.S. blocking SK Innovation from producing battery cells in the country and importing components required for the cells.

The USITC has already made a preliminary ruling against SK Innovation in a default judgment and was supposed to finalize it on Oct. 5 (local time). However, the panel postponed it to Oct. 26, and decided to delay it again without clarifying the reason.

LG Chem and SK Innovation released their respective interpretations of the delay ― LG Chem claims COVID-19 and SK Innovation claims the USITC investigation. But industry officials said a more convincing explanation is political considerations.

"The compelling factor in this case is the U.S. public interest," an industry official said. "Since SK is building a battery plant in Georgia and the company promised to create thousands of jobs there, the decision is not confined to industrial patents. Plus, Ford and Volkswagen are already planning to buy batteries from the plant and build EVs in the U.S., the result of the battle can pose an immense impact on the automotive supply chain in the U.S."

The construction site of SK Innovation's battery plant in Georgia / Courtesy of SK Innovation

In 2018, SK Innovation revealed its plan to build a battery plant in Georgia, with a goal of establishing a production capacity of 9.8 gigawatt-hours by 2022. A year later, the company announced an additional plan to build a second battery plant in the state.

In return for the investments, Georgia offered a $300 million incentive and SK Innovation promised to create 2,600 jobs there with the possibility that the number could increase to 6,000. Given Ford and Volkswagen are planning to use SK Innovation batteries for the Ford F-150 truck eco-friendly model and other EVs, the jobs at Ford's and Volkswagen's U.S. plants are also expected to be affected.

The state of Georgia is pinning high hopes on the economic impact of the investments and closely monitoring whether SK Innovation is keeping its promise. In September, U.S. Immigration and Customs Enforcement (ICE) arrested 13 Koreans working illegally at the construction site of the plants.

LG Chem is also operating a large battery plant in the state of Michigan, and plans to set up a battery joint venture with General Motors in the state of Ohio. Though the USITC decision will not affect LG Chem's operations in the U.S., the company and its partner General Motors can claim indirect damages stemming from SK Innovation's alleged trade secret theft.

Since both companies are making sizable investments in the U.S., siding with either LG Chem or SK Innovation would be a thorny issue for the country while its presidential election is imminent, thus the USITC could have postponed the decision until after the election so that the new president can review the case.

So far, the USITC has delayed its final determination in 14 cases. Of them, four cases were postponed twice, two were postponed three times, one was delayed four times and two case were delayed five times. Nine of 14 cases have come to their final determination. Also, there is no precedent of the USITC overturning its default judgment decision at the final determination.

"The USITC is facing difficulties in making its final determination considering the potential impacts on the U.S. automotive industry and jobs," Meritz Securities analyst Roh Woo-ho said.

LG Chem's premises in the city of Holland, Michigan / Courtesy of LG Chem

The election carries extra significance for LG Chem and SK Innovation's battle because Georgia is emerging as a swing state. Georgia is typically considered a Republican state, but an Atlanta Journal-Constitution poll released Monday reports that 47 percent of Georgia's likely voters prefer Democratic presidential nominee Joe Biden and 46 percent favor President Donald Trump.

Forbes reported that "a win for Biden in Texas or Georgia would almost certainly lead to a landslide win for the Democratic nominee."

Due to this, a number of U.S. media outlets, including the National Review, reported that Trump "could step in and veto the ITC decision and save the plant, right before Election Day in Georgia," but the presidential review is now up to the new president following the delay decision.

Though there is a slim chance of a presidential veto, there are not many cases of a U.S. president exercising the right. In 2013, the Barack Obama administration vetoed an import ban Samsung had won from the USITC which would have prevented the iPhone 4 and select iPad models from coming into the U.S. It was the first time such a ban had been vetoed since 1987.

Sources said the Samsung-Apple battle is different from the situation between LG Chem and SK Innovation, because the former was aimed at protecting an American company, while the latter is more vague in terms of any protection for the U.S. industry.

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