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Trade Enforcement for Electric Vehicle Batteries Protects Jobs, Upholds Trade Treaty

Feb. 26, 2021, 9:01 AM

A trade secret case about lithium-ion batteries decided Feb. 10 by the International Trade Commission offers an important opportunity to affirm support for American jobs and innovation, rule of law, and the integrity of international commitments to respect intellectual property.

LG and SK are South Korean companies with significant investments in U.S. operations. Both manufacture batteries for the growing market in electric vehicles. In 2019, LG brought the ITC case against SK for trade secret misappropriation. Last year, the ITC’s administrative law judge grappled with this complex factual dispute and concluded, after careful review, that SK had engaged in a disturbing effort to destroy evidence and that the available evidence points to a culpable state of mind on the part of SK and an intent to hide evidence of trade secret misappropriation by SK.

On Feb. 10, the panel of ITC commissioners affirmed the ALJ. While the ITC has broad power to issue general remedial orders, it showed wise restraint in issuing a strong but limited remedial order that protects internationally shared interests in IP and trade enforcement, and respects customers as well as the interests of the losing party that don’t relate to the violations.

The case is now up for 60 days of presidential review. Only twice in the past 30 years has the White House found the exceptional circumstances to set aside an ITC enforcement order.

Public Interests in Enforcement Are Wide-Ranging

This case is too ordinary and enforcement too important here to merit that kind of extraordinary White House intervention. The public interests in enforcement here are wide-ranging. With shared desire to improve the global environment for generations, policymakers worldwide are priming the market for improved electric vehicle batteries.

Everyone sees the need for vital innovations to commercialize complex technologies like these. That’s why IP laws, including to protect trade secrets, exist around the world—they enable the cycle of risk, innovation, and reward that ultimately benefits all. It’s also why IP protection is codified in the long-standing and strategically powerful economic and security relationship between South Korea and the U.S. in Article 18 of the U.S.-Korea Free Trade Agreement entered into force in 2012 (KORUS).

Against this backdrop of high-minded talk, it’s essential to ensure a matching walk. IP adjudication at the ITC has a well-earned long-standing tradition of being non-partisan, fair, well-reasoned, and well-supported by a detailed factual record. Transparency is baked into the ITC process. While some administrative tribunals—both in the U.S. and abroad—operate, by design, with fast procedures, issue only short determinations, and openly take direction from political overseers, the ITC operates under exacting procedures, gives detailed reasons for its decisions, and functions independently.

The case between LG and SK did raise a noteworthy difficulty—namely, the lack of evidence due to the actions that the ALJ found SK to have committed. After careful examination, including exacting questions directed at SK and relevant witnesses, the ALJ entered a default judgment.

Though labeled “default,” the substance of the procedure reveals much more careful assessment than the label might suggest out of context. At the ITC, litigating parties before the ALJ are guaranteed the chance to tell their side of the story, examine witnesses, and present evidence—or, in SK’s case, to try to explain the disappearance of evidence.

In addition, ALJs at the ITC are independent adjudicators duty-bound to explain their decisions. Moreover, the ITC’s Office of Unfair Import Investigations (OUII) is a veritable institution within the institution that litigates on behalf of the public’s interest, further ensuring full and fair adjudication. The skilled IP trial attorneys from OUII bring yet an additional independent scrutiny to both parties’ legal theories and factual claims. All of this resulted in a not-atypical ALJ initial determination that runs to 142 close-reasoned pages.

Furthermore, the ITC commissioners themselves are removal-protected and serve in staggered nine-year terms. The ITC’s statute ensures that the six commissioners are balanced between the two political parties, with a chair that rotates every two years between the two political parties. This all ensures the ITC reaches decisions through reasoned collaboration, not partisan preference.

The transparent and detailed nature of the entire ITC process means that any objections to an ITC determination must themselves be particular as well. But absent some particular factual or legal error, such a sound and fair process should otherwise run its ordinary course.

From the record of facts and orders produced in the lithium-ion battery case, it is clear that the ITC has afforded both parties a fair and transparent forum, while upholding the vital national economic and security interests in cooperation between the U.S. and South Korea by giving life to the commitments in KORUS Article 18. All of this fosters public trust in rule of law and investor confidence in commercializing the innovations of tomorrow.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

F. Scott Kieff works on international trade, business, technology, and security. A former commissioner of the International Trade Commission, he is the Stevenson Research Professor at GW Law School, and does consulting, mediating, arbitrating, and compliance monitoring through Kieff Strategies LLC.

Thomas D. Grant works on international law, trade, technology, and national security. He is a Fellow of the Lauterpacht Centre for International Law in Cambridge and has served as a member and arbitrator of the Permanent Court of Arbitration and as senior adviser for strategic planning in the Bureau of International Security and Nonproliferation of the State Department.