Bottled Lightning

by Seth Fletcher

  Immediately following the Armand group’s response came a rebuttal from Chiang’s team. “The ‘reproduced’ experiments by Ravet et al.”—the first name on the Armand group’s letter was Nathalie Ravet, a chemist at the University of Montreal—“have, on closer reading, clear differences in procedure from ours.” Chiang’s team argued that every objection Armand raised had been addressed in the original paper. They had accounted for and isolated the effect of extraneous carbon. Chiang’s team also argued that Armand’s response was fundamentally flawed. Years later, Chiang told me, “Today there’s absolutely no doubt that [lithium iron phosphate] can be doped, and it’s not only our work but other published work that shows that.” On the matter of the extraneous carbon, he said, “In that first paper we measured and calculated the amount of carbon and showed that results were not correlated with carbon.”

  In February 2004, an independent party entered the fray. Linda Nazar, a professor of chemistry at the University of Waterloo, had been studying lithium iron phosphate since 2000. After reproducing Chiang’s experiments, she submitted her paper to Nature Materials. As she put it, “The description of a highly electronically conductive phosphate challenges conventional wisdom.”

  There were stakes beyond scientific esteem. By the time his 2002 paper was published, Yet-Ming Chiang and Bart Riley, Ric Fulop, and David Vieau were already in the process of spinning out Chiang’s research on doped lithium iron phosphate into A123 Systems, named after the force constant used in the study of nanoparticles. They started with private capital and a $100,000 small-business grant from the Department of Energy. Then in late 2003, the company got its first big break—a contract to supply power-tool batteries to Black & Decker.

  Nazar’s paper was published in 2004. She concluded that it wasn’t the carbon alone in Chiang’s material that provided the extraordinary increase in electronic conductivity, but it also wasn’t Chiang’s dopant. Instead it was a coating of a highly conductive iron phosphide, an unexpected contaminant that Nazar and her collaborators observed directly using a transmission electron microscope. According to Armand, Nazar’s paper showed that “there was nothing new in [Chiang’s] phosphate.”

  Chiang had a response for this too: “We also published a paper around that same time in Electrochemical and Solid-State Letters that showed that the materials we were measuring had discrete particles of metal-rich phosphides, not the continuous metal-rich phosphides necessary to form a conductive path.” Chiang argued that continuous streams appeared in Nazar’s experiment because she used different gases in her experiment, which created an environment that allowed them to form.

  Under normal circumstances, a dispute this arcane would have never spilled out of the scientific journals. But the commercial promise of lithium iron phosphate was clear to everyone involved. Chiang had a company on the line. Soon, a parallel fight began in court.

  In November 2005, A123 had its coming-out party. The company had been operating in stealth mode for four years, quietly raising money, looking for customers. In that time, A123 had raised more than $30 million in venture capital from pedigreed investors such as Qualcomm, Motorola, and Sequoia Capital, so when A123 started talking about its plans for the future, the press was eager to listen. The Wall Street Journal, the magazine Red Herring, and a regional tech-industry publication all reported on the company that fall. Chiang, who had previous experience with a high-tech start-up, was a natural salesman. “We think this is equivalent to the impact lithium-ion batteries originally had on the electronics industry in the mid-1990s, where it unseated nickel-metal-hydride batteries as the standard,” he told a reporter. A123’s 36-volt “nano phosphate” battery packs were scheduled to start selling the following summer, in Black & Decker’s DeWALT line of high-end power tools. Due to their ability to dump electricity rapidly, the batteries would soon be powering a series of saws, a hammer drill, and an impact wrench.

  Hydro-Québec sent A123 a warning in late 2005, a letter accusing them of violating Hydro-Québec’s exclusive license on U.S. patents 5,910,382 and 6,514,640, which the University of Texas held on Goodenough’s lithium iron phosphate technology. The letter put A123 on notice: if they didn’t stop building lithium iron phosphate batteries right away, they could expect a lawsuit.

  But A123 struck first. On April 7, 2006, the company filed an action seeking declaratory judgment against Hydro-Québec, arguing that “neither the lithium metal phosphate technology nor any other product made, used, or sold by A123 infringes” on either patent, according to a complaint filed with the U.S. District Court of Massachusetts. On September 8, they requested a reexamination of the patents, arguing that they overlapped with several Japanese patents that were filed earlier.

  Three days later, the fight came to a very public head. The University of Texas stepped in and, along with Hydro-Québec, sued everyone involved in manufacturing and marketing A123’s debut power-tool batteries: A123, Black & Decker, and China BAK Battery. “Nearly a decade ago,” read an Austin American-Statesman article on the legal battle, “the University of Texas licensed two patents that were supposed to help power the next generation of laptop computers, cell phones and other staples of the tech age. Today, the university says, this longer-lived and more powerful lithium-ion battery is finally hitting the mass market … The problem, according to the university, is that Black & Decker is essentially bootlegging its technology.”

  Litigation, patent disputes, overpromising, and get-rich-quick hype have stained the battery business since its inception. In fact, the earliest attempts to commercialize the rechargeable lead-acid battery were shady enough that in the 1880s the storage battery business was about as reputable as cash-for-gold schemes are today. Back then, the French inventor Camille Faure, who developed a method for the fast manufacture of lead-acid batteries, and a businessman named Gustave Philippart wanted to make the storage battery an indispensable component in the electrical lighting systems that were beginning to emerge. The pitch was based on efficiency and labor costs: With a large array of batteries, employees at a central power station could, during normal working hours, run dynamos to charge the batteries. Then they could go home, and when customers turned on their lights in the evening they would draw electricity from the bank of batteries charged earlier in the day. Almost without exception, however, the battery companies of this era failed, in part because their technology was still relatively crude, but also because they were run by a fractious bunch of hustlers—primarily Philippart, Charles Brush in England, and a character with the perfect evildoer name of E. Volckmar—who drove the industry into a swamp of patent lawsuits, market-cornering schemes, and vicious public arguments. The companies built on Faure’s technology “were an unfortunate attempt to make too much money too quickly with too little technology,” wrote Richard H. Schallenberg. The public saw men like Philippart as scam artists and put the battery in the same category as snake oil. This is what inspired Thomas Edison to call the battery “a catch-penny, a sensation, a mechanism for swindling the public by stock companies,” a corrupting genie’s jar that brings out a man’s “latent capacity for lying.”

  So the fight over ownership of lithium iron phosphate had plenty of precedent. Actually, the A123 conflict wasn’t even the first legal battle over the compound. That one began in 2001, when the University of Texas and Hydro-Québec filed suit against Nippon Telegraph and Telephone. The coalition had been shopping their technology in Japan when they heard some surprising news. During negotiations with Sony and Matsushita, the North Americans learned that NTT had been granted a Japanese patent on the same substance four years earlier. And they had filed for it in November 1995—thirteen months after Shigeto Okada had returned to Japan from Goodenough’s lab in Austin.

  Akshaya Padhi had finished his work on lithium iron phosphate in the fall of 1994; Okada returned to Japan on October 9 of that year. Despite Goodenough’s warnings, Padhi hadn’t exactly been discreet about his findings. “Padhi told [Okada] everything that
was going on,” Goodenough said. Padhi even continued to e-mail Okada details of his research well after Okada had returned to Japan. In court documents, the University of Texas and Hydro-Québec claim that “upon returning to NTT in Japan, [Okada] disclosed the confidential information, which NTT used to apply for a Japanese patent.” Goodenough said that NTT had long wanted to make lithium iron phosphate but had never figured out how to fabricate it properly. That part, Goodenough claims, they learned in Texas, through Okada. And because they had thought of lithium iron phosphate at one point, Goodenough said, they thought they were entitled to a patent.

  “As a result,” Goodenough said, “we ended up with a lawsuit. And I learned how lawyers work.” With that, Goodenough unleashed an epic laugh lasting ten seconds and containing at least thirty separate bellowing, unrestrained chuckles.

  In the suit, the university and Hydro-Québec accused NTT of, inter alia, “tortuous interference, unfair competition, misappropriation of trade secrets, conversion, and breach of a confidential relationship.” The university’s lawyer, a Dallas suit named William Brewer, did some belligerent gloating to the Houston Chronicle three years later, in 2004. “I think that when a jury hears the facts, they might just hand me a rope,” Brewer puffed.

  The most damning piece of evidence was probably a note that Okada had faxed Goodenough from Japan shortly before the plaintiffs filed suit. In it Okada admitted that, upon closer inspection of his notes, maybe things were not quite on the up and up. “It seems to show the themes of Swamy and Padhi as you said,” he wrote in imperfect English. “You have teached us them apparently. I have forgotten this discussion in UT up to now. I was unconscious of having made a mistake. I must apologize to you and Padhi again. To take the responsibility of my sin, I send this paper by fax.”

  After the university filed suit, Okada walked back his alleged confession, and NTT denied any obligation. Of Okada, Brewer told the Chronicle, “He is a liar. He is flat out lying and hoping to get away with it.”

  The question at the core of the A123 saga is whether Yet-Ming Chiang transformed the chemical that John Goodenough patented into a new and eminently more useful compound, or whether his compound was essentially the same as what had come before.

  A123’s position is simple: Their cathode material has a different chemical formula, and therefore is a new invention that is the work of Yet-Ming Chiang and his colleagues.

  On the scientific front, Armand’s argument didn’t depart much over the years from the case he made in the pages of Nature Materials in 2003. After that, Linda Nazar became the chief agitator. Nazar and Chiang became well-known debate partners as Nazar continued to challenge Chiang’s research on lithium iron phosphate and Chiang continued to respond. In 2006, Nazar published another paper on the subject. Then in 2008, she published a paper that further clarified the role of Chiang’s dopant—in a way that was not at all favorable to Chiang. Naturally, Chiang hit back, publishing another paper in 2009. Nazar and her colleagues issued what she said was their final entry in the saga in 2010, and Chiang published a reply in the same journal.

  In a phone conversation, Nazar seemed tired of the drama yet unable to let it go. She would say she didn’t want to comment on the controversy, and then she would comment anyway. She was adamant that it was a scientific disagreement, not a clash of personalities, and because she has no financial interest in lithium iron phosphate batteries, it’s not a business matter. “Scientifically there has been a disagreement on the nature of electronic conductivity enhancement in lithium iron phosphate,” she said. “And the science speaks for itself. It shouldn’t get down to anything personal between scientists; it’s simply based on science. And the scientific community judges for themselves as well.” A number of researchers in the field told me they believed the consensus is that Chiang’s initial results were not as claimed, but no one was willing to be quoted saying it.

  Peter Bruce, who, like Nazar, has served as an expert for Hydro-Québec in their litigation against A123, explained the state of the science, which is still unsettled. “The difficulty in answering your question is that it still today remains a controversial issue. As indeed does the issue of what actually is the limiting factor in lithium iron phosphate. Some people believe it’s the electronic, and some people believe it’s the ionic conductivity. And if it isn’t the electronic conductivity, then it doesn’t matter so much if you improve it.” In short, “There’s still a lot that’s not understood about this material.”

  Nazar is quick to point out that, scientific discussions about why Chiang’s invention works so well aside, it does work well. “Suffice it to say that he has a successful company,” she said. “The materials seem to work electrochemically.”

  Chiang, for his part, stands by the original results. He also said that in the years since the 2002 paper, he’s discovered that the process of doping yields additional benefits, which he has published. “The behavior of these materials turned out to be richer than we had originally thought,” he said. “It left a lot of opportunity for further improvements in the material.”

  While the scientific dispute among Chiang, Nazar, and others played out in the pages of peer-reviewed journals, the patent battles continued. By January 2007, the U.S. Patent and Trademark Office (PTO) had agreed to reexamine both patents, putting the litigation on hold until that process was complete. No injunction had been filed, so A123 was free to keep making batteries. The patent office eventually rejected all the original claims of both patents. In response, the University of Texas then narrowed its claims. Finally, by May 2009, the PTO accepted the amended patents. The lawsuits were then free to move forward.

  “It’s been all messed up because of these patent disputes, and people are stealing it right and left,” Goodenough said. He wasn’t referring to A123 as much as the numerous other companies that have jumped into the phosphate game—the Austin-based company Valence, for instance, which supplies lithium-ion batteries to Segway and other customers. Hydro-Québec sued them in 2006; the following year, Valence sued Phostech Lithium. (In February 2011, Valence won the latter suit.) Or BYD, the Chinese battery and electric-car manufacturer that aims to lead the world in electric-car sales by 2015 using its “Fe” battery, “Fe,” of course, being the elemental sign for iron. If BYD begins selling those batteries in the United States, it may be inviting a lawsuit. Aside from the Valence-Phostech case, only one other major legal disputes involving lithium iron phosphate had been settled by the time of this book’s publication. In October 2008, Nippon Telegraph and Telephone settled its suit out of court. They agreed to pay the plaintiffs $30 million and give them an exclusive license on their patents, while still denying any wrongdoing.

  On the case of A123, Goodenough is both harsh and magnanimous—not angry, but disappointed. The money, well, that he’d just like to use to endow a chair for a fellow professor at the University of Texas. On the science, however, he is blunt. “A123 didn’t understand chemistry,” he said. Nonetheless, Goodenough gives A123 credit for generating a crush of interest in a material that he at first didn’t fully believe in. “They got a good material,” Goodenough said. “And A123 did a very good marketing job. They are excellent marketers.”

  Michel Armand is still furious. To Armand, patents “are tearing the community apart.” The saga of lithium iron phosphate is a “horror story” of “meanness and greed.” “Oh, yeah, of course, he feels very angry,” Goodenough said. “Because I must say Michel Armand was the one who recognized that the LiFePO4 was potentially very interesting.”

  Even before Yet-Ming Chiang published the paper that so profoundly offended him, Armand had in quick succession lost control of the two technologies that he was most passionate about. His saga began when Hydro-Québec transferred to its venture capital arm a subsidiary called Argo-Tech, which had been created to commercialize a form of the lithium-metal-polymer battery that Armand had invented two decades earlier. In 1999 the venture capital arm brought in a new CEO, and Argo-Tech got a
new name: Avestor. The company hoped to get lithium-metal-polymer batteries into the automotive and stationary storage markets as soon as possible. After the shakeup, a close colleague of Armand’s named Michel Gauthier, who had been program manager for lithium polymer batteries at Argo-Tech, left Hydro-Québec. Then in 2001, Hydro-Québec signed over 50 percent of Avestor to Kerr-McGee Chemical, an Oklahoma-based oil-and-gas company and manufacturer of certain battery compounds. “An oil company!” Armand said. He believes Avestor’s fate was sealed as soon as that deal was inked.

  That same year, Hydro-Québec transferred its license to manufacture lithium iron phosphate electrode powder to a newly formed Montreal-based company called Phostech Lithium. The president was Michel Gauthier, who between leaving Hydro-Québec in 1999 and the formation of Phostech had spent two years as a visiting researcher in Armand’s lab at the University of Montreal.

  In September 2002, Avestor began commercial production of 48-volt lithium-metal-polymer batteries to be used as backup power sources in telecom cabinets, those green electronic boxes parked between suburban yards all over the country. They started shipping them in 2004, in respectable volumes—AT&T installed seventeen thousand in cable boxes used by its U-verse broadband network. But right around the same time, just as the telecom-backup batteries started shipping, Avestor laid off a quarter of its staff and pulled out of the automotive market to focus solely on telecommunications. The company’s main automotive customer, a consortium of French companies that wanted to build electric cars, had bailed, saying that the Avestor batteries didn’t work.