Why Is A123 Systems Suing Apple? What Else Does It Have To Do

In Silicon Valley, people like to say failure is a badge of honor in the technology business.

If that’s the case, A123 Systems is one of the most accomplished companies in clean technology history.

The battery maker—which has filed a lawsuit against Apple and five former employees claiming they collectively breached nondisclosure agreements to take advantage of A123's technology—has a singular history of being on the wrong side of history. They were the Solyndra of clean technology before the real Solyndra swept them off the headlines. (Disclosure: I have always been skeptical about the company, even during the feverish build up to their IPO, but events have shown that the reservations were grounded in fact.)

Spun out of MIT in 2001, A123’s goal was to build safer, more stable versions of lithium ion batteries by replacing the standard lithium cobalt chemistry with a formula based around lithium phosphate. It was a great idea. Researchers and large companies had become increasingly worried about the future of lithium cobalt batteries. Consumers demanded more power for their gadgets. Cranking up the energy density of lithium cobalt batteries, however, increased the risk of electrical shortages and “runaway thermal reactions.”

In 2004, Sony engineers said that the performance curve for lithium cobalt might hit a wall in two years: in 2006, news reports began to surface about laptops bursting into flames.

Unfortunately for A123, lithium phosphate cells don’t pack the same level of performance you get with cobalt. Interest in alternative energy and green also began to draw in conglomerates like LG, Johnson Controls and Samsung who brought larger economies of scale and different chemistries to the table. By 2009, A123 accumulated revenue of $168.5 million while its cumulative net losses came to $146 million. 75% of the revenue came from three clients.

The company held a stunning IPO in 2009 with the stock rising nearly 50% on the first day of trading, months after receiving $249 million from the Department of Energy months before.

This proved to be the high point. By 2010, Black & Decker, once the company’s largest customer, shifted to other suppliers. Revenue from a Mercedes-Benz project declined. So did revenue from BAE Systems .

Potential deals to supply batteries to Chrysler and General Motors fell through.

The company did get one notable contract. Fisker Automotive agreed to use the company’s batteries. Whether the deal had anything to do with A123 agreeing to invest $35 million in Fisker is anyone’s guess, but in the end it didn’t matter. Fisker flamed out.

In 2012, the company filed for bankruptcy and was scooped up by China’s Wanxiang Group. (It became a well-trodden path for once celebrated MIT startups: Luminus Devices and Evergreen Solar also ended up being bought by Chinese investors.)

The company pivoted toward supplying batteries for stationary energy storage. It landed deals with companies like AES. But stationary storage is also a crowded field and the chemistry/technology options are far broader. It remains to be seen if A123 can keep up in terms of price or performance.