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Silicon Valley battery startup Envia Systems once claimed that its next-generation lithium ion battery tech was such a breakthrough that it could bring electric vehicles to the masses. Those claims brought in millions of dollars of funds from the Department of Energy’s APRA-E program, Valley venture capitalists, and a deal with car giant GM, which makes the Volt electric car. But according to information revealed in two lawsuits against Envia, the company is alleged to have used other companies’ technology in its battery tech (one part allegedly stolen, one part purchased and used as if it was their own), and hasn’t been able to recreate the breakthrough battery results for its GM deal, leading to that deal allegedly being cancelled.

I’ve reached out to Envia for more information on the status of the GM deal and haven’t heard back. Envia’s former PR agency no longer represents it. Updated: Envia has responded and denied the allegations in the lawsuits, and now has a new PR firm. You can see their response below.

On November 22, 2013 Envia’s former CEO Atul Kapadia, and Envia executives Hari Iyer and Rohit Arora filed a lawsuit against the company and its co-founder Sujeet Kumar alleging fraud in the inducement of employment, and wrongful termination. A few months earlier Kapadia, Iyer and Arora had been terminated after the deal with GM — Envia’s only source of revenue according to the court documents — had gone south. So what happened?

Well, back in February 2012 a nanotech startup called NanoeXa Corporation sued Envia saying that Kumar and two other executives had left NanoeXa in 2007 and taken NanoeXa’s intellectual property for battery cathode technology with them. A battery is made up of an anode on one side and a cathode on the other, with an electrolyte in between. For a lithium ion battery, lithium ions travel from the anode to the cathode through the electrolyte, creating a chemical reaction that allows electrons to be harvested along the way.

That lawsuit, which is still ongoing, alleged that Kumar used NanoeXa’s cathode technology as the basis for starting Envia in 2007. When he was still with Envia as CEO, Kapadia was in charge of working on getting that lawsuit dismissed. But in the lawsuit that Kapadia filed just last month, he says that it was revealed to him after he left Envia that Kumar downloaded over 99 files and more than a gigabyte of confidential information from NanoeXa and attempted to cover it up.

Updated: Envia has a new PR firm and it sent me this statement, denying the allegations in the lawsuit:

The allegations in the complaint are baseless. The evidence will show that the plaintiffs’ lawsuit is nothing more than the spurious allegations of three disgruntled former employees. In their lawsuit, plaintiffs contend that Envia misappropriated trade secrets from NanoeXa. Not true. NanoeXa’s lawsuit against Envia, filed nearly two years ago, asserts these very same allegations and yet NanoeXa has failed to produce a shred of evidence even suggesting Envia misappropriated trade secrets from NanoeXa or anyone else. Moreover, during his tenure as Envia CEO, Kapadia spearheaded Envia’s defense in the NanoeXa litigation and identified under oath and at length the weaknesses of NanoeXa’s claims. It defies logic that Kapadia would now, after leaving Envia, file a lawsuit against Envia based on the very same set of facts. NanoeXa has suddenly dismissed Kapadia from the lawsuit – and Kapadia appears to be working with NanoeXa’s counsel.

February 2012 was also the time frame when Envia was touting that its breakthrough battery technology — which used both the next-gen cathode and a new type of anode — had achieved an energy density of 400 watt-hours per kilogram. Energy density refers to how much energy a battery can store and provide for a car with a given battery size — the more energy dense the battery, the smaller the battery can be. As I explained when I covered the news at the time, a 400 watt-hour-per-kilogram battery could be a tipping point for bringing electric cars to a mainstream car owner, and could lead to an electric car that has a 300-mile range and could cost around $25,000 to $30,000.

At the same time in February 2012 that Envia was talking up its battery, the Department of Energy’s annual ARPA-E Summit was being held. The ARPA-E Program gives small grants to high-risk, high-reward projects that can create breakthroughs or moonshots for energy. In 2009 ARPA-E had given Envia a $4 million grant for a battery that could deliver 400 wh/kg energy density. The California Energy Commission followed up with a $1 million grant for the tech.

Because Envia had reached this milestone in early 2012, ARPA-E highlighted Envia above many other companies as a symbol of its success at the Summit. At the Summit, Kumar gave a talk and former ARPA-E Director Arun Majumdar later joined the board of Envia. I’m not exactly sure of the ARPA-E process, but I would assume that ARPA-E validated the milestone at the time.

But it turns out, according to the court filings, the battery that had achieved this milestone not only used cathode tech that might have belonged to another company, but it also used anode tech that had been confidentially purchased from a Japanese chemical company Shin-Etsu. Kapadia’s lawsuit alleges that Kumar hid the fact that the battery tech used Shin-Etsu’s anode, and Kapadia and Majumdar allegedly didn’t find out about the real ownership of the anode tech until the spring of 2013.

Over the years, Envia’s breakthrough battery had also attracted the attention of GM, which likely wanted to use the tech for future EVs and evolutions of the Volt. GM, though its venture arm, had invested in Envia back in 2010, and had gained access to licensing its cathode technology.

After Envia reached the ARPA-E milestone in creating a battery with an energy density of 400 wh/kg, GM in December 2012 entered into a deal with Envia to license the battery tech for future cars, and also pay Envia a royalty on each car. In that deal, the court documents claim that Envia said it owned or could legally license all the tech involved with the battery.

According to the court documents, after that deal was signed Envia — still led by Kapadia — started to look for a buyer. However by spring 2013, it started to become clear that Envia could not replicate the 400 wh/kg technology and turn it into a product. Samsung, LG and Asahi Kasei declined to buy the company because it found problems with the technology, according to the court documents. Kapadia’s lawsuit also alleges that Kumar wanted to create a fake term sheet from Samsung that he would leak to the media to start a bidding war.

When the technology was not recreated for GM by summer 2013, GM eventually cancelled the deal. According to the lawsuit, the board supported Kumar in his actions and didn’t stand behind Kapadia. Kapadia and the other two execs were dismissed shortly after.

Envia raised $17 million in 2010 from GM Ventures, Asahi Kasei, Asahi Glass, Bay Partners, Redpoint and Panagea Ventures, as well as about $10 million before that. In addition Envia also snagged the $4 million grant from ARPA-E and the $1 million from the CEC.

It’s not a ton of money for a battery startup, but the company’s struggles are embarrassing for both ARPA-E and GM, which have been working hard to find breakthrough battery tech. The problems also highlight how difficult it is to achieve a battery breakthrough and turn it into a mass produced product.

The issues also highlight how hard it is for investors and business execs to do due diligence on battery chemistry. Kumar was touted as the brains behind the tech at Envia and Kapadia and the other execs hadn’t worked at a battery company before and didn’t have oversight on any tech matters.

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Updated: This article was updated at 2:56 EST to clarify that the lawsuit on November 22, 2013 alleges that Envia was using an anode from Shin-Etsu that was purchased confidentially and used as if it was Envia’s IP.

Updated for a second time at 5:52 pm EST with a response from Envia denying the allegations in the lawsuits.