The physical artificial intelligence (AI) corporations MakinaRocks(477850) received an "extremely poor" rating for a research and development (R&D) project carried out with government support and was hit with a restriction on participating in national research and development projects and additional monetary sanctions of about 200 million won.
MakinaRocks argued it delivered more advanced results than initially planned, including securing data from actual industrial sites, but the court said objective evidence of performance was lacking and found the government's action justified.
According to legal sources on the 31st, the 13th Administrative Division of the Seoul Administrative Court (Presiding Judge Jin Hyun-seop, Director General Judge) on the 20th dismissed all claims by the plaintiffs in a lawsuit filed by the MakinaRocks corporation, the chief executive officer, and the executive director in charge of business development seeking to overturn sanctions including restrictions on participating in national research and development projects imposed by the Minister of the Ministry of SMEs and Startups.
The Ministry of SMEs and Startups (MSS) in Mar. last year imposed a one-year restriction on MakinaRocks' participation in national research and development projects and additional monetary sanctions of 194.47 million won. It judged that the results of the R&D project carried out with government support fell short of the original targets.
MakinaRocks participated in the Ministry of SMEs and Startups (MSS)'s "Startup growth technology development project, innovation-type startup task" in 2019 and submitted a business plan titled "Development of an AI-based predictive maintenance solution for industrial robot arms."
The original plan, considering the difficulty of obtaining actual robot arm data from manufacturers, was to directly build a small robot using a six-axis motor and collect and analyze experimental data generated from it.
However, the plan changed during the project. In 2020, MakinaRocks signed a memorandum of understanding (MOU) with another company and received operational data from robot arms running in an actual factory. The company appears to have considered the data secured in the field to be a more meaningful outcome than the initial plan.
The problem was that this data could not be disclosed externally. As a result, the process of collecting and analyzing experimental data using the small robot initially planned, and developing predictive maintenance technology based on it, did not proceed properly.
MakinaRocks submitted its final report to the Ministry of SMEs and Startups (MSS) in 2021 but did not submit test reports from an accredited testing institution to verify the performance indicators presented at the time of the agreement.
Subsequent on-site inspections concluded that it was necessary to check the experimental data and performance of the developed output. In 2023, the reevaluation committee rated MakinaRocks' project execution with the lowest grade, "extremely poor." National R&D project evaluation grades are classified as "excellent, average, insufficient, extremely poor."
MakinaRocks objected and filed a lawsuit with the Seoul Administrative Court in Aug. last year. The company was said to have argued that it carried out the project using data obtained from actual industrial sites and achieved results more advanced than the original plan.
The court, however, sided with the Ministry of SMEs and Startups (MSS). The bench judged, "It cannot be considered unjust to rate the results of the project execution in this case as 'extremely poor.'" In particular, it found fault with the lack of materials objectively verifying whether MakinaRocks had achieved the final development goals.
It also found that merely submitting test reports about three years after the project ended was insufficient to overturn the prior evaluation. In government R&D projects, claims of actual technology development alone are not enough; the goals and performance set at the time of the agreement must be proven with objective materials.
Meanwhile, MakinaRocks was listed on the KOSDAQ market in May. On a consolidation basis for the first half of this year, revenue was 7.02692 billion won, up 168% from a year earlier, but operating loss during the same period was 4.23567 billion won.
A MakinaRocks official said, "We are closely reviewing the first-instance ruling and will proceed with the relevant procedures in due course." The result of this lawsuit will stand unless both sides appeal.