DuPont, Kolon Feud Over Freezing $1B Trade Secrets Case

DuPont, Kolon Feud Over Freezing $1B Trade Secrets Case DuPont A DuPont technician examines Kevlar brand fibers.

E.I. du Pont de Nemours & Co.’s trade secrets case against Kolon Industries Inc., which climaxed in a now-vacated $920 million verdict for DuPont three years ago, is becoming one of those court fights that just won’t end. The wait for justice could get even longer if Kolon pulls off a bid to stay the lawsuit pending the resolution of a parallel criminal case that’s moving at an even more glacial pace.

Kolon’s lawyers at Paul Hastings and LeClairRyan made a plea for the stay in a motion filed on Monday with U.S. District Judge Anthony Trenga in Alexandria, Va. The South Korean company asserted that DuPont won’t be hurt by a stay because the criminal case involves the same accusations as the civil case—Kolon allegedly pumped former DuPont employees for proprietary information about the best-selling fiber Kevlar—and because DuPont can trust the U.S. Department of Justice to represent its interests. On the other hand, Kolon maintains it won’t be able to adequately defend itself in the criminal case if the civil case unfolds in parallel.

Back in 2006, DuPont terminated an engineer named Michael Mitchell who went on to work for Kolon soon afterward. Concerned that Mitchell was furnishing its trade secrets to Kolon, DuPont notified the Federal Bureau of Investigation, which began probing the claims. Mitchell has since pleaded guilty to criminal trade secrets theft and served jail time.

Amid a larger government criminal investigation into Kolon’s role in Mitchell’s scheme, DuPont sued Kolon for trade secrets misappropriation in February 2009. The case culminated in a $920 million verdict for DuPont in September 2011, following a jury trial before U.S. District Judge Robert Payne. (See our prior coverage here, here and here.) The U.S. Court of Appeals for the Fourth Circuit reluctantly vacated the verdict in April, ruling that Payne improperly barred Kolon from arguing that DuPont had waived trade secrets protection for some of the Kevlar technology at issue. In an unusual move, the Fourth Circuit reassigned the case on remand to Trenga.

Meanwhile, Kolon has also been fighting criminal charges against its top executives that the DOJ unsealed in October 2012. The case is still in its infancy because Kolon has pressed an argument that no current statute or treaty gives the Justice Department the ability to serve it with a criminal summons. Briefing on that issue is pending before Trenga.

With the civil case heading toward a possible retrial, Kolon moved for a stay of the criminal case on July 14. Kolon reiterated its plea in Monday’s motion, writing that “absent a stay, the government will have access to civil discovery that is unavailable under the Federal Rule of Criminal Procedure 16; and the specter of future investigation and indictment creates a substantial risk that Kolon or third-party witnesses will either refuse to testify or sit for depositions, or will invoke the Fifth Amendment.”

DuPont’s lawyers at Crowell & Moring and McGuireWoods wrote in a July 25 court filing that their client will be prejudiced by the freezing of a case that’s already more than five years old. DuPont also argues that Kolon’s due process arguments are red herrings. Civil discovery is complete, DuPont asserts, so there’s no risk that the Justice Department could obtain documents through DuPont that would be otherwise be unavailable in the criminal case. And the government is promising safe passage to Kolon employees who testify.

DuPont’s lawyers at McGuireWoods include Brian Riopelle and Rodney Satterwhite. The company is also represented by Crowell partners Andrew Kaplan, Kent Gardiner and Michael Songer.

Kolon has a Paul Hastings team led by Jeffrey Randall, as well as Gretchen Byrd of LeClairRyan. Bancroft’s Paul Clement argued for Kolon at the Fourth Circuit.

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