One of the world’s largest chemical companies was awarded nearly $920 million in a trade secrets theft case last year against a rival manufacturer accused of stealing information about Kevlar brand technology to develop a competing high-strength fiber.
Now the federal government has brought its own case, criminally charging South Korea-based Kolon Industries Inc. and five executives with stealing secrets from DuPont. Justice Department officials and federal prosecutors in Virginia announced the indictment last week charging Kolon in the Eastern District of Virginia. The charges, including conspiracy and trade-secret theft, were filed under seal in late August.
Federal prosecutors wants to seize nearly $226 million from Kolon, marking one of the largest-ever trade-secret theft prosecutions the federal government has pursued. Kolon’s lawyers unsuccessfully fought grand jury subpoenas, arguing prosecutors were unfairly piggybacking on the parallel civil suit to squeeze information from the company. A federal appeals court in Richmond, Virginia, last year rejected Kolon’s legal challenge.
Lanny Breuer, the assistant attorney general for the criminal division, said in a statement Thursday that Kolon conspired to steal trade secrets “in a brazen attempt” to benefit from the investment and ingenuity of other companies. In addition to DuPont, prosecutors identified Teijin Ltd., one of the largest chemical companies in Japan, as a victim.
“By allegedly conspiring to steal DuPont’s and Teijin’s intellectual property, Kolon threatened to undermine an economic engine at both companies,” Breuer’s statement said. “We cannot and we will not stand idly by in the face of such flagrant alleged conduct.”
Request For Service
Lawyers who represented Kolon in the related civil case, including Stephen Kinnaird of Paul Hastings, were not available for comment by deadline. Crowell & Moring partner Stephen Byers, who was among the DuPont lawyers in the civil case, also was not available.
“We believe in a fair and level playing field and will remain vigilant in protecting and enforcing our trade secrets,” DuPont general counsel Thomas Sager said in a statement. He said the indictment “constitutes a major step in bringing this matter to a conclusion. We will continue to pursue enforcement of our civil judgment in the United States, Korea and around the world.”
Assistant U.S. Attorney Michael Gill in Richmond said in court papers that the United States sent an official request for assistance to South Korea for service of a summons on Kolon.
The defendants include Jong-Hyun Choi, who served as a vice president and managing director at Kolon. Prosecutors said Choi oversaw the development of a competing high-strength fiber called Heracron. DuPont’s Kevlar brand technology is commonly used in law enforcement and military body armor, fiber optic cables and airplane components.
The indictment said DuPont executed agreements with employees, including a sales official named Michael Mitchell, that prohibited the disclosure of secret or confidential information either during or after their employment with the company.
Prosecutors said Kolon sought secrets by hiring or attempting to hire current and former DuPont employees.
Mitchell, who was fired by DuPont in 2006, went to work as a consultant for Kolon. Mitchell, who is charged with stealing DuPont secrets, cooperated with investigators. He was sentenced in 2010 to an 18-month prison term. Mitchell is one of five consultants identified in charging documents.
Prosecutors charge Mitchell in 2007 placed “numerous confidential DuPont business documents” on a laptop in preparation for a presentation at Kolon in South Korea. Prosecutors said Kolon obtained from Mitchell a document detailing DuPont’s “capabilities and costs for the full line of its Kevlar products.” The information included production capacity, ingredient costs and profit margins.
Prosecutors said senior executives at Kolon and its parent, Kolon Corp., participated in meetings “that reinforced the directives to obtain competitor technology” through consultants. Court papers reveal Kolon paid three consultants, all former DuPont employees, more than $350,000 combined.
“While DuPont disclosed basic concepts related to Kevlar manufacture in patents and trade journals, it treated the vast majority of technical information related to the commercial manufacture of Kevlar as confidential and proprietary,” according to charging documents.
Prosecutors said the $226 million subject to forfeiture represents gross proceeds of the sale of the Heracron fiber from 2006 to June 2012.
“Kolon is accused of engaging in a massive industrial espionage campaign that allowed it to bring Heracron quickly to the market and compete directly with Kevlar,” U.S. Attorney Neil MacBride said in a statement. “This indictment should send a strong message to companies located in the United States and around the world that industrial espionage is not a business strategy.”