Korean company indicted for alleged theft of DuPont trade secrets

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Kolon Industries Inc. and several of its executives and employees have been indicted for allegedly engaging in a a long-running program to steal trade secrets related to DuPont’s Kevlar  and Teijin Limited’s Twaron  fiber.

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DonkeyHotey / Foter

The indictment seeks at least $225 million  from the alleged theft of trade secrets from competitors of Kolon, which is based in Korea.

The charges were announced  by U.S. Attorney for the Eastern District of Virginia Neil H. MacBride; Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; and Jeffrey C. Mazanec, Special Agent in Charge of the FBI’s Richmond Field Office.

Headquartered in Seoul,  Kolon was indicted by a grand jury in Richmond, Va. The indictment charges Kolon with one count of conspiring to convert trade secrets, four counts of theft of trade secrets and one count of obstruction of justice.

Kolon makes a product called Heracron, which is a recent entrant into the fiber market as a competitor to products called Kevlar and Twaron. Para-aramid fibers are used to make body armor, fiberoptic cables and automotive and industrial products.

Kevlar is produced by DuPont and was a product of its Delaware Experimental Station.  For decades, Kevlar has competed against Twaron, a para-aramid fiber product produced by Teijin Limited, one of the largest chemical companies in Japan.

According to the indictment, from July 2002 through February 2009, Kolon allegedly sought to improve its Heracron product by targeting current and former employees at DuPont and Teijin and hiring them to serve as consultants, then asking these consultants to reveal information that was confidential and proprietary.

The indictment alleges that in July 2002, Kolon obtained confidential information related to an aspect of DuPont’s manufacturing process for Kevlar, and within three years Kolon had replicated it. This misappropriation of DuPont’s confidential information, the indictment alleges, spurred Kolon leadership to develop a multi-phase plan in November 2005 to secure additional trade secret information from its competitors, by targeting people with knowledge of both pre-1990 para-aramid technology and post-1990 technologies.

Kolon is alleged to have retained at least five former DuPont employees as consultants. Kolon allegedly met with these people individually on multiple occasions from 2006 through 2008 to solicit and obtain sensitive, proprietary information that included details about DuPont’s manufacturing processes for Kevlar, experiment results, blueprints and designs, prices paid to suppliers and new fiber technology. In cases where the consultants could not answer Kolon’s specific and detailed questions, Kolon allegedly requested the consultants to obtain the information from current employees at DuPont.

The indictment alleges that during a meeting with one consultant, a Kolon employee surreptitiously copied information from a CD the former DuPont employee had brought with him that contained numerous confidential DuPont business documents, including a detailed breakdown of DuPont’s capabilities and costs for the full line of its Kevlar products, customer pricing information, analyses of market trends and strategies for specific Kevlar submarkets. This information was allegedly copied and dispersed among several Kolon executives and employees, and the indictment alleges that many of these documents and others associated with the consultants were deleted by the Kolon executives and employees after DuPont filed a civil suit against Kolon in 2009.

Kolon also is accused of attempting to recruit a former employee of a Teijin subsidiary, Teijin Twaron, who reported the requests for trade secret information to Teijin Twaron. Legal representatives from Teijin Twaron sent a letter to Kolon in January 2008 demanding that Kolon cease and desist from seeking to obtain trade secrets related to Twaron.

The indictment alleges  in August 2008, Kolon employees met with a current DuPont employee in a hotel room in Richmond and discussed how the DuPont employee could provide trade secrets to Kolon without leaving evidence.

In addition to the corporation itself, the following Kolon executives and employees from Seoul were charged with conspiring together to steal trade secrets and obstruction of justice for deleting information from their computers.

The conspiracy and theft of trade secrets counts each carry a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants, and a fine of $5 million or twice the gross gain or loss for the corporate defendant. The obstruction of justice count carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants, and a fine of $500,000 or twice the gross gain or loss for the corporate defendant.

The case is being prosecuted by Assistant U.S. Attorneys Timothy D. Belevetz and Kosta S. Stojilkovic of the U.S. Attorney’s Office for the Eastern District of Virginia’s Financial Crimes and Public Corruption Unit and Trial Attorney John W. Borchert of the Criminal Division’s Fraud Section and Senior Counsel Rudolfo Orjales of the Criminal Division’s Computer Crime and Intellectual Property Section. This case is being investigated by the FBI’s Richmond Field Office.

 

 

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