DuPont Wins the Battle Over Kevlar . . . But Has It Won the War?

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After being slammed with a verdict of $919.9 million against it in September 2011, South Korean-based Kolon Industries suffered its second whammy in August when the United States District Court for the Eastern District of Virginia enjoined it from production of its Heracron aramid fiber line, a competitor to DuPont’s Kevlar aramid fiber line, on the basis of misappropriation of DuPont’s trade secrets.

The District Court’s rulings were the products of litigation instituted by DuPont against Kolon in February 2009, wherein DuPont alleged that Kolon stole trade secrets and confidential information about Kevlar, DuPont’s aramid fiber developed in the 1960s and used in military and first responder protective gear.  More specifically, the suit urged that Michael Mitchell, a former DuPont employee who had worked as a Kevlar marketing executive, stole the trade secrets and passed them along to Kolon when he became employed therewith.  (Side bar: the F.B.I. investigated, Mitchell plead guilty, and he ultimately was sentenced to 18 months in prison).  Kolon denied any wrongdoing.

Following the massive damages award to DuPont in September 2011, DuPont announced that it would press forward with an effort to secure injunctive relief prohibiting Kolon from profiting further from having stolen DuPont’s trade secrets.

And so it was.  On August 29, 2012, the District Court entered an Order requiring Kolon to return DuPont’s trade secrets by October 1, 2012, prohibiting Kolon’s use of DuPont’s trade secrets permanently, and enjoining Kolon from producing or selling any para-aramid fiber products worldwide for twenty years.  In so doing, the Court stated that Kolon showed a “complete disregard for DuPont’s trade secret rights and a disregard for the law that protects such secrets,” further noting that Kolon engaged in stealing DuPont’s trade secrets as “a matter of corporate policy.”  Not surprisingly, Kolon voiced its disapproval of the injunction’s issuance and immediately moved to stay the order pending the appeal of the jury verdict, which was granted by the Fourth Circuit Court of Appeals.

Shortly thereafter, the federal government announced on October 18, 2012 an indictment charging Kolon with theft of DuPont’s trade secrets, conspiracy, and obstruction of justice, and five of its executives with conspiracy and obstruction of justice, contending that Kolon engaged in a multi-year campaign to recuirt DuPont employees to Kolon for purposes of obtaining Kevlar-related trade secrets.  The United States Department of Justice is attempting to seize $226 million from Kolon, allegedly representing the proceeds of the sale of Heracron fiber from 2006 to June 2012, plus over $300,000 in payments allegedly made to former DuPont employees to provide trade secret information.  If found guilty, the Kolon executives face up to 30 years in prison, and both the executives and Kolon would face millions of dollars in fines.
U.S. Attorney Neil MacBride, in discussing the indictment, stated that it “should indicate that industrial espionage is not a business strategy and will not be tolerated by the United States Department of Justice.”

As Kolon has been found liable for civil violations and charged with criminal action related to its alleged trade secret theft from DuPont, DuPont has won the battle.  However, since Kolon has now appealed the civil matter and will contest the criminal action, has DuPont won the war? We will have to wait and see.

If you would like additional information on non-compete agreements or trade secrets law, please contact one of the Burr & Forman Non-Compete & Trade Secrets team members.