Updated 12:38 p.m.
Last year, one of the world's largest chemical companies was awarded nearly $920 million in a trade secrets theft case against a rival manufacturer, Kolon Industries Inc., which was 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 Korean-based Kolon and five executives with stealing secrets from E.I. du Pont de Nemours and Co. U.S. Justice Department officials and federal prosecutors in Virginia today announced the indictment charging Kolon in U.S. District Court for the Eastern District of Virginia. The charges, including conspiracy and trade-secret theft, were first filed under seal in late August.
DOJ 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 that prosecutors were unfairly piggybacking on the parallel civil suit to squeeze information from Kolon. A federal appeals court in Richmond last year rejected Kolon's legal challenge.
Lanny Breuer, the assistant attorney general for the DOJ Criminal Division, said today in a statement 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 Limited, 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 said in prepared remarks. "We cannot, and we will not, stand idly by in the face of such flagrant alleged conduct."
Lawyers who represented Kolon in the related civil case, including Stephen Kinnaird of Paul Hastings, were not immediately reached for comment this morning. Crowell & Moring partner Stephen Byers, who was among the lawyers who represented DuPont in the civil proceedings, also was not immediately reached.
"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 prepared statement. Sager 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."
An assistant U.S. attorney in Richmond, Michael Gill, said in court papers filed today that the United States has sent an official request for assistance to South Korea over service of a summons on Kolon.
The individual 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.
Kolon, prosecutors said, sought secrets by hiring or attempting to hire current and former DuPont employees.
Mitchell, who was fired from DuPont in 2006, began working as a consultant for Kolon. Mitchell, charged with stealing DuPont secrets, cooperated with the government. He was sentenced in 2010 to an 18-month prison term. Mitchell is one of five consultants identified in charging documents.
According to the government, 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 that detailed 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 company, Kolon Corp., participated in meetings "that reinforced the directives to obtain competitor technology" through consultants. Court papers reveal that Kolon paid three consultants, who were each 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 between 2006 and 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 of the Eastern District of Virginia 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.”