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South Korean firm accused of stealing Kevlar trade secrets
Question of the Day
A federal grand jury has indicted a South Korean company and five of its executives on charges they conspired to steal from two other firms trade secrets about Kevlar, a high-strength fiber used in body armor for both law enforcement and military personnel.
The indictment of Kolon Industries Inc. and its executives, handed up Thursday in U.S. District Court in Richmond, seeks forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets from E. I. du Pont de Nemours and Company (DuPont) in Wilmington, Del., and Teijin Limited, one of the largest chemical companies in Japan.
U.S. Attorney Neil H. MacBride in Virginia said Kolon is accused of engaging in a “massive industrial espionage campaign” that allowed it to bring a new high-strength fiber, Heracron, to the market and compete directly with Kevlar.
“This country’s greatest asset is the innovation and the ingenuity and creativity of the American people,” Mr. MacBride said. “The genius of free enterprise is that companies compete on the excellence of their ideas, products and services — not on theft. 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.”
Kolon recently introduced Heracron into the para-aramid fiber market as a competitor to Kevlar and Twaron. Para-aramid fibers are used to make body armor, fiberoptic cables and automotive and industrial products.
Headquartered in Seoul, South Korea, Kolon was named in the indictment on one count of conspiring to convert trade secrets, four counts of theft of trade secrets and one count of obstruction of justice.
The indictment said that from July 2002 through February 2009, Kolon 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 them to reveal information that was confidential and proprietary.
According to the indictment, Kolon obtained confidential information in July 2002 on DuPont’s manufacturing process for Kevlar and within three years had replicated it. It said this “successful misappropriation of DuPont’s confidential information” spurred Kolon’s leadership to develop a multiphase plan in November 2005 to secure additional trade secret information from its competitors.
The indictment said Kolon hired at least five former DuPont employees as consultants, obtaining 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.
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. The indictment said Teijin Twaron demanded in a letter that Kolon cease and desist from seeking to obtain trade secrets but that the South Korean company continued, taking “additional steps to attempt to avoid detection of its actions.”
The indictment also said that 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.
Also charged were Jong-Hyun Choi, 56, a senior Kolon executive; In-Sik Han, 50, who managed the company’s research and development of Heracron; Kyeong-Hwan Rho, 47, head of the Heracron Technical Team; Young-Soo Seo, 48, general manager for the Heracron Business Team; and Ju-Wan Kim, 40 , a manager on the Heracron Business Team.
“By allegedly conspiring to steal DuPont’s and Teijin’s intellectual property, Kolon threatened to undermine an economic engine at both companies,” said Assistant Attorney General Lanny A, Breuer, who heads the Justice Department’s Criminal Division. “Developing Kevlar and Twaron was resource-intensive work, and required strategic investment and ingenuity. Kolon, through its executives and employees, allegedly acted brazenly to profit off the backs of others. The Justice Department has made fighting intellectual property crime a top priority, and we will continue to aggressively prosecute IP crimes all over the country.”
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