Trade Secrets to South Korea

On May 1, 2015, Kolon Industries, Inc., a South Korean industrial company, was sentenced in the Eastern District of Virginia to 5 years’ probation and was ordered to pay $400 special assessment, $85,000,000 in criminal fines and $275,000,000 in restitution. Kolon Industries, Inc., appearing through two successor entities—Kolon Industries, Inc. and Kolon Corporation (collectively, Kolon)—pleaded guilty in federal court on April 30, 2015, to one count of conspiracy to convert trade secrets involving E.I. DuPont de Nemours & Co.’s (DuPont) Kevlar technology. According to the statement of facts filed with the plea agreement, from June 2006, to Feb. 2009, Kolon conspired with former DuPont employees and others to steal DuPont’s trade secrets for making Kevlar, a highstrength, para-aramid synthetic fiber. Kevlar, a trademarked name, is one of DuPont’s most well-known products and is used in a wide range of commercial applications such as body armor, fiber optic cables, and automotive and industrial products. Kolon admitted that it was attempting to improve the quality of its own para-aramid fiber known as Heracron. Kolon personnel met repeatedly with former DuPont employees, including Edward Schulz of Brownstown, PA, and Michael Mitchell, of Chesterfield, VA, to obtain confidential and proprietary DuPont information about Kevlar. Schulz pleaded guilty to conspiracy to steal trade secrets in Sep. 2014, and was sentenced in July 2015, to 2 years’ probation, 500 hours’ community service, $100 special assessment and a $75,000 fine. Mitchell pleaded guilty to theft of trade secrets and obstruction of justice in Dec. 2009, and was sentenced to 18 months in prison, 3 years supervised release, $200 special assessment, and $187,895.90 in restitution. Kolon admitted that it obtained technical and business documents regarding Kevlar, including instructional materials that described DuPont’s “New Fiber Technology,” documents on polymerization, and a detailed breakdown of DuPont’s capabilities and costs for the full line of its Kevlar products and DuPont’s Kevlar customers. According to the statement of facts and Mitchell’s admissions at his guilty plea, Mitchell exchanged numerous telephone calls and emails with Kolon personnel. On more than one occasion, Mitchell advised Kolon personnel that some of the information they sought was proprietary and that DuPont considered such information to be trade secrets. Mitchell also coordinated a meeting at a hotel in Richmond, at which Kolon personnel were introduced to a cooperating witness who pretended to be a disgruntled scientist from DuPont. During the Richmond meeting, Kolon personnel indicated that they would only be comfortable communicating with the cooperating witness in a manner that was confidential and that would not leave an evidentiary trail. In Feb. 2009, DuPont filed a civil lawsuit against Kolon in the Eastern District of Virginia, alleging theft of trade secrets. Thereafter, certain Kolon personnel attempted to delete files and emails related to Mitchell, Schulz and outside consultants hired to improve Kolon’s para-aramid fiber, and urged other Kolon personnel to search for such materials and mark them for deletion. Kolon also admitted that certain employees approached a former employee of an American subsidiary of Teijin Ltd. – a Japanese company that makes the para-aramid fiber called Twaron—in an unsuccessful effort to obtain information about Twaron. This case represents the first time that foreign corporations with no direct presence in the United States were found to be successfully served with U.S. criminal process, over their objections, based on service pursuant to an international treaty. In Dec. 2014, the district court found that both of the successor companies were properly served, and ordered them to appear for arraignment. In Feb. 2015, the Fourth Circuit Court of Appeals denied Kolon’s petition for extraordinary relief seeking reversal of the district court’s order. Five former Kolon executives and employees, all of South Korea, were charged in an Aug. 2012, indictment filed in the Eastern District of Virginia: Jong-Hyun Choi, a senior executive who oversaw the Heracron Business Team; In-Sik Han, who  managed Kolon’s research and development related to Heracron; Kyeong-Hwan Rho, the head of the Heracron Technical Team; Young-Soo Seo, the general manager for the Heracron Business Team; and Ju-Wan Kim, a manager on the Heracron Business Team. The case was investigated by the FBI’s Richmond Division.