Friday, October 19, 2012

Global Impact: South Korean Firm Indicted on Trade Secret Theft, Forfeiture of $225 Million Sought

A federal grand jury in Richmond, VA, has indicted a South Korean company, Kolon Industries Inc., and five of its executives on charges that they conspired to steal trade secrets from two competing firms who sell Kevlar, a fiber used in body armor for both law enforcement and military personnel.

The indictment of Kolon and its named executives yesterday (October 18) seeks the forfeiture of at least $225 million in proceeds from the alleged theft of trade secrets from E.I. du Pont de Nemours and Company and Teijin Limited, one of the largest chemical companies in Japan.

US Attorney Neil H. MacBride in Richmond asserted that Kolon has been engaged in  a “massive industrial espionage campaign” that allowed it to bring a new high-strength fiber, Heracron, to market and compete directly with Kevlar.

COMMENT: Headquartered in Seoul, 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. 

Additionally, the indictment states that from July 2002 through February 2009, Kolon sought to improve Heracron 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.

The indictment also alleges that Kolon actually hired at least five former DuPont employees as consultants, obtaining sensitive, proprietary information that included details about the company's manufacturing processes for Kevlar, experiment results, blueprints and designs, prices paid to suppliers and new fiber technology.

Moreover, Kolon is accused of attempting to recruit a former employee of a Teijin subsidiary, Teijin Twaron. The indictment demonstrates that Teijin Twaron demanded in a letter that Kolon cease and desist from seeking  to obtain trade secrets, but that the South Korean company continued to persist in doing so.

Since the Economic Espionage Act of 1996 (EEA) was passed by the US Congress and signed into law by the President, the majority of defendants prosecuted under the statute have been ethnic Asians who have sworn their allegiance to the US.

Any US company selling its products and services on the world stage are urged to institute a rigorous information security program designed to prevent the compromise and theft of its trade secrets, including the non-disclosure of proprietary information during their employment as well as afterwards. Failure to abide my such signed agreements could render them liable under the EEA.

If companies claiming to possess trade secrets do NOT take formidable steps to protect such proprietary information, they could be denied standing under the EEA.