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Kolon Faces Kevlar Theft Charges

Issued: November 01 2012

United States Marine Corps Sergeant Mark Dean and Major Trent A. Gibson sort out the pieces of the Kevlar helmet used to absorb the blast of a grenade in the streets of Iraq.
Kolon Industries, a global chemical company based in South Korea, and five of its executives have been charged with stealing trade secrets regarding the manufacture of Kevlar, an para-aramid fibre manufactured by US-based chemical company DuPont.

Kevlar is strong and light. According to DuPont, it has five times the strength of steel and is used to manufacture body armour, fibre optic cables, automotive and other industrial products.

Kolon launched Heracron to compete with products including Kevlar and Twaron, which is made by Japan’s Teijin Group. The launch resulted in charges being brought against Kolon by a grand jury in Richmond, Virginia, after an FBI investigation.

The indictment states that Kolon allegedly sought to improve Heracron by hiring DuPont and Teijin employees for their confidential and proprietary information, including supplier prices, between July 2002 and February 2009, and had replicated the manufacturing process within three years.

US Attorney for the Eastern District of Virginia Neil MacBride said that 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. “This indictment should send a strong message to companies located in the US and around the world that industrial espionage is not a business strategy.”

A DuPont representative tells Asia IP that the company’s focus remains on “working with our customers and other stakeholders in Korea and around the world to provide the most innovative protection technologies in the industry. We believe in a fair and level playing field, yet we will remain vigilant in protecting and enforcing our trade secrets.” Kolon faces a minimum forfeiture of US$225 million, which approximates Heracron’s profits over six years, and six charges, including one count of trade secret conversion conspiracy, one count of justice obstruction and four counts of trade secret thefts.

The Korean government has been cooperative and extradited the Kolon employees, but when the defendants will be put on trial remains unknown. “We do not yet know when the criminal trial will be scheduled,” the DuPont spokesperson says. “The verdict in the civil case was decided following a trial last year which resulted in a US$920 million verdict against Kolon. One former Kolon consultant has already pleaded guilty. Before our civil trial last year, the court found that Kolon had intentionally destroyed relevant evidence, which led to the obstruction of justice charge in the indictment.”

The Korea Times has reported that Kolon claims it developed its own version of para-aramid fibre with research dating back to 1979.

“DuPont reaped the benefits of monopoly power to the extent permitted by law, including higher prices to consumers. Now that DuPont’s key patents have expired, competitive products such as Heracron should be free to compete in the US and internationally,” said Jeff Randall, global co-chair of intellectual property at Paul Hastings, the firm which represents Kolon.

DuPont says it does not have a monopoly on para-aramid fibre. “In the US, the court threw out Kolon’s antitrust allegations as being legally and factually unsupported. In Korea, the Korea Fair Trade Commission similarly rejected Kolon’s claims.”

Teijin representative Rie Mashiba said the company could not comment on an ongoing case.

 

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