Kolon pleads guilty in Kevlar trade secrets case

By Miles Moore, Senior Washington Reporter

ALEXANDRIA, Va. (May 22, 2015) — South Korean industrial firm Kolon Industries Inc. has pleaded guilty to conspiracy to steal DuPont's trade secrets regarding the manufacture of Kevlar.

Kolon entered its guilty plea April 30 before the U.S. District Court for the Eastern District of Virginia. Judge Anthony J. Trenga sentenced Kolon to pay $85 million in criminal fines and $275 million in restitution to DuPont.

The same day Kolon entered its guilty plea, it entered into a settlement agreement with DuPont resolving all issues in the civil lawsuit DuPont filed against Kolon in February 2009.

The settlement includes up-front and ongoing payments to DuPont, but the terms of the settlement are confidential, DuPont said in a statement.

On April 3 of this year, the Fourth Circuit Court of Appeals in Richmond reversed a $920 million jury award to DuPont dating from 2011, on the grounds that the Eastern Virginia court wrongfully excluded Kolon's evidence that some of DuPont's Kevlar patents involving police and military gear were invalid. It remanded the case to the lower court and said the case should be reassigned to another judge.

At the time, one of Kolon's attorneys declared in a Kolon news release that the reversal was a major victory for his client. The same attorney could not be reached for comment on the recent settlement.

Between June 2006 and February 2009, Kolon conspired with former DuPont employees and others to steal DuPont's trade secrets for making Kevlar, according to the statement of facts accompanying the April 30 plea agreement.

(bowmantire.com photo)

A cutaway of a Goodyear Wrangler MT/R shows the use of DuPont Kevlar in the tire's construction.

Kevlar is a trademarked name for a high-strength, para-aramid fiber DuPont has manufactured since 1965. It is used in a wide range of commercial applications, including body armor, fiber optic cable, and automotive and industrial products.

Kolon admitted it was trying to improve the quality of Heracron, its own para-aramid fiber, according to a release from the U.S. Department of Justice.

The company admitted it illegally obtained various technical and business documents involving Kevlar, the agency said. These included instructional materials that described DuPont's “New Fiber Technology,” documents on polymerization, a detailed breakdown of DuPont's capabilities and costs for its full line of Kevlar products and a list of DuPont's Kevlar customers.

Two former DuPont employees, Edward Schultz and Michael Mitchell, have pleaded guilty in the case.

Mr. Schultz, who pleaded guilty in September 2014 to conspiracy to steal trade secrets, is scheduled to be sentenced June 26, Justice said. Mr. Mitchell, who pleaded guilty in December 2009 to theft of trade secrets and obstruction of justice, was sentenced to 18 months in prison.

In August 2012, five former Kolon executives and employees, all South Koreans, were indicted in the case. They are:

  • Jong-Hyun Choi, a senior executive who was in charge of Kolon's Heracron business;

  • In-Sik Han, who managed Heracron research and development;

  • Kyeong-Hwan Rho, former head of the Heracron Technical Team;

  • Young-Soo Seo, former general manager for the Heracron Business Team; and

  • Ju-Wan Kim, a former manager on the Heracron Business Team.

None of these defendants has appeared in the U.S. to face the charges, Justice said.

This is the first case in which foreign corporations with no direct presence in the U.S. were successfully served with U.S. criminal charges, over their objections, based on the provisions of an international treaty, according to Justice.

DuPont hailed the guilty plea and settlement agreement in an April 30 news release.

“The resolution of this litigation helps ensure the protection of our proprietary technology,” Stacy L. Fox, DuPont senior vice president and general counsel, said in a statement. “We look forward to continuing to apply our innovative science to meet the needs of customers and licensees of Kevlar.”

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To reach this reporter: [email protected]

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