Kolon gets a retrial in Kevlar case

Kolon Industries, a major Korean chemical company under Kolon Group, welcomed a United States appeals court decision yesterday to throw out a $919.9 million jury verdict won by DuPont in a trial over alleged theft of trade secrets for Kevlar, a synthetic fiber used to make bulletproof vests.

It ordered a new trial.

“It’s a meaningful victory,” Kolon said in a statement. “We respect the decision of the appeals court and since we can submit evidence that was omitted in the first trial, we look forward to see more fair results.”

The news lifted the price of Kolon Industries shares on the Kospi as analysts said it cleared uncertainties surrounding the company although there will be a new trial with a new judge in the future.

Kolon Industries surged 14.91 percent to 60,900 won ($57.74) on Korea’s main bourse, while Kolon Corporation, the holding company of Korea’s 29th-largest conglomerate, also rose 14.82 percent to 22,850 won.

“Although the amount of award in the case is not confirmed, it is expected to be lower than the previous amount,” said Kwak Jin-hee, a researcher at Eugene Investment and Securities. “As Kolon could reuse the 80 billion won allowance prepared for the case in the near future, this will also have a positive impact on Kolon’s operations from the first quarter.”

The Korean chemical maker was wrongfully barred at the first trial from presenting evidence that some of DuPont’s trade-secret claims for the anti-ballistic fiber used in police and military gear were invalid, the U.S. Court of Appeals in Richmond, Virginia, ruled yesterday.

However, prosecutors said the ruling does not affect a criminal case against Kolon and some of its employees over the Kevlar data.

The decision is a setback for DuPont, the largest U.S. chemical company by market value. Aramid products such as Kevlar accounted for 37 percent of the DuPont safety and protection unit’s $3.88 billion in sales in 2012, according to the company’s website. The safety and protection unit brings in almost 11 percent of the company’s revenue.

A report last year by the Commission on the Theft of American Intellectual Property, a U.S. research group, found the U.S. economy suffers about $300 billion in losses annually from such thefts. In a separate case, a California engineer was convicted in March of stealing DuPont’s secrets for making white pigment found in plastics and in the creamy filling for Oreo cookies and selling the data to a Chinese company.

The appeals panel said in yesterday’s ruling that “the trial court abused its discretion and acted arbitrarily” in barring Kolon’s evidence that DuPont had already made public some material related to its trade-secrets claims.

“We will continue to vigorously pursue Kolon to hold them accountable and are confident that we will prevail,” Thomas Sager, DuPont’s general counsel, said in an emailed statement.

After the trial, U.S. District Judge Robert Payne in Richmond prohibited Kolon from making a competing product against Kevlar for 20 years. That ban was put on hold by the appeals court and never took effect.

“The new trial should allow Kolon to present strong evidence in support of its defenses, which had been erroneously excluded from the jury during the original proceedings,” Jeff Randall, a Paul Hastings lawyer who represented the manufacturer at trial, said in an email.

DuPont began selling the Kevlar material in 1965. It is used in body armor, military helmets, ropes, cables and tires. Kolon began making its version in 2005. Wilmington, Delaware- based DuPont sued in February 2009, alleging the Korean company stole confidential data.

Jurors concluded in 2011 that Kolon and its U.S. unit had wrongfully obtained DuPont’s proprietary information by hiring some of the U.S. company’s former engineers and marketers.

The next year, Kolon and five of its executives were charged in federal court in Richmond with conspiring to steal trade secrets from DuPont and Osaka, Japan-based Teijin, the maker of the para-aramid product Twaron.

According to an indictment made public in October 2012, Kolon obtained confidential information about aspects of the Kevlar manufacturing process in 2002, spurring its leadership to develop a multi-phase plan to secure additional secrets from its competitors.

The United States alleged Kolon hired at least five former DuPont employees as consultants as part of the scheme.

Kolon was charged with trade-secret theft as well as conspiracy and obstruction of justice. The individual defendants were charged with conspiracy and obstruction of justice for deleting information from their computers.

None of the defendants has been arraigned or extradited. Kolon has raised procedural objections to the case, Stojilkovic said today in a telephone interview.

The indictment includes a forfeiture claim seeking at least $225 million in alleged criminal proceeds from Kolon. The conspiracy and theft charges carry maximum 10-year prison terms, while the obstruction charge carries a maximum 20-year penalty.

Separately, in March 2010, Michael Mitchell, who worked as an engineer and salesman for more than 25 years at a DuPont-owned plant in Richmond, was sentenced to 18 months in prison after pleading guilty to stealing Kevlar data to give it to Kolon’s officials.

BY JOO KYUNG-DON, BLOOMBERG [kjoo@joongang.co.kr]