DuPont wins 20-year ban on Kolon's Kevlar rival

Fri Aug 31, 2012 1:23pm EDT

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(Reuters) - DuPont Co (DD.N), the inventor of Kevlar, used in bulletproof vests and other body armor, won a federal court order barring South Korea's Kolon Industries Inc (120110.KS) from making a competing version of the synthetic fiber for 20 years.

Kolon on Friday asked U.S. District Judge Robert Payne in Richmond, Virginia, to put his permanent injunction on hold while it appeals, saying a ban would cause the "uncompensated death" of an entire business and result in irreparable harm. Four hours later, DuPont filed papers opposing that request.

Shares of Kolon closed down 2.4 percent at 64,200 won ($56.59) in Seoul on Friday, the first trading day after the injunction.

Last September 14, a federal jury in Richmond, Virginia, ordered Kolon to pay DuPont $919.9 million of damages for stealing 149 trade secrets relating to Kevlar, a high-strength para-aramid fiber used in body armor, military helmets, tires and fiber-optic cables.

DuPont sued Kolon in February 2009, accusing it of misusing proprietary information obtained from Michael Mitchell, a 24-year DuPont veteran who left the company in 2006 to start his own fiber business and later began working with Kolon.

Mitchell in 2010 pleaded guilty to theft of trade secrets and served most of an 18-month prison term, court and prison records show.

In issuing the 20-year ban on activity related to para-aramid fibers, Payne called Kolon's use of stolen trade secrets "integral and essential" to its production of Heracron, a rival to Kevlar and Twaron, made by Japan's Teijin Ltd (3401.T).

He also said the $919.9 million judgment alone was not an adequate remedy, explaining that Kolon would still be free to use the stolen trade secrets at DuPont's expense, and that DuPont might have to go to South Korea to enforce the judgment. DuPont began selling Kevlar in 1965.

"That Kolon found it necessary as a matter of corporate policy to misappropriate DuPont's trade secrets to augment the knowledge and efforts of its own research staff illustrates that, left to its own devices, Kolon simply would not have developed the trade secrets it misappropriated," Payne wrote.

The injunction, he added, could significantly reduce harm to DuPont without any harm to Kolon, "except that which it brought upon itself and which, by right, it should suffer."

In its request for a stay, Kolon said it is likely to win an appeal, citing alleged errors at trial, weaknesses in DuPont's case, and a lack of evidence that Kolon's activities caused DuPont to lose sales or profit.

DuPont countered that Kolon faces no irreparable harm, as Heracron accounts for only 1.7 percent of sales. It also said Kolon has not posted bond to secure the $919.9 million award, and a court should not review its stay request until it does.

According to court papers, DuPont sells more than 70 percent of para-aramid fibers purchased in the United States.

The company's safety and protection operations, which include Kevlar and Nomex, a flame-resistant fiber used by firefighters, had $1.93 billion of sales from January to June, 9 percent of DuPont's $22.24 billion total sales.

The Wilmington, Delaware-based company also makes products used in the chemical, agriculture and biotechnology industries.

DuPont shares were up 0.3 percent at $49.72 on Friday afternoon on the New York Stock Exchange.

The case is DuPont v. Kolon Industries Inc et al, U.S. District Court, Eastern District of Virginia, No. 09-00058.

($1 = 1,134.57 South Korean won)

(Reporting by Jonathan Stempel in New York; Editing by John Wallace and Matthew Lewis)

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