October 18, 2012 / 2:19 PM / in 5 years

U.S. charges South Korea's Kolon with trade secrets theft

WASHINGTON (Reuters) - A U.S. grand jury charged South Korea-based Kolon Industries Inc with criminal trade theft in a long-running dispute over how the company produced high-strength fiber, according to an indictment unsealed on Thursday.

Kolon and five company executives face charges that they stole trade secrets belonging to DuPont Co, maker of Kevlar fabric used in body armor and other products, and to Japan’s Teijin Ltd, maker of Twaron, a rival fabric.

The United States threatens to take at least $226 million in assets from Kolon, which represents the gross proceeds of the company’s sales of its fabric, Heracron, according to the indictment.

“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,” said Neil MacBride, the chief U.S. prosecutor in the Eastern District of Virginia, in a statement.

The indictment, dated August 21, was filed in U.S. District Court in Richmond, Virginia. DuPont developed Kevlar in Richmond, according to the indictment.

Kolon said it will vigorously defend itself against the charges from the U.S. Justice Department. The company said the fabric technology is four decades old and beyond the protection of DuPont’s patents.

“It is disturbing that the DOJ would bring charges that effectively assist DuPont in improperly extending its monopoly,” Kolon lawyer Jeff Randall said in a statement.

The company and the executives also face a charge that they obstructed the U.S. government’s investigation.

Randall said there are “significant questions as to what DOJ now seeks to accomplish,” given that Kolon and DuPont have already been fighting over their products in court. The Justice Department began its investigation in 2007 and opted not to prosecute, Randall said.

In a civil lawsuit, a federal jury in 2011 ordered Kolon to pay DuPont $920 million in damages based on similar accusations. Kolon is appealing.

A judge in August barred Kolon from making its version of the synthetic fiber for 20 years, but a federal appeals court later said Kolon can continue while it pursues appeals.

A court hearing in the criminal case has been scheduled for December 11.

The case is United States v. Kolon Industries Inc, et al, U.S. District Court for the Eastern District of Virginia, No. 3:12-00137.

Editing by Kenneth; Barry and Dan Grebler

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