Trade Secrets The Other Intellectual Property

When our thoughts turn to protection or enforcement of intellectual property rights in technology, most of us think first of existing or potential patent rights in the technology. Trade secret rights are often an afterthought. A federal court case that began in 2009 and has had some unusual twists and turns over the past year illustrates the potency under the right circumstances of technology protection through enforcement of trade secret rights. At issue was a dispute between the U.S.-based DuPont chemical company and a Korean competitor, Kolon Industries, Inc., over trade secret technology utilized in the production of para-aramid synthetic fiber products, most notably body armor marketed by DuPont under its Kevlar brand name and by Kolon under its Heracron brand. While the end results of the several legal threads in this dispute could be viewed as extreme, the underlying factual scenario was not that unusual. Following many years of R&D work by each of the companies on their products, Kolon was alleged to have tried to improve its competitive position by getting former employees of its competitors to reveal trade secrets that would help in further development of Kolon’s Heracron products. The playing out of the scenario in this case illustrates both the dangers to any company considering engaging in this sort of industrial espionage, and the potential effectiveness of trade secret protection laws, in this case the Virginia Uniform Trade Secrets Act. While the rest of this story may still unfold through legal appeals and other machinations, the results to date include: — A guilty plea and an 18-month prison term for a former DuPont employee accused of stealing DuPont trade secrets and passing them on to Kolon. — A U.S. federal court jury award of nearly $920 million in compensatory damages and another $350,000 in punitive damages against Kolon for stealing Kevlar trade secrets. — Issuance by the U.S. District Court judge in the case of a 20-year injunction prohibiting Kolon from making or selling Heracron or any other para-aramid products. — Staying of this injunction by a three-judge panel of the 4^th Circuit Court of Appeals, allowing Kolon to continue selling its products while it appeals the injunction ruling. — And most recently, in October 2012, unsealing of a U.S. grand jury indictment charging Kolon and five of its executives with criminal charges for stealing DuPont trade secrets, and also seeking upwards of $225 million in recompense from Kolon, based on proceeds of its previous sales of Heracron. While these results are out of the ordinary, they serve as a reminder that protection of technology trade secrets can be very worthwhile, and, under the right circumstances, enforcement of rights in those trade secrets can serve very well to protect and preserve the value of the technology and the business built around it. –Robert E. Smartchan