Blog Editors

Recent Posts

Analyzing Tech Regulation: Shapiro's Critique and Policy Recommendations

UPCOMING EVENT: Automated Decision-Making Technology and Artificial Intelligence

Free Speech and Trademark Law Clash in Vidal v. Elster

Using Technical Solutions to Address Issues in Privacy Law: A Talk by Professor Zubair Shafiq

An Introduction to Venture Capital

Archive

A Massive Attack on Body Armor - 2nd Round

Posted By JaeWon Lee, Nov 4, 2013

In their opening briefs, Kolon and DuPont exchanged arguments on more than twenty issues. The battlefield includes district court’s abuse of discretion in procedural matters and admissibility of evidence; jury instruction; choice-of-law; establishment of trade secret elements; remedies; and recusal.

Here are some of the arguments and counterarguments from each side.

1. Kolon argued that the district court abused its discretion and made irreversible procedural errors.

Unpleaded Claims

Kolon: DuPont, in their 2009 complaint, only alleged that Kolon obtained Kevlar trade secrets from Mitchell. This is critical because not only the entire $919.9 million judgment is based on this allegation but it sets the basic framework for the case, venue, and the applicability of Virginia Law. Without amending the complaint, DuPont subsequently expanded allegations – to include allegations related to four other consultants (one of whom never been a DuPont employee) and the actions taken in Korea. Discovery notice is insufficient without Kolon’s consent and DuPont’s unpleaded additional claims deprived Kolon of the opportunity to raise personal jurisdictional defenses and to conduct complete discovery.

DuPont: The 2009 complaint provided Kolon with sufficient notice that DuPont’s misappropriation claim included “all” Kevlar trade secrets Kolon stole, not limited to those obtained from Mitchell. Kolon conducted extensive discovery concerning every trade secret misappropriations.

Adequate Specificity & Moving Target

Kolon: DuPont failed to define its trade secrets with adequate specificity at the outset of discovery. DuPont merely divides 149 asserted trade secrets into 16 broad categories with vague descriptions. DuPont only identified lengthy representative documents in each category without identifying the specific pages on which the secrets could be found. DuPont started to define its trade secrets only after the close of fact and expert discovery, and DuPont further changed those definitions later.

DuPont: DuPont identified trade secrets sufficiently – by producing 60-page responses with detailed information concerning the trade secrets, by categorizing trade secrets into 16 groups, and by identifying specific documents evidencing those trade secrets. On the other hand, Kolon was obligated but failed to explain why DuPont’s trade secrets disclosures were insufficient or what specific details were lacking.

Admissibility of the Akzo Litigation Document

Kolon: DuPont disclosed vast amounts of technical information in the 1980s when DuPont had engaged in a widely publicized patent dispute with Akzo Novel, DuPont’s only para-aramid competitor at that time. At least 42 of the trade secrets DuPont has asserted in this case involve information that was wholly or partially disclosed during the Akzo litigation.

DuPont: Kolon failed to produce any evidence that any particular trade secret in this case was disclosed in the Akzo litigation.

Applicability of Virginia Law

Kolon: DuPont’s new unpleaded claims involved conduct occurring entirely in Korea. And Kolon raised the choice-of-law issue sufficiently before the pretrial conference – Kolon was only unable to raise that issue sooner because DuPont failed to plead the Korea-based trade secret claims in its 2009 complaint.

DuPont: Kolon waived its choice-of-law argument by raising this issue untimely. Also Kolon failed to explain how Korean law is different from Virginia law.

Before jumping to the next part, let’s briefly review what trade secret is.

The Uniform Trade Secrets Act (UTSA) was promulgated to provide legal framework for improved trade secret protection for industry in all 50 states. 47 states and the Virgin Islands and the District Columbia have adopted the UTSA. Under UTSA,

“Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

So, if the alleged trade secret is not the type of information protected by the Act, does not derive independent economic value, is generally known, is readily ascertainable, or is not reasonably protected as secret, as a matter of law, that is not a protectable trade secret (under the Act). Of course, a plaintiff can allege alternative claims. But as long as the plaintiff fails to establish the information as a trade secret first, one cannot successfully allege a trade secret misappropriation claim.

2. Kolon argued that it was entitled to judgment as a matter of law.

Generally known or Readily ascertainable

Kolon: DuPont’s expert testimony was insufficient to show that each and every one of the 149 trade secrets was not readily ascertainable.

DuPont: Kolon should have objected to and appealed from the admission of DuPont’s expert testimony, if Kolon believed the testimony was flawed. Moreover, what Kolon argue is a fact issue: that Kolon had the opportunity to address on cross-examination and through its own evidence; and that the jury decided in favor of DuPont after weighing the experts’ testimony.

"En Masse" Strategy

Kolon: Each trade secret claim must be analyzed individually, apart from each other alleged trade secret. DuPont lumped many of the alleged trade secrets into groups and asserted that the whole agglomeration met the statutory element.

DuPont: DuPont submitted a serious of exhibits showing precisely where in the trial record DuPont satisfied each element for each trade secret.

Use

Kolon: Under the Virginia code, the word “use” implies action and implementation, more than a showing of mere possession. DuPont obtained a jury verdict on all 149 trade secrets based on “reference use” theory arguing that mere retention of trade secrets constitutes use. DuPont did not offer any evidence that Kolon used the alleged 87 business trade secrets and 68 technical trade secrets.

DuPont: DuPont did not rely on reference use theory. Instead, DuPont presented evidence that Kolon “used” all of the 149 stolen trade secrets in its processes, development, and marketing. Also, the jury found use for all 149 trade secrets.

3. Kolon argued that $919.9 million damage award was grossly excessive.

Jury Instruction

Kolon: Unjust enrichment damages should be limited to Kolon’s actual, not possible, cost savings caused by the use of the trade secret. But, the district court erroneously awarded the monetary value attributed to the benefit that Kolon received as a measure of DuPont’s damages.

DuPont: Virginia code expressly permits the unjust enrichment caused by the misappropriation that is not taken into account in computing actual loss. The unjust enrichment can be measured based solely on the finding of misappropriation without the need to prove the wrongdoer used the trade secrets.

Expert Testimony

Kolon: DuPont expert’s entire methodology in computing damages is baseless. DuPont expert failed to consider massive technological advances since DuPont initially developed Kevlar more than 40 years ago, information disclosed in the public domain, information that Kolon never received, and the wage rate difference in Korea and in the US (which alone inflated the damage award by $667 million).

DuPont: DuPont expert used a well-accepted methodology to calculate damages. On the other hand, Kolon failed to explain why the expert testimony does not satisfy any Daubert factor. At most, the issue was a factual question that the jury found in DuPont’s favor.

4. Kolon argued that the permanent injunction is inappropriate and overbroad.

Kolon: DuPont failed to survive federal law’s four-factor test. Under this test, DuPont must prove irreparable injury and the inadequacy of money damage, and that the balance of hardships and the public interest tip in the DuPont’s favor. But, DuPont has never attempted to show irreparable injury resulting from Kolon’s action. DuPont can be made whole through an appropriately calculated award of money damages and a narrower injunction that is tailored to preventing the specific harm, if any, caused by Kolon’s conduct.

DuPont: Virginia code expressly permits both the damages and the injunction. Under the Virginia standard injunction (state law), all that it required is proof that the statute or regulation has been violated. Even under the federal standard, Kolon’s theft of DuPont’s trade secrets caused irreparable harm that cannot be compensated through monetary damages. Without a production injunction, DuPont faces the permanent loss of customers.