E.I. Dupont De Nemours & Co. v. Kolon Indus., Inc.
| Decision Date | 30 August 2012 |
| Docket Number | Civil Action No. 3:09cv58. |
| Parties | E.I. DUPONT DE NEMOURS AND COMPANY, Plaintiff, v. KOLON INDUSTRIES, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Virginia |
OPINION TEXT STARTS HERE
Rodney A. Satterwhite, Brian Charles Riopelle, Kristen Marie Calleja, Matthew Devane Fender, Robyn Suzanne Gray, Thomas Moultrie Beshere, III, McGuireWoods LLP, Richmond, VA, Andrew David Kaplan, David Daniel Cross, Jeffrey L. Poston, Kent Alan Gardiner, Michael Joseph Songer, Shari Ross Lahlou, Stephen Matthew Byers, Terence P. Ross, Crowell & Moring LLP, Washington, DC, for Plaintiff.
Dana Johannes Finberg, SNR Denton U.S. LLP, Brian Ankenbrandt, Carla Walworth, Jeffrey Graham Randall, Michael Christopher Hendershot, Paul Hastings Janofsky & Walker LLP, Palo Alto, CA, Daniel Bruce Goldman, Thomas Peter O'Brien, Paul Hastings Janofsky & Walker LLP, New York, NY, Daniel Prince, Paul, Hastings, Janofsky & Walker, Los Angeles, CA, Igor Victor Timofeyev, Scott Mitchell Flicker, Stephen B. Kinnaird, Paul Hastings LLP, Washington, DC, Rhodes Beahm Ritenour, LeClair Ryan PC, Richmond, VA, for Defendant.
This matter is before the Court on the MOTION FOR PERMANENT INJUNCTION (Docket No. 1533) filed by Plaintiff E.I. Du Pont de Nemours and Company (“DuPont”). For the reasons set forth below, the motion is granted to the extent herein described.
Following a seven-week trial, a jury found that Kolon Industries, Inc. (“Kolon”) violated the Virginia Uniform Trade Secrets Act (“VUTSA”), Va. Code Ann. § 59.1–338A. Using a fifty-one page verdict form, the jury specifically found that Kolon willfully and maliciously misappropriated and used 149 DuPont trade secrets for the manufacture of DuPont's para-aramid fiber, Kevlar®.1 (Docket No. 1514). The jury returned a verdict in favor of DuPont, and against Kolon in the amount of $919.9 million in compensatory damages. The Court assessed punitive damages in the amount of $350,000. Thereafter, DuPont filed its Motion for Permanent Injunction, pursuant to Virginia Code Ann. § 59.1–337A.
The record shows that Kolon had attempted in the 1980s and 1990s to develop a commercial para-aramid product. That lengthy effort was unsuccessful and, in 1995, Kolon abandoned the effort. .
In approximately 2002, Kolon's top executive directed that the company renew its efforts to produce para-aramid, and Kolon did so. In 2005, Kolon announced that it soon would enter the para-aramid fiber market with its product, Heracron®. Id. Thereafter, the company began to produce its Heracron® product, but Kolon's efforts were less than successful. Because the market for para-aramid fiber was regarded as a lucrative one, the company's top management again placed success in the manufacture of Heracron® as a top priority.
Kolon continued its development efforts and was making some progress toward success, but it encountered significant problems in quality control and in efficient production, both of which kept Heracron® from being competitive with Kevlar® and Teijin's product, Twaron®. So, with the knowledge and approval of its chief executive, Kolon set out to learn how DuPont, one of the world's leading para-aramid producers and Kolon's competitor, manufactured Kevlar® in an effort to solve Kolon's quality control and production problems. To that end, Kolon made the deliberate decision to acquire DuPont's trade secrets and confidential information.
To achieve its objective, Kolon retained, as consultants, former DuPont employees whom it paid to divulge DuPont's trade secrets. One of those former employees was Michael Mitchell, who had worked for DuPont since 1982, and whose employment was terminated by DuPont in February 2006. Shortly after the termination of his employment with DuPont, Kolon approached Mitchell about the possibility of a consulting arrangement. In April 2007, Mitchell and Kolon entered into a formal consulting arrangement. In 2010, Mitchell was convicted, upon a plea of guilty, of stealing numerous trade secrets concerning the making of Kelvar® and passing them to Kolon. In meetings with Kolon, Mitchell answered many detailed technical questions respecting those trade secrets. Also, Mitchell had placed on his personal computer more details about those, and other, trade secrets respecting the manufacture of Kevlar®. The record showed that, during a luncheon recess from a meeting in Korea, Kolon surreptitiously copied those secrets from Mitchell's computer.
Kolon also engaged other former DuPont employees as consultants during the relevant time period. The trial record is replete with documents (and recordings) that shows why Kolon needed the stolen trade secrets and how it used them in every stage of its own production of Heracron®.
At trial, DuPont presented persuasive evidence obtained from inspection of Kolon's manufacturing facilities and from Kolon's own documents that showed how Kolon had incorporated the stolen DuPont trade secrets into Kolon's own operations, including evidence that Kolon even had copied machine configurations that DuPont had used solely because of its need to fit machinery into limited space in its plant. DuPont prepared a forty-six page description of the evidence of Kolon's use, which was attached as Exhibit 5 to DuPont's Opposition to Kolon's Motion for Judgment as a Matter of Law (Docket Nos. 1695 & 1711). Exhibit 5 accurately describes the extensive use made by Kolon of the misappropriated trade secrets. The exhibit sets forth specific references to the trial transcript and exhibits. Exhibit 5 is incorporated here because it demonstrates and documents the extensive misappropriation and use found by the jury which was clearly proved at trial.
On the basis of the record, the Court finds that the use of the stolen trade secrets by Kolon was integral and essential to Kolon's manufacture of Heracron®. The record also proves that the misappropriated trade secrets are inextricably connected with Kolon's manufacture of Heracron®. The record also establishes, and the Court so finds, that there is a strong likelihood, if not a certainty, that Kolon continues to use, and will continue to use if not enjoined, the stolen trade secrets in its manufacture of Heracron®. DuPont seeks an injunction that will permanently prohibit Kolon from manufacturing para-aramid fiber, prohibit Kolon from any further disclosure of the stolen trade secrets within the Kolon organization or otherwise, and require that Kolon return the misappropriated trade secrets (and any copies or memorialization thereof).
After consideration of the initial briefs, the Court asked for supplemental briefing on two legal issues: first, whether applying the standard for injunctive relief in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006), to a post-verdict request for permanent injunctive relief under the VUTSA would trench upon the rule of Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); 2 and second, if Virginia law is applied, what are the factors under Virginia law that a district court should consider in determining whether to grant an injunction under the VUTSA. (Hr'g Tr., Mar. 28, 2012, Docket No. 1979.) The supplemental briefs have been filed, and this matter is ripe for decision.
The threshold issue presented by DuPont's motion is whether DuPont must meet the requirements for injunctive relief set out in eBay in order to obtain a permanent injunction where, as here, it has proved violations of the VUTSA. In eBay, the Supreme Court of the United States held that “a plaintiff seeking a permanent injunction must satisfy a [familiar] four-factor test before a court may grant such relief.” eBay, supra, at 391, 126 S.Ct. 1837.3 The Court cited two decisions as exemplary of this principle: Weinberger v. Romero–Barcelo, 456 U.S. 305, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982) which applied that principle under the Federal Water Pollution Control Act; 4 and Amoco Production Co. v. Gambell, 480 U.S. 531, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987) which applied that principle to the Alaska National Interest Lands Conservation Act 5 and the Outer Continental Shelf Lands Act.6 And, in eBay, the Court held that those “familiar principles apply with equal force to disputes arising under the Patent Act.” Id. In so doing, the Court analogized the Patent Act to the Copyright Act, another federal statute. eBay, supra, at 392, 126 S.Ct. 1837.
In its concluding paragraph, the Court stated:
We hold that the decision whether to grant or deny injunctive relief rests within the equitable discretion of the district courts, and that such discretion must be exercised consistent with traditional principles of equity, in patent disputes no less than in other cases governed by such standards.
eBay, supra, at 394, 126 S.Ct. 1837. The Court did not explain the phrase “no less than in other cases governed by such standards.” However, by citing authorities decided under federal statutes, the Court made clear that, at least, those “familiar principles” governed the decision whether to grant or deny injunctions in cases arising under federal statutes.
In eBay, the Supreme Court made clear that, in such cases, irreparable injury and the unavailability of an adequate remedy at law must be shown as part of the four traditional elements for injunctive relief. The Supreme Court of Virginia has held, just as clearly, that:
When a [Virginia] statute empowers a court to grant injunctive relief, the party seeking an injunction is not...
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