E. I. DuPont De Nemours & Comp v. Kolon Industries Incorporated

Filing

UNPUBLISHED PER CURIAM OPINION filed. Originating case number: 3:09-cv-00058-REP Copies to all parties and the district court/agency. [999329319].. [12-1260, 12-2070]

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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 12-1260

E.I. DUPONT DE NEMOURS & COMPANY,
Plaintiff - Appellee,
v.
KOLON INDUSTRIES, INC.,
Defendant - Appellant,
and
KOLON USA, INC.,
Defendant,
v.
ARAMID FIBER SYSTEMS, LLC,
Third Party Defendant.

No. 12-2070

E.I. DUPONT DE NEMOURS & COMPANY,
Plaintiff - Appellee,
v.
KOLON INDUSTRIES, INC.,
Defendant - Appellant,
and

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KOLON USA, INC.,
Defendant,
v.
ARAMID FIBER SYSTEMS, LLC,
Third Party Defendant.

Appeals from the United States District Court for the Eastern
District of Virginia, at Richmond.
Robert E. Payne, Senior
District Judge. (3:09-cv-00058-REP)

Argued:

May 17, 2013

Decided:

April 3, 2014

Before SHEDD and DIAZ, Circuit Judges, and DAVIS, Senior Circuit
Judge.

Vacated and remanded with instructions by unpublished per curiam
opinion. Judge Shedd wrote a separate opinion concurring in the
judgment.

ARGUED: Paul D. Clement, BANCROFT, PLLC, Washington, D.C., for
Appellant.
Adam Howard Charnes, KILPATRICK TOWNSEND & STOCKTON
LLP, Winston-Salem, North Carolina, for Appellee.
ON BRIEF:
Stephen B. Kinnaird, Jeff G. Randall, Igor V. Timofeyev, PAUL
HASTINGS LLP, Washington, D.C.; Jeffrey M. Harris, BANCROFT,
PLLC, Washington, D.C., for Appellant. Raymond M. Ripple, Donna
L. Goodman, E.I. DUPONT DE NEMOURS AND COMPANY, Wilmington,
Delaware; Brian C. Riopelle, Rodney A. Satterwhite, MCGUIREWOODS
LLP, Richmond, Virginia; Richard D. Dietz, Thurston H. Webb,
KILPATRICK
TOWNSEND
&
STOCKTON
LLP,
Winston-Salem,
North
Carolina; Michael J. Songer, Stephen M. Byers, CROWELL & MORING
LLP, Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

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PER CURIAM:
“Absent fundamental error, we are loath to overturn a jury
verdict in a civil case. Jury trials are expensive, in time and
resources, both for the litigating parties and for society as a
whole.” Terra Firma Investments (GP) 2 Ltd. v. Citigroup Inc.,
716 F.3d 296, 298 (2d Cir. 2013). We are constrained to find
such a fundamental error in this diversity action.
Appellee E.I. DuPont De Nemours & Co. (DuPont) sued Kolon
Industries,

Inc.

(Kolon),

under

the

Virginia

Uniform

Trade

Secrets Act (the “VUTSA”), Va. Code § 59.1-336. After a sevenweek

trial,

willfully

the

and

jury

returned

maliciously

a

verdict

finding

misappropriated

Kolon

DuPont

149

that

trade

secrets and awarded DuPont $919.9 million in damages.
Kolon has timely appealed, raising a host of issues, urging
us

to

enter

judgment

in

its

favor

as

a

matter

of

law

or,

alternatively, to order a new trial. Having carefully considered
the

record

persuaded

before

that

the

us

and

the

district

arguments

court

abused

of

counsel,

its

we

discretion,

are
to

Kolon’s prejudice, when it granted one of DuPont’s pre-trial
motions

in

limine

and

thereby

excluded

relevant

evidence

material to Kolon’s defense. Accordingly, we vacate the judgment
and remand with instructions.
DuPont is a well-known chemical company that has, for more
than

thirty

years,

produced

“Kevlar,”
3

a

high-strength

para-

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aramid fiber that is five times stronger than steel. Kevlar is
used in ballistics, bullet-resistant armor, and automotive and
industrial products. Kevlar is made through a highly complex
chemical process that results in a dough-like polymer being spun
at high speed until it becomes a fiber. DuPont maintains that
Kevlar’s production process is a “well-guarded secret.” DuPont
Br. 3. All DuPont employees working on Kevlar are required to
sign a confidentiality agreement. Additionally, DuPont requires
all visitors to the Kevlar plant to be pre-approved, and to sign
a confidentiality agreement before entering.
Kolon

is

a

South

Korean

corporation

that

has

produced

synthetic fibers, including nylon and polyester, for decades.
Kolon engaged in pilot projects for the development of paraaramid

pulp

and

fiber

products

in

the

1980s

and

1990s.

It

suspended its para-aramid research in the mid 1990s during the
Asian

financial

crisis

but

resumed

in

2000.

In

2005,

Kolon

marketed a para-aramid fiber under the name “Heracron.”
In 2006, Kolon sought out five former DuPont employees to
work

as

consultants

technology
Heracron.

and

to

According

to

improve

assist
to

in

Kolon,

its

para-aramid

resolving
the

manufacturing

quality

consultants

issues

“assured

with
Kolon

they were not sharing confidential DuPont information,” Kolon
Br. 3, but the jury was entitled to find, to the contrary, that
Kolon willfully and knowingly acquired from one or more of the
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consultants a myriad of DuPont trade secrets concerning Kevlar,
involving

both

technical

and

business/marketing

confidential

information.
DuPont learned of Kolon’s alleged strategy of collecting
and utilizing its trade secrets when Kolon began consulting with
Michael

Mitchell,

a

former

employee

of

DuPont.

Mitchell

had

extensive knowledge of both the technical and business trade
secrets relating to Kevlar. Kolon contacted Mitchell in 2007 and
flew him to Korea to meet with Kolon to discuss certain aspects
of

Kevlar

manufacturing.

After

his

initial

visit

with

Kolon

representatives in Korea, Mitchell continued to communicate with
Kolon

about

Kevlar’s

manufacturing

process.

In

addition

to

Mitchell, Kolon obtained confidential information from several
other former DuPont employees.
In 2008, the FBI opened an investigation into Mitchell and
his relationship with Kolon. After a search warrant was executed
at his home, Mitchell agreed to cooperate with the FBI. Through
Mitchell and others, the FBI obtained compelling evidence of
Kolon’s misconduct. (On August 21, 2012, a federal grand jury in
the Eastern District of Virginia indicted Kolon and five of its
executives

for

theft

of

trade

secrets,

conspiracy,

and

obstruction of justice. See United States v. Kolon Indus., Inc.,
No: 3:12-CR-137 (E.D. Va.)).

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In

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2009,

February

damages,
trade

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sued

alleging,

secrets

DuPont

among

under

other

the

Kolon

theories,

VUTSA.

for

substantial

misappropriation

Kolon

filed

of

antitrust

counterclaims against DuPont. In due course, the district court
granted DuPont’s motion under Federal Rule of Civil Procedure
12(b)(6) and dismissed the counterclaims for failure to state a
claim upon which relief could be granted. After we reversed the
dismissal of the counterclaims and remanded, see E.I. du Pont de
Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435 (4th Cir.
2011), the district court proceeded to trial separately on the
trade secret claims.
Critical to several of its theories of defense to DuPont’s
misappropriation

claims,

Kolon

that

to

suggest

that

at

issue

tended

secrets

put

information.
had

by

Specifically,

disclosed

or

intended

to

introduce

number

of

the

a

DuPont
Kolon

otherwise

involved
theorized

failed

to

keep

alleged

publicly
that

evidence
trade

available

DuPont

itself

confidential

such

information in the course of intellectual property litigation in
which it was engaged during the 1980s with its then primary
competitor, AkzoNobel. One such case had been litigated in the
Eastern District of Virginia (“the Akzo litigation”); DuPont was
represented by the same law firm representing it in this case.
As the commencement of the trade secrets trial approached,
DuPont

filed

a

motion

in

limine
6

“to

Preclude

Kolon

from

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Presenting Evidence or Argument at Trial Concerning the Akzo
Litigations,” arguing that such evidence was not relevant and
that permitting the jury to consider any such evidence would
cause confusion and delay, to DuPont’s prejudice. See Fed. R.
Evid.

401,

403.

The

district

court

agreed

with

DuPont

and

granted the motion in a summary order, concluding, in part, that
“Kolon
secret,

ha[d]
much

produced
less

a

no
trade

evidence

that

any

secret

that

is

particular
at

issue

in

trade
this

litigation, was disclosed in the litigation between [DuPont] and
Akzo, N.V.” J.A. 1918.
The case proceeded to trial before a jury over the course
of

seven

September

weeks.
14,

The

2011,

jury

deliberated

returned

a

for

verdict

two

finding

days
that

and

on

Kolon

willfully and maliciously misappropriated all the trade secrets
put in issue by DuPont. The jury found that Kolon’s misdeeds
resulted in a benefit to itself worth $919.9 million and awarded
that amount in damages to DuPont. Following the verdict, the
district court enjoined Kolon from para-aramid fiber production
for twenty years. The district court denied Kolon’s motion for a
new trial and its renewed motion for judgment as a matter of law
on January 27, 2012. Kolon filed this timely appeal on August
31, 2012. We stayed the district court’s injunction pending our
consideration of the merits of the appeal.

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Meanwhile, Kolon’s antitrust counterclaims were dismissed
on summary judgment. We affirm the judgment in favor of DuPont
on

the

antitrust

counterclaims

in

an

opinion

filed

today

together with this opinion. Kolon Indus., Inc. v. E.I. duPont de
Nemours & Co., --- F.3d --- (4th Cir. 2014).
On
Kolon

appeal

from

orders,

challenges
trial

a

the
host

decisions,

trade
of

secrets
the

and

verdict

district

post-trial

in

court’s

rulings. *

this

case,

pre-trial
We

reject

summarily Kolon’s contention that it should be awarded judgment
as a matter of law, but we find that a new trial is warranted.
In light of our remand for a new trial, we need not and do not
address the remaining procedural and evidentiary issues raised
by Kolon, as those issues may or may not arise upon remand and,
in any event, may arise in a decidedly different posture.
Kolon argues that the district court abused its discretion
in

excluding

litigation.

all

Kolon

evidence
maintains

and
that

any
the

mention
excluded

of

the

Akzo

evidence

would

have tended to demonstrate that “[a]t least 42 of the trade
secrets DuPont has asserted . . . involve information that was
wholly or partially disclosed during the [prior] litigation.”
*

Kolon also challenges in this appeal, as it does in
appeal of the district court’s summary judgment as to
antitrust counterclaims, the district court judge’s denial
its motion for recusal. We reject that challenge here for
reasons stated in the companion opinion. See infra pp. 15-16.

8

its
its
of
the

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Kolon Br. 37. Kolon further asserts that the district court’s
exclusion of that evidence severely limited its ability to put
on

a

meaningful

defense

because

it

prohibited

Kolon

from

establishing that one or more of the 42 alleged trade secrets
cannot meet the elements of a protectable trade secret.
DuPont responds that the district court did not abuse its
discretion

in

excluding

all

Akzo

litigation

evidence

because

Kolon failed to demonstrate that any of the trade secrets at
issue in this case were disclosed in the Akzo litigation. We
agree with Kolon.
Upon its review of DuPont’s motion in limine, the district
court concluded that Kolon failed to produce any evidence that
“any particular trade secret, much less a trade secret that is
at

issue

in

litigation;

this

that

litigation,

Kolon

did

was

not

disclosed”

establish

that

in
two

the

prior

documents

contained in the publicly-available Joint Appendix in the appeal
of the prior litigation contained any trade secrets; and that
the evidence from the Akzo litigation was therefore irrelevant,
and

even

if

marginally

relevant,

its

relevance

would

be

significantly outweighed by jury confusion and delay. J.A. 19181919.
We review a district court’s evidentiary rulings for abuse
of discretion and “will only overturn an evidentiary ruling that
is

arbitrary

and

irrational.”

U.S.
9

ex

rel.

Ubl

v.

IIF

Data

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Solutions, 650 F.3d 445, 453 (4th Cir.), cert. denied, 132 S.
Ct. 526 (2011).
Under Virginia law, a “trade secret” is defined as:
information, including but not limited to, a formula,
pattern,
compilation,
program,
device,
method,
technique, or process, that:
1. 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
2. Is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
Va. Code § 59.1-336 (2013).
Under the Federal Rules of Evidence, evidence is relevant
if it has a tendency to make a fact of consequence to the action
more or less probable than it would be without the evidence.
Fed. R. Evid. 401. We are persuaded that, under this inclusive
standard, Kolon provided the district court with a sufficient
number

of

examples

of

how

information

disclosed

in

the

Akzo

litigation contained details of the Kevlar production process
that

were

strikingly

similar

to

aspects

of

several

of

the

alleged trade secrets in this case.
The district court’s conclusion that “Kolon has produced no
evidence that any particular trade secret, much less a trade
secret that is at issue in this litigation, was disclosed in the
litigation between the plaintiff and Akzo,” J.A. 1918, is simply

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stringent

circumstances

a
of

standard
this

Pg: 11 of 17

for

case,

we

admissibility.

think

a

Under

“strikingly

the

similar”

standard of relevance is enough.
First,

Kolon

substantial
certain

has

drawn

similarities

aspect

of

this

between

the

Court’s
two

para-aramid

attention

to

the

charts

illustrating

production

process.

a
The

parties agree that one of the charts was used as an exhibit in
the

Akzo

litigation,

and

the

other

was

used

as

an

exhibit

depicting some of the alleged trade secrets at issue in this
suit.

We

conclude

that

Kolon

was

entitled

to

have

the

jury

consider its contentions, including its expert opinion evidence,
regarding the similarities and overlap between what is depicted
in the two documents.
Second, in its opposition to DuPont’s motion in limine,
Kolon provided the district court with a chart comparing seven
alleged

trade

contained

in

secrets
an

concerning

expert

witness

the

report

production
in

this

process

case

with

descriptions of, and citations to, those same details of the
production process that were disclosed in a trial exhibit in the
Akzo

litigation.

See

opposition

memorandum

preliminary

results

J.A.

6260-6261.

that
of

its

this

Kolon

chart

review

of

explained

represented
the

Akzo

in

its

only

the

litigation

evidence for the potential disclosure of all or part of alleged
trade secrets in this case. We hold that Kolon was not required
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to establish, as the district court seemingly demanded, that
evidence derived from the Akzo litigation amounted to an actual
trade

secret

relevance

of

at

issue

the

in

this

evidence,

case.

Kolon

Rather,

simply

to

needed

show
to

the

make

a

plausible showing that, either directly or circumstantially, one
or more elements of DuPont’s misappropriation claims, e.g., the
reasonableness of its efforts to maintain confidentiality, was
less likely true. Equivalently, Kolon simply needed to make a
plausible showing that, either directly or circumstantially, one
or more elements of its defenses, either to liability or to the
quantum of damages, e.g., the reasonableness of its asserted
belief that its consultants were not disclosing trade secrets,
was more likely true than not true.
This

last-mentioned

because

one

of

Kolon’s

witness

for

DuPont

in

point

is

particularly

consultants
the

Akzo

had

served

litigation.

salient
as

While

an

here
expert

there

were

myriad infirmities and deficiencies in that witness’s testimony,
and his credibility is surely open to serious question, Kolon
was

nonetheless

witness,

who

litigation.

entitled

was

The

to

himself

district

put
a

on

DuPont

court’s

its

case

witness

wholesale

through
in

the

preclusion

of

that
Akzo
any

mention of the Akzo litigation made that impossible.
With reluctance, we hold that the district court abused its
discretion and acted arbitrarily in excluding, on the wholesale
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basis that it did, as irrelevant or insufficiently probative,
evidence derived from the Akzo litigation. The usefulness of
pre-trial in limine motions in streamlining trial generally and
in

fostering

the

orderliness

of

evidentiary

presentations

of

complicated issues cannot be doubted. On the other hand, a court
is often wise to await the unfolding of evidence before the jury
before

undertaking

to

make

definitive

rulings

on

the

likely

probative value of disputed evidence. Kolon has demonstrated on
appeal that evidence from the prior litigation over DuPont’s
Kevlar program was not irrelevant as a matter of law and that
the probative value of that potential evidence exceeded the bare
minimum the district court seemed to ascribe to it. “Weighing
probative value against unfair prejudice under [Rule] 403 means
probative value with respect to a material fact if the evidence
is

believed,

Bowden

v.

not

the

McKenna,

degree
600

the

F.2d

court

282,

finds

284–85

it
(1st

believable.”
Cir.

1979)

(footnote and citation omitted).
Although

it

is

true,

as

DuPont

contends,

that

the

mere

“presence [of confidential information] in [a federal court’s]
public files, in and of itself, did not make the information
contained in the document ‘generally known’ for purposes of the
[UTSA],” Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d
411, 419 (4th Cir. 1999) (last brackets in original), we also
emphasized

in

that

very

case
13

that

“whether

[ostensibly

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confidential information] remains a trade secret” “is a factintensive question to be resolved upon trial.” Id.
To be sure, there is little doubt as to the possibility of
juror

confusion

and

other

litigation

perhaps

in

a

trial

delay

arising

having

the

from

attention

complexity

this

to
one

surely did. Nevertheless, under Federal Rule of Evidence 403,
exclusion on that basis is only proper when the probative value
of the evidence is substantially outweighed by the danger of
confusion of the issues or misleading the jury. That standard is
not

satisfied

on

this

record.

At

bottom,

the

potential

for

confusion and delay does not outweigh, much less substantially
outweigh, the probative value (as to both liability and damages)
of the excluded evidence. When a district court conducts a Rule
403 balancing exercise, ordinarily it should “give the evidence
its

maximum

reasonable

probative

force

and

its

minimum

reasonable prejudicial value.” Deters v. Equifax Credit Info.
Servs., Inc., 202 F.3d 1262, 1274 (10th Cir. 2000) (citations
omitted). The district court did not do so in this instance.
We
suggest

hasten
that

to

add

anything

that
Kolon

we

are

labels

not
as

to

be

derived

understood
from

the

to

Akzo

litigation must be admitted on the retrial. We are persuaded,
however, that the blanket exclusion of such evidence seriously
prejudiced Kolon’s ability to present its case to the jury. The
district court is free on remand to determine in a more nuanced
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particularized

manner

Pg: 15 of 17

what

evidence

offered

by

Kolon

or

DuPont should be admitted.
*
As

set

companion

forth

case

*

in

filed

detail

*

*

in

the

together

*
majority

with

this

opinion

opinion,

in

see

the

Kolon

Indus., Inc. v. E.I. duPont de Nemours & Co., --- F.3d ---, --(4th

Cir.

2014),

disqualification

we

decline

motion

under

to
28

countenance
U.S.C.

Kolon’s

§ 455(b)(2).

belated
Although

Kolon has sought to justify its dilatoriness by suggesting that
it needed to ascertain the extent of the district judge’s actual
participation in the Akzo litigation before filing a recusal
motion, the factual and legal basis for its eleventh hour motion
for disqualification was the fact that the district court judge
was a partner in a law firm representing DuPont in the earlier
litigation. This was a fact known to Kolon from the first days
after DuPont’s complaint was filed and served in this case. In
any

event,

for

the

very

reasons

set

forth

in

the

majority

opinion in the companion opinion, we hold that Kolon’s motion
was untimely.
That said, we think it prudent to direct, pursuant to our
supervisory

powers

under

28

U.S.C.

§

2106,

that

all

further

proceedings on remand be conducted before a different district
judge. Accordingly, for the reasons set forth, we vacate the
judgment and remand this case to the Chief Judge of the Eastern
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District of Virginia, whom we direct, in the exercise of this
Court's supervisory powers, to reassign it to another judge, who
shall conduct further proceedings in a manner not inconsistent
with this opinion.
VACATED AND REMANDED WITH INSTRUCTIONS

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SHEDD, Circuit Judge, concurring in the judgment:
For

the

reasons

stated

in

my

separate

opinion

in

Kolon

Industries, Inc. v. E.I. DuPont de Nemours & Co., No. 12-1587, I
would find that the district judge was recused from this case
under 28 U.S.C. § 455(b)(2) no later than July 2011, prior to
the trade secrets trial.

I therefore concur in the judgment

vacating the jury verdict and remanding for further proceedings.
I

likewise

concur

in

the

portion

reassignment to another judge.

17

of

the

judgment

requiring