A former Valspar Corp. technical director has been sentenced to 15 months in federal prison for stealing up to $20 million in formula secrets to share with Nippon Paint, his future employer.
David Yen Lee, who holds a doctorate in chemistry, pleaded guilty in September in U.S. District Court in Chicago to theft of a trade secret—reduced from five counts of economic espionage with which he was originally charged. He had faced up to 10 years in prison and a $250,000 fine on the charge.
In addition to the prison sentence, Lee was ordered to pay $30,975 in restitution, to reimburse Valspar for the costs of its internal investigation. He will begin serving his sentence next year.
Valspar has not commented on the case and did not respond to a request for comment Thursday (Dec. 9).
New Product Oversight
Lee, 54, formerly of Arlington Heights, IL, and currently of Jersey City, NJ, had worked for Valspar as Technical Director of New Product Development for the Architectural Group since 2006.
His duties included scouting new paint technologies; coordinating with other paint laboratories; and overseeing Valspar’s technical service group, which conducted experiments for paint coloring. He also coordinated staffing and projects with Huarun Ltd., a Valspar subsidiary in China, and he traveled there occasionally on business, authorities said.
Between September 2008 and February 2009, authorities said, Lee negotiated a new position as vice president of technology and administrator of research and development for Nippon Paint, in Shanghai, China. The job was to begin on April 1, 2009.
Nippon is Asia’s largest paint manufacturer and a direct Valspar competitor. Nippon Paint was not a defendant in the Lee case.
Technical, Sales Data Downloads
Between November 2008 and March 2009, Lee later admitted, he downloaded technical documents and materials, including 160 original paint formula batch tickets, belonging to Valspar.
He also obtained raw materials information, chemical formulas and calculations, sales and cost data, and other internal memoranda, product research, marketing data, and other materials from Valspar’s offices in Wheeling, WV, and copied some downloaded files to external thumb drives to store the data, federal authorities said.
The total value of the trade secret information Lee took was estimated at between $7 million and $20 million. There was no evidence that he actually disclosed any of the stolen information.
Lee resigned from Valspar without notice on March 16 and was scheduled to fly from Chicago to Shanghai on March 27. Federal agents arrested Lee on March 26. At the time, he was carrying flash drives containing about 44 gigabytes of confidential Valspar formulation data, prosecutors said.
The sentence was announced by Patrick J. Fitzgerald, U.S. Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the FBI’s Chicago Office. The government was represented by Assistant U.S. Attorney Jessica Romero.