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Ex-DuPont Chemist Sued Over Trade Secrets

Friday, March 11, 2011

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DuPont Powder Coatings has filed suit to stop a longtime senior research chemist from sharing pipe coating trade secrets with competitors—including a South Korean firm he joined after abruptly leaving DuPont.

DuPont Powder Coatings DuPont worked three years to hone its exclusive coating for use by TransCanada PipeLines Ltd.

In a civil suit filed Feb. 25 in Texas, DuPont accuses Dr. Wenjing Zhou, of Houston, TX, of taking his extensive knowledge about a DuPont coating developed exclusively for TransCanada to KCC Corp., which then tried to compete for the coating contract.

Culture of Confidentiality

Zhou, a Ph.D. chemist, went to work for DuPont Powder Coatings USA Inc. in September 2001 as a research chemist, according to court papers.

When he was hired, Zhou signed a confidentiality agreement not to disclose “proprietary commercial information”—including product formulas, specifications and processes—“either during his employment by the company or thereafter.” He also agreed to surrender “all proprietary business information” if and when he left DuPont.

The agreement was reinforced by a daily culture of extreme confidentiality, court papers say. For example:

• Zhou underwent yearly training that reaffirmed the confidentiality of company information.

• No work product was allowed off DuPont’s premises without express permission from a supervisor.

• No work information was allowed to be kept in a personal computer or portable drive.

• Lab books were secured at the end of the day, and all formulas and product specs were password protected.

• Coatings were manufactured with encrypted formulations.

Lead Scientist

On June 1, 2006, Zhou was named Group Leader for DuPont’s Functional Coatings line, making him the lead scientist responsible for developing and upgrading the entire product line. For four years, he was responsible for monitoring key aspects of all Functional Coatings product formulations and variants.

TransCanada TransCanada transports more than 20% of the natural gas used in North America.

His duties also included meeting with customers, including TransCanada PipeLines Ltd., which used an exclusive DuPont coating on its pipeline. TransCanada’s 37,000+ miles of pipeline transport about 20% of the natural gas used in North America.

Zhou also met with representatives from Bredero Shaw, the industrial painting contractor that applied the coatings to TransCanada’s pipelines, court papers say.

During those years, TransCanada “set heightened coating specifications” that required DuPont to reformulate its pipeline product—an R&D effort that took three years, DuPont contends.

Resigned, Hired, Fired

On Nov. 30, 2010, Zhou resigned from DuPont without explanation and without notice, saying he “planned to spend more time with his family and take time to decide upon a new direction for his life,” according to court papers.

Weeks later, the papers say, DuPont learned that Bredero Shaw was “seeking to qualify other powder coatings suppliers to the meet the TransCanada specification for its pipe.”

One of those potential suppliers, DuPont learned, would be KCC Corp. of Seoul, South Korea, which was sending a delegation Jan. 13 to meet with TransCanada. The delegation would include Zhou.

DuPont says it confirmed that Zhou was then working for KCC and sought to head off the meeting with TransCanada. DuPont also warned Zhou and KCC in a letter that his participation in the project would violate his confidentiality agreement.

On Jan. 19, KCC allegedly told DuPont that KCC had fired Zhou, who it said had been recommended for employment by Bredero Shaw.

Neither Bredero Shaw nor KCC is a party to the Zhou litigation.

Work Ban Sought

The lawsuit seeks to permanently bar Zhou from working for “any person or entity” in the functional powder coatings business, saying his DuPont knowledge would give competitors advantage over DuPont.

“Any dissemination by Zhou of DuPont's proprietary information and trade secrets to KCC or another competitor has already created, and will continue to create, an unfair and ill-gotten competitive advantage” that will “result in a sustained loss of revenue to DuPont,” the suit says.

It adds: “Zhou simply cannot eject from his memory all of the specialized proprietary information he developed while working in DuPont's employ—information specific to industrial-use functional coatings.”

Zhou’s DuPont experience makes him “a unique repository” of proprietary information that “unavoidably” would become the basis for his work at any other coatings company and unjustly enrich him, DuPont contends.

The suit also seeks immediate injunctions to specifically bar Zhou from disclosing any DuPont information to KCC, Bredero Shaw, TransCanada or their affiliates and partners.

The company is also asking that Zhou be ordered to surrender “all records and data of any kind” related to DuPont and that he be ordered not to destroy, hide or alter any computer information, including email.

Zhou could not be reached for comment.

Comment from Jack Henley, (3/14/2011, 8:24 AM)

Not knowing all the background, I can't make a meaningful comment, however, from what I can see, DuPont appears to have a very strong case. Yes, I hope they win.

Comment from Antonio Tolotto, (3/14/2011, 4:07 PM)

I understand the position of Dupont regarding the respect of a signed secrecy agreement; that is mandatory. But another thing is to assert that people who worked for one Company cannot work in the same field for others because in the brain of the employees are imprinted secret information. If this position is accepted, it would mean that everyone has the opportunity to join a job only once in a lifetime and cannot change the company. If he changes company, he must just change the type of work. And then it must be considered that in this case, who can say if DuPont hasn't used for the development of its products some information already stored in the brain of Mr. Zhou, accumulated in his previous work experience? It is not an easy matter. Generally speaking, my opinion is that all persons who make a career in any field must be able to change employers to broaden their experience.

Comment from Daniel Morenings, (3/14/2011, 8:16 PM)

Antonio, I agree, he should be allowed to seek employment, in any other field besides his, at least for the next 10 years. After 10 years of sitting on the sidelines, he can go to work for anyone he wants. Until then, he can wash windows for a living. He needs to learn that confidentiality means just that. Otherwise, he is nothing more than a corporate spy. Besides, washing windows would broaden his experience for sure.

Comment from David Johnson, (3/16/2011, 10:16 AM)

If he signed a non-disclosure and non-compete, then he should find a different field to work in. He has a PhD and is capable of many things. If he wanted the rights to the coatings he developed, he should develop them on his own. Not in DuPont's laboratory and production facility, which he did not invent, finance, or run. He wants the reward without the labor. It is stealing and is wrong anyway it is cut.

Comment from M. Halliwelll, (3/16/2011, 10:29 AM)

I think Jack is quite right in this case. We don't have the information we need to make a meaningful comment. If Zhou was subject to a non-compete clause, then he'd likely have to find alternative work. If it was strictly a confidentiality clause, it's a much harder case to make...DuPont would have to prove the use of proprietary information and not just that Zhou was working for another firm. Granted, Zhou and KCC look bad right now based on the information presented...but it does not necessarily follow that Zhou has broken his confidentiality agreement. Before I'd condemn Zhou or KCC of stealing, corporate espionage or any other wrong doing, I'd need more facts.

Comment from Shameem Khan, (4/8/2011, 8:35 AM)

I am in agreement with Mr. David Johnson's comment. In additon I would like to understand the circumstances in which Mr. Zhou forced to leave DuPont. Maybe the ill treatment of his company towards him? That may be a turning point?