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Former Valspar Corp. Technical Manager Gets 15-Month Prison Term for Stealing Trade Secrets

Thursday, December 9, 2010

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A former Valspar Corp. coatings technologist was sentenced to 15 months in federal prison for stealing trade secrets—including paint formulas worth up to $20 million, according to the U.S. attorney's office in Chicago.

The defendant, David Yen Lee, 54, pleaded guilty in September to theft of a trade secret, admitting that he planned to take proprietary formula information to a new employer in China, Nippon Paint.

Lee, of Jersey City, N.J., formerly of Arlington Heights, Ill., and originally from Taiwan, also was ordered to pay Valspar restitution of $30,975 as compensation for the cost of the company’s internal investigation.

Lee faced up to 10 years in prison and a $250,000 fine. Federal agents arrested Lee, who holds a doctorate in chemistry, in March 2009. At the time, he was carrying flash drives containing about 44 gigabytes of confidential Valspar formulation data that prosecutors said was worth between $7 million and $20 million. He was then indicted on five counts of economic espionage.

According to the indictment, Lee began work in 2006 as a Technical Director for Minneapolis-based Valspar at its facility in Wheeling, Ill. Authorities said he was technical director of new product development for the company’s Architectural Group.

Some of Lee’s duties involved Huarun Ltd., a Valspar subsidiary in the People’s Republic of China, and he traveled there occasionally on business, authorities said. His work for Valspar included research of new paint technologies, coordinating with other paint laboratories, coordinating projects with Huarun,  and overseeing Valspar’s technical service group.
A federal indictment against Lee alleged that between September 2008 and February 2009, Lee negotiated a new position with Nippon Paint, Asia’s largest paint manufacturer, to work on developing paint products and technologies. Between November 2008 and March 2009, Lee “downloaded technical documents and materials, including trade secrets, belonging to Valspar from Valspar’s secure internal computer network, and removed numerous documents and other materials from the offices of Valspar,” the indictment said.

Lee accepted a job with Nippon in February 2009, and was to start work April 1, 2009, in Shanghai, the indictment stated. In March 2009, he transferred documents and materials from Valspar and Huaran, including product data, to an external thumb drive, and told Valspar he planned to resign. He was arrested on March 26, 2009.

Lee reportedly was in line to join Nippon as vice president of technology and administrator of research and development.

Authorities said there was no evidence that he actually disclosed any of the stolen trade secrets, according to news reports.


Tagged categories: Coatings manufacturers; Criminal acts; Laws and litigation; Nippon Paint; Valspar

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