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Orbotech Acquitted of Korean Industrial Espionage Charges

Orbotech Korea employees were acquitted on charges of theft of corporate secrets from LG and Samsung.
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Orbotech Ltd. (Nasdaq: ORBK) and five employees have been acquitted on all charges in an industrial espionage case in Korea. One employee was found guilty of certain legal violations and was fined $10, 000. The Seoul Central District Court issued the decision in the criminal proceedings on Monday.

The embarrassing case at Orbotech Korea began will great fanfare, including charges that the company and certain employees were involved in the theft of corporate secrets from LG Corporation (KSX: 3550) and Samsung Electronics Co. Ltd. (KSX: 5930; LSE: SMSN). Orbotech is a manufacturer of automated optical inspection (AOI) systems for flat panel displays (FPDs) and printed circuit boards (PCBs).

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The indictments stated that, in June 2012, Orbotech Korea employees photographed OLED technology circuits for 55-inch televisions during visits to the two companies’ factories to fix problems in Orbtech’s inspection equipment. They kept the pictures on USB drives they concealed in belts or shoes, and then sold them to Chinese screen manufacturer BOE Technology Group Co. Ltd. (Shenzhen: 725), and other companies. The Korean prosecutor said that the case involved “core technology”, which should not be removed from the country.

Orbotech, its reputation on the line, flew to Korea legal experts who succeeded in persuading the court that the company and its employees’ conduct was aboveboard.

The acquittal is unlikely to have any direct effect on Orbotech’s results for 2013, because the case’s legal costs were covered by insurance. The company reported millions of dollars in legal costs in 2012. The greater impact will be in customer relations, as FPD customers will not fear working with the company. Before the verdict, Orbotech lost a small number of deals in this market.

Orbotech posted a net profit of $26.8 million on $318 million revenue in January-September 2013.

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