June 08, 2015 Practice Points

Unsealed Indictment Charges Economic Espionage and Theft of Trade Secrets

The indictment alleges a complex and long-running conspiracy by the defendants, in conjunction with entities ultimately funded by the People’s Republic of China.

By David Lincoln – June 8, 2015

On May 19, 2015, the U.S. Department of Justice released what was formerly a sealed indictment from the Northern District of California accusing six individuals connected to China of crimes relating to economic espionage and theft of trade secrets. The grand jury issued the 32-count indictment on April 1, 2015, and it was unsealed after one of the defendants was arrested upon re-entry to the United States on May 16, 2015.

The indictment alleges a complex and long-running conspiracy by the named defendants, in conjunction with entities ultimately funded by the Peoples Republic of China (PRC), to steal trade secrets from Skyworks Solutions, Inc., in Woburn, Massachusetts, and Avago Technologies in San Jose, California.

According to the indictment, defendant Wei Pang worked for Avago from 2006, after his graduation from the University of Southern California (USC) with a PhD in electrical engineering, until 2009. His former USC classmate, defendant Hao Zhang, worked for Skyworks Solutions during the same timeframe.

The technology in question has applications as radio-frequency filters for wireless communications. The technology also has military applications, and some of the technology alleged to have been stolen was developed using money from the Defense Advanced Research Projects Agency (DARPA). The indictment details the measures taken by Skyworks and Avago to ensure confidentiality of the information.

The defendants allegedly engaged in a scheme over almost 10 years to steal secrets from the two companies and (1) secretly transfer them to new companies in China and (2) use the secrets to establish their credentials as professors in China. To hide their activities, the defendants allegedly conspired to create a shell company in the Cayman Islands and a joint venture between the state-run Tianjin University’s
investment arm and themselves. Furthermore, the two principal defendants allegedly applied for patents in both the U.S. and China for information developed by the companies, but left Pang’s name off of U.S. patents applied for based on his company’s technology.

The indictment includes one count of conspiracy to commit economic espionage, one count of conspiracy to commit theft of trade secrets, 15 counts of aiding and abetting economic espionage, and 15 counts of aiding and abetting theft of trade secrets. See 18 U.S.C. §§ 1831–32. The indictment also alludes to, but does not charge, violations of 18 U.S.C. § 1001 for false statements in connection with patent applications, and it contains a forfeiture allegation under 18 U.S.C. §§ 1834 and 2323.

David Lincoln, Wiggin and Dana LLP, New Haven, CT

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