A federal grand jury has indicted six Chinese citizens in what authorities say was a long-
running conspiracy to steal valuable technology from two U.S. firms for the benefit of the Chinese government.
The indictment, unsealed Monday, highlights the threat posed by insiders who use their position to steal sensitive information on behalf of a foreign government or for financial gain. The move is part of a larger trend by the U.S. government to step up efforts to deter Chinese theft of trade secrets.
It is also a manifestation of the ongoing innovation war between China and the United States and could increase tensions in a relationship that is already fraught.
“According to the charges in the indictment, the defendants leveraged their access to and knowledge of sensitive U.S. technologies to illegally obtain and share U.S. trade secrets with the [People’s Republic of China] for economic advantage,” said Assistant Attorney General John Carlin, head of the Justice Department’s national security division. “Economic espionage imposes great costs on American businesses, weakens the global marketplace and ultimately harms U.S. interests worldwide.”
One of the six defendants, Hao Zhang, 36, was arrested on Saturday at Los Angeles International Airport. He had flown from China to speak at a conference.
Zhang and two other defendants had obtained engineering degrees from the University of Southern California and then secured jobs at high-tech firms. The other three remained in China and were alleged to be part of a conspiracy in which the defendants set up a company in China to profit from stolen U.S. technology that filters wireless signals in cellphones and other mobile devices.
At the university, Zhang and Wei Pang, 35, had conducted research on thin-film bulk acoustic resonator, or FBAR, technology with U.S. Defense Department funding. After earning their doctorates in 2005, Pang was hired as an FBAR engineer at Avago Technologies in Colorado and Zhang took a similar job at Skyworks Solutions in Massachusetts.
The 32-count indictment alleges that beginning in 2006, Zhang, Pang and their coconspirators developed a business plan and began soliciting Chinese universities to become partners in establishing a business using the FBAR technology.
The government alleges that the men carried out their plan with the intent of benefiting the Chinese government and Tianjin University, a state school; a university investment arm called Tianjin Micro Nano Manufacturing Tech; the government’s Tianjin Economic Development Area; and ROFS Microsystems, a joint venture between the investment arm and the defendants.
According to the indictment, in 2006, Huisui Zhang, a third defendant and USC classmate, e-mailed Pang and Hao Zhang his notes from a planning meeting for creating a factory in China. One section of the notes was titled “Moving Avago to China.”
In another e-mail, Pang told a former USC colleague, also a Chinese citizen, that “the filter market for cell-phone alone is estimated to be more than $1 billion in 2005,” according to the indictment.
In yet another e-mail, Pang told his colleagues that they could beat competitors because they would save “a lot” of money by not having to conduct research and development, the indictment states.
In 2008, Tianjin University officials agreed to finance the defendants’ establishment of a factory, the indictment says. In 2009, Pang and Hao Zhang quit their jobs with Avago and Skyworks and accepted positions as professors at Tianjin.
Also in 2009, at the university’s direction, Pang set up a shell company in the Cayman Islands to appear to be the legitimate source of the stolen trade secrets, according to the indictment.
In 2008 and 2009, the government alleged, Pang and Zhang e-mailed each other a series of files, slides and documents containing Avago and Skyworks trade secrets. The secrets allegedly stolen included pricing details, silicon-etching techniques, tool specifications and design kits.
In 2009 and 2010, according to the indictment, Zhang and Pang filed patent applications in the United States based on stolen Avago and Skyworks technologies and listed themselves as either sole inventors or co-inventors.
In 2011, the men launched ROFS Microsystems. Later that year, the government alleged, Avago became aware of Pang’s thefts after it saw the patent applications. In late 2011, Pang’s former boss, Rich Ruby, traveled to China to attend a conference. While there, he visited Tianjin University to see Pang and Zhang’s new lab, where he recognized that it was allegedly using stolen Avago technology. He confronted Pang and another defendant, Jinping Chen, the university’s assistant dean, and accused them of stealing and using the company’s trade secrets.
Pang denied having any company to sell FBAR technology. Chen e-mailed Ruby that the university was not using any of the patented technologies Ruby mentioned.
Also indicted were Zhao Gang, the general manager at ROFS, and Chong Zhou, a Tianjin University graduate student who worked with Pang and Zhang and allegedly altered documents containing Avago trade secrets.
All were charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets. Zhang, Pang and Zhou were also charged with economic espionage and theft of trade secrets.
The case is being prosecuted by the U.S. attorney’s office in San Francisco, in consultation with the Justice Department’s counterespionage section.