Late last month, the U.S. Attorney’s Office for the Eastern District of Pennsylvania announced the indictments of GlaxoSmithKline (GSK) scientists Yu Xue and Lucy Xi, as well as three of their associates for trade secrets theft, wire fraud, and conspiracies to commit both crimes. The indictment accuses the scientists of transmitting proprietary GSK data to their associates and co-conspirators at a Chinese startup called Renopharma, a firm that focuses on providing products and services to support drug discovery programs.
The allegedly misappropriated data relates to research into monoclonal antibody treatment for cancer which, if brought to market, “should represent [a] ‘bio-better and bio-superior’ system in comparison to existing competitors,” according to GSK documents cited in the indictment. The government alleges that Ms. Xue, Ms. Xi, and their associates hoped to profit from the data by virtue of their ownership interests in Renopharma. Ms. Xue is quoted in the indictment via email, stating that she “ha[s] absolute control of [the] company” with ownership of “the highest stock share which is 30%.”
The charges against Ms. Xue and Ms. Xi come on the heels of an earlier high profile case investigated by the same FBI agent and brought by the same Philadelphia U.S. Attorney’s Office against a Chinese naturalized American. In that case, the U.S. Attorney charged Dr. Xi Xiaoxing, the interim chair of Temple University’s Physics Department, with wire fraud in connection with transfer of confidential technical information to China. But the U.S. Attorney abruptly dropped the charges, shortly before trial, when experts demonstrated that the alleged crimes were standard collaborations amongst scientists, not trade secret theft.
In another case, the U.S. Attorney for the Southern District of Ohio filed and then abruptly dropped charges against Sherry Chen, a National Weather Service hydrologist, accused of passing confidential information about the American dam system to Chinese officials. As with the case against Dr. Xi, the government’s case against Ms. Chen fell apart when the government reevaluated its key evidence shortly before trial. Unfortunately for Ms. Chen, the government’s reevaluation took place five months after she was falsely accused of being a Chinese spy, arrested, led in handcuffs past her co-workers, and told she faced 25 years in prison and $1 million in fines.
The current case against the GSK scientists also resembles a 2013 case where the Indianapolis U.S. Attorney’s Office accused former Eli Lilly scientists of passing on company information to a Chinese competitor. According to filings by defense attorneys in the case, the information had all appeared in published papers years earlier and did not include data or formulae owned by Eli Lilly. In December 2014, fifteen months later, the prosecutors dropped the charges, but not until after the defendants, who were Chinese naturalized Americans, had lost their jobs, been jailed for over 200 days and placed on house arrest until shortly before the charges were dismissed.
This upward trend of indictments is no coincidence; law enforcement is facing new pressure to pursue any leads that could be related to trade-secret theft, particularly Chinese economic espionage. Notably, more than half of the economic espionage indictments since 2013 have had a Chinese connection, according to a 2014 FBI report. But these earlier trade secrets cases demonstrate that more investigation needs to be conducted before charging innocent Chinese naturalized Americans with trade secrets theft. Only time will tell whether the Justice Department has learned from its earlier mistakes before charging the GSK scientists, but the case will be one to watch to see if the government can improve its trade secret track record.