Huawei Technologies Co., the world’s largest telecommunications company, and CNEX Labs Inc. went to trial this week in the U.S. District Court for the Eastern District of Texas over dueling allegations of trade secret theft relating to semiconductor chip technology behind solid-state drives. Huawei Technologies Co. Ltd. et al v. Huang et al, No. 4:17-cv-00893-ALM.
The dispute began in 2017 when Huawei sued former employee and CNEX co-founder Yiren Huang, alleging he stole Huawei technology and recruited fourteen employees to compete with Huawei. Huawei brought breach of contract and trade secret misappropriation claims in violation of the Defend Trade Secrets Act (“DTSA”) and the Texas Uniform Trade Secrets Act (“TUTSA”) among others. CNEX admitted it employs fourteen former Huawei employees but denied any impropriety. Instead, in 2018, CNEX filed a countersuit, claiming Huawei and Chairman Eric Xu engaged in a years-long conspiracy to steal CNEX’s trade secrets and that Mr. Xu ordered a Huawei engineer to pose as a potential customer and meet with CNEX officials in June 2016 to acquire proprietary information and authored and submitted a report to a Huawei competitive-intelligence database detailing CNEX’s technology. CNEX further alleges Huawei attempted to steal CNEX’s trade secrets through Xiamen University, which acquired a CNEX computer memory board purportedly for an academic research project and subject to a licensing agreement and a non-disclosure provision, by requiring the University to share all research test reports with Huawei, which then incorporated the research results into chip projects. Huawei denied misappropriation.
This case taps into larger concerns about Chinese companies engaging in trade secret theft. As recently covered by Crowell & Moring’s Trade Secrets Trends Blog and a piece authored by a former Deputy Director of WIPO, the United States government blacklisted Huawei due to these national security concerns. Tech giants Google, Intel, Qualcomm, and Micron have also stopped doing business with Huawei out of concerns over trade secret theft resulting in the loss of valuable intellectual property. However, the outcome of this trial remains to be seen.