A new indictment alleging misappropriation of U.S. oil and gas trade secrets by a Chinese energy company, its U.S.-based affiliate, and an executive is another example in a recent string of prosecutions for trade secrets theft involving China, a topic that we have covered on the blog here.
Continue Reading Grand Jury Indicts Chinese Energy Company, U.S. Oil and Gas Affiliate, and Chinese National on Trade Secrets Charges
Taiwanese Semiconductor Pleads Guilty, To Pay $60 Million Fine for Criminal Trade Secret Theft
United Microelectronics Corporation, Inc. (“UMC”), a Taiwanese semiconductor foundry and the world’s fourth largest contract chipmaker, pleaded guilty on October 28, 2020, to criminal trade secret theft, will pay a $60 million fine – the second largest ever in a criminal trade secrets case – and will cooperate in the investigation and prosecution of its co-defendant, a Chinese state-owned enterprise.
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Chinese Individual Indicted for Alleged Trade Secret Theft from Semiconductor Company
The U.S. government is continuing its endeavor of prosecuting individuals for the theft of U.S. trade secrets and for allegedly selling or bringing these trade secrets to China. The U.S. government is demonstrating that it considers the protection of trade secrets, particularly those used in national defense and other essential technology, to be a priority.
On October 1, 2020, the U.S. Attorney’s Office for the District of Massachusetts reported that Haoyang Yu, a U.S. citizen who was born in China, his wife Yanzhi Chen, and their company Tricon MMIC LLC, were charged in a 24-count indictment for the alleged theft of American trade secrets worth millions of dollars from Analog Devices. Analog Devices, which has its headquarters in Norwood, Massachusetts, is an international semiconductor company. Yu was charged in 2019 with stealing, downloading, and copying Analog Devices’ trade secrets. Now, he and his wife have been charged with possession and attempted possession of a trade secret; transporting stolen goods; smuggling; visa fraud; and procuring U.S. citizenship unlawfully.
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Trade Secret Battle Waged in Legal Services Market
Given the value of trade secrets in the global economy, businesses should always be on high alert for signs of misappropriation of trade secrets or other confidential information. COVID-19 has only increased the importance of doing so given employee mobility and a growing remote work force, which not surprisingly has spurred litigation by businesses attempting to protect trade secrets.
One recent example, CourtAlert.com (“CourtAlert”), a company offering case monitoring software for the legal industry, brought suit against a former employee and its competitor American LegalNet, Inc. (“ALN”) alleging trade secret misappropriation, unfair competition, and unjust enrichment among other claims. See CourtAlert.com, Inc. v. American LegalNet, Inc., No. 1:20-cv-07739 (S.D.N.Y.).
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DOJ Indictment of Chinese Hackers for Break-Ins at 100 Companies Reinforces The Importance of Protecting Trade Secrets and Implementing Security Protections
Recent United States Department of Justice (“DOJ”) indictments of Chinese hackers provide a reminder that trade secrets and other intellectual property stored on databases are attractive targets to bad actors. The DOJ announced that seven international defendants were charged in connection with computer intrusion campaigns impacting more than 100 victims in the United States and abroad.
The victims of the cyberattacks included software development companies, computer hardware manufacturers, telecommunications providers, social media companies, video game companies, non-profit organizations, universities, think tanks, and foreign governments. The hacking facilitated the theft of source code, software code signing certificates, customer account data, and other valuable business information. These cyberattacks also enabled the defendants’ other criminal schemes, including ransomware attacks and “crypto-jacking” schemes, which involve the unauthorized use of victim computers to “mine” cryptocurrency.
Seventh Circuit Upholds $140 Million Compensatory Damages Award and Caps Punitive Damages at $140 Million in Trade Secret Case
In Epic Systems Corp. v. Tata Consultancy Services Ltd., Epic Systems Corp. (“Epic”) filed a case in the U.S. District Court for the Western District of Wisconsin accusing Tata Consultancy Services Ltd. (“TCS”) of stealing documents and confidential information related to software applications performing billing, insurance benefits management, and referral services for health care companies.
In 2016, a federal jury ruled in Epic’s favor on all claims, ordered TCS to pay $140 million for uses of the comparative analysis, $100 million for uses of “other” confidential information, and $700 million in punitive damages. We reported on the jury verdict here and permanent injunction here. The district court later struck the compensatory award for “other uses” and reduced the punitive damages award from $700 million to $280 million because of a Wisconsin statute capping punitive damages at two times compensatory damages. See Wis. Stat. § 895.043(6).
Shortly thereafter, both TCS and Epic appealed the verdict – TCS challenged the punitive damages decision and Epic appealed the decision to vacate the $100 million award relating to uses of “other” confidential information. On August 20, 2020, the Seventh Circuit issued an opinion which reduced the punitive damages amount, but upheld the jury’s $140 million verdict. The Seventh Circuit held that TCS gained an advantage in its development and competition from its use of the comparative analysis and stolen information and that “the jury would have a sufficient basis to award Epic $140 million in compensatory damages” based on TCS’s use of Epic’s information to make a comparative analysis. In addition, the Seventh Circuit concluded that Epic did not provide “more than a mere scintilla of evidence in support of its theory that TCS used any other confidential information” such that the $100 million award could not stand.
Continue Reading Seventh Circuit Upholds $140 Million Compensatory Damages Award and Caps Punitive Damages at $140 Million in Trade Secret Case
Caught between a rock and a hard place; that is, a subpoena and a protective order
A federal judge in Colorado declined to sanction Plaintiff DTC Energy Group Inc. (“DTC”) for disclosing information governed by a civil protective order. DTC Energy Group, Inc. v. Hirschfeld, 1:17-cv-01718 (D. Colo. July 27, 2020).
DTC, a consulting and staffing firm serving the oil and gas industry across the United States, filed suit in July 2017 against Defendants Ally Consulting, LLC (“Ally”), a former business partner and direct competitor of DTC, and two former DTC employees.
The amended complaint alleged a variety of claims, including trade secret misappropriation, unfair competition, breach of employment contract, and civil conspiracy to steal trade secrets.
During discovery, and subject to an oral protective order issued by the court, Ally produced to DTC documents and information that contained certain of Ally’s trade secrets. DTC later shared documents produced as “confidential” in the litigation with both its outside criminal attorney and with a Denver assistant district attorney after receiving a grand jury subpoena for those documents. Ally and the other defendants accused DTC of malfeasance and of willful violation of the protective order, and sought sanctions in the litigation.
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Chinese Biotech Researcher Pleads Guilty to Trade Secret Misappropriation
The U.S. Department of Justice has secured yet another conviction against a Chinese national for trade secret theft which is part of a larger push to protect valuable intellectual property.
Li Chen, a long time biotech researcher in a medical lab at Nationwide Children’s Hospital Research Institute in Ohio, pled guilty to conspiracy to misappropriate trade secrets and conspiracy to commit wire fraud. Chen, and her husband Yu Zhou, a fellow biotech researcher, were indicted in September 2019 following an extensive investigation. The indictment and plea agreement details their efforts to steal trade secrets related to exosome isolation technology, which represents a critical development in the diagnosis and treatment of pediatric diseases, including liver cancer and a condition found in premature babies.
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Prison Time for Founding Member of Self-Driving Car Program in Trade Secret Theft Case
Anthony Levandowski, one of the founding members of Google’s self-driving car program and a former Uber executive, was sentenced to 18 months in prison and ordered to pay restitution after pleading guilty to one count of stealing self-driving car trade secrets from Google. This sentencing comes after years of civil and criminal matters relating to this lucrative technology.
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DOJ Targets Chinese Hackers for Stealing United States Trade Secrets
This week, the U.S. government continued its enforcement activity against Chinese government-sponsored trade secret theft, indicting two Chinese hackers for allegedly stealing data from 25 domestic and international companies, including targeting those now researching COVID-19 testing, vaccines, and treatment. The two defendants had allegedly acquired hundreds of millions of dollars worth of trade secrets and other valuable business information across a span of nearly eleven years. This announcement follows in the wake of the indictment of Dr. Charles Lieber, a former Harvard professor, who allegedly lied about his participation in China’s “Thousand Talents Plan,” a program that has been accused of facilitating the stealing of American trade secrets. Our coverage of that indictment is here.
On Tuesday, July 21, 2020, the U.S. Department of Justice (“DOJ”) announced charges against Li Xiaoyu and Dong Jiazhi in the Eastern District of Washington, alleging that they hacked the computer networks of 13 United States and 12 international companies in industries ranging from high tech manufacturing and medical device engineering to solar energy and pharmaceuticals, all between September 2009 and July 2020.
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