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IP theft continues to be a threat to businesses’ bottom lines – and a major issue for Sino-American relations.
IP theft and China
An American CEO accuses a former Chinese partner of being "out to kill my company," claiming that stolen IP effectively torpedoed his business. A recent report details the economic damage done by stolen intellectual property – and, critically, places much of the blame on unscrupulous companies operating in China. Here's a look at some recent lowlights.
WHAT HAPPENED: As recently reported by NBC News, this wind energy giant allegedly enticed an employee of Massachusetts-based American Superconductor to provide source code for software critical to running wind turbines.
FALLOUT: The employee, who worked for American Superconductor's Austrian office, was convicted of theft of trade secrets in that country and sentenced to a year in jail in 2011. Sinovel is under indictment in federal court for wire fraud and trade theft.
WHAT HAPPENED: In 2011, unknown hackers based in China are thought to have compromised the networks of iBahn, a smaller firm that provides Internet service to hotels – presumably, according to Bloomberg, with the aim of snooping through corporate communications among guests at those hotels.
FALLOUT: The iBahn case is one of many attributed to a group dubbed Byzantine Candor, the Bloomberg report states, which is thought to be an elite group of hackers operating under the auspices of the Chinese People's Liberation Army.
WHAT HAPPENED: An employee of the Chicago-area paint company was arrested in March 2009 for stealing technical details on Valspar's products from his workplace. He'd accepted a job offer as an R&D executive with the Shanghai branch of Japanese Nippon Paint just before the theft, unbeknownst to his previous employers.
FALLOUT: The employee, David Yen Lee, was sentenced to 15 months in prison for the theft in December 2010. Nippon Paint hasn't been charged in the case.
WHAT HAPPENED: Kexue Huang, a Chinese national working for Dow in the U.S., was charged with passing proprietary information about sophisticated pesticides to the Chinese government in June 2010.
FALLOUT: Huang pled guilty to violating the Economic Espionage Act and was sentenced to more than seven years in prison. The Trade Secrets Institute called the case "particularly interesting because it dealt explicitly with the prong of the Economic Espionage Act that criminalizes stealing trade secrets for the benefit of a foreign government."
WHAT HAPPENED: The Justice Department charged several people and a number of companies affiliated with the Pangang titanium and vanadium group with conspiracy to steal trade secrets from DuPont – specifically, technology for the production of titanium dioxide, a paint pigment.
FALLOUT: The case has yet to go to trial, and Pangang's lawyers won an important procedural battle last year. A critical hearing on the future of the case is set for August 16.
WHAT HAPPENED: Veteran aerospace engineer Dongfan Chung was outed as a spy for the Chinese government in 2006, as a result of the FBI investigation of another PRC agent. He was accused of passing along hundreds of thousands of pages of classified technical information to his handlers.
FALLOUT: Despite his comparatively advanced age – 73 – Chung was sentenced to more than 15 years in prison, after a bench trial in 2009.
University of Wisconsin
WHAT HAPPENED: A research assistant named Huajun Zhao was accused in April of having stolen samples of an experimental cancer treatment substance from the office of a professor, apparently with the aim of obtaining research funding in China. He even attempted to delete the professor's original records in order to solidify the impression that he had created the treatment in the first place.
FALLOUT: Zhao accepted a deal last week that dropped a more serious economic espionage charge in exchange for a guilty plea to computer fraud, according to local news. He was sentenced to time served, plus two years of supervised release.
WHAT HAPPENED: According to the U.S. Attorney for the Eastern District of Michigan, Xiang Dong Yu stole 4,000 design documents from Ford Motor Company before heading off to a job with "the China branch of a U.S. company" in December 2006.
FALLOUT: Yu was arrested in 2009 upon returning to the U.S, and pled guilty in April 2011 to two counts of theft of trade secrets. He was sentenced to nearly six years in jail and subsequent deportation.
WHAT HAPPENED: Lockheed was one of the companies targeted by a cyber attack that apparently emanated from a mysterious Chinese army unit in 2011, in the wake of the infamous hack of security firm RSA.
FALLOUT: Lockheed says nothing of importance was stolen in the 2011 attack, but the responsible parties have never been definitively identified.
Emerging Leaders 2018