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Chinese spies target US intellectual property

Taylor Armerding | Aug. 25, 2015
The U.S. economy is losing hundreds of billions of dollars each year to economic espionage, mainly from China, experts say. Some of the problem is political, but plenty of it is due to a ‘stupefying’ lack of security.

Among multiple examples of that is a case from 2007 when Hanjuan Jin, a Chinese-born American citizen and a software engineer at Motorola, was stopped for a security check at O’Hare International Airport in Chicago just before boarding a flight to Beijing (she had purchased a one-way ticket). The screeners found about $31,000 in cash plus more than 1,200 confidential Motorola documents stored on a laptop, four external hard drives, thumb drives and other devices.

The company said the intellectual property was worth about $600 million.

Jin was convicted in 2012 of stealing trade secrets, sentenced to four years in prison and fined $20,000, but escaped conviction on the more serious crime of violating the federal Economic Espionage Act – stealing the information to benefit a foreign government.

She was also named as a co-defendant in a civil lawsuit later brought by Motorola against China’s Huawei telecoms group over the alleged theft of trade secrets. That suit was eventually settled for undisclosed terms.

But Mark Halligan, a partner at FisherBroyles, who represented Motorola in the suit, noted that while Jin’s attempted theft was prevented, she was only moments away from boarding the flight to China, and that there are likely many other cases where economic spies haven’t been caught.

“How many other times has this happened?” he said. “At a high level, what you can say is that Motorola was the No. 1 telecom in the world, and Huawei didn’t even exist until 1987. Today, Motorola has been split in two, and Huawei is No. 1.”

Halligan also said Jin’s case and others show that Chinese economic espionage is not necessarily occurring only from thousands of miles away via the Internet, but is frequently done by company insiders.

“You have the top grads from tech schools in China, who then go to the U.S., get master’s degrees and then apply to U.S. companies. They have stellar resumes, and then work their way up as trusted employees.”

Another example of that, he said, came in 2010 at Valspar Corp., a paint manufacturer, “where every paint formula is a trade secret.”

According to the FBI, David Yen Lee, a chemist for Valspar, was sentenced to 15 months in prison for stealing company trade secrets valued at up to $20 million as he prepared to go to work for a competitor in China.

“He downloaded the entire paint formula library, reorganized it on a separate hard drive and bought a one-way ticket to Beijing,” Halligan said. The only reason he got caught is that somebody noticed an anomaly and notified FBI. They (Valspar) would have lost their entire company.”

There is evidence that the U.S. government is becoming more aggressive in pursuing economic espionage cases. The Wall Street Journal reported in 2013 that the Justice Department had pursued at least 19 cases of corporate espionage since 2009 – most of the defendants were Chinese, but were working for U.S. corporations.

 

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