The allegation that Chinese professors have stolen technology and trade secrets from American companies to benefit China is bound to cast a shadow on Chinese President Xi Jinping’s coming State visit to the US in September this year since both US and China were viewing this visit as a paramount priority for China-U.S. relationship in the days ahead.
On May 16, 2015, Tianjin University Professor Hao Zhang was arrested upon entry into the United States from the People’s Republic of China (PRC) in connection with a recent superseding indictment in the Northern District of California.
This was announced on Tuesday by Assistant Attorney General for the US National Security John P. Carlin, U.S. Attorney Melinda Haag of the Northern District of California and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division.
At the daily press briefing here, Jeff Rathke, Director, Press Office of US Department of State replying to a query on this issue said on Tuesday that the United States is committed to protecting U.S. companies’ trade secrets and their proprietary business information from theft. So this is an important issue for the United States.
Rathke further said we are committed to enforcing the law and to supporting those – the law enforcement agencies and also to ensuring that American companies and American individuals – that their business information is protected and that economic espionage is something that we take very seriously.
When a journalist asked is there going to be extra scrutiny on overseas nationals working in this area and the granting of work visas or authorizing them to work here in that area? Is there going to be extra scrutiny? the US spokesperson replied: “it would be too early to say that there were specific operational measures that the State Department would adopt.”
The Department of Justice statement further says:
The 32-count indictment, which had previously been sealed, charges a total of six individuals with economic espionage and theft of trade secrets for their roles in a long-running effort to obtain U.S. trade secrets for the benefit of universities and companies controlled by the PRC government, a US Department of Justice, Office of Public Affairs statement said.
“According to the charges in the indictment, the defendants leveraged their access to and knowledge of sensitive U.S. technologies to illegally obtain and share U.S. trade secrets with the PRC for economic advantage,” said Assistant Attorney General Carlin. “Economic espionage imposes great costs on American businesses, weakens the global marketplace and ultimately harms U.S. interests worldwide. The National Security Division will continue to relentlessly identify, pursue and prosecute offenders wherever the evidence leads. I would like to thank all the agents, analysts and prosecutors who are responsible for this indictment.”
“As today’s case demonstrates, sensitive technology developed by U.S. companies in Silicon Valley and throughout California continues to be vulnerable to coordinated and complex efforts sponsored by foreign governments to steal that technology,” said U.S. Attorney Haag. “Combating economic espionage and trade secret theft remains one of the top priorities of this Office.”
“The conduct alleged in this superseding indictment reveals a methodical and relentless effort by foreign interests to obtain and exploit sensitive and valuable U.S. technology through the use of individuals operating within the United States,” said Special Agent in Charge Johnson. “Complex foreign-government sponsored schemes, such as the activity identified here, inflict irreversible damage to the economy of the United States and undercut our national security. The FBI is committed to rooting out industrial espionage that puts U.S. companies at a disadvantage in the global market.”
According to the indictment, PRC nationals Wei Pang and Hao Zhang met at a U.S. university in Southern California during their doctoral studies in electrical engineering. While there, Pang and Zhang conducted research and development on thin-film bulk acoustic resonator (FBAR) technology under funding from U.S. Defense Advanced Research Projects Agency (DARPA). After earning their doctorate in approximately 2005, Pang accepted employment as an FBAR engineer with Avago Technologies (Avago) in Colorado and Zhang accepted employment as an FBAR engineer with Skyworks Solutions Inc. (Skyworks) in Massachusetts. The stolen trade secrets alleged in the indictment belong to Avago or Skyworks.
Avago is a designer, developer and global supplier of FBAR technology, which is a specific type of radio frequency (RF) filter. Throughout Zhang’s employment, Skyworks was also a designer and developer of FBAR technology. FBAR technology is primarily used in mobile devices like cellular telephones, tablets and GPS devices. FBAR technology filters incoming and outgoing wireless signals so that a user only receives and transmits the specific communications intended by the user. Apart from consumer applications, FBAR technology has numerous applications for a variety of military and defense communications technologies.
According to the indictment, in 2006 and 2007, Pang, Zhang and other co-conspirators prepared a business plan and began soliciting PRC universities and others, seeking opportunities to start manufacturing FBAR technology in China. Through efforts outlined in the superseding indictment, Pang, Zhang and others established relationships with officials from Tianjin University. Tianjin University is a leading PRC Ministry of Education University located in the PRC and one of the oldest universities in China.
As set forth in the indictment, in 2008, officials from Tianjin University flew to San Jose, California, to meet with Pang, Zhang and other co-conspirators. Shortly thereafter, Tianjin University agreed to support Pang, Zhang and others in establishing an FBAR fabrication facility in the PRC. Pang and Zhang continued to work for Avago and Skyworks in close coordination with Tianjin University. In mid-2009, both Pang and Zhang simultaneously resigned from the U.S. companies and accepted positions as full professors at Tianjin University. Tianjin University later formed a joint venture with Pang, Zhang and others under the company name ROFS Microsystem intending to mass produce FBARs.
The indictment alleges that Pang, Zhang and other co-conspirators stole recipes, source code, specifications, presentations, design layouts and other documents marked as confidential and proprietary from the victim companies and shared the information with one another and with individuals working for Tianjin University.
According to the indictment, the stolen trade secrets enabled Tianjin University to construct and equip a state-of-the-art FBAR fabrication facility, to open ROFS Microsystems, a joint venture located in PRC state-sponsored Tianjin Economic Development Area (TEDA), and to obtain contracts for providing FBARs to commercial and military entities.
The six indicted defendants include:
Hao Zhang, 36, a citizen of the PRC, is a former Skyworks employee and a full professor at Tianjin University. Zhang is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets. Zhang was arrested upon entry into the United States on May 16, 2015.
Wei Pang, 35, a citizen of the PRC, is a former Avago employee and a full professor at Tianjin University. Pang is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets.
Jinping Chen, 41, a citizen of the PRC, is a professor at Tianjin University and a member of the board of directors for ROFS Microsystems. Chen is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.
Huisui Zhang (Huisui), 34, a citizen of the PRC, studied with Pang and Zhang at a U.S. university in Southern California and received a Master’s Degree in Electrical Engineering in 2006. Huisui is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.
Chong Zhou, 26, a citizen of the PRC, is a Tianjin University graduate student and a design engineer at ROFS Microsystem. Zhou studied under Pang and Zhang, and is charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets.
Zhao Gang, 39, a citizen of the PRC, is the General Manager of ROFS Microsystems. Gang is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.
The maximum statutory penalty for each of the charges alleged in the superseding indictment is as follows:
Count One: conspiracy to commit economic espionage: 15 years imprisonment; $500,000 fine or twice the gross gain/loss; three years’ supervised release; and $100 special assessment.
Count Two: conspiracy to commit theft of trade secrets: 10 years imprisonment; $250,000 fine or twice the gross gain/loss; three years’ supervised release; and $100 special assessment.
Counts Three Through Seventeen: economic espionage; aiding and abetting: 15 years imprisonment; $500,000 fine or twice the gross gain/loss; three years’ supervised release; and $100 special assessment.
Counts Eighteen Through Thirty-Two: theft of trade secrets; aiding and abetting: 10 years imprisonment; $250,000 fine or twice the gross gain/loss; three years’ supervised release; and $100 special assessment.
Zhang was arrested on May 16, 2015, upon landing at the Los Angeles International Airport on a flight from the PRC. He made his initial appearance yesterday afternoon in Los Angeles before the U.S. Magistrate Judge Alicia G. Rosenberg of the Central District of California, who ordered the defendant transported in custody to San Jose for further proceedings. His next scheduled appearance will be before the U.S. District Judge Edward J. Davila of the Northern District of California, at a date to be determined.
The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.
The investigation is being conducted by the FBI’s Palo Alto Resident Agency/San Francisco Division. The case is being prosecuted by Assistant U.S. Attorneys Matt Parrella and Dave Callaway of the Northern District of California, and the National Security Division’s Counterespionage Section.