Justice Department Charges Six Chinese Nationals with Insider Theft

The Northern District of California has announced the indictment of six Chinese nationals, charging them with theft of trade secrets and economic espionage.

The Justice Department has issued a 32-count indictment including charges of economic espionage and theft of trade secrets against a pair of Chinese professors along with four other citizens of the People’s Republic of China. Authorities last Sunday arrested one of the alleged, Professor Hao Zhang of China’s Tianjin University, upon entry into the U.S. from China.

The professors, Zhang, 36, and Wei Pang, 35, met during doctoral studies in electrical engineering at the University of Southern California. During their tenure at USC, the pair studied Film Bulk Acoustic Resonators (FBARs) under a Defense Advanced Research Projects Agency (DARPA) grant. Upon receiving their doctorates, Zhang and Pang each went on to develop FBARs at Skyworks Solutions and Avago Technologies respectively. It is from these two firms that the six defendants are accused of stealing or conspiring to steal trade secrets.

FBARs are a type of Bulk Acoustic Wave (BAW) filter used to eliminate incoming and outgoing radio frequency interference for wireless signals and devices. While filter chips may seem like an obscure mobile component, the indictment cites an email penned by Pang in which the he estimates the worth of that market at around $1 billion. The email dates all the way back to 2006, perhaps a year or more before the beginning of the smartphone boom.

The indictment claims that the alleged conspirators stole proprietary information in order to benefit the PRC state-controlled Tianjin University, which boasts itself as China’s oldest university. In addition, the group is also accused of forming a joint venture with Tianjin University under the company name ROFS Microsystems, a company in the business of selling FBAR chips.

The indictment states that Pang and Zhang began preparing business plans and pitched PRC universities on the idea of manufacturing FBARs as early as 2007. Some time during 2008, officials from Tianjin University are said to have met with Pang and Zhang and others named in the indictment in San Jose, California. Tianjin University officials reportedly agreed help Pang and Zhang establish an FBAR manufacturing facility in the PRC.

Pang and Zhang continued to work at Avago and Skyworks, allegedly passing information along to Tianjin University, until the pair simultaneously resigned from the U.S. companies and accepted full time professorships at Tianjin University in mid-2009.

Specifically, the indictment claims that Pang and Zhang stole source code, specifications, presentations, design layouts and other confidential and proprietary documents from Skyworks and Avago  and passed that information along to one another and individuals working for Tianjin University.

“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, David J. Johnson, of the FBI’s San Francisco division.  “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 other defendants named in the indictment include, Jinping Chen, 41, Huisui Zhang, 34, Chong Zhou, 26, and Zhao Gang, 39. Chen, accused of conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets, is a professor at Tianjin University and a member of the board of directors for ROFS Microsystems. Zhang, who studied with Pang and Zhang at USC, receiving a Masters degree in electrical engineering in 2006, is charged with the same conspiracies. Zhou is a Tianjin University graduate student and a design engineer at ROFS Microsystems who studied under Pang and Zhang. He is charged with the same pair of conspiracies along with economic espionage and theft of trade secrets. Gang is the general manager of ROFS Microsystems and is charged with conspiracy to commit economic espionage and conspiracy to commit theft of trade secrets.

Zhang and Pang are both charged with conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets.

The counts of conspiracy to commit economic espionage and the actual committing of economic espionage carry maximum sentences of 15 years imprisonment, along with $500,000 fines (or twice the gains earned or losses caused by the schemes) and three years supervised release. Conspiracy to commit theft or the actual theft of trade secrets carry maximums of 10 years imprisonment, $250,000 fines (or twice the gains earned or losses caused by the scheme) and three years supervised release.

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