The U.S. Department of Justice has jumped into the fray between Micron Technology, companies located in Taiwan and China and three individuals with the release of a grand jury indictment. Readers may recall in February we wrote about Micron’s efforts, via a civil suit, to recapture their intellectual property which had been stolen, and noting that the government of Taiwan had indicted United Microelectronics Corporation (UMC), Fijian Jinhua Integrated Circuit Company (Fijian) and three employees of UMC.
The DoJ indictment identifies these same companies—UMC and Fijian—and the same three Taiwan nationals: Chen Zhengkun, aka Stephen Chen, age 55; He Jianting, aka J.T. Ho, age 42; and Wang Yungming, aka Kenny Wang, age 44. The DoJ goes one step further and confirms that Fijian is a Chinese State-Owned-Enterprise (SOE) and for this reason, the charges of economic espionage are appropriate.
FBI Director Christopher Wray commented, “The Chinese government is determined to acquire American technology, and they’re willing use a variety of means to do that – from foreign investments, corporate acquisitions, and cyber intrusions to obtaining the services of current or former company employees to get inside information. If China acquires an American company’s most important technology – the very technology that makes it the leader in a field – that company will suffer severe losses, and our national security could even be impacted. We are committed to continuing to work closely with our federal, state, local, and private sector partners to counter this threat from China.”
China, late to the party, had identified the acquisition of dynamic random-access memory (DRAM) technology as an economic priority and opted to engage in economic espionage as its means to leapfrog into competition against Micron, which dominated the $50 billion market with 20 percent to 24 percent market share.
The theft of Micron’s technology wasn’t a grab-and-go type operation; it was a multiyear concerted effort to provide China a toehold into the DRAM market. Investigators in Taiwan and the United States have identified the genesis may have coincided with the acquisition of a Taiwanese electronics company of which Chen was the general manager and chairman in 2013. In 2015, Chen resigned and hustled over to UMC.
Chen wasted no time and began the wholesale recruitment of Micron employees in Taiwan, having at least two (Ho and Wang) bring the Micron intellectual property with them. Investigation showed that Wang alone brought with him 900 Micron confidential documents/files.
DoJ Investigation During a Civil Suit
Is is the first time the DoJ has stepped in and investigated the theft of intellectual property that also was the subject of a company-to-company civil suit? Not in the least.
For example, when Ross Klein and Amar Lalvani left Starwood—where they had been involved in the creation of the W brand—and landed at Hilton Hotels—where they were to build the Denizen brand—they were followed by eight other Starwood execs. Starwood then filed a civil suit against Hilton, which was settled with Hilton paying Starwood $75 million and agreeing to defer for two years the creation of high-end lifestyle hotels. In the midst of the civil suit, the DoJ requested a “stay of discovery” to allow it to investigate and determine if corporate espionage may have occurred, in violation of U.S. criminal sanctions.
Bottom line, if you have had your intellectual property stolen, pursue all avenues to protect that intellectual property and to prevent others from using the information to compete against your company. While Micron may not be able to halt Fijian’s production of DRAMs given it is a Chinese SOE, it may be able to prevent their sale into the United States and other global markets, and thus protecting their substantial market share.