It is becoming an increasingly common thread: A U.S. startup has an exciting new technology; shares exemplars of new technology with potential customers; and potential customer violates all agreements in an attempt to reverse-engineer said technology.
The variable in these tales are the names of the startup or enterprise, while the common denominator is Chinese telecommunications giant Huawei.
At the RSA Conference 2019 this week, FBI Director Christopher Wray noted how all 56 FBI field division offices had economic espionage investigations open that included China. In fairness, not all those 50+ investigations involve Huawei—but the one involving Akhan Semiconductors sure does.
Akhan Semiconductors filed a patent in December 2017 for a “multilayer diamond display method,” a method to create a multilayered display screen for use in smartphones and tablets, which carried the trade name “Miraj Diamond Glass.” On March 5, patent number 10224514 was granted to Akhan, but let’s not get ahead of ourselves: On the way to the granting of that patent, Akhan engaged with a number of smartphone manufacturers, including Huawei.
Their relationship with Huawei began in 2016 and ended in an ignoble manner following the 2019 Consumer Electronics Show (CES) in January with the FBI advising Adam Khan, the CEO of Akhan, to have no further contact with the Chinese manufacturer.
During discussions between Huawei and Akhan, Huawei ignored Khan’s advice, consul and agreements when it was provided access to samples of Akhan’s revolutionary glass for assessment in its San Diego laboratory.
According to Bloomberg, Khan and his colleague, Akhan COO Carl Shurboff, met with representatives of Huawei at CES to confront Huawei on its attempt to reverse-engineer and steal Akhan’s technology.
The meeting—or sting, as it has come to be known—was orchestrated by Khan and the FBI in an attempt to have Huawei representatives provide confirmatory evidence that Huawei had attempted to steal the technology of Akhan and had violated U.S export control laws (ITAR). The Bloomberg writeup noted that, following this meeting between Akhan representatives and Huawei’s representative,“The FBI raided Huawei’s San Diego facility on the morning of Jan. 28. That evening, the two special agents and Assistant U.S. Attorney David Kessler briefed Khan and Shurboff by phone. The agents described the scope of the search warrant in vague terms and instructed Khan and Shurboff to have no further contact with Huawei.”
In late 2016, Akhan was working with prototypes of its new diamond glass and had offered samples to various manufacturers. In February 2017, Huawei and Akhan had reached an agreement—a letter of intent—under which two samples of the diamond glass would be provided to Huawei’s San Diego laboratory for non-destructive examination and review, and the requirements surrounding access to the technology with respect to ITAR would be followed. The agreement also called for samples to be returned within 60 days.
In February 2018, after Akhan filed for its patent, the company had a new improved sample available for review by manufacturers. Again, an agreement was reached with Huawei and the samples were provided. When May 2018 came and went, Akhan knew it had a problem: The 60 days had passed and the samples had not been returned. Requests for the samples to be returned were ignored.
Finally, in August 2018, Huawei returned the samples. Akhan noted upon receipt that the glass samples had been subjected to destructive testing. Khan realized Huawei was attempting to reverse-engineer the patent-pending technology. He had Shurboff contact the FBI.
In December 2018, Akhan contacted Huawei, with the FBI listening to the call. The representative confirmed the sample glass had been sent to China and the testing had not been conducted in the lab in San Diego, then expressed Huawei’s desire to be Akhan’s first customer and suggested a meeting at CES.
At the CES meeting, Huawei showed up with one representative from the San Diego test lab and another from its Santa Clara, California, office, a senior supply manager. The meeting has been described as “tense.” Following the meeting, as detailed above, the FBI advised Akhan to terminate its contact with Huawei.
Akhan released its own press release that outlines its lesson learned for all:
AKHAN takes seriously any unlawful use of its technology. The theft of any AKHAN assets, attempted or successful, will be not be tolerated. AKHAN will continue to cooperate with law enforcement and work towards an expedient resolution to this matter. Given the threat that Huawei’s apparent theft poses to AKHAN shareholders, employees, and customers—and the potential loss to U.S. jobs, revenue, and other projected economic impact—AKHAN is considering any and all legal remedies.