PRC State-owned Company, Taiwan Company, and Three Individuals Charged with Economic Espionage

November 2, 2018
AIT Press Release #: PR-1839

 

Investigation Conducted with Assistance of Taiwan Authorities Results in U.S. Indictment

SAN FRANCISCO –  The Department of Justice announced that a federal grand jury indicted a state-owned enterprise of the People’s Republic of China (PRC), a Taiwan company, and three individuals, charging them with crimes related to a conspiracy to steal, convey, and possess stolen trade secrets of an American semiconductor company for the benefit of a state-owned enterprise of the PRC.  In addition, the United States filed a civil lawsuit seeking to enjoin the further transfer of the stolen trade secrets and to enjoin certain defendants from exporting to the United States any products manufactured by UMC or Jinhua that were created using the trade secrets at issue.  The indictment was filed on September 27, 2018, and unsealed today. The civil lawsuit was filed this morning.

“I am announcing that a grand jury in San Francisco has returned a multi-defendant indictment alleging economic espionage on the part of a state-owned Chinese company, a Taiwanese company, and three Taiwan individuals for an alleged scheme to steal trade secrets from Micron, an Idaho-based semi-conductor company,” said Attorney General Sessions.  “Micron is worth an estimated $100 billion and has a 20 to 25 percent share of the dynamic random access memory industry—a technology not possessed by the Chinese until very recently.  As this and other recent cases have shown, Chinese economic espionage against the United States has been increasing—and it has been increasing rapidly.  I am here to say that enough is enough. With integrity and professionalism, the Department of Justice will aggressively prosecute such illegal activity.”

“The theft of intellectual property is not only unfair, but stifles technological innovation by disincentivizing investment in long-term research and development.  The theft of intellectual property on a continuing basis by nation-state actors is an even more damaging affront to the rule of law,” said U.S. Attorney Alex Tse. “We in the Northern District of California, one of the world’s great centers of intellectual property development, will continue to lead the fight to protect U.S. innovation from criminal misappropriation, whether motivated by personal greed or national economic ambition.”

“The attempts by foreign governments to illegally obtain U.S. intellectual property and trade secrets pose a substantial threat to our national security and economy,”  said Special Agent in Charge John F. Bennett.   “The San Francisco Bay Area, with its unique blend of human talent and innovative technologies, is often a target of economic espionage and theft of trade secrets by foreign individuals and governments.  This indictment demonstrates the FBI’s commitment to protecting American innovation, research, and development.”

According to the indictment, the defendants were engaged in a conspiracy to steal the trade secrets of Boise, Idaho-based Micron Technology, Inc. (Micron), a leader in the global semiconductor industry specializing in the advanced research, development and manufacturing of memory products, including dynamic random-access memory (DRAM).  DRAM is a leading-edge memory storage device used in computer electronics.  In the worldwide DRAM supply, Micron holds approximately a 20-25% of the market share.  Micron is the only United States-based company that manufactures DRAM.  According to the indictment, Micron maintains a significant competitive advantage in this field due in large part from its intellectual property, including its trade secrets that include detailed, confidential information pertaining to the design, development, and manufacturing of advanced DRAM products.

Prior to the events described in the indictment, the PRC did not possess DRAM technology, and the Central Government and State Council of the PRC publicly identified the development of DRAM and other microelectronics technology as a national economic priority.  The indictment describes the manner and means by which the defendants conspired to steal Micron’s intellectual property related to DRAM and convey it to a company controlled by the PRC government.

The criminal defendants are United Microelectronics Corporation (“UMC”), a Taiwan semiconductor foundry; Fujian Jinhua Integrated Circuit, Co., Ltd. (“Jinhua’”), a state-owned enterprise of the PRC; and three Taiwan nationals: Chen Zhengkun, a.k.a. Stephen Chen, age 55; He Jianting, a.k.a. J.T. Ho, age 42; and Wang Yungming, a.k.a. Kenny Wang, age 44.   UMC is a publicly listed semiconductor foundry company traded on the New York Stock Exchange; is headquartered in Taiwan; and has offices worldwide, including in Sunnyvale, Calif.  UMC mass produces integrated-circuit logic products based on designs and technology developed and provided by its customers.  UMC did not possess advanced DRAM technology prior to misappropriating it from Micron.

Jinhua is a state-owned enterprise of the PRC, funded entirely by the Chinese government, and established in February 2016 for the sole purpose of designing, developing, and manufacturing DRAM.  The indictment describes how UMC, Jinhua, and employees of both, conspired to bypass many years of research and development by illegally obtaining Micron’s proprietary technology.  The DRAM technology at issue is based on research and development and other proprietary information worth at least hundreds of millions and up to billions of dollars.

According to the indictment, Chen was a General Manager and Chairman of an electronics corporation that Micron acquired in 2013.  Chen then became the president of a Micron subsidiary in Taiwan, Micron Memory Taiwan (“MMT”), responsible for manufacturing at least one of Micron’s DRAM chips.  Chen resigned from MMT in July 2015 and began working at UMC thereafter.  While at UMC, Chen helped negotiate a cooperation agreement between UMC and Jinhua whereby, with funding from Jinhua, UMC would transfer DRAM technology to Jinhua to mass-produce.  The technology would be jointly shared by both UMC and Jinhua.  Chen became the head of UMC’s division tasked with fulfilling the terms of the cooperation agreement, namely developing DRAM technology to transfer to Jinhua.  Chen later became the President of Jinhua and was put in charge of its DRAM production facility.

While at UMC, Chen recruited numerous MMT employees, including Ho and Wang, to join him at UMC.  Prior to leaving MMT, Ho and Wang both stole and brought to UMC Micron trade secrets related to the design and manufacture of DRAM.  For example, Ho and Wang stole confidential and proprietary materials pertaining to the past, current, and future generations of DRAM technology, some still in the research and development phase.  Wang downloaded over 900 Micron confidential and proprietary files before he left MMT and stored them on USB external hard drives or in personal cloud storage, from where he could access the technology while working at UMC.

In sum, all defendants are charged with one count of conspiracy to commit economic espionage, in violation of 18 U.S.C. § 1831(a)(5); one count of conspiracy to commit theft of trade secrets, in violation of 18 U.S.C. § 1832(a)(5); and one count of economic espionage (receiving and possessing stolen trade secrets), in violation of 18 U.S.C. § 1831(a)(3).  Additionally, Wang is charged with two counts of substantive economic espionage and Ho is charged with one count each of economic espionage and theft of trade secrets.

An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, the individual defendants face a maximum sentence of 15 years imprisonment and a $5,000,000 fine for economic espionage charges, and 10 years imprisonment for theft of trade secrets charges.  If convicted, each company faces forfeiture and a maximum fine of more than $20 billion.  However, any sentence following conviction would be imposed by the court only after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

The defendants have been summoned to appear on November 19, 2018 before U.S. Magistrate Judge Susan van Keulen.

In the civil complaint, the United States sues UMC, Jinhua, and Chen to enjoin them from exporting to the United States any products containing DRAM manufactured by Jinhua or UMC.  The lawsuit also seeks an order preventing the civil defendants from transferring the trade secrets to anyone else.  As authority for the lawsuit, the complaint cites 18 U.S.C. § 1836(a), a statute that permits the Attorney General to “obtain appropriate injunctive relief” against violations of 18 U.S.C. §§ 1831 and 1832.

This prosecution is a result of an investigation by the FBI.  Substantial assistance was provided by Taiwan’s Ministry of Justice and the Ministry of Justice Investigation’s Bureau, MJIB.

Further Information:

Case #: 18-465 MMC (criminal action)
18-6643 NC (civil action)

A copy of this press release may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges’ calendars with schedules for upcoming court hearings can be viewed on the court’s website at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney’s Office should be directed to Abraham Simmons at (415) 436-7264 or by e-mail at Abraham.Simmons@usdoj.gov.