Samsung Fights Back Against Industrial Espionage as Eight Koreans Jailed for Selling Tech Secrets

A woman walks past a new flagship store of Samsung Electronics at the Gangnam district in Seoul on June 28, 2023. (Jung Yeon-je/AFP via Getty Images)

Last week, eight Koreans were found guilty of divulging confidential information from Samsung Display to Chinese firm BOE Technology Group, lured by the promise of high salaries. In a related development, the United States International Trade Commission (ITC) is investigating a lawsuit by Samsung Display alleging that BOE infringed on its trade secrets.

On Nov. 30, a court handed down sentences to employees of Toptec, an affiliate of Samsung Display. The charges involved the leak of Samsung’s proprietary edge panel technology, used in smartphones, to BOE, China’s leading display manufacturer.

The head of Toptec’s sales department, referred to as Mr. A in the indictment, received a three-year prison term. Four other former and current Toptec employees were sentenced to prison terms ranging from one to two and a half years. Additionally, three individuals who facilitated the connection to the Chinese firm were given one to two years in prison.

The defendants were charged with transferring 3D lamination technology secrets, a key component of Samsung Display’s edge panels, to BOE. The trial, initiated in January 2019, was temporarily put on hold due to a separate trial involving the former head of Toptec, accused of leaking another trade secret.

Samsung’s edge panel technology is crucial in creating curved corners on smartphone screens. The technology, which is integral to Samsung’s Galaxy smartphone series, represents a significant investment. The company allocated roughly 150 billion Korean won (about $120 million) in research and development, engaging 38 engineers.

Mr. A previously oversaw sales of Samsung Display’s 3D lamination equipment at Toptec. According to Korean news agency Newsis, he was approached in November 2017 by a Chinese manufacturer. It offered him a substantial annual salary in exchange for the 3D lamination technology, with instructions to establish manufacturing capabilities in China, produce panels, and supply them to BOE.

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Subsequently, Mr. A, along with an intermediary referred to in the indictment as “Mr. B” and others, founded a company in China in March 2018. Mr. A then recruited Toptec engineers, using the stolen technology data to develop design drawings and proposals for 3D lamination equipment.

These proposals were presented to BOE, culminating in the unauthorized disclosure of the 3D lamination technology.

Samsung Escalates Legal Battle Against BOE

The ongoing struggle for technological supremacy has seen Samsung, a global leader in IT innovation—particularly in semiconductor and organic light-emitting diode (OLED) display technology—face repeated setbacks. The company, having suffered significant losses, is now confronting the issue head-on, particularly targeting BOE Technology Group.

On Oct. 31, Samsung Display initiated legal proceedings against BOE and several of its subsidiaries, alleging trade secret infringement. The lawsuit was filed with the ITC.

On Nov. 30, the ITC confirmed that it will launch an investigation into certain OLED display modules and components, as per Samsung Display’s complaint. The ITC aims to expedite its final decision on this matter, according to an ITC press release.

Samsung Display’s complaint traces the infringement back to late 2017, implicating BOE in the illicit acquisition of OLED panel and module technologies through Toptec, a Samsung Display affiliate. Samsung accuses BOE of competing unfairly and violating U.S. laws.

Samsung, BOE Spar Over Patents

Leading up to the recent lawsuit, in late 2022, Samsung Display indirectly targeted BOE by filing a complaint with the ITC against 17 American smartphone repair shops, over their use of allegedly counterfeit panels for smartphone OLED display replacements.

The complaint urged them to avoid using parts and display panels that infringe upon Samsung’s patents, including Samsung’s “Diamond Pixel” technology.

In a countermove, in April, BOE sued Samsung Electronics, the Chinese subsidiary of Samsung Display, and its local partner. The lawsuit, filed in the Chongqing First Intermediate Court, alleges that Samsung Display infringed upon BOE’s OLED display panel patents.

Further, in June, BOE filed proceedings with the U.S. Patent and Trademark Office, seeking to invalidate five patents filed by Samsung.

Samsung Display then filed a separate patent infringement case in June in the Eastern District Court of Texas and in Chinese courts. The case accuses BOE of misappropriating OLED display patents, originally developed for the iPhone 12.

In a pre-trial order in September, the ITC backed Samsung’s claim that BOE infringed on five of its display patents, including “Diamond Pixel” technology. Diamond Pixel technology, introduced in 2013, is considered key to Samsung’s OLED displays.

Samsung Removes BOE from Primary Display Panel Suppliers

In a significant shift in its supply chain strategy, Samsung Electronics revealed in its recent third quarter report that BOE Technology Group has been removed from its primary panel suppliers, falling out of the top three in supplying panels for TVs and monitors. The report marks the first time in over seven years that BOE has not been listed as a main component source for Samsung Electronics.

Previously, BOE held a prominent position in supplying Liquid Crystal Display (LCD) panels to Samsung Electronics, catering primarily to the company’s laptop and television production needs. BOE, a global leader in the LCD panel market, contributed approximately 10 percent of the panels used in Samsung Electronics’ televisions as of the first half of this year.