Court Allows Chinese Chipmaker to View Micron’s Trade Secrets in Hong Kong as Part of DOJ Litigation

March 11, 2020 Updated: March 11, 2020
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News Analysis

A California federal court granted China’s Fujian Jinhua and Taiwan’s UMC the right to view trade secret information they allegedly stole from U.S.-based Micron at a review site in Hong Kong.

The U.S. Department of Justice filed a landmark criminal indictment against Fujian Jinhua Integrated Circuit, United Microelectronics Corporation (UMC), and three individuals for allegedly conspiring to recruit employees of Micron Technologies to steal $8 billion worth of trade secrets related to dynamic random access memory (DRAM) chip design technology used in computer electronics. Micron was the only American company manufacturing DRAM at the time.

China did not possess DRAM, and according to the Justice Department’s announcement of the indictment on Nov. 1, 2018, the Chinese regime had already identified the development of DRAM as “a national economic priority.”

The criminal charge against Fujian Jinhua was part of a series of trade war actions advocated by the Trump administration that began in September 2018 in a broad crackdown against Chinese firms stealing American intellectual property rights.

After failing to get the case dismissed in May 2019, the defendants entered into negotiations toward a consent decree aimed at preventing any future wrongful disclosure of Micron’s trade secrets. As part of the U.S. legal system, such criminal defendants are entitled to review all evidence that forms the basis of alleged crimes.

Given the complex set of global legal teams, expert witnesses, and key company representatives, Micron offered defendants secure review of its intellectual property at locations in United States, Japan, Taiwan, and Singapore. But Fujian Jinhua, UMC and the former Micron employees demanded Hong Kong as a more “convenient” location.

The DOJ, joined by Micron, filed for a protective order to “prevent and proscribe” any review of Micron’s trade secrets in Hong Kong. The motion argued there is a high risk that the Chinese regime could steal Micron’s trade secrets as Hong Kong is an Administrative Region inside of China (since 1997).

The DOJ argued that the court is obligated under 18 U.S.C. § 1835 to “enter such orders and take such other action as may be necessary and appropriate to preserve the confidentiality of trade secrets,” according to Michigan-based law firm Butzel Long.

However, the court rejected the DOJ’s and Micron’s arguments that tried to equate Hong Kong to China in terms of intellectual property theft risk.

The judge noted that defendants are represented by “reputable law firms,” including Morrison & Foerster representing Fujian Jinhua, and Latham & Watkins representing United Microelectronics Company (UMC). Butzel Long said the judge stated that both firms can be trusted to professionally manage and sufficiently safeguard Micron’s trade secrets in Hong Kong.

The ruling in favor of the defendants could undermine the DOJ’s efforts to crack down on economic espionage committed by Chinese state-owned firms.

“No country presents a broader, more severe threat to our ideas, our innovation, and our economic security than China,” FBI Director Christopher Wray said in a statement.

The Department of Justice and Micron have not indicated if either will appeal the ruling.