Huawei Executive Accused of Orchestrating US Trade Theft Scheme

May 23, 2019 Updated: May 23, 2019

Eric Xu, a deputy chairman of Huawei, allegedly was directly involved in a conspiracy to steal trade secrets relating to solid-state drive (SSD) technology from a U.S. startup, according to newly released court documents from an ongoing lawsuit.

It’s the latest development in tit-for-tat lawsuits involving San Jose, California-based startup CNEX Labs Inc. and the Chinese telecom giant, with each accusing the other of theft of trade secrets.

CNEX has received investment funding from Microsoft and Dell Technologies.

In the latest court documents, CNEX alleges that a professor from China’s Xiamen University pretended to be a customer in order to acquire its technology and transfer the know-how to Huawei chip-development subsidiary HiSilicon.

CNEX, citing information from Huawei staff, also claims that Xu was briefed about the whole scheme involving the university professor, and directed Huawei engineers to analyze CNEX’s data storage technology.

In response to the allegations about Xu’s involvement, CNBC reported that a Huawei spokesman told reporters on May 23 that CNEX’s claims are “misleading and unsubstantiated.”

The case will go to trial at a federal court in the Eastern District of Texas on June 3.

To protect American technological know-how, the U.S. government has also reportedly slowed down hiring approvals for Chinese nationals selected to work for U.S. semiconductor companies.

Huawei Executive

According to Huawei’s website, Xu, 52, has worked for Huawei for 26 years, in different positions ranging from chief strategy and marketing officer, to chief products and solutions officer. He is one of Huawei’s rotating chairmen.

According to court documents obtained by the Wall Street Journal and Reuters, CNEX alleges that the Xiamen University professor, identified as Bo Mao, asked CNEX in June 2016 for some circuit boards as part of his academic research project.

In 2017, CNEX provided a computer memory board to Mao after he signed a licensing agreement, which included a strict non-disclosure provision, with CNEX.

The U.S. company said Mao didn’t disclose that he had a cooperation agreement with Huawei to supply the technology to it.

Without telling CNEX, Mao prepared a technological report about CNEX’s computer memory board and handed it to HiSilicon’s database containing intel on its competitors, known as the “D-box directory.”

CNEX claimed that Mao was directed by Xu, the chief orchestrator of the scheme.

At a pre-trial hearing, a Huawei lawyer confirmed that a CNEX document about SSD technology was submitted to its D-box directory, and that Xu “was in the chain of command that had requested” information about CNEX. But Huawei rejected the claim of IP theft. It said the document concerned products and open source technology, and that the cooperation between Huawei and Xiamen University was for developing database software.

Tit-for-Tat Lawsuits

CNEX was co-founded by Yiren “Ronnie” Huang, after he resigned from his job at Futurewei, Huawei’s U.S. subsidiary, in 2013. Huang, who was born in China, is a naturalized U.S. citizen.

After joining Huawei, Huang tried to sell his pre-existing intellectual property (IP) on SSD technology to Futurewei, but the company refused to buy it.

Huawei tried to obtain Huang’s IP by including a provision about his invention in his employment agreement, but Huang didn’t agree to include the provision.

In 2017, Huawei filed a lawsuit against CNEX and Huang, claiming that the startup improperly recruited 14 of its employees, and that the company’s inventions were related to the work that Huang and others did at Huawei.

CNEX filed its countersuit in 2018, and alleged that Huawei was seeking to obtain deeper access to the startup’s technology through the lawsuit’s discovery process.

Each company denies the other’s allegations.

Meanwhile, the Wall Street Journal reported on May 21 that several top U.S. chipmakers, including Intel, Qualcomm, and Globalfoundries, failed to have their Chinese employees’ working papers approved in time by U.S. authorities, citing industry insiders.

The three firms had sought to hire hundreds of Chinese employees or move Chinese employees from overseas locations to the United States since last year. But since the U.S. administration began to crack down on Chinese IP theft, the companies said they encountered difficulties in securing the paperwork.

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