Chinese Energy Company Indicted for Allegedly Stealing US Trade Secrets

The seal of the United States Department of Justice is seen on the building exterior of the United States Attorney's Office of the Southern District of New York in Manhattan, N.Y., on Aug. 17, 2020. (Andrew Kelly/Reuters)

A Chinese energy company, its U.S. affiliate, and a Chinese national have been indicted on charges relating to the alleged theft of technology from a Houston-area manufacturer, the Justice Department (DOJ) announced on Oct. 28.

Prosecutors allege that Jason Energy Technologies Co. (JET), its U.S. affiliate Jason Oil and Gas Equipment (JOG) LLC USA, and Chinese national Gao Lei, the U.S. affiliate’s general manager, conspired to steal coiled tubing technology from a U.S. competitor, with the help of Robert Erford Jr., who worked for the company.

The two entities and Gao were charged with conspiracy, theft of trade secrets, and attempted theft of trade secrets.

Erford was the production mill operator at the U.S. company’s manufacturing facility in Dayton, Texas. He previously pleaded guilty to conspiracy to steal trade secrets in a separate case. Gao previously lived in Houston and is believed to be at-large in China, the DOJ stated.

Coiled tubing is used for maintenance of underground oil and gas pipes. The U.S. company is an industry leader in producing advanced forms of the technology, according to court papers.

Prosecutors said that Gao met with Erford at the JOG offices in November 2019, months after Erford sought Gao for a job opportunity at JOG. Erford then signed a consultancy agreement with Gao, agreeing to work in China as a consultant to assist JOB in coiled tubing technology. He was to be paid $1,000 each day of a 15-day visit, prosecutors said.

At the same meeting, Erford was given a letter from JET’s general manager in China, inviting him to visit to help with the company’s manufacturing efficiency, reducing machine failure, and increasing production capacity, according to prosecutors.

Later that month, Erford visited JET’s offices and facilities in the eastern Chinese city of Shandong. There, he provided the Chinese firm with the victim company’s confidential procedural document that contained trade secrets relating to the manufacture of coiled tubing, court documents stated. He also held meeting with Gao and JET officials and discussed the victim company’s proprietary technology, practices, and procedures, prosecutors allege.

Erford also took 120 photographs of the U.S. company’s facility, processes, data, and equipment, some of which showed the victim company’s confidential manufacturing information. He shared a portion of these photos with Gao via Chinese messaging app WeChat, court documents stated.

The companies could be fined up to $5 million, or three times the value of the stolen trade secrets, whichever is greater. Gao faces a maximum prison sentence of 10 years, as well as a $250,000 fine or twice the gross gain or loss.

The DOJ has cracked down on Chinese state-sanctioned theft of U.S. intellectual property under its China Initiative. For instance, a Chinese professor earlier in October was sentenced to 18 months in prison after he was convicted of economic espionage and trade-secret theft. Zhang Hao, prosecutors said, conspired with others to steal technology from two U.S. companies for the benefit of the Chinese regime.