Court Decision Empowers US Technology Theft by CCP

A view of a building where the facilities of U.S. semiconductor giant Micron is located in Shanghai on May 22, 2023. (Hector Retamal/AFP via Getty Images)

Commentary

It just became much harder for American hi-tech firms to protect their intellectual property (IP).

On Feb. 27, Maxine Chesney, a U.S. federal judge in the Northern District of California, found that there was “insufficient evidence” to convict Chinese state-owned Fujian Jinhua Integrated Circuit Co. Ltd. of conspiracy to commit economic espionage and actual theft of trade secrets from Micron Technology Inc., the only U.S-based company that makes dynamic random access memory (DRAM) chips.

The End of Protecting US Technology?

DRAM chips are crucial for Micron to remain in business and for the United States to maintain its strategic technological and military edge over communist China. With both commercial and strategic military applications, the theft of specialized IP for manufacturing techniques used in current and future versions of DRAM chips and other technological innovations is a huge loss for Micron and the country.

The Feb. 27 decision crushed the Trump-era policy that was intended to stop China’s widespread theft of U.S. technology and trade secrets. It has arguably done more to threaten U.S. strategic technology secrets and national security than Jinhua’s Taiwanese partner company, United Microelectronics Corp. (UMC), which has admitted to stealing Micron’s critical technology secrets.

Curious Coincidences and Clumsy Kleptomaniac

The backstory of this case is strangely coincidental, to say the least. Jinhua was founded in February 2016 and received funding of $5.6 billion from Beijing and Fujian Province. The company planned to “develop” DRAM chips with its aforementioned partner company, UMC, to increase China’s self-sufficiency in the DRAM semiconductor industry to at least 70 percent by 2025.

The theft began in April 2016, when Kenny Wang, one of three engineers employed by Micron, stole DRAM blueprints and 900 files from the company. Soon after, Mr. Wang quit and returned to Taiwan, ostensibly to “join his family’s business,” which was a clumsy lie and easily discovered.

In fact, after Mr. Wang and his two other cohorts left Micron, they took jobs with UMC in Taiwan. But Mr. Wang’s thievery was pretty clumsy as well.

Related Stories

US Firms Say China Has Become ‘Uninvestable,’ Commerce Secretary Says

8/29/2023

White House Condemns China for Micron Ban But Will Keep Communications Open

5/25/2023

According to the U.S. indictment, Mr. Wang “downloaded Trade Secrets ... from his Micron company laptop.” But then he also Googled how to “erase your history” on that same company laptop.

How obvious can a thief be?

Then, during a police raid, Mr. Wang stuffed his laptop in a locker in a weak attempt to hide the evidence. He even gave his incriminating cell phone to a colleague during the raid and then lied about why he did so. Finally, Mr. Wang referred to the DRAM chips made by UMC by their internal Micron names when communicating about them with other companies.

All of this amateurish skullduggery is documented. It was almost as if Mr. Wang wanted to get caught.

UMC Pleads Guilty of Trade Secret Theft

Then, in October 2018, the Department of Commerce, under the Trump administration, banned U.S. companies from exporting semiconductor equipment and materials to Jinhua, citing national security concerns. The following month, the Department of Justice (DOJ) filed an indictment against Jinhua and UMC for conspiracy to steal intellectual property from Micron.

Shortly thereafter, in March 2019, Jinhua ceased production. Then, in October 2020, UMC pleaded guilty to one count of receiving and possessing a stolen trade secret and admitted to recruiting Mr. Wang and others to transfer the DRAM blueprints to Jinhua. UMC agreed to a $60 million fine in exchange for cooperating with the DOJ.

CCP Is Gaming the US System

But here’s where it gets really interesting.

After UMC pleaded guilty in 2020 and was sued by Micron under the Defend Trade Secrets Act, Jinhua filed a countersuit in China that spanned several international legal jurisdictions, accusing Micron of patent infringement.

Due to Jinhua’s lawsuit against Micron, Judge Chesney ruled that UMC and Jinhua were legally entitled to inspect the trade secret information and patents they alleged that Micron stole from them. The only problem was that the patents actually belonged to Micron, as UMC had previously admitted.

But it didn’t matter. The judge compelled Micron to allow Jinhua and UMC access to the patents that they alleged Micron had stolen from them.

This is a typical legal maneuver that Chinese firms use to gain access to critical IP from U.S. companies. They know that in U.S. law, both sides have the right to discovery and to examine the evidence. The strategy is simple: By accusing Micron of patent infringement, Jinhua would be legally entitled to inspect Micron’s patents—the “evidence”—to determine where or how Micron had infringed on Jinhua’s patent(s).

Damage to the US Is Unlimited

Judge Chesney somehow determined that having Micron’s patents inspected in Hong Kong would minimize the risk of the Chinese Communist Party (CCP) laying its eyes on them. How that location made the risk acceptable remains unclear.

Micron warned that such an inspection of its patents could allow the CCP to access its highly sensitive IP, endanger the company’s ability to do business, and put the United States at risk. It could also severely limit future criminal prosecutions under the DOJ’s China Initiative.

FBI Director Christopher Wray added to Micron’s warning, saying at the time, “If China acquires an American company’s most important technology—the very technology that makes it the leader in a field—that company will suffer severe losses, and our national security could even be impacted.”

A worker produces semiconductor chips at a workshop in Suqian, Jiangsu Province, China, on Feb. 28, 2023. (STR/AFP via Getty Images)

But it gets worse.

Despite all the evidence to the contrary, including an admission of guilt by Jinhua’s Taiwan-based partner UMC, the judge ruled in favor of Jinhua and against Micron and the security interests of the United States.

Seeing the writing on the wall, Micron reached out to Beijing to create a new joint partnership and offered to invest $600 million in a new plant in China.

A Damaging Precedent

This precedent couldn’t be more damaging. How can any company now or in the future defend itself against the CCP’s rampantly aggressive IP theft efforts if the U.S. court is going to force American companies that are the target of Chinese lawsuits to show their highly valuable and sensitive IP to their Chinese adversaries?

With rulings like this one, what’s the point of U.S. firms trying to protect their IP or trade secrets?

The CCP got everything it wanted—an incredibly valuable technological win and a legal precedent that makes suing Chinese companies for IP theft or industrial espionage a joke.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.