Feds charge six Chinese citizens with spying on Silicon Valley

The Justice Department announced charges Tuesday against six Chinese citizens suspected in a long-running espionage plot aimed at stealing U.S. technology with the backing of their government.

The action, revealed in newly unsealed indictments, reflects an aggressive push to tamp down on the foreign theft of U.S. trade secrets and, in particular, sends a strong message to Beijing — a top competitor on technology.

{mosads}Hao Zhang, 36; Wei Pang, 35; and four others were charged with a range of offenses, including conspiracy to commit economic espionage, conspiracy to commit theft of trade secrets, economic espionage and theft of trade secrets.

According to federal prosecutors, Hao and Wei sit at the center of an industrial theft ring that spans years.

Three defendants, including Hao and Wei, were charged with all four counts. Hao was arrested on Saturday.

The other three were charged on two counts each.

Investigators allege that Hao and Wei stole trade secrets from Avago Technologies and Skyworks Solutions, where they worked.

The two companies manufactured FBAR technology, a type of filter used in cellphones. Investigators allege that the two men worked to steal the company’s trade secrets and establish a company in China making FBAR technology using the knowledge they had gained from Avago and Skyworks.

According to the Justice Department’s indictment, one defendant said that a purpose of the scheme was “moving Avago to China.”

Investigators also say Hao and Wei worked with Tianjin University, which is linked to the Chinese Ministry of Education, to establish their company, ROFS Microsystems.

Jinping Chen, a professor who works at Tianjin University and sits on the board of ROFS Microsystems, was one of six charged.

Others charged include a Tianjin graduate student and other associates of Hao and Wei.

The Justice Department said in a news release that “the stolen trade secrets enabled Tianjin University to construct and equip a state-of-the-art FBAR fabrication facility, to open ROFS Microsystems, a joint venture located in PRC [the People’s Republic of China] state-sponsored Tianjin Economic Development Area (TEDA), and to obtain contracts for providing FBARs to commercial and military entities.”

“As today’s case demonstrates, sensitive technology developed by U.S. companies in Silicon Valley and throughout California continues to be vulnerable to coordinated and complex efforts sponsored by foreign governments to steal that technology,” said U.S. Attorney for the Northern District of California Melinda Haag. “Combating economic espionage and trade secret theft remains one of the top priorities of this office.”

In recent years, China has sought to gain an advantage in certain technology sectors that thrive in the U.S., such as biotech and communications technology, according to Stephen Ezell, director of global innovation policy at the Information Technology and Innovation Foundation.

One way manufacturers can get the upper hand is by stealing trade secrets, and producing copied products they can sell at a fraction of the cost.

“Stealing intellectual property, in many cases … is a fundamental and endorsed component of Chinese economic strategy and that’s of particular concern to U.S. and other companies that depend on innovation for their competitiveness,” Ezell said.

The indictments are a rare — but not unprecedented — shot at Beijing. Last year, federal authorities indicted five members of the People’s Liberation Army for hacking into the systems of U.S. companies.

It remains to be seen if the Chinese government will respond with the same vehemence it displayed when the alleged hackers from their army were indicted.

“I don’t see the Chinese actually responding that angrily to it, in the sense that they’re not indicting a PLA officer,” said Adam Segal, a senior fellow for China studies and director of the Digital and Cyberspace Policy Program at the Council on Foreign Relations.

Segal also noted that Chinese President Xi Jinping plans to visit the U.S. in September, which may provide the Chinese government a reason to stay quiet on the indictments.

Though there are many sources of tension between China and the U.S., industrial theft has emerged as a key point of contention. The Obama administration has pledged to crack down on industrial espionage; while investigations have increased, it only obtained its first federal jury conviction on economic espionage last March.

In the case, an American was convicted of selling trade secrets from DuPont to China.

Segal suggested that the Obama administration’s focus on trade secrets comes, at least in part, in response to of pressure from businesses concerned about their own trade secrets.

“I think there’s a sense that the business community increasingly feels like the playing field isn’t level,” Segal said.

He said it is common for individuals peddling stolen trade secrets in China to end up dealing with the government because there are so many policies in place for the government to fund technology projects or other businesses.

“Anyone who steals technology in the West will try and find a buyer in China, and that buyer will always be a state actor of one kind or another,” Segal said.