Federal Prosecutors Pursuing Criminal Case Against Huawei for Alleged Theft of Trade Secrets
Probe involves allegations that Huawei stole robot phone-testing technology from T-Mobile
wsj.com
T-Mobile's device-testing robot.
By
Dan Strumpf,
Nicole Hong and
Aruna Viswanatha
Updated Jan. 16, 2019 3:41 p.m. ET
Federal prosecutors are pursuing a criminal investigation of China’s Huawei Technologies Co. for allegedly stealing trade secrets from U.S. business partners, including the technology behind a robotic device that T-Mobile US Inc. used to test smartphones, according to people familiar with the matter.
The investigation grew in part out of civil lawsuits against Huawei, including one in which a Seattle jury found Huawei liable for misappropriating robotic technology from T-Mobile’s Bellevue, Wash., lab, the people familiar with the matter said. The probe is at an advanced stage and could lead to an indictment soon, they said.
A Justice Department spokesman declined to comment.
A Huawei spokesman declined to comment. The company contested the T-Mobile case, but conceded that two employees acted improperly.
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Chinese telecom giant Huawei has long caused tension between Washington and Beijing. WSJ’s Shelby Holliday explains what the company does and why it’s significant. (Photo: Aly Song/Reuters)
The federal investigation puts added pressure on the Chinese technology giant, the world’s largest maker of telecommunications equipment and the No. 2 maker of smartphones world-wide. It comes amid a broader push by the Trump administration to aggressively pursue claims of intellectual property theft and technology transfer by Chinese companies.
Huawei has long been under scrutiny by the U.S., which has effectively blocked the Chinese telecom company from installing its equipment in major U.S. networks because of concerns that its gear could be used to spy on Americans.
Huawei has forcefully denied that it is a security threat, says it is owned by its employees and operates independently of the Beijing government.
U.S. pressure on Huawei has been building. Last month, Canadian authorities arrested Huawei Chief Financial Officer Meng Wanzhou at the request of U.S. authorities. Ms. Meng, the daughter of company founder Ren Zhengfei, is accused of misleading banks about the nature of Huawei’s business in Iran, leading to violations of U.S. sanctions on the country.
Ms. Meng has denied the charges, and Huawei says it follows the law in all countries where it operates.
In another development, Polish authorities last week arrested Huawei executive Wang Weijing and charged him with conducting espionage on behalf of the Chinese government. Huawei wasn’t accused of wrongdoing, and the company on Saturday terminated Mr. Wang’s employment.
On Tuesday, Huawei’s founder made a rare appearance before international media at the company’s headquarters in the southern Chinese city of Shenzhen, seeking to directly confront the concerns. Mr. Ren said Huawei hasn’t—and would never—spy on behalf of the Chinese government.
The new federal investigation against Huawei involves, in part, allegations leveled in the civil suit by T-Mobile in 2014, according to the people familiar with the matter.
At the time, T-Mobile had hired Huawei to supply cellphones for the U.S. wireless network operator, according to the lawsuit. T-Mobile had developed a testing robot it nicknamed “Tappy” to perform quality-control tests on phones that it sold.
During the course of the business relationship, Huawei employees asked detailed questions about the robot and repeatedly sought information about proprietary technology, the T-Mobile lawsuit claimed.
In one alleged instance, two Huawei employees slipped a third one into the testing lab to take unauthorized photos of the robot. One employee also tried to hide the fingerlike tip of “Tappy” behind a computer monitor so that it would be out of view of a security camera, and then tried to sneak it out of the lab in his laptop-computer bag, according to the lawsuit.
That employee later admitted that he took the component because Huawei’s research and development office believed the information would improve its own robot, the lawsuit said.
“Due to Huawei’s material breaches of its contracts with T-Mobile, and its unlawful theft of trade secrets, T-Mobile was forced to stop its ongoing handset supply relationship with Huawei at substantial cost,” the lawsuit said. “Huawei has used the robot technology it misappropriated from T-Mobile to unjustly gain a commercial advantage worth hundreds of millions of dollars.”
In a filing responding to T-Mobile’s allegations, Huawei said it didn’t steal trade secrets because Tappy wasn’t a secret at all. Video of the device could be easily found on YouTube, and details of its design and specifications were published in numerous patents, Huawei said.
The case eventually went to trial, and a jury in 2017 awarded T-Mobile $4.8 million after it found Huawei breached its contract with the network operator.
“With the jury finding misappropriation of trade secrets and breach of contract, we won the first trial that we believe revealed their wrongdoing and began to unravel the Huawei story,” T-Mobile’s lawyer on the trial, John Hueston, said Wednesday.
The Justice Department in recent months has stepped up its efforts to prosecute allegations of Chinese technology theft, including by bringing criminal cases involving conduct previously outlined in civil lawsuits.
In November, it unsealed charges against a Chinese state-owned business and its Taiwan partner for allegedly stealing trade secrets from the U.S.’s largest memory-chip maker, Micron Technology Inc. That came after Micron sued the companies over similar allegations. |
