DOJ Charges Huawei With Trade Secret Theft

The U.S. Department of Justice (DOJ) charged Huawei and its subsidiaries with racketeering conspiracy and conspiracy to steal trade secrets in an indictment released late Thursday afternoon. The charges escalate ongoing tensions between the United States and the Chinese telecommunications firm, which was already facing charges.

The indictment listed 16 charges of conspiracy to steal trade secrets as part of a “long-running practice of using fraud and deception to misappropriate technology,” and named Huawei and four subsidiaries, some of which were formerly unknown—Huawei Device Co. Ltd., Huawei Device USA Inc., Futurewei Technologies Inc., and Skycom Tech Co. Ltd.—along with its Chief Financial Officer Wanzhou Meng. Meng was previously arrested in 2018 and is awaiting extradition in Canada.

“As revealed by the government's independent investigation and review of court filings, the new charges in this case relate to the alleged decades-long efforts by Huawei, and several of its subsidiaries, both in the U.S. and in the People's Republic of China, to misappropriate intellectual property, including from six U.S. technology companies, in an effort to grow and operate Huawei's business,” according to a DOJ press release. “The misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for Internet routers, antenna technology, and robust testing technology.”

The DOJ also alleged that Huawei and its subsidiaries, including Huawei USA and Futurewei, planned to reinvest the proceeds back into Huawei’s business, including in the United States.

Huawei used a variety of methods to obtain trade secret information, including allegedly creating a bonus program that rewarded employees who obtained confidential information from competitors. Through this and other means, the DOJ claimed that Huawei obtained intellectual property on Internet router source code, cellular antenna technology, and robotics—reducing its research and development costs to give the company an advantage.

Huawei and its subsidiaries also allegedly used proxies in the form of professors at research institutions. These individuals claimed they were not affiliated with Huawei to gain access to victim companies' nonpublic intellectual property and then provided it to Huawei and its subsidiaries.

“When confronted with evidence of wrongdoing, the defendants allegedly made repeated misstatements to U.S. officials, including FBI agents and representatives from the U.S. House Permanent Select Committee on Intelligence, regarding their efforts to misappropriate trade secrets,” the DOJ said. “Similarly, the defendants engaged in obstructive conduct to minimize litigation risk and the potential for criminal investigations, including the very investigation that led to this prosecution.”

The DOJ also charged that Huawei’s actions were a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).

“By using the RICO act, the DOJ is alleging that Huawei didn't just commit one or more crimes, but essentially operated an ongoing criminal enterprise,” according to Joshua Rich, partner and general counsel at McDonnel Boehnen Hulbert & Berghoff, in an interview with WIRED.

The U.S. Department of Justice's new charges against #Huawei are based on resolved civil disputes from the last 20 years. Attacking us will not help the U.S. stay ahead of the competition. We believe that the court will make a fair ruling based on facts & evidence. #HuaweiNews

— Huawei (@Huawei) February 14, 2020

Huawei has denied the charges, claiming they are the last in a long-standing U.S. effort to damage the company's reputation. “These new charges are without merit and are based largely on recycled civil disputes from the last 20 years that have been previously settled, litigated, and in some cases, rejected by federal judges and juries,” Huawei said in a statement reported by The Washington Post.

The new charges against Huawei come at a time of increasing concerns about China’s theft of intellectual property and trade secrets.

“Rather than building a competitive advantage, they decided to steal one,” said U.S. Representative Mike Rogers (R-AL), ranking member of the House Homeland Security Committee, about Chinese development.

FBI Director Christopher Wray has also said that China poses the most “severe threat” to U.S. ideas, innovation, and economic security.

“The Chinese government is determined to acquire American technology, and they're willing to use a variety of means to do that—from foreign investments, corporate acquisitions, and cyber intrusions to obtain the services of current or former company employees to get inside infor­mation,” Wray explained. “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.”

The new Huawei charges also come at a time of increased skepticism from the rest of the world about whether U.S. concerns about the telecommunications company are overblown. At the end of January, Britain made the controversial decision to not ban the use of Huawei to support its 5G network.

“The British decision was crucial in a broader fight for tech supremacy between the United States and China,” according to The New York Times. “Britain, a key American ally, is the most important country so far to reject White House warnings that Huawei is an instrument of Beijing. Britain's membership in the ‘five eyes’ intelligence-sharing group of countries, which also includes Australia, Canada, and New Zealand, gave the outcome an added significance.”

Security Technology analyzed a recent European Commission report on threat scenarios to 5G networks that would have major ramifications if they were carried out: network disruption, spying on traffic or data in the network, modification or rerouting of traffic or data in the network, and destruction or alteration of other infrastructure and systems connected to 5G networks.

“In particular, greater reliance on economic and societal functions on 5G networks could significantly worsen the potential negative consequences of all disruptions,” the report found. “As such, the integrity and availability of those networks will become major concerns, on top of the existing confidentiality and privacy requirements.”