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The U.S. Department of Justice announced yesterday the arrest of a Chinese professor upon his arrival in the United States in connection with a 32-count indictment for economic espionage. Hao Zhang, a professor at Tianjin University (TJU) located in the People’s Republic of China (PRC), is just one of six defendants charged with economic espionage and theft of trade secrets related to diversion of U.S. trade secrets and intellectual property from tech companies in the United States.

The superseding indictment, filed April 1, 2015 and recently unsealed, charges the defendants with orchestrating a scheme intended to create a new company in China based on technology acquired from two U.S. companies, Avago Technologies and Skyworks Solutions, Inc. The primary technology at issue is the development and application of Film Bulk Acoustic Resonators, a type of filtering technology used in cell phones and other wireless devices.

The defendants in this case are charged with 18 U.S.C. § 1831 for economic espionage, and 18 U.S.C. § 1832 for theft of trade secrets, as well as conspiracy.  What makes economic espionage a crime separate and distinct from the run of the mill theft of trade secrets is the allegation that the acts were committed with the intent or knowledge that such information would benefit a foreign government, foreign instrumentality, or foreign agent. Thus, rather than just stealing trade secrets, there has to be some evidence that the benefit was intended for use by a foreign government or instrumentality thereof.

Here, the charges for economic espionage are based on the alleged involvement of Tianjin University, which according to the indictment, is a State university and part of the PRC’s Ministry of Education. Rather than just the fact that some of the defendants are employed by TJU, the indictment takes it a step further and alleges that TJU knew that unlawfully obtained trade secrets were being used by the defendants, and directed that the defendants set up a front company to conceal the conduct.

The charges of economic espionage require the prosecutors to meet a higher legal burden, specifically, that the defendants intended to misappropriate trade secrets to confer a benefit not just to another person, but to an instrumentality of a foreign government. Given that the indictment evidences the existence of cooperators that worked for TJU, the government may likely meet this burden. However, even in the event that the defendants are successful in challenging the argument that they intended to benefit a foreign instrumentality of the PRC, inter alia TJU, the inclusion of 18 U.S.C. § 1832 for theft of trade secrets is likely intended as a fallback argument.

Despite the fact that economic espionage is not highly prosecuted does not mean that it is not a high priority for prosecutors, particularly in consideration of the rising concern of crimes related to technology. If anything, economic espionage is a federal crime that is likely to get more face time as technology continues to increase and more companies become cautious as to employee access to trade secrets.

In addition to Hao Zhang, the indictment also charges the following individuals: Wei Pang, former Avago employee and professor at TJU; Jinping Chen, a professor at TJU; Huisui Zhang, a classmate of Pang and Zhang; Chong Zhou, a graduate student at TJU; and Zhao Ghang, general manager at the joint venture created by other defendants and TJU.

The author of this blog is Margaret S. Ververis, a Senior Associate at Ferrari & Associates, P.C. specializing in federal criminal defense matters and U.S. economic sanctions representation. For questions regarding this post, please contact Ms. Ververis at (202) 440-2581 or ververis@ferrariassociatespc.com.

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