Guilty Plea for Espionage, IP Theft

Thursday, May 25, 2017 @ 06:05 PM gHale


A Chinese national pleaded guilty to economic espionage and theft of trade secrets from his former employer in the U.S.

Xu Jiaqiang pleaded guilty to three counts of economic espionage, and three counts of theft of a trade secret, from the U.S. company where he worked as a developer between November 2010 and May 2014.

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The defendant, formerly of Beijing, had access to proprietary software and its source code, stored behind a company firewall and was accessible by a small number of employees. He “stole, duplicated, and possessed” the source code with the intent of benefitting the National Health and Planning Commission of the People’s Republic of China, according to the Department of Justice (DoJ).

“Xu Jiaqiang admitted and pled guilty to stealing high tech trade secrets from a U.S. employer, intending to benefit the Chinese government,” said Acting Assistant Attorney General for the National Security Dana Boente. “What Xu did was not only a federal crime, but a threat to our national security and the American spirit of innovation.”

Each count of economic espionage carries a maximum sentence of 15 years in prison; each count of theft of a trade secret carries a maximum of 10 years.

From November 2010 to May 2014, Xu worked as a developer for a U.S. company. As a developer, Xu had access to certain proprietary software, as well as that software’s underlying source code. The proprietary software is a clustered file system developed and marketed by the victim company in the U.S. and other countries, said the DoJ in a statement. A clustered file system facilitates faster computer performance by coordinating work among multiple servers. The victim company took significant precautions to protect the proprietary source code as a trade secret. Among other things, the proprietary source code is stored behind a company firewall and can be accessed only by a small subset of the victim company’s employees. Before receiving proprietary source code access, victim company employees must first request and receive approval from a victim company official. Victim company employees must also agree in writing at both the outset and the conclusion of their employment that they will maintain the confidentiality of any proprietary information. The victim company took these and other precautions in part because the proprietary software and the proprietary source code are economically valuable, which value depends in part on the proprietary source code’s secrecy. 

In May 2014, Xu voluntarily resigned from the victim company. Xu subsequently communicated with one undercover law enforcement officer, who posed as a financial investor aiming to start a large-data storage technology company, and another undercover law enforcement officer, who posed as a project manager, working for the other “agent.” In these communications, Xu discussed his past experience with the victim company and indicated he had experience with the proprietary software and the proprietary source code. On March 6, 2015, Xu sent both agents code, which Xu stated was a sample of Xu’s prior work with the victim company. A victim company employee later confirmed the code sent by Xu included proprietary Victim Company material that related to the Proprietary Source Code, the statement said.

Sentencing is scheduled for October 13.

Click here for more details on the case.



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