Motions Set in Technology Espionage Case

[InfoSec News <isn () c4i org>]

http://www.eweek.com/article2/0,4149,1358133,00.asp

By Rachel Konrad
AP Business Writer 
October 20, 2003   
 
SAN JOSE, Calif. (AP) - Prosecutors say the case of two men arrested
on their way to China with suitcases crammed with data from high tech
companies is clear-cut trade theft. Defense attorneys say the data was
routine reference material that any engineer might carry.

A federal judge was scheduled to hear pretrial motions Monday in the 
case of Fei Ye, 37, and Ming Zhong, 36. Both are accused of stealing 
microchip designs and other secrets, as well as at least $10,000 in 
equipment, from computer giants Sun Microsystems Inc., NEC Electronics 
Corp., Transmeta Corp. and Trident Microsystems Inc. 

If allowed to proceed, the case brought under the 1996 Economic 
Espionage Act could have implications for international relations. It 
also could spur other companies to be more forthcoming about trade 
secret theft, which costs the nation's 1,000 largest businesses more 
than $45 billion per year, according to a 2001 study by 
PricewaterhouseCoopers. 

The men were arrested in November 2001 at San Francisco International 
Airport with tickets to China. Prosecutors say they intended to use 
the stolen data to start a company called Hangzhou Zhongtian 
Microsystems Co.—a joint venture with the Chinese city Hangzhou. 

The Chinese government wrote in documents found at the men's homes 
that their project would be "extremely useful to the development of 
China's integrated circuit industry," according to court filings. 

Hangzhou officials could not be reached for comment. China's Foreign 
Ministry said it knew nothing about the case, and China's Consulate 
General in San Francisco said there was "no link or connection" 
between the men and the Chinese government. 

Economic espionage is more difficult to track and prosecute than trade 
secret theft because it requires authorities to find evidence that a 
foreign government was involved. 

"It's much more difficult to prove someone stole trade secrets with 
the intent to benefit a foreign government," said Ross Nadel, chief of 
the Computer Hacking and Intellectual Property Unit of the U.S. 
Attorney's Office for Northern California. 

"But we believe we do have the proof to prove separate counts of trade 
secrets, transportation of stolen property and conspiracy," he said. 

If convicted, Ye and Zhong could face up to 95 years in prison and $3 
million in fines on 10 criminal counts. 

Ye, a naturalized U.S. citizen, worked for Transmeta, but it's unclear 
what role Zhong, a permanent resident, played at the companies 
involved in the case. Both men are originally from China. 

Paul B. Meltzer, who represents Ye, said his client was merely 
carrying "the materials that any engineer would take and use as 
reference materials" when they were arrested at the airport. 

"If you carefully analyze that which was found, it would be like 
taking apple seeds to plant oranges," Meltzer said. "The information 
he possessed was not relevant to the business he was going to be 
involved in China." 

Zhong's attorneys did not return calls seeking comment. 

The FBI and the Justice Department are investigating or prosecuting 
132 cases of trade secret theft, including at least three dozen 
economic espionage investigations. 

 

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