TECHNOLOGY

6 Chinese Men Indicted in Theft of Code From U.S. Tech Companies

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WASHINGTON — The Obama administration on Tuesday announced the arrest of a Chinese professor and the indictment of five other Chinese citizens in what it contended was a decade-long scheme to steal microelectronics designs from Silicon Valley companies.
The indictment was the broadest since five members of the People’s Liberation Army were indicted last year by the United States, accused of hacking into the computer systems of American companies to steal technology for state-owned companies.
None of those five have been arrested or seen an American courtroom, and for a time those indictments froze discussions between the United States and Chinese governments over rules for reducing online attacks. But the chief of the national security division of the Justice Department, John P. Carlin, recently defended the approach as the best way to “raise the price” for the Chinese.
The arrest and indictments revealed on Tuesday seemed bound to revive the tensions with Beijing.
The professor who was arrested, described as Hao Zhang of Tianjin University, one of China’s oldest universities, was detained on Saturday after he arrived at Los Angeles International Airport to take part in a conference. He appeared in court for the first time on Monday and appears to still be in custody.
The indictment, for “conspiracy to commit economic espionage,” a relatively rare charge, contends that the six men studied in the United States and took jobs at two small American chip companies, Avago Technologies and Skyworks Solutions.
All of them worked, the indictment contends, to steal trade secrets for a type of chip popularly known as a “filter” that is used for acoustics in mobile telephones, among other purposes. They took the technology back to Tianjin University, created a joint venture company with the university to produce the chips, and soon were selling them to both the Chinese military and to commercial customers.
“Sensitive technology developed by U.S. companies in Silicon Valley and throughout California continues to be vulnerable to coordinated and complex efforts sponsored by foreign governments to steal that technology,” said Melinda Haag, the United States attorney in San Francisco.
According to the indictment, two of the professors began to apply for patents on some of the technology in the United States, beginning in 2010.
The indictment said Mr. Hao and another Chinese professor, Wei Pang, who apparently remains in China, “needed to justify their hiring as full professors” at Tianjin by “having patent applications in their names in both the United States” and in China.
The indictment includes emails from several of the accused Chinese professors and engineers dating to 2006, when they were still working in the United States.
“Please try not to check personal email account in company,” said one from Mr. Wei to Mr. Hao and another defendant, Huisui Zhang. “It could be tracked as long as in company’s network. It is very important. Even in Avago, I have seen several law cases” where employees were investigated.
The indictment cites other emails describing plans to “form a company and establish a factory in China” to produce the filter chips used by Motorola, Samsung, Nokia and others, and estimating that the market for the chips was around $1 billion. That was a year before the iPhone was introduced in 2007, which led to an explosion in smartphone sales.
Other emails cited in the indictment run through 2013, and the government contends they included a “stolen Avago design kit” for the chips.
The indictments come at a particularly sensitive time in United States relations with China. The Obama administration is considering how hard to push back against China’s occupation of disputed islands in the South China Sea, a marked acceleration in its nuclear weapons and missile programs, and continued tension over online theft. This case, curiously, involved no evidence of hacking, but rather of insider theft.
The question of economic espionage, however, has moved to the center of the relationship — and so far the Obama administration effort to combat it has had only limited success.
Two years ago, the White House vowed to make investigations and prosecutions in the theft of trade secrets a top priority, after Chinese hacker attacks began to dominate headlines.
Between 2009 and 2013, the Federal Bureau of Investigation reported a 60 percent increase in trade secret investigations, but prosecutions have proved difficult. For one thing, hacker attacks can be difficult to trace to the individuals behind them, and jurisdictional limits make it difficult to arrest Chinese citizens or to serve summonses to the Chinese companies that benefit from trade secret theft.
Most indictments filed over the past two years have resulted from simpler investigations: Chinese citizens in the United States being charged with stealing intellectual property from their American employers and sending it back to China for replication abroad.
Last year, federal prosecutors achieved the first-ever federal jury convictionon economic espionage charges, against two Americans and a corporation accused of selling DuPont trade secrets to a state-owned company in China. The two Americans were charged with stealing trade secrets by poaching former DuPont employees.
But in that case, too, the Justice Department has yet to bring charges against the two Chinese citizens who played a critical role in their theft, or the Chinese state-owned entity that benefited.
The grand jury in the latest case charged six Chinese citizens: Mr. Hao, who is 36, Mr. Wei, 35, Jinping Chen, 41, Huising Zhang, 34, Chong Zhou, 26, and Zhao Gang, 39. The indictment said they conspired to replicate the stolen technologies in a new Chinese venture, named ROFS Microsystem.
David E. Sanger reported from Washington and Nicole Perlroth from San Francisco.