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2 November 2018

US escalates trade secret war with China

US authorities yesterday unsealed an indictment against two companies accused of stealing trade secrets owned by Micron Technology, in the latest round of an increasingly hostile dispute with China.

Chinese firm Fujian Jinhua Integrated Circuit Company, its Taiwan-based partner United Microelectronics Corporation (UMC) and three individuals stand accused of stealing dynamic random access memory (DRAM) technology.

DRAM is a leading memory storage device used in computer electronics.

The US has also filed a civil lawsuit seeking to stop the stolen trade secrets being transferred any further and to block the defendants from exporting any related products to the US.

It comes just days after the US Department of Commerce enacted an export ban against Jinhua over concerns that it had stolen DRAM trade secrets from Micron. The department said the Chinese company threatened the long-term economic viability of domestic suppliers of essential components of US military systems.

UMC later confirmed it was temporarily suspending its research and development activities with Jinhua in light of the export ban.

In the indictment, which was filed on September 27, the US has charged the defendants with conspiracy to commit economic espionage, among other crimes.

Announcing the move, attorney general Jeff Sessions said “I am here to say that enough is enough”, accusing China of increasingly conducting economic espionage against the US.

The indictment claims that before the defendants stole Micron’s trade secrets, China did not possess DRAM technology—and the Chinese government identified the development of DRAM as a national economic priority.

According to the indictment, Chen Zhengkun became president of a Micron subsidiary in Taiwan after the company he had worked for was acquired by Micron in 2013. After leaving for UMC two years later, he allegedly arranged for UMC to transfer DRAM technology to Jinhua to mass produce it under a joint agreement.

Chen later became president of Jinhua, the indictment said.

But, while at UMC, he allegedly recruited numerous employees from the Micron subsidiary he had left from. Before they joined Chen at UMC, the other two defendants, He Jianting and Wang Yungming, allegedly stole and brought to UMC several Micron trade secrets covering DRAM.

In  a statement released today, November 2, UMC said that the allegations are virtually the same as those in a civil complaint that Micron previously filed against UMC.

"UMC regrets that the US attorney’s office brought these charges without first notifying UMC and giving it an opportunity to discuss the matter," the statement said.

It added that the company devotes vast resources to researching and developing technologies and owns a portfolio of thousands of active technology patents worldwide. "UMC takes seriously any allegation that it may have violated any laws and fully intends to respond to these allegations accordingly."

If convicted, the defendants could face up to 15 years in prison and a $5 million fine for economic espionage charges, and ten years in prison for theft of trade secrets charges. The companies could face forfeiture and a maximum fine of more than $20 billion.

However, all defendants are presumed innocent until proven guilty.

Joel Poppen, senior vice president, legal affairs, general counsel and corporate secretary at Micron, said that the company has invested billions of dollars to develop its IP, and “the actions announced reinforce that criminal misappropriation will be appropriately addressed”.

The indictment is part of a wider dispute between Micron, on the one hand, and Jinhua and UMC on the other, with cases continuing in Taiwan, China, and at the US District Court for the Northern District of California.

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