U.S. charges Chinese professor tied to Huawei with criminal theft of IP

Huawei building
A professor linked to Huawei is accused by U.S. prosecutors of using his academic status to steal intellectual property from a U.S. tech startup. (Huawei)

At the center of a complicated U.S. criminal case involving China’s giant telecom firm Huawei is a Chinese professor in Texas named Bo Mao.

The case is significant because Huawei has repeatedly been accused of stealing intellectual property from U.S. companies, which Huawei denies. More broadly, President Trump has repeatedly accused China in recent months for reaping billions of dollars in IP theft from U.S. companies over the past two decades.

A criminal complaint accuses Mao of wire fraud in the theft of intellectual property of the architecture for Solid State Drive (SSD)  controllers for semiconductor storage that was created by startup CNEX Labs in San Jose, California. The case (1:19-cr-00392-AMD1) was recently transferred from a Texas district court to the eastern district federal court in New York. The maximum penalty for a federal wire fraud conviction is 20 years in prison and up to $250,000 in fines.

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Attorneys for Mao and the U.S. Attorney’s Office in New York refused to discuss the case when contacted by FierceElectronics. Some of the court records are sealed. However, the criminal complaint filed by an FBI agent  Aug. 14 in Texas lays out a long description of Mao’s alleged scheme over many months in obtaining the IP. Mao pleaded not guilty on Aug. 28 and is free on bail.

The criminal complaint portrays Mao as a professor using the guise of academic research to advance Huawei technology.

While the criminal complaint against Mao never names CNEX or Huawei by name, it closely parallels a civil suit filed by CNEX against Huawei. In that case, a federal jury in Texas found Huawei stole CNEX’s SSD technology but didn’t award any damages to CNEX.

 Huawei originally sued a CNEX co-founder for IP theft in 2017, and then CNEX lawyers countersued.

In the new criminal case against Mao, the FBI agent accuses him of obtaining a computer board with an embedded software development kit that includes an integrated chip for an Open-Channel controller developed by CNEX, which identified only as “Victim Company” in the complaint. The board was not available for public purchase.

Mao entered into a non-disclosure agreement with CNEX to obtain the board, purportedly for academic research, since Mao was employed as an associate professor at a Texas university, now identified as University of Texas at Arlington. But Mao “falsely represented” that he would not transfer the board to third parties such as Huawei (described as Company 1 in the complaint) or would create a similar or competitive product, according to the complaint. “To the contrary, Bo Mao violated the terms of the agreement and used his access to the Open-Channel SDK board to benefit Company 1, for whom he was doing work, including on what appears to be a similar product,” the complaint says.

The criminal complaint makes reference to the civil trial in Texas, noting that Mao had emailed CNEX to buy an Open-Channel SDK Board to build an experimental platform and conduct storage research. CNEX complied, although CNEX didn’t realize Mao worked for Huawei.

The FBI reviewed Mao’s emails to discover he was surreptitiously working for payment from Huawei in exchange for the Open-Channel technology. Several weeks after Mao received the board, he told CNEX that the board had been damaged by a student, but an expert consulted by the FBI who reviewed the damaged board said the damage was not accidental.

The complaint details several Mao emails and testimony in the civil case that make it “clear that Mao secretly provided [CNEX] proprietary information to [Huawei].” The complaint concludes that Mao “devised a scheme to defraud a U.S. based technology company and to obtain money and property by means of materially false and fraudulent pretenses.”

A Huawei spokesperson said in an email to FierceElectronics that despite the outcome of the civil trial “U.S. federal prosecutors are charging forward with CNEX’s allegations, but doing so against a Chinese university professor who was never sued by CNEX, never was required to participate in civil discovery and was never called to testify at trial…Whatever arrangement CNEX may have entered into with the university and its professors is between CNEX and that institution—it does not involve Huawei.”

The Huawei spokesperson said that U.S. prosecutors should give due consideration to Huawei’s claims from 2017 against CNEX. “But to date, the U.S. government has shown no interest in that side of the story. Unfortunately this is not the only instance of selective prosecution…”

In May, the Wall Street Journal described several cases in U.S. federal courts showing Huawei had a “corporate culture that blurred the boundary between competitive achievement and ethically dubious methods of pursuing it.”

The case against Bo Mao continues in federal district court in Brooklyn, New York, before Judge Ann Donnelly, the same judge handling the case against Huawei deputy chairwoman Meng Wanzhou who faces allegations for violating U.S. sanctions on Iran.  Meng is the daughter of Huawei’s founder Ren Zhengfei. She faces extradiction to the U.S. from Canada after being arrested in Vancouver on Dec. 1.

RELATED: Microsoft's legal chief condemns U.S. entity listing of Huawei in report

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