450 Golden Gate, United States District Court for the Northern District of California

Federal prosecutors in San Francisco have charged a Chinese state-backed company, a Taiwanese semiconductor maker and three Taiwan nationals with conspiring to steal trade secrets from a U.S. semiconductor company.

In an indictment unsealed Thursday, the DOJ lawyers claim that Taiwanese semiconductor foundry United Microelectronics Corp. (UMC) partnered with Fujian Jinhua Integrated Circuit Co. Ltd. (Jinhua), a state-owned Chinese enterprise, to steal trade secrets of dynamic random access memory, or DRAM, from Micron Technology. According to the indictment, Micron currently holds about 20 to 25 percent of the entire market share of DRAM, a widely used in technology in a variety of digital electronics that require low-cost, high-capacity memory. 

The economic espionage charges against the individual defendants carry a maximum 15 year prison sentence and a $5,000,000 fine.  The companies, meanwhile, could each face forfeiture penalties and a maximum fine of more than $20 billion.

“As this and other recent cases have shown, Chinese economic espionage against the United States has been increasing—and it has been increasing rapidly,” Attorney General Jeff Sessions said in a statement announcing the charges. The DOJ also filed a civil suit seeking to ban UMC and Jinua from exporting to the U.S. products created using the allegedly stolen trade secrets. 

“I am here to say that enough is enough. With integrity and professionalism, the Department of Justice will aggressively prosecute such illegal activity,” Sessions said.

The announcement coincided with Sessions unveiling of a new DOJ initiative to combat Chinese economic espionage. The DRAM case marks the second high-profile trade secrets prosecution from the U.S. Attorney’s office for the Northern District of California to surface this week. In an indictment unsealed Monday, the office charged four individuals with stealing trade secrets to help the company’s Taiwan-based rival JHL Biosciences make biosimilar versions of Genentech drugs.

“The theft of intellectual property is not only unfair but stifles technological innovation by disincentivizing investment in long-term research and development,” said Northern District U.S. Attorney Alex Tse in a statement Thursday.  “The theft of intellectual property on a continuing basis by nation-state actors is an even more damaging affront to the rule of law. We in the Northern District of California, one of the world’s great centers of intellectual property development, will continue to lead the fight to protect U.S. innovation from criminal misappropriation, whether motivated by personal greed or national economic ambition.”

A spokeswoman for UMC, which has U.S. offices in Sunnyvale, California, didn’t immediately respond to a request for comment.

According to the indictment, Jinhua was established in February 2016 with $5.65 billion in funding from the Chinese government and affiliated entities with the express purpose of designing, developing and making DRAM. Early that year, the DOJ claims UMC entered into a technology cooperation agreement with Jinhua to develop DRAM technology.

Key among the individual defendants is Chen Zhengkun—also known as Stephen Chen—who was general manager and chairman of an electronics corporation that Micron acquired in 2013. According to the indictment, Chen later became the president of a Micron subsidiary in Taiwan, Micron Memory Taiwan, before resigning to join EMC.

The indictment claims that Chen recruited multiple employees of Micron’s Taiwanese subsidiary, including codefendants  He Jianting—also known as  J.T. Ho—and Wang Yungming—also known as Kenny Wang.

The indictment claims that Ho and Wang both brought Micron trade secrets related to designing and making DRAM with them to UMC. The government claims Wang downloaded over 900 proprietary Micron files before leaving the Micron unit and stored them on USB drives or in the cloud storage where he could access them after leaving for UMC.

Joel Poppen, senior vice president, legal affairs, general counsel and corporate secretary at Micron said in a statement Thursday that the company appreciated the DOJ’s effort. “Micron has invested billions of dollars over decades to develop its intellectual property,” Poppen said. “The actions announced today reinforce that criminal misappropriation will be appropriately addressed.”

Read the indictment below:

 

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