By Marisa Kendall, From The Recorder

SAN FRANCISCO — The U.S. Department of Justice has charged a Chinese professor and five alleged associates with funneling stolen U.S. trade secrets to China, claiming they used an elaborate scheme involving bogus patent filings and a shell company in the Cayman Islands to cover their tracks.

Hao Zhang was arrested Saturday when he landed at the Los Angeles International Airport on a flight from China. Federal prosecutors claim Zhang, who obtained a doctorate in electrical engineering in 2006 from the University of Southern California, helped start a government-backed tech company in China using secrets stolen from Avago Technologies and Skyworks Solutions Inc.

The 32-page indictment filed in the Northern District of California and unsealed Monday references emails among the six defendants that discussed how to copy information to China and emphasized the need for secrecy.

In a statement Tuesday, U.S. Attorney Melinda Haag of the Northern District of California said that economic espionage and trade secrets theft cases are one of her office’s top priorities.

“As this case demonstrates,” she wrote, “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.”

Some defense attorneys agree the DOJ has ramped up trade secrets prosecutions, particularly in cases involving the removal of intellectual property to China.

“These are super popular cases,” said Keker & Van Nest partner Stuart Gasner. “I think people generally believe China to be cheating and trying to steal intellectual property.”

The Justice Department didn’t provide information on the whereabouts of the five defendants who have not been arrested, but Gasner said the chances are slim they would be extradited from China.

Zhang is represented by Southern California attorney Robert Cornforth, according to Abraham Simmons, a U.S. attorney’s office spokesman. Cornforth did not respond to a call or email requesting comment Tuesday.

Assistant U.S. Attorney Matthew Parrella and David Callaway, criminal chief of the Northern District office, are leading the prosecution, which was investigated by the U.S. attorney’s computer hacking and intellectual property unit.

Federal prosecutors claim the defendants charged in Monday’s indictment were backed by state-funded Tianjin University in China, where Zhang and others worked as professors. The defendants and the university jointly founded ROFS Microsystem, intending to mass produce the technology prosecutors say two defendants stole while working for U.S. companies.

“In effect, and in the words of one of the defendants, the objective was ‘moving Avago to China,’ ” according to the indictment.

Avago, based in Silicon Valley, manufactures technology used in mobile phones and other wireless devices to filter out unwanted signals. Massachusetts-based Skyworks left the market in 2009 after selling some of its intellectual property rights to Avago.

Zhang and defendant Wei Pang, who also earned a doctorate in electrical engineering from USC, worked at Skyworks and Avago, respectively, until 2009. Haag’s office claims the defendants began plotting in 2006 to steal the companies’ trade secrets. Prosecutors claim the defendants formed Novana Inc. in the Cayman Islands in 2009, intending to make it seem as if the company was the legitimate source of the stolen trade secrets.

Zhang and Pang also applied for patents in both the United States and China covering Bulk Acoustic Wave (BAW) technology that prosecutors contend was developed by the U.S. companies. The patents based on Avago technology were filed in Zhang’s name only, prosecutors allege, in order to hide the involvement of former Avago employee Pang.

“By filing for the patents, Pang and Zhang also disguised the fact that they had stolen the technology from their respective employers,” according to the indictment, “which enabled them to present themselves to potential investors and suppliers as the developers and owners of that stolen intellectual property.”

The indictment quotes emails sent between the defendants in English and Chinese. In an October 2006 message, Pang warned Zhang and another defendant not to check personal email at work because it could be tracked. The next month, Pang emailed a former colleague with details about their proposed business plan. But since he and Zhang were still working at Avago and Skyworks, he asked the colleague to “please keep it as secret.”

In December 2006, Pang emailed meeting notes to his alleged co-conspirators. “My work is to make every possible effort to find out about the process’s every possible detail and copy directly to China,” he wrote.

And in January 2007, the defendants emailed back and forth to discuss potential names for their new company. Pang suggested “Clifbaw,” explaining: “China lift BAW technology ~ Clifbaw. haha.”

Keker & Van Nest partner Gasner said prosecutors will have a field day with that last email.

“It’ll be in the opening and the closing, and as many other times as they can bring it out during trial,” he said. “Pretty much all of the juicy emails will.”

Gasner defended East Bay engineer Walter Liew against charges that he sold E.I. du Pont de Nemours and Co. trade secrets to China. Liew was sentenced in July to 15 years in prison on charges including economic espionage and possessing trade secrets. He has appealed his conviction to the U.S. Court of Appeals for the Ninth Circuit.

Thomas Nolan, a defense lawyer with Nolan Barton Bradford Olmos, said the Zhang case will come down to whether information the defendants used to start their Chinese company qualifies as trade secrets. The emails, however juicy, are secondary.

Nolan’s partner, Daniel Olmos, represents a Chinese citizen accused of stealing trade secrets from heart-valve technologies company Edwards Lifesciences. Charges filed in the Central District of California accuse the defendant of using that technology to start a company in China with his wife’s family.

Olmos said the U.S. government has made a concerted push to protect U.S. industry against the perceived Chinese threat. The cases often involve engineers taking what Olmos said could be innocent actions—working from home or emailing themselves work from a personal account. “When you think about the fact that it keeps happening to people with certain kinds of surnames,” Olmos said, “it certainly makes you think hard.”

IMAGE: U.S. Attorney Melinda Haag

For more on this story go to: http://www.therecorder.com/id=1202726949251/Feds-Charge-Chinese-Engineers-With-Stealing-Silicon-Valley-Technology#ixzz3amf5qzFA