Economic Espionage- Trade Secrets- California

Xiaodong Sheldon Meng is charged with stealing military application trade secrets from his former employer San Jose based Quantum 3D, intending to use them to benefit the governments of China, Malaysia and Thailand.^[1] The Meng case is the third foreign economic espionage indictment under the Economic Espionage Act.^[2] Meng is free on a $500,000 bond and is scheduled to appear before U.S. Magistrate Judge Howard Lloyd on Monday.^[3]

This case is being prosecuted by the Computer Hacking and Intellectual Property (CHIP) Unit of the U.S. Attorney’s Office based in San Jose, CA.^[4]

President Clinton signed the Economic Espionage Act into law in 1996 to protect intellectual property, especially trade secret theft.^[5] Under 18 U.S.C. § 1831 it is a crime for a foreign government or a foreign government controlled company to engage in economic espionage.^[6] 18 U.S.C. § 1832 prohibits foreign or domestic commercial theft of trade secrets.^[7]

Under section 1832, the Government must prove beyond a reasonable doubt that: (1) the defendant stole, or without the owner's authorization obtained, sent, destroyed, or conveyed information; (2) the defendant knew or believed that the information was a trade secret; (3) the information was in fact a trade secret; (4) the defendant intended to convert the trade secret to the economic benefit of somebody other than the owner; (5) the defendant knew or intended that the owner of the trade secret would be injured; and (6) the trade secret was related to, or was included in, a product that was produced or placed in interstate or foreign commerce. It is also illegal to attempt to steal a trade secret, or to receive, purchase, destroy, or possess a trade secret which the defendant knew was stolen.^[8]

The penalty for a conviction under section 1832 is a sentence of up to ten years and fines of up to $250,000 for an individual.^[9]

On December 14, 2006, in an unrelated case, Fei Ye, a U.S. citizen and Ming Zhong, a permanent U.S. resident pleaded guilty in federal court to stealing civilian chip technology from two Silicon Valley firms under the Economic Espionage Act.^[10]

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[1] Connie Skipitares, Cupertino Man Charged in Alleged Theft of Trade Secrets, Mercury News, December 14, 2006.
[2] Id.
[3] Id.
[4] Id.
[5] U.S. Dept. of Justice Cybercrimes Manual
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Tom Abate and John Coté, Silicon Valley Espionage Case, San Francisco Chronicle, December 15, 2006