Two Engineers Charged with Rare Economic Espionage

Lan Lee and Yuefei Ge are about to go on trial for allegedly stealing confidential computer chip designs from their Silicon Valley employers.^[1] They were indicted Wednesday on the rare and serious charge of economic espionage.^[2]

The indictment was returned by a grand jury in U.S. District Court in San Jose, and accuses Lee and Ge of orchestrating theft of computer-chips so they could go into business with the Chinese military.^[3] It has been alleged that the two men stole secret data sheets and other confidential documents from NetLogic Microsystems Inc., which designs processors for use in networking equipment such as Internet routers and switches, and Taiwan Semiconductor Manufacturing Co., a Taiwan-based company that operates chip-making factories.^[4]

The indictment alleges Lee and Ge formed a company called SICO Microsystems Inc. to develop chips based on the stolen designs; then they allegedly reached out to Chinese government agencies for help funding the business.^[5] Lee and Ge were charged with five felony counts each, including two counts of economic espionage, two counts of theft of trade secrets and one count of conspiracy.^[6]

Only three people have ever been convicted in the U.S. of economic espionage.^[7] The theft of trade secrets to benefit a foreign government is, by a large margin, the most serious crime outlined under the Economic Espionage Act of 1996.

All previous convictions have been from Silicon Valley, an area that investigators describe as a hotbed for intellectual property theft to benefit foreign nations.^[8] According to the head of an FBI counterintelligence unit in San Jose, “Silicon Valley is a hotbed of economic espionage…..[the] valley is home to many of the estimated 3,000 Chinese front companies nationwide set up to steal secrets and acquire technology.”^[9] It has become such an issue that the FBI recently established an economic espionage counterintelligence unit in San Jose, to go along with the one already functioning in Palo Alto.^[10]

Economic espionage requires the government to prove beyond a reasonable doubt that the defendant stole, duplicated, communicated, or otherwise provided access to trade secrets without authorization, and that the defendant intended for the acts to benefit any foreign government.^[11] The punishment for economic espionage is very steep: a fine of up to $500,000 ($10,000,000 if committed by an organization), imprisonment for up to 15 years, or both.^[12]

In August, Xiaodong Sheldon Meng pleaded guilty to one count of economic espionage for stealing software used to train military fighter pilots and trying to sell it to the Chinese Navy.^[13] We have discussed Meng’s case in this blog previously; this post can be found here. Federal criminal defense attorney Douglas McNabb has also previously discussed this case, here. Additionally blogs on the national security crimes involving espionage can be found here.

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^[1] Jordan Robertson, Economic espionage alleged in chip theft, Associated Press Newswire, September 26, 2007, available at LEXIS, News Library, Wire News Services.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.
^[6] Id.
^[7] AP Staff, Guilty plea in economic espionage case, Associated Press Newswire, August 2, 2007, available at LEXIS, News Library, Wire News Services File
^[8] Robertson, supra note 1.
^[9] K. Oanh Ha, Stealing a Head Start, San Jose Mercury News, Sep. 28, 2006, available at LEXIS, News Library, Periodical News Services File.
^[10] FBI Website, Focus on Economic Espionage, Investigative Programs—Counterintelligence Division, available at http://www.fbi.gov/hq/ci/economic.htm (last visited Oct. 3, 2007).
^[11] 18 U.S.C. § 1831 (2007).
^[12] Id.
^[13] Robertson, supra note 1.