Federal Prosecutors Pursue Charges against Chinese Prof. Hao Zhang as U.S. Attorneys Drop Like Cases in Philadelphia, Ohio

By Sharon Simonson

U.S. District Court in downtown San Jose

The link between the treatment of immigrants and ethnic groups in the United States and the relationship between the U.S. government and their home countries’ federal governments is well-documented by historians. The entrance to the federal courthouse in downtown San Jose features this memorial to Japanese-Americans imprisoned during World War II by the U.S. government after Japan bombed Pearl Harbor. Relations between the U.S. government and the Chinese government have deteriorated. The Obama administration has fingered the Chinese government and companies as persistent thieves of U.S. intellectual property. (Photo by S. Simonson)

SAN JOSE, Calif.—Will the San Jose indictment against Chinese professor Hao Zhang be the next one the federal government decides to abandon?

Zhang is accused of conspiracy to steal trade secrets from two semiconductor companies with Silicon Valley ties for his own benefit and the Chinese government’s. In March and then again this month, federal prosecutors in Philadelphia and Dayton, Ohio, dismissed indictments against two Chinese-Americans accused of similar crimes.

Both cases relied heavily on email communications, as does the case against Zhang. Both alleged the theft of secret and valuable information, as does the case against Zhang. In both cases federal prosecutors sought to dismiss after they lost the use of purported evidence key to their claims. In Philadelphia, prosecutors confused two technical schematics, according to published reports. In Ohio, federal Judge Thomas M. Rose excluded from trial two email strings, including one that cast the defendant’s character in poor light. Prosecutors failed to show the emails were relevant to her alleged crimes, the judge said.

Sometime this week, U.S. prosecutors in San Jose expected to deliver 100,000 emails to lawyers for Zhang, a Chinese citizen who holds a doctoral degree in electrical engineering from the University of Southern California. It would be the second load of discovery material that prosecutors produce for the defense. The first arrived Aug. 27.

How much of this evidence ever falls under public scrutiny is very unclear. The parties and U.S. Magistrate Judge Howard R. Lloyd have agreed to a broad protective order in which documents and other electronic material produced by the government are presumed confidential and are being filed under seal.

Trade secrets of the kind Zhang is accused of stealing are tricky intellectual devices in a court setting, where openness is the presumption. Trade secrets, once disseminated, lose their status. Companies must protect their trade secrets continually, and the indictment against Zhang spells out in some detail how Avago Technologies and Skyworks Solutions Inc., the companies accusing him of the crimes, acted to keep their trade secrets their own.

Avago executives said they became aware of the trade-secret theft in the fall of 2011 after Zhang filed a U.S. patent application that they believed covered Avago technology. Later that year, Avago’s Rich Ruby traveled to China where he toured a new state university laboratory that Zhang was using. He believed Avago technology had been incorporated into the lab’s design and confronted his Chinese hosts, both verbally and in writing, according to the indictment.

Zhang and his alleged co-conspirators were originally indicted in U.S. federal court in February, but the indictment remained secret until May 16 when law enforcement agents boarded Zhang’s plane at Los Angeles International Airport. When he was arrested, Zhang was traveling on a U.S. State Department business-tourist visa issued in April. He was traveling to a conference in Phoenix where he had been invited to speak.

The defense says it needs three months to process the electronic messages and investigate further. If convicted on the more than two-dozen counts against him, Zhang faces decades in prison, millions of dollars in fines and forfeiture of personal property.

Sitting in Judge Edward Davila’s federal courtroom in downtown San Jose on Sept 14 — for the first time in the gallery rather than behind the bar in leg shackles and an orange jumpsuit with Santa Clara County Detention Center stenciled on the back — Zhang was dressed in casual pants and a collared, colorful shirt, tucked in. His wife sat beside him, her long black hair pulled back in a ponytail. During his court proceedings, an interpreter speaking Mandarin Chinese translates for him, but Zhang converses with his attorneys in English.

Before the hearing, Zhang attorney Daniel Olmos introduced the professor to a reporter who has been tracking his story. “Sorry for your troubles,” the reporter says as the two shake hands. Everyone laughs. No other words are exchanged.

Early in Zhang’s detention hearing — a process that took some half dozen court sessions as prosecutors and defense lawyers fought over how intently Zhang should be supervised as he prepared for trial — defense attorney Tom Nolan told U.S. Magistrate Judge Nathanael Cousins: “These cases are not what they look like at the beginning. The government relies on the company. They don’t do any independent inquiry. The success of these cases is not great.”

“We are not retrying those other cases here,” Cousins replied.

Later in the same hearing, Assistant District Attorney Matthew Parrella told Judge Cousins the case against Zhang was “overwhelming,” citing the extensive email trove of communications among he and his co-conspirators and “overt acts around trade secrets that he took.”

The judge has expanded the definition of house arrest for Zhang, loosening his confinement from his Mountain View apartment to include the property’s limits, encompassing an on-site gym and laundry room. The trial and its preparation are expected to take as long as five years. A hearing to review the conditions of Zhang’s release is set for Oct. 20. Zhang has pled not guilty.

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