Court Sets 18-Day Trial for Chinese Professor Accused of Trade Theft

The U.S. District Court building in downtown San José where Chinese Professor Hao Zhang faces criminal charges of trade-secret theft, conspiracy and economic espionage to benefit himself and the Chinese government. His purported victims were two semiconductor companies with Silicon Valley ties. (Photo by Sharon Simonson)

SAN JOSÉ—A U.S. District Court has set aside eighteen days beginning in late April for the trial of Chinese scientist Hao Zhang on criminal charges of trade-secret theft from two semiconductor companies with Silicon Valley ties.

It is the second set of dates that Judge Edward J. Davila of the Northern District of California has reserved for the trial of U.S.-educated Zhang. The first trial had been set in February but was postponed at the request of counsel on both sides.

If the proceedings move forward as now planned, the trial will occur almost exactly four years since Zhang’s arrest by U.S. Customs and Border Patrol agents at the Los Angeles International Airport. Zhang was en route to Phoenix with his wife to attend a professional symposium when federal agents boarded his flight at LAX. The couple were carrying U.S. State Department-issued temporary travel visas.

Zhang faces 30 criminal counts alleging economic espionage and the theft of trade secrets from San Jose-based Avago Technologies and Massachusetts-based Skyworks Solutions Inc., two semiconductor companies that did business in Silicon Valley and with one another. The first count alone—conspiracy to commit economic espionage—carries a penalty of 15 years in prison and a potential fine of hundreds of thousands of dollars, according to the indictment.

Avago is now known as Broadcom Inc., though its ticker symbol remains AVGO.

At the insistence of the company’s attorneys and in deference to its purported trade secrets, the court has allowed vast swaths of the case to be conducted in private, with hundreds of pages of normally public court records placed under seal and off-limits to scrutiny by anyone not involved in the case. The seal also covers some orders of the court. 

Daniel Olmos

At the heart of the trial delay has been an ongoing battle between Avago’s and Zhang’s attorneys regarding Avago’s release of certain internal corporate documents. In an impassioned motion filed late last year, defense attorney Daniel Olmos asserted that Avago had been willing to turn over more than a million documents to bring about the prosecution and argue its case, but had refused to deliver records that could exculpate Zhang, even though the company is under court order to do so.

At the most recent hearing before Magistrate Judge Nathanael Cousins, who is managing the case alongside Judge Davila, Avago attorney Michael Martinez, in explanation for the company’s refusal to produce the documents, accused Zhang of violating the terms of his release as set by Cousins. 

“We have proof,” Martinez told the court. 

Avago is involved in bitter litigation in China over the exact trade secrets at issue in the U.S. case, he said. Avago fears that confidential corporate records from the U.S. case will somehow migrate to China. 

The nature of Avago’s “proof” against Zhang remains under seal. Zhang attorney Leanne Marek denied Martinez’ claims. 

Zhang is accused along with five other men, all of them citizens of China, of conspiring to steal technology for the manufacture of semiconductor chips used in cell phones and other electronic devices to “filter” or minimize static or frequency interference. The technology has become increasingly valuable as the air waves have grown more crowded with wireless communications and electronic devices, according to the indictment.

Zhang and the others are accused of acting for their own benefit and that of the Chinese government. Tianjin University, where Zhang and two other defendants were professors, is a part of China’s Ministry of Education, according to the indictment. Zhang is the only one of the men to have been arrested.

Domestic tensions over Chinese and Russian government spying in the United States have only grown since Zhang’s arrest. The July 27 cover story for Politico magazine carries the headline: “How Silicon Valley Became A Den of Spies.”  Particular focus has been directed at academia as American colleges and universities have dramatically increased the number of foreign-student admissions since the 2008 financial crisis, according to a new Pew Research Center study. Most academic student visas are issued to people from China and India, Pew found.     

Zhang attended the University of Southern California, which admits tens of thousands of foreign students and places more of them in American workplaces for post-graduate training than any other public or private university in the country. 

Magistrate Judge Nathanael Cousins of U.S. District Court for the Northern District of California

In a statement released shortly after Zhang’s arrest, Tianjin University denied that it or Zhang, or his alleged co-conspirators who were affiliated with the university, had done anything wrong. The university pledged “to provide necessary humanitarian and legal assistance” to Zhang and his family.

Zhang has been represented in the federal courtroom in downtown San José by a force of nearly a dozen Silicon Valley and Atlanta-based attorneys, so much so that the depth of his legal bench has been the subject of some courtroom joking, even by Judge Cousins. Among the team’s initial members were two former U.S. prosecutors, Michael L. Brown and William R. Mitchelson Jr. of Alston & Bird LLP. Both men have now departed—Brown to become a federal judge—as have Leanne Marek and another attorney affiliated with the firm. Zhang is now represented by Thomas J. Nolan and Daniel B. Olmos of Palo Alto’s Nolan Barton & Olmos and Yitai Hu of Alston & Bird in its East Palo Alto office, according to the most recent filings.

Zhang was 36-years-old when he was arrested. He is now 39 and will be 40 at his trial. Since his arrest he has lived under court-ordered monitoring, at first under full house arrest with his wife in a Mountain View house, then later alone with some additional freedoms after she returned to China. 

In a somewhat surprising development earlier this month, the federal attorneys trying the case did not contest a defense request to allow Zhang to travel outside of Northern California—though only within the state—with his wife and five-year-old son, who are visiting from China until Sept. 13. After Zhang was arrested, prosecutors argued vehemently against his release from police custody, contesting that no amount of bond money could mitigate the risk of his flight to evade prosecution. A status conference in the case has been set for August before Judge Davila.

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