Huawei Technologies has lost its trade secret case against California semiconductor designer CNEX Labs, Reuters reports.
The company is suing CNEX Labs because it was founded by a former employee of Huawei. Sources say that CNEX Co-founder Yiren “Ronnie” Huang quit working for Huawei due to Huawei’s attempt to buy Huang’s pre-existing SSD patents from him, which he refused.
Huawei’s refusal to give up on attempting to acquire those patents led to Huang’s departure from Futurewei, where he co-founded CNEX just three days later. Huang went on to file a number of patents related to designing memory chips, violating his contract agreement that said he had to contact Huawei about any patents filed within his first year away from the company.
Huawei sued CNEX in Sherman, Texas in US District Court in 2017, claiming that CNEX misappropriated trade secrets and stole 14 employees from its US research division, Futurewei, for $85.7 million in damages. Memory control technology has been at the heart of this case. The court ruled that Huang did violate his contract, but did not award Huawei any fines.
Huang also filed a countersuit, alleging that Huawei posed as a customer to get trade secrets. Huawei Deputy Chairman Eric Xu ordered an employee to spy on CNEX and attempt stealing its protected technologies. The person hired by Xu to steal CNEX’s technologies posed as a false customer.
The eight-person jury sided with CNEX regarding Huawei but awarded no money for damages.
Huawei demanded that Huang inform the company of his patent filings up to a year “after” he left the company, but this is too overreaching and lies outside of most normal contracts. Employees only have to comply with rules while they’re employed; when they leave or get fired from the company, they no longer have to assist the company about anything in the job.
When it comes to the actual case, it does seem interesting that Huang co-founds CNEX just three days after he leaves Huawei. Why the need to create a new company so soon? Is it because Huang was en route to copy the technology that Huawei had created? Or was Huang’s decision to create his company and file a patent out of a desire to protect his original interests for the market?
And yet, filing a patent and claiming technology no one has yet claimed is not a matter of wrongdoing. It’s always wise to protect one’s financial interests when it comes to original ideas. If a restaurant has a secret recipe for a delicious magic sauce but doesn’t patent it, a cook who retires from the restaurant, opens his own, and files a patent for the recipe in ownership has done no wrong. Patent filings are a case of “the early bird gets the worm,” and companies that don’t file early can’t claim ownership.
It is also interesting that Huawei can accuse another company of trade theft when it is also entrenched in some trade theft cases of its own. Back in 2014, Huawei was accused of stealing trade secrets from Deutsche Telekom-owned T-Mobile when it snuck into a lab and took unauthorized photos of T-Mobile’s smartphone testing robot, “Tappy,” while then hiding the robot’s fingerlike tip in a bag to sneak it out the lab. T-Mobile won its lawsuit in 2017, with Huawei owing $4.8 million in damages.
Huawei came under fire earlier this year when it was the target of an FBI sting operation at the 2019 Consumer Electronics Show (CES) for trade theft against American startup Akhan Semiconductor. Akhan says that it showed Huawei its Miraj Diamond Glass in 2017 by giving Huawei samples, but Huawei brought the modules back in a terribly damaged state leading Akhan to suspect Huawei dissected and harvested its diamond glass prototypes.
Akhan’s Miraj Diamond Glass is considered to be ten times more scratch-resistant and six times tougher than Kentucky glass maker Corning’s Gorilla Glass.
The Futurewei in question above as the US research division of Huawei finds itself banning parent company Huawei from its buildings, and forbidding its employees from using Huawei’s logo on any and all correspondence in light of Trump’s Huawei ban in the US.
South Korean smartphone and component manufacturers Samsung Electronics, SK Hynix, LG Chemical, and others, speaking at the 3rd IP Strategy Forum: Strategies for Responding to Industrial Technology Disclosure from IP Perspective, spoke out against China trade secret thefts.
These Korean companies say that the current laws in place aren’t enough to prevent trade secret theft and that Chinese companies are using partnerships and mergers to gain access to supply chains, business technology IP, and human assets where these companies then steal the desired information.