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US Formally Indicts Huawei for Fraud, Stealing Trade Secrets

by Chris Brook on Wednesday January 30, 2019

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One of the indictments alleges the company stole proprietary data, including the details of a robot designed to test mobile phones, from a US wireless firm.

After what feels like years in the making, the U.S. finally charged Huawei, the belabored Chinese telecom, with fraud, breaking confidentiality agreements, violating sanctions, and stealing trade secrets, this week.

Acting Attorney General Matthew Whitaker announced the charges on Monday, following two grand jury indictments.

According to one of the indictments, Huawei made efforts to steal proprietary data on a robot, Tappy, that T-Mobile, used to test mobile phones. While T-Mobile is owned Germany's Deutsche Telekom, the company's headquarters and laboratory are based in Bellevue, Wash.

Huawei China, for what it's worth, inquired whether T-Mobile was willing to sell or license the robot system in May 2012 but was rebuffed. Following this, Huawei, one of T-Mobile's suppliers, apparently asked Huawei employees in the U.S. to obtain anything they could about Tappy, including serial numbers, hardware, and software specifications. The Chinese company reportedly also urged its employees to take photos of the robot and in one instance even take a piece of the robot so engineers in China could recreate it for use in their own robot, "xDeviceRobot," it planned to use to test phones it would supply T-Mobile.

The purpose of the robot is to essentially mimic human activity. Tappy’s robotic arm imitates a human using the phone, how long it takes to perform tasks, the phone's responsiveness, performance, and stability, how much battery is used by certain processes, etc.

Huawei persisted, even though it knew T-Mobile was unwilling to part with information on Tappy. The company, desperate for information, like Tappy's calibration standards and the tools and software it used to calculate delays during performance testing, purportedly had employees take photos of Tappy and email them to higher ups at the company. Included in the emails was a document, "Robot Environmental Information," that detailed the mechanical assembly, operation, and other details of Tappy.

T-Mobile certainly took efforts to protect its trade secrets, in this case the specifications, source code, component selection, operating instructions, and other proprietary data. It kept the robots in a secure laboratory, secured with cameras and a security guard, only accessible to a select number of employees and suppliers.

As if these actions - actions that would clearly violate confidentiality agreements, not to mention nondisclosure agreements, weren’t enough – Huawei purportedly even launched a bonus program in 2013, incentivizing its employees to steal competitors' secrets.

"Under the policy, HUAWEI CHINA established a formal schedule for rewarding employees for stealing information from competitors based upon the confidential value of the information obtained. Employees were directed to post confidential information obtained from other companies on an internal Huawei website, or, in the case of especially sensitive information, to send an encrypted email to a special email mailbox," the indictment reads.

“The charges unsealed today clearly allege that Huawei intentionally conspired to steal the intellectual property of an American company in an attempt to undermine the free and fair global marketplace,” FBI Director Christopher Wray said Monday.

The stolen trade secrets story, of course, is only a drop in the bucket when it comes to the accusations against Huawei.

The other indictment unsealed Monday alleges the company, with the help of two affiliates, has been engaged in a fraudulent financial scheme that helped it evade Iranian sanctions through bank fraud.

All of this comes almost two months after the company's chief financial officer, Meng Wanzhou, was arrested on behalf of the U.S. in Canada, where she is still awaiting extradition.

Tags:  Government Data Theft

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