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Semiconductor Company Awarded $66M in Trade Secret Theft Case

by Chris Brook on Tuesday August 21, 2018

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A California jury ruled earlier this month that Elec-Tech International Co., a Chinese competitor of semiconductor company Lumileds, misappropriated trade secrets belonging to Lumileds, and used them to develop ETI's energy efficient LEDs.

Lumileds, a semiconductor company that specializes in lighting technology, was awarded $66 million earlier this month after a jury found a Chinese competitor stole the company's sensitive trade secrets

A dozen jurors at Superior Court of the State of California, County of Santa Clara found the defendants liable for damages in intellectual property theft on August 10.

The verdict found that Gangyi Chen, a scientist formerly employed by Lumileds, worked with Donglei ‘Tony’ Wang, the CEO of Elec-Tech International Co Ltd (ETI), a Chinese intelligent home appliance manufacturer, to misappropriate Lumileds trade secrets to develop ETI’s LED technology.

The stolen data in this case involves complicated computer instructions for programming reactors that find their way into semiconductor chips which power energy efficient LED lights.

According to Brian Roche, a partner with Reed Smith, the law firm that represented Lumileds, Wang authorized a substantial payment to be made to Chen four months before he left Lumileds. It’s safe to say this made matters worse – as Chen was essentially getting paid to work for ETI while still going about day-to-day activities with Lumileds.

It wasn't until Lumileds finished testing Fontus N, a set of instructions for programming the LED chip-producing reactors, that Chen jumped ship for Elec-Tech. The company – in a quick turnaround – released a LED product of its own.

Lumileds, which is headquartered in the Netherlands, develops, manufactures, and distributes LEDs, light bulbs, and automotive lighting solutions. The company's backlit LED lighting technology finds its way into TVs, mobile devices like cell phones, and computer displays.

The case dates back more than six years, to 2012, when Koninklijke Philips, aka Philips, held a majority stake in Lumileds. Philips sold an 80.1 percent stake in the company, at the time called Philips Lumileds Lighting Co. LLC, to Apollo Global Management in 2016, making it an independent company.

It was in June of 2012 however that the company filed a suit against Chen that alleged he copied thousands of files containing confidential business data to a portable storage device before leaving the company. Elec-Tech's lawyers said that Chen did put data from his laptop via USB drive but contended it was personal documents, like visa records.

Perhaps the most interesting angle of the case is the opinion of the jury. Despite the ramifications of the trade theft - in the eyes of the court $66M is roughly the sum that ETI saved by stealing Lumileds' trade secrets in lieu of developing its own - the jurors found that none of the defendants - Elec-Tech, the CEO, or the engineer - acted "willfully and maliciously" when misappropriating the trade secrets.

While Lumileds had its day in court and ultimately emerged victorious, it could have been spared years of litigation by having a robust data protection program in place in the first place. Companies and organizations can deploy technology to ensure encryption, track data usage by users, and prevent the exfiltration of information by insiders via removable media like USB flash drives.

Tags:  Industry Insights IP Protection Manufacturing

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