Loose Lips Sink...your Business

How to protect your most important corporate trade secrets amidst rampant economic espionage

If you don’t think trade secret theft is a security issue that should be near the top of your radar, you aren’t paying attention to the news:

• Michigan couple Yu Qin (Chin) and Shanshan (Shannon) Du were found guilty in December 2012 of stealing trade secrets on hybrid car technology from General Motors to help develop such vehicles in China. The U.S. claimed Du, the ex-GM employee, copied the company’s private information on the motor control of hybrids and provided documents to her husband, Qin. Prosecutors accused Qin of using the data to seek business ventures or employment with GM’s competitors, including the Chinese automaker Chery Automobile Co. GM contended that the secrets are worth more than $40 million, prosecutors said. The defendants face a maximum sentence of 10 years and a $250,000 fine on each of the trade secret theft counts. 

• A former senior software engineer pleaded guilty in October 2012 to downloading computer source code and other proprietary information related to the world’s largest derivatives exchange, CME Group’s futures exchange Globex electronic trading platform. Chunlai Yang was developing plans to improve an electronic trading exchange in China.

• Yihao “Ben” Pu was arrested in October 2012 and charged with stealing confidential information related to the Citadel Group’s electronic trading system. After the firm’s IT department questioned the large amount of data stored on his computer, Pu allegedly had a friend dump several hard drives into a sanitary canal. After recovering the computer equipment, investigators also allegedly found Pu’s plans to start a hedge fund in China. Pu has pleaded not guilty.

• In September 2012, Sixing Liu, aka, “Steve Liu,” 49, a citizen of the People’s Republic of China (PRC), was convicted of stealing thousands of electronic files from his employer, L-3 Communications, Space and Navigation Division. The stolen files detailed the performance and design of guidance systems for missiles, rockets, target locators and unmanned aerial vehicles. Liu stole the files to position and prepare himself for future employment in the PRC. As part of that plan, Liu delivered presentations about the technology at several PRC universities, the Chinese Academy of Sciences and conferences organized by PRC government entities. Liu faces up to 45 years in prison and nearly $2 million in fines.

• Hanjuan Jin was convicted in February 2012 of illegally possessing thousands of Motorola’s trade secrets on her computer and in other forms of digital storage. The woman was detained by federal agents as she tried to board a flight to Beijing on a one-way ticket. Prosecutors said Jin, a Chinese-born American, intended to pass the information to the Chinese military.

Whether it’s cars, paints, electronic trading systems or — worst of all — guidance systems for missiles, it seems no market is safe from insiders determined to steal electronic and paper-based secrets. These types of thefts, in many cases, can lead to cheap knock-offs of patented products and ultimately to the eventual dismantling of American companies — especially small businesses that may lack the resolve to fight back.

But these cases are only a drop in the bucket, according to Brett Kingstone, a one-time victim of trade secret theft turned vocal leader in the fight against it. “We are dealing with a situation where you have tens of thousands of wrongdoers every day and very few prosecutions and sentences,” says Kingstone, writer of The Real War Against America (available at Amazon.com), a book that details how his start-up company was crippled by the theft of trade secrets related to LED lighting.

“This is an absolute tidal wave of criminal activity, and we’re not even scratching the surface. We are literally having our nation systematically stolen out from under us,” Kingstone warns.

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