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Federal Prosecutor's Office prosecutes Huawei for alleged theft of trade secrets

The prosecution is investigating China's Huawei Technologies Co. for allegedly stealing business secrets from US business associates, including the technology behind a robotic device

T-Mobile US

used to test smartphones, by persons who are familiar with the matter.

The investigation was partially based on civil suits against Huawei, including one in which a Seattle jury found the robot technology from Bellevue, Washington, USA guilty of using robotic technology. The investigation was at an advanced stage and could soon lead to an indictment.

A Justice Department spokesman declined to comment.

A Huawei spokesman declined to comment. The company has challenged the T-Mobile case, but acknowledged that two employees were not acting properly.

Chinese telecommunications giant Huawei has long caused tensions between Washington and Beijing. Shelby Holliday of WSJ explains what the company does and why it matters. (Photo: Aly Song / Reuters)

The federal investigation puts additional pressure on the Chinese technology giant, the world's largest manufacturer of telecommunications equipment and the number 2 manufacturer of smartphones worldwide. The Trump government is taking a wider stance to assert obvious claims for intellectual property theft and technology transfer by Chinese companies.

Huawei has long been under scrutiny by the US, which effectively prevented the Chinese telecommunications company from installing its equipment on major US networks, fearing that its equipment could be used to spy on Americans.

Huawei has strongly denied that it is a security threat, says it is owned by its employees and works independently of the government of Beijing.

US. Pressure on Huawei has increased. Last month, the Canadian authorities arrested Huawei's Chief Financial Officer, Meng Wanzhou, at the request of the US authorities. Ms. Meng, the daughter of company founder Ren Zhengfei, is being accused of misleading banks over the nature of Huawei's dealings in Iran, which has led to violations of US sanctions against the country.

Ms. Meng has denied the allegations, and Huawei says it follows the laws in all the countries where it operates.

In another development, the Polish authorities arrested Huawei's executive Wang Weijing last week and accused him of espionage on behalf of the Chinese government. Huawei was not accused of misconduct and the company announced Mr. Wang's employment on Saturday.

  Ren Zhengfei, founder and CEO of Huawei, during a media meeting on Tuesday in Shenzhen, China. He said the tech giant would never spy on China's government.

Ren Zhengfei, founder and CEO of Huawei, at a meeting with the media in Shenzhen, China, on Tuesday. He said the tech giant would never spy on China's government.


Vincent Yu / Associated Press

On Tuesday, the founder of Huawei made a rare appearance in front of international media at the company's headquarters in Shenzhen City, Shenzhen, to directly address the concerns. Mr. Ren said that Huawei has and will never spy on behalf of the Chinese government.

The new lawsuit against Huawei includes partial allegations that T-Mobile filed in civil action in 2014, according to those familiar with the matter.

At the time, T-Mobile had hired Huawei to deliver mobile phones to the US mobile operator. T-Mobile had developed a test robot nicknamed "Tappy" to perform quality control tests on sold phones.

During the relationship, Huawei employees asked detailed questions about the robot and repeatedly asked for information about proprietary technology, as the T-Mobile lawsuit asserted.

In an alleged case, two Huawei employees have pushed a third employee into the test lab to take unauthorized photos of the robot. An employee also attempted to hide the finger-like tip of "Tappy" behind a computer monitor so that he could not get into the view of a surveillance camera, and then tried to sneak him out of the lab in his laptop computer case.

This employee later admitted that he had taken over the component because Huawei's research and development bureau believed the information would improve its own robot, the lawsuit said.

"Due to Huawei's significant breaches of its T-Mobile contracts and unlawful theft of trade secrets, T-Mobile has had to discontinue its ongoing wireless mobile communications relationships with Huawei at significant cost," the lawsuit said. "Huawei has used robot technology abused by T-Mobile to gain an unjustified commercial benefit worth hundreds of millions of dollars."

In a lawsuit responding to T-Mobile's allegations, Huawei said it had not stolen trade secrets because Tappy was no secret at all. The device's video is easy to find on YouTube, and design and specification details have been released in numerous patents, Huawei said.

The case was eventually brought to trial, and a jury in 2017 granted T-Mobile $ 4.8 million after Huawei found Huawei had breached its contract with the network operator.

"After the jury found the breach of trade secrets and breach of contract, we won the first lawsuit we believe has exposed their misconduct and began clarifying Huawei's story," said John Hueston, attorney from T-Mobile.

The Ministry of Justice has intensified its efforts in recent months to prosecute alleged Chinese technology theft, including through the initiation of criminal cases previously described in civil litigation.

In November, she filed lawsuits against a Chinese state-owned company and its Taiwanese partner for alleged theft of trade secrets against the largest memory chip manufacturer in the US, Micron Technology Inc. This came after Micron had sued the companies for similar allegations

Write to Dan Stocking ([email protected]), Nicole Hong ([email protected]) and Aruna Viswanatha ([email protected]).

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