Toronto Star

Trouble calling:

Huawei executive accused of being party to theft of trade secrets,

- KATE O’KEEFFE

A Silicon Valley chip startup backed by Microsoft Corp. and Dell Technologi­es Inc. accused a top executive at Huawei Technologi­es Co., Deputy Chairman Eric Xu, of participat­ing in a conspiracy to steal its trade secrets, court documents show.

The allegation­s were made in a lawsuit set for trial June 3 in federal court in the Eastern District of Texas, in which CNEX Labs Inc. claims Huawei engaged in a multiyear conspiracy to steal the San Jose, Calif., company’s solid-state drive computer storage technology, including with the help of a Chinese university.

Huawei representa­tives initially declined to comment on the allegation­s but later provided a statement calling them “misleading and unsubstant­iated.” The statement also said Huawei is confident it will prove at trial that it was actually CNEX that stole Huawei’s technology, which the U.S. firm denies.

The case is coming to a head amid heightened tensions between the Trump administra­tion and the Chinese telecommun­ications firm, with U.S. officials last week unveiling two national security measures that threaten to cut Huawei off from American suppliers and ban it from doing business in the U.S.

In a pretrial hearing last month, CNEX attorneys alleged that Mr. Xu directed a Huawei engineer to analyze CNEX’s technical informatio­n.

CNEX said the engineer met with CNEX officials in June 2016, posing as a potential customer to obtain trade secret informatio­n, according to a transcript of the April 17 hearing, which was conducted by the court via teleconfer­ence. Afterward, the engineer produced a report about CNEX’s technology and submitted it to a competitiv­e-intelligen­ce database maintained by HiSilicon, Huawei’s chip-developmen­t unit, according to a CNEX lawyer who cited the engineer’s deposition, the transcript shows.

Mr. Xu also was briefed on an arrangemen­t between Huawei and China’s Xiamen University, according to CNEX lawyers, who said the partnershi­p was part of a plot to misappropr­iate CNEX’s trade secrets.

Lawyers for CNEX said Xiamen in 2017 sought a computer memory board from the company for use in a purported academic research project. CNEX said it provided the board under a licensing agreement with a strict nondisclos­ure provision. “What was hidden from CNEX was that Xiamen was working with Huawei and had entered into an agreement separately with Huawei to provide them with all of their research test reports,” said Eugene Mar, a lawyer for CNEX, according to the court transcript. Huawei then fed the results of the Xiamen study into chip projects, including one slated for release this year, Mr. Mar said, citing the deposition of another Huawei employee.

A Huawei lawyer acknowledg­ed that Mr. Xu “was in the chain of command that had requested” informatio­n about CNEX, and confirmed that a CNEX document had been put into HiSilicon’s competitiv­e intelligen­ce database, known as its “D-box directory,” according to the transcript of the April 17 hearing. But Huawei lawyers said nothing was stolen. They said the engineer had met with CNEX after being invited to discuss “their products and their open source technology,” the transcript shows.

Huawei lawyers also acknowledg­ed, according to the transcript, that there was an agreement between Xiamen University and the Chinese firm but said it didn’t involve any reverse engineerin­g or proprietar­y CNEX code, and that the goal of the project wasn’t to develop chips but rather to design software for a database.

The intellectu­al property at issue in the CNEX case—solidstate drive (SSD) storage technology—allows massive data centers to manage the evergrowin­g volume of informatio­n generated by artificial intelligen­ce and other advanced applicatio­ns. The technology prompted investment in the startup from the venture-capital arms of Dell and Microsoft, which operate leading storage and cloud platforms, respective­ly.

The legal dispute began when Huawei sued CNEX and its cofounder, Yiren “Ronnie” Huang—a former Huawei employee—in 2017, alleging he had stolen Huawei’s tech and improperly recruited 14 of its employees. CNEX admitted in court papers that those employees used to work at Huawei but denied any conspiracy.

CNEX filed its countersui­t in 2018. Many of the details surroundin­g its allegation­s of trade-secrets theft by Huawei had been redacted in earlier court filings. The unredacted transcript of the April 17 hearing, which only recently became available for purchase, provided the clearest picture to date of CNEX’s claims.

Mr. Huang, a Chinese-born U.S. citizen, worked in Silicon Valley for nearly 30 years, including nearly a dozen years at Cisco Systems Inc., CNEX said in court filings. In 2011, Huawei’s Futurewei unit, in Plano, Texas, hired Mr. Huang to work at its Santa Clara, Calif., offices because of his expertise in SSD technology, but the Chinese firm refused his offer to sell his pre-existing intellectu­al property to Futurewei, CNEX alleged. Later, CNEX said, Huawei tried to get Mr. Huang to sign it away under an employment agreement, but he refused to do so.

Mr. Huang left Futurewei in May 2013 and promptly cofounded CNEX, the Silicon Valley firm said in its filings.

 ?? FRED DUFOUR AFP/GETTY IMAGES ?? Huawei representa­tives said they’re confident they can prove it was actually CNEX that stole technology from the Chinese giant.
FRED DUFOUR AFP/GETTY IMAGES Huawei representa­tives said they’re confident they can prove it was actually CNEX that stole technology from the Chinese giant.

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