Trouble calling:
Huawei executive accused of being party to theft of trade secrets,
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.