Co-authored by Ted A. Gehring.
On November 5, 2014, the United States Court of Appeals for the Ninth Circuit, in an unpublished disposition, issued its opinion in U.S. v. Suibin Zhang. There, the Ninth Circuit upheld the criminal conviction of Suibin Zhang under 18 U.S.C. Section 1832 for the theft of Marvell Semiconductor Inc.’s trade secrets. According to an FBI release, Zhang was an employee of Netgear, Inc., and through that employment had access to Marvell’s secure extranet. According to the release:
Evidence at trial showed that Zhang, 44, of Belmont, California, was employed as a Project Engineer at Netgear Inc., of San Jose, which gave him access to Marvell’s secure database (“Extranet”). On March 8, 2005, Zhang accepted a position at Broadcom Corporation (Broadcom), which is also Marvell’s chief competitor. Beginning the very next day, March 9, 2005, and continuing on two other days before he left Netgear, Zhang used his Netgear account to download and steal trade secret information found in dozens of documents, datasheets, hardware specifications, design guides, functional specifications, application notes, board designs, and other confidential and proprietary items from Marvell. On April 27, 2005, Zhang loaded the Marvell trade secrets onto a laptop issued by Broadcom, where they continued to reside on June 24, 2005, when the FBI served search warrants at Zhang’s home and at Broadcom and took possession of his laptop.
After a bench trial, Zhang was found guilty and sentenced to three months in prison followed by three months of supervised release, 200 hours of community service, and $75,000 in restitution.
Zhang appealed the verdict, challenging the sufficiency of the evidence, challenging an evidentiary ruling of the district court and contending that his Sixth Amendment right to a public trial was violated.
On appeal, the Ninth Circuit held that there was sufficient evidence, beyond a reasonable doubt, that Marvell took “reasonable measures” to protect its trade secrets. It advised users of the existence of trade secrets and limited access on a need to know basis and controlled access through passwords. The Ninth Circuit found these measures “reasonable” though some were delegated to Marvell’s partner. The Court also held that, although Zhang did not personally sign the Marvell non-disclosure agreement, he accepted a limited license agreement that incorporated its terms. And he had signed a non-disclosure agreement with Netgear. Zhang was advised in the terms of use of Marvell’s extranet of the confidentiality of information on the extranet and the terms of use. The Court also held that sufficient evidence established that Zhang stole the information. Zhang had claimed that information downloaded by him was relevant to a new project. But the Court found the timing of the downloads suspicious. And there was no evidence that Zhang had ever worked on the new project. Zhang had also transferred files to a Broadcom laptop. The Court further held that even though Zhang never sold the documents or sent around economically valuable secrets, sufficient evidence established that he intended to reap an economic reward. The Court held this same evidence established an intent to injure Marvell.
Finally, the Ninth Circuit held that the lower court had adequately supported its decision to close the courtroom for the testimony of one witness whose testimony went to the contents of documents that the government alleged contained trade secrets. The Court held that the lower court had properly heard the concerns of all parties, including the objections of Zhang to closure and the arguments of Marvell that testimony could not be parsed question by question and held that Zhang’s Sixth Amendment rights were not violated.
Zhang is a reminder that not only can the misappropriation of trade secrets constitute a crime, but also that the intent to reap an economic benefit is sufficient to sustain a conviction under 18 USC Section 1832.
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