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Huawei Formally Charged in Racketeering and Trade Secrets Theft Conspiracies

Huawei Technologies Co. Ltd., the world’s largest telecommunications equipment manufacturer, has been charged in a New York federal court along with four of its subsidiaries (Huawei Device Co. Ltd., Huawei Device USA Inc., Futurewei Technologies Inc. and Skycom Tech Co. Ltd.) and the company’s chief financial officer with conspiracy to violate the Racketeer Influenced and Corrupt Organizations Act (RICO). According to a U.S. Justice Department press release, the 16-count indictment also includes a charge of conspiracy to steal trade secrets stemming from the company’s alleged long-running practice of using fraud and deception to misappropriate sophisticated technology from U.S. companies.

According to the Justice Department, the new charges relate to the alleged decades-long efforts by Huawei and several of its subsidiaries, both in the United States and mainland China, to misappropriate intellectual property, including from six U.S. technology companies, in an effort to grow and operate Huawei’s business. Justice alleges that the misappropriated intellectual property included trade secret information and copyrighted works, such as source code and user manuals for internet routers, antenna technology and robot testing technology. Huawei, Huawei USA and Futurewei ostensibly agreed to reinvest the proceeds of this alleged racketeering activity in Huawei’s worldwide business, including in the United States.

Justice asserts that the means and methods of the alleged misappropriation included entering into confidentiality agreements with the owners of the intellectual property and then violating the terms of the agreements by misappropriating the intellectual property for the defendants’ own commercial use, recruiting employees of other companies and directing them to misappropriate their former employers’ intellectual property, and using proxies such as professors working at research institutions to obtain and provide the technology to the defendants. As part of the scheme, Huawei allegedly launched a policy instituting a bonus programme to reward employees who obtained confidential information from competitors. The policy made clear that employees who provided valuable information were to be financially rewarded.

Justice adds that through these methods the defendants obtained non-public intellectual property relating to internet router source code, cellular antenna technology and robotics. As a result, Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage.

The indictment also includes new allegations about Huawei and its subsidiaries’ involvement in business and technology projects in countries subject to U.S., European Union and/or United Nations sanctions, such as Iran and North Korea, as well as the company’s efforts to conceal the full scope of that involvement. Justice states that these activities, which included arranging for shipment of Huawei goods and services to end users in sanctioned countries, were typically conducted through local affiliates in the sanctioned countries.

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