The U.S. Department of Justice is charging Huawei with racketeering and conspiracy to steal trade secrets, with a new federal indictment against the Chinese telecom equipment giant unsealed Thursday.
The 16-count superseding indictment (PDF) adds to charges from a prior indictment unsealed in early 2019. It also names two U.S. subsidiaries, including Huawei Device USA and Huawei’s U.S. R&D arm Futurewei, along with Huawei’s Chief Financial Officer Wanzhou Meng.
The DoJ said the charges stem from Huawei’s alleged decades-long practices of using fraud and deception to steal intellectual property, including from six U.S technology companies to grow and operate its business.
The indictment, returned Wednesday in federal court in Brooklyn New York, alleges theft of trade secrets and copyrighted works including source code and user manuals for internet routers, antenna technology and robot testing technology.
T-Mobile, though not explicitly named, is one of the companies impacted by the alleged Huawei theft. According to the Wall Street Journal, other companies identifiable in the indictment include Cisco, Motorola and chip startup CNEX Labs.
In a new statement Friday, Huawei said that disputes over IP are a common occurrence in international business and accused the DoJ of “selective, politically-motived enforcement of the law.”
“For quite a while, the US government has been using the strength of an entire nation to come after a private company. It has used every tool at its disposal, whether they be legislative, administrative, judicial, or diplomatic, and has even tried to turn public opinion against Huawei to disrupt our normal business operations. The US Department of Justice's new charges against Huawei are part of this campaign. This is political persecution, plain and simple,” said Huawei in part of its lengthy statement.
The U.S. alleges that Huawei got its hands on technology through methods such as, violating confidentiality agreements with companies, recruiting employees to gain information from their former companies, and utilizing professors working at research institutions. It also accuses Huawei of launching a bonus program policy to financially reward employees who secured confidential information from competitors.
T-Mobile was also part of the 2019 indictment that alleged Huawei had started efforts in 2012 to steal information on a T-Mobile smartphone-testing robot dubbed “Tappy.” Huawei allegedly violated confidentiality agreements that gave Huawei employees restricted access to the robot laboratory. There they illegally took photos, gathered technical information, and tried to steal a robot arm. When discovered, Huawei allegedly characterized the actions as isolated incidents committed by a rogue employee.
In Huawei’s Friday statement, the vendor claims the charges don’t reveal any new information and accuses the DoJ of reintroducing previously resolved civil cases as criminal cases.
“They are based largely on resolved civil disputes from the last 20 years that have been previously settled, litigated, and in some cases, rejected by federal judges and juries. In these disputes, no court has ever found that Huawei had engaged in malicious intellectual property theft, or required Huawei to pay damages for infringement on others' intellectual property,” Huawei stated.
Prior to the federal indictment, T-Mobile in 2014 sued Huawei for corporate espionage related to its cellphone-testing robot technology, which it said Huawei used to design its own testing robot.
In 2017 a jury awarded T-Mobile $4.8 million in the case, finding that Huawei misappropriated T-Mobile’s trade secrets. Although T-Mobile won, it was only a fraction of the $500 million in damages the carrier had been seeking, and the court did not find Huawei’s misappropriation “willful and malicious."
In its Friday statement, Huawei said that by the end of 2018 it had been granted 87,805 patents, including 11,152 in the U.S. Since 2015, the vendor says it received more than $1.4 billion in licensing revenue, while simultaneously paying more than $6 billion on royalties “for the legitimate use of other companies’ patents.” Of that, nearly 80% was paid to U.S. companies, according to Huawei.
According to the new indictment, in 2009 Futurewei filed a provisional patent for cellular antenna technology that relied largely on intellectual property from "Company 6," in violation of a non-disclosure agreement Futurewei signed as part of scheme to obtain details about the technology. Between approximately 2009 and 2016, the indictment claims Huawei generated about $22 million in income from the sale of products that used the allegedly stolen IP.
Huawei for its part insists that none of its products or technologies were developed through stealing trade secrets, instead pointing to the company’s massive investment in R&D over the last 30 years.
“The US government's sole purpose for this is to attack, discredit, and smear the reputation of Huawei's leading technologies. They want to damage Huawei's competitive edge in the global market,” Huawei’s statement continued. “We believe that the court will make a fair ruling based on facts and evidence.”
In announcing the charges, the DoJ said Huawei’s efforts to steal U.S. tech were successful.
“As a consequence of its campaign to steal this technology and intellectual property, Huawei was able to drastically cut its research and development costs and associated delays, giving the company a significant and unfair competitive advantage,” stated an announcement from the DoJ Office of Public Affairs.
The U.S. also claims that Huawei repeatedly lied to FBI agents and U.S. lawmakers when confronted with allegations, and actively worked cover up actions to minimize litigation risk and and the potential for criminal investigations.
The new indictment also includes allegations against Huawei and subsidiaries related to shipments of goods and services in countries subject to U.S. economic sanctions, using code names for countries including Iran and North Korea.
The charges come amid continued tensions between the U.S. and Huawei. The U.S. has continued efforts to keep the technology giant out of next-generation communications networks, over security concerns that it could be used by the Chinese government to spy or disrupt networks. Huawei denies those allegations.
Earlier this year, U.S. lawmakers introduced legislation that would provide over $1 billion to invest in U.S.-based alternatives to Huawei.
According to the WSJ, U.S. companies first started alleging Huawei was stealing their technology more than 15 years ago, when Cisco in 2003 accused Huawei of copying its router software and manuals.