Huawei Loses Trade Secrets Case Against US Chip Designer

A Huawei company logo is seen at a shopping mall in Shanghai, China on June 3, 2019. Aly Song/Reuters

A U.S. jury on June 26 cleared California semiconductor designer CNEX Labs Inc of stealing trade secrets from Chinese electronics giant Huawei Technologies while awarding CNEX no damages on its own trade theft claims.

Huawei had sued CNEX in U.S. District Court in Sherman, Texas, for misappropriation of trade secrets involving a memory control technology and for poaching its employees. The jury rejected those claims, while finding a CNEX founder failed to notify the company of his patent filings.

CNEX filed a counter suit, alleging Huawei sought to steal its technology by posing as a customer and calling the original claims part of a pattern by Huawei to obtain others’ secrets. The jury found Huawei had misappropriated CNEX’s secrets but awarded no damages.

“This is a victory for the rule of law and for global standards of ethical corporate behavior,” said CNEX General Counsel Matthew Gloss. “This case was never about money.”

The United States has effectively banned its agencies from buying Huawei telecommunications equipment and barred U.S. companies from doing business with Huawei, claiming the firm represents a threat to national security.

Huawei has filed a suit to overturn the U.S. sales ban before the same Texas judge who heard the trade secrets suit. Two Huawei units separately face charges in a federal court in Seattle of conspiring to steal T-Mobile US Inc trade secrets between 2012 and 2014.

Huawei is reviewing the decision and considering its next moves, said Tim Danks, a Huawei vice president for risk management.

CNEX co-founder Yiren “Ronnie” Huang, who quit Huawei and co-founded CNEX days later, breached his employment contract requiring him to notify the company of any patents he obtained within a year of leaving the firm. However, it did not award Huawei damages.

Danks called the result a “mixed verdict,” noting the company “is disappointed that the jury awarded no damages after finding Mr. Huang breached his employment agreement.”

Huawei had sued CNEX and co-founder Huang in 2017 and was seeking at least $85.7 million in damages and rights to the San Jose, California, company’s memory-control technology.

“The things that Huawei claims are trade secrets are not,” CNEX attorney Deron Dacus said in court at the beginning of the trial earlier this month. He further described the lawsuit as “bullying and intimidation.”

The eight-person jury did not award CNEX any damages in its trade theft claims because it did not have any revenue, a CNEX spokesman said. Huawei’s suit was an effort to acquire “CNEX’s advanced semiconductor technology” through a court action, said CNEX spokesman Paul Sherer.

U.S. District Court Judge Amos Mazzant, who heard the trade secrets case, separately is overseeing Huawei’s bid to overturn the Trump administration’s ban on its sales to government agencies and contractors.

In January, the U.S. Department of Justice (DOJ) unsealed two indictments against Huawei, its chief financial officer (CFO), Meng Wanzhou, and several of the company’s subsidiaries, in a pair of legal cases accusing the company of violating sanctions against Iran, and stealing trade secrets from U.S. mobile carrier T-Mobile.

By Gary McWilliams. The Epoch Times contributed to this report.