Software Engineer Charged With Stealing Trade Secrets, Passing to China

Xudong Yao, a software engineer, was charged with stealing trade secrets from a Chicago locomotive manufacturer and taking it to China, according to a federal indictment unsealed on July 10. Photo by Luke Sharrett/Getty Images

A Chinese-born software engineer was charged with taking stolen trade secrets from a Chicago-area locomotive builder to China, according to a recently unsealed federal indictment.

Xudong “William” Yao, 57, a naturalized U.S. citizen originally from China, was charged with nine counts of theft of trade secrets, according to an indictment filed in U.S. District Court in northern Illinois in December 2017, and unsealed on July 10.

Yao began working as a software engineer for the locomotive manufacturer in August 2014, according to the indictment. Within two weeks, he had downloaded more than 3,000 unique files containing the company’s proprietary and trade secret information relating to the software system that operates the firm’s locomotives.

For the next six months, Yao downloaded additional files containing trade secrets, including technical documents and software source code, the indictment said.

While employed at the U.S. firm, the software engineer also allegedly found, negotiated, and accepted employment with a company in China that provided on-board telecommunications and information systems for automobiles.

In February 2015, the train manufacturer terminated Yao’s employment for reasons unrelated to the alleged theft, which at the time hadn’t been discovered, the U.S. Justice Department (DOJ) said in a statement on July 11. Shortly after his firing, Yao made copies of the stolen trade secrets, namely, the control system source code and specifications that explained how the source code operated, the indictment said.

Yao then traveled to China in July 2015 and began working for the Chinese company, the indictment said. Four months later, Yao flew from China to O'Hare International Airport in Chicago. At the time, he had in his possession more than 3,000 unique files of the Chicago company’s intellectual property and trade secrets, including nine complete copies of the control system source code and explanatory specifications, prosecutors alleged.

Yao then returned to China, where he is believed to be residing, the DOJ said. A warrant for his arrest was issued in December 2017.

Yao faces a maximum of 10 years in federal prison for each count of theft of trade secrets.

The DOJ has brought a spate of cases in recent years alleging theft of U.S. intellectual property for the benefit of Chinese companies and the Chinese regime. In November 2018, the department announced that it would prioritize prosecutions of IP theft, hacking, and economic espionage, as part of the Trump administration’s efforts to counter national security threats posed by China.