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Plea Deal Reached in Trade Secret Theft and Espionage Source Code Case

March 25, 2020 Posted in News

How the FBI Proved a Software Engineer Stole a Trade Secret

A software developer who pled guilty to trade secret theft and espionage was sentenced to five years in prison earlier this year. Xu Jiaqiang worked for IBM in China from 2010 until he quit in 2014. During his employment, he had access to the proprietary source code that he was accused of stealing. In 2015, Xu told an undercover officer that he used the stolen code to develop clustered file system software to sell to customers.

The government had gathered crucial evidence against Xu that proved the elements of theft of trade secrets, including the fact that the source code was a trade secret. A trade secret is code, programs, technology, devices, data, processes, designs, techniques or other proprietary information that derives an independent economic value from not being generally known and not readily ascertainable. Of vital relevance is how the owner of the trade secret protects the information. 

The FBI’s Findings

A company must allow its software engineer access to computer code in order for him to perform his job function. However, according to the FBI announcement, IBM took “significant precautions to protect the Proprietary Source Code as a trade secret,” in these ways:

  • The code was stored behind a company firewall 
  • The company limited access to the code by a select set of IBM employees
  • An IBM official determined which employees were permitted to have access to the code
  • IBM employees were required to sign a confidentiality agreement in relation to the proprietary information

The FBI also noted that IBM took these precautions because the code and software had economic value that depended on its secrecy. Both Xu and his intended buyers would benefit from using software into which IBM invested decades of work. Had IBM failed to take precautionary steps or had the information not been considered economically valuable, Xu would have had a viable defense. He might have acted unethically, but he could not be convicted of stealing a trade secret unless the government proved that the code was, in fact, a trade secret. 

Undercover agents posed as a financial investor and a project manager of a start-up tech company. Xu transmitted the proprietary code to the agents and offered to build a network based on the code. Xu clearly knew that the code was proprietary, which shows his intent to commit trade secret theft, another crucial element, because he took action to conceal the origin of the code. 

This case highlights the importance of retaining counsel immediately after arrest. An experienced lawyer knows how to attack each element of the crime. Contact White Collar Defense today for help with your case.

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