Huawei, Accused of Bullying Ex-Worker, Claims He's a Thief
Visitors register at the Huawei Connect 2017 conference in Shanghai, China. (Photographer: Qilai Shen/Bloomberg)

Huawei, Accused of Bullying Ex-Worker, Claims He's a Thief

(Bloomberg) -- Huawei Technologies Co. said CNEX Labs Inc. owes it almost $85.7 million and that the Silicon Valley startup’s co-founder stole critical and secret technology related to data storage.

While working at Huawei, CNEX co-founder Yiren “Ronnie” Huang “misused confidential information,” Huawei lawyer Michael Wexler told jurors at the beginning of a trial in federal court in Sherman, Texas. “He poached employees and he misused trade secrets.”

Lawyers for Huang and CNEX said they were the victims of a plot by the Chinese telecom company to steal Huang’s ideas. CNEX’s lawyer, Deron Dacus, accused Huawei of “three years of bullying and intimidation” and said CNEX was entitled to $24.5 million for the theft of its trade secrets.

The dueling tales of corporate espionage, disloyalty and intrigue will be presented to an eight-person jury over the next three weeks in a courtroom about an hour north of Dallas. The trial is likely to give some insight into a company that’s at the center of a global battle between the U.S. and China that’s sucked in political allies and businesses.

It also marks a rare instance of Huawei accusing someone of stealing its secrets. The Chinese maker of networking gear is fighting allegations from the Trump administration that it stole critical phone-testing technology from T-Mobile USA Inc. Huawei has denied wrongdoing.

The dispute in Texas is over solid state drives, which are made up of chips called Nand flash memory that store information on semiconductors. They access data much more quickly than traditional magnetic disk-based technology. It’s critical to storing and retrieving the massive amounts of data kept on cloud storage.

Huang, who had worked in the field for decades, was hired at Huawei’s FutureWei unit in Santa Clara, California, in January 2011 to oversee a group researching storage techniques that could be integrated into Huawei’s networking products.

Huawei said that it hired Huang for his expertise only for him to start a competing firm with proprietary information developed at the company. Other former Huawei employees left to work at CNEX, including one that Wexler said was paid by Huang to make off with a hard drive of information.

Huang said his hiring was a ruse so Huawei could steal his know-how. Huang’s lawyer Bryan Kohm told jurors they would see a series of Huawei emails showing the company’s plan. CNEX lawyer Dacus said CNEX “had no knowledge of and never had any Huawei documents.”

District Court Judge Amos Mazzant, who is presiding over the trial, also is overseeing a Huawei lawsuit against the U.S. government. The company is asking the judge to rule that a ban on federal agencies and contractors buying its gear is unconstitutional.

Huawei and CNEX have been aggressive in their accusations against one another. In a court filing, CNEX lawyers claimed a high-ranking Huawei executive led the effort to steal Huang’s technology, and the firm’s general counsel Matthew Gloss claims Huawei “has tried to bury us with litigation.”

CNEX has the backing of a Republican congressman whose Texas district is to the west of Dallas. Representative Mike Conaway called it “yet another example of a Chinese company, backed by the Chinese Communist government, attacking American businesses in our own court system.”

Huawei called CNEX’s statements about the Huawei executive “unsubstantiated” and said it was “confident the full facts will vindicate Huawei from these misleading claims.”

The case is Huawei Technologies Co. v. Huang, 17-893, U.S. District Court for the Eastern District of Texas (Sherman)

©2019 Bloomberg L.P.

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