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Federal prosecutors pursue criminal proceedings against Huawei for alleged theft of trade secrets




Federal prosecutors pursue a criminal investigation by China's Huawei Technologies Co. for allegedly stealing business secrets from US business partners, including the technology behind a robotic device such as

T-Mobile USA
Inc.

used to test smartphones, according to people who are familiar with the case.

The survey grew partly out of civil lawsuits against Huawei, including one where a jury in Seattle found Huawei responsible for abusing robotic technology from T-Mobile's Bellevue, Wash., Lab, telling the people familiar with the case. The probe is in an advanced stage and can lead to a charge soon, they said.

A spokesman for the Justice Department refused to comment.

A Huawei spokesman refused to comment. The company challenged the T-Mobile case, but admitted that two employees were wrong.

The Chinese telecommunications giant Huawei has long caused tension between Washington and Beijing. WSJ's Shelby Holliday explains what the company is doing and why it's significant. (Photo: Aly Song / Reuters)

The federal survey puts pressure on the Chinese technology giant, the world's largest producer of telecommunications equipment and the number 2 smart phone manufacturer worldwide. It comes amid a wider pressure of the Trump administration to aggressively pursue intellectual theft and technology transfer claims of Chinese companies.

Huawei has long been under the supervision of the United States, which has effectively blocked the Chinese telecommunications company from installing the equipment into large US networks due to concerns that the equipment could be used to spy on Americans.

Huawei has strongly denied that it is a security threat, saying it is owned by its employees and operates independently of the Beijing government.

US .. The pressure on Huawei has been built. Last year, Canadian authorities organized Huawei CFO Meng Wanzhou at the request of US authorities. Ms. Meng, the daughter of the company's founder Ren Zhengfei, is accused of misleading banks about the nature of Huawei's business in Iran, leading to violations of US sanctions in the country.

Ms. Meng has denied the charges, and Huawei says it follows the law in every country where it operates.

In another development, the Polish authorities last week arrested Huawei executive Wang Weijing and told him to spy on behalf of the Chinese government. Huawei was not charged with injustice, and the company on Saturday concluded Wang's employment.

On Tuesday, Huawei's founder originated a rare appearance before international media at the company's headquarters in the southern Chinese city of Shenzhen, which attempted to directly confront the concerns. Mr. Ren said Huawei didn't have it ̵[ads1]1; and would never spy on behalf of the Chinese government.

The new federal investigation against Huawei involves, in part, the claims in T-Mobile in civil law in 2014, according to the people who are familiar with the case.

At that time, T-Mobile had hired Huawei to deliver cell phones to the US wireless network operator, according to the lawsuit. T-Mobile had developed a test robot called "Tappy" to perform quality control tests on phones it sold.

During the business relationship, Huawei employees asked detailed questions about the robot and repeatedly searched for proprietary technology information, T-Mobile claimed.

In an alleged case, two Huawei employees joined a third of the test lab to take unauthorized images of the robot. An employee also tried to hide the finger distance of "Tappy" behind a computer screen, so that it would be out of a security camera, and then attempted to throw it out of the lab into his laptop bag, according to trial.

The employee later admitted that he took the component because Huawei's research and development office believed that the information would improve its own robot, the lawsuit said.

"Because of Huawei's material breach of its contracts with T-Mobile and its illegal theft of trade secrets, T-Mobile was forced to stop its ongoing handset supply relationship with Huawei at a significant cost," the lawsuit said. The robot technology it misappropriated from T-Mobile for unfairly gaining a commercial advantage worth hundreds of millions of dollars. "

In an archive that responds to T-Mobile's claims, Huawei said it did not steal trade secrets because Tappy was not a secret in it Video of the device could easily be found on YouTube, and details of the design and specifications were published in many patents, Huawei said.

The case finally came, and a jury in 2017 received T-Mobile $ 4.8 million after Huawei's breach of the contract with the network operator.

"With the jury finding misuse of trade secrets and breaches of contract, we won the first trial that we believe have revealed their mistakes and began to unravel the Huawei story, said T-Mobile's lawyer John Hueston on Wednesday.

In recent months, the Ministry of Justice has strengthened its efforts to prosecute allegations of Chinese technology theft, including by bringing criminal cases involving behaviors previously discussed in civil proceedings.

In November, there were unsealed charges against a Chinese state-owned company and its Taiwan partner allegedly stealing business secrets from the US's largest memory circuit maker Micron Technology Inc. It came after Micron stuck the companies over similar allegations.

Write to Dan Strumpf at daniel.strumpf@wsj.com, Nicole Hong at nicole.hong@wsj.com and Aruna Viswanatha at Aruna.Viswanatha@wsj.com



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