Authorities Investigating Whether BASF Employees Leaked Tech to China

by Chris Brook on Wednesday January 9, 2019

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Former employees at the company are being accused of leaking electronic-grade chemical technologies to a Chinese company.

Authorities in Taiwan are looking into whether former employees at BASF, the largest chemical producer in the world, leaked trade secrets to a Chinese rival.

Police there arrested six suspects - five former BASF employees, one current BASF employee – last week on suspicion they may have took proprietary data on electronic manufacturing processes and technology and supplied it to Jiangyin Jianghua Microelectronics. Jiangyin Jianghua, based in Jiangyin, a city just outside of Shanghai, makes electronic chemicals for manufacturing LED lights, lithium batteries, and ultra-clean high purity reagents and photo resist reagents for semiconductors.

BASF’s losses from the alleged theft could total 100 million euros, $114 million USD, according to a source who spoke to Agence France-Presse, which reported on the news this week. That source, an official who had knowledge of the situation, told the publication the ex-employees were caught before they could sell the most confidential data.

Jianghua offered the employees $5.8 million for the information in order to build a new factory, investigators with Taiwan's Criminal Investigation Bureau (CIB) said in a press conference given on Monday. The employees had already received some of the payment, $1.3 million, after it was deposited in two Samoan bank accounts, last month, the CIB added.

The timeline around and how exactly the suspects appropriated the technology are unclear. 

According to a report from Taiwan's national news agency on Monday, Jianghua allegedly hired a retired BASF employee who headed up BASF's Taoyuan factory to work for the company for a monthly salary of 90,000 Chinese yuan, or $13,383 USD in 2017. The employee purportedly went on to recruit engineers from the factory to assist him. Nikkei, citing a conversation with Taiwanese investigators, said Tuesday that some of the data Jianghua obtained were formulas for ultrapure electronic-grade ammonia water and sulfur, materials used to manufacture semiconductor chips.

Five of the employees are still being detained according to reports; the remaining employee has been released on bail but is forbidden from leaving Taiwan.

BASF issued a statement over the weekend saying that the company was aware of the situation, that it has suspended the employee involved, and is working with local law enforcement to carry out an investigation.

The company claims it has also taken steps to harden its systems in wake of the incident.

“BASF is committed to investing in, and protecting, Intellectual Property resulting from research and development as well as production know-how both by BASF and our customers, the company said Sunday, “To this end we have established systems and policies which minimize risks. In light of this situation, we will further reinforce these information protection systems.”

Intellectual property theft has long been an issue for data-rich companies, both U.S.-based and abroad.

Intensified by the ongoing trade war, IP theft has especially run rampant in China, where the efforts are being carried out in order to built up the country's own tech industry and often state-sponsored.

It was only a few weeks ago the Department of Justice arrested a Chinese national after he allegedly stole trade secrets worth more than $1 billion from his employer, Phillips 66. The suspect, who was subsequently let go, reportedly accessed files pertaining to lithium-based battery systems. Upon investigating, the FBI ultimately found an employment agreement from a Chinese company that develops production lines for lithium ion battery materials on the suspect's laptop.

That news came shortly after one of 2018’s biggest stolen trade secrets stories, when the DOJ unsealed charges against a Chinese company and a Taiwanese company alleging they stole trade secrets from Micron, a U.S. memory chip manufacturer. That data was valued between $400 million and up to $8.75 billion, according to Micron.

In Washington, on a legislative level, efforts continue to be made to combat intellectual property theft.

Last week Rubio and Mark R. Warner (D-VA) introduced a bill to establish a new office, the Office of Critical Technologies and Security, in hopes of better protecting intellectual property from state-sponsored technology theft.

“China continues to conduct a coordinated assault on U.S. intellectual property, U.S. businesses, and our government networks and information with the full backing of the Chinese Communist Party,” Marco Rubio (R-FL) said Friday. “The United States needs a more coordinated approach to directly counter this critical threat and ensure we better protect U.S. technology.”

On Monday the Trump administration kicked off an initiative to encourage U.S. firms to better safeguard their trade secrets. The campaign, launched by the National Counter-Intelligence and Security Center, is named "Know the Risk, Raise Your Shield,” and designed to highlight foreign intelligence threats faced by U.S. companies.

Tags: IP theft

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Chris Brook

Chris Brook is the editor of Data Insider. He is a technology journalist with a decade of experience writing about information security, hackers, and privacy. Chris has attended many infosec conferences and has interviewed hackers and security researchers. Prior to joining Digital Guardian he helped launch Threatpost, an independent news site which is a leading source of information about IT and business security for hundreds of thousands of professionals worldwide.