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Digital Guardian's Blog

Jury Convicts Ex-Employee in Tech Trade Secret Theft Case

by Chris Brook on Monday September 13, 2021

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The conviction came just days before National Insider Threat Awareness Month, a government campaign designed to boost awareness around insider threats and identifying risky behavior.

The gears of the American court system continue to grind throughout the COVID-19 pandemic, just slower for some than others.

For instance, it took nearly 10 years but one of the bigger tech trade secret theft stories of the last decade saw a conviction late last month when a former employee at a California tech company was found guilty of possession of stolen trade secrets, in this case proprietary LCD chip technology, from his employer.

A California federal jury cleared two former employees of the employer, U.S. Applied Materials, Inc. - a company that makes equipment for the manufacture of semiconductor (integrated circuit) chips for electronics – of conspiracy but found a third employee guilty of possession of stolen trade secrets.

The trial, which began on July 27, is based around allegations that the employees were engaged in a conspiracy to steal Applied Materials' data - trade secrets that took years and millions of dollars to create - and later use it to form a competing startup, Envision.

We learned earlier this summer, in August, that the company asked the FBI to investigate and charge the workers with IP theft. While the FBI looked into the case, one of the agency's special agents, Ann Trombetta, acknowledged during the trial that the company never turned over emails that showed some of the company's executives encouraging one of the defendants to launch their own startup, shortly after announcing that his division would soon be shuttered.

As Connie Bertram, the founder of Bertram LLP, an employment counseling and litigation firm who’s been following the case, notes, counsel for the defendants showed evidence that the claims against them were driven by Applied Materials corporate counsel, which launched a lawsuit against them after they were fired.

"Executives stated that they wanted to keep Chen 'engaged' so that he would not move to a competitor or lure away “top technical people” after he was terminated by Applied Materials," Bertram writes. When asked, the state court balked at a request to issue a temporary restraining order; after which, Applied Materials contacted the FBI.

The company's counsel, the defense claims, omitted emails in which executives encouraged one of the employees, Liang Chen, to find investors to fund his startup and hinted at a potential licensing deal with it.

Chen, along with two other employees, Wei-Yung Hsu and Robert Ewald, were ultimately cleared of criminal charges. According to court documents, a federal jury found Donald Olgado, who was fired from the company in 2013, guilty in 11 of the 12 counts of possession of stolen trade secrets.

The four were initially charged with conspiracy to steal trade secrets, under the allegation they planned to use them to launch a US/China-based competitor, back in 2017.

Around that time, it made clear the trade secret theft was geared around the theft of Applied Materials’ metal organic chemical vapor deposition technology, or MOCVD, a process for growing crystalline layers by spraying different chemicals on wafers. In the initial complaint, it was alleged the four worked together using personal email to discuss plans to steal data, including having some lower level employees download confidential materials, including more than 16,000 drawings, and upload them to a Google Drive account.

Despite the fact that there was only one conviction, Applied Materials celebrated the news, issuing a statement several days after the verdict that it was grateful the court found its technology valuable and insisting that it was committed to protecting its trade secrets.

"At Applied, our innovations make possible a better future, and our intellectual property is our lifeblood," said Teri Little, Chief Legal Officer and Corporate Secretary of Applied Materials. "We are committed to vigorously protecting our trade secrets and those of our trusted partners, including by seeking redress in state and federal court, as necessary, to protect those trade secrets, as we did in this case."

The company said the jury's findings coincide with a pending civil case based on the same trade secret theft, although it’s unclear exactly whether Olgado is implicated by it.

The conviction came just a few days before September, a month that several US government agencies have dubbed National Insider Threat Awareness Month.

The idea for the month, which is overseen by the National Counterintelligence and Security Center (NCSC), the National Insider Threat Task Force (NITTF), the Office of the Under Secretary of Defense Intelligence and Security, the Defense Counterintelligence and Security Agency, and the Department of Homeland Security, is to devote attention to education around insider threats, of which the Applied Materials case is a textbook example, and its indicators.

One of the goals of the program is to spread awareness around the role of insider threat program, something that's critical to have in place when it comes to mitigating theft and protecting intellectual property.

Departing employees can always pose a risk when it comes to confidential information; the Applied Materials case is yet another example of how attuned executives need to be when it comes to the level of access employees have to trade secrets.

While three of the four ex-employees were acquitted, as targets of a federal investigation, they still had to endure nine long years of prosecution and scrutiny over their actions. Having an insider risk program, something in place to detect and mitigate data loss, can go a long way in ensuring the safety and protection of valuable data.

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.