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Researcher Pleads Guilty to Scientific Trade Secret Theft

by Chris Brook on Monday August 10, 2020

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The researcher worked for the hospital for 10 years but acknowledged last month that and her husband stole its data and used it to launch two companies, one in China, one in the US.

A researcher suspected of conspiring to steal scientific trade secrets has acknowledged her wrongdoing and has plead guilty to stealing trade secrets related to pediatric healthcare.

The researcher, Li Chen, was initially charged last fall along with her significant other, Yu Zhou, after reportedly stealing medical trade secrets from a research facility at Nationwide Children’s, a children's hospital in Ohio they worked at for 10 years.

The secrets were related to exosomes and exosome isolation; exosomes, medically speaking, are structures composed of lipid molecules commonly used to carry out research on cancer, clinical care, and diagnostics monitoring.

Exosomes can also help detect medical conditions like necrotizing enterocolitis (a condition found in premature babies), liver fibrosis and liver cancer, according to the Department of Justice's note about Chen's guilty plea.

Chen formally plead guilty two weeks ago, acknowledging she had conspired to steal the trade secrets – five in total – in addition to conspiring to commit wire fraud around the data.

We learned via last year's indictment that the pair sent emails to China with files, JPGs, .PDFs, Powerpoint documents, Word, and Excel documents attached - each contained the hospital's "proprietary and non-public" exosome-related data.

In a plea agreement filed in April but not made public until July, Chen said she monetized one of the trade secrets she stole by starting a company in China, with help from the government there, then creating and selling exosome "isolation kits."

In exchange for the data, Chen received payments from China, including the country's State Administration of Foreign Expert Affairs and the National Natural Science Foundation of China.

“Once again we see the People’s Republic of China (PRC) facilitating the theft of our nation’s ingenuity and hard work as part of their quest to rob, replicate and replace any product they don’t have the ability to develop themselves,” John C. Demers, Assistant Attorney General for National Security, said last month during a press conference.

Last September's indictment revealed that on top of the then purported trade secret theft, the two founded two companies in the wake of their theft, one, a Chinese company - Beijing GenExosome - it used to sell the aforementioned exosome isolation kits, and another in 2017 actually on U.S. soil - GenExosome Technologies Inc, which was co-formed with help from Avalon GloboCare Corp.

Both companies were formed – and used its trade secrets in one form or another - without the knowledge of Nationwide Children’s.

"The complained-of acts were done without RINCH's [The Research Institute at Nationwide Children's Hospital] authorization, knowledge, permission, or license despite the fact that at least Defendants Zhou and Chen were aware of RINCH policies regarding confidential information, intellectual property (including the RINCH Trade Secrets), conflicts of interest, and outside activities," last year's indictment read.

The hospital, which is based in Columbus, Ohio, took reasonable measures to protect its IP and trade secrets, according to the court but it clearly wasn't enough to prevent the stealthy theft of data from researchers who for years had cultivated the trust of the hospital.

As part of the plea, Chen has to forfeit $1.4 million, in addition to the stock of those two previously mentioned companies - 500,000 shares of common stock of Avalon GloboCare Corp. and 400 shares of common stock of GenExosome Technologies Inc.

The case was one of thousands involving Chinese espionage and data theft worked on by U.S. officials as of late. The FBI's director Christopher Wray, said earlier this summer the agency opens a new "China-related counterintelligence case about every 10 hours” and that it currently has roughly 2,500 cases involving it on its books.

As only Chen is mentioned in the DOJ's press release, not Zhou, it appears as if there's more to come on this case.

The United States' attorney moved to seal the case involving Zhou and Chen last month, "apprehensive that one or more persons may flee the juristdiction or that possibly evidence may be destroyed if they become aware of the existence of the Indictment and the Arrest Warrant."

Tags: Industry Insights

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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.