Federal Prosecutor Calls Two Engineers "Traitors to NetLogic" In Opening Statements to the Jury in Rare Economic Espionage Prosecution

We want to thank the San Jose Mercury News and ComputerWorld for publishing courtroom accounts of this rare Economic Espionage Act prosecution of Lan Lee and Yuefei Ge.

Calling Lee and Ge "traitors" to NetLogic, Assistant U.S. Attorney Matthew Parrella told the jury that the case was about stealing cutting-edge chip designs to set up a company that was backed by a Chinese venture capital program and China's military.

"There is no doubt about it," the prosecutor said. "They planned to build, market and sell in China the chip that is a direct competitor."

Parrella told jurors that the government would present a "treasure trove" of evidence that the two engineers conspired to steal NetLogic's technology, including e-mails and material found
on their home computers linking them to business plans with China and its venture capital arm, known as the "863 program." Government attorneys also said they have evidence the two stole company secrets from Taiwan Semiconductor.

But while the prosecutor unveiled how the alleged scheme was exposed, including anonymous e-mails and phone calls to NetLogic executives and the FBI from Ge's wife, defense lawyers offered a very different portrait.

In statements to the jury, defense attorneys August Gugelmann and Tom Nolan said the men were carrying out the most commonplace of Silicon Valley stories — using their engineering know-how to build their own company with their own ideas.

Lee and Ge, they said, did not steal trade secrets and never intended to benefit China.

"This case isn't really about economic espionage, it's not about spying and it isn't about stealing trade secrets," Gugelmann said. "What this case is really about is our clients wanting to start a company of their own based on their own ideas, their own design."

The defense also made clear it would attack the FBI's pursuit of the engineers, saying Ge's wife tipped off agents because she didn't want her husband to start his own business but that there was never any evidence to back up her claims they were stealing from NetLogic. She is expected to testify in the trial.

The case against Lee, a Palo Alto resident, and Ge, of San Jose, is the second in the nation to go to trial under the specific provision of the 13-year-old law making it a crime to steal technology to aid a foreign government. ComputerWorld has an informative piece on the trial and prosecution theories here: http://news.idg.no/cw/art.cfm?id=768E949E-1A64-67EA-E4C550C1C0E32C36. [Note: we are quoted in the piece but it is informative, nonetheless].

We'll keep watching this one for you. Of particular interest to us is the development of the evidence concerning this "863 program" - a program set up by The People's Republic of China to generate technologies that will benefit and enrich China. You can read the Chinese government's explanation of this program here: http://www.most.gov.cn/eng/programmes1/200610/t20061009_36225.htm.

This is the hottest trade secrets trial we've covered and it really is a showdown between Silicon Valley's interests and those of a foreign government suspected for years of sponsoring technology theft and copying at the highest levels. Stay tuned . . . .