Trade Secrets Unicorn: Economic Espionage Act Charge Against Former Dow Chemical Employee for Theft to Benefit a Foreign Government - China

To our knowledge, there's been only one known conviction under the "to benefit a foreign government" part of the federal Economic Espionage Act: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/06/19/BARD11B9U7.DTL.

The Boston Globe is reporting that a scientist from Westborough, Massachusetts passed on trade secrets worth more than $100 million to China about a commercial insecticide developed by Dow Chemical Company.

Kexue Huang, 45, who worked for Dow in Indiana for five years until he was fired in early 2008, was arrested on July 13 in Massachusetts, where he now lives, on 12 counts of economic espionage to benefit a foreign government or instrumentality. Huang was also charged with five counts of interstate or foreign transportation of stolen property.

The charges, which do not involve classified or national defense information, stem from a federal indictment in Indiana that remains sealed. Garland and Alexander H. Arnett Jr., an FBI agent who testified briefly at the hearing, provided scant details except that Huang allegedly transmitted commercial secrets to Hunan Normal University in China, some by e-mail.

But Huang’s lawyer, James P. Duggan of Boston, said his client, a Canadian citizen and legal US resident, was merely a coauthor of an article in a scholarly journal published by the university in December 2008. The article was called “Recent Advances in the Biochemistry of Spinosyns’’ and dealt with insect control agents used in agriculture.

“If he was really intending to steal trade secrets which allegedly have these commercial values of hundreds of millions of dollars, he would hardly be publishing what he knew in a scholarly journal which is open to and available to the public,’’ Duggan said after the hearing. “That is not the way a proper crime is committed.’’

Dow AgroSciences, a Dow business unit based in Indianapolis, said in a statement that it was “aware of an FBI investigation into a potential violation of our company’s intellectual property rights by a former employee.’’

“We are cooperating fully with the authorities,’’ the statement said. “Because of the nature of the investigation, we are unable to comment further.’’

Huang lives in Westborough and works as a scientific researcher for Qteros Inc., a Marlborough biofuels company, and hopes to return to work.

Duggan implored the judge to release his client and let Huang report to Indiana himself. His chances of remaining free while awaiting trial would probably be far greater if Hillman lets him report to Indiana.

Duggan said Huang has no criminal record and is a well-educated man with a wife, who works as a data manager for Brigham and Women’s Hospital, and two children. His wife sat in the gallery of the otherwise empty courtroom.

“I do think it’s unusual, judge, that you could allege a larceny scheme’’ based on publication in a journal, Duggan added.

Garland countered that the allegations against Huang extended beyond the article in the journal but declined to elaborate.

Duggan said later that prosecutors contend Huang’s alleged theft of trade secrets could enable manufacturers in China to make the same variety of insecticide Dow was developing.

Hillman put off a decision on Huang’s bail until he gets more information from prosecutors.