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Composition of a Chinese Trade Secrets Theft Enterprise–Case Study: FINAL

In January 2016, U.S. federal prosecutors (Department of Justice-DOJ) in Pennsylvania indicted five people for allegedly stealing trade secrets from UK pharmaceutical company GlaxoSmithKline (GSK).

One of which was considered one of the top protein biochemists in the world (YUE XUE a.k.a “Joyce.”)

Two of the accused were scientists at GSK’s U.S. facility in Pennsylvania. A third was the twin-sister of one of the GSK scientists, and another was the husband of the other GSK scientist.

According to the 2016 DOJ press release, the theft occurred in order to benefit a Chinese company.

The following five (5) defendants were charged with trade secrets theft:

  • YUE XUE; (GSK scientist)
  • TIAN XUE (her twin-sister)
  • LUCY XI (GSK scientist)
  • YAN MEI; (her husband)
  • TAO LI

Up to very recently, three of the five defendants had pled guilty.

Now, according to last week’s (January 3, 2022) DOJ press release, a fourth defendant pled guilty: LUCY XI.

The fifth accused appears to have fled back to China and considered a fugitive: YAN MEI.

In 2018 and 2019, I wrote a series of blog posts that served to analyze the manner and means used by the criminals to steal trade secrets from the pharmaceutical company, as well as the investigative steps taken by the FBI.

I have extracted the main points from each of my six (6) previous posts to give some context to the case.

LAUNCH OF INVESTIGATION

This FBI criminal investigation was started like so many others–somebody heard the criminal directly or indirectly brag about what they were doing.

Here’s essentially a quote from the criminal complaint:

“Informant #1 stated that “Joyce’s” twin sister bragged about being hired by a Chinese pharmaceutical company and stated she was being paid very generously.

“Informant #1 also stated that “Joyce” and twin sister’s mother, who resides in the People’s Republic of China, was also being paid approximately $165,000. a year from a Chinese pharmaceutical company.

“Joyce’s twin sister bragged to Informant #1 that a ‘big payday’ was coming in the future from the Chinese pharmaceutical company.”

Although we don’t know how this informant came to the FBI’s attention from a review of public court records, it appears the informant overheard, or had a conversation with “Joyce’s” twin sister. But, regardless of where it occurred, we cannot overstate the fundamental importance of employees in such trade-secrets-packed companies to pay attention to what others say around them.

“If you hear something, say something.”

Don’t immediately dismiss absurd sounding comments–as absurd. Often criminals cannot help telling others how smart they think they are.

Trade secrets protection “mindfulness” is key.

INVESTIGATIVE STEPS

  • FBI served search warrants on Google for personal e-mail account information for the five defendants, which was subsequently provided
  • Search warrants were issued to search the work areas of the two GSK employee-defendants to include their computers
  • GSK scientists assisted the FBI in identifying proprietary GSK trade secrets embedded in the defendants’ emails
  • The FBI also retained an independent expert (not associated with GSK) who came to the same conclusion

SAMPLES OF THE STOLEN TRADE SECRETS

  • GSK powerpoint presentation
  • Research paper with GSK letterhead on each page
  • The document clearly identified as being GSK information and clearly marked, “CONFIDENTIAL”
  • GSK documents with the email instruction from one of the GSK employees, “Please do not spread.”
  • GSK powerpoint presentation and training lecture           

HOW WOULD THE CRIMINALS PROFIT?

The defendants planned to profit in multiple ways:

  • They planned to sell the GSK trade secrets as their own research
  • They intended to use GSK trade secrets to secure lucrative consulting contracts
  • They intended to do additional research to finalize and perfect GSK products still in development
  • They intended to patent some GSK products
  • They intended to use GSK products to bolster their personal business entities reputation

MONEY LAUNDERING

To hide the profits, “Joyce” titled her interest in her personal business entity and the proceeds of the crime in the names of family members and other associates.

Here’s a quote from the criminal complaint, “YU XUE (a/k/a “Joyce”) instructed two of the other defendants to hide the proceeds of the fraud scheme in the name of her twin sister in an attempt to prevent the criminal conduct from being traced back to “Joyce.”

MANNER AND MEANS

The following is essentially the “Manner and Means” the five defendants used to carry out their crimes as described in the indictment:

The two GSK employees stole GSK trade secrets and would typically do the following:

  • “Joyce” would e-mail the trade secrets from her work e-mail account to her personal e-mail account
  • She then emailed the trade secrets from her personal e-mail account to the personal e-mail accounts of the other defendants (including her sister and brother)
  • The other GSK scientist emailed the stolen information to her defendant-husband

And the cycle would repeat itself, over and over again.

In one of many telling email exchanges “Joyce” had with her co-conspirator twin sister, the twin sister asked, “…is ok you sent this plan from your company email?”

            And “Joyce” assured her, “it is ok.”

DEFENDANTS CRIMINAL BUSINESS STRUCTURE

The following is the business structure of the trade secrets theft enterprise as described in the indictment:

Three of the five defendants formed three corporations (one in Delaware–the other two were off-shore entities) to market, sell, and ultimately profit from the stolen GSK information.

LESSONS LEARNED

This case reminds us of two fundamental trade secrets protection strategies:

  1.  Establish and maintain a vigorous company email monitoring program; and
  2.  Conduct periodic background checks of employees who have access to complex and valuable trade secrets.

(See the below screenshot of the company registered by the defendants–to facilitate their theft operation–publicly listed on the Delaware, Department of State, Division of Corporations site. “RHENOPHARMA.”)

When you consider the potential impact these two basic IP protection strategies could have had in disrupting this trade secrets theft enterprise sooner, similar companies–going forward–should zealously implement those actions.

Instead, the thieves could disseminate countless trade secrets from 2012 until on or about November 3, 2015.

Terminating this scheme should not have depended on one informant (as important as informant development is) overhearing or being bragged to. That was an exceptional opportunity (in this case) that companies cannot rely on.

FINAL THOUGHTS

Bad actors will go to almost any lengths to steal your IP to avoid a massive commitment to research and development ( R&D) themselves.

As an IP protection and investigations consultant and blogger, I am always interested in learning more about how different trade secrets theft conspiracies work.

Uncovering the mechanics of these operations teach us how to more effectively defend against it, and help minimize exposure.

ADDITIONAL READING

See the following links to read the previous six (6) posts: Part 1 – Part 2 – Part 3 – Part 4Part 5 and UPDATE.

DisclaimerIPProbe.Global is a service to the professional IP community. While every effort has been made to check information in this blog, we provide no guarantees or warranties, express or implied, regarding the content provided in IPProbe.Global. We disclaim all liability and responsibility for the qualification or accuracy of representations made by the contributors or for any disputes that may arise. It is the responsibility of the readers to independently investigate and verify the credentials of such persons and the accuracy and validity of the information provided by them. This blog is for general information only and not intended to provide legal or other professional advice.

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Ron Alvarez is an IP investigations and protection consultant and writer in New York City. He is a former NYPD lieutenant where he investigated robbery, narcotics, internal affairs, and fine art theft cases. Ron has since coordinated the private investigation of international fraud and money laundering cases, as well as IP-related investigations and research involving the four pillars of IP: copyright, patents, trademarks, and trade secrets. Ron is a graduate of the FBI National Academy and earned a B.A. in Government and Public Administration from John Jay College of Criminal Justice in Manhattan. He has written a number of articles for various investigative publications, as well as published "The World of Intellectual Property (IP) Protection and Investigations" in November 2021.

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