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Trade Secret Theft: Former Applied Materials Employee Convicted

Four former employees of Applied Materials were charged with stealing and possessing trade secrets of Applied Materials and engaging in a conspiracy to steal it proprietary LCD chip technology to launch a competing start-up. The jury found one defendant guilty of possessing stolen trade secrets, found two defendants not guilty of conspiring to steal Applied Materials’ proprietary technology and is still deciding on the charges against the fourth defendant.

The prosecutors argued that the former employees had stolen proprietary LCD chip technology, trade secrets that Applied Materials had spent six years and millions of dollars developing. However, the defense claimed that after the senior management announced that it was closing the defendants’ division, they encouraged Liang Chen who is one of the defendants, to find investors to fund a spin-off entity before being terminated in 2012.

During the trial, the jurors were shown emails from 2012 in which Applied Materials executives stated that they wanted to keep Chen “engaged” so he would not be tempted to move to a competitor or lure away “top technical people” after he was terminated. Additionally, the jurors were shown a start-up pitch that was created by Chen that allegedly proposed appointing Mark Pinto, a senior Applied Materials executive, to the board of the start-up.

Counsel for the defendants presented evidence that the claims against them were driven by Applied Materials corporate counsel, who pursued a lawsuit in state court weeks after they were terminated.  When the state court refused to issue the temporary restraining order sought by Applied Materials, the company urged the FBI in early 2013 to investigate and charge the defendants with trade secret theft.  Counsel for Applied Materials, defense counsel claimed, did not disclose to the government internal emails showing that executives encouraged Chen to launch a spin-off and showed interest in a potential licensing deal with him.

Trade secret theft is a challenge for US companies. With companies attempting to pursue prosecutions of former employees of alleged trade secret theft, criminal prosecution has been relatively rare. In the Applied Materials case, prosecutors face an uphill battle in proving the claims, including showing that the information in question was truly a “trade secret”. This is why companies need to have an established insider threat program to protect their intellectual property. Additionally, they should have the tools to alert when confidential data has been taken.  Whether the data is taken intentionally or not companies should have the ability to remedy the loss without having to go the route of involving the court system.

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This entry was posted on Thursday, September 2nd, 2021 at 2:10 pm. Both comments and pings are currently closed.