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Both federal and state laws prohibit the Intentional theft of trade secrets, which is subject to civil and criminal liability in the US.
INTRODUCTION
For Criminal Theft of Trade Secrets-Part 1, CLICK HERE.
In Part 2, we cover a recent federal criminal case on conspiracy to commit theft of trade secrets under 18 US Code Section 1832.
In August, a district court in the Northern District of California accepted guilty pleas from two former biotech company executives for conspiracy to steal trade secrets and commit wire fraud. In this case, the government charged that the defendants knew of the trade secret thefts and failed to intervene.
DISCUSSION
Biotech industry executives continue to make headlines.
In the Northern District of California, a district court recently convicted two company executives — the company’s former Chief Executive Officer and Chief Operating Officer — for conspiracy to steal trade secrets and commit wire fraud. The two men pleaded guilty in August and face sentencing in December 2021.
The case is United States v. Jordanov, and is notable because the government indicted two executives for conspiracy to steal trade secrets under 18 USC § 1832, which carries a potential maximum prison sentence of 10 years.
Here are the details of the case as reported by the United States Department of Justice:
Raco Jordanov and Rose Lin – former Genentech Chief Executive Officer and Chief Operating Officer, respectively – left Genentech and founded JHL Biotech.
JHL Biotech used Genentech’s trade secret information to expedite their own production of generic drugs and reduce their costs to produce generic versions of Genentech medications. Specifically, the defendants paid a Genentech scientist to provide information to JHL Biotech, with payments sent to the scientist through her husband.
Both Jordanov and Lin knew that JHL Biotech employees used Genentech’s stolen confidential documents but did nothing to prevent it.
Both Jordanov and Lin were charged, among other charges, for conspiracy to commit theft of Genentech’s trade secrets under 18 USC § 1832.
The DOJ, the Internal Revenue Service ̶Criminal Investigation (IRS-CI), and the Federal Bureau of Investigation, all worked together on the case.
Jordanov’s Conduct
Under the leadership of CEO Jordanov, JHL Biotech obtained confidential, proprietary, and trade secret information from Genentech and used it to accelerate their production timeline and reduce their costs to develop and market generic versions of Genentech’s drugs.
JHL Biotech was not authorized to have or use Genentech’s trade secrets.
Jordanov hired former Genentech employees to work at JHL Biotech. When he found out that those employees brought over to JHL Biotech certain proprietary information and confidential documents stolen from Genentech, he condoned it.
Jordanov knew about and accepted their illegal behavior, taking no steps to discourage his employees.
In the grand jury indictment, prosecutors alleged that Genetech’s trade secrets allowed JHL Biotech to “cheat, cut corners, solve problems, provide examples, avoid further experimentation, eliminate costs, lend scientific assurance, and otherwise help JHL Biotech start-up, develop, and operate its business secretly using the intellectual property and scientific know-how taken from Genentech.”
When questioned, Jordanov admitted his suspicions that people brought over information from Genentech in violation of Genentech non-disclosure agreements and employment contracts.
Between 2014 and 2018, Jordanov personally used and instructed others to use confidential, proprietary, trade secret Genentech documents and information relating to Genentech’s technology.
He used Genentech’s confidential and tech transfer documents to develop, construct, and operate new facilities for JHL Biotech, including its manufacturing facility in Wuhan, China.
Jordanov instructed the employees to whom he sent the documents not to share them with others inside the company.
Jordanov took steps to obstruct justice. In September of 2018, after the criminal investigation had begun, Jordanov instructed at least one JHL employee to delete incriminating emails from Jordanov. Jordanov also instructed the employee to tell others to delete emails and attachments they received from Jordanov.
Lin’s Conduct
Jordanoff’s co-defendant Lin hired a full-time scientist from Genentech in 2014 to secretly work to help JHL Biotech develop generic drug formulas that JHL Biotech would sell.
Lin encouraged JHL Biotech scientists to ask this full-time Genentech scientist, Xanthe Lam, for assistance or information, knowing that Xanthe Lam was not authorized to work for JHL Biotech.
Lin also knew that Xanthe Lam did not want Genentech to learn of her work for JHL Biotech.
Lin agreed to pay Xanthe Lam’s consultancy fee through her husband, Allen Lam. To further conceal Xanthe Lam’s work for JHL Biotech, it always paid her through Allen Lam.
Lin agreed to conceal Xanthe Lam’s work for JHL Biotech because Lin knew Genentech would not permit Xanthe Lam to work for another biotech company.
Lin also directed JHL Biotech employees to use Allen Lam’s JHL email address to email questions to Xanthe Lam.
Lin also instructed JHL Biotech employees to refer to Xanthe Lam as “Allen” in these email communications.
When Lin learned in 2014 that JHL Biotech employees were using confidential and proprietary documents, taken without authorization from Genentech, to create a set of JHL Biotech standard operating procedures (“SOPs”), he did not discourage the conduct. JHL Biotech needed SOPs to apply for certain governmental certifications.
Lin was in charge of ensuring that JHL Biotech met deadlines set for the government certification process. Lin saw emails where JHL Biotech employees discussed using Genentech documents to create JHL Biotech’s SOPs. Lin knew the JHL Biotech employees did not have the right to use Genentech’s documents and that their actions constituted theft from Genentech.
Misrepresentations to Business Partners
In December 2016, Jordanov and Lin met with representatives of Sanofi SA, a large multi-national French pharmaceutical company, to discuss a potential strategic partnership agreement between Sanofi and JHL Biotech.
To induce Sanofi to enter into a deal with JHL Biotech, Jordanov and Lin represented to Sanofi that their company developed its technology “without infringing the intellectual property rights of other companies or using other companies’ proprietary information.”
Jordanov and Lin did not disclose to Sanofi their possession and use of stolen Genentech documents to Sanofi, and instead, Jordanov signed the partnership agreements on behalf of JHL Biotech.
By concealing these facts, Jordanov and Lin made it appear that JHL Biotech had developed its own intellectual property when, in fact, JHL Biotech had relied upon Genentech’s intellectual property, including confidential, proprietary, and trade secret information that employees stole or received without authorization.
JHL Biotech used the stolen trade secret information to obtain regulatory approval for its clinical trials and build out its manufacturing capability.
Jordanov and Lin knew that if they had revealed these facts, Sanofi would not have agreed to the corporate transaction and invested approximately $101 million in JHL Biotech securities.
Click here for the Department of Justice’s full press release announcing the guilty pleas:
The Plea Bargain
Before their guilty pleas in August, defendants Jordanov and Lin faced all of the following charges:
(1) conspiracy to commit theft of trade secrets and wire fraud, in violation of 18 USC § 371;
(2) wire fraud, in violation of 18 USC §§ 1343 and 2 (three counts each defendant);
(3) international money laundering, in violation of 18 USC § 1956(a)(2)(A) (nine counts against Jordanov and five counts against Lin); and
(4) conspiracy to obstruct justice, in violation of 18 USC § 371.
In addition, the indictment charged Jordanov with two counts of theft of trade secrets, in violation of 18 USC § § 1832(a)(1)(2)(3) and 2; and charged Lin with one additional count of making false statements to a government agency, in violation of 18 USC § 1001(a)(2).
In a testament to what can happen in the plea bargaining process, both defendants pleaded guilty to only count one of the indictment, conspiracy to commit theft of trade secrets and wire fraud. If the defendants comply with the terms of the plea agreements, the remaining charges will be dismissed at sentencing.
For their convictions, Jordanov and Lin face possible prison sentences controlled by the terms of their plea agreements, and the court may also order additional assessments, forfeiture, and restitution.
The court would impose any sentence after considering the US Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 USC § 3553.
CONCLUSION
Raco Jordanov and Rose Lin now face a sentencing hearing in federal court in December 2021. For anyone facing an upcoming sentencing hearing for a white-collar crime, there are steps one can take to obtain better outcomes.
Click below for a guide to preparing for sentencing, prison and probation, from our team at White Collar Advice:
A Step-By-Step Guide to Prepare For Sentencing, Prison & Probation
Our team at Prison Professors, an Earning Freedom company, regularly helps clients who face a sentencing hearing to obtain better outcomes.
