NEWARK, N.J. – Charges under the Economic Espionage Act likely await two Lucent Technologies scientists and a third Chinese man accused of providing information on a Lucent Technologies product to a Chinese company, legal experts say.
Bail of $900,000 in cash or property was set Monday for each of the men, who had been held without bail since their arrests May 3. None could immediately post that amount.
Assistant U.S. Attorney Scott S. Christie argued Monday that no bail should be set, contending that all three men pose a risk of flight because none are citizens and all have business interests in China.
Lawyers for the three said they maintain their innocence and are eager to remain in the United States.
There have only been about two dozen economic espionage cases brought since the federal law was enacted in 1996, but the Lucent case seems to provide "an unusually direct case of intellectual property theft," said Timothy S. Durst, a Dallas lawyer who has represented technology companies.
In such cases it is unusual to find "a trail of electronic transmissions that would show transmission of confidential and proprietary information out of the company to another," Durst said.
Court filings by the FBI outline just such a trail, including a boast by the suspects that their joint venture with the Chinese company would become "the Cisco of China" by selling a copy of Lucent's product there.
Prosecutors who are to present the case to a federal grand jury are being watched by the technology community "to see that federal authorities are interested in assisting with the protection of intellectual property rights," Durst said.
Lucent spokesman Bill Price said Monday that lawyers for the two scientists were sent letters Thursday notifying them the men had been fired.
Hai Lin, 30, of Scotch Plains, and Kai Xu, 33, of Somerset, had been on the technical staff at the Murray Hill headquarters for the telecommunications giant that was once part of AT&T Corp.
The third man, Yong-Qing Cheng, 37, of East Brunswick, worked at Village Networks, an optical networking vendor in Eatontown. A lawyer for the company, Robert A. Mintz, did not immediately know his status.
The FBI complaint charges conspiracy to commit wire fraud, which carries up to five years in prison and a $250,000 fine. Maximum penalties under the Economic Espionage Act are 15 years in prison and a $10 million fine.
Christie has said a substantial amount of the source code, "the crown jewel" of Lucent's PathStar data and voice transmission system, was sent to the trio's Chinese partner, Datang Telecom Technology Co. Ltd. of Beijing.
Christie and Lucent have said they do not know whether Datang could build a system with the information, but legal experts say that won't matter in court.
"They don't even have to show that anything was transferred. All they have to show is that there was an attempt to transfer or an agreement to transfer" for the benefit of someone other than the owner, said Stephen G. Sozio, a former federal prosecutor in Cleveland who has represented companies victimized by theft of trade secrets.
Datang has asserted it "always follows the laws and regulations about intellectual patents."
Thefts of trade secrets rarely become criminal cases, as companies often either sue or ignore the matter to avoid embarrassment, said Peter J. Toren a former prosecutor in the Justice Department's intellectual crime division.
Prosecutors commended Lucent for alerting them in February to the theft. Lucent's strategy "sends a strong message to other companies and existing employees, that if you steal our trade secrets, we're not going to ignore it but work with the government to make sure you are prosecuted to the full extent of the law," Toren said.
The PathStar system, which Lucent said was discontinued before the theft was discovered, enables Internet service providers to offer low-cost voice and data services.
It had over 90 percent of the market for such services, and generated $100 million for Lucent last year, according to court papers.
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