Tempted by Tappy: Why Huawei is accused of trying to steal trade secrets

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In May 2013, Huaweiallegedly made a fateful decision to send an employee known as "F.W." to Seattle.

According to an indictment for wire fraud and attempted theft of trade secrets, the company was determined to get its hands on proprietary technology belonging to one of its partnersandcompetitorswireless giant T-Mobile.

The item in question was a robot named Tappy, which T-Mobile had designed to test the vulnerabilities of mobile phones. The technology was considered so valuable it was kept in a sealed laboratory, with access granted only under the strictest terms of non-disclosure.

Prosecutors claim Huawei was desperate to develop its own version of Tappy.Several of the company's U.S.-based employees had access to the robot lab as part of Huawei's professional relationship with T-Mobile.

The indictment claims Huaweiemployees in the U.S.let F.W. into the lab after he arrived in Seattle. He allegedly took pictures and gathered technical information before he was discovered by a T-Mobile employee and ordered to leave.

The indictmentand F.W.'s alleged attempts to spend time alone with Tappy read like a corporate spy novel.It waspart of a raft of charges announced in January against both Huawei and the company's chief financial officer, Meng Wanzhou.

Meng,who is living under a form of house arrest in Vancouver,faces possible extradition to the United States for allegedly helping Huawei violate sanctions against Iran.

Not surprisingly, her situation has drawn far more attention than Tappy's torrid tale.But Huawei's alleged attempts to copy the robot highlights an issue that forms part of the bigger backdrop to the Meng case theft of intellectual property.

Sincere, lucrativeform of flattery

The charges against Meng aren't the first time corporate espionage has ended in a criminal complaint, but they come at a particularly fraught time in the relationship between the U.S. and China.

Intellectual property theft provided the rationale under the terms of the U.S. Trade Act for President Donald Trump's 2018 decision to impose tariffs on billions of dollars' worth of Chinese goods. By some estimates, Chinese intellectual property theft costs the U.S. and its allies as much as $600 billion a year.

Richard Gold, a McGillUniversity professor and the founding director of the Centre for Intellectual Property Policy, said it's nosurprise Chinese companies might violate the patents and copyright of their Western counterparts.

China has developed rapidly, he said, but didn't start off with a strong research or industrial base. The country is catching up when it comes to innovation, but a large part of the Chinese economy is still based on an ability to produce inexpensive versions of Western products.

Imitation isn't just the sincerest form of flattery, Gold said, it's also quite lucrative.

"But that will change over time, as China goes from being an imitator to an innovator," Gold said.

"We saw this history in the United States. When the United States was industrializing, they were if you wish stealing ideas from the U.K. and Europe, and not giving them any protection."

Tappy's tangled tale

T-Mobile sued Huawei over the alleged theft of the Tappy technology in a case that ended in a $4.8 million US civil settlement in 2017.Huawei has cited the agreement as part of the reason why the companybelievesa new criminal indictment for stealing trade secretsis unwarranted.

According to the charges, T-Mobile developed Tappy in 2006 as a way to test the performance of phones by recording and tracking responsiveness and measuring the battery life used for particular tasks.

"T-Mobile experienced a significant decline in customer returns after Tappy was implemented," the court documents read. "Tappy represented a valuable asset that T-Mobile had the option of further monetizing."

Another Huawei employee who had legitimate access to Tappy "A.X." is accused of surreptitiously placing one of Tappy's robot arms into his laptop bag and secretly removing it from the laboratory.

He "described the incident as a 'mistake' and offered to return the part," the indictment reads."A.X. returned the stolen robot arm to T-Mobile. T-Mobile thereafter revoked A.X.'s access to the laboratory and no longer allowed any Huawei U.S.A. employees in the facility without an escort."

The indictment claims Huawei conducted an "internal" investigation to "affirmatively mislead T-Mobile about what happened in T-Mobile's laboratory."

Huaweisays both the criminal allegations against the company and Meng are unfounded.

Huawei has said it "denies that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments, is not aware of any wrongdoing by Ms. Meng, and believes the U.S. courts will ultimately reach the same conclusion."

Plans for fighter jets stolen

It's not the first time Huawei has been accused of stealing intellectual property. The company has been involved in previous civil suits with Motorola and Cisco.In all cases, Huawei has denied any wrongdoing.

The situation is also not the first time that alleged Chinese theft of intellectual property has resulted in a criminal indictment.

Su Bin, a 51-year-old businessman who had been living in the Lower Mainland of B.C., was sentenced in Seattle to nearly four years in jail in 2016.

He pleaded guilty to conspiring to hack into computer networks of major defence contractors to steal plans for fighter jets and a military transport plane.

Su emailed Chinese-based conspirators to tell them what people, companies and technologies to target.Once they hacked into networks, he guided them to files and then he translated the information they stole from English into Chinese.

'Only so much you know'

Gold said cases where criminal activity is alleged in the theft of intellectual property usually have as much to do with the way in which the information was accessed as the theft itself.

In both the Huawei and Su cases, some form of trespass and espionage is alleged.

Gold doesn't expect any global increase in criminal cases, although Trump's hard line on China does make it a possibility.

More civil cases, though, are another matter.

"In the electronics world, it's almost impossible not to infringe on someone's rights, because there's just so much out there and there's only so much you know," Gold said.

"So in some industries, you take the risk, you wait for [the rights holder]to contact you and they usually negotiate some kind of settlement agreement."