In 2013, Huawei Technologies Co., Ltd.'s storage division perceived that it was falling behind other vendors' storage technology. One such vendor was CNEX Labs, Inc. Huawei attempted to catch up by employing two techniques to acquire CNEX's technology. First, Huawei's management tricked CNEX into disclosing some of its technology by pretending that a business deal for CNEX was on the table. Second, and simultaneously, they commissioned an academician to illegally obtain and reverse-engineer CNEX's technology.
CNEX, headquartered in California, was started in 2013 to develop solid-state drives (SSDs) controllers.
One of its co-founders, Yiren Huang, had worked on such controllers and related technology areas for several years. This co-founder also worked at Huawei from 2011 to 2013 in Huawei's storage division.
By 2016, CNEX had developed some advanced controllers for SSDs - technology that Huawei did not yet have [1], [2].
Huawei engaged CNEX by pretending that it was interested in purchasing CNEX's technology. In 2015, Huawei invited CNEX to make a presentation in China. Huawei portrayed this presentation as "for the headquarter and not for the storage group." Subsequently, Huawei pressured CNEX to share a copy of the deck - the pressure came from dangling the possibility of product purchases in front of CNEX. Huawei assured CNEX that it would not share the presentation with the storage group. However, once it had the presentation, Huawei did just that. The idea was to understand bits of technology documented in the presentation and use those ideas in Huawei's storage products. This scheme to lure CNEX into disclosing its technology was sanctioned by Huawei's deputy chairman Eric Xu [2], [3].
In 2016, Huawei engaged two academicians to study CNEX's product. One academician was based at the University of Texas in Arlington. The other academician - Bo Mao - was based at Xiamen University in China [2].
Huawei gave the academician in Texas a $100,000 grant to procure equipment from CNEX. The academician initiated contact with CNEX but did not follow through. However, a different academician at the same university purchased two controllers from CNEX using the Huawei grant. The two Texas academicians knew each other, worked in the same general area of computer science, and had conducted research together [8].
Huawei cut a separate deal with Mao to create a project to reverse engineer CNEX's technology. Huawei paid Mao for this work and maintained frequent and sustained communication with Mao regarding the project.
Mao, in turn, contacted CNEX, but without disclosing to CNEX that he was conducting work on behalf of Huawei. In fact, Mao pretended that he was conducting academic research.
CNEX was motivated to work with both the Texas academicians and Mao as it thought the researchers' study would prove the superiority of the CNEX product over existing technologies.
CNEX was not yet selling its product in China. However, CNEX had lined up a Chinese distributor for future sales. At Mao's insistence, CNEX worked with the distributor to get a controller to Mao. As part of the process, Mao signed a license and non-disclosure agreement with CNEX. This agreement prohibited Mao from disclosing information about the controller to a third party, developing a competitive product, or reverse-engineering the controller [2].
In April 2017, with the controller in hand, Mao and his students attempted to understand the functionality of the various components. In the process, they ended up breaking the controller - it would not work anymore. Mao contacted CNEX and claimed that one of his students had accidentally broken the controller. Subsequent analysis revealed that the damage to the controller was not accidental - i.e., someone had attempted to learn how the controller worked by carefully dismantling a portion of it [2].
However, now, Mao and his team could not get the controller back into working condition. Mao needed some technical assistance to fix the controller (or get a replacement controller).
In June 2017, Huawei contacted the distributor to buy a CNEX controller. This contact was odd because CNEX had not previously disclosed its distributor or part numbers to Huawei. The only person who had the complete ordering information was Mao.
Huawei could only have earned the ordering information from Mao - after all, Mao had been providing regular updates to Huawei as he attempted to reverse-engineer the CNEX controller.
Had Huawei been successful in procuring the part, they could conduct reverse-engineering independently or provide Mao with additional controllers to continue (or accelerate) his work.
In July 2017, when CNEX learned of Huawei's covert attempt to buy the controller, it guessed Mao's true intentions (of reverse-engineering CNEX's technology for Huawei) and cut-off technical support to Mao [2]. Mao was now stuck.
It turns out that Mao knew the first academician at the University of Texas at Arlington. They had published a few papers together, and their relationship preceded Mao's CNEX project. Mao also knew that the Texas academician had considered purchasing a CNEX controller.
Mao contacted this academician to lobby for access to the controller. While this Texas academician did not have the controller, his colleague did. It appears that Mao worked out a deal with the two academicians to get short-term remote access to the CNEX controller(s) in Texas.
Throughout the reverse-engineering project, Mao provided progress reports and information on the inner workings of the CNEX controller to multiple Huawei employees [2].
Huawei took some additional steps to destabilize CNEX. It created an organizational chart representing CNEX, enumerating CNEX employees, their locations, and their compensation. Then it launched an effort to hire these employees from CNEX to create turmoil within CNEX [2].
Huawei and CNEX filed dueling lawsuits against each other in 2017 in the U.S. In 2019, a jury found that Huwaei had misappropriated CNEX's technology [4].
Subsequently, in a separate 2019 case, Mao admitted to lying to the FBI when the FBI questioned Mao regarding his CNEX project. The lying was provable given the FBI's investigation into Huawei vis-a-vis CNEX. The FBI seems to have dropped the rest of the case (that pertained to the actual intellectual property theft) after Mao admitted to lying [5], [6], [7].
[1]: Superseding Indictment. Case 1:18-cr-00457-AMD. United States Eastern District Court. February 23, 2020.
[2]: Document 1. Case 4:19-MJ-00647-BJ. U.S. District Court for the Northern District of Texas, Fort Worth Division. August 14, 2019.
[3]: Semiconductor startup CNEX Labs alleged Huawei's deputy chairman conspired to steal its intellectual property. Catherine Shu. Techcrunch. May 22, 2019.
[4]: Huawei Technologies loses trade secrets case against U.S. chip designer. Gary McWilliams. Reuters. June 26, 2019.
[5]: U.S. charges Chinese professor tied to Huawei with criminal theft of I.P. Matt Hamblen. Fierce Electronics. September 10, 2019
[6]: Chinese professor stole hard drive secrets for Huawei, U.S. government charges. Timothy Lee. Ars Technica. September 9, 2019.
[7]: Chinese professor pleads guilty to lying to FBI in Huawei-related case. Karen Freifeld. Reuters. December 4, 2020.
[8]: As per [6], the first academician at the University of Texas at Arlington appears to be Hong Jiang. The second academician at the same university appears to be Song Jiang. Hong Jiang list his areas of research as "big data and large-scale computing, computer architecture, memory/storage and i/o systems, cloud and edge computing systems, systems support for big data analytics, hpc systems." Song Jiang lists his areas of research as "big data and large-scale computing, file and storage systems, os, hpc, and Management of Big Data." None of the reports that we analyzed indicate that these two academicians knowingly passed CNEX intellectual property to Huawei.
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