Hello readers! We are here to report on an important development in the technology industry as well as an important case in the history of law in China. A Shanghai court has given 14 before engineers from technology giant Huawei prison sentences for trade secret theft. This is a noteworthy sign of a developing commitment to protecting intellectual property in China.

The former employees who were previously employed through HiSilicon, Huawei semiconductor unit, were found guilty of taking proprietary information to start a rival company; Zunpai Communication Technology. On July 28, a Shanghai court handed down a ruling to Huawei and sentenced the former employees to jail sentences of up to six years and large monetary fines.

The founder of Zunpai, Zhang Kun, was at the time a researcher at HiSilicon who left Huawei in 2019. He founded Zunpai Communication Technology in 2021 bringing on the same employees from Huawei. They were, according to several reports cited by the South China Morning Post, offered high salaries and stock options, and were instructed to copy before they officially resigned all of Huawei's confidentiality on their chip technology.

Huawei became aware of these illegal actions and filed a lawsuit against the defendant in August 2023. In December, Shanghai police apprehended 14 suspects for stealing trade secrets. Shareholder assets had been frozen that were valued as high as 95 million yuan (or $13.1 million) of Zunpai.

During the investigation, the police had confirmed about 40 of Zunpai technologies that were almost identical to HiSilicon in regards to what could be described as "ironclad evidence" that Zunpai had stolen many of Huawei intellectual property rights. As a result, the ruling is called a "decisive victory" for Huawei in the fight to defend its intellectual property rights.

This case is particularly remarkable because it marks a role reversal for Huawei. The company has typically been on the receiving end of intellectual property cases. In 2019, the U.S. Department of Justice had deemed Huawei guilty of ten counts of stealing Western Technology, which included stealing trade secrets from T-Mobile, and indicted the company for wire fraud and obstruction of justice. Huawei denied the claims, and there was a combination of other laws at the government level against the company.

In 2020, the United States Justice Department indicted Huawei for racketerring conspiracy and conspiracy to steal trade secrets, stating the company conducted a serial, decades long effort to misappropriate intellectual property from several U.S. companies. The indictment stated this enabled Huawei to, "drastically cut its research and development costs" and have an unfair advantage over competitors.

The prosecution and conviction of the former Huawei employees highlight a growing trend in China. The country is taking stronger action to enforce intellectual property laws and create a more secure environment for businesses and innovators. China Supreme People's Procuratorate reported that 21,000 people were criminally prosecuted for IP crimes in 2024 alone. Punitive damages for IP infringements have also been applied in a larger number of cases.

This case, along with others, signals a clear message: China legal system is becoming more serious about protecting intellectual property. For the engineers involved, their legal team may still be able to challenge the decision. However, the verdict is a significant win for Huawei and a powerful example of the country evolving legal landscape.