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A hot Chinese driverless startup’s new hire has been charged with stealing secrets from Apple

Li Zengwen, a development engineer at Changan Automobile, lifts his hands off the steering wheel as the car is on self-driving mode during a test drive on a highway in Beijing, China, April 16, 2016. REUTERS/Kim Kyung-Hoon - GF10000390806
Reuters/Kim Kyung-Hoon
A case in point.
By Echo Huang
Published Last updated This article is more than 2 years old.

In the race to put self-driving cars on the road, China and the US are neck and neck. Companies in both countries want to guard the technologies they’re developing, but that can be a challenge as rivals try to poach key engineers, often the gatekeepers of intellectual property.

Apple is well aware of the problem. This week US prosecutors charged Zhang Xiaolang, a former hardware engineer at the tech giant, with stealing trade secrets from the firm’s autonomous driving project. According to a criminal complaint filed to a federal court in California on Monday (July 9), Zhang is accused of downloading files containing Apple’s proprietary information earlier this year. Shortly after he resigned, he took a post in May with Chinese electric-vehicle manufacturer Xiaopeng Motors, working in its offices in Mountain View, California.

The case comes at a time of growing tension between China and the US, especially on matters of trade and intellectual property. The trade war that began in earnest last week was sparked in part by anger in the Trump administration over China compelling foreign companies to share technology and form joint ventures with local partners. White House trade advisor Peter Navarro said in March that the new tariffs were explicitly calculated to help the US recoup losses from such arrangements.

Zhang joined Apple in 2015 to design and test circuit boards for the company’s autonomous car project. His position gave him access to the project’s confidential database, open to about 2,700 of Apple’s 135,000 employees, according to the complaint.

During a monthlong paternity leave starting on April 1 this year, Zhang traveled to China. After returning, he resigned from Apple on April 30. The company he switched to, Guangzhou-based Xiaopeng Motors, was founded in 2014 and is among China’s most high-profile firms. It’s backed by Alibaba executives and showcased an all-electric SUV at this year’s Consumer Electronics Show in Las Vegas. In 2017, Xiaopeng also hired (link in Chinese) Gu Junli, a former engineer who helped build up Tesla’s autopilot team.

Apple found increased network activity from Zhang in the days before he left, including “downloading copious pages of information from the various confidential database applications,” according to the complaint.

On May 1, upon request, Zhang handed a laptop belonging to his wife to the company. Apple found several folders of concern, particularly one with about 40GB of data. Apple reported that so far it’s found that 60% of the data on the computer is “highly problematic,” according to the complaint.

In an interview with Apple on May 2, Zhang said the data was collected for self-education purposes. He also admitted to taking from the company, ahead of his leave, a server and two circuit boards, which he later returned. He did it, he said, in hopes that it might “benefit him in a new position within Apple.” Zhang admitted to visiting the Apple office on April 28, a Saturday, to transfer data to a non-company device, his wife’s laptop.

The FBI also interviewed Zhang, on June 27 at his residence, just before he booked a last-minute round-trip flight from San Jose to Beijing, with a final destination to Hangzhou. On July 7, the agency arrested him at the airport as he attempted to leave the country. It did so on the basis that it believed Zhang might have committed theft of trade secrets, according to the court documents. Zhang could face penalties of 10 years in prison and a $250,000 fine.

Xiaopeng Motors said that it only learned about Zhang’s case on June 27, according to a statement (link in Chinese) it shared on the social media platform Weibo. When joining the company in early May, Zhang signed an intellectual property document, but has never disclosed any “sensitive information or violation” to the firm, read the statement. The carmaker said it strictly abides by laws in China and the US and “puts high value on intellectual property protection.”

It’s unclear what projects Zhang has been involved in since joining Xiaopeng Motors, or what steps the company might take to ensure it hasn’t accessed Apple’s proprietary information as a result of Zhang’s actions.

Apple said it is working with the authorities and would “make sure this individual and any other individuals involved are held accountable for their actions.”

Tamara Crepet, a federal public defender who is initially representing Zhang, didn’t immediately respond to a request for comment.

The field has seen other such cases. Waymo, the autonomous driving unit of Google parent Alphabet, brought a suit against Uber in late 2017, saying the ride-hailing company had acquired Waymo’s technology through buying a startup founded by a former Waymo employee. The firms settled in February. Last December, China’s search engine giant Baidu sued a former executive who left to start his own driverless company over alleged theft of technology secrets. Baidu dropped the case in March after the two companies agreed to cooperate on technology development.

Apple suddenly cooperating with anyone suspected of stealing its trade secrets seems unlikely.

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