On August 24, 2021, the Northern District of California accepted the guilty pleas of the two co-founders of the Taiwanese biopharmaceutical start-up, JHL Biotech (now known as Eden Biologiccs) for trade secret theft and wire fraud. Pending sentencing, both face steep criminal penalties and possible prison sentences.
Chief Executive Officer Racho Jordanov and Chief Operating Officer Rose Lin were indicted for engaging in a fraudulent scheme to steal confidential and proprietary materials from competitor Genetech for over a decade. With these materials, JHL Biotech boosted its own, business because it was able to “cut corners, reduce costs, solve problems, save time, and otherwise accelerate product development timelines, ” alleged the Department of Justice in their indictment earlier this summer. Acting United States Attorney Hinds called the company a “nearly $1 billion Taiwanese unicorn built on a foundation of lies.”
The guilty pleas lay out a sweeping, decade-long, complex scheme to steal intellectual property from a competitor. Jordanov hired former Genetech employees for his own company, who “surreptitiously brought, without authorization, confidential and proprietary documents” from the competing firm. Lin secretly arranged for a principal Genetech scientist to work at JHL Biotech, without the other company’s authorization. Xanthe Lam, the principal scientist, and her husband pled guilty to conspiracy to commit trade secret theft in July.
And that was just the tip of the iceberg. Not only did the co-founders work to overtly obtain confidential and proprietary material from a competitor they “tolerated” the practice of employees joining the company with stolen documents and “made no effort to discourage” employees from using documents or information they brought with them.
Though multiple high-level officials at JHL Biotech have now pled guilty to a litany of trade secret-related crimes, the company will face no charges. After engaging in remedial measures and cooperating with the investigators for three years, JHL Biotech entered into a Non-Prosecution Agreement—a tool commonly used by prosecutors in similar scenarios to incentivize cooperation and in crucial fact-gathering.
Preventing intellectual property and preventing theft of trade secrets is a priority for the U.S. federal government. Of particular concern are situations such as these where “corporate espionage” threatens “innovation,” which the U.S. Attorney’s Office considers a “crown jewel” of the Northern District of California, a district which notably includes Silicon Valley and San Francisco. It is not just the federal government prioritizing protection of trade secrets. The “aggressive” prosecution of corporate espionage and efforts to protect trade secrets from falling into the hands of foreign entities has spread beyond the federal government. Florida recently passed the “Eliminating Corporate Espionage Act” making trade secret theft a second- degree felony. For a more detailed discussion of the Eliminating Corporate Espionage Act, see Crowell & Moring’s update earlier this year, “Florida Lawmakers Seek to Address Corporate Espionage in Proposed Legislation.”