Lucent scientists sold secrets to China, FBI says

FBI officers on Thursday charged two Chinese nationals working at Lucent Technologies and a third man with stealing source code and software and giving the trade secrets to a Chinese state-owned company in an effort to develop the "Cisco of China."

The two Lucent employees and another man, a Chinese-American, sought to use the stolen technology to create a leading data networking company as big as Cisco Systems, according to a statement from the office of U.S. Attorney Robert Cleary and the criminal complaint. Cleary is the U.S. attorney for the District of New Jersey.

The FBI arrested the men on Thursday, and they were scheduled to appear for a hearing in the Federal District Court in New Jersey during the afternoon.

Federal agents arrested Hai Lin, 30, of Scotch Plains, N.J., and Kai Xu, 33, of Somerset, N.J., both of whom work as scientists at Lucent. The third man is Yong Qing Cheng, 37, of East Brunswick, N.J.

The investigation has been going on since about February, according to a source close to the investigation. Lin and Xu had worked as product development engineers in Lucent's switching business for less than five years, the source said.

Lucent spokeswoman Mary Lou Ambrus declined to provide specifics of what was stolen or the value of the intellectual property. The Murray Hill, N.J., company has a system to protect its intellectual property and that system worked, she said. The company contacted authorities when it learned that the employees were allegedly stealing the technology.

An affidavit with the criminal complaint filed Thursday disclosed that the men were experts in the source code, software and the entire design of Lucent's Pathstar system. Pathstar is capable of sending voice and data services over the Internet and it generated approximately $100 million in revenue for Lucent in 2000. Federal authorities allege the three worked together to steal and transfer the technology out of the U.S.

Lin, Xu and Cheng allegedly founded New Jersey-based ComTriad Technologies in January 2000. Cheng traveled to Beijing in July 2000 and began negotiations for a joint venture between ComTriad and Datang Telecom Technology of Beijing, a company that is majority-owned by the Chinese government, according to the complaint.

Negotiations continued for the joint venture, and ultimately Lucent's Pathstar source code and software were stored on a password-protected Web site by ComTriad. Federal authorities allege that earlier this year the three men transferred the Pathstar data to Datang for the use in developing a ComTriad system. The system, known as the CLX 1000, was virtually identical to Pathstar, according to the complaint.

The Datang-ComTriad venture was financed by $1.2 million from Datang and was approved by Datang board of directors in October 2000, according to federal authorities.

Lin, Xu and Cheng are each charged with conspiracy to commit wire fraud and face a maximum penalty of five years in prison and a $250,000 fine.

The IDG News Service is a Network World affiliate.