Controversial Chinese technology firm Huawei and its Santa Clara-based subsidiary Futurewei allegedly stole trade secrets from San Jose tech giant Cisco and used them to copy Cisco routers, a federal indictment released Thursday indicates.
The U.S. Department of Justice claimed in its racketeering indictment and a news release that Huawei -- under fire from the administration of President Donald Trump over alleged links to the Chinese government and military -- and its Silicon Valley subsidiary stole operating system code and other data needed to make routers, and used the pilfered secrets to make Huawei-branded routers sold in the U.S. The indictment also alleges that five other unnamed U.S. firms were targeted.
Cisco is not mentioned by name in the indictment, which refers to "Company 1." But the indictment cites a lawsuit filed in Texas against Futurewei and Huawei over the alleged router-data theft. The suit, filed by Cisco in Texas, ended with a confidential settlement, court records show.
Huawei, in a statement, called the indictment an attempt by the Justice Department to "irrevocably damage Huawei's reputation and its business for reasons related to competition rather than law enforcement."
The alleged behavior by the company, several of its subsidiaries and its chief financial officer "is nothing more than a contrived repackaging of a handful of civil allegations that are almost 20 years old and that have never been the basis of any significant monetary judgment against Huawei," the company said. "The government will not prevail on these charges which we will prove to be both unfounded and unfair."
The indictment alleges that when the Texas litigation started, Futurewei and Huawei claimed to have already removed misappropriated code from products, and recalled routers containing that code. However, the firms had erased the memory drives of the recalled routers and sent them to China before they could be accessed, "thus destroying evidence of Huawei and Futurewei's illicit conduct," the indictment claims.
"Also, in an effort to destroy evidence, Futurewei attempted to remotely access Huawei routers that had already been sold in the United States and erase the misappropriated source code contained therein," the indictment alleges, without saying whether the government believes the attempted erasure was successful.
The indictment does not make clear how U.S. prosecutors believe Futurewei and Huawei obtained the copyrighted code, but it claims the two companies had "hired or attempted to hire Company 1 employees and directed these employees to misappropriate Company 1 source code."
Cisco, in its Texas lawsuit, claimed that Futurewei and Huawei obtained some relatively easy-to-access code through "slavish copying," and got hold of harder-to-access code through "improper means" it did not describe. The two companies also engaged in "flagrant plagiarism" of Cisco's user manuals for routers, the suit alleged.
While the allegations of stolen Cisco secrets concern routers sold in the U.S. in 2002, the indictment charges Huawei, Futurewei and two other Huawei subsidiaries with running a scheme from 2000 to the present "to operate and grow the worldwide business of Huawei and its parents, global affiliates and subsidiaries through the deliberate and repeated misappropriation of intellectual property of companies