Engineer is first sentenced for economic espionage

[bhdean]

By JORDAN ROBERTSON, AP Technology Writer Wed Jun 18, 6:17 PM ET


SAN JOSE, Calif. - An engineer who admitted he tried to sell fighter-pilot training software to the Chinese Navy was sentenced Wednesday to 24 months in federal prison, in the first sentencing for a newly defined intellectual property crime.
Xiaodong Sheldon Meng, 44, who was raised in China and holds Canadian citizenship, was sentenced on the rare charge of committing economic espionage against the U.S. It's the most serious crime under the Economic Espionage Act of 1996 and involves stealing trade secrets to benefit a foreign government.
Only five cases have been filed under the law, three of them in Silicon Valley, which authorities say is fertile ground for trade-secret thieves looking to make a quick buck or bolster the technological and military development of foreign nations.
Meng, who didn't speak during the half-hour hearing in U.S. District Court in San Jose, stood with his hands clasped and head down as Judge Jeremy Fogel sentenced him in line with the U.S. Attorney's recommendation and Meng's plea agreement.
Fogel commended Meng's attempts to turn around his life following his arrest in 2004 but said Meng's crime hurt United States national security.
"This is a case where the court has to be merciful but it has to be very firm," Fogel said.
Meng faced a maximum sentence of 25 years in prison on two felony counts: economic espionage and exporting controlled military technologies. Because he had no prior criminal record, prosecutors agreed to seek a far shorter sentence.
Outside court, Assistant U.S. Attorney Mark Krotoski said Meng was focused on profit, not a foreign allegiance, in stealing the trade secrets and trying to sell them to the highest bidder so he shouldn't be punished as harshly as someone convicted of spying.
"People have this image of a spy, but you can cause a lot of harm without being a spy — you can damage national security," Krotoski said in an interview.
Meng's defense lawyer, Manuel Araujo, called Meng's actions "stupid" but said his client has undergone a "profound metamorphosis" and deserved a lighter sentence.
"For him as an individual it was too harsh," Araujo said. "He's a good man who got caught up in the fast and loose trading of trade secrets. The sentence might open the eyes of people who don't realize the consequences of these actions."
Investigators say Meng went around giving sales pitches to Asian military officials for software stolen from his former employer, San Jose-based Quantum3D Inc.
Meng lives in nearby Cupertino, about 45 miles south of San Francisco.
He was indicted in December 2006 on 36 felony counts alleging he attempted to sell the programs to the Royal Thai Air Force, the Royal Malaysian Air Force and the Navy Research Center in China.
Authorities have declined to say whether he made any sales. Krotoski said officials in China apparently didn't know Meng was trying to sell them stolen trade secrets — just that the program was of high value to the U.S.
In addition to serving the prison sentence, Meng is to pay a $10,000 fine.
Meng left the courthouse without commenting to reporters. Released on a $500,000 bond, he has until August 18 to begin serving his sentence. Prosecutors described him as a low flight risk.

Prosecutors say the other economic espionage cases highlight how easily rogue employees can get valuable intellectual property and shop it around.
Two other Silicon Valley engineers — Fei Ye, a U.S. citizen from China, and Ming Zhong, a permanent resident of the U.S. from China — have pleaded guilty of economic espionage for stealing microchip blueprints from their employers and attempting to smuggle them to China. Their sentencing is set June 23.
In a separate case, Silicon Valley engineers Lan Lee and Yuefei Ge were indicted in September on charge they stole chip designs and tried to launch a microprocessor startup with a Chinese venture capital firm. Their trial hasn't been set. In Southern California, Chinese-American engineer Dongfan "Greg" Chung, who worked at Boeing Co. and space shuttle-builder Rockwell International, has pleaded not guilty of charges he stole secrets regarding the space shuttle, a military transport plane and a rocket on behalf of China.