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United States v. Liew

United States Court of Appeals, Ninth Circuit

May 5, 2017

United States of America, Plaintiff-Appellee,
v.
Walter Liew, Defendant-Appellant. United States of America, Plaintiff-Appellee,
v.
USA Performance Technology, Inc., Defendant-Appellant.

          Argued and Submitted November 16, 2016 San Francisco, California

         Appeals from the United States District Court for the Northern District of California Jeffrey S. White, District Judge, Presiding D.C. Nos. 4:11-cr-00573-JSW-1, 4:11-cr-00573-JSW-4

          Dennis P. Riordan (argued), Donald M. Horgan, Gary K. Dubkoff, and Matthew C. Dirkes, Riordan & Horgan, San Francisco, California, for Defendants-Appellants.

          Merry Jean Chan (argued), Assistant United States Attorney; Barbara J. Valliere, Chief, Appellate Division; Brian Stretch, United States Attorney; United States Attorney's Office, San Francisco, California; for Plaintiff-Appellee.

          Before: Mary M. Schroeder, Kim McLane Wardlaw, and John B. Owens, Circuit Judges.

         SUMMARY [*]

         Criminal Law

         The panel affirmed in part, reversed in part, vacated in part, and remanded, in a case in which Walter Liew and his company USA Performance Technology, Inc. were convicted of multiple offenses including conspiracy and attempt to commit economic espionage and theft of trade secrets, possession of misappropriated trade secrets, and conveying trade secrets related to E.I. du Pont de Nemours and Company chloride-route technology for producing titanium dioxide (TiO2).

         The panel held that the district court did not commit reversible error in giving a jury instruction regarding compilations; or in rejecting a public-disclosure instruction, an instruction regarding disclosure to a single recipient, and reverse-engineering/general-knowledge instructions.

         The panel held that the defendants waived their right to obtain review of their arguments that the district court's conspiracy and attempt instructions constructively amended the indictment and erroneously allowed the jury to convict without finding that the trade secrets involved were in fact trade secrets. The panel held that even if the issue were reviewable, United States v. Nosal, 844 F.3d 1024 (9th Cir. 2016), establishes that the conspiracy and attempt instructions were legally correct and did not constructively amend the indictment; and that any error was harmless.

         The panel rejected the defendants' sufficiency-of-the-evidence challenges relating to substantive trade secret counts. The panel explained that the government was not required to prove that no disclosures of DuPont's TiO2 technology occurred; instead, it needed to establish that DuPont took reasonable measures to guard that technology. The panel held that the defendants failed to show that the sale of an Ashtabula, Ohio factory was unreasonable, particularly under the Economic Espionage Act's then-requirement that trade secrets not be generally known to "the public." The panel concluded that a rational juror could have found that the high-grade ore technology used at the Antioch, California and Ashtabula plants was not part of the trade secrets covered by Counts 6-9, which involved low-grade ore technology; that DuPont took reasonable measures to protect its technology; and that such technology was not readily ascertainable by or generally known to the public.

         The panel reversed the defendants' convictions for conspiracy to obstruct justice by agreeing to file a false answer in civil litigation with DuPont. The panel wrote that the statement in the defendants' answer - that they "never misappropriated any information from DuPont or any of its locations" - tacked too close to a general denial to constitute obstruction of justice.

         The panel reversed Liew's conviction for witness tampering. The panel wrote that standing alone, evidence that Liew told a witness not to mention anything about former DuPont employees who worked for USA Performance Technology because doing so would not be good for the witness or his family was insufficient to prove beyond a reasonable doubt that Liew intimidated, threatened, or corruptly persuaded the witness to prevent the use of his testimony in the DuPont lawsuit.

         The panel held that the district court erred by not requiring the prosecution to disclose the FBI's interviews with a deceased co-conspirator, where the defendants produced a declaration by the co-conspirator's attorney that supported an inference that the rough notes contained favorable material. The panel remanded for in camera review of the material to determine whether disclosure might have affected the outcome of the trial.

          OPINION

          OWENS, CIRCUIT JUDGE:

         Defendants Walter Liew and his company USA Performance Technology, Inc. ("USAPTI") appeal from their eight counts of conviction under the Economic Espionage Act of 1996 ("EEA") for conspiracy and attempt to commit economic espionage and theft of trade secrets, possession of misappropriated trade secrets, and conveying trade secrets related to E.I. du Pont de Nemours and Company ("DuPont") chloride-route technology for producing titanium dioxide ("TiO2"). Defendants also appeal from their convictions for conspiracy to tamper with witnesses and evidence, and Liew appeals from his conviction for witness tampering, which arose out of Liew's conduct in a civil lawsuit filed by DuPont. We affirm in part, reverse and vacate in part, and remand for resentencing and in camera review of potential Brady material.

         FACTUAL BACKGROUND

         A. DuPont and Titanium Dioxide Production

         If you wanted to learn about the secretive and lucrative world of titanium dioxide production, then this was the trial for you. TiO2 is a white pigment extracted from ore and used in a wide variety of products, from paint to the filling in Oreo cookies. In the 1940s, scientists developed a chloride process to manufacture TiO2, which was less labor intensive and costly, produced less waste, and resulted in a better product than the sulfate process originally used to produce TiO2. Production plants in the United States now exclusively use the chloride process, while plants in Europe and Asia (including China) continue to use the less efficient sulfate process.

         Since the 1940s, DuPont has been a leader in the TiO2 industry and the chloride process. It opened its first chloride plant in Edgemoor, Delaware ("Edgemoor") in 1948, and its second in New Johnsonville, Tennessee ("Johnsonville") in 1958. It opened its Antioch, California plant in 1962. While the Edgemoor and Johnsonville plants were designed to use "a wide range of ores, " the Antioch plant used only high-grade ore (ore with high levels of titanium), so it lacked some of the features of the Edgemoor and Johnsonville plants.

         In 1967, DuPont agreed to build a plant for Sherwin-Williams in Ashtabula, Ohio, modeled after the Antioch high-grade ore plant. Sherwin-Williams agreed that it and any successor would maintain the confidentiality of DuPont's chloride-route technology for fifteen years. Sherwin-Williams sold the Ashtabula plant in the 1970s.

         During the following decades, DuPont expanded existing facilities and built new ones, including the Kuan Yin plant in Taiwan. Kuan Yin, an entirely new "greenfield" facility, was designed to process ore at lower grades than those used at the Antioch or Ashtabula plants.

         Starting in 2000, DuPont took steps to build a TiO2 plant in Dongying, China. By 2007, DuPont had obtained a number of governmental approvals required for the project, but by 2008, the project had stalled because DuPont could no longer get in touch with government officials and "couldn't get any information" about the status of the project. During this time, DuPont met with the Pangang Group ("Pangang"), a Chinese company, to discuss purchasing ore, but DuPont later determined that Pangang's ore was "totally unsuitable" for the planned facility.

         DuPont remains the world's largest TiO2 producer, and has the most competitive chloride process, in part due to its ability to use lower-grade ore. Its TiO2 chloride-route technology is both "unique" and "very valuable" to DuPont.

         B. Liew and His China Campaign

         Liew is a U.S. citizen with a master's degree in electrical engineering. In the early 1990s, Liew started his company LH Performance ("Performance Group"). During this period, Liew designed an acrylic resin plant in China.

         In the early 1990s, the Chinese government attempted to buy TiO2 technology from DuPont so it could build its own plant. But because DuPont was charging $75 million to license its technology, the Chinese government instead decided to go with a molten-salt chlorination process developed in the former Soviet Union. In 1991, Liew attended a banquet hosted by high-ranking Chinese officials who thanked Liew "for being a patriotic overseas Chinese who [had] . . . provided key technologies" to China. At the banquet, the Secretary General of China's State Council gave Liew "directives" regarding what he could continue contributing to China, and Liew later received a list of "key task[s]" that highlighted chloride TiO2 production as "one of the more important projects."

         In the years that followed, Liew tried to obtain the resources necessary to design a TiO2 facility. In 1997, he met Robert Maegerle and Tim Spitler, two former DuPont employees with experience at TiO2 facilities: Maegerle as a project engineer and Spitler as a chemical engineer. Upon their retirement from DuPont, both Maegerle and Spitler certified that they had returned all "secret or confidential" materials to DuPont and agreed "not to use or divulge . . . any secret or confidential information" without DuPont's permission. Liew hired them both as consultants. While their initial work for Liew was limited, their involvement increased in the 2000s.

         In 2004, Liew wrote a letter to the chairman of Pangang explaining that after learning of China's need for "titanium white by chlorination technology, " his company had performed "many years of follow-up research and application" and now had "mastery of the complete DuPont way of titanium white by chlorination." He boasted that his company employed "experts" who had worked "for companies like Dow Chemical, DuPont . . . et cetera, " and that his company possessed "its own proprietary technologies which are transferable." And while Dupont had "the most advanced [TiO2 chloride process] technology, " its "technology has always been highly monopolized, and absolutely not transferable, " whereas his company now possessed chloride-route technology that was "transferable without involving intellectual property rights issues."

         In November 2005, Pangang and Performance Group signed a $6.18 million contract. Performance Group would upgrade the Chinese molten-salt plant into a chloride process facility. While Liew hired seven to ten employees to work on this project, none had any experience with TiO2 technology. Maegerle, the former DuPont employee, served as the "in-house expert, " despite referring to himself as "an oxidizer man, not a chlorinator man" and stating that the TiO2 chloride process "was not his process."

         In January 2009, Liew filed for bankruptcy on behalf of Performance Group, but did not disclose the molten-salt upgrade project, or any patents or trade secrets.[1] In February 2009, Liew formed USAPTI and operated it out of the same building as Performance Group, with many of the same employees.

         In May 2009, USAPTI signed a $17.8 million contract with Pangang to build a TiO2 chloride facility in Chongqing, China. Pangang retained two third-party consulting firms to review the project, and their 2009 report concluded "that DuPont is the source of the [project] technology" and "that the technology has come from the Edgemoor plant at DuPont headquarters." The consultants recommended that Pangang seek "legal counsel to avoid any possible delays."

         Despite these concerns, Liew's company continued to work on both projects and rely on Maegerle and Spitler as consultants. Liew paid Maegerle $370, 000 between 2004 and 2011 for his consulting work. And Liew took notes of his conversations with Spitler, where they discussed how a TiO2 plant would fail "without . . . startup people and maintenance experienced people, " "[e]ven with the best technology with stolen prints." Liew also obtained documents from Spitler, including a "reference sheet" against which Liew checked numbers. According to Liew, Spitler told him that there was "a very small problem to use your ...


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