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 ...