Company Directors Plead Guilty to Conspiracy to Steal Trade Secrets
A district court in the Northern District of California recently accepted a guilty plea by a company's former CEO and COO for conspiracy to steal trade secrets and commit wire fraud.1 While rival companies regularly are sued civilly for alleged theft of trade secrets, the case of United States v. Jordanov, et. al. is notable because of the criminal exposure for theft of trade secrets by the two executives. They were indicted for conspiracy to steal trade secrets, pursuant to 18 U.S.C. §§ 371 and 1832, which carries a potential maximum prison sentence of 10 years.2
Specifically, according to court records, Raco Jordanov and Rose Lin – former Genentech CEO and COO, respectively – left the company and founded JHL Biotech, which operated in China and Rancho Santa Fe, California. Genentech developed, manufactured and marketed biopharmaceuticals for treating cystic fibrosis and certain types of cancer.
Jordanov and Lin pled guilty to stealing Genentech trade secret information to expedite production and reduce costs of JHL Biotech's generic version of Genentech medications. The defendants paid a Genentech scientist to provide information to JHL Biotech, with payments sent to the scientist through her husband.
The indictment further alleged that both Jordanov and Lin knew that JHL Biotech employees were using confidential documents taken from Genentech3 and, specifically, that Jordanov never intervened to prevent their use by JHL Biotech. On Aug. 24, 2021, each defendant pled guilty to Count 1 of the indictment – conspiracy to steal trade secrets and commit wire fraud. The defendants are scheduled for sentencing on Dec. 7, 2021.4
The case highlights how the government can seek criminal charges against theft of trade secrets under either 18 U.S.C. § 1831 (Economic espionage) or 18 U.S.C. §1832 (Theft of trade secrets). Further, 18 U.S.C. § 1832 includes a conspiracy charge where a culprit may not have completed the entire theft alone, but 1) agreed to engage in the activity, 2) took one or more overt acts to implement the agreement and 3) intended to commit the substantive crime.
Finally, the case also is notable as it is alleged that the defendants did not commit the theft itself but knew it had occurred to the benefit of their company and failed to intervene. The case is emblematic of a larger trend involving pursuit of criminal charges for trade secret theft.
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1 United States v. Jordanov, et. al., 3:21-cr-00227-WHA.
2 18 U.S.C. § 1832(a)(5).
3 In a related civil lawsuit, in the Northern District of California, Genentech v. JHL Biotech et al., Case No. 18-cv-06582 WHA, Genentech sued JHL Biotech. JHL Biotech settled the lawsuit by agreeing to stop production of certain medication.
4 (ECF No. 23).