HTC Designers Arrested Over Alleged Leaks Of Trade Secrets
September 3, 2013

Alleged Trade Secret Leaks Spark Arrests Of HTC Designers

redOrbit Staff & Wire Reports - Your Universe Online

Top designers at Taiwanese smartphone maker HTC were arrested on Friday on suspicion of stealing trade secrets related to "key interface technology” they were allegedly planning to sell to Chinese rivals, the Bangkok Post reported on Monday.

Huang Mou-hsin, the deputy chief prosecutor at the Taipei District Prosecutor’s Office, said five people were interrogated on the matter, including Vice President of Product Design Thomas Chien, R&D director Wu Chien Hung and design team senior manager Justin Huang. Chien and Wu were arrested and taken into custody after their offices and homes were searched. The others, which included one person working outside the company, were released on bail.

According to the Bangkok Post report, HTC chairwoman Cher Wang personally filed a complaint to Taiwan's Investigation Bureau, which has since learned that Chien, Wu and Huang had planned to set up a new mobile design firm – already registered under the Chinese name Xiaoyu – in both Taiwan and mainland China.

HTC accused the three former executives of conducting talks with rival Chinese firms after setting up Xiaoyu in order to possibly sell the technology used in HTC's yet-to-be-announced Sense 6.0 smartphones, scheduled for launch later this year.

HTC also said the men used “falsified vouchers” to illegally claim more than $330,000 in design fees from the firm, according to a China Times report.

Convictions of stealing trade secrets and breaching trust each carry a maximum jail term of ten years in Taiwan.

Chien, Wu and Huang have denied the allegations.

Shares of HTC’s stock plummeted following news of the arrests, although in a statement the company said the incident has had “no impact on its operations, product portfolio plans and overall business performance.”

“Protecting the company's proprietary and intellectual properties, privacy and security is a core fundamental responsibility of every employee,” according to a statement posted to the Engadget website.

The company said it expects its employees to “observe and practice the highest levels of integrity and ethics.”

“The company does not compromise nor condone any violation at any level of our organization and the company shall act in accordance to the law. As this matter is currently under investigation by the relevant authorities, we therefore refrain from further comments.”

HTC has suffered disappointing sales and the departure of key executives in recent months. The company’s stock has plunged 88 percent since its peak in 2011 as HTC lost market share to rivals Samsung and Apple.

Shares of HTC’s stock fell 5.8 percent on Monday, closing at NT$147.50 on Monday in Taipei.