By Our Staff Reporter
Islamabad: In a move which has raised eyebrows in Pakistan, a US based software company has alleged that Huawei has stolen its trade secrets as the two companies worked together on a project commissioned by government of Pakistan.
Business Efficiency Solutions LLC (BES), a California based software company has said in a statement that it is suing Chinese tech giant Huawei in the California federal court for allegedly stealing its trade secrets following their joint venture on a project for the Pakistani government.
The company has already lodged a complaint in the California Court In this regards. In the complaint, BES accused Huawei of using its technology to create a “backdoor” that allowed it to collect sensitive data “important to Pakistan’s national security.”
Huawei didn’t respond to the allegations leveled by the BES.
Media reports quoted the complaint filed by BES, Huawei subcontracted with BES in 2016 for its $150 million bid to develop software for a Pakistani government program providing new technology for police and law enforcement in Lahore. BES said it created software for the project that collects data from government agencies, controls access to buildings, monitors social media and manages drones, among other things.
The eight software systems BES developed for the project included proprietary code, designs, diagrams and other information that are “valuable trade secrets at the core of BES’s business,” the complaint said.
Huawei officials allegedly demanded that BES send this information to the company in China for testing, and BES said it agreed to the demand but terminated its authorization to use the technology after Huawei revoked its access to the testing laboratory.
The complaint said Huawei has yet to return any of the confidential software design tools or uninstall the software, as BES said it had agreed to.
BES said Huawei later demanded it install its data-aggregation software – used by Pakistani law enforcement to collect and analyze “sensitive data from different sources and government agencies” – in its Chinese lab, “this time not merely for testing purposes but with full access to data at the Lahore Safe City project.” BES said it agreed, under threat of termination and withheld payments, after Huawei said it had approval from the Pakistani government.
The complaint accused Huawei of using the software “as a backdoor from China into Lahore to gain access, manipulate, and extract sensitive data important to Pakistan’s national security.”
BES also said that Huawei never paid for some of its software, and that Huawei is misusing its trade secrets in similar “Safe City” projects in Pakistan and around the world.
Competitors have long accused Chinese telecommunications giant Huawei of corporate espionage. Now the company is facing US federal charges over what prosecutors call a decades-long conspiracy to steal trade secrets.
Last year. the Department of Justice filed a 16 count indictment against Huawei that included charges under the Racketeer Influenced and Corrupt Organizations Act (RICO). The indictment alleges that as long ago as 2000, Huawei stole trade secrets from at least six US companies. The companies aren’t named, but previous lawsuits by Cisco and Motorola against the Chinese company are mirrored in the indictment.
The new filing incorporates charges from an earlier indictment, released last year, alleging that Huawei misled banking partners about violations of US sanctions against Iran and that the company stole trade secrets from T-Mobile. Huawei CFO Meng Wanzhou, the daughter of the company’s founder, Ren Zhengfei, was arrested in Canada on those charges in late 2018. She is still in Canada under house arrest while fighting extradition to the US. The new indictment alleges that in addition to Iran, Huawei sold equipment to North Korea.
Huawei didn’t respond to a request for comment, but told The Wall Street Journal that the indictment “is part of the Justice Department’s attempt to irrevocably damage Huawei’s reputation and its business for reasons related to competition rather than law enforcement.”
As for the RICO charge, “the ‘racketeering enterprise’ that the government charged today is nothing more than a contrived repackaging of a handful of civil allegations that are almost 20 years old,” the company said.
By using the RICO act, the DOJ is alleging that Huawei didn’t just commit one or more crimes but essentially operated an ongoing criminal enterprise, says Joshua Rich, partner and general counsel at the Chicago-based intellectual property law firm McDonnell Boehnen Hulbert & Berghoff.
In 2019, the US Department of Commerce added Huawei to a list of companies considered a threat to US national security, meaning it would need permission to acquire technology developed in the US, including microchips and operating systems such as Android.
Similar restrictions almost forced another Chinese telecom company out of business in 2018 when the US government imposed sanctions on ZTE for selling equipment to Iran. The US backed eventually backed down on the requirements.
Huawei was in a better position to survive those restrictions than ZTE, and founder Ren has claimed that the company is prepared to weather those restrictions by designing its own chips and building its own mobile operating system. But losing access to the US financial system as a result of one or more of the DOJ’s charges would be a more serious blow to the company.