US govt loses appeal in GSK trade secret suit
Trade secret suit allegedly cost the pharma company over $1bn | Chinese researcher who stole approximately 200 GSK documents avoids paying restitution | Economic warfare.
The US Court of Appeals for the Third Circuit has rejected the US government’s attempt to reverse a finding in a trade secrets dispute that allowed a Chinese researcher to avoid paying an enhancement for stealing secrets from GlaxoSmithKline.
According to the government, the trade secret case allegedly cost GSK more than $1 billion.
In a decision handed down on August 2, the Third Circuit affirmed the Pennsylvania court’s ruling which found that a former GSK researcher doesn’t have to pay an enhanced amount requested by the government.
Researcher Yu Xue was arrested in February 2016, and pleaded guilty to a single count of conspiracy to steal trade secrets in 2018. Yu stole approximately 200 GSK documents, some of which contained trade secrets, and sent them to her co-conspirators. A fellow ex-GSK researcher pleaded guilty the following year.
At the time, prosecutors alleged that the pair had carried out the theft to benefit Renopharma, a Chinese company “bankrolled by the Chinese government,” and classed it as “economic warfare”.
The government had sought restitution in excess of $1 billion, derived from the “fair market value” of the stolen information.
At sentencing, the government had requested that the Pennsylvania court apply an enhancement under the US government’s sentencing guidelines based on the “loss” attributable to Yu's conduct.
While the parties didn’t dispute that GSK hadn’t suffered an actual monetary loss as a result of the trade secret theft, the definition of “loss” in the sentencing guidelines also includes losses that the defendants intended.
However, in June last year, a Pennsylvania court declined to apply this enhancement and concluded that the government was unable to prove the value of the loss allegedly intended by the defendants.
Yu was also ordered to serve eight months in prison, followed by three years of supervised release and faced a fine of $20,000.
The government appealed against the decision to the Third Circuit but, earlier this week, the court rejected the appeal.
“The District Court found that the government failed to establish that the defendants had the purpose to inflict a pecuniary loss on GSK, and accordingly, we hold that the court did not err in declining to value the trade secrets.”
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