United States v. Liew: Trade Secrets

A California consultant who sold DuPont's chloride-route titanium-dioxide process to Chinese state firms became the first defendant convicted by a jury under the economic-espionage section of the EEA. The Ninth Circuit affirmed those counts, but reversed two obstruction-related convictions and vacated his sentence.

In United States v. Liew, Nos. 14-10367, 14-10384, 856 F.3d 585 (9th Cir. May 5, 2017), the United States Court of Appeals for the Ninth Circuit upheld what the Department of Justice had described as the first federal jury conviction for economic espionage under 18 U.S.C. § 1831. The trial took place in the United States District Court for the Northern District of California, No. 4:11-cr-00573-JSW, before Judge Jeffrey S. White. After a roughly two-month trial, the jury convicted Walter Lian-Heen Liew in March 2014 on all counts submitted to it, and Judge White sentenced him on July 10, 2014, to 15 years (180 months) in prison, with orders to forfeit $27.8 million in illegal profits and pay $511,667.82 in restitution.

The Ninth Circuit’s disposition was mixed, and it matters. The panel (Judge Owens, joined by Judges Schroeder and Wardlaw) affirmed the EEA counts, including the § 1831 economic-espionage convictions, but it reversed the convictions for conspiracy to obstruct justice and Liew’s separate conviction for witness tampering, vacated the sentence, and remanded for resentencing and for in camera review of potential Brady material. The formal disposition reads “AFFIRMED IN PART, REVERSED IN PART, and VACATED AND REMANDED IN PART.” On remand, Judge White resentenced Liew on October 30, 2018, to 144 months’ imprisonment followed by three years of supervised release. The espionage core of the case therefore survived: a jury-tested prosecution proving that a private consultant stole an iconic American manufacturer’s process secrets to deliver them to instrumentalities of the People’s Republic of China.

At a glance

Case: United States v. Liew, 856 F.3d 585 (9th Cir. 2017)
District court: N.D. Cal., No. 4:11-cr-00573-JSW (Judge Jeffrey S. White)
Verdict: March 2014 (conviction on all counts tried); sentenced July 10, 2014
Original sentence: 15 years (180 months) imprisonment; $27.8 million forfeiture; $511,667.82 restitution
Charges: Conspiracy to commit and attempted economic espionage, 18 U.S.C. § 1831; conspiracy and attempt to commit theft of trade secrets and conveying/possessing trade secrets, 18 U.S.C. § 1832; plus obstruction, witness tampering, false statements, false tax returns, and bankruptcy-fraud counts
On appeal: EEA counts affirmed; conspiracy to obstruct justice and witness tampering reversed; sentence vacated; remanded for resentencing and in camera Brady review
Sentence on remand: 144 months’ imprisonment plus three years’ supervised release (resentenced October 30, 2018)
Significance: First federal jury conviction under the EEA’s economic-espionage section; the § 1831 counts were affirmed by the Ninth Circuit
Trade secret: DuPont’s chloride-route process for manufacturing titanium-dioxide (TiO2) white pigment

Titanium dioxide is the pigment that makes paint, paper, and plastics brilliantly white, and DuPont’s chloride-route process for producing it was among the company’s most closely held manufacturing secrets. Evidence at trial showed that Liew, an owner and president of the Oakland consulting firm USA Performance Technology, Inc. (USAPTI), learned in the early 1990s that the PRC had prioritized indigenous development of chloride-route TiO2 technology. Over the following two decades, Liew recruited former DuPont engineers, obtained the company’s proprietary engineering specifications and designs, and contracted with Chinese state-owned enterprises (entities affiliated with the Pangang Group) to build TiO2 factories using DuPont’s stolen know-how, earning tens of millions of dollars.

Proving the foreign-benefit element

The defining feature of an economic-espionage case is § 1831’s requirement that the defendant act intending or knowing the offense will benefit a foreign government, instrumentality, or agent. Where that element sank the espionage charge in United States v. Hanjuan Jin, in Liew the government built the record that § 1831 demands. The evidence was not merely that Liew dealt with foreign customers; it was that he understood his counterparties to be instrumentalities of the Chinese state and that the entire enterprise existed to fulfill a PRC industrial priority. Testimony established that Liew met with PRC officials, learned of the government’s prioritization of chloride-route technology, and structured his consulting and construction contracts to serve state-owned enterprises pursuing that national objective.

That distinction (between selling to a foreign buyer and acting to benefit a foreign sovereign’s instrumentality) is what made Liew a true § 1831 conviction rather than an ordinary theft case dressed in espionage language. The Pangang entities’ status as state-controlled enterprises supplied the foreign-instrumentality nexus, and Liew’s documented knowledge of and participation in the PRC’s strategic program supplied the intent. The jury’s verdict, sustained on appeal, confirms that § 1831 is provable to a criminal standard when the government can connect the defendant’s purpose to an identifiable state objective.

What counts as a trade secret in a process case

A recurring battleground in EEA prosecutions is whether process know-how (engineering specifications, flow diagrams, equipment configurations) qualifies as a trade secret when some underlying chemistry is publicly known. On appeal, the defense pressed sufficiency and definitional challenges, arguing in part that aspects of chloride-route TiO2 production were known in the industry and that the protected information was not adequately identified. The Ninth Circuit rejected those arguments. It held that the EEA protects the specific, detailed engineering implementations DuPont had developed and guarded (the particular specifications that translate general scientific principles into a working, optimized industrial process) even where the broad concept of chloride-route production was not itself secret.

The court’s reasoning tracks a core principle of trade-secret law: secrecy attaches to the particular compilation and refinement of information, not to the general field of knowledge. DuPont’s value lay in the accumulated, proprietary detail of how to run the process efficiently at scale, detail that competitors could not lawfully obtain and that DuPont protected through confidentiality controls. That the public understood titanium dioxide could be made by a chloride route did not make DuPont’s specific designs any less secret or less valuable.

The surrounding obstruction and fraud counts

Liew is also a reminder that economic-espionage prosecutions are rarely tried in isolation. Alongside the EEA counts, the jury convicted Liew of conspiracy to obstruct justice, witness tampering, evidence tampering, false statements, filing false tax returns, and offenses arising from his bankruptcy proceedings. Liew had attempted to conceal the scheme by hiding income, fabricating documents, and pressuring witnesses, and those efforts produced an independent web of charges.

But two of those counts did not survive. The Ninth Circuit reversed the conspiracy-to-obstruct-justice conviction (Count 10), which rested on the defendants’ agreement to file a civil answer denying that they had “misappropriated any information from DuPont or any of its locations.” That statement, the panel held, “tacked too close to a general denial to constitute obstruction of justice.” The panel also reversed Liew’s witness-tampering conviction (Count 11), holding that evidence Liew told a witness not to mention former DuPont employees because doing so “would not be good” for the witness or his family was, standing alone, insufficient to prove beyond a reasonable doubt that he intimidated, threatened, or corruptly persuaded the witness. Because those reversals disturbed the sentencing calculus, the court vacated the 15-year sentence and remanded rather than reaching Liew’s challenge to the district court’s loss calculation.

The cover-up still carried real weight: the surviving fraud, tax, and bankruptcy counts remained, and the resentencing produced 144 months rather than a materially lighter term. The instructive point is that obstruction conduct can both add counts and aggravate the offense level, but obstruction theories built on litigation denials are vulnerable, because a general denial of liability is not itself a crime.

Open questions

Even a complete jury conviction leaves the doctrine incompletely settled. Liew does not draw a bright line for how much state control over a commercial enterprise is needed to make it a “foreign instrumentality” under § 1831, nor does it specify how directly a defendant’s purpose must align with a foreign government’s stated priorities. The opinion also leaves room for argument about the level of particularity with which the government must identify process trade secrets at trial, especially in technically complex cases where secret and non-secret elements are intertwined. And because Liew involved a uniquely well-documented two-decade scheme, it offers limited guidance for closer cases in which the foreign-benefit intent rests on thinner, more ambiguous proof.

Implications

Section 1831 is provable to a jury. Liew demonstrates that economic espionage can be proven beyond a reasonable doubt when the government ties the defendant’s intent to an identifiable foreign-state objective and a state-controlled recipient.
State-owned enterprises supply the instrumentality nexus. Dealing with PRC state enterprises pursuing a national industrial priority can satisfy the foreign-benefit element where the defendant knows their character.
Process specifications are protectable. Detailed engineering implementations qualify as trade secrets even when the general scientific approach is public; secrecy attaches to the particular, guarded compilation.
Cover-up conduct compounds exposure, but obstruction theories have limits. Fraud, tax, and bankruptcy counts added substantially to Liew’s exposure. The two counts built on his litigation conduct did not hold: the Ninth Circuit reversed both the conspiracy-to-obstruct-justice and witness-tampering convictions, which cost him the 15-year sentence only in part, since resentencing produced 144 months.
The contrast with Jin is instructive. The same statutory element that defeated the espionage charge in Jin was met in Liew through direct evidence of purpose and recipient identity.

Frequently asked questions

Why is Liew considered a milestone? It was the first time a federal jury convicted a defendant of economic espionage under 18 U.S.C. § 1831, and the § 1831 convictions were affirmed on appeal, establishing that the statute’s demanding foreign-benefit element can be proven to a criminal jury. The Ninth Circuit did reverse two related obstruction counts and vacate the sentence, and Liew was resentenced to 144 months in October 2018, but the economic-espionage convictions stand.

What trade secret did Liew steal? DuPont’s proprietary chloride-route process for manufacturing titanium-dioxide white pigment: specifically the detailed engineering specifications and designs, which he sold to Chinese state-owned enterprises to build TiO2 factories.

How did the government satisfy § 1831’s foreign-benefit requirement? Through evidence that Liew knew his counterparties were instrumentalities of the Chinese state and that the scheme was designed to fulfill the PRC’s prioritized goal of developing indigenous chloride-route TiO2 technology.