A few months ago, we discussed the federal government’s difficulties prosecuting foreign companies and individuals for theft of U.S. trade secrets. We highlighted three cases in which foreign defendants effectively stalled their criminal prosecutions by challenging the government’s attempts to serve them abroad. These cases raise the concern that complicated U.S. procedural rules are getting in the way of the government’s efforts to protect the nation from cybertheft, and allowing foreign defendants to violate U.S. law with impunity.
Since our original post, we’ve checked the dockets and have an update on what’s been going on with these criminal prosecutions. And the answer is — absolutely nothing.
In United States v. Sinovel, a Western District of Wisconsin case, the United States filed a letter on July 8, 2013, describing in intimate detail the various methods by which it had attempted to serve process on Chinese defendant Sinovel. These methods included:
Serving an individual named Zhou Zhi with a summons and complaint naming Sinovel Wind Group, Ltd. as a defendant;
Sending summonses via FedEx on four different occasions to the Delaware and Texas registered agents, and a Houston address, for Sinovel Wind Group (USA) Co., Ltd.; and
Serving copies of the various summonses on Capitol Services, Dover, Delaware.
On August 16, 2013, attorneys specially appearing for Sinovel filed a 38-page motion to quash service of process. Sinovel’s attorneys argued, inter alia, that service on the U.S.-based subsidiary, Sinovel Wind Group (USA) Co., Ltd., does not constitute service on the Chinese parent, Sinovel Wind Group Co., Ltd. The United States opposed Sinovel’s motion to quash, and Sinovel filed its reply on September 20, 2013. The case is stayed pending resolution of the motion to quash.
In United States v. Kolon, an Eastern District of Virginia case, we previously reported that defendant Kolon’s motion to quash was scheduled to be heard on July 18, 2013. Well, it was not heard on that date and the case has instead spun into a procedural black hole. Once the matter was fully briefed, the United States requested leave to file a sur-reply, which the court granted. Kolon then asked for leave to file a sur-sur-reply, and the court granted that request. Then on its own initiative, the court ordered the United States to file a sur-sur-sur-reply. The court stated that it did so because it’s the United States’ burden to demonstrate that service was properly effectuated — suggesting that the court didn’t think the United States had done so up to that point. The government filed its sur-sur-sur-reply on August 13, 2013, and nothing has happened in the case since. We are eagerly waiting to see if there will be a sur-sur-sur-sur-reply.
In United States v. Pangang, a Northern District of California court had granted Pangang’s motion to quash service and ordered the United States to submit a “Status Report re: decision on action to be taken” by July 18, 2013. But on the due date, the United States instead requested an extension of time for it to file that status report. About a month later, the government filed a request asking the court to find that it had “substantially complied” with the service requirements. In so doing, the United States is essentially asking the court to deem its service attempts “good enough.” It seems like this may be the government’s Hail Mary pass — if this doesn’t work then the case may be over and the China-based defendant will apparently have succeeded in avoiding prosecution even though it’s fully aware of the case and hired a top-tier law firm to make these procedural arguments on its behalf. On August 29, 2013, the Pangang defendants opposed the government’s motion. The court has not yet ruled.
Concerns about the United States’ practical ability to prosecute foreign trade secret thieves seem to be justified. Each of these three criminal prosecutions has been stalled indefinitely pending the courts sorting out these service of process issues.
In the meantime, efforts to change the rules governing foreign service of process are progressing slowly. On October 25, 2012, the Justice Department asked the Advisory Committee on the Federal Rules of Criminal Procedure to rewrite Rule 4 governing service of process. The Justice Committee argued that, given the new global economy, an amendment is necessary to permit effective service of summons on a foreign organization that has no agent or principal place of business within the United States. On May 8, 2013, the Advisory Committee reported that it had created a subcommittee “for further study and report.” The Advisory Committee has asked that the subcommittee report on its progress at the Advisory Committee meeting scheduled for October 17, 2013.
As always, Trade Secrets Watch will continue to monitor these developments and keep our readers posted.