Trial of Ex-Coca-Cola Principal Engineer Accused of Espionage and Stealing Trade Secrets Begins.

Orrick - Trade Secrets Group

Orrick - Trade Secrets Group

The trial of Xiaorang You (aka “Shannon You”)—the principal research engineer accused of stealing trade secrets from several companies, including Coca-Cola—began on April 6, 2021 in the Eastern District of Tennessee at Greeneville. Ms. You was indicted by a grand jury on February 12, 2019 for theft of trade secrets, conspiracy to commit theft of trade secrets, and wire fraud. The trade secrets were valued at more than $119 million. In August 2020, a superseding indictment added additional charges related to economic espionage.

While Coca-Cola’s vaulted secret formula remains intact, Ms. You is accused of stealing trade secrets related to bisphenol-A-free (“BPA-free”) coating, which is used to prevent beer and soda cans from corroding or reacting with the food or beverage inside them, minimize flavor loss, and prevent threats to human health.

Xiaorang You served as Coca-Cola’s Principal Engineer for Global Research from December 2012 to August 2017. With a Ph.D. in Polymer Science and Engineering from Lehigh University, Ms. You had extensive education and experience with BPA and BPA-free coating technologies.

Prior to the advent of BPA-free technology, which is very difficult to develop, companies used “bisphenol-A,” which is alleged to have harmful effects to human health. Accordingly, Coca-Cola had agreements with various companies, including Akzo-Nobel, Dow Chemical, and Sherwin Williams, to help develop BPA-free technology. Ms. You was one of a limited number of Coca-Cola employees with access to BPA-free related trade secrets belonging to these companies.

From August 2017 to June 2018, Ms. You served as the Packaging Application Development Manager for Eastern Chemical in Kingsport, Tennessee, and is alleged to have also been exposed to Eastern Chemical’s trade secrets related to BPA-free coating technologies.

Ms. You is alleged to have stolen the BPA-free trade secrets in order to compete in a Chinese government sponsored program called “The Thousand Talents,” which encourages individuals with advanced education and experience living in Western countries to return to China to promote its economic and technological development. Ms. You is also accused of working with others to form a Chinese company to personally profit from the stolen trade secrets, with the intent of building a China-based laboratory capable of developing second-generation BPA-free coating and ultimately competing with U.S. and foreign companies.

Ms. You is alleged to have taken pictures of files containing trade secrets on her computer to bypass Coca-Cola’s security measures and to have transferred trade secret information to an external hard drive, including the transfer of an encrypted file from Coca-Cola’s network shortly after confidential files were copied to her hard drive. She’s also alleged to have taken photos of Eastern Chemical’s lab equipment, located in a secure restricted area within the company, to ascertain the types of industrial laboratory equipment she would need to produce the formulation. The U.S. government claims that Eastern Chemical’s confidential trade secret information was eventually uploaded to Ms. You’s Google Drive account.

Ms. You’s case demonstrates that real-time alerts (for example, an alert that can detect when an external hard drive is plugged into a company computer) designed to detect insider threats and prevent digital transfers of company data, could help stop employees from obtaining and ultimately exploiting company secrets. Designating specific workstations for use in accessing trade secret information and requiring employees to place their phones in a locker when using such stations may also be helpful in protecting company secrets. Companies should also endeavor to restrict the use of personal and non-authorized devices—including smartphones with cameras—from restricted areas containing sensitive equipment or trade secrets.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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