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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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February 7, 2012

More Industrial Espionage

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Posted by Derek

Well, we last got into arguments about industrial espionage here in December, so it's what? February already? Then here we go: from C&E News, we have this:

Federal prosecutors charged last week that Chinese government officials played a role in the theft from Dupont of technology to manufacture the paint pigment titanium dioxide.

According to a document filed on Jan. 31 in U.S. District Court for the Northern District of California, Federal Bureau of Investigation officials obtained letters in a search of the home of Walter Liew. The letters show that Liew “was tasked by representatives of the People’s Republic of China government to obtain technology used to build chloride-route titanium dioxide factories,” prosecutors say.

Here are more details from Reuters. More on this as it develops. . .

Comments (27) + TrackBacks (0) | Category: The Dark Side


COMMENTS

1. why oh why? on February 7, 2012 12:52 PM writes...

And these are the guys we are giving the keys to our IP to. Well done Mr. MBA's, well done.

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2. Joe T. on February 7, 2012 12:56 PM writes...

Just why does the Chinese government care so deeply about making titanium dioxide that they're willing to mount an industrial-espionage operation?

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3. Chemjobber on February 7, 2012 12:57 PM writes...

Joe T., I've been wondering the same question myself. What's the profit margin on TiO2? 1 cent per kilo? 5 cents per kilo?

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4. MTK on February 7, 2012 1:02 PM writes...

OK,

Before we go on some more Chinese-bashing, a popular thing to do here, and I really can't say it's not undeserved, but it's not like they're the only ones doing it.

I guess the most famous was probably the Michael Andrew Flack and Paul Whybrow case. Two Brits working for Bayer who broke into two Cypriot generic companies looking for evidence that the generic's were engaging in unlawful patent infringement. (Untangle that one.)

Industrial espionage is probably a lot more common than we think.

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5. CR on February 7, 2012 1:56 PM writes...

Yep, not limited to the Chinese. I remember hearing a story regarding P&G's SoftBake Cookies. Back in the early '80's they were coming out with this idea and claimed in a lawsuit that three other major manufacturer's (Nabisco being one I think) stole their patents in order to launch their own brands. I believe they alleged that one of the companies was flying aerial surveillance over the P&G plant in KC in order to determine the number of stacks that then equated to the number of ovens. Another was alleged to send an employee to P&G to gain employment there in order to snoop. I believe the companies settled an paid somewhere north of $100 M.

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6. CMCguy on February 7, 2012 1:59 PM writes...

Why you ask do Chinese want a TiO2 process? Because they have had to stop allowing products that use Pb paint of course!

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7. Tony Montana on February 7, 2012 2:29 PM writes...

Those here who are questioning the Chinese's interest in titanium dioxide are missing the point. Once the channels of communication are open, anything and everything is up for grabs. Alternatively the TiO2 could be a diversionary tactic, deflecting attention from the stuff that really matters.

It's the new Cold War. During the 1930s, before they stole nuclear secrets, the Soviets were engaged in a similar massive effort to pilfer every variety of industrial secret you can imagine, from automobile designs to chemical processes to drug patents. Both the most mundane and the most valuable information was up for grabs. In fact the famed atomic spy Harry Gold cut his teeth on stealing manufacturing protocols for common chemicals for Uncle Joe.

The web of espionage that the Soviets had in place to do this was so vast that we still haven't accounted for all their spies. China seems to be following the same recipe. Just wait for a few years before our missile and weapons designs show up in their defense portfolio.

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8. GreedyCynicalSelfInterested on February 7, 2012 2:42 PM writes...

How's that cheap, overseas labor working out for you?

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9. angchem on February 7, 2012 2:52 PM writes...

Why did they need to steal the technology anyway? We would have probably just given it to them like we give away all our other technology then apologized for it.

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10. Nicholas on February 7, 2012 3:02 PM writes...

It's great to know that Chinese Spies have an easier time getting a job at DuPont than Americans.

DUPONT SHOULD REIMBURSE THE FBI FOR INVESTIGATING THIS MATTER. THEY SHOULD ALSO PAY FOR THE PROSECUTION.

No doubt DuPont claimed they couldn't find a qualified American for the position.

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11. Bruce Hamilton on February 7, 2012 3:24 PM writes...

Nicholas,

Don't get your hopes of a job up too high. Most candidates should be expected to know that Taiwan is not in the USA.

From the linked article "DuPont’s complaint alleged that Liew and others he employed embezzled technology from DuPont’s newest and most up-to-date TiO2 facility in Kuan Yin, Taiwan."

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12. PharmaHeretic on February 7, 2012 3:52 PM writes...

Any guesses about the timing for their next round of layoffs?
----

http://www.bloomberg.com/news/2012-02-03/eli-lilly-freezes-salaries-as-sales-slip-after-best-seller-faces-generics.html

Eli Lilly & Co. will freeze salaries for most employees worldwide this year, as sales of its best- selling drug declined faster than expected after losing patent protection.

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13. Dale on February 7, 2012 5:11 PM writes...

@11 said- "DuPont’s complaint alleged that Liew and others he employed embezzled technology from DuPont’s newest and most up-to-date TiO2 facility in Kuan Yin, Taiwan."

Bruce might note they're being indicted by a Northern California grand jury. Not a Taiwanese court. Bruce is not very attentive to details.

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14. lalalander on February 7, 2012 5:52 PM writes...

Derek and all commenters,

Interested to know your take on this ruling by the Supreme Court of Canad(i)a re Merck's "trade secrets".

http://www.pharmalot.com/2012/02/merck-loses-trade-secrets-battle-in-canada/

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15. Lu on February 7, 2012 5:52 PM writes...

7. Tony Montana on February 7, 2012 2:29 PM writes...
Once the channels of communication are open, anything and everything is up for grabs. ... It's the new Cold War.

Totally agree. You would not believe the attitude I've seen in some of these people. Copying any information they can reach including colleagues' raw data and software licenses is normal, it's just "part of the process" (tm)

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16. Algirdas on February 7, 2012 6:41 PM writes...

@13 Dale

"Bruce is not very attentive to details."

Bullshit. As far as #10 Nicholas's xenophobic rant is concerned, location of grand jury which indicted Liew is irrelevant. Instead, Bruce points out that the factory from which the alleged "IP" "theft" occurred is in China, Republic of. If Nicholas desires to be employed by Dupont (as he seems to imply), he would be well advised to find out the location of the facility in question. Plus, he should start learning mandarin post-haste. Preceded by a bit of reading comprehension in his native language, perhaps?

Also, note that C&EN article mentions factory in Taiwan, but not the location of grand jury, while the Reuters article mentions indictment, but not location of the factory.

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17. newnickname on February 7, 2012 7:53 PM writes...

I'm reading the same documents but here's my take on it. (1) Liew is a native of Malaysia, has been in the US for 32 years and is a US citizen. He is accused of crimes in the US and is charged in the US. (2) The factory is a state of the art DuPont facility that just happens to be in Taiwan ROC. It could have been in Brazil or Tasmania, it's still a DuPont facility. Information about the factory and its processes can be assumed to be known to DuPont employees (or former employees) in the US who may have helped to design and build it. The (allegedly) stolen secrets could have been stolen in the US. (3) Liew has been connected with officials of the government of PRC, not ROC, and is accused of selling secrets to PRC or companies in PRC controlled by the PRC government, not ROC.

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18. ReneeL on February 7, 2012 8:40 PM writes...

From an old paint chemist -

Titanium dioxide is the whitest white pigment available, so it commands a decent price compared to other white pigments like calcium carbonate or various clays. It's also used in paints, cosmetics, paper, etc. I don't know what its profit margin is, but it's considerably more than 5 cents a kilo.

The process to make it starts with titanium tetrachloride, which is not so easy to handle on a large scale. Hence, it's so much easier to pilfer the technology than come up with one's own.

If DuPont hadn't laid off so many technical people the past couple of years, there wouldn't be so many ex-employees around with company know-how. That's what allowed this to happen.

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19. Anonymous on February 7, 2012 8:52 PM writes...

@18 AMEN!!! Big pharma also needs to be aware of this after the Abby Pharmatech fiasco at Sanofi.
These companies need to stop laying off people because they generally leave with a severely bad taste in their mouth and "shit eventually happens"....

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20. Thomas McEntee on February 7, 2012 9:13 PM writes...

@7 "Just wait for a few years before our missile and weapons designs show up in their defense portfolio."

According to a recent issue of Aviation Week, the delays and cost overruns on the F-35 Joint Strike Fighter have been significantly attributed to the need for engineering re-designs and new software code for its avionics and communications systems. Why? The Aviation Week report points to the compromise by hackers, suspected of being located in China, of the information systems of major US defense contractor and many of their subcontractors. Such attacks are consistently denied by China and the US will not reveal its methods for attribution. China is not alone in being suspected of attacks of this type which have become known within the information security community as the "advanced persistent threat."

Unless you have your proprietary digital information on a air-gapped network where external connections to the internet are forbidden, you should assume that any advanced country's "A Team" can get to it without you ever knowing it...if they haven't already cleaned out your locker.

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21. Chemjobber on February 8, 2012 12:01 AM writes...

Thanks, ReneeL, for the expertise.

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22. Bruce Hamilton on February 8, 2012 12:31 AM writes...

@13 Dale.

I may not be very attentive to details, but apparently I'm not alone. According to ICIS...

"Liew is charged with witness tampering, conspiracy to tamper with witnesses and making a false statement in connection with the US probe.

In July, federal investigators appeared at Liew's home with a search warrant, the US alleged.
At the home, investigators found a key to a safe-deposit box and asked Liew's wife, Christina Liew, if she knew the location of the box, the government alleged.

Walter Liew told is wife in Chinese to lie, and she complied, saying that she did not remember the box's location, the government alleged.

However, one of the agents understood Chinese, the government said. Ultimately, they learned that the box was in a bank, and it was held in Christina Liew's name, the US alleged.

In the box, agents found evidence showing that Walter Liew was selling DuPont's trade secrets to companies controlled by China, the US alleged.

At Walter Liew's home, agents also found DuPont blueprints and handwritten notes showing that he knew the plans were stolen, the US alleged.

"The evidence shows that Liew was tasked by representatives of the PRC government to obtain technology used to build chloride-route titanium dioxide factories," the US said.

The Liews were arrested in August and charged with
making false statements to the FBI. Both pleaded not guilty."

I note that the current US charges are not about the theft of IP, which is the current topic. That topic is covered in an earlier civil case from Du Pont.

I've no idea whether IP theft occurred in USA or Taiwan, but we will find out sometime soon.

My response was simply to Nickolas's equally ill-founded rant, and the USA charges you refer to don't appear to address the issue of where the IP theft occurred.

This case seems likely to develop, as there are now claims that a main witness has unfortunately recently committed suicide.

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23. Morten G on February 8, 2012 4:38 AM writes...

Titanium dioxide: Solar panels

Whole lotta money

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24. agogmagog on February 8, 2012 5:40 AM writes...

In any discussion of this nature the words pot and kettle spring to mind.

They steal off us and we steal off them (please insert any competing nationality/industry/company you wish for 'us' and 'them').

So ideas spread and humanity prospers.

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25. A Nonny Mouse on February 8, 2012 6:28 AM writes...

Another case in the agrochem sector; Chinese producers are making Dow's latest ag product using stolen bugs. Unfortunately, the person who stole them had the cheek to return to the US (and was promptly arrested).

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26. Anon on February 8, 2012 8:51 AM writes...

Let's hope the Chinese do a better job in manufacturing TiO2 for stolen formulas than they did with the stolen formula for the electrolyte in electrolytic capacitors.

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27. petros on February 9, 2012 8:12 AM writes...

It was always alleged the the USSR#s agents stole the plans for Concorde so they could build Concordski.

But the stolen plans had been subtly altered!

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