China holds US engineer on trade secrets charge

[December 17, 2009]  BEIJING (AP) -- Chinese police have detained an American automotive engineer for more than a year on accusations he misused trade secrets -- the latest case of vague secrecy laws being used against an American in China.

Hu Zhicheng, a prize-winning designer of industrial catalysts to control auto emissions, has had letters from his family censored and has been denied reading materials during his detention in the port city of Tianjin, said the U.S. Embassy in Beijing. Last week police rejected an Old Testament he asked U.S. consular officers to bring him.

The stern treatment is being meted out in a business dispute over an automobile technology. Hu told U.S. officials that investigators have threatened him with multimillion-dollar fines unless he gives the rights to his U.S.-registered patent to a former business partner in Tianjin.

Hu's wife, a China-born naturalized American like her husband, said Tianjin authorities' real target is a China-based company she managed and whose cutting-edge products competed with those of the former business partner, the Hysci (Tianjin) Specialty Materials Co. Hysci, she said, complained that her startup was developing products unusually fast, prompting the trade secrets investigation.

"You don't sue someone just because you think their R&D is too fast," said Hong Li, who lives in the Los Angeles area with their two teenage children. "This case is being conducted illegally."

Police traveled from Tianjin to raid her company, seizing computer hard drives and production materials, Li said, declining to name the location of the company. The U.S. Embassy said prosecutors have twice sent the case back to police for further investigation -- often a sign the evidence is insufficient for an indictment.

Hysci declined comment, as did the Chinese company that employed Hu at the time of his detention. Prosecutors referred inquiries to the Tianjin police. The police information office said the criminal investigation is continuing but refused to elaborate other than to say "it is a complicated case."

A holder of nine patents in the U.S., Hu is just the kind of emigre Beijing has been eager to lure back to bolster an economy growing rapidly but short of talented managers and innovators. He has done research at the Massachusetts Institute of Technology as well as for multinationals in the U.S. and Japan.

Yet, Hu's predicament shows how powerful vested interests marshal law enforcement agencies to pressure foreign business executives, especially those who like Hu were once Chinese citizens but now hold foreign passports.

Hu's detention comes amid other similar prosecutions of China-born foreign nationals. In recent months, Australian national Stern Hu -- an executive with the global mining giant Rio Tinto involved in big-money and politically touchy iron ore negotiations -- was detained on state secrets charges that were later reduced to infringing trade secrets.

Another China-born, naturalized American, geologist Feng Xue, disappeared into custody two years ago and has been put on trial for passing on state secrets -- for arranging the purchase of a detailed commercial database on the Chinese oil and gas industry.

At a third and final hearing of his case by Beijing's No. 1 Intermediate People's Court on Friday, prosecutors introduced new evidence against Xue, said his lawyer, Tong Wei. Tong declined to discuss the substance of Xue's case, saying the state secrets charges make public discussion off-limits. He said a verdict may come as soon as this weekend, though the case has been twice postponed, so further delays are possible.

Charges of infringing commercial secrets generally carry less severe penalties than state secrets. Yet both have blurry definitions, legal experts say, and the ambiguity invites meddling by companies and their political backers.

"What makes something a state secret? Is it because it's information about a state company?" said Jerome Cohen, an expert on China's legal system at New York University School of Law.

The cases against mining executive Hu, geologist Xue and auto engineer Hu involve industries deemed vital by the government to China's economic security -- steel, energy and autos.

Often the families have only reluctantly gone public, either because they are intimidated or believe behind-the-scenes bargaining offers the best hope of release. Xue's detention, during which he was tortured, went unpublicized for two years until an Associated Press report about it last month.

Detained in November 2008, Hu Zhicheng's case was first reported early this month in an account written under a pen name that appeared on Boxun News, a Chinese-language Web site based in Durham, N.C., that accepts citizen journalism submissions. Hu's wife, Li, had shied away from publicity, fearing it would anger the Tianjin authorities.

Like many ambitious Chinese in the 1980s, Hu left China to further his education and career. After earning a doctorate in chemical engineering at Japan's University of Tsukuba, Hu went to MIT to do research on chemical agents used to help clean up automobile emissions, according to a biographical sketch posted on a Web site of the Jiangsu province government.

Hired by Engelhard Corp. in New Jersey, Hu spent 14 years designing more efficient and affordable catalysts -- chemical agents that speed up or slow reactions -- for automobile catalytic converters. Along with two other Engelhard scientists, Hu received the 2004 Thomas Alva Edison patent award from the American Society of Mechanical Engineers for a redesigned catalyst that allows sports utility vehicles to meet pollution controls comparable to sedans.

Hu began traveling back to China, getting to know the companies and executives in the burgeoning Chinese auto industry. He struck up a relationship with Hysci, using them as suppliers of materials for Engelhard catalysts, his wife said. The relationship made Hysci greatly profitable and one of Tianjin's biggest taxpayers, the Boxun report said.

In 2004, Hu moved back to China to get in on the boom. By late 2006, he was chief engineer for Wuxi Weifu Environmental Catalysts Co., looking to create better catalytic converters that met stringent European pollution control standards, the company's Web site said.

Hu continued to pick up accolades, being named a leading innovator by Jiangsu province, where Wuxi Weifu is located. They were both busy, Li said, she running the company that became a supplier to Wuxi Weifu.

Then, Hysci's business foundered, Li said, owing to a dispute among its two biggest shareholders, chairman Zhou Jun and chief executive Dou Shihua, over the company's direction. She said Hysci's relationship with her husband soured.

Wanting their daughter to complete high school in the United States, Li moved the family to California in 2007. "The tensions were already there," she said.

Late last year, Hu was detained for reasons Li said are not wholly clear to her. Hysci began accusing her and the Chinese company that she ran of developing competitive materials too quickly for a startup, she said.

"I don't know what happened. I didn't ask him what was going on with him, and he didn't ask what was going on with me. We were all busy in our work," she said.

Li said she did not know what patented technology Hu is accused of violating. She declined to name the company she chaired or its location, saying it was under a proprietary supplier relationship with Wuxi Weifu.

Wuxi Weifu and Hu's lawyer, Shanghai-based intellectual property rights expert Zhu Miaochun, declined comment. Engelhard was acquired in 2006, two years after Hu left, by the German chemical maker BASF. A BASF spokeswoman said the company had not been contacted by Hu, his lawyer or Chinese authorities about the case.

During most of his time in detention, Hu has been held in a group cell in a police jail, the U.S. Embassy said.

BASF Catalysts, a U.S.-based division of BASF that absorbed some of Engelhard's business, applied this year to patent a new automotive exhaust catalyst -- naming Hu and five others as inventors.

[Associated Press; By CHARLES HUTZLER]

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