United States District Court, District of Columbia
CHRISTOPHER R. COOPER, UNITED STATES DISTRICT JUDGE.
29, 2019, a jury found Defendant Shan Shi guilty of
Conspiracy to Commit Theft of Trade Secrets. Dr. Shi now
moves for a judgment of acquittal, arguing that the evidence
presented at trial was insufficient to convince a reasonable
juror that he committed the crime. Finding ample evidence to
support the conviction, the Court will deny the motion.
Superseding Indictment in this case charged Dr. Shan Shi and
others with conspiracy to commit theft of trade secrets in
violation of 18 U.S.C. § 1832 (Count 1); conspiracy to
commit economic espionage in violation of 18 U.S.C. §
1831 (Count 2); and conspiracy to launder monetary
instruments in violation of 18 U.S.C. § 1956(h) (Count
3). All three counts involved an alleged agreement to
misappropriate trade secrets related to “syntactic
foam”-a manufactured material consisting of small
hollow spheres suspended in epoxy resin. Among other
applications, syntactic foam is used in drill riser buoyancy
modules (“DRBMs”). DRBMs are buoyant casings
attached along conduits (or “risers”) that run
from an off-shore oil or gas rig to the drilling equipment on
the sea floor. They are necessary to prevent the weight of
the risers from destabilizing the rig afloat on the surface.
2014, Dr. Shi established a company in Houston-Construct
Better Materials International (“CBMI”)-to
develop syntactic foam for use in DRBMs and related products.
Gov. Ex. 2 at 32252, 34574 (corporate overview presentation).
CBMI was funded by a Chinese company-Taizhou CBM-Future New
Materials Science and Technology Co., Ltd.
(“CBMF”)- that had been tasked by the Chinese
government to help develop the country's ability to
manufacture marine engineering equipment. Id. at
32252-54, 34613; see also Gov. Ex. 40 (CBMI Articles
of Incorporation listing CBMF as the sole shareholder). To
advance this goal, the indictment charges that Shi and the
two companies obtained trade secrets from Trelleborg Offshore
US, Inc. (“Trelleborg”), a DRBM manufacturer also
located in Houston. They did so, the Indictment alleges, by
hiring former Trelleborg employees, who in turn used and
transferred Trelleborg's confidential manufacturing
specifications and testing procedures to help CBMF develop
syntactic foam in China.
addition to Shi and the two companies, the charged
conspirators included Sam Ogoe and Gang Liu, both former
Trelleborg employees who subsequently joined forces with
CBMI; Uka Uche and Johnny Wayne Randall, two then-current
Trelleborg employees who allegedly sent Trelleborg
confidential information to Ogoe after he joined CBMI; Kui
Bo, a CBMI employee involved in developing syntactic foam;
and Hui Huang, a China-based employee of CBMF who allegedly
directed some of CBMI's activities. Ogoe and Bo both pled
guilty to one count of conspiracy to commit theft of trade
secrets in violation of 18 U.S.C. § 1832, admitting that
they obtained and/or used Trelleborg confidential information
to help CBMF develop syntactic foam. Uche and Randall also
pled guilty to the trade secret theft conspiracy,
acknowledging that they provided confidential Trelleborg
information to Ogoe. Liu managed to abscond prior to trial,
Huang remained in China, and CBMF and CBMI never appeared,
leaving Dr. Shi as the lone defendant at trial.
Indictment identifies seven alleged trade secrets that CBMI
obtained from Trelleborg. To better understand the technology
involved, a bit must be said about how the spheres contained
in syntactic foam are made and tested. Dr. Kipp Carlisle, a
materials engineer with Trelleborg, summarized the
manufacturing process for the jury. He explained that the
process begins by placing polystyrene pellets in a customized
tumbler, akin to a cement mixer. Tr. 1266 (July 16, 2019
a.m.). As the tumbler spins, a syrupy liquid comprised of an
epoxy and a hardening agent is added. Id. at 1261. A
fibrous material is then introduced, with the mixture coating
the pellets. Id. at 1263. The liquid eventually
forms a hardened shell around the pellets, creating spheres
made spheres of different strengths. Various factors affect
the strength of a sphere, including the number of coats
applied to the surface, the type of fiber used in the coating
mixture, and the ratio between the liquid and fiber in the
mixture. Id. at 1263-65. Trelleborg used three
different types of fiber: glass, wollastonite, and carbon,
each with different structural properties and costs.
Id. at 1247. Stronger, higher-density spheres are
used in deeper water to withstand the higher pressures to
which they are subjected. Id. at 1242. Trelleborg
also made different sized spheres depending on the
application for which they were intended. Id. at
testified that Trelleborg developed manufacturing
specifications for its spheres over time based on research
and empirical analysis. Tr. 1163-67 (July 15, 2019 p.m.).
These specifications included calculations for density and
pressure resistance at various sea depths for spheres of
different diameters and fiber compositions. While Trelleborg
disclosed some of these specifications in its marketing and
bid materials, the complete specifications remained
proprietary. Tr. 1250-51 (July 16, 2019 a.m.). Allen Burgess,
Trelleborg's President, added that pressure and density
specifications, when combined with corresponding depth
ratings, were not publicly available and that it would be
“foolhardy” to provide that information to a
competitor. Tr. 1956-58 (July 18, 2019 p.m.). Production
engineers on Trelleborg's shop floor were given laminated
print outs of the specifications for use in the manufacturing
process. Tr. 1240 (July 16, 2019 a.m.).
ensure that the manufactured spheres performed as designed,
Trelleborg subjected them to testing. The lab technicians who
performed the tests were given the same specifications that
the production engineers used to make the spheres.
Id. One of the tests-called a hydrostatic burst
pressure test-involved subjecting a sample of spheres to
pressure to determine if they met pre-determined acceptance
criteria. If more than a certain percentage of the spheres
remained intact under the pressure, the batch passed the
test. Carlisle testified that Trelleborg's design team
developed the acceptance criteria and testing protocol over
time based on trial and error and did not share them with its
competitors. Id. at 1256-58.
that primer, the seven alleged trade secrets can be
summarized as follows: Trade Secret 1 is a series of Excel
charts reflecting production specifications for various types
of Trelleborg spheres at specified depths. Gov. Exs. 21, 21A,
21B, 21C. Trade Secret 2 is another set of charts showing the
target densities for particular types of spheres at specified
depths. Gov. Ex. 23A. Trade Secret 3 is Trelleborg's
standard operating procedure for conducting the hydrostatic
burst pressure test described above. Gov. Exs. 25, 26. Trade
Secret 4 is another set of Excel spreadsheets showing sphere
specifications, as well as information about the
manufacturing process like the type of hardener used and the
ratio of fiber to coating material. Gov. Ex. 28A. One of the
worksheets within Trade Secret 4 is labeled “Reference
- Trelleborg.” Id. Trade Secret 5 is the
formulation that Trelleborg used to make its syntactic foam,
with some of the ingredients specified by brand name. Gov.
Ex. 31. Trade Secret 6 is another spreadsheet showing the
number of coats that Trelleborg applied to various types of
spheres at specified depths. It too is labeled
“Reference - Trelleborg.” Gov. Ex. 32A. Finally,
Trade Secret 7 is a chart showing bulk prices for the raw
materials that Trelleborg used in its syntactic foam. Gov.
Ex. 33A. It is labeled “Reference - Trelleborg”
as well. Id.
told, the jury heard ten days of argument and evidence.
Twenty-one witnesses testified and some 250 exhibits were
admitted. After three days of deliberation, the jury returned
a guilty verdict on Count 1 alleging conspiracy to commit
theft of trade secrets, and not guilty verdicts on Counts 2
and 3 alleging conspiracies to commit economic espionage
(essentially, stealing trade secrets to benefit a foreign
government) and money laundering. Verdict Form, ECF No. 260.
motion for acquittal under Federal Rule of Criminal Procedure
29, the Court must consider the evidence in the light most
favorable to the government and determine whether the
evidence “is sufficient to permit a rational trier of
fact to find all of the essential elements of the crime
beyond a reasonable doubt.” United States v.
Harrington, 108 F.3d 1460, 1464 (D.C. Cir. 1997) (citing
Jackson v. Virginia, 443 U.S. 307, 319 (1979)).
Because the Court owes “tremendous deference to a jury
verdict, ” United States v. Long, 905 F.2d
1572, 1576 (D.C. Cir. 1990), it “must presume that the
jury has properly carried out its functions of evaluating the
credibility of witnesses, finding the facts, and drawing
justifiable inferences, ” United States v.
Campbell, 702 F.2d 262, 264 (D.C. Cir. 1983). Further,
the Court must “accord the government the benefit of
all legitimate inferences.” United States v.
Weisz, 718 F.2d 413, 437 (D.C. Cir. 1983). The standard
for “clear[ing] the bar for [a] sufficiency of evidence
challenge” is “very high, ” and the
evidence to support a conviction does “not need to be
overwhelming.” United States v. Pasha, 797
F.3d 1122, 1135 n.9 (D.C. Cir. 2015). Granting a motion for
judgment of acquittal after a jury verdict is appropriate
only where “a reasonable juror must necessarily have
had a reasonable doubt as to the defendant['s]
guilt.” Weisz, 718 F.2d at 437.
moves for a judgment of acquittal on Count 1. He attacks the
sufficiency of the evidence supporting his conviction in
three main respects. First, he maintains there was no
evidence from which a reasonable juror could have found that
he conspired to steal Trelleborg trade secrets. Second, he
argues there was no evidence to support a finding that he
“knew or reasonably believed” that any of the
seven alleged trade secrets were trade secrets, as required
for a conviction. Third, he insists there was no evidence
that he knew or believed that Trelleborg had taken reasonable
measures to protect any of the seven alleged trade secrets,
which the jury was also required to find.
Court begins by cataloging some, but not all, of the trial
evidence bearing on Dr. Shi's evidentiary challenges
before turning to his arguments for why the evidence cannot
support his conviction.
December 2013, Dr. Shi visited Trelleborg's Houston
facility with two senior employees of CBMF. Tr. 1661-63 (July
17, 2019 p.m.) (testimony of Kui Bo). Trelleborg's
Director of Human Resources, Jerolyn Jones, testified that at
the time of Shi's tour, Trelleborg had in place a number
of visible physical security measures to protect its
confidential business information. For example, the Houston
production facility was fenced and monitored by security
guards and video cameras around the clock, at a cost of $500,
000 to the company. Tr. 1503-04 (July 17, 2019 a.m.).
Visitors, such as Dr. Shi, were logged in and out and given
badges while present at the facility. Id. at
1505-06, 1511. They were also escorted and told not to take
photographs of the facility. Id. at 1511-12.
Particularly sensitive areas such as the testing facility and
R&D lab were locked with coded keypads and only certain
employees had access to them. Id. at 1507-08.
Jones also described a number of measures that Trelleborg
took to protect its electronically stored data. For example,
it followed its parent company's worldwide IT policy.
Id. at 1513-14. Employees had to enter a log-in ID
and a password to access the company's computers and
network. Id. And employee access to the
company's computer files was restricted on a need-to-know
basis. Id. at 1522.
incorporated CBMI in 2014 for the purpose of assisting CBMF
enhance its syntactic foam manufacturing capabilities. Gov.
Ex. 12A (April 12, 2014 cooperation agreement between Shi and
CBMF to work together to develop marine buoyancy materials).
CBMF viewed the production of syntactic foam and related
products as important to China's efforts to catch up with
the western nation's deep-sea drilling technology.
E.g., Gov. Ex. 4 at 35006 (CBMF marketing proposal
explaining that “[a]lthough our country has conducted
the related research in this field for many years, it's
still left behind the advanced level overseas in terms of the
performance of the solid buoyancy materials for deep
submersible applications.”); Gov. Ex. 40 (CBMI Articles
of Incorporation dated March 21, 2014 listing Shi as a
Director and CBMF as the sole shareholder). As part of their
collaboration, CBMI and CBMF agreed that the two companies
would protect their technology as trade secrets and that CBMI
would not disclose their technical information without
CBMF's consent. Gov. Ex. 12A at 35020. Additionally, Dr.
Shi indicated to CBMF that he intended to recruit employees
from competitors to assist in developing the foam. See Gov.
Ex. 12A (As ...