The chief lawyer for CNEX Labs Inc. was still simmering days after his semiconductor company went toe-to-toe with Huawei Technologies Co. Ltd. in a federal court in Sherman over trade-secret theft allegations.

“This is a bad company,” Matthew Gloss said of the Chinese telecom giant. “They love to swim up alongside small companies like mine, raid our IP and when they're done taking it they turn around and sue without mercy, especially in the Eastern District of Texas, where they've clearly weaponized that forum.” 

Gloss is the general counsel, vice president and corporate secretary of CNEX, a Silicon Valley-based chipmaker co-founded in 2013 by Yiren “Ronnie” Huang, a former employee of Huawei's U.S. research arm of Futurewei Technologies Inc. 

China-based Huawei alleged in the 2017 lawsuit that Huang built CNEX with technology developed by Futurewei and lured away Huawei's employees. Huawei also accused Huang of violating his employment contract by failing to notify Huawei of any patents he obtained within a year of his departure. 

In counterclaims, CNEX alleged Huawei masqueraded as a potential business partner to steal CNEX's trade secrets and reverse engineer them at Xiamen University in China. CNEX also argued Huang's patents were exempt from the disclosure provision because he developed the underlying technology before he joined Huawei. 

The jury found last month that Huawei stole trade secrets from CNEX and Huang violated his employment contract on patent notification. But jurors awarded no damages, concluding neither side was harmed or benefited substantially from the misconduct. 

“Huawei did and still does feel very strongly about the underlying facts and the need for Huawei to address the bad acts by multiple employees who went on to form or join CNEX,” said Steven Geiszler, U.S. chief intellectual property litigation counsel for Huawei. He declined to comment further on the case. 

'Seminal' Case 

An attorney for Huawei, Chicago-based Seyfarth Shaw partner Andrew Boutros, said he believed the “jury essentially found for each side.”

“For the most part it was a draw,” he added. “If you look at the wins and losses that were decided by the court and not just the jury, the court only allowed one of the other side's 18 claims to go to the jury [CNEX's counterclaim for misappropriation of trade secrets]. We're happy with how we did under the circumstances, but this was a hard-fought case on each side.” 

Gloss considers the verdict to be an obvious victory for CNEX and called the case “seminal,” a pivotal moment in which Huawei, which is embroiled in the U.S.-China trade war, was called out in court for stealing trade secrets from a U.S. company. 

He said CNEX's attorneys spoke with jurors after the verdict and were told the evidence made it clear “there was really only one party that had any technology of interest, and that was CNEX.” He added, “I think the jury smelled a rat.”

Gloss joined CNEX in 2016 when he said Huang and the other founders were “very, very excited” to be on Huawei's radar. Gloss said the founders' enthusiasm persisted even after Huawei blindsided CNEX with a letter asserting Huawei owned Huang's patents, laying a foundation for the lawsuit. 

“My guys were still excited about having commercial meetings with them. They were sure I was overreacting to the letter and it was all something we could take care of in the course and scope of our commercial negotiations,” he said. “The litigation unfortunately proved me right. My CEO has a better appreciation I think for the very dark set of facts that we managed.” 

Looking back, he said, “We were incredibly naive for trying to work this out with Futurewei and Huawei.” 

'Tough Case'

Gloss asserted Huawei made a “calculated decision” to set up its headquarters in the Eastern District of Texas, a well-known hotbed of IP litigation, because the company believed it would receive preferential treatment — an allegation Geiszler and Boutros vehemently denied. 

“We had basic motions that were not granted but they [Huawei's] were granted,” Gloss said. “I want to avoid sounding like a guy chewing on sour grapes because the judge wasn't fair. Every general counsel feels that way about a tough case. Everybody deals with this. But I have never seen anything so blatant.” 

Boutros, meanwhile, argued it was Huawei that truly faced “difficult circumstances, given the geopolitical climate.” 

Dallas-based patent litigator Russ Emerson, a partner at Haynes and Boone who was not involved in the litigation, said he found it hard to believe Huawei would get preferential treatment in the Eastern District of Texas or any other U.S. courtroom for that matter. 

“Even though they have a presence in East Texas, in Plano, it's still a Chinese company,” he said. “I don't know that an opponent is going to get hometowned by Huawei.”

As the dust settles from the verdict, both sides have said they are reviewing their next steps. Gloss said CNEX plans to petition the court for an estimated $15 million in legal fees. 

“I believe the right thing is for us to get our legal fees and understand that it can't make use of the courts for such illicit purposes,” he said.

Huawei, meanwhile, said it was “pleased that the jury accepted our evidence finding that Mr. Huang violated his employment agreement with Huawei. Although we disagree, we respect the jury's finding for CNEX on its only surviving counterclaim for which they awarded no damages.”