Sixth Circuit upholds conviction of chemist who stole secrets for China

CINCINNATI (CN) — The Sixth Circuit on Tuesday upheld the conviction of a chemist accused of stealing trade secrets from her former employers to start a business in China.

In 2021, a Tennessee jury found naturalized U.S. citizen Xiaorong You guilty on counts of possessing stolen trade secrets, wire fraud and espionage. A federal judge sentenced You to 14 years in prison.

You, who was born in China, was found to have taken trade secrets from her former employers Coca-Cola and the Eastman Chemical Co. of Tennessee related to a BPA-free aluminum can liner.

The chemist had planned to start her own can coating company in China and had partnered with the Chinese chemical company Weihai Jinhong Group and had been awarded business grants from China’s “Thousand Talents program.”

According to court documents, while working for Coca-Cola You transferred files related to BPA-free chemical formulas to a personal Google Drive account and later to a USB drive.

After joining Eastman, You copied company files to the same Google Drive account and USB drive the day before she was fired. Eastman employees were able to retrieve the USB drive from her and reported her to the FBI.

On a return trip from China, law enforcement agents seized You's computer and questioned her, and she was officially arrested by the FBI in February 2019.

After her conviction You filed an appeal claiming that her trial, which took place during the throes of the Covid-19 pandemic, was tainted by an “anti-Chinese environment” and that testimony from University of California economist Barry Naughton should not have been admitted.

However, the Sixth Circuit disagreed and in a 25-page ruling found You had not been unfairly prejudiced during her trial.

"The record shows that the district court was sufficiently careful. For example, the court acknowledged the Covid-19 virus’ origin in China and the recent spike of anti-Asian hate crimes in America when it excluded as unfairly prejudicial the testimony from a different government witness,” U.S. Circuit Court Judge Danny Boggs wrote for the panel. “For each witness, the district court considered the testimony’s capacity to evoke an improper emotional response from the jury. At all times, the district court ensured that You was being tried for her crimes, not for her status as a person of Chinese ethnicity.”

The Ronald Reagan appointee also wrote that Naughton’s testimony was not prejudicial because his statements on how China approaches foreign-technology acquisition did not imply You planned to benefit the country with the stolen information.

“It does not necessarily follow from this testimony, if credited, that You intended to benefit a foreign government or instrumentality,” Boggs wrote.

Despite upholding the conviction, the Sixth Circuit also found the trial court had improperly based its sentence on shaky estimates to the total value of the Chinese market for can coatings.

Boggs noted the judge confused profits with sales, and that the errors were not harmless and You should be resentenced.

“But we cannot be certain that the district court, after correcting its error, would issue the same sentence again,” Boggs wrote. “The district court on remand might again look to anticipated profits, tweak its model, and reach a loss amount that corresponds with a lower guidelines range and, subsequently, a lower sentence.”

U.S. Circuit Court Judges Julia Gibbons and David McKeague, both George W. Bush, appointees, joined in the opinion.