In August 2007 Assistant Attorney General for National Security Kenneth L. Wainstein announced that Xiaodong Sheldon Meng, formerly a resident of Beijing, China now residing in Cupertino, California, entered guilty pleas to two counts under a December 2006 indictment involving violations of the Economic Espionage Act of 1996 (EEA), Arms Export Control Act (AECA) and the International Traffic in Arms Regulations (ITAR). Meng, who had been employed by Quantum 3D in San Jose, pleaded guilty to one count of violating AECA and ITAR by exporting without State Department authorization the source code for "viXsen," a Quantum 3D visual simulation software program used for training military fighter pilots and a "defense article" under ITAR. He also pleaded guilty to a second count, charging that he violated EEA by possessing a trade secret belonging to Quantum 3D intending and knowing that his possession would benefit a foreign government – in this case, the People's Republic of China through its Navy Research Center. The trade secret, known as "Mantis," is a Quantum 3D product used to simulate real world motion for military training purposes. Meng had installed a demonstration unit of Mantis at the PRC Navy site and had altered Mantis to make it appear as if it belonged to ORAD, Meng's new employer and a competitor of Quantum 3D based in the PRC.
The convictions are noteworthy because one represents the first in the United States under the AECA involving illegal exports of source code, while the other represents only the second conviction under EEA and just the third case charging violations of EEA. Meng, who is scheduled to be sentenced on January 23, 2008, is currently out of custody on a US$500,000 bond. Under the plea agreement, he is subject to a maximum term of imprisonment of 24 months, a maximum fine of US$500,000 for the EEA conviction, a maximum fine of US$1 million for the AECA conviction and a three-year term of supervised release.
Enacted in 1996, EEA reflects Congress' recognition of the ease with which intellectual property can be stolen as the nation's workforce becomes more mobile, the increasingly important role of intellectual property in the national economy and the difficulties federal prosecutors often have had fitting trade secret cases within earlier federal statutes. The National Stolen Property Act, 18 U.S.C. §2314, does not apply to the theft of purely intellectual property, nor do mail and wire fraud statutes always apply. The only federal statute explicitly targeting the theft of trade secrets prior to the enactment of EEA was limited to government employees' unauthorized disclosure of trade secrets.
EEA contains two distinct provisions. One addresses economic espionage directed by foreign governments or government-controlled entities (18 U.S.C. §1831). The other prohibits the commercial theft of trade secrets carried out for economic or commercial advantage, whether the perpetrator is foreign or domestic (18 U.S.C. §1832). Meng's conviction for violating EEA came under the latter provision.