Bay Area company alleges Chinese partners stole trade secrets

A Bay Area medical device company alleged in a lawsuit last week that its former business partners “brazenly” stole money, employees and trade secrets as part of a “criminal enterprise.”

In a lawsuit filed Friday in the United States District Court’s Northern District of California, Lumenous Device Technologies accused former employees of its partner company in China of operating as a “criminal syndicate.” The suit specifically alleges that the employees, after trying and failing to oust Lumenous as the joint venture’s owner, embarked on a criminal spree, stealing $12 million, equipment and trade secrets, and then started a new company based on Lumenous’ intellectual property.

Lumenous’ lawsuit portrays the scheme, which allegedly began in January 2022, as a well-organized feat of criminal racketeering, claiming in the suit that the former employees broke laws regarding extortion, wire fraud and economic espionage.

The dispute stems back to 2002, when Santa Clara-based Lumenous formed a subsidiary in China called Jiangyin Peier Technology Co. to manufacture and sell its products to customers in Asia and the Middle East, according to the filing. Ownership percentages at JYPT varied over the years, but Lumenous was a constant — and the key designer, developer and innovator behind the subsidiary’s products, the filing says.

Lumenous mostly deals in stents, the hyper-precise wires that help hold open blood vessels in patients with coronary artery disease. JYPT accounted for about 80% of Lumenous’ revenue, the lawsuit says. 

By 2021, “JYPT was thriving,” the lawsuit says, and preparing to go public. But the IPO process hit a snag due to a “ministerial defect that complicated JYPT’s ownership picture,” the filing states. Lumenous CEO Todd Dickson allegedly told JYPT general manager Shen Bin that they’d need to delay the IPO to reaffirm Lumenous’ ownership legally.

“Where Dickson saw a modest hurdle to overcome, Defendant Shen smelled blood in the water,” the suit says.

The filing alleges that Shen and her colleagues at JYPT “sprang into criminal action,” which the suit claims was done in pursuit of higher earnings from an eventual IPO if Lumenous was no longer the owner of JYPT. The suit dubs the resulting chain of events the “Shen Enterprise.”

In January 2022, the filing alleges, they kicked off two potential plans — to offer Lumenous a smaller stake in a new version of the firm, or to take JYPT’s property outright if Dickson and Lumenous refused the smaller stake. Shen told Dickson that the new firm would drop his and Lumenous’ stake from around 69% of JYPT to around 27%, the filing said, “with the understanding that the Shen Enterprise would be able to successfully steal the business’s assets, including trade secrets and cash, if Lumenous refused.”

One defendant, in an email cited in the suit, wrote, “Our direction is very clear: set up a new platform and the team will become a major shareholder. We deserve it.”

JYPT’s board of directors, led by Dickson, voted to fire Shen a few months later. JYPT employees pushed back in a letter, calling the decision “invalid” and saying that they would keep working under Shen. The suit alleges that Shen and her colleagues later transferred more than $12 million out of JYPT bank accounts, and argued in Chinese court that JYPT should be dissolved.

After failing to oust Lumenous or dissolve JYPT, the suit says, Shen and her colleagues started a new company, Jiangyin Zhongpei Technology Co., allegedly taking stolen physical equipment and trade secrets from Lumenous and JYPT with them. The suit adds that the new firm promised its workers they’d honor JYPT’s benefits and compensation rates, with the “vast majority” of employees at the new firm coming from the old one.

“To this day,” the suit says, “Zhongpei continues to operate under the Shen Enterprise’s direction, using Lumenous trade secrets to line the Shen Enterprise’s pockets.” It calls the new firm a “sham company” born of Lumenous’ work and investments. The lawsuit asks for a jury trial. 

Hear of anything happening at a Bay Area tech company? Contact tech reporter Stephen Council securely at [email protected] or on Signal at 628-204-5452.