United States v. Yu Qin ( 2012 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 12a0233p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellant, -
UNITED STATES OF AMERICA,
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-
No. 12-1015
v.
,
>
-
Defendants-Appellees. -
YU QIN and SHANSHAN DU,
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N
Appeal from the United States District Court
for the Eastern District of Michigan at Detroit.
No. 2:10-cr-20454—Marianne O. Battani, District Judge..
Decided and Filed: July 20, 2012*
Before: COLE and DONALD, Circuit Judges; SARGUS, District Judge.**
_________________
COUNSEL
ON BRIEF: Kathleen Moro Nesi, UNITED STATES ATTORNEY’S OFFICE, Detroit,
Michigan for Appellant. Frank D. Eaman, FRANK D. EAMAN PLLC, Detroit,
Michigan, Robert M. Morgan, Detroit, Michigan, for Appellees.
_________________
OPINION
_________________
BERNICE BOUIE DONALD, Circuit Judge. On July 21, 2010, Yu Qin and his
wife Shanshan Du (collectively, “Defendants”) were indicted for, among other related
charges, conspiring to possess and possessing stolen trade secrets and wire fraud. Upon
receiving notice of the government’s intent to introduce evidence under Rule 404(b) of
*
This decision was originally issued as an “unpublished decision” filed on July 20, 2012. The
court has now designated the opinion as one recommended for full-text publication.
**
The Honorable Edmund A. Sargus, Jr., United States District Judge for the Southern District
of Ohio, sitting by designation.
1
No. 12-1015 United States v. Qin, et al. Page 2
the Federal Rules of Evidence, Defendants moved to exclude the evidence. On
December 9, 2011, the district court granted the motion. The government timely
appealed. For the reasons assigned herein, we affirm.
I. BACKGROUND
From 1985 to 2005, Yu Qin (pronounced “Chin”) worked as an electrical
engineer in Troy, Michigan, for Controlled Power Company (“CPC”), a company that
designs and manufactures electrical power equipment and systems. From 1997 until his
termination on August 30, 2005, Qin held the position of Vice President of Engineering
and Research and Development at CPC. Qin’s wife, Shanshan Du, also worked as an
electrical engineer for CPC until some time in 2000. Thereafter, Du began working for
General Motors (“GM”) as an engineer in its Advanced Technology Vehicles Group.
At GM, Du worked on various software engineering projects related to hybrid vehicle
technology and was responsible for some of the motor control code used in GM’s hybrid
electric motor controller cards. These cards constitute proprietary information owned
by GM. During the course of their employment, both Qin and Du signed documents in
which they agreed to protect the confidential and/or proprietary information belonging
to their respective employers. Du further agreed to return “all documents and other
materials containing any GM business or technical information or other proprietary
information created or obtained in the course of [her] service[]” at GM.
On January 30, 2005, Du’s supervisor at GM, apparently dissatisfied with Du’s
job performance, offered Du a severance agreement in return for her resignation. Du
accepted the offer in writing on March 14, 2005. During Du’s exit interview on March
17, 2005, Du certified in writing that she had “returned all GM Records in printed
(copies or reproductions), electronic or other tangible form including secret and
confidential information in [her] possession or under [her] control, located in [her]
office, home or any other off-site location.” Du also acknowledged that her “obligation
not to disclose secret or confidential information [would] continue[] after the termination
of [her] employment.”
No. 12-1015 United States v. Qin, et al. Page 3
By summer 2005, CPC’s Vice President of Operations, Christian Tazzia, had
become suspicious that Qin was engaging in outside business activities. Tazzia soon
discovered through another CPC employee that Qin owned and operated a business
known as Millennium Technologies International, Inc. (“MTI”). Qin had been operating
this business unbeknownst to CPC since at least 2000. Based on MTI’s website, the
business appeared to be in direct competition with CPC, promoting products that CPC’s
own Research and Development Department—of which Qin was Vice President—had
been developing for years.
On August 30, 2005, CPC confronted Qin about these activities, and Qin initially
denied any involvement in MTI business. Later that day, CPC employees discovered a
bag belonging to Qin hidden in a co-worker’s office. The bag contained a large quantity
of electrical components later identified as CPC property and a large external hard drive
determined to be Qin’s personal property. Tazzia reviewed the contents of the hard
drive and discovered a directory titled “Shanshan” that contained many electronic
documents that appeared to be the property of GM. CPC subsequently advised GM of
its discovery of these documents, whereupon GM conducted its own forensic analysis
of the hard drive. GM’s analysis revealed that the “Shanshan” directory contained
16,262 individual files, the majority of which were confirmed to be the property of GM.
The forensic analysis also indicated that all 16,262 files had been copied to the hard
drive on February 2, 2005, three days after GM offered Du a severance package. The
files contained numerous confidential GM documents, including at least four pieces of
GM intellectual property essential to GM’s hybrid motor controller card. Most of this
intellectual property was information that Du would have had no legitimate reason to
possess during the ordinary course of her employment with GM. In fact, even Du’s
former supervisor did not have access to some of this information, nor would he have
had any legitimate need to access it. Other confidential information located in the
“Shanshan” directory included detailed specifications for the power transistors used by
GM in its hybrid motor inverters; GM’s requirements for its hybrid electric vehicle drive
train, including the motor, inverter, and controller card; a complete user manual for
GM’s proprietary suite of engineering and design software used in the development of
No. 12-1015 United States v. Qin, et al. Page 4
its hybrid electric vehicles; and documents that detailed GM’s E67 engine controller
mechanization. According to GM, there was no legitimate need for Du in her capacity
as a GM employee to access or possess the vast majority of this information.
This discovery prompted further investigation into MTI’s business activities,
which showed that MTI had been marketing power control products for the hybrid
electric vehicle market. CPC uncovered evidence that Qin had directed subordinate CPC
employees to perform engineering work for MTI on CPC company time as well as
evidence that MTI was engaged in a project to develop a hybrid electric vehicle with
Chinese automobile manufacturer Chery Automobile. Qin’s hard drive also contained
evidence indicating that he had misappropriated CPC resources and information and
used them to further his MTI business. In particular, CPC found documents related to
its development of a three-phase uninterruptible power system, including source code,
circuit board schematic drawings, and marketing materials. All of these materials had
been modified, however, such that “CPC” had been replaced with “MTI” as the owner
of the intellectual property.
On July 22, 2010, Defendants were charged with one count of conspiring to
obtain trade secrets from GM pertaining to motor controls for hybrid vehicles, two
counts of unlawfully possessing those trade secrets with intent to provide them to third
parties, one count of wire fraud, and, as to Qin only, one count of obstruction of justice.
None of the conduct charged in the indictment related to Qin’s possession of parts,
resources, intellectual property, or other confidential information belonging to CPC.1
On November 1, 2011, the government provided Defendants’ counsel with notice
of its intent to offer evidence at trial pursuant to Federal Rule of Evidence 404(b). The
evidence consisted of “proof that defendant Qin appropriated resources of his employer
. . . for the benefit of MTI.” On November 15, 2011, Defendants filed a joint motion to
1
CPC initiated a civil lawsuit in Oakland County Circuit Court that lists several causes of action
against Defendants. While one of those claims alleges a trade secret violation, the search of Defendants’
homes pursuant to the warrant in this case did not uncover any trade secrets of CPC, and Defendants have
never been indicted for possessing any trade secrets of CPC. Rather, the principal basis of CPC’s civil suit
is that Qin unfairly competed against CPC by forming a separate company and making products that
competed with CPC. Du is named in that case because of her ownership interest in MTI.
No. 12-1015 United States v. Qin, et al. Page 5
exclude the 404(b) evidence. They argued that Qin had many defenses to CPC’s
allegations and, therefore, that introducing those allegations in the criminal proceedings
would not only be inappropriate, but would be unduly burdensome, essentially resulting
in a trial within a trial. Defendants also argued that the evidence would be more
prejudicial than probative under Rule 403, particularly as to Du, to whom CPC did not
attribute any of the underlying conduct forming the basis of CPC’s civil complaint. The
government responded on November 29, 2011, arguing that the evidence was relevant
to show Defendants’ specific intent to commit the charged offenses, their participation
in a common scheme or plan, and the absence of mistake, all of which are at issue by
virtue of the elements of the criminal charges.
On December 6, 2011, the district court held a hearing in which it granted
Defendants’ motion to exclude the proffered evidence. In support of this ruling, the
court stated:
[What] you are talking about here [is] stealing trade secrets. . . . When I
look at what the Government has outlined here, . . . it shows that
Defendant – at least Defendant Qin is setting up this business, working
this business. They obviously have a business. I don’t think that’s an
issue that they have a business.
Using CPC documents, I mean, they substituted . . . MTI into wherever
it said CPC, this is something, I don’t know whether it is more of a
generic form as . . . the defense is trying to say or a form that is used that
could be modified, but is that stealing? I mean, I don’t see it. I don’t see
it as a substantially similar circumstance. I think what it goes to show is
that these individuals or at least Mr. Qin is setting up this business. Was
he doing it while he was working at CPC? Clearly he was doing it while
he was working at CPC, but does that show that he was stealing things
outside of perhaps time, which I don’t think is necessarily relevant. . . .
I simply don’t think there is . . . substantially enough relevance to this
and that it could be way more prejudicial than probative because to me
its weight only goes to showing that they were, in fact, setting up a
business and doing so on CPC time, so the Court is not going to allow
[the evidence].
This interlocutory appeal followed, and proceedings in the district court were stayed
pending resolution of the issue now before us.
No. 12-1015 United States v. Qin, et al. Page 6
II. ANALYSIS
A. Standard of review
We review a district court’s ruling on the admissibility of evidence for abuse of
discretion. United States v. Haywood, 280 F.3d 715, 720 (6th Cir. 2002). We will find
that a district court has abused its discretion when we are “left with the definite and firm
conviction that the district court committed a clear error of judgment in the conclusion
it reached upon a weighing of the relevant factors.” United States v. Jenkins, 345 F.3d
928, 936 (6th Cir. 2003) (quoting United States v. Copeland, 321 F.3d 582, 595
(6th Cir. 2003)).
B. Prior bad acts
A trial judge is accorded broad discretion in determining the admissibility of bad
acts evidence under Rule 404(b). United States v. Stout, 509 F.3d 796, 799 (6th Cir.
2007). The Rule provides, in relevant part: “Evidence of other crimes, wrongs, or acts
is not admissible to prove the character of a person in order to show action in conformity
therewith. It may, however, be admissible for other purposes, such as proof of motive,
opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or
accident. . . .” Fed. R. Evid. 404(b). This circuit employs a three-step process for
determining the admissibility of such evidence:
First, the district court must decide whether there is sufficient evidence
that the other act in question actually occurred. Second, if so, the district
court must decide whether the evidence of the other act is probative of
a material issue other than character. Third, if the evidence is probative
of a material issue other than character, the district court must decide
whether the probative value of the evidence is substantially outweighed
by its potential prejudicial effect.”
Jenkins, 345 F.3d at 937(citing Haywood, 280 F.3d at 719-20). Applying this standard,
we are not left with a “definite and firm conviction that the district court committed a
clear error of judgment” in excluding the evidence. Id. at 936. Accordingly, the district
court’s ruling is affirmed.
No. 12-1015 United States v. Qin, et al. Page 7
1. Evidence that the act occurred
As to the first prong, the relevant inquiry is whether “there is sufficient evidence
to support a finding by the jury that the defendant committed the similar act.”
Huddleston v. United States, 485 U.S. 681, 685 (1988). As Defendants point out, this
test is often met by the accused’s admission that the prior act or conviction occurred.
See, e.g., United States v. Clay, 667 F.3d 689, 694 (6th Cir. 2012) (“The [prior bad act]
is undisputed, so no discussion is needed as to step one.”); Jenkins, 345 F.3d at 937
(“[T]here is no doubt that the bad act occurred; [the defendant] freely admitted [it].”);
Haywood, 280 F.3d at 720 (“Haywood concedes that the other act at issue . . . actually
occurred.”). In the instant case, by contrast, Qin vigorously denies engaging in any
improper conduct at CPC. Thus, while the government contends that its proof would be
relatively straightforward and would likely require only a few hours, Qin would have
every incentive to refute the government’s allegations with proof of his own, attempting
to establish for the jury that the allegations are unfounded.
While the record does not establish that the district court made a definitive
finding as to the first prong, it does show that the court considered the evidence and—at
least implicitly—found it lacking. Given the parties’ positions, the evidence could
reasonably support a finding on either side of this contentious issue, and we are inclined
to agree that its resolution could easily become a trial unto itself. For the purposes of
this appeal, however, we will assume without deciding that there is sufficient evidence
to support a jury finding that Qin appropriated CPC resources for the benefit of MTI.
2. Probative of issue other than character
We turn, then, to whether the evidence is probative of a material issue other than
character. “Evidence of other acts is probative of a material issue other than character
if (1) the evidence is offered for an admissible purpose, (2) the purpose for which the
evidence is offered is material or ‘in issue,’ and (3) the evidence is probative with regard
to the purpose for which it is offered.” Haywood, 280 F.3d at 720.
No. 12-1015 United States v. Qin, et al. Page 8
Although the district court did not address the first part of this inquiry directly,
the government clearly purported to offer the 404(b) evidence for an admissible purpose:
to show Defendants’ specific intent, participation in a common scheme or plan, and
absence of mistake or accident.2 See, e.g., United States v. Blankenship, 775 F.2d 735,
739 (6th Cir. 1985) (noting other permissible uses of 404(b) evidence, including its use
to show a common scheme or plan). The district court was likewise silent on the second
prong, but we agree with the government’s argument that its proffered purposes are
material by virtue of the mens rea elements of the charged offenses and Du’s defense
that she only retained possession of the GM files inadvertently. Thus, our inquiry turns
to whether evidence of Qin’s alleged misappropriation of CPC parts, information, and
time is probative of Defendants’ specific intent to steal trade secrets from GM. Id.“To determine if evidence of other acts is probative of intent, we look to whether
the evidence relates to conduct that is ‘substantially similar and reasonably near in time’
to the specific intent offense at issue.” Haywood, 280 F.3d at 721 (quoting Blankenship,
775 F.2d at 739). The district court based its exclusion of the 404(b) evidence on this
prong, ruling that the proffered evidence was not probative of Defendants’ criminal
intent because it was not substantially similar to the charged offenses. We agree.
The government proffered evidence that Qin misappropriated CPC electrical
parts for use in MTI products, that he used CPC forms and documents for the benefit of
MTI, and that Qin and his subordinates conducted MTI business during CPC work time.
The charged offenses, in contrast, were conspiracy to possess and unauthorized
possession of trade secrets. These charges require the government to prove that
Defendants stole information that GM had taken reasonable measures to keep
confidential and that the stolen information “derives independent economic value, actual
or potential, from not being generally known to, and not being readily ascertainable
2
We note, however, that it is a fine line the government attempts to draw between conduct that
is part of a common scheme or plan and conduct that is in conformity with character. The government
argues that “[a]llowing the jury to see the full picture in the context of the common scheme of stealing
from employers to benefit their private company makes it more likely the jury will understand that Du’s
possession of GM trade secrets was for the benefit of MTI and not a mistake.” In essence, the government
would be asking the jury to find that Qin and Du stole from her employer by introducing evidence that Qin
(possibly) stole from his. This sounds perilously close to the definition of improper character evidence.
No. 12-1015 United States v. Qin, et al. Page 9
through proper means by, the public[.]” 18 U.S.C. § 1839(3). Moreover, the
government must prove that Defendants stole this information with the specific intent
to convert it for the economic benefit of someone other than GM. Id. at § 1832(a).
While it is possible to generalize Qin’s alleged conduct in such a way as to make it
sound substantially similar to the conduct charged in the indictment (e.g., Qin stealing
from CPC is substantially similar to Qin and Du stealing from GM), that would be an
over-simplification. Pilfering office supplies—or discarded electrical parts, for that
matter—and conducting personal business on company time may well constitute theft,
but they are of a fundamentally different character than stealing trade secrets, which
involves gaining unauthorized access to highly confidential and valuable intellectual
property and converting that information for one’s own economic benefit. We find no
error in the district court’s determination that these acts were not substantially similar.
3. Probative value vs. prejudicial effect
Third, we consider the district court’s Rule 403 determination. United States v.
Johnson, 458 F. App’x 464, 470 (6th Cir. 2012.) Where relevant evidence carries with
it the risk of unfair prejudice, confusion of the issues, misleading the jury, or undue
delay, and that risk substantially outweighs the probative value of the proffered
evidence, Rule 403 provides that the evidence may be excluded. The district court found
that, in addition to lacking probative value, the proffered 404(b) evidence would be
highly prejudicial to Defendants and, thus, that it should be excluded. We find that this
determination was well within the bounds of the district court’s discretion.
We have already touched briefly on the issue of undue delay, and reiterate here
our concern that determining whether the allegations of Qin’s misconduct at CPC are
with or without merit could result in a trial within a trial. In fact, the risk of undue delay
is substantial enough that it is likely sufficient in itself to justify exclusion of the
evidence under Rule 403. In addition to lengthening the time needed for trial,
presentation of the proffered evidence carries with it a high risk of confusing and/or
misleading the jury. Unlike a prior conviction, which is a discreet act or event that the
prosecution could call to the jury’s attention, the government seeks to introduce evidence
No. 12-1015 United States v. Qin, et al. Page 10
of a variety of alleged misconduct that occurred over the course of several years during
Qin’s employment at CPC. The amount of time and the number of witnesses needed to
present and rebut these allegations would almost certainly influence the jury’s perception
of its relative importance and could cause confusion that this alleged conduct is part of
the criminal charges for which Defendants are on trial. This is especially true where the
government continually refers to the conduct as part of Defendants’ common scheme or
plan. In reality, the only scheme or plan charged in the indictment is Defendants’
scheme to steal GM trade secrets, and the government has not established how Qin’s use
or misuse of CPC time and resources is part of Qin and Du’s scheme to steal trade
secrets from GM. The government argues generally that this conduct makes it “more
probable that the defendants were engaged together in a common scheme or plan to
defraud their employers for MTI’s benefit.” But the charges against Defendants are not
so broad; they encompass only the alleged theft of GM trade secrets. By generalizing
in this manner, the government increases the risk that the jury will interpret the 404(b)
evidence in precisely the manner that the rule is intended to prohibit—namely, that
Defendants are thieves who routinely steal from their employers for the benefit of their
own company. Thus, presented in this manner, the evidence is not only likely to mislead
the jury but also to unfairly prejudice Defendants.3
Finally, in response to the government’s argument that the proffered evidence is
probative of the absence of mistake, we note that “[o]ne factor in balancing unfair
prejudice against probative value under Rule 403 is the availability of other means of
proof.” Johnson, 458 F. App’x at 470-71 (quoting United States v. Merriweather,
78 F.3d 1070, 1077 (6th Cir. 1996)). There is other evidence in the record that, in our
view, is far more probative on this point than the proffered 404(b) evidence. For
instance, Du certified in writing that she had returned all GM documents in her
possession, thereby seriously undermining any argument that she simply “forgot” that
she had the obligation to do so. The manner in which the information was copied to the
3
This is especially true as to Du, who did not engage in any of the alleged misconduct at CPC that
is the subject of the proffer. The government would be arguing that Qin’s alleged misconduct at CPC is
evidence of Du’s criminal intent to steal from GM.
No. 12-1015 United States v. Qin, et al. Page 11
hard drive is also highly probative. These were not simply many years’ worth of work
files that Du accumulated on her hard drive over the course of her employment; rather,
all 16,262 files were copied to Du’s hard drive at the same time. A jury will likely be
skeptical that this occurred “accidentally,” particularly in light of the fact that the files
were copied three days after Du was asked to resign. Finally, the content of the files is
also highly suggestive of the absence of mistake, as, according to the government, Du
would never have had any legitimate reason to access most of the information contained
in the files. In other words, her retention of the files after her termination can hardly be
“innocent” if she was never authorized to possess them in the first place.
III. CONCLUSION
Upon consideration of all relevant factors, we find that the district court did not
abuse its discretion in excluding the 404(b) evidence. Accordingly, we AFFIRM.