A landmark criminal trial against Chinese telecom giant Huawei Technologies opened in Brooklyn federal court last week, putting state-sponsored intellectual property theft on a collision course with a U.S. legal system that is being asked to separate corporate conduct from the government strategy behind it.
According to reporting by The Federalist, the case before Judge Ann Donnelly grew out of a 2018 probe into whether Huawei violated U.S. sanctions by moving telecom equipment and conducting related business through Iran. That investigation produced the arrest of Huawei chief financial officer Meng Wanzhou, daughter of company founder Ren Zhengfei, in Vancouver on a U.S. warrant. The outlet notes that Chinese intelligence was reportedly ordered to prevent her extradition out of concern she might reveal sensitive information — and that shortly after her arrest, China detained former Canadian diplomat Michael Kovrig and businessman Michael Spavor on espionage charges.
A 2021 agreement involving the U.S., Canada and China allowed Meng to return home under a deferred-prosecution deal that also freed the two Canadians. In an agreed statement of facts, Meng acknowledged she had made material misrepresentations to a bank about Huawei’s Iran-connected subsidiary, Skycom. Her individual charges were dropped, but in June 2026 Judge Donnelly ruled those admissions could be used against the company itself.
A Twelve-Count Complaint
Huawei now faces 12 counts in a criminal complaint, including racketeering conspiracy, conspiracy to steal trade secrets, and bank and wire fraud tied to false information given to financial institutions such as HSBC and Citi about its Iran business.
In opening remarks on Sept. 9, Justice Department trial attorney Taylor Stout described Huawei’s business model with a blunt three-word phrase: “theft, lies, cover-up.” He portrayed the company as a criminal enterprise that, between 1999 and 2020 — roughly two decades — stole from American companies and exploited the U.S. financial system to take control of the telecom industry. Among the alleged victims Stout cited were Cisco, whose router operating system source code was described as a target, and T-Mobile. To illustrate his point, Stout referenced an episode in which a Huawei employee photographed the inside of a T-Mobile robotic device and placed a key component in his backpack.
Brian Heberlig, Huawei’s attorney, pushed back with a competing framing, calling the case one of “competition, not conspiracy” and arguing that isolated employee misconduct does not amount to a corporate racketeering scheme.
Judge Donnelly instructed the jury that neither China nor the Communist Party is on trial. That is the correct instruction for a criminal courtroom, but it leaves the broader policy question untouched. As The Federalist’s analysis puts it, the primary responsibility for China’s intellectual property theft rests with the Chinese Communist Party.
A State-Backed System
The legal architecture underpinning that system is not hidden. China’s 2017 National Intelligence Law allows companies and individuals to be compelled to assist in intelligence activities. The Federalist reports that for years Beijing has blended legitimate technology acquisition with theft, forced transfer and hacking, then channeled stolen intellectual property to state-owned enterprises or nominally private Chinese firms — giving them an unfair advantage in global markets.
The most frequently cited example is Huawei’s growth in wireless equipment. The outlet notes that reports have long linked Chinese intrusions into Nortel, once Canada’s leading telecommunications company, to Huawei’s ability to sell comparable equipment at lower prices as Nortel collapsed.
Huawei’s trajectory reflects a broader pattern in which Chinese companies have come to dominate industries including electric vehicles and AI chips. While those firms do innovate, The Federalist argues their early success was often underwritten by a systematic, state-backed campaign of IP theft — market share first, research and development second, and entrenched positions in the global market afterward.
The Bill for American Innovation
The economic toll on the United States is difficult to overstate. A 2017 report by the Commission on the Theft of American Intellectual Property estimated that Chinese IP theft costs the U.S. between $225 billion and $600 billion annually — a figure that likely excludes undetected theft entirely.
The method is now targeting a new frontier. The U.S. government recently accused six Chinese AI companies, including DeepSeek and Moonshot, of industrial-scale “distillation” from U.S. models developed by Anthropic, OpenAI, Google and xAI — actions The Federalist says were likely taken with the Chinese government’s knowledge. Distillation, which trains smaller AI models on the outputs of more sophisticated ones, is not identical to direct intellectual property theft. Still, the outlet describes it as another avenue for benefiting from someone else’s research without permission or adequate compensation.
With President Trump due to meet Xi Jinping later this month, The Federalist argues that intellectual property theft should sit high on the agenda. The concern is that export and investment rules could be eased while industrial-scale appropriation of U.S. models and manufacturing know-how continues. As the outlet frames it, a court can try a company — but only governments can decide whether the system that company grew up in remains cost-free.
Source: thefederalist.com — https://thefederalist.com/2026/09/14/charges-against-chinese-telecom-giant-spotlight-ccp-sponsored-intellectual-property-theft/