Court Opinion

ID: 804772
Source: CourtListenerOpinion
Date Created: 2012-07-20 14:15:45+00
Date Added: 2024-06-11T12:34:48.297542
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                             File Name: 12a0789n.06
                                                                                        FILED
                                           No. 12-1015
                                                                                    Jul 20, 2012
                              UNITED STATES COURT OF APPEALS                   LEONARD GREEN, Clerk
                                   FOR THE SIXTH CIRCUIT

UNITED STATES OF AMERICA,                     )
                                              )
       Plaintiff-Appellant,                   )
                                              )
v.                                            )   ON APPEAL FROM THE UNITED
                                              )   STATES DISTRICT COURT FOR THE
YU QIN and SHANSHAN DU,                       )   EASTERN DISTRICT OF MICHIGAN
                                              )
       Defendants-Appellees.                  )
                                              )

       Before: COLE and DONALD, Circuit Judges, and SARGUS, District Judge.*

       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 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

       *
           The Honorable Edmund A. Sargus, Jr., United States District Court for the Southern
District of Ohio, sitting by designation.
No. 12-1015
United States v. Qin, et al.

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.”

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United States v. Qin, et al.

       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

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No. 12-1015
United States v. Qin, et al.

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 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,

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No. 12-1015
United States v. Qin, et al.

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 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.

       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.

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No. 12-1015
United States v. Qin, et al.

       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.

                                          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

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No. 12-1015
United States v. Qin, et al.

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.

               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

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No. 12-1015
United States v. Qin, et al.

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

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‘in issue,’ and (3) the evidence is probative with regard to the purpose for which it is offered.”

Haywood, 280 F.3d at 720.

       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

       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.

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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 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.

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                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 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

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United States v. Qin, et al.

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 hard drive is also highly

       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.

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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.

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