iPad leak

China orders prison terms in iPad leak

A Chinese court sentenced three people to prison terms for collaborating to steal information from a key supplier regarding Apple Inc.'s iPad 2 several months before its release, the latest outcome from leaks about products made by the technology giant.

The Shenzhen Bao'an People's Court, in announcing its decision, said the head of a Chinese electronics-accessories manufacturer allegedly paid a former employee and a then-active employee of Taiwan's Hon Hai Precision Industry Co. for information about the iPad 2 in order to produce protective cases for the device. Hon Hai, known by its trade name Foxconn, makes the iPad 2 and other gadgets for Apple in its factories in China.

The court announced the decision Tuesday in statements on its official account at Sina Weibo, a Twitter-like microblogging service in China. It said that Xiao Chengsong, general manager of Shenzhen MacTop Electronics Co., had offered 20,000 yuan, or about $3,000, plus discounts on MacTop products to a former Hon Hai employee named Hou Pengna, for information about the iPad 2. The court said Ms. Hou then paid Lin Kecheng, a Hon Hai research-and-development employee, to get digital images of the device's back cover from last September, six months before the iPad 2 was publicly announced.

The court said Mr. Xiao was sentenced to 18 months in prison, and fined 150,000 yuan. Mr. Lin was sentenced to 14 months and fined 100,000 yuan, and Ms. Hou was sentenced to a year in prison and fined 30,000 yuan.

A court official declined to elaborate on the decision. The three defendants couldn't be reached for comment, and the identities of their lawyers couldn't be determined.

Apple declined to comment. Hon Hai didn't comment directly on the court's decision. "We cannot comment on matters of internal security, but Foxconn takes its commitment to protecting its intellectual property as well as that of its customers very seriously and undertakes all appropriate actions to safeguard against any violations," Hon Hai said in a written statement.

A woman who answered the phone at MacTop declined to comment or to transfer the call to anyone else at the company.

Apple is known for strictly guarding product-development secrets. Hon Hai has become the world's biggest contract manufacturer of electronics in part because of its ability to protect the secrets and technology of its clients, which also include Hewlett-Packard Co., Sony Corp., Dell Inc. and Nintendo Co.

In July 2009, a 25-year-old Hon Hai worker in the southern Chinese city of Shenzhen committed suicide after being questioned by a Hon Hai security official. Local-media reports, which weren't confirmed, said the questioning involved the disappearance of a prototype iPhone. Hon Hai expressed regret over the worker's death and agreed to compensate his family. Apple also said it was saddened by the worker's death. "We require that our suppliers treat all workers with dignity and respect," a spokesman for Apple said at the time.

The Shenzhen court said that MacTop had begun manufacturing cases for the iPad 2 and promoting them online, including on Alibaba Group Holding Ltd.'s online trade platform Alibaba.com, before the iPad 2 was released. Alibaba said that listings for iPad 2 cases appeared on its site in December, and were removed after Alibaba received a "legitimate" request to have the listings taken down. The listings were posted by several companies, but Alibaba didn't say if any of them came from MacTop.

Mr. Lin "has violated the privacy policy of the company and provided trade secrets to others," the court said in a statement. Mr. Xiao and Ms. Hou obtained that information "by illegal means," which "caused huge losses" to Hon Hai, the court said. "All three people have infringed trade secrets."

(Published by WSJ - June 16, 2011)

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