Liebherr accusing workers, Chinese companies of copying mining truck

[kscarbel2]

The Daily Press / March 28, 2015

A large manufacturing company is accusing several former workers at its Newport News production plant of stealing thousands of design documents used to make huge mining trucks — then turning the information over for copycat truck production in China.

In a case heading for a jury trial this summer, Liebherr Mining & Construction Equipment is suing six former employees, alleging they conspired against the company.

Liebherr is also suing a Detroit engineering firm, accusing it of serving as a conduit to Chinese companies, and two Chinese manufacturing partnerships, accusing them of imitating a Liebherr diesel truck with a 400-ton payload.

"This case involves industrial espionage of a serious and brazen nature," says a 2013 complaint in the case. "It involves the wholesale theft of trade secrets from a United States manufacturing facility and the use of these trade secrets to help multiple Chinese competitors design a competing product."

Access to those documents — from truck designs to vendor information to factory layouts — allowed the Chinese firms to build the large mining trucks "in a fraction of the time, at a fraction of the cost, and with a fraction of the manpower as could be accomplished by lawful means," the 104-page complaint alleges.

All six workers — as well as the Detroit firms and the Chinese companies — have denied the allegations against them, saying they were not involved in a conspiracy to copy Liebherr trucks. One of the sued workers, the case's original defendant, died about a year ago.

The complaint accuses some of the former workers of stealing documents by downloading files from their computers to thumb drives and USB devices, and says that one worker walked around the Newport News factory taking pictures of its layout and tools for use by a Chinese firm.

The suit alleges that the Liebherr name was later taken off some of the documents and replaced with the Chinese firm's name. Liebherr, the suit says, spent significant money on computer forensics experts to track the downloading.

If the theft isn't reversed, Liebherr contends, "American manufacturing jobs will be lost" to companies that have taken the easy way out and ripped off technology and processes that took decades and millions of dollars to develop.

The Liebherr mining trucks — built at a Newport News manufacturing plant on Chestnut Avenue, off Interstate 664 — stand 29 feet tall and have a carrying capacity of 400 tons, with tires taller than a grown man. That compares to a normal dump truck that stands 10 feet tall and has a 40-ton payload.

"Design of mining trucks occurs over years, not weeks," says the 2013 complaint, filed by Brett A. Spain and David A. Kushner with Wilcox & Savage. For its $5 million mining trucks, the complaint adds, "Liebherr has been analyzing and upgrading its design for over 15 years."

"This effort has included teams of employees in research and development, design, computer modeling, quality assurance, vendor relations, manufacturing and testing," the complaint says. "Liebherr has spent hundreds of thousands of man-hours and tens of millions of dollars designing and improving these trucks and components."

Preparing for court

Liebherr USA — which includes the Newport News plant — is a division of a Switzerland-based manufacturing group, Liebherr-International AG, which was founded in 1949 by a German industrialist, Hans Liebherr.

The case, with the complaint first filed in late 2010, is being heard in Newport News Circuit Court before Judge Timothy S. Fisher, with a jury trial set for July. Numerous defendants and lawyers are involved, with court filings taking up two large boxes.

Parties in China have been served with the Newport News complaint by way of the Hague Convention, an international agreement that includes rules on serving court documents overseas.

The complaint asks for $40 million in compensatory damages, though it asks that that be tripled — to $120 million — under state rules on conspiracy. It also asks for $350,000 in punitive damages against each defendant. Alternatively, the suit calls for a "reasonable royalty" to Liebherr and restitution "to be determined at trial" in "the amount the Defendants have been unjustly enriched."

Moreover, the suit asks that the companies involved be forever barred from "producing or selling any trucks or truck designs which are derived from Liebherr's designs" or using its trade secrets again.

Six former employees at the Newport News plant — Richard Hudson, Larry Gollady, Marc Viau, Billy M. Lewis, Allen W. Cunningham and Francis Bartley — are named as defendants.

Disputing the allegations

But Hudson — the original defendant in the case — died in Oklahoma about a year ago, said Cynthia Boettcher, a lawyer who represented him. Boettcher said Fisher hasn't let her or her law partner out of the case, even though she said Hudson has no estate left.

In an October 2011 court filing, Hudson disputed the allegations against him. "Hudson admits that he copied some Liebherr documents, but denies they were … misappropriated," one of his lawyers wrote. Hudson also denied "that there was any conspiracy" and maintained he didn't use "any Liebherr documents in manufacturing a truck."

A Michigan engineering firm — Detroit Heavy Truck Engineering, or "DHTE" — is also being sued, as are two officials, founder Liangyu "Mike" Huang, and vice president, Shenger "Ted" Ying. They are accused of conspiring with the Chinese companies to steal Liebherr's technology and hire former Liebherr workers to do it.

Two Virginia Beach lawyers who once represented DHTE and its three former Liebherr workers — Cunningham, Lewis and Bartley — withdrew from the case in January and did not return phone calls this week.

In 2011 court filings, DHTE and the three workers disavowed the suit's claims. "It is expressly denied that Liebherr's trade secrets were in any way used in the development, design or construction of the (Chinese) truck," said a filing from DHTE's then-attorney.

Cunningham "expressly denies that he misappropriated" Liebherr documents, while Lewis "denies that he has conspired with anyone to damage Liebherr or misappropriate its … trade secret information," court filings say. Bartley also flatly denied the allegations.

Ying and Huang couldn't be reached Thursday in Michigan, with Huang's wife saying he was traveling overseas.

Robyn H. Hansen, a lawyer with Jones Blechman Woltz & Kelly who is representing two former Liebherr workers — Golladay and Viau — and their Hampton firm, Off-Highway Engineering, said her clients also deny the allegations. "My clients deny any liability and deny having engaged in any wrongful or illegal activity," Hansen wrote in an email.

In a court filing, she said her clients deny taking information or "that they have conspired with any other defendant … to misappropriate property from Liebherr's Newport News facility."

Chinese manufacturers sued

Two groups of Chinese manufacturers are also being sued, accused of knowingly using Liebherr technology to build their own trucks, based on Liebherr's T-282-C.

The first group — known as "Elite" — is made up of Ceri Heavy Industrial Equipment Co. and the MCC Heavy Industrial Equipment Co., which the lawsuit says operates as a single entity based in Xiangtan, China, in the Hunan Province.

But Elite has failed to file a single response to the lawsuit's allegations since it was initially filed in October 2010.

The second Chinese manufacturing group — which the lawsuit refers to collectively as "CSSG" — is made up of China Space Sanjiang Group Co. (CSSG), its subsidiary, Wuhan Sanjiang Import Export Co., and a related holding company, China Aerospace and Industry Group.

The suit contends CSSG took over building the truck when Elite got out of the business a few years ago. But CSSG and Wuhan, for their part, contend DHTE approached them with the design — and failed to mention the lawsuit or that the design was a matter of controversy.

"CSSG and Wuhan deny that they, individually or collectively, conspired with Ying, Huang, Elite or any of the other defendants or consulting companies to misappropriate Liebherr's alleged trade secrets," and deny any other "unlawful acts," said a filing by Williams Mullen attorneys William Stauffer and George Bowles.

Meanwhile, two Washington lawyers representing China Aerospace and Industry Group recently asked to withdraw from the case.

Conspiracy alleged

The suit alleges the conspiracy began in early 2010, when "Elite" wanted to get into the large mining truck business. Only five other companies in the world — including Liebherr — were involved in such production.

They wanted to get into the business sooner rather than later, the complaint said, given the downturn in the economy and their thinking that customers around the world might want lower-priced alternatives to the high-end trucks.

"Elite and its parent companies set an extraordinarily aggressive schedule, calling for the design and production of a 400-ton mining truck within months," the suit says. Though Elite didn't have employees with mining truck experience and had never built them, it set a deadline for designing its first mining truck by December 2010, the suit says.

Around that time, the suit alleges, Elite or its parent companies started up the Detroit firm — DHTE — to "provide certain technology" to it.

Soon, DHTE hired Lewis — who had left Liebherr four years earlier as its general manager of engineering administration. The firm then hired Bartley, who had left Liebherr's senior management ranks in 2005, as its technical officer.

The lawsuit contends Lewis and Bartley had "retained Liebherr trade secrets and other property" when they left Liebherr, and that the company soon began to hire others away from Liebherr.

In June 2010, the suit alleges, DHTE hired the now-deceased Hudson as a "contractor." Over the next month — while he was still employed by Liebherr — Hudson "secretly stole gigabytes of Liebherr's most sensitive information," invoicing DHTE for "downloading/researching" fees, the suit contends.

Data taken to China, suit says

Hudson took a trip to China, with a computer and "at least one thumb drive full of Liebherr trade secrets and other property," the suit alleges. He shared pictures he took of the Newport News facility and its tools in July 2010— even though pictures are strictly prohibited at the factory, the suit says.

"When Hudson returned from China, he continued to download and misappropriate Liebherr trade secrets," the complaint alleges. After he had stolen a "shocking volume" of information, he resigned on July 23, 2010, the suit says.

"Hudson left Liebherr's employment with possession of virtually every type of drawing, design and other document necessary to build a mining truck business, design a manufacturing facility and design a series of mining trucks to compete with Liebherr," the complaint alleges.

The complaint cites weld joints as a prime example. While it took years for Liebherr to painstakingly develop them, the complaint says, "Hudson was able to convert each Liebherr weld-joint design into a DHTE copy in a matter of minutes."

Another worker, Cunningham — Liebherr's logistics warehouse manager — left Liebherr in September 2010 to become a DHTE contractor. But before he left, the complaint alleges, he emailed Hudson and asked him for "work assignments" from DHTE.

In the complaint, Cunningham is accused of stealing, among other things, pictures of the plant and equipment, a design drawing of a forklift used to move a massive frame, as well as Excel spreadsheets with weights of each part of a mining truck.

Cunningham also is accused in the suit of "throwing away" his DHTE hard drive "to cover up the Liebherr documents he transferred."

Two other workers, Golladay, a structural engineer, and Viau, a senior mechanical engineer, are also accused of accessing Liebherr documents and design files before leaving in August 2010 to work as DHTE contractors.

Golladay, for example, is accused of attaching a USB device and copying 300 design files related to a prototype mining truck, which the suit says he had not worked on in 10 months. Viau stands accused of copying a Liebherr contact list and drawings related to valve assembly and a suspension system project.

The complaint asserts that a document deletion tool, "CCleaner," was found on Viau's computer and Viau's and Golladay's thumb drives, "suggesting that they have attempted to cover up their possession and use of Liebherr's property."

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[Red Horse]

Hmnnn...Looks like a duck, walks like a duck etc. Nothing like a fair trial but does look like a blatant case. How many others like this are out there.

[DailyDiesel]

But really, what is the recourse for Liebherr? Will a Chinese company the resorted to espionage really stop making their copy cat trucks? Will they agree to pay any judgement? I would say the damage has been done. Of course, making a truck from stolen blueprints is probably harder than it looks.

[BC Mack]

Can't believe this... must be an April Fools joke...

those honest Chinese businessmen would never stoop so low as to steal proprietory, trademarked or copyrighted material...

nooo..... they would buy the company with cash, call it a "joint venture", send in the "corporate review team" and then move the whole operation, lock stock and barrel on boats to China..!!!! and then sell the product to the Westerners who no longer have any industry to make one themselves.

BC Mack

[220cummins]

Not surprising at all. The Chinese are good at copying just not real innovative yet.

[kscarbel2]

Sadly, the root of the problem clearly lies in the US with Americans who placed greed over values (Richard Hudson, Larry Gollady, Marc Viau, Billy M. Lewis, Allen W. Cunningham and Francis Bartley). Simply put, this should never have happened, and would not have happened had it not been for these individuals with zero regard for America's economic well-being.

That said, Liebherr being German, I have yet to read if/how the German government is acting on this matter.

Also noteworthy, neither one of these Chinese companies are major players in the construction machinery sector. The big ones like SANY, Liugong, XCMG, Shantui and Zoomlion are self-developing.

[Red Horse]

Not exactly on topic, but as KSC mentioned Liugong, a friend of mine bought a new 3 yd. Liugong loader early this winter. UNDER $90,000 brand new. A 3 yard CAT for under 90,000 would be used with about 8000 hours on the clock-unreal pricing. Very impressed at first. However, the nickle/dime stuff has started. It is Cummins powered,not sure about rest of driveline.

From time to time I run a 966 Cat with over 10,000 hours on the clock. Wonder how that Liugong will perform at that stage in its life.

Back to topic and inline with KSC's comments, I hope these guys get the book thrown at them. It is a free country. You want to quit and take your mind to the Chinese? Fine. When you go to the extremes these guys did, different story- Hang 'em out to dry!

[Green Dash]

The Chinese will copy anything, even stuff that doesn't exist. There are several Harry Potter books produced in China that were not written by JK Rowling, for example. Callaway Golf Clubs discovered their products were being counterfeited when customers tried to return what they thought were Callaway clubs that had failed. Sickening.