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Texas jury teaches Huawei a 'hard lesson,' says US chip start-up cleared of trade secret theft

Key Points
  • "Even though we're small, we fought a hard fight. And we won. That'll send a pretty strong message to Huawei," says CNEX co-founder Alan Armstrong.
  • Yiren Huang, who started CNEX with Armstrong, worked at Huawei immediately before launching the new company.
  • In 2017, Huawei sued the California start-up, accusing Huang of breaching an employment contract and misappropriating trade secrets.
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CNEX Labs CEO Alan Armstrong on the trade secrets case against Huawei

Huawei was "taught a hard lesson" after a federal jury in Texas ruled against the Chinese tech giant in a trade secrets case, Alan Armstrong, co-founder and CEO of U.S. chip designer CNEX Labs, told CNBC on Tuesday.

Yiren Huang, who started CNEX with Armstrong, worked at Huawei immediately before launching the new company. In 2017, Huawei sued the California start-up, accusing Huang of breaching an employment contract and misappropriating trade secrets. CNEX countersued, claiming Huawei had attempted to steal its technology.

Last Wednesday, jurors found that, while Huang had violated his employment agreement, it was Huawei that tried to steal trade secrets. The jury did not award damages to either party.

"I think Huawei was taught a hard lesson by the good people of Texas, and I think we were an easy fight to pick," Armstrong said in a "Squawk Alley" interview. "Even though we're small, we fought a hard fight. And we won. That'll send a pretty strong message to Huawei."

CNEX launched in 2013 and possesses a memory-control technology, which Huawei sued for the rights to. CNEX is backed by Dell and Microsoft.

Meanwhile, Huawei has been a focus of the ongoing U.S.-China trade war, with the Trump administration in May effectively banning U.S. companies from doing business with the Chinese telecom company, citing national security reasons. President Donald Trump agreed to soften the U.S. stance toward Huawei at Saturday's meeting with Chinese President Xi Jinping at the G-20 summit in Japan.

Armstrong declined to say whether he viewed Huawei as a national security threat, but he did say the issue of stealing intellectual property is a Huawei problem, not a China one.

"There's great Chinese companies that we would love to do business with that act with integrity," Armstrong said. "Huawei is a specific case, there may be others, but I don't think this is a country issue."

— Reuters contributed to this report.

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Key Points
  • American semiconductor companies and Microsoft are making plans to continue business as usual with Huawei as experts make sense of amendments to Trump's ban.
  • Trump's willingness to use Huawei as a bargaining chip in trade negotiations has been met with skepticism by some lawmakers and intelligence officials.