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But Lucent grew suspicious of Lin and Xu's activities and last February contacted the FBI and the U.S. Attorney's office in Newark, N.J., which began tracking the Internet exchanges of the two scientists. Without signs of independent product development at ComTriad, investigators nevertheless found e-mails allegedly showing the partners' listing "intellectual assets" identical to those of PathStar and discussing product presentations "based on PathStar." And unfortunately for Lucent, the e-mails show that by the time the feds were on the case, the PathStar source code was in Datang's hands. It will be harder to recover than a U.S. spy plane in Hainan--if not impossible. Investigators say there is no indication of any criminal act by Datang and the Chinese government, nor any indication that Beijing and its conglomerate knew their joint-venture partner ComTriad was acting illegally.
Like many American companies, Lucent has invested millions in (and signed lucrative contracts with) Chinese companies. The incident is unlikely to dampen the company's ardor--or that of any other U.S. firm--for the promise of China capitalism. But the bottom line isn't likely to be profitable for three Chinese partners in America. The men are to be charged with wire fraud. Each faces five years in jail and $250,000 in fines. Cheng is a naturalized American; Lin and Xu were only months away from their green cards. Hoping to be the Cisco of China, they may have forfeited the right to make it in America.
--With reporting by Desa Philadelphia/New York