HTC staff arrested for alleged theft of corporate secrets

Reports claim that HTC executives have been arrested after allegedly leaking trade secrets.

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Three design executives hired by smartphone maker HTC have been arrested on suspicion of leaking corporate secrets.

According to the Bangkok Post, the Taiwanese smartphone maker -- which has suffered disappointing sales and the departure of key executives as of late -- now has to deal with members of its design team who allegedly planned to sell trade secrets to Chinese rivals.

The publication says that HTC's vice president of product design Thomas Chien, research and development director Wu Chien-Hung and senior manager of design and innovation Justin Huang were arrested on Friday after their offices and homes were searched in relation to the alleged theft of "key interface technology." It is claimed the three HTC employees conducted talks with rival Chinese firms after setting up their own smartphone design firms, in order to possibly sell the technology which is used in HTC's yet-to-be-announced Sense 6.0 smartphones, slated for launch later this year.

All three deny the accusations.

HTC has accused the executives of stealing trade secrets and breaching trust, both of which carry a maximum jail term of ten years in the region. In addition, the Taiwanese smartphone maker claims that the men have illegally claimed more than $330,000 in design fees from the firm with "falsified vouchers," according to the China Times.

Chien and Chien-Hung remain in custody, while Huang has been released on bail, prosecutors office spokesman Mou Hsin Huang told India's Economic Times.

The smartphone maker said the arrested had no impact on its operations, although share prices plummeted following the announcement. In a statement, HTC said:

"The company expects employees to observe and practice the highest levels of integrity and ethics. Protecting the company's proprietary and intellectual properties, privacy and security is a core fundamental responsibility of every employee. The company does not condone any violation. The matter is under investigation by relevant authorities. We therefore refrain from further comments."

The arrests are the latest issue in a long list faced by the Taiwanese firm. The firm has predicted an operating loss in Q3 due to the high costs associated with building its flagship smartphone HTC One, following Q2 results registering a net income slide of 83 percent to NT$1.25 billion ($41 million) and Q1 profit of only $2.85 million -- a 98 percent drop year on year.

The delayed launch of the HTC One and fierce competition by rivals including Samsung and Apple have contributed to a far-from-healthy HTC balance sheet . Peter Chou, HTC's CEO, has promised to improve profitability by choosing more suitable building materials and optimizing operations.

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