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Huawei sues U.S., claiming security law is unconstitutional

WSJ: Huawei files suit against U.S.
  • Huawei asked a federal court to reject as unconstitutional a U.S. ban on using its equipment
  • That ban would block Huawei's access to major markets as the push to 5G technology picks up
  • The lawsuit calls the U.S. ban a corporate "death penalty"
  • The U.S. says the company facilitates spying by the Chinese, which Huawei denies

Shenzhen, China - Chinese tech giant Huawei is challenging a U.S. law that labels the company a security risk and would limit its access to the American market for telecom equipment.

Huawei Technologies' lawsuit, announced Thursday, asks a federal court to reject as unconstitutional a portion of this year's U.S. military appropriations act that bars the government and its contractors from using Huawei equipment.

It comes as the biggest global maker of network gear fights a U.S. campaign to persuade allies to shun Huawei. That effort threatens to block access to major markets as phone carriers prepare to invest billions of dollars in next-generation, 5G networks.

The complaint, filed in Plano, Texas, the headquarters of Huawei's U.S. operations, cites the framers of the U.S. Constitution, including Alexander Hamilton and James Madison, in arguing that the law in question violates the constitutional separation of powers, denies due process and amounts to a "Bill of Attainder" that singles out a specific entity for adverse treatment.

It says the law causes the company "concrete and particularized injury, and imminent future injury" and subjects it to a "burden that is severe, permanent and inescapable" that amounts to a corporate "death penalty."

What's behind Chinese telecom Huawei's espionage allegations?

Huawei, China's first global tech brand, is at the center of U.S.-Chinese tensions over technology competition and cyberspying. The company has spent years trying to put to rest accusations it facilitates Chinese spying or is controlled by the ruling Communist Party.

Increasingly, both sides appear to be resorting to courts to press their cases.

"Last resort"

"We are compelled to take this legal action as a proper and last resort," the company's rotating chairman, Guo Ping, said at a news conference. Guo said the ban would limit competition, slowing the rollout of fifth-generation communications and raising consumer prices.

Huawei has pleaded not guilty to U.S. trade-theft charges after a federal court in Seattle unsealed a 10-count indictment in January against two of its units, Huawei Device Co. and Huawei Device USA. The charges include conspiracy to steal trade secrets, attempted theft of trade secrets, wire fraud and obstruction of justice.

China demands release of Huawei executive

Huawei Chief Financial Officer Meng Wanzhou is fighting extradition to the U.S. after she was arrested in Vancouver, Canada, on Dec. 1. U.S. prosecutors have filed charges accusing Meng, who's the daughter of Huawei's founder, of lying to banks about dealings with Iran. Huawei denies any wrongdoing.

At a routine briefing Thursday, a Chinese foreign ministry spokesman noted that the Chinese government has also objected to the law.

"We believe that it is perfectly proper and fully understandable for companies to defend their legitimate rights and interests through legal means," Lu Kang said. He added he had no information about whether China would join Huawei in the lawsuit.

Cited as a security risk

Huawei has about 40 percent of the global market for network gear. Its U.S. sales evaporated after a congressional panel in 2012 cited the company and a Chinese competitor, ZTE, as security risks and told phone carriers to avoid dealing with them.

U.S. authorities "have hacked our servers and stolen our emails" but have presented no evidence to support their security claims, Guo said. He complained Washington was "sparing no effort to smear" the company.

Huawei said the new law would shrink its potential U.S. market further by prohibiting the government from buying the Chinese vendor's technology and from buying goods or services from or giving grants or loans to companies or other third parties that do. The U.S. accounts for 20 percent to 25 percent of the global market for computer and telecom technology.

Chinese tech giant Huawei accused of stealing trade secrets from U.S.

Huawei said the U.S. law it is protesting has Congress improperly play the role of a court.

The ban is "based on numerous false, unproven and untested propositions," said Song Liuping, the company's chief legal officer, at the news conference. "Huawei has an excellent security record and program. No contrary evidence has been offered."

The Chinese government said Washington fabricates or exaggerates security concerns to block competition.

Based in Shenzhen, near Hong Kong, Huawei is a leading developer of 5G along with rivals Nokia of Finland and Sweden's LM Ericsson. Industry analysts said excluding the Chinese vendor from markets for 5G equipment would reduce competition and might lead to higher prices.

5G contracts with 30 carriers

Founded in 1987 by a former military engineer, Huawei overtook Ericsson in 2017 as the biggest global supplier of network equipment. It says it supplies 45 of the world's top 50 phone companies and has contracts with 30 carriers to test 5G wireless technology.

European governments are balking at U.S. pressure to ban Huawei. The company has announced contracts with customers including the United Arab Emirates in the Middle East for network technology.

China's government arrested two Canadians, a former diplomat and a businessman, on Dec. 10 in what was widely seen as an attempt to pressure Canada to release CFO Meng.

On Monday, Beijing accused the two men of acting together to steal state secrets. That followed the Canadian government's announcement Friday that the extradition proceeding for Meng would be allowed to continue.

Huawei executives said American security warnings have yet to affect sales outside the U.S. The company's 2018 revenue forecast is $100 billion, and its founder, Ren Zhengfei, said last month this year's target is $125 billion.

Huawei CEO: "We will never" provide Chinese government with any information

Some European officials and others cite a Chinese security law requiring companies to cooperate with intelligence agencies they say might oblige Huawei and other tech companies to install "backdoors" in equipment to allow eavesdropping.

Huawei denies altering its equipment to facilitate spying. It has set up testing centers in Britain, Canada and continental Europe to allow governments to examine its technology.

"Huawei has not and will never implant 'backdoors,' " said Guo, the chairman.