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Designer Seed Thought to Be Latest Target by Chinese

Tuesday, February 4, 2014  
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By John Eligon and Patrick Zuo, The New York Times

KANSAS CITY, Mo. — The case of the missing corn seeds first broke in May 2011

when a manager at a DuPont research farm in east-central Iowa noticed a man

on his knees, digging up the field. When confronted, the man, Mo Hailong, who

was with his colleague Wang Lei, appeared flushed. Mr. Mo told the manager

that he worked for the University of Iowa and was traveling to a conference

nearby. When the manager paused to answered his cellphone, the two men sped

off in a car, racing through a ditch to get away, federal authorities said.


What ensued was about a year of F.B.I. surveillance of Mr. Mo and his

associates, all but one of whom worked for the Beijing Dabeinong Technology

Group or its subsidiary Kings Nower Seed. It resulted in the arrest of Mr. Mo last

December and the indictment of five other Chinese citizens on charges of

stealing trade secrets in what the authorities and agriculture experts have called

an unusual and brazen scheme to undercut expensive, time-consuming research.


China has long been implicated in economic espionage efforts involving

aviation technology, paint formulas and financial data. Chinese knockoffs of

fashion accessories have long held a place in the mainstream. But the case of Mr.

Mo — who was arraigned last week in Des Moines, pleaded not guilty and

remains in custody — and a separate one in Kansas last year suggest that the

agriculture sector is becoming a greater target, something that industry analysts

fear could hurt the competitive advantage of farmers and big agriculture alike.


"Agriculture is an emerging trend that we’re seeing,” said Robert Anderson

Jr., assistant director of counterintelligence at the F.B.I., adding that the trend

has developed internationally in the last two years. "It’s pretty clear cut. Before

then, the majority of the countries and hostile intelligence services within those

countries were stealing the other stuff.”


The defendants in the Mo case visited numerous seed testing fields in Iowa

and Illinois that were used by the big agriculture companies Pioneer, Monsanto

and LG Seeds, the authorities said. They bought a test plot of their own in

Illinois, according to the complaint, and concealed stolen seeds in, among other

things, microwave popcorn boxes and napkins from Subway restaurants.


The seeds that they were after are called inbreds, meaning they come from

self-pollinating corn plants. Inbreds are eventually crossed with other inbreds to

create hybrid seeds that are then sold to farmers, and they are bred to be durable

in the face of drought and pests. One inbred line takes five to eight years of

research and can cost $30 million to $40 million to develop, federal prosecutors



A company or farmer can replant a stolen inbred seed and eventually use the

new seeds to cross with a separate inbred to produce a hybrid — a shortcut that

avoids years of costly research.


"These are quite brazen facts,” said Jay P. Kesan, a professor at the

University of Illinois who specializes in intellectual property and technology law.

"What makes this different, I guess, is really the extent to which these entities

seem to have gone to try to get at these trade secrets.”


Mr. Mo, 44, was arrested at his home in Boca Raton, Fla., but the other

defendants are not in custody, and the authorities have declined to comment on

their status. Mr. Mo’s lawyer denies that his client, a seed dealer and permanent

resident who he said moved to the United States 15 years ago, did anything

wrong. In the other seed case, Zhang Weiqiang, of Manhattan, Kan., a rice

breeder for Ventria Bioscience, a Colorado-based biopharmaceutical company,

and Yan Wengui, of Stuttgart, Ark., a research geneticist for the federal

Agriculture Department, are accused of giving proprietary rice seeds that

contained medicinal qualities to crop researchers in their native China.


In 2012, Mr. Zhang, 47, a permanent resident, and Mr. Yan, 63, a

naturalized citizen, both made trips to China, where the authorities said they

discussed research they had performed in the United States with Chinese

scientists. The men then arranged for a group from the Chinese Academy of

Agricultural Science and the Crop Research Institute in China to travel to the

United States last year. They brought the group to the Ventria facility in Kansas

where Mr. Zhang worked and to his home, and to the federal agriculture facility

in Arkansas where Mr. Yan worked.


The proprietary rice seeds were found in the luggage of members of the

Chinese delegation as they tried to leave the country, according to the

indictment, and at the home of Mr. Zhang, who, along with Mr. Yan, was

arrested in December.


As seed technology has become more costly and time consuming to develop,

"in some people’s eyes, it makes it more advantageous for them” to try to steal it

because it "enables them to get a jump on three to five years of research on the

back of somebody else’s time and effort that was put in,” said Andrew W.

LaVigne, the president and chief executive of the American Seed Trade



American farmers are concerned that stolen seeds could give their Chinese

counterparts an unfair advantage because they could get access to the

technologically advanced hybrids at lower prices, said Dave Miller, the research

director for the Iowa Farm Bureau.


Foreign vegetable seeds make up 80 percent of the Chinese market, said

Guo Ming, a consultant specializing in corn breeds for a Beijing-based

agribusiness firm. Multinational corporations’ share of the corn seed market in

China grew from a tenth of a percent just over a decade ago to 11 percent in 2011,

according to an article published last year in People’s Daily, the Communist

Party’s official newspaper. Although China’s domestic corn output has been

growing over the years, the yield per corn plant has not grown significantly.


The Chinese have not developed a major corn hybrid since 2001, though the

country’s second most popular corn, which debuted in 2007, was a collaboration

between Pioneer and a Chinese company.


Analysts say one of the major problems is the fragmented seed industry in

China. Much of the breeding research is done in state-funded universities and

academies, and there is poor communication between them and the companies

that sell and trade the seeds. So research often fails to yield strong commercial

results. This structure also has fostered theft within the Chinese seed market,

Ms. Guo, the breeding consultant, said.


"Some seed trading companies just went to breeding bases to steal the

seeds,” she said. "Some breeding companies would outsource breeding to

farmers, but when the seeds were harvested, the farmers wouldn’t sell back to

the breeding company because seed trading companies pay more.”


Those trading companies would then sell the seeds at a premium, Ms. Guo

continued, making an exorbitant profit on a product that cost them nothing to



"That’s the ethos here,” she said.


That attitude, some say, could mean that the Chinese have long been

stealing from American seed companies without getting caught. As the Chinese

government encourages more innovation from seed producers, the desire to steal

plant technology could grow.


"These varieties that Pioneer has, have shown to be better than the best

varieties they’ve got in China,” said Carl E. Pray, a professor of agriculture, food

and resource economics at Rutgers. "If they’re going to compete with

multinationals, even in China, they need to get access to the basic material that

multinationals are using.”

John Eligon reported from Kansas City, and Patrick Zuo from Beijing.

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