The allegations stem from Cruz’s legal work for a Chinese company in a patent suit against an American inventor, and his opposition to a trade bill under consideration by the U.S. Congress.
Both sides have accused the other of lying about the case and distorting the facts. On the eve of their first one-one-one debate in Dallas, Dewhurst aired another TV ad about the case, accusing Cruz of misleading voters about his role in it.
The Texas Tribune reviewed the allegations, ads and position papers to get to the bottom of the controversy.
In 2006, Jordan Fishman, an American inventor who designs mining tires, discovered that his patented designs had been stolen by an employee and were being used by two international tire distributors, the Al Dobowi Group of Dubai and Shandong Linglong of China.
In October 2009, Fishman filed a patent infringement lawsuit against the two companies in U.S. District Court in Virginia. Fishman won the $26 million suit which led the two companies to appeal the ruling, calling on lawyers from the international firm of Morgan, Lewis & Bockius, where Cruz worked as an appellate lawyer, for legal counsel. The appellate court upheld the lower court’s ruling.
In October 2011, Dewhurst supporters sent out an email labeling Cruz “Red Ted” — an insinuation that Cruz had sympathized with Chinese Communists — after a Texas Monthly write-up about his involvement with the patent lawsuit.
The emails followed Cruz’s soundbite-worthy interview with conservative talk show host Laura Ingraham on trade with China. In the interview, Ingraham criticized Cruz for opposing a bill — aimed at cracking down on China — that would impose tariffs on countries that keep their currency artificially low in order to gain a trade advantage. Dewhurst said he supports the legislation. Cruz is siding with both President Obama and presumptive GOP nominee Mitt Romney in opposing the legislation, which has floundered in Congress. Cruz calls it a “protectionist” measure that could spark a dangerous trade war.
In April, Dewhurst published a YouTube video and a website highlighting Cruz’s involvement with the patent lawsuit. Among other things, the Dewhurst camp accused Cruz of being a lead counsel and legal mercenary who helped a “Chinese conglomerate kill American jobs.” They also accused him of stalling the case to stay on the payroll of a Chinese company that was actively infringing patents.
Cruz responded to the video and website with a point-by-point refutation of the charges, starting with clarifying his role in the suit.
Cruz noted that his firm’s involvement in the case began in appellate court, so neither he nor his firm had a hand in the initial trial. When his firm became involved, Cruz described his role as relatively minor: He says he edited the appellate briefs while the actual appeal was argued by three other lawyers.
Casting the suit as “Chinese vs. American” also skewed the facts, Cruz said. The manufacturing of Fishman’s tire design was coordinated through a Chinese partner business. The stateside jobs that Fishman claimed as casualties to the patent infringement were in sales and distribution. According to Fishman, about 45 jobs were lost as a result of the theft of his blueprints.
Cruz, who touts his expertise as an appellate lawyer on the campaign trail, performed legal work for Shandong Linglong and lists the company, as required, as one of his employer's clients that generated more than $5,000 for the firm. That makes the subject fair game in a political contest that hinges as much on the candidates' backgrounds as their policy differences.
But the “Red Ted” label, designed to conjure up negative and shady images of Cruz, is a stretch. While Cruz could have refused to work on the case, the notion that doing so makes him a Communist sympathizer is groundless and inflammatory. Dewhurst himself said questioning Cruz's political allegiance was "ridiculous."
Cruz’s firm was retained by the company, and Cruz was called on to assist in the case, so the Dewhurst campaign’s description of him as a “legal mercenary” is also off base.
According to Cruz’s personal financial disclosure form, Linglong paid Morgan Lewis more than $5,000. Cruz is not required to disclose how many billable hours he worked on the Fishman case or how much the company paid in total to his law firm in connection with it. He has declined to release that information voluntarily.
The verdict was upheld on appeal, but Cruz was not among the lawyers doing the arguing part of it, and did not appear in court. Dewhurst has referred to Cruz as "lead counsel" in the case. The technical term for Cruz's role is "counsel of record." According to legal definitions listed on the Cornell Law School website and others, lawyers who act as counsel of record are responsible for the representation of the client, regardless of whether they ever appear in a courtroom on behalf of that client. In an interview, Cruz said he has never appeared in any courtroom in regard to this case. They are also required to sign legal documents and typically cannot be removed as counsel of record without court action.
The evidence for calling the case a “China vs. America” affair is not clear cut.
Linglong wasn’t involved in the initial conspiracy to undercut Fishman’s business. Sam Vance, one of Fishman’s most trusted American employees, initiated the damage when he encouraged Fishman’s customers to cut Fishman out of the deal and buy straight from the manufacturer (based out of China), according to the lawsuit.
Vance later went on to mastermind the conspiracy to sell the tire blueprints, court documents indicate. When Fishman found out his designs had been stolen and filed suit, Al-Dobowi, the Dubai-based tire distributor, was the most noted defendant, named 172 times in the court document.
In comparison, Linglong was mentioned 49 times — yet was the only conspirator mentioned in the Dewhurst attacks.
Also, Fishman’s lawyer, August Matteis, said he had no evidence that Linglong was connected to the Chinese government. The Dewhurst campaign said Linglong was tied to Communist-led government before market reforms were introduced in the 1970s, and has used those ties to gain unfair trade advantages.
Cruz didn’t play first chair in the appeal of this lawsuit, but he has taken the lead on other international patent infringement cases, successfully arguing a $5 million intellectual theft case before the Supreme Court against a Chinese company last year.