By Dan Levine
SAN FRANCISCO (Reuters) - A U.S. judge ruled prosecutors had not properly notified China-based Pangang Group Steel Vanadium & Titanium Co Ltd of a criminal indictment over allegations it conspired to steal trade secrets from chemical giant DuPont.
The opinion on Monday from U.S. District Judge Jeffrey White in San Francisco deals a setback to federal prosecutors as the United States has identified industrial spying as a significant and growing threat to the nation's prosperity.
White gave the government until August 16 to say how they intend to proceed with its case.
A spokesman for the U.S. Attorney's office in San Francisco declined to comment. Pangang attorney Bob Feldman said: "We are pleased by the result and the thoroughness of Judge White's analysis."
A Northern California grand jury indicted Pangang Group and other defendants earlier this year for conspiracy to commit economic espionage and other crimes including conspiracy to steal trade secrets.
Pangang, a steel manufacturer in Sichuan province, and its subsidiaries worked with a California businessman and others to obtain several valuable trade secrets from DuPont, the indictment alleged.
Prosecutors argued that they properly notified Pangang of the indictment through a U.S. company, Pan America, which acted as Pangang's agent.
However, White ruled on Monday that the government had not shown sufficient evidence that Pangang exercised enough control over Pan America for it to be considered an agent.
California businessman Walter Liew his wife, Christina, also face charges of conspiracy to commit economic espionage and other counts. Liew, a U.S. citizen, allegedly paid former DuPont engineers for assistance in designing chloride-route titanium dioxide, also known as TiO2.
DuPont is the world's largest producer of the white pigment used to make a range of white-tinted products, including paper, paint and plastics.
Both Liew and his wife have plead not guilty.
The case in U.S. District Court, Northern District of California is United States of America vs. Walter Liew, Christina Liew et al., No. 11-cr-573.
(Reporting By Dan Levine; Editing by Bernard Orr and Andrew Hay)