The U.S. Department of Justice has filed charges against Chinese wind turbine manufacturer Sinovel Wind Group Co. Ltd. for stealing trade secrets from American engineering company AMSC.
According to a grand jury indictment brought in the U.S. District Court for the Western District of Wisconsin, Sinovel stole from AMSC a software source code that regulated the flow of electricity from wind turbines to electrical grids. The Chinese company had originally agreed to purchase software and products from AMSC but ceased after the alleged theft, costing the American company as much as $800 million in revenues.
Prosecutors say two China-based Sinovel executives—deputy research and development director Su Liying and technology manager Zhao Haichun—recruited Austria-based AMSC engineer Dejan Karabasevic to download the software from an AMSC computer located in Wisconsin.
Karabasevic, who traveled to Beijing regularly as part of his work for AMSC, allegedly did so in March 2011 and resigned from the company just days layer. That same month Sinovel stopped paying for shipments from AMSC, according to the indictment. As a result, AMSC, which counted on Sinovel for almost 80 percent of its business, was forced to lay off about half of its workforce, and the company’s market value dropped to $200 million from $1.6 billion.
“This charged IP theft caused significant harm to a domestic company that develops cutting edge technology and employs Americans throughout the country, said acting assistant U.S. Attorney General Mythili Raman in a statement. “Stamping out intellectual property theft is a top priority for this administration, and we will continue to work with our IP Task Force partners to ensure that American ingenuity is protected.”
AMSC, formerly American Superconductor Corp. had already filed four legal actions against Sinovel in China, in September 2011. But the Chinese police have yet to investigate the charges and the country’s civil courts have yet to begin substantive hearings of the case, according to a company statement.
Karabasevic has previously admitted stealing the software in a 2011 trial in Austria, which resulted in his being sentenced to a year in prison and ordered to pay his former employer around $270,000. According to a Boston Globe story from the time, the engineer testified he sold the secrets for a little over $20,000 due to frustration over a failed marriage and a recent demotion at AMSC.
The Globe reported that the American company began suspecting theft in June 2011, when an AMSC crew inspecting turbines in China found an imperfect replica of its software in a Sinovel turbine.
Sinovel, the two executives, and Karabasevic are charged in the Wisconsin case with one count each of conspiracy to commit trade secret theft, theft of trade secrets and wire fraud. If convicted, Sinovel faces a maximum penalty on each count of five years of probation and a fine of twice the gross gain or loss, meaning Sinovel’s potential liability is in the billions.
Vinson & Elkins Washington, D.C., partners John Elwood and Amy Lamoureux Riella, along with San Francisco partner Matthew Jay Jacobs, are acting for Sinovel.
Neither the firm nor Sinovel could be reached for comment.