Sinovel fined RM238.4m over trade-secrets theft

--FILE--A Chinese man talks on his mobile phone in front of a logo of Sinovel in Jinan city, east China's Shandong province, 25 October 2013. Sinovel Wind Group Co., once China's biggest supplier of wind turbines, said its loss more than doubled in the first half as orders fell and asset-impairment losses increased. The net loss was 864.6 million yuan ($135 million) in the first six months ended June 30, compared with a revised net loss of 371.3 million yuan a year ago, the Chinese wind-turbine maker said in a statement to the Shanghai stock exchange. Sales tumbled 76 percent to 483.8 million yuan. The loss spells a continuation of difficulties for Sinovel, which faced being delisted earlier this year after posting annual losses for the previous two years. While the turbine maker was able to stave off that threat after posting a small profit for fiscal 2014, it remains embroiled in several legal disputes.Several senior officials resigned in April from the company, which is also being investigated by Chinese regulators. The company was sued in July by American Superconductor Corp. and two affiliate companies for infringing business secrets.

By BLOOMBERG

BROOKLYN • Chinese turbine maker Sinovel Wind Group Co must pay US$59 million (RM238.36 million) for stealing trade secrets from wind technology firm, American Superconductor Corp (AMSC), a US judge ruled.

Sinovel was found guilty in January of the theft in a rare criminal trade-secrets trial that called into question whether China is doing enough to clamp down on infringement of intellectual property (IP), while escalating tensions between the countries.

The theft of IP by Chinese companies partly spurred US President Donald Trump to impose a 25% levy on US$34 billion of Chinese goods entering the US. China immediately retaliated with new tariffs on US goods, with the Commerce Ministry accusing Trump of igniting “the largest trade war in economic history”.

US District Judge James Peterson last Friday ordered the Chinese company to pay US$1.5 million in fines and US$57.5 million in restitution at a sentencing hearing in Madison, Wisconsin, according to the Justice Department. AMSC claimed it suffered at least US$800 million in losses.

“IP theft poses a serious threat to American companies,” US acting assistant attorney general John Cronan said in a statement. “The Department of Justice is committed to aggressively investigating and prosecuting individuals and corporations who undermine American competitiveness by stealing what they did not themselves create.”

Collection of restitution from the Chinese firm was seen as difficult.

AMSC reached a settlement with Sinovel, filed in court last Wednesday, under which it agreed to pay the US$57.5 million.

AMSC partnered Sinovel on wind power projects after China passed a clean energy law in 2005, launching the development of major wind farms throughout the country. The Chinese firm built turbines and the US company developed software and technology to control them.

Prosecutors said Sinovel, now China’s largest wind turbine manufacturer, contracted with a former AMSC employee in Austria to steal the code in 2011, and then refused to pay the US firm for US$800 million in products and services it had promised to buy. The software system, called Low Voltage Ride Through was designed to help regulate the flow of electricity into a power grid.

AMSC had sought more than US$1.2 billion in damages from Beijing- based Sinovel in Chinese courts, accusing the company of putting the stolen source code in more than 1,000 turbines. According to the Justice Department, AMSC suffered a loss of more than US$1 billion in shareholder equity and almost 700 jobs, over half its global workforce.

Although Sinovel had been providing long-term maintenance for some US projects, it “fled from the US” in 2013 “in attempt to avoid facing prosecution”, prosecutors said in a June 26 court filing.

Judge Peterson found during a hearing last Friday that AMSC’s losses exceeded US$550 million, warranting a maximum fine of US$1.5 billion. Sinovel has already paid US$32.5 million of the restitution it promised the US firm. Peterson put the company on a year’s probation, during which it will be expected to pay an additional US$25 million.