China hit with maximum fine in trade secret case

Source: Blake Sobczak, E&E News reporter • Posted: Monday, July 9, 2018

A federal court in Madison, Wis., handed down a $1.5 million penalty against Beijing-based Sinovel Wind Group LLC for stealing trade secrets from an American energy company.

The maximum fine pales in comparison to the $550 million that Massachusetts-based wind technology company American Superconductor (AMSC) is estimated to have lost to its onetime client, according to the Justice Department.

Seven years ago, Sinovel stole wind turbine software from AMSC, including the source code for a proprietary turbine control system, to avoid paying tens of millions of dollars in licensing fees. Prosecutors accused the Chinese firm of bribing a worker at an AMSC subsidiary, enticing him to copy and pass along sensitive computer files.

A federal jury convicted Sinovel on counts of stealing trade secrets, conspiracy to commit trade secret theft and wire fraud in January (Energywire, Jan. 25).

“Rather than pay AMSC for more than $800 million in products and services it had agreed to purchase, Sinovel instead hatched a scheme to brazenly steal AMSC’s proprietary wind turbine technology, causing the loss of almost 700 jobs and more than $1 billion in shareholder equity at AMSC,” acting Assistant Attorney General John Cronan said in a statement Friday announcing the court’s penalty.

Earlier last week, AMSC announced it had reached a separate $57.5 million settlement with Sinovel, closing what AMSC CEO Daniel McGahn called a “challenging chapter” for the company.

“Through Sinovel’s and AMSC’s joint efforts, we have signed a settlement agreement to resolve the previous disputes in a constructive manner that we believe will enable us to move on with our respective businesses,” McGahn said in a statement Tuesday.

The back-to-back announcements cap off a yearslong saga that strained U.S.-Sino relations by effectively gutting an American tech firm. U.S. intelligence officials have warned for years of Chinese state-sponsored intellectual property theft, fueled by spies, hacking and bribes. The Sinovel case stands out for having gone to trial. The Justice Department first brought charges against Sinovel and several of its executives in 2013, after investigators unearthed a plot to pay an Austrian AMSC employee $1.7 million to siphon off secrets from his company’s computers.

That AMSC engineer, Dejan Karabasevic, was sentenced to a year in prison in 2011 in Austria for his role in the scheme.

The two Sinovel managers accused of orchestrating the theft live in China.