Sinovel Must Pay $59 Million as Punishment in Trade Secrets Case

(Bloomberg) -- Chinese turbine maker Sinovel Wind Group Co. must pay $59 million for stealing trade secrets from wind technology firm, American Superconductor Corp., a U.S. 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, while escalating tensions between the countries.

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

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

"Intellectual property theft poses a serious threat to American companies," U.S. 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. American Superconductor reached a settlement with Sinovel, filed in court Wednesday, under which it agreed to pay the $57.5 million.

AMSC partnered with 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 U.S. company developed software and technology to control them.

Wind Turbines

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 U.S. firm for $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, based in Devens, Massachusetts, had sought more than $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 $1 billion in shareholder equity and almost 700 jobs, over half its global workforce.

“This case is about protecting American ideas and ingenuity,” Scott Blader, U.S. Attorney in Madison, said in a statement. "The devastation Sinovel’s illegal actions caused to AMSC and its employees will not be tolerated.”

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

The case was initially brought by the Obama administration in 2013 through a special intellectual-property task force. At the time, the Justice Department described corporate espionage by Chinese agents as a threat to U.S. economic security. In August, Trump notched up pressure by encouraging the U.S. Trade Representative to investigate intellectual property theft by Chinese entities.

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

Lawyers for Sinovel didn’t immediately respond to a request for comment.

The case is U.S. v. Sinovel Wind Group Co. Ltd., 13-cr-84, U.S. District Court, Western District of Wisconsin (Madison).

©2018 Bloomberg L.P.