For many years now, consternation in western countries about technology secrets and other intellectual property being allegedly stolen by Chinese companies and government organisations has been on the rise.
Predominately, concerns have been focused around information technology, but a recent civil suit filed by an American wind technology company highlights that the battleground extends more broadly to a wide range of engineering and hi-tech industries.
In the latest developments, US wind energy company AMSC has filed three civil lawsuits in Chinese courts against the Chinese firm Sinovel Wind Group Co (Sinovel). AMSC says it is seeking $1.2 billion from Sinovel and related companies for contracted shipments and damages in what it says what it says represented a discovery of intellectual theft by staff of the Chinese company.
“In total, AMSC is seeking to recover more than $1.2 billion for contracted shipments and damages from Sinovel in these cases, which stem from Sinovel’s contractual breaches in March 2011 and AMSC’s discovery of intellectual property theft by Sinovel employees in June 2011” the company says in a statement.
The case centers around contractual arrangements under a strategic partnership which had been in place between AMSC and Sinovel since 2005. Under that arrangement, AMSC provided core electrical components for some of Sinovel’s smaller wind turbines as well as engineering support and power electronics for larger turbines which were jointly developed between the two companies. In 2009, that arrangement expanded to include the joint development of multi-megawatt-scale turbines which Sinovel was to then market and sell both domestically and in export markets.
Problems arose in March last year when AMSC accused Sinovel of breaching its contract by refusing to accept delivery of equipment or to pay for previously delivered items. Following the arrest of a former AMSC employee in charges of economic espionage and fraudulent manipulation of data, the US firm said it believed that the individual in question had improperly transferred AMSC’s wind turbine control software source code to the Chinese firm. The former employee, AMSC said, illegally used the code to develop a modification which allowed Sinovel to circumvent the encryption and remove technical protection measures for the technology. Essentially, AMSC alleges that this allowed Sinovel to illegally gain access to AMSC’s wind turbine technology – allowing the latter to simply copy technology rather than purchase equipment from the former.
Following the alleged breach, the American firm reported a fall in revenue during the second quarter of fiscal 2011, which it blamed on a lack of revenue from its former customer. Furthermore, the American company said that because Chinese equipment is being used in wind turbines containing its wind turbine control software, “we believe that our copyrighted software is being infringed.”
The latest developments come as amid ongoing concern from both America and other western countries about alleged stealing of intellectual policy by China.
In July last year, US Treasury Secretary Tim Giethner blasted the country for ‘systematically stealing’ the intellectual property of American firms. Earlier in January, the New York Times has described intellectual property theft as ‘the No. 1 problem’ for the United States with China’s economy, with technology companies continuing to notice Chinese government agencies downloading updates for programs they have never bought. And in December, US cyber security experts and analysts said that as few as twelve different Chinese groups, largely backed by the Chinese government, were responsible for the majority of critical data from US companies and government agencies.
The latest developments highlight that concerns relating to intellectual property protection apply not just to information technology and defence, but also to a broader range of hi-tech engineering and technology fields.
Pleasingly, however, AMSC says the company was starting to see ‘motion’ from Chinese courts regarding its case, although a judgment in the smallest of the three cases has already gone against the company.
“We are starting to see motion from the Chinese courts, and proceedings are getting underway as expected”, AMSC President and Chief Executive Officer Daniel P. McGahn says.
The latest developments also come amid accusations by the United States against China for allegedly providing several hundred million US dollars in illegal grants since 2008 to wind turbine makers for using Chinese components.