In what is emerging as a major green IP story, not just of technology but of international intrigue, American Superconductor (AMSC) recently filed two lawsuits against its erstwhile customer, Chinese wind energy system maker Sinovel.
Both cases involve allegations that a former AMSC employee who was arrested in Austria in July was indirectly paid by Sinovel for portions of AMSC’s wind turbine control software source code.Â The control software wasÂ developed by AMSC for use with Sinovel’s 1.5MW wind turbines.
The employee later pled guilty to charges of passing the code to Sinovel.
AMSC accuses Sinovel of unauthorized use of the turbine control software source code and the binary code, or upper layer, of its software for the PM3000 power converters in the 1.5 MW turbines.
AMSC also believes the former employee illegally used the source code to develop a software modification so Sinovel could circumvent the encryption and remove technical protection measures on certain power converters used with the turbines.
Wind technologyÂ and wind patent expert Philip Totaro, principal at Totaro & Associates, said the disputed technology relates to “the low-voltage ride through (LVRT) capability, which provides stability of the wind turbine/farm in case of voltage fluctuation or drop-out on the grid.”
TotaroÂ had this to add aboutÂ the significance of the technology at issue to Sinovel in the context of an evolving Chinese wind industry:
The Chinese grid requirements related to LVRT capability have evolved due to the large-scale deployment of wind turbines on their grid, and stability has become an increasing issue.Â Anyone who cannot meet the new grid requirements will not receive permits/approval to deploy their turbines.Â With the size of a company like Sinovel (named #2 in market share globally based on 2010 sales volume) and the ongoing capital and operating revenue required to sustain their business, they are obligated to maintain their sales volumes or be forced into massive layoffs and downsizing.Â This challenge was made even more difficult since the Chinese market demand has decreased in the past 10 months and [Sinovel] had a volume supply contract with AMSC for converters with the LVRT capability.
According to a recentÂ AMSC SEC filing, the allegations are theÂ basis of two IP actions AMSC is seeking to file against Sinovel in China.Â AMSC submittedÂ a first civil action application to the Beijing No. 1 Intermediate People’s Court for copyright infringement and a second civil action application to the Beijing Higher People’s Court for trade secret infringement.
However, in a reflection of the uncertainty surrounding enforcement of intellectual property rights in China, the SEC filing indicates that in each case the court must accept AMSC’s application for the case to proceed, “and there can be no assurance that the court will do so.”
In a related case, AMSC filed a copyright infringement complaint in the Hainan Province No. 1 Intermediate People’s Court against Dalian Guotong Electric (Guotong) and wind farm operator Huaneng Hainan Power.Â
According to the SEC filing, this complaint alleges that the defendants replaced AMSC”s PM1000 converters in certain Sinovel wind turbines with converters produced by Guotong and are using the replacement converters in conjunction with AMSC’s control software.
In light of the volume of clean tech business,Â technology transfer, andÂ IP licensing done in China, these will be important cases to watch as barometers of IP enforcement there.Â
U.S. Treasury Secretary Timothy Geithner made a recent statement about IP theft in China, expressing the importance of the issue and the U.S.’s frustration with this trend.