The AMSC- Sinovel copyright and trade secret dispute involving wind turbine control systems has been big news (see, e.g., previous posts here, here, here and here), but legally speaking, mostly civil. 

That changed recently when the U.S. Department of Justice filed an indictment in federal court in Wisconsin alleging that Sinovel, two of its employees, and a former AMSC employee conspired to commit trade secret theft and criminal copyright infringement.

The technology involved is AMSC’s source code, software, equipment designs and technical drawings that relate to regulating the flow of electricity from wind turbines to the electricity grid.  More particularly, the electrical control system includes the Power Module 3000 (PM3000) and the Programmable Logic Controller (PLC), both of which use AMSC’s proprietaryLow Voltage Ride Through (LVRT) sofware to keep wind turbines operational during temporary dips in electricity flow in the electric grid.

According to the indictment, AMSC took reasonable measures to maintain the confidentiality of its trade secrets and proprietary information such as restricting access to authorized personnel only, requiring a unique password to enter the computer system, and requiring employee certification of ethics and confidentiality rules.

The 11-page indictment states that the purpose of the alleged conspiracy was to:

obtain AMSC’s copyrighted information and trade secrets in order to produce LVRT compliant wind turbines, and to retrofit existing wind turbines with LVRT technology, without having to pay AMSC for previously-delievered AMSC software, products, and service or for AMSC’s trade secrets and intellectual property, thereby cheating AMSC out of more than $800,000,000 USD.

The remainder of the indictment lays out the details of the alleged conspiracy, which it says took place from about January 1, 2011 to about December 20, 2012.  The former AMSC employee allegedly copied or downloaded the PM3000 and PLC source code, adapted it for unlicensed use within Sinovel’s turbines, and emailed the modified software to one of the Sinovel employees.

In exchange, Sinovel allegedly offered the former AMSC employee an employment contract worth about double what he was being paid at AMSC, but the contract made it appear that he would be working for a different company – a Chinese wind turbine blade manufacturer - for a period of time.

The former AMSC employee allegedly traveled to China to work on adapting the proprietary and trade secret information for use in Sinovel wind turbines, and Sinovel allegedly conducted a successful “voltage sag” test using the updated LVRT technology.  One of the Sinovel employees allegedly wrote in a Skype chat with the former AMSC employee that the success was “all because of you.”

Sinovel also allegedly copied the AMSC PM3000 source code into some wind turbines commissioned in Massachusetts in 2011 and 2012.

There are so many things that could be said about this case, which began with several civil infringement and contract suits in China.  I will offer just a couple of observations. 

First, it seems an excellent case for the feds to pursue criminal charges because it represents the nexus of two of the Obama administration’s policy goals:  supporting the U.S. clean tech industry and dealing with IP theft in China.

Second, as eloquently explained by wind patent and technology expert Philip Totaro in this prior post, the case points up the critical importance of LVRT technology for the stability of wind energy in China and the economic viability of Chinese wind turbine manufacturers.

 

In previous posts (here, here and here), I discussed the IP litigation in China between American Superconductor (AMSC) and Chinese wind energy system maker Sinovel.

Recharge reports that China’s Supreme People’s Court recently agreed to hear AMSC’s appeal in one of the civil actions of the dispute. 

This is an appeal by AMSC of the Hainan Supreme Court’s decision to affirm a lower court ruling that dismissed AMSC’s copyright infringement action against Sinovel, Dalian Guotong, a power converter maker partially owned by Sinovel, and Huaneng Hainan Power Company. 

The Hainan Province No. 1 Intermediate People’s Court threw out AMSC’s suit on jurisdictional grounds after Sinovel filed a motion to dismiss in December 2011.  In that motion, Sinovel argued that the case should be governed by the Beijing Arbitration Commission, which is hearing separate contractual disputes between AMSC and Sinovel.

According to the Recharge piece, AMSC appealed this copyright infringement case to the Supreme People’s Court because it is “purely a copyright infringement dispute rather than a contractual matter.  As such, it is independent of the contracts and belongs within the civil court system.”

The of heart of the dispute is AMSC’s allegations that Sinovel misappropriated its propietary software code for controlling wind turbines and power converters.  

Specifcally, AMSC accuses Sinovel of copyright infringement and theft of trade secrets by Sinovel’s unauthorized use of the turbine control software source code and the binary code, or upper layer, of its software for the PM3000 power converters used with Sinovel’s 1.5 MW turbines.  The control software was developed by AMSC for use with Sinovel’s turbines.

The litigation has involved four separate actions by AMSC in various forums in China where the effectiveness of intellectual property enforcement remains an open question of increasing importance to the clean tech industry.

Several green patent lawsuits (and one green copyright suit) have been filed in the last several weeks in the areas of LEDs, hybrid vehicles, wastewater treatment, energy management, and biodegradable materials.

 

LEDs

Bluestone Innovations Florida, L.L.C. v. Formosa Epitaxy

Bluestone Innovations (Bluestone), a Florida-based patent licensing company, recently filed a Complaint in the U.S. District Court for the Middle District of Florida against Formosa Epitaxy (Formosa), a Taiwanese corporation.

Bluestone alleges that Formosa engaged in the manufacture, importation, offer for sale, and sale of LED semiconductor devices and other optoelectric devices, such as gallium nitride (GaN) LED wafers and chips, and indium gallium nitride (InGaN) LED wafers and chips.

The complaint alleges these activities infringe U.S. Patent Number 6,605,832, entitled “Semiconductor Structures Having Reduced Contact Resistance”.  Bluestone is seeking a permanent injunction and damages, including treble damages and attorney fees.

Wastewater Treatment

Polylok, Inc. v. Bear Onsite

A recent post discussed a suit between wastewater treatment rivals Polylok and Bear Onsite in Connecticut in which Polylok asserted infringement of U.S. Patent Number 6,129,837, entitled “Waste water treatment filter including waste water level control alert device” (’837 Patent). 

The ’837 Patent is directed to a filtration device for a waste water treatment tank with a level alert device to provide an alarm when the filter becomes plugged.  The claims are directed to particular means for mounting the alert device to the filter.

Bear Onsite recently responded with a declaratory judgment action (Petition for Declaration of Rights).  Specifically, Bear Onsite is seeking a declaratory judgment of invalidity, unenforceability and non-infringement of the ‘837 Patent.

 

Hybrid Vehicles

KGR IP L.L.C. v. Ford Motor Company
KGR IP L.L.C. v. Honda Motor Company

KGR recently filed two complaints in the U.S. District Court for the Northern District of California (KGR_IP-Ford_Complaint; KGR_IP-Honda_Complaint). 

The complaints allege that both Ford and Honda are infringing U.S. Patent Number 6,639,614, entitled “Multi-variate data presentation method using ecologically valid stimuli” (‘614 Patent).  The ‘614 Patent relates to visual display of data using “ecologically valid” icons.

KGR alleges infringement of the ‘614 Patent in the Ford Fusion Hybrid vehicles and Honda vehicles that utilize the Eco Assist function.  KGR is seeking injunctive relief and damages.

 

Fernandez v. Toyota Motor Corporation

Dennis Fernandez, an individual inventor, recently filed a Complaint against Toyota Motor Corporation, Toyota Motor Sales, U.S.A and Toyota USA (collectively “Toyota”), alleging patent infringement.
Fernandez alleges Toyota is infringing U.S. Patent Numbers 7,374,003, 7,575,080, and 7,980,341, each entitled “Telematic Method and Apparatus with Integrated Power Source”.

The complaint states that Toyota is using the accused devices in its Prius II hybrid vehicle. The complaint seeks damages and attorney fees.

 

Biomaterials; Recycling & Waste Management

Frito-Lay North America v. Innovia Films Limited

Frito-Lay filed a Complaint against Innovia Films, Inc. (Innovia), a manuafcturer of bio-based films, on November 23, 2011 seeking declaratory relief over Frito-Lay’s ownership of two patents and two patent applications.

The complaint relates to recent actions commenced by Innovia against Frito-Lay in both the U.K. and Europe.  In that litigation, Innovia claims that Frito-Lay breached a confidentiality agreement and used information gained during confidential meetings to develop biodegradable packaging.  Innovia claims the technology led to Frito-Lay’s U.S. Patent Numbers 7,951,436 and 7,943,218 and U.S. Patent Applications 11/848,775 and 12/716,033.

Frito-Lay contends that it did not acquire any technology from Innovia and that development of its degradable bags was conducted independently.  Frito-Lay states that its “scientists and engineers discovered and invented novel flexible film packaging that maintains certain barrier properties and is made up of several layers of films, including a biodegradable ‘bio-based’ layer.”

 

Smart Grid / Energy Management

Opower, Inc. v. Efficiency 2.0, LLC

In a rare clean tech copyright dispute, Opower, Inc. (Opower) recently filed a copyright infringement Suit against Efficiency 2.0, LLC (Efficiency 2.0), a New York energy efficiency software company.

Opower produces Home Energy Reports, paper reports mailed to residents which show their home energy consumption in relation to similarly situated neighbors.  Opower’s Home Energy Reports were registered with the Copyright Office in September 2009 as Registration No. VA0001692228 and in October 2011 as Registration No. TX0007435604.

According to the complaint, Efficiency 2.0’s Energy Savings Reports are nearly identical to Opower’s copyrighted reports.  Opower claims the similarities include “overall layout and blocking, use of open space, use of language, use of font, bolding, accents and color, as well as selection and presentation of specific graphics and information.”

Opower is seeking damages, and a preliminary and permanent injunction barring Efficiency 2.0 from using Opower’s copyrighted reports.

David Gibbs is a contributor to Green Patent Blog.  David is currently in his third and final year at Thomas Jefferson School of Law in San Diego.  He received his undergraduate degree in Geology from the University of California, Berkeley.

 

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.  The control software was 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 technology 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.”

Totaro had this to add about 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.  Anyone who cannot meet the new grid requirements will not receive permits/approval to deploy their turbines.  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.  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 recent AMSC SEC filing, the allegations are the basis of two IP actions AMSC is seeking to file against Sinovel in China.  AMSC submitted 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. 

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, technology transfer, and IP licensing done in China, these will be important cases to watch as barometers of IP enforcement there. 

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.

 

I’ve written in this space before about the lawsuits between California biofuel processor designer Greenline Industries (Greenline) and Agri-Process Innovations (API), an Arkansas engineering firm, involving processor design copyrights and allegations of breach of contract, misappropriation of trade secrets and false advertising.

The technology relates to processors that convert feedstocks such as seed oils and animal fats into biodiesel fuels.

Greenline’s proprietary technology provides waterless systems to clean the fuel, allowing producers to avoid the time and money associated with introducing water into the process and later separating it out. 

Greenline also enjoys an exclusive worldwide license to continuous flow technology, which greatly increases its processors’ production capacity. 

A recent post discussed the companies’ tussle over venue, with Greenline trying to move a suit API initially filed in Arkansas to federal court in California and API fighting to transfer Greenline’s subsequent northern California case to Arkansas. 

In July the federal court in Oakland, California, where Greenline had filed suit, decided to defer to the Arkansas court to decide where the cases should go forward.

In an order signed last month (greenline_arkansas_order.pdf), Judge Brian S. Miller of the Eastern District of Arkansas in Little Rock ruled that Arkansas is the proper venue for the case. 

In the event that two lawsuits involving the same parties and same issues are filed in different jurisdictions, federal courts apply a first-to-file rule, subject to certain limited exceptions, to determine where the suit will proceed. 

Judge Miller held that none of the exceptions, which include inequitable conduct, bad faith, anticipatory suit and forum shopping, applied in this case, and so the case will proceed in API’s home state of Arkansas because API beat its opponent to the punch, filing suit there before Greenline sued in California.

There is a third lawsuit pending between Greenline and API in federal court in Los Angeles, which also may be transferred to Arkansas.  API has moved to dismiss that case, and in the alternative, to transfer the case to Arkansas to be tried together with the other suits (api_motion_transfer.pdf).

Arter Neon & LED Sign, Inc. (Arter Neon) is a Los Angeles area company that designs and sells neon and LED signs for retail and business displays.  Pong C. Kao is a principal of Arter Neon and the creator of several copyrighted signs and works of art sold by the company.

Kao is the named author on U.S. Copyright Registration Nos. VAu 742-862 for a “Scissors” LED design VAu 750-093 for a series of of neon and LED works.  Kao also has two applications pending before the U.S. Copyright Office for designs for a “Reflexology” sign and a “Foot Massage” sign.  Arter Neon is the exclusive licensee of these copyrights.

Last month, Arter Neon and Kao filed a complaint (arterneoncomplaint.pdf) in federal court in Los Angeles against Touch of Asia Spa Equipment, Inc. (TOA) and its principals and employees, alleging that TOA infringed Kao’s copyrights and breached a license agreement between the parties.

In July 2007, Arter Neon and TOA entered into a license agreement which permitted TOA to distribute signs containing some of Arter Neon’s copyrighted designs.  According to the complaint, Arter Neon provided TOA with images of the designs for TOA’s web site, and all orders for those products were to be forwarded to Arter Neon. 

The agreement prohibited TOA from manufacturing products containing the copyrighted designs or obtaining such products from a third party.

The complaint alleges that, during a delivery in June 2008, Kao noticed signs in TOA’s showroom that displayed the Arter Neon copyrighted designs but were not made by or purchased from Arter Neon.  When Kao confronted one of the principals of TOA, Hong Ju Liu, Liu allegedly refused to stop selling the third party merchandise.

According to the complaint, Arter Neon sent TOA written notice that it was terminating the agreement later that day.  The letter also requested that TOA cease and desist the infringing conduct.  The complaint alleges that a private investigator subsequently purchased infringing signs from KOA, and KOA continues to infringe.

On the copyright infringement claim, Arter Neon asks for an injunction and either compensatory damages (based roughly on the copyright holder’s lost profits) or statutory damages (the Copyright Act provides the option of calculating damages as a set figure, between $750 and $30,000 at the court’s discretion, per infringing work).

Should Arter Neon succeed on the breach of contract claim, the damages probably would have to be parsed by the type of breach.  This is because the license agreement has a “liquidated damages” clause, a provision that sets the damages sum for certain breaching acts. 

Here, the clause provides that failure to pay royalty payments and “unauthorized usage” of the copyrighted designs render KOA liable for $5,000 per instance of failure or unauthorized use. 

One potential area of contention is whether KOA’s purchases of signs containing the copyrighted designs from a third party constitute an unauthorized use of the designs subject to the liquidated damages clause or are another type of breach for which the damages amount is calculated by other methods. 

The specificity of the enumerated breaches in the liquidated damages clause (and the placement of the prohibition against purchasing the signs from a third party in a separate paragraph) seems to indicate that those acts are not subject to the provision. 

In any event, this case is definitely subject to the “be careful what you ask for” maxim – when Kao warned Liu that KOA’s conduct violated the license agreement and constituted copyright infringement, she allegedly replied, “go ahead and sue me.”

In a previous post, I wrote about a lawsuit between California biofuel processor design company Greenline Industries (Greenline) and Agri-Process Innovations (API), an Arkansas engineering firm. 

That suit, pending in federal court in Oakland, California, involves copyrighted processor designs as well as accusations of stealing trade secrets, breaching a processor installation agreement and engaging in false advertising.

In June API moved for the California case to be transferred to Arkansas, where it had previously sued Greenline over the same issues.  Shortly thereafter, in the Arkansas suit, Greenline moved for the case to be transferred to California.

In the event that two lawsuits involving the same parties and same issues are filed in different jurisdictions, federal courts apply a first-to-file rule to to determine where the suit will proceed. 

In a recent order (greenlineorder.pdf), Judge Claudia Wilken found that, because API sued in Arkansas before Greenline filed its California complaint, the Arkansas suit has priority for purposes of the first-to-file rule.  However, Judge Wilken denied API’s motion to transfer and deferred to the Arkansas court to decide the appropriate forum for the case on Greenline’s pending motion there.

Given the dueling venue motions (and the cost in attorney time they require), it’s clear that the parties think they have much to gain from fighting their battle on friendly home turf.

Greenline Industries (Greenline), based in Larkspur, California, designs processors that convert feedstocks such as seed oils and animal fats into biodiesel fuels.  Greenline’s proprietary technology provides waterless systems to clean the fuel, allowing producers to avoid the time and money associated with introducing water into the process and later separating it out.  Greenline also enjoys an exclusive worldwide license to continuous flow technology, which greatly increases its processors’ production capacity. 

In 2006, Greenline and Arkansas engineering firm Agri-Process Innovations (API) created a venture, now called AP Fabrications (APF), for the purpose of installing Greenline biodiesel plants.  In 2007, Greenline gave up its ownership rights in the venture, and API became the sole owner of APF.

Last month Greenline sued API and APF in federal court in Oakland, California for anticipatory breach of contract, misappropriation of trade secrets, false advertising and a declaratory judgment that Greenline owns the copyrights in its processor designs.  Greenline alleges that its vendor agreement with APF provided that Greenline would be exclusively responsible for the design of biodiesel processing units while APF’s role was limited to installation of the units.  Greenline also contends that the agreement allowed API to sell the processors but required that they be marketed as “Greenline Industries” plants.

The trigger for the lawsuit was a May 5, 2008 letter in which API and APF told Greenline they were terminating the vendor agreement and demanded compensation for (unspecified) intellectual property rights created by API and used by Greenline.  Greenline alleges this repudiation of the agreement constitutes anticipatory breach of contract.  

According to the complaint, API also claims rights to Greenline’s technology through statements on its web site that API designs the processing units.  These and other statements implying ownership of the processing techniques, as well as claims of responsibility for the design of specific processing plants, form the basis for Greenline’s claims of false advertising.

While the anticipatory breach and false advertising claims seem reasonably well-founded, it’s hard to see how API/APF’s actions constitute misappropriation of trade secrets, considering that the only allegations of theft of intellectual property in the complaint are the May 5 letter and the statements on API’s web site. 

The Uniform Trade Secrets Act (upon which many state trade secrets laws are modeled) defines misappropriation as acquisition of a trade secret by someone who knows or should know it was acquired by improper means or disclosure of a trade secret that was improperly acquired.  The facts of the complaint suggest that any acquisition or disclosure of Greenline’s proprietary information by API or APF occurred pursuant to the vendor agreement, which was in force until last month.  Simply making misrepresentions of ownership of a particular proprietary technology to third parties would not seem to rise to the level of misappropriation.

The other striking thing about this dispute is the extremely short time period between API/APF’s letter to Greenline terminating the agreement (May 5, 2008) and the date Greenline filed the lawsuit (the complaint is dated May 12, 2008).  This rapid turnaround suggests either that tensions were brewing for a while or the two sides made little attempt to resolve the dispute before resorting to litigation.