January 24, 2018 / 11:32 PM / 6 months ago

China's Sinovel convicted in U.S. of trade-secret theft

(Reuters) - Chinese wind turbine maker Sinovel Wind Group Co was convicted on Wednesday of U.S. charges that it stole trade secrets from AMSC, causing the Massachusetts-based company to lose more than $800 million.

A federal jury in Madison, Wisconsin, found Sinovel, once AMSC’s largest customer, guilty on all charges it faced, including conspiracy, trade-secret theft and wire fraud, the U.S. Justice Department said.

The conviction exposes Beijing-based Sinovel to hundreds of millions of dollars in potential fines, according to the Justice Department. It is scheduled to be sentenced on June 4.

Sinovel, which saw its shares slide 4 percent in Thursday morning trade on the news, will take legal measures to protect its rights and interests as well as those of its shareholders, it said in a filing to the Shanghai stock exchange.

The stock has lost 46 percent since the charges were brought in June 2013, giving it a market value of about $1.4 billion.

The charges were announced amid heightened concern about Chinese theft of U.S. trade secrets and a legal battle in the Chinese courts pitting Devens, Massachusetts-based AMSC against Sinovel, one of the world’s largest turbine makers.

The conviction also comes as the United States studies possible intellectual property action against China. U.S. Commerce Secretary Wilbur Ross said on Wednesday China’s tech ambitions represent a direct threat that is being implemented by disrespect for “intellectual property rights, by commercial espionage.”

The case centered on technology that AMSC, formerly known as American Superconductor Inc, developed to regulate the flow of electricity from wind turbines to electrical grids that Sinovel purchased for its products.

Prosecutors said that as of March 2011, Sinovel owed AMSC $100 million for products that had been delivered and had contracts to buy more than $700 million in future products.

But prosecutors said that Sinovel conspired beginning in 2011 to obtain AMSC’s copyrighted information and trade secrets so that it could make wind turbines and retrofit existing ones in order to avoid having to pay AMSC.

An indictment said Sinovel recruited Dejan Karabasevic, an employee of an AMSC subsidiary, to join the Chinese company and to secretly copy information from AMSC’s computer system, including the source code for the PM3000, part of its wind turbine control system.

Sinovel then commissioned several wind turbines in Massachusetts and incorporated into them software that the Chinese company compiled from the stolen PM3000 source code, prosecutors said.

The Justice Department said AMSC subsequently lost more than $1 billion in shareholder equity and almost 700 jobs.

“Sinovel nearly destroyed an American company by stealing its intellectual property,” Acting Assistant Attorney General John Cronan said in a statement.

Charges are pending against Karabasevic, who lives in Serbia, and two individuals who live in China and worked for Sinovel at the time, Su Liying, the deputy director of its research and development department, and Zhao Haichun, a technology manager, according to court records.

The case is U.S. v. Sinovel Wind Group Co Ltd, et al, U.S. District Court, Western District of Wisconsin, No. 13-cr-00084.

($1 = 6.3495 Chinese yuan)

Reporting by Nate Raymond in Boston; Additional reporting by Meg Shen in Hong Kong; Editing by Peter Cooney, James Dalgleish and Edwina Gibbs

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