WIND TESTS CHINA

A Test Case for Intellectual Property in China; Will Chinese courts finally protect foreign IP?
Eliza Strickland, March 2012 (IEEE Spectrum)

"In the next few months, a series of lawsuits will play out in the Chinese courts that could define the risks foreign companies take when they try to make money in China’s booming markets. The U.S. green energy company AMSC is suing its former customer Sinovel Wind Group Co., China’s biggest wind turbine manufacturer…[and] is asking for about US $1.2 billion in damages, making this the largest intellectual property case to date in China.


"AMSC appears to have strong evidence, including a full confession from an AMSC employee who said he sold trade secrets to Sinovel. Yet China has a reputation as a place where intellectual property laws are routinely flouted. So the legal outcome is uncertain—and is of great interest to foreign companies…Sinovel did not respond to requests for comments, but the company previously released a statement calling the charges ‘completely false.’ The company has also filed a counterclaim regarding the contractual dispute…Sinovel…got a full dismissal of [the first legal skirmish—a $200 000 copyright infringement case regarding AMSC’s software] from a provincial court. But the much larger cases regarding trade secrets and contracts may fare better in the higher courts of Beijing.
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"AMSC (formerly known as American Superconductor Corp.) sells wind turbine designs and turbine electrical control systems through its Windtec Solutions division…Sales to Sinovel previously accounted for about 70 percent of AMSC’s revenues. But in March 2011, Sinovel refused a shipment of wind turbine components…[and] in June [AMSC] discovered [the theft of] a new software package…When an AMSC employee in China found a Sinovel turbine operating with “expired” software, AMSC quickly fingered an employee in Austria, Dejan Karabasevic…[who] pleaded guilty in an Austrian court and was sentenced…for stealing trade secrets…AMSC says it has further evidence, including signed employment contracts between Karabasevic and senior-level Sinovel employees that amount to more than $1.5 million.


"The Chinese courts that will rule on the AMSC cases are aware of the world’s scrutiny, says Mark Wu, an assistant professor at Harvard Law School and an expert on intellectual property in China. He says…more patent and copyright lawsuits are being brought in Chinese courts by Chinese litigants…[F]oreign companies are still frustrated with IP theft and dissatisfied with China’s enforcement mechanisms…The question really is whether IP enforcement in China is effective from a business standpoint…If AMSC wins its lawsuits in the Chinese courts, a lot of other companies will suddenly feel more secure, too."