A Chinese company, Sinovel Wind Group Co., has been ordered to pay American SuperConducter Inc. (AMSC) $57.5 million after being convicted of multiple charges regarding the theft of proprietary software. This theft resulted in substantial losses for AMSC, including $800 million in revenue and $1 billion in stock market value. Today, the Chinese company has recently made its last installment payment of the agreed-upon settlement, however, the trade theft first began in 2011 in what was expected to be a profitable partnership between the two companies.
Originally, AMSC and Sinovel Wind Group Co. worked together in what seemed like a mutually beneficial business partnership. The agreement was that Sinovel Wind Group Co. would produce windmills and purchase $800 million in software from AMSC to control and operate the windmills. However, in 2011, Sinovel Wind Group Co. abruptly ended their agreement and claimed that they no longer needed the software from AMSC to control their windmills.
It was later discovered that multiple employees of the Chinese company had convinced an Austrian employee of AMSC to hand over a source code of the software, which allowed Sinovel Wind Group Co. to create its own version of the program. In a bold move, Sinovel Wind Group Co. then used their stolen software to control several windmills they had produced and installed in Massachusetts. At this time, AMSC discovered the theft of their trade secrets and a lawsuit was filed. Meanwhile, the Austrian employee who divulged the software’s source code was eventually convicted of theft by an Austrian court.
It was estimated that Sinovel Wind Group Co. cost AMSC over $550 million in losses, and after an 11-day trial in the state of Wisconsin, a settlement was reached between the two companies. After being convicted of conspiracy to commit trade secret theft, theft of trade secrets, and even wire fraud, Sinovel Wind Group Co. was ordered to pay AMSC $57.5 million. Sinovel Wind Group Co. was also ordered to pay $1.5 million to the United States government, as well as an additional $850,000 for anonymous victims of the trade secret theft.
However, upon being charged for these crimes in the United States, sales at Sinovel Wind Group Co. plummeted, making it increasingly difficult for the company to pay these substantial fees. The company made its first payment to AMSC in July in the amount of $32.5 million and has now made its second and final payment in the amount of $25 million. In total, the $57.5 million paid by Sinovel Wind Group Co. presents a large piece of what the company has left following its massive drops in revenue.
As part of the settlement, AMSC agreed to drop its lawsuit against Sinovel Wind Group Co., which effectively closes the chapter between these two companies.
An Unusual Prosecution
However, this prosecution is truly unusual in its own right. Trade wars between the United States and China resulted in a mutual explosion of tariffs on products around the same time this case was filed. At this time, the Trump Administration had also been urging China to put a stop to practices that they believed cost the United States an estimated billions of dollars per year and degrade the advancement of technology in the United States. The culmination of these events seemed to lead to the federal prosecution of the Chinese company, Sinovel Wind Group. Co., and may mean the start to similar prosecutions of this nature in the future.
Although AMSC has now received the entirety of its settlement from Sinovel Wind Group Co., the substantial losses the company has suffered will take time to repair. In total, AMSC lost 700 jobs and was also forced to downsize its facility. However, upon receiving its final payment from the Chinese company just a couple weeks ago, AMSC can finally bring this chapter to a close and focus on the growth of their company. Although AMSC has made no indications that it will avoid working with Chinese companies in the future, statements from the company’s chief executive, Daniel McGahn, point towards their focus on the United States’ market for the sales of their products for the time being.
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