The theft of U.S. intellectual property has always been a hot button topic. According to the U.S. International Trade Commission, Chinese IP theft cost U.S. companies nearly $50 billion in 2009.
The U.S. government has adopted a stronger stance against IP theft by other countries, including China. In June, the Department of Justice charged Chinese wind turbine maker Sinovel Wind Group Co. and two of its employees with stealing trade secrets from a U.S. company, American Superconductor Corp. (AMSC).
According to the Department of Justice, AMSC developed and sold software and equipment to regulate the flow of electricity from wind turbines to electrical grids, and it considered the software and equipment to be trade secrets and proprietary information. Meanwhile, Sinovel purchased software and equipment from AMSC for the wind turbines that Sinovel manufactured, sold and serviced.
In 2011, Sinovel recruited AMSC employee, Dejan Karabasevic, to leave the company and join Sinovel. The Chinese company also allegedly offered him $1.7 million to secretly copy intellectual property from the AMSC computer system. Using the stolen computer code, Sinovel sold four pirated turbines to customers in the U.S., “cheating AMSC out of more than $800 million,” according to the indictment.
An Austrian court has already convicted Karabasevic, and sentenced him to a year in jail and two years of probation for his part in this international trade secret theft.
Since the United States obtained indictments in late June, Sinovel is fighting back, claiming that the service of the summons were faulty and that the United States improperly (and ineffectively) served Sinovel’s U.S.-based subsidiary, Sinovel Wind Group (USA) Co., Ltd., but not its Chinese parent, Sinovel Wind Group Co., Ltd. Sinovel argues that it is not subject to the United States’ summons power as a Chinese corporation and that service of Sinovel USA (dissolved in early July 2013) is not proper under Federal Rule of Civil Procedure 4.
On September 6, 2013, the United States filed its response in opposition to the motion to quash, arguing that Sinovel USA is the alter ego of the parent corporation. At the heart of this argument, the United States is claiming that Sinovel’s recent closure of its US subsidiary was made to avoid service of process and a direct result of the United States’ case against Sinovel.
Also, this past week the China Securities Regulatory Commission (CSRC) began looking into security market regulation violations by Sinovel.
I will be watching this case and reporting on how the final disposition of this could affect your business interests when working with foreign firms.
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– Ex astris, scientia –
I am and avid amateur astronomer and intellectual property attorney in Pasadena, California and I am a Rising Star as rated by Super Lawyers Magazine. As a former Chief Petty Officer in the U.S. Navy, I am a proud member of the Armed Service Committee of the Los Angeles County Bar Association working to aid all active duty and veterans in our communities. Connect with me on Google +