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In wake of Sinovel conviction, wind industry grows more wary

The conviction of a Chinese wind turbine maker for stealing trade secrets from a Massachusetts software company came as a wakeup call to the wind industry: companies need to be more aggressive about protecting intellectual property from competitors.

On Jan. 24, a federal jury found Sinovel Wind Group Co. Ltd. guilty of trade secrets theft, conspiracy and wire fraud after the turbine manufacturer recruited an employee from American Superconductor Corp., or AMSC, to transfer information on AMSC's technology that manages electricity flow to the grid. Sentencing is scheduled for June 4, and the Beijing-based company could face steep fines.

"Sinovel nearly destroyed an American company by stealing its intellectual property," acting Assistant Attorney General John Cronan said in a statement. "This type of conduct, by any corporation — anywhere — is a crime, and won’t be tolerated."

The Sinovel verdict underscores the wind turbine market's global scope and the increasing importance of protecting intellectual property, said Michael Hobbs, a partner at Atlanta-based Troutman Sanders LLP who specializes in intellectual property law for the energy industry. The Chinese government partially owns the turbine maker and was actively involved in the litigation, Hobbs said.

"They don't get involved in small things," he said in an interview. China's five-year plan for energy through 2020 calls for 210 GW of wind generation capacity by 2020, according to the Global Wind Energy Council, as the country continues its transition from coal-based power.

For wind turbine manufacturers and other companies involved in the supply chain, their intellectual property and proprietary technology are two of the most valuable assets, Hobbs said. Sinovel ordered $800 million of AMSC products and services in 2011. After the turbine maker stole the information, AMSC said it lost $1 billion in market capitalization and laid off 700 employees, or 70% of its workforce.

"The main lesson is that it's a jungle out there," said James Pooley, a California-based intellectual property lawyer and former president of American Intellectual Property Law Association. "You have to be very vigilant to protect the integrity of the information you bring to the party."

The Sinovel conviction also sets the stage for the much larger ongoing litigation between General Electric Co. and Vestas Wind Systems A/S. GE has accused the Danish wind turbine giant of infringing on two patented technologies that ensure turbines stay connected to the grid during low- or zero-voltage events such as lightning strikes. Vestas has denied GE's allegations.

While GE's case only involves patent infringement, the discovery process could lead the company to add a trade secret theft charge, Pooley said. Even for cases that involve only patents, Sinovel's trade secret theft charge will raise awareness about guarding intellectual property, especially as company data becomes more valuable than hard assets.

"Data forms the lion's share of asset value of most modern companies," Pooley said. "And data assets are mainly protected by secrecy."