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American Superconductor CEO calls for US action in Sinovel trade-secrets case

American Superconductor Corp. CEO Dan McGahn said the conviction of Chinese turbine maker Sinovel Wind Group Co. Ltd. in a United States federal court for stealing its trade secrets will hopefully lead the U.S. government to help prevent future trade secret theft.

During the company's Feb. 6 earnings call, McGahn said the U.S. government has said it is committed to seeking restitution for the Massachusetts-based company after Sinovel recruited an AMSC subsidiary employee to steal information on its electricity flow management technology instead of honoring its contract to buy $800 million of AMSC products and services. That led to the loss of $1 billion in market capitalization and the layoff of 700 employees, the company said.

"Our hope is that the administration is about action," McGahn told analysts during AMSC's earnings call, adding that the company expects a need for government-to-government interaction to resolve the issue. "You know the solar market very well. You see there's already been action activity there. So we hope there'll be action that will help us with our case as well."

McGahn and his team are now focusing on ongoing civil cases with Sinovel in China, where they hope for similar outcomes. He said Sinovel's conviction was "a great victory for the United States and for the defense of intellectual property rights" and noted that President Donald Trump's administration is focused on protecting American intellectual property.

"We would not like to see this happen again, and we'll leave that to the politicians to figure out the best way to do that," he said in a Feb. 7 interview.

The Sinovel verdict has added to the U.S. government's tensions with the Chinese government. On Jan. 22, Trump imposed tariffs of 30% on imported solar panel materials after two financially stressed U.S. manufacturers claimed cheap imports from China were hurting the domestic industry.

Beijing-based Sinovel will have its sentencing June 4 and could face fines of up to $4.8 billion. If the judge deals steep fines, Sinovel would need to have the Chinese government pay the amount beyond what cash it has on hand, said Jeff Osborne, a managing director covering renewable energy and industrial technology for Cowen and Company LLC.

The U.S. government is entering uncharted waters with the AMSC-Sinovel case and possible restitution, Osborne said in an email. It may get harder on China as Trump sees more areas where the country is not always playing fair, specifically on trade and intellectual property issues, but it is not clear if that would work into trade regulations.

"There isn't a playbook per se where investors can expect certain things to happen," Osborne added.

Intellectual property lawyers said the verdict will serve as a warning on the growing importance of protecting company trade secrets and sensitive information from competition for the wind industry.

"I don't know how it will directly impact the wind industry, other than to say that probably Western wind developers have not been nor will probably be very keen on working with Chinese suppliers," McGahn said in an interview. "I think that's a fact."