A Chinese wind turbine company convicted earlier this year of stealing trade secrets from the Middleton office of a U.S. energy technology company was ordered Friday in federal court in Madison to pay a $1.5 million fine — the maximum allowed by law — and continue restitution payments totaling close to $60 million.
The fine levied against Sinovel Wind Group, of Beijing, and the amount of restitution do not capture the full impact of the crime on Massachusetts-based AMSC — formerly known as American Superconductor — as well as the business relationship between U.S. and China, U.S. District Court Judge James D. Peterson said.
“The failure to respect intellectual property rights is a serious crime that inhibits fair exploitation and development of technology,” Peterson said.
In January, a federal jury deliberated for less than four hours before finding Sinovel guilty of conspiracy, theft of trade secrets and wire fraud following an 11-day trial. The case was first charged in the U.S. District Court’s Western District of Wisconsin more than five years ago.
Assistant U.S. Attorney Timothy O’Shea said he believes that the conviction and sentence as well as Sinovel’s plummeting bottom line are showing the world that it doesn’t pay to try to steal trade secrets from U.S. companies. Court documents show Sinovel’s total assets that reached a high of $3.4 billion in 2013 dropped to just over $1 billion in 2017.
“As Sinovel’s defense attorneys alluded to, they are a shell of their former selves,” O’Shea said. “If a little (federal) district like the Western District of Wisconsin can bring a multinational company like Sinovel to its knees through prosecution, that sends a pretty strong message.”
At Friday’s sentence hearing, AMSC general counsel John Samia testified that AMSC suffered a $1.1 billion drop in market value because of Sinovel’s theft of its intellectual property in 2011.
Prior to the theft, AMSC had counted on Sinovel for about 70 percent of its total revenues, Samia testified. After Sinovel stole key AMSC trade secrets and then told AMSC it was cancelling all its contracts with them, AMSC’s stock suffered a one-day drop from $24.87 to $14.87 — a $527 million drop in market capitalization, Samia told the court.
“It’s important for the public to understand the true harm imposed by Sinovel in this case,” O’Shea said. “It makes you think about how it affects innovation and the incentive to create when the labor of one’s hands and the labor of one’s mind can be stolen.”
As its stock continued to drop, the Massachusetts-based company was forced to lay off 700 employees, close down its Middleton office and downsize its New Berlin office, O’Shea said.
The president of another Massachusetts company that contracted with Sinovel to set up and maintain turbines on two wind farms in Massachusetts in 2013 testified that Sinovel broke the contract after it was criminally charged and sent its workers back to China. Gordon Deane, the president of the Palmer Capital Corp., estimated total damages to date are about $2 million.
“We have yet to make a dime off any of those projects,” Deane said.
Sinovel already has paid AMSC $32.5 million of the $57.5 million it agreed to pay AMSC in restitution and it must send the remaining $25 million in the next 10 months, according to O’Shea. Sinovel also is in the process of paying the Massachusetts turbine owners all of its $850,000 restitution agreement, O’Shea said.
During the trial, prosecutors provided evidence of how in 2011 a disgruntled AMSC engineer, Dejan Karabasevic, who was based in Austria, conspired with two Sinovel officials, Su Liying and Zhao Haichun, to steal AMSC’s copyrighted information and trade secrets to produce wind turbines and retrofit existing wind turbines.
A jury learned that Karabasevic downloaded the source code for AMSC software needed to operate its wind turbines from a server located at AMSC’s Middleton office. The software regulates the flow of electricity from wind turbines to electrical grids. Sinovel then used the source code to produce wind turbines for use in China as well as for the turbines it set up and was maintaining in Massachusetts.
Karabasevic, who lives in Serbia, and Su and Zhao, both of whom live in China, have been charged with the same crimes but their countries are not extraditing them to the U.S., O’Shea said.