Chinese Courts Hand Down Split Decision in Cleantech IP Case

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In a previous post, I discussed the IP litigation in China between American Superconductor (AMSC) and Chinese wind energy system maker Sinovel.

The dispute centers on allegations that Sinovel misappropriated AMSC’s software code for controlling wind turbines and power converters.

Last year, a former AMSC employee pled guilty to charges of passing portions of AMSC’s wind turbine control software source code to Sinovel. The control software was developed by AMSC for use with Sinovel’s 1.5MW wind turbines.

AMSC accuses Sinovel of unauthorized use of the turbine control software source code and the binary code, or upper layer, of its software for the PM3000 power converters in the 1.5 MW turbines.

AMSC also believes the former employee illegally used the source code to develop a software modification so Sinovel could circumvent the encryption and remove technical protection measures on certain power converters used with the turbines.

The litigation has involved four separate actions by AMSC in various forums in China.

Recently, there were rulings in two of those actions. In the first, the Hainan Province No. 1 Intermediate People’s Court dismissed AMSC’s copyright infringement suit filed there in September.

The decision was on jurisdictional grounds after Sinovel filed a motion to dismiss in December. According to AMSC President and CEO Daniel McGahn, the action was AMSC’s smallest case, in which the company had requested about $200,000 in damages as well as a cease and desist order. McGahn said AMSC would appeal the ruling (see the Recharge piece here).

The second ruling went AMSC’s way. The Beijing No. 1 Intermediate People’s Court denied Sinovel’s motion to strike AMSC’s copyright action and have the case transferred to the Beijing Arbitration Commission. This action involves a $6 million damages claim by AMSC (see the Windpower Monthly article here).

A third action, involving trade secrets claims, is pending in the Beijing Higher People’s Court. AMSC is seeking over $450 million in damages in that case.

Finally, AMSC continues to pursue its contractual disputes with Sinovel in the Beijing Arbitration Commission.

According to experts interviewed for this Greentech Media piece, a critical weakness in AMSC’s case is that the company’s contract with Sinovel did not specify the amount of damages it would be entitled to in the event of a breach.

Perhaps AMSC’s four-pronged litigation approach is a way to hedge its bets in an uncertain Chinese IP enforcement environment. For technology companies around the world that want to do business in China, this is an important dispute to watch.

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About Author

Walter’s contributions to CleanTechies over the past 4 years have been instrumental in growing the publications social media channels via his ongoing editorial and data driven strategies. He is the founder and managing director of Sunflower Tax, a renewable energy tax and finance consultancy based in San Diego, California. Active in the San Diego clean technology community, participating in events sponsored by CleanTech San Diego, EcoTopics, and Cleantech Open San Diego, Walter has also been a presenter at numerous California Center for Sustainability (CCSE) programs. He currently serves as an adjunct professor at the University of San Diego School of Law where he teaches a course on energy taxation and policy.

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