Monday, January 8, 2018

Sinovel Wind Turbine Case Heads to Trial

The Wall Street Journal reported today that the Wisconsin trade secrets case of United States v. Sinovel Wind Group Co. is scheduled to begin trial this week. The criminal case highlights the growing problem of intellectual property theft by state-sponsored organizations in China. And it further illustrates that multi-national organizations often target vulnerable inside employees to aid and abet in brazen acts of theft.

The Department of Justice back in 2013 issued a Press Release detailing the charges against Sinovel Wind and several individuals, including a former employee of American Superconductor, the victim of alleged trade secret theft. According to the indictment, American Superconductor developed software that controlled the flow of electricity from wind turbines to electrical grids. This software source code is at the heart of the indictment for trade secret theft. The allegation of misappropriation centers on Sinovel's apparent acquisition, through an ex-employee, of the software to produce wind turbines that it previously agreed to buy from American Superconductor.

The charging documents outline a familiar, if not sloppy, pattern of insider theft. The FBI, for instance, was able to discover that the rogue American Superconductor employee used Skype to communicate with Sinovel regarding the stolen source code. He also e-mailed Sinovel to discuss the source code and to send repairs to the source code. Of note, the ex-insider frequently traveled to China to work on Sinovel, which at one time constituted 80 percent of American Superconductor's business. The alleged theft resulted in a drop in American Superconductor's market value from roughly $1.6 billion to approximately $200 million.

For those interested to see what a real trade-secrets theft investigation looks like, and the level of detail undertaken with respect to a forensic analysis, I highly recommend a read through the key charging affidavit, embedded below.

Finally, a topic that frequently comes up in trade secrets cases is closure of the courtroom. On December 28, the court stated that "the trial of this case will be conducted in open court, unless a strong showing is made that some evidence must be kept from public disclosure." The court allowed for limited courtroom protections for trade secrets that were the subject of the government's indictment, but denied any corresponding protection to Sinovel on the basis that it had not made the appropriate showings to gain such protection.

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