US firm sues Sinovel for corporate espionage

China's Sinovel Wind Group is being sued by American Superconductor Corporation, which makes proprietary technologies for the electric power infrastructure and has alleged theft of its intellectual property.

In a phone conference with financial analysts, AMSC revealed that a former employee stole software code from the company and is now in jail on corporate espionage charges.

AMSC added that investigations showed that Sinovel illegally obtained and used AMSC's intellectual property to upgrade its 1.5-mw wind turbines in the field to meet proposed Chinese grid codes and to potentially allow for the use of core electrical components from other manufacturers.

Many of China's wind turbines are not connected to the grid because of issues with low-voltage ride through (LVRT), a capability meaning turbines being able to cope with the stresses of fast rises and drops in voltage. A recent report from the State Electricity Regulatory Commission demanded that this issue be addressed.

Whatever the merits of the case, the news has had a negative impact on AMSC's share price as the Sinovel Wind Group was its top customer. AMSC now has to move from a loss-generating position to profitability without its largest customer and with the real threat of tit-for-tat legal action in China.

Sinovel, China's largest wind power equipment maker, has vigorously denied the allegations in China's state press and in a statement released Friday, said "it has stopped accepting and paying for AMSC's products since April as the products did not conform with the contracts and also integration requirements of Chinese grid".

Sinovel also alleged that there was a high failure rate for AMSC’s power inverters, the company had poor maintenance procedures and that it was owed money for repair work it had carried out on behalf of AMSC in China.