Wind turbine component maker AMSC seeks more than $1.2bn for contracted shipments and damages from Chinese manufacturer Sinovel, formerly its largest customer, through four lawsuits filed in Chinese courts.
AMSC alleges intellectual property (IP) infringement related to its software for low-voltage ride through (LVRT) technology, and breach of supply contracts.
AMSC chief executive Daniel McGahn says courts have accepted each of the civil cases. He expects proceedings to begin within a few months.
The US company filed for arbitration with the Beijing Arbitration Commission, seeking nearly $70m in compensation for past shipments and asking the courts to enforce contracts in place with Sinovel. “The value of the undelivered components under those existing contracts exceeds $700m,” McGahn says.
AMSC also filed two civil lawsuits for copyright infringement in the Beijing No. 1 Intermediate People’s Court and in the Hainan Province No. 1 Intermediate People’s Court. AMSC is suing Sinovel and Guotong, a company Sinovel invested in to manufacture systems that compete with AMSC’s, McGahn says. His company seeks cease-and-desist orders and damages exceeding $6m.
In addition, AMSC filed a trade secrets case against Sinovel and certain members of its senior-level staff with the Beijing Higher People’s Court seeking monetary damages of more than $450m.
“We believe the strengths of our case is undeniable,” McGahn says.
He lists evidence including: the confession of a former AMSC employee who is in prison for IP theft; hundreds of emails between senior Sinovel staff and the former employee that demonstrate that Sinovel requested the IP and that senior-level employees knew it was obtained illegally; contracts between the former employee and Sinovel and related parties, promising more than $1.5m in payment; an email demonstrating the transfer of the IP; and Sinovel wind turbines in China that have been upgraded with the LVRT software that AMSC developed.
The technology is increasingly important as China moves to implement more stringent grid standards.
AMSC is incurring significant costs to pursue its cases. In its fiscal second quarter, $3.3m of Sinovel legal costs, along with $4.3m in restructuring charges and a $28.2m charge to terminate its acquisition agreement with The Switch, dragged AMSC to a $51.7m net loss on $20.8m in sales. AMSC forecasts an additional $3m in Sinovel litigation expense this quarter.
Asked about the likelihood that AMSC will ultimately receive payment from Sinovel through this legal process, McGahn says, “we anticipate and believe that we would see a positive outcome from this”.
A Chinese IP lawyer tells Recharge that AMSC appears to be pursuing all legal angles in search of a remedy. But she also notes that from a strategic perspective, cases in the Beijing Higher People’s Court attract more media attention and would be less influenced by local government.
McGahn notes the broader implications of the cases: “While we acknowledge that this is a commercial matter, many have pointed to this case as an important litmus test for future energy cooperation between China and the West.”