AMSC sues Sinovel over breach of contract and IP infringement
By Terry Wang
Shanghai. September 20. INTERFAX-CHINA - Nasdaq-listed American Superconductor Corp. (AMSC), a clean energy solutions provider, is suing China's largest wind turbine manufacturer, Sinovel Wind Group Co. Ltd., for breach of contract and infringement of intellectual property rights (IPR), AMSC announced via the company website Sept. 14.
According to the statement, AMSC is requesting that Sinovel stop using its propriety technology, The Massachusetts-based company is also demanding that Sinovel pay compensation for damages caused by the alleged IPR infringements. In addition, AMSC wants Sinovel to pay for all contracted but undelivered electrical components.
AMSC filed the action with the Beijing Arbitration Commission, as stipulated in its supply contract.
Xiao Qiang, brand manager for Sinovel, told Interfax in an email that AMSC began supplying electrical components to Sinovel in 2006.
Xiao alleges that AMSC "could not keep up with" China's rapidly developing wind power market.
Sinovel stopped accepting shipments from AMSC and suspended payments as of April this year, he said, adding that the payments were stopped because "AMSC products did not comply with State Grid of China Corp. (SGCC) grid connection requirements."
To cope with the fluctuating wind power output and avoid mass stoppages in wind farm operation, SGCC began requiring wind farms to install low voltage ride through (LVRT) technology in 2009. In 2011, the policy was adopted by the National Energy Administration (NEA).
"We asked AMSC to update their technology several years ago, but receive no solutions from them," said Xiao.
AMSC's court filing alleges that Sinovel illegally obtained and used its proprietary technology, violating international IPR laws.
According to AMSC, a former employee at its Austrian subsidiary, AMSC Windtec GmbH, was arrested on charges of economic espionage and fraudulent manipulation of data. AMSC believes the employee was engaged by Sinovel through an intermediary to obtain and transfer proprietary technology, including LVRT solutions, for its 1.5-MW wind turbines.
Xiao counters that Sinovel's LVRT technology was developed by an in-house research and development team.
He further maintains that the relationship with AMSC ended due to the latter's negligence, both in terms of product compliance and after-sales service.
"AMSC seemingly ignored our repeated requests for component maintenance," said Xiao.
In 2010, Sinovel installed 4.39-gigawatts (GW) of wind turbines in China, accounting for roughly 23 percent of the country's entire wind power market, making it the largest domestic manufacturer of wind turbines and second in the world behind Denmark's Vestas Wind Systems A/S.
Sinovel accounted for approximately 51, 67 and 70 percent of AMSC's total revenue in fiscal years 2007, 2008 and 2009, respectively. As a result, Sinovel's suspension of business with AMSC has led to significant financial stress on the American energy solutions provider.
In August, AMSC announced a 30 percent workforce reduction as well as a $10 million cut of annualized expenses.
The company said that the reductions were made to better align costs with the company's revenue expectations, which had been affected by business and contractual issues with Sinovel.
Emails to AMSC for comment went unanswered at the time of this report.