WASHINGTON - China’s next leader, Xi Jinping, may never have heard of American Superconductor Corp. before he arrived here Monday, but by the end of his visit US officials hope to make the small Massachusetts wind-energy company an object lesson in the impact of Chinese trade secret theft on US business.
Senator John Kerry, Democrat of Massachusetts and chairman of the Senate Foreign Relations Committee, plans to raise personally with Xi the case of a company that saw 70 percent of its business evaporate last year after a Chinese partner enticed one of its employees to steal the crown jewel of its technology.
“It’s a very clear and, in our judgment, egregious, palpable demonstration of the practice that we are deeply concerned about,’’ Kerry said, “but it’s not the only one. There are so many things: cyberattacks, access-to-market issues, espionage, theft. These are major points of discussion between us and China.’’
Both President Obama and Vice President Biden warned Xi yesterday that they had been hearing more and more from US businesses about intellectual property and trade secret theft, but they did not specifically mention American Superconductor, knows as AMSC. However, background material on the company’s experience was included in briefing papers distributed before the arrival in Washington of Xi’s delegation, and a top administration official said the Chinese were aware of US frustration over the case.
With anger toward Chinese trade and industrial practices emerging as a major theme for the 2012 campaign season, American Superconductor’s story seems ripe for the moment.
The facts are difficult to dispute, given the volume of evidence. Last March, China’s Sinovel, the world’s second largest wind turbine manufacturer, abruptly refused shipments of American Superconductor’s wind turbine electrical systems and control software. The blow was devastating; Sinovel provided more than 70 percent of the firm’s revenues.
The value of undelivered components on existing contracts exceeded $700 million, Daniel Patrick McGahn, the company’s president and chief executive, told investors. Its share price plunged by more than 80 percent in six months.
Last summer, evidence emerged that Sinovel had promised $1.5 million to Dejan Karabasevic, a Serbian employee of American Superconductor in Austria.
Company officials say they found hundreds of e-mails and messages between senior Sinovel staff members and Karabasevic detailing the property to be stolen from the company, offering the money, and showing the actual transfer of the software. They even found signed contracts for the transaction.
Karabasevic was arrested, confessed to the crime, was convicted and is now serving time in an Austrian prison.
American Superconductor filed multiple lawsuits against Sinovel, seeking more than $1.2 billion in damages, cease and desist orders, and copyright remedies.
In October, Sinovel countersued, saying it stopped accepting components because of quality problems and asking an arbitration commission to award it about $58 million for a breach of contract. The company is also demanding that American Superconductor pay its lawyers’ fees, expenses and the cost of the arbitration.
This month, a court in Hainan, China, dismissed the smallest of the suits and said it should be heard by an arbitration commission in Beijing. The first arbitration hearing is scheduled for Feb. 24.
Robert D. Atkinson, president of the Information Technology and Innovation Foundation who has been leading a roundtable on such cases for the White House Office of Science and Technology Policy, called the case particularly egregious. But, he added, “This is not a one-shot deal that affects one company in Massachusetts. It is unbelievably endemic.’’