Brazilian utility and developer Desenvix signed a contract with Sinovel last September for 23 turbines of 1.5MW for its Barra dos Coqueiros project. It then filed court orders to determine if the turbines contained intellectual property allegedly stolen from AMSC, but dropped the action in August when it received confirmation that the turbine's control system technology is from US company Emerson Electric and that the software is a brand-new innovation developed by Sinovel and its partners, including Denmark's Mita-Teknik.
Nevertheless, AMSC is continuing to sue Desenvix over potential intellectual theft of the code. AMSC vice president Jason Fredette said: "Since we still have not received evidence, we have not withdrawn our suit. We will continue to work this through the courts and with Desenvix to obtain independent verification."
Sinovel has agreed to an independent inspection of the turbines by a third party chosen by both Desenvix and Sinovel. "Both parties expect and are committed to having the inspection as soon as possible," a spokesman for Desenvix said. Emerson has confirmed that the technology belongs to it.
"This is a fully fledged war [between AMSC and Sinovel] that will occur every time Sinovel does an overseas sale," said Andrew Chen of USFOR Energy, a consultancy which advises Chinese companies entering the US market.
AMSC's trade secrets, including software coding for turbine power electronics, were stolen by a disgruntled ex-employee in Austria in 2010, who was jailed after claiming that he sold the code to Sinovel. Sinovel vehemently denies this. Some believe the Chinese firm will have a hard time selling many turbines in the US, or in the EU because of the Austrian case. "Trade law is trade law," said Aaron Chew of US-based Maxim Group.
The turbine delivery for Desinvex is Sinovel's first major export. In 2011, developer Mainstream shelved a 1GW deal with the Chinese firm for Irish projects because of the IP fight. Sinovel has since won a 600MW agreement in Turkey, which is outside the EU ruling.
The Brazilian market has seen a gold rush of major wind players, but with a recent decision by the BNDES state-owned bank to drop five manufacturers from its financing programme through failure to provide sufficient local content, it has become somewhat uncertain for some foreign players. Sinovel, with $55 million funding from the China Development Bank for the Desenvix project, relies less heavily on BNDES.
It has also said that it will build an assembly plant in Brazil, although no date has yet been set. Caitlin Pollock, consultant at IHS Emerging Energy Research said that AMSC is likely to be pursuing Sinovel in Brazil due to its aggressive ambitions there. Not only does Sinovel have its largest firm overseas contract in that country, but it has also set up a local sales office and is considering local assembly.
Under pressure
Min Xu, an analyst at Jefferies believes that the fight with AMSC could really affect Sinovel's ability to sell overseas. Like other Chinese manufacturers, it has seen its domestic sales rocked by a softening
market in China. Sinovel could not be reached for comment.
AMSC is continuing to pursue Sinovel through the courts in China, while Sinovel has countersued for alleged breach of contract. For both companies, Brazil is an important market, and this legal battle appears to be far from over.
AMSC also appears to have turned to the might of US politics to pursue its case, with its chief executive officer and president, Daniel McGahn, saying that ambassador to China Gary Locke, minister of state Hillary Clinton and vice president Joe Biden are "personally pressing our case with their counterparts in the Chinese goernment".
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