Communist Chinese Company Sinovel Wind Group Convicted Of Theft of Trade Secrets

The U.S. Justice Department released the below link:

A manufacturer and exporter of wind turbines based in the People’s Republic of China was convicted today of stealing trade secrets from AMSC, a U.S.-based company formerly known as American Superconductor Inc., announced Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Scott C. Blader for the Western District of Wisconsin.

Following an 11-day trial, a jury sitting in Madison, Wisconsin, convicted Sinovel Wind Group Co. Ltd., dba Sinovel Wind Group (USA) Co. Ltd. (Sinovel) of conspiracy to commit trade secret theft, theft of trade secrets, and wire fraud.  Sentencing is set for June 4.

“Sinovel nearly destroyed an American company by stealing its intellectual property,” said Acting Assistant Attorney General Cronan.  “As today’s jury verdict demonstrates, this type of conduct, by any corporation – anywhere – is a crime, and won’t be tolerated.  The Department is dedicated to helping foster innovation and growth in our economy by deterring and punishing intellectual property theft from American companies.”

“Today’s verdict sends a strong and clear message that the theft of ideas and ingenuity is not a business dispute; it’s a crime and will be prosecuted as such,” said U.S. Attorney Blader.  “Sinovel’s illegal actions caused devastating harm to AMSC.  I commend the efforts of the investigation and prosecution team, and reaffirm the commitment of this office to protect American commerce and prosecute those who would seek to steal intellectual property.”

As proven at trial, Sinovel stole proprietary wind turbine technology from AMSC in order to produce its own turbines powered by the stolen intellectual property.  AMSC developed the technology – software that regulates the flow of electricity from wind turbines to electrical grids – in Wisconsin and elsewhere.  At the time of the theft in March 2011, Sinovel had contracted with AMSC for more than $800 million in products and services to be used for the wind turbines that Sinovel manufactured, sold, and serviced.

Sinovel was charged on June 27, 2013, along with Su Liying, the deputy director of Sinovel’s Research and Development Department; Zhao Haichun, a technology manager for Sinovel; and Dejan Karabasevic, a former employee of AMSC Windtec Gmbh, a wholly-owned subsidiary of AMSC.  The evidence presented at trial showed that Sinovel conspired with the other defendants to obtain AMSC’s copyrighted information and trade secrets in order to produce wind turbines and to retrofit existing wind turbines with AMSC technology without paying AMSC the more than $800 million it was owed and promised.  Through Su and Zhao, Sinovel convinced Karabasevic, who was head of AMSC Windtec’s automation engineering department in Klagenfurt, Austria, to leave AMSC Windtec, to join Sinovel, and to steal intellectual property from the AMSC computer system by secretly downloading source code on March 7, 2011, from an AMSC computer in Wisconsin to a computer in Klagenfurt.  Sinovel then commissioned several wind turbines in Massachusetts and copied into the turbines software compiled from the source code stolen from AMSC.  The U.S.-based builders of these Massachusetts turbines helped bring Sinovel to justice.  Su and Zhao are Chinese nationals living in China, and Karabasevic is a Serbian national who lived in Austria, but now lives in Serbia.

According to evidence presented at trial, following the theft, AMSC suffered severe financial hardship.  It lost more than $1 billion in shareholder equity and almost 700 jobs, over half its global workforce.

The case was investigated by the FBI’s Madison, Milwaukee, and Boston Offices; the FBI Legal Attachés’ Offices in Vienna, Austria and Beijing; the FBI Criminal Investigative Division; the FBI Intellectual Property Rights program; the Bundeskriminalamt (Federal Criminal Intelligence Service) and the Bundesministerium Fuer Justiz (Federal Ministry of Justice) in Austria; the Landeskriminalamt - Klagenfurt and the Staatsanwaltschaft - Klagenfurt (Criminal Investigative Police and State Prosecutor’s Office – Klagenfurt, Austria); and with the assistance of the Justice Department’s Office of International Affairs and the Cybercrime Laboratory of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS).

Senior Counsel Brian L. Levine of CCIPS and Assistant U.S. Attorneys Timothy M. O’Shea and Darren Halverson for the Western District of Wisconsin prosecuted the case, with substantial assistance from CCIPS Trial Attorney Joss Nichols and Digital Investigative Analyst Laura Peterson.

The Department of Justice’s Task Force on Intellectual Property (IP Task Force) contributed to this case.  The IP Task Force is led by the Deputy Attorney General to combat the growing number of domestic and intellectual property crimes, to protect the health and safety of American consumers, and to safeguard the nation’s economic security against those who seek to profit illegally from American creativity, innovation, and hard work.  To learn more about the IP Task Force, go to https://www.justice.gov/iptf.  

FBI: Putting The Brakes On Intellectual Property - Crime Trio Pirated Mercedes-Benz Diagnostic Software

The FBI released the below report:

The case of the pirated Mercedes-Benz software is a classic example of how a company’s intellectual property can be compromised—and how criminals can profit from someone else’s hard work.

In April 2016, California resident Martin Vellozzi was the last of three individuals sentenced for creating and selling non-authentic Mercedes-Benz diagnostic software systems. The diagnostic systems are used by auto mechanics to diagnose and fix Mercedes vehicles. For more than a decade, Vellozzi and his co-conspirators—Rainer Wittich of Louisiana and Robert Beckmann of North Carolina—made money by stealing the proprietary software and selling it at a steep discount.

“All three conspirators had legitimate businesses in the automotive industry,” said Special Agent Sundanah Parsons, who investigated the case from the FBI’s New Orleans Field Office. “Each one had a different kind of expertise, and they came together to profit from their illegal activity.”

The Mercedes-Benz Star Diagnostic System is a hand-held computer containing proprietary, confidential software that costs as much as $22,000. “Vellozzi discovered a way to pirate the software from legitimate Star Diagnostics Systems,” Parsons explained, “which over the years effectively robbed Mercedes of millions of dollars in business opportunities.”

By stealing the Mercedes software—and without having to spend money on research and development—Vellozzi, Wittich, and Beckmann were able to produce, market, and sell their illegal versions of the system on laptop computers for anywhere from $6,000 to $12,000. Court records indicate the trio sold nearly 1,000 of the units. “They were selling them all over the country and even internationally,” Parsons said. “It was all about the money.”

In 2011, representatives from Mercedes-Benz contacted the FBI’s Intellectual Property Rights Unit to report their suspicions that the diagnostic system had been compromised. The Bureau later sent an undercover operative to one of Vellozzi’s automotive repair seminars, where the pirated units were being openly sold.

“Mercedes was rightfully concerned about its intellectual property,” Parsons said, explaining that the diagnostic system could be used to modify and control a variety of critical features on automobiles, including air bags and braking systems.

“Vellozzi and his colleagues knew what they were doing was illegal,” Parsons added. “Although the units were being sold openly at seminars he held around the country, Vellozzi didn’t advertise the systems on his website or list them anywhere in his business records—and neither did Wittich and Beckmann.”

In April, a federal judge sentenced Vellozzi to four years’ probation and a $6,000 fine. In January 2016, Wittich and his Louisiana-based aftermarket auto parts distributor business, The Brinson Company, were sentenced for their roles after previously pleading guilty to criminal copyright infringement and violating the Digital Millennium Copyright Act. Wittich received five years of probation, and his company was ordered to forfeit $150,000 and assist Daimler AG—parent company of Mercedes-Benz—in compiling a list of all customers to whom it provided the pirated software systems.

In March 2016, a federal judge sentenced Beckmann to four years of probation, with the first four months to be served on home detention, and a fine of $5,000 for criminal copyright infringement. His company, Beckmann Technologies, was also sentenced to five years of organization probation and fined $75,000.

“They all knew what they were doing was wrong,” Parsons said. “They made a lot of money, but then they got caught.”