Every week it seems brings a story of a Chinese company being accused of stealing intellectual property from an American firm. But the charges being levied against China’s Sinovel Wind Group take this trend to a new, and disturbing, level.
U.S. Attorney John Vaudreuil accused Sinovel of “attempted corporate homicide," describing a “well-planned attack on an American business,” a Massachusetts-based software firm called AMSC.
A federal grand jury on Thursday indicted Sinovel for theft of trade secrets, copyright infringement and wire fraud, resulting in a loss of $800 million to AMSC. For a time, Sinovel was AMSC's largest customer and allegedly used that relationship as an opportunity to commit corporate espionage on a very large and blatant scale. (Sinovel denies wrongdoing, The Wall Street Journal reports.)
Concerns about Chinese hackers targeting the Pentagon and other U.S. government agencies may dominate the headlines, but corporate espionage is presently a bigger cyber-security threat. Chinese theft of intellectual property and related violations cost U.S. corporations almost $50 billion in 2009 and have drained more than 900,000 jobs from America, according to the U.S. International Trade Commission.
In addition, many U.S. multinationals – industry giants like Boeing, Ford and Intel – face the Hobson’s choice of either foregoing China’s huge market or putting their most important proprietary information at risk of being stolen, as Rick Newman and I discuss in the accompanying video.
Meanwhile, a Senate Agriculture Committee has set a hearing next week to review the proposed buyout of Smithfield Foods by China’s Shanghui International. Most observers don’t expect the deal to be blocked and Washington insiders say the hearing is mainly an opportunity for certain members of Congress to express their “concerns” about the deal – and attempt to garner some campaign support from the Chinese. A legal shakedown, in other words.
But given the recent breakdown of U.S.-Chinese relations over the Edward Snowden affair, plus the recent hostage situation with U.S. businessman Chip Starnes (who was released unharmed) and the language used in this Sinovel case, don't be surprised if the Smithfield-Shanghui deal actually does face some serious headwinds in Washington.
As an aside, I’ll note that hog futures are the best performing commodity so far this year, up 19% to date vs. a 9.9% decline for the Dow Jones-UBS Commodity Index. If the Smithfield sale poses any real “risk” to American consumers, it’s that more U.S.-produced pork products will be exported to China; assuming U.S. demand remains stable, the reduced supply would result in higher prices for U.S. pork consumers.
If you agree, or have other concerns about the Smithfield deal, please email me at the address below or post your concerns on Twitter using the hashtag: #SaveOurBacon.
- Company Legal & Law Matters