A
former British Prime Minister, Lord Palmerston, is believed to have
said once of Great Britain: “ We have no permanent allies, we have
no permanent enemies, we only have permanent interests.” I think
that this probably holds true not only for countries of the world but
holds good for the industry too.
Few
decades ago, when I was running my own business, I had learned this
hard truth through many bitter experiences. During those years, I
used to develop small gadgets and accessories for big industrial
clients, who used to purchase these from me and fit them on their
products. A manufacture of large diesel engines once asked me to
develop an electronic gadget that would start raising an alarm if the
engine temperature rises abnormally. I developed one such gadget and
after rigorous tests was approved by the company and they placed a
large order with me to supply these gadgets. I was very happy and
supplies continued smoothly for next six months or so.
After
that, when I was visiting our client, one of their inspectors, whom I
had started knowing well, told me confidentially that soon our order
would be closed as they have developed another contractor to supply
the same gadget but at lower cost. I was quite surprised and made
some inquiries. It appeared that my client diesel engine
manufacturer, had coolly handed over few units from my supply to
another vendor and had asked him to copy the same and supply these at
lower cost.
I
learned my lesson from this episode and started encapsulating the
electronic circuit boards in epoxy raisins to make them almost
impossible to copy. Except for that, I was not able to take any
action against my client because of the “Big fish eat small fish”
type situation and had to quietly accept loss of revenue. .
But
what happens when both the parties are big fish? Would companies
behave honestly with each other or in the same fashion, my client had
treated me? The answer to that is simple. The business world is ruled
only by the law of the jungle, and each and every corporate entity
works in its self interest and would use any fair or unfair means, as
has been proved by a recent example. Sinovel Wind Group Company,
(Chinese: 中文：华锐风电)
is the largest turbine manufacturer in China and by 2011 market share
the second largest in the world. This company also manufactures wind
turbines used for generating electric power or wind power. In the
latest wind turbines made all over the world, the flow of electricity
from wind turbines is automatically regulated by using advanced
computer software. Sinovel bought this advanced software from an
American Company called as American Superconductor (AMSC) located in
Devens, Massachusetts. American Superconductor had developed this
advanced computer software that regulates the flow of electricity
from wind turbines on their own and was their proprietary product.
In
March 2011, Sinovel abruptly cut American Superconductor off, even
refusing to pay for contracted shipments. Since Sinovel was the
single largest customer for American Superconductor, it lost three
quarters of its revenue, half its workforce, and more than $1 billion
in market value for its stock. Subsequent to this, Sinovel supplied a
wind turbine funded with $4.7 million of US federal stimulus funds to
the Massachusetts Water Resources Authority and the wind turbine was
installed just 40 miles away from the headquarters of American
Superconductors. After this installation, someone found out that the
wind turbine still used the propriety software of American
Superconductors, which was no longer supplied to Sinovel by them. The
FBI got involved and it was later discovered that stolen software
was being used by Sinovel on its wind turbine.
FBI
investigations are now complete and it has been now revealed that
Sinovel actually offered big money and access to women to entice an
engineer employed by American Superconductors to launch a cyber raid
on his employer, stealing sensitive computer codes and thereby
cheating the company to the tune of $800 million. Sinovel managed to
entice Dejan Karabasevic, American Superconductor's chief engineer in
its Austria office to steal the software and offered him a $1.7
million contract, an apartment in Beijing and access to women -- as
well as payments wired into the bank account of a girlfriend who was
a Vietnamese flight attendant.
US
Federal prosecutors have now brought to light some secret e mails and
SMS between Karabasevic and Sinovel executives and it makes an
interesting reading. In one message Karabasevic says "All
girls need money. I need girls. Sinovel needs me." A Sinovel
executive praising Karabasevic says "Best man. like
Superman...haha." In a separate law suit in Austria, Karabasevic
has pleaded guilty to stealing the trade secrets in 2011 and was
sentenced to a year in jail. In US, Sinovel, along with two of its
executives and the former American Superconductor engineer, were
recently indicted by a federal grand jury on charges of trade theft
and wire fraud.
I do
not see any basic difference between these two instances essentially.
What happened with me was on a Nano scale and here in Sinovel's case
the scale and value of product was huge. Even then, in both cases,
proprietary intellectual property rights were simply overlooked.
That is why, I have said above, that in corporate world only law of
jungle prevails. Corporates have even known to spend huge amounts of
funds to buy a competitor's brand, which is subsequently just killed.
We can therefore rightly say: “ Corporates have no permanent
allies, no permanent enemies, they only have permanent interests.”
10
August 2013
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