seminar on technology transfer to china dg trade, ueapme ... · general assembly board of directors...

www.eppsa.eu

EUROPEAN POWER PLANT SUPPLIERS ASSOCIATION

Seminar on Technology Transfer to China

DG Trade, UEAPME, Business Europe

Patrick Clerens7th October 2010

European CommissionBrussels, Belgium

Technology Transfer to China 07.10.2010

Outline

• About EPPSA

• EPPSA Members’ experience with patent infringements

• Expectations from the industry side

• Required Actions

About EPPSA: Who we are

The European Power Plant SuppliersAssociation (EPPSA) is the voice, at Europeanlevel, of companies supplying power plants,components and services.

EPPSA members, located throughout Europe,represent a leading sector of technologywith more than 100.000 employees andannual revenue of over 20 billion euro.

Almost all existing Power Plants in the EUhave either components from or were buildby EPPSA Members


About EPPSA: EPPSA Members

This leading technology branch has more than 100 000employees and an annual turnover of over €20 billion


About EPPSA: What we do

EPPSA actively promotes technologies for highly efficient and sustainable power generation in a carbon constrained world.

EPPSA believes increased investment in Research, Development and Demonstration is a key factor in driving EU competitiveness as well as ensuring an affordable near zero emission power supply.


General

Assembly

Board of

Directors

Public Relations Committee

Chairman

Gerhard Brandt (ABB)

Technical Committee

Chairman

Klaus-Dieter Tigges (HPE)

WG on

CSP*

WG on

PPEI*

WG on

IPR*

WG on

Smart Grids

President

Andreas Wittke (Alstom)

Vice President

Mike Farley(Doosan Babcock Power Systems)

Treasurer

Pierre Melin(CMI Energy)

Vice President

Rainer Redinger(TLT-Turbo)

Secretary General

Patrick Clerens

WG on

FGC*

Organisation Chart

Working Groups on* CSP – Concentrated Solar Power*PPEI – Power Plant Efficiency Improvements*FGC – Flue Gas Cleaning*IPR – Intellectual Property Rights


Five cases involving EPPSA members:

Five EPPSA members encountered particular problems in protecting their IPR regarding China:

• AE&E (Austrian Company)

• Alstom (French Company)

• Magaldi (Italian Company)

• NEM (Dutch Company)

• Hitachi Power Europe (German Company)


Desulphurisation unit:


First case involving EPPSA members:

• AE&E (Austrian Company)


AE&E - Desulphurisation


AE&E

History:

• In 2001 the licence contract for Wet Limestone FGD (Flue Gas Desulphurisation) and CFB dry scrubbing technology was signed between AE&E Lentjes and Longking.

• The main parameters were:- licence territory is restricted to PRC- Longking is not entitled to use any other technology for Flue Gas

Desulphurisation- Royalties to be paid for each contract within PRC- Duration of the licence Contract is 10 years

• In 2009, Longking started their market activities in Europe, requesting AE&E to get the allowance to bid for projects in Europe. This approval was not given, clearly referring to the territory restriction in the licence contract, but however a case to case approval was envisaged if:- the Client for FGD is Chinese or- a Chinese financing for the whole project is in place


AE&E

History:

• In 2009 Longking made a bid for a FGD project in Romania (FGD project Paroseni). As soon as it was clear that the bid from Longkingwas submitted, AE&E Lentjes did:- write a letter to Longking stating once again that they have no permission to bid for FGD projects outside PRC- write a letter to the client in order to inform him about the fact that Longking is violating the IP rights of AE&E

• However, since the tender was cancelled no further activities were done

• On September 23, 2010 Longking submitted a bid for the FGD project Isalnita in Romania.

• AE&E again has deposited in written form to the client and Longkingits concern of the violation of AE&E's IP rights.


Second case involving EPPSA members:

• Alstom (French Company)


Alstom - Desulphurisation


Alstom

History:

• 2004: Licence agreement signed between Alstom and InsigmaTechnology granting to Insigma the access to a technology of “wet desulphurisation” to the Chinese market only

• 2005: Several projects correctly launched with this technology

• 2006: Insigma stops paying royalties to Alstom and transfers the licence to one of its subsidiary, Insigma M&E, thus disregarding the terms of the agreement

• Alstom terminated the agreement and started litigation against Insigma at the Singapore International Arbitration Court, as foreseen under the licence agreement in case of litigation.

• 2010: The arbitration court confirmed that Insigma had continued to use illicitly Alstom’s technology well after the licence the licence termination and awarded to Alstom 26,6 M$ damages. The arbitration court prohibited Insigma to use Alstom technology perpetually outside China


AlstomFirst Case – Bulgaria:

• In violation with its licence, Insigma, allied to Idreco, an Italian engineering company, started competing against Alstom in Europe.

• 2008: Insigma-Idreco wins the tender for the PP Maritza East 2 (BG)

• This contract is co-financed by the EBRD (36 M€) and the EC (34 M€ISPA funds)

• After the Bulgarian courts decided it had no jurisdiction as the project is financed by international funds, Alstom claimed to the EBRD, indicating that its IPR was violated and that Idreco-Insigma had fraudulently represented its references to qualify for the contract award. In spite of these claims the EBRD released its no objection to the contract signature in Dec 2008

• Jan 2009: Alstom filled a complaint with the European Commission.

• This time both the Commission and the EBRD reacted: an OLAF investigation was opened in March 2009 and the funding has been temporarily stopped.

• Neither the EC nor the EBRD have taken yet any final enforcement measures and project execution still continues.

• Alstom has filed a new IP complaint at the EC in Aug 2010.Technology Transfer to China 07.10.2010

AlstomSecond Case – Romania:

• Alstom offered in April 2009 the best tender (53 M€) for the desulphurisation project at the Craiova power plant. The contract was award in June 2009. The project is funded by EC Structural Funds

• This award was challenged by the Idreco-Insigma-Romelectroconsortium on the grounds of an alleged non-conformity of Alstom’stechnical tender. The challenge was successful and the contract was awarded in July 2009 to the consortium with for a 10% higher price

• Alstom challenged the decision of the first instance court but its appeal was dismissed under the objection of lack of interest raised by the consortium. Alstom made also another appeal against the second award decision itself as the consortium is not meeting the qualification criteria, this appeal is still pending at the Cluj court.

• Alstom has filed a complaint at the OLAF and at the Commission against the decision to award to contract to Idreco-Insigma, these complaint have led to an infringement procedure which is on-going

• Since the arbitration award has been released in Jan 2010, Alstom has requested to the Romanian authorities to check which technology the consortium is using and to have access to the technical tender of the consortium. All these requests have been rejected !


Third case involving EPPSA members:

• Magaldi (Italian Company)


Dry bottom ash handling:


Magaldi

EXPERIENCE IN CHINA – Factual situation

• 1998-99: Installation of the first MAC system in Sanhe (Beijing)

• Oct. 2002: Magaldi signed a licence Agreement with SP Long Yuan, (owned by Guodian Group of the State Power of China)

• 2003: full technical training to SPLY engineers in Italy

• Since 2002: Chinese counterfeiters flourished, among them also Beijing Guodian Futong Science and Technology Development Co. Ltda spin-off from Electric Power Construction and Research Institute (EPCRI)

• EPCRI fabricated the Chinese copy of the dry bottom ash extractor, a Xerox-copy of the MAC extractor installed by Magaldi in Sanhe PP


Magaldi

EXPERIENCE IN CHINA – Factual situation

• May 2002: while the L/A was under negotiation a conference was organised by State Power (SPLY mother company)

• During the conference: EPCRI introduced its copied dry bottom ash removal system, which was installed in Shijingshan PP.

• A delegation from the conference also visited the PP and EPCRI factory, as a result the delegates judged that:

-“EPCRI’s system is technologically valid and its technical level has reached the level of the foreign product”

- “EPCRI recovered the technology gap taking the Chinese system to the level of international standards” i.e. Magaldi system

- EPCRI was even congratulated for protecting this technology with some relevant patents


• Magaldi original drawing passed to competitors from Magaldi licencee SPLY and used by Magaldi counterfeiters as its own drawing in a public bidding.

MagaldiEXPERIENCE IN CHINA – Factual situation (cont.)


NGE (Nanjing General Electric):

In their website they claim they have a cooperation with Magaldi Power, a completely false information!

As evidence they put this picture taken during a presentation given by Magaldi to the General Manager of NGE.

Magaldi people were not aware that this picture was taken.

Magaldi

This picture was taken from http://www.nge.cn/shownews2.asp?NID=54

EXPERIENCE IN CHINA – Factual situation (cont.)


Magaldi

EXPERIENCE IN CHINA – Legal situation

• Magaldi MAC dry bottom ash handling system was invented in 1985 in Italy and is patented

• All Magaldi technologies were legally patented in China

=> Magaldi tried to protect its interests suing the counterfeiters forpatent infringement in front of the Chinese tribunal

In 2004 the ruling of the Middle Court of Beijing was that Magaldiwas “not an original idea” thus claim # 1 was voided.


Fourth case involving EPPSA members:

• NEM (Dutch Company)


NEM

Company Profile:

NEM B.V. was established in 1929

NEM B.V is a globally leading supplier of steam generators and related equipment

Head office is located in Leiden, The Netherlands.

Division involved in the case:

NPS (NEM Power Systems) is NEM’s German subsidiary.

NPS is supplying dampers and diverters for gas-turbine applications.

- Diverter Damper: crucial part for a bypass stack between a gas-turbine and the boiler located behind the gas-turbine.It closes off the gas-path either towards the boiler or towards the bypass-stack.

- Twin-Blade Damper: the main damper type in flue gas desulphurisation plants.


Key-products NEM Power Systems

Single flap bladediverterwith diverter

Twin-Blade Damper

NEM


NEMEXPERIENCE IN CHINA

• Jan 2001: NPS signed a Secrecy Agreement with Wuxi Hua Dong Electric Power Equipment Co- Ltd (HD) based in Wuxi.

• The Secrecy Agreement :

1) was meant to cover designs and know-how

2) would have formed part of the Sales and Manufacturing Agreement for Twin-blade dampers that was being negotiated

• During the negotiations Madam Zhang (HD boss) mentioned her idea to build a fully working model of the Twin-Blade damper (2m x 2m), explaining she was going to invite people from the various design institutes and power stations to her factory to let them see how the damper functioned.HD was supposed to carry all the costs if NPS could supply the drawings.

• NPS sent the drawings in February 2001nevertheless HD never built the model!

• 1st June 2001: a Sales and Manufacturing Agreement was finally signed:- NPS was responsible for basic and detailed engineering,- HD was as responsible for selling and manufacturing the dampers.


NEM

EXPERIENCE IN CHINA (cont.)

• Jan 2002: NPS received a copy of the Chinese patent for a Twin-Blade damper for application in FGD plants in Madam Zhang’s name.She had used NPS drawings for the application dated March 9, 2001!

• March 2002: a meeting took place in Wuxi. Madam Zhang explained she applied for the patent to protect NPS interests and to prevent any other company from supplying Twin-Blade Dampers in China.NPS replied she had no right to do so and she was in breach of the Secrecy Agreement for which they could have claimed 1 million DM.

• April 2002: HD finally signed a licence agreement with NPS allowing them the exclusive rights to the patent!

• Until then HD had been very successful on the Chinese market, shortly after, however they started to complain about the level of NPS engineering fee and saying that they could obtain all the NPS “special parts” cheaper in China directly.

• August 2002: Madam Zhang explained that the competition from another company based in Wuxi, was driving the prices down so hard that they could not pay NPS the engineering fee anymore.


NEMEXPERIENCE IN CHINA (cont.)

• => as the dampers were only slightly different in size from an earlier contract they simply changed the dimension in the fabrication drawings to suit.In addition, they bought the special parts in China cheaper than NPS prices.

• Later on, when a client complained to NPS that the lamella seal strip had corroded too quickly, NPS found out that HD copied their lamella seal strip from other contracts but used inferior materials.

• On August 28, 2002 NPS cancelled the agreement, just three weeks later HD signed an agreement with Bachmann Industries (a U.S. competitor ).

• NPS contacted then a large law firm in Beijing to obtain the original patent held by HD. After months of discussion the original patent was transferred to the name of NPS Chinese lawyer (at that time Chinese law did not allow a Chinese patent to be transferred to a foreign company!).

• NPS lawyer also found out that Madam Zhang patented NPS diverter damper in China along with 3 patents for Bachmann’s damper designs!

• After months of wrangling NPS finally had the diverter patent transferred to its lawyer and a small compensation fee was negotiated (about 15.000 € )

• September 2005: both patents were transferred from the lawyer’s name to NPS


Fifth case involving EPPSA members:

• Hitachi Power Europe (German Company)


Hitachi Power EuropeEXPERIENCE IN CHINA

• HPE signs the contract to build in Germany the Datteln Power Plant

• 2007: Shanghai Boilers was manufacturing for Hitachi Power Europe specific boiler parts as a subcontractor for this Power Plant

• 2009 and 2010: HPE built the boiler in Germany with the sub-supplied parts

• 2010: HPE realises that sketches of their original drawings for this contract appear in 4 international patents applications (PCT Patent application), based on a Chinese Patent application submitted in 2008

• HPE is now defining how they want to deal with this topic, since they fear that if the patent is accepted, HPE would have to forsee a lawsuit everytime they want to use their own original technology where patent protection would have been granted to Shanghai boilers


ConclusionsCONSEQUENCES FOR THE FOREIGN COMPANIES:

1. To penetrate the Chinese Market one needs to transfer technology, mostly in licence agreements due to “Class A” licence obligation, which only Chinese companies may de facto get

2. The technology supplied by the foreign Original Equipment Manufacturers is often copied, despite any attempt to recur to IP protection

3. Legal protection of IPR is not easily achievable – existing patents are declared non-valid

4. Results for the foreign company:

- complete loss of the Chinese market

- endangerment for other markets where Chinese counterfeiters start sellingthe copied technology after having saturated their internal market( “Grasshopper Strategy”) to Magaldi this is already happening in India,

Indonesia and Turkey!

=> Competition not level playing field: Leads directly to Job losses in EU


What we needEXPECTATIONS FROM THE INDUSTRY SIDE:

Adaptation of the existing EU procedures for infringements which are considered inadequate

Urgent need for a general mechanism protecting at least the European market

Intellectual Property Rights (patents, trademarks) and Know-how should not be overlooked anywhere in the world

Need for appropriate legal measures preventing Chinese companies from taking copied products back into the European market

Copyrights for the technological drawings are required


Required actions SUGGESTIONS FOR ACTING IN A NEAR FUTURE:

1. Ban import of IPR-infringing technologies and goods (as US already did)

2. Put in place a level playing field regarding mutual market access (licence A)

3. Develop a mechanisme to give a financial value Trade Secrets (TS) (not patentable) in order to claim compensation if illegally used by others. TS are only today recognised on Member State level, not EU level

4. Act for one EU internal protection implementation of IPR protection

5. Facilitate EU wide application of Arbitration Court decision; today need to ask execution in 27 Member States

6. Enforce a EU external diplomatic action to help IPR protection

7. Issue a EU black list of infringing companies


Contact details

Avenue Adolphe Lacomblé 59B - 1030 BrusselsTel: +32 2 743 2986Fax: +32 2 743 [email protected]

Secretary General: Patrick [email protected]

Policy Officer: Maria João [email protected]

THANK YOU

FOR YOUR ATTENTION!


http://www.eppsa.eu/

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