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Sinovel Wind Group Co. (601558), a Chinese windturbine company, was charged with stealing trade secrets from its former U.S. supplier, a case of industrial espionage that may heighten tensions in U.S.-China relations in the wake of the Edward Snowden affair.

U.S. prosecutors secured an indictment of the company and two of its executives in federal court yesterday in Madison, Wisconsin. Also charged was Dejan Karabasevic, who pleaded guilty in Klagenfurt, Austria, to stealing source code for the turbine controllers made by American Superconductor Corp. (AMSC), his former employer. The company lost more than $1 billion in market value after the theft became public.

The indictments timing may give it prominence in the U.S. intensifying dispute with China over economic espionage. That conflict has only been inflamed by Snowdens disclosures of U.S. computer-based spying, and Chinas decision to allow the ex-National Security Agency contractor to fly to Russia from Hong Kong, where he had fled. My 5-year-old understands that this is wrong, AMSC Chief Executive Officer Daniel McGahn said by phone. If your ideas can be stolen without recourse, there is no reason to invest in innovation, and if there is no reason to invest in innovation, there is no purpose to the American economy. Sinovels stock fell 1.5 percent to 3.95 yuan at 10:44 a.m. local time in Shanghai after plunging 7 percent earlier. Wang Wen, a Beijing-based spokeswoman at Sinovel, declined to comment.

Legal Struggle The indictment is the latest development in a legal struggle between AMSC, a maker of small industrial computers that fit inside wind turbines, and the company that was formerly its largest customer. AMSC, based in Devens, Massachusetts, is seeking more than $1.2 billion in damages from Sinovel in Chinese courts, accusing Beijingbased Sinovel of putting the stolen source code in more than 1,000 turbines that it sold in its home country. Amy Riella and Elliott Joh, lawyers for Sinovel at Vinson & Elkins LLP, didnt immediately respond to an e-mail message seeking comment on the charges. Sinovel, Chinas third-largest turbine maker, has been battered by global competition and falling prices for its products. Still, the company remains well-connected to Chinas elite. One of its early investors was the private equity group New Horizon Capital, co-founded by Wen Yunsong, son of Chinas former premier, Wen Jiabao.