Manitowoc is seeking the banning of the importation of the SCC8500 and components into the US.
Sany is being investigated for patent infringement of Manitowoc’s revolutionary VPC technology for crawler cranes, as well as theft of trade secrets, through its recruitment of engineer John Lanning, Stian Overdahl writes.
It may sound like something out of a corporate espionage whodunit, the case of an unscrupulous high-ranking engineer and his trade secrets lured away to a rival company, who subsequently are able to bring the product to market even before the company itself who developed it is able.
But at least that is what Manitowoc alleges is the case, with former-employee John M Lanning playing the role of the engineer, Sany the rival company, and the SCC8500 crawler crane the product bought to market, for which Sany now faces a patent infringement investigation by the US International Trade Commission, as well as a federal lawsuit filed by Manitowoc in Delaware, to be tried by jury.
Ultimately Manitowoc is seeking the banning of the importation of the SCC8500 and components into the United States, destruction of all existing models in Sany’s possession, and awarding of damages (in triple) for loss of market share and sales, as well as being awarded its legal fees and costs.
The case revolves around the variable position counterweight (VPC) technology, which Manitowoc holds two patents for, and which was first introduced on its super-size crawler the ‘31000’ at Conexpo in 2008, which has a maximum lift capacity of 2,300t.
The VPC system allows the counterweight to move backwards from the centre of the crane, increasing the load moment for heavy lifts without the use of extra weights, as well as being moved to the centre of the crane when it is not under load, rather than stacking extra weights at the front to balance it. The VPC is connected solely to the carbody of the crane, floating, which reduces the amount of ground preparation needed, and can allow the crane to crawl when carrying a heavy load, problematic when using a weight trailer.
And while the VPC has been seen on Manitowoc’s largest lattice boom crawler, the court documents reveal that the company is working on at least two smaller crawlers, which will utilise a version of the technology called transformable VPC, allowing the cranes to be set up in completely different configurations, also reconfiguring the VPC system in each case, for greater job flexibility and multi-purpose utilisation.
Manitowoc says that it has been working on the transformable VPC technology since 2008, and still hasn’t bought a product to market, perhaps since the majority of its focus in that time was on the development of the 31000, built to supply anticipated demand in the burgeoning nuclear power plant construction sector.
Meanwhile the figure of John Lanning emerges as the significant player in the legal drama. Lanning is listed as an inventor on one of the two patents for VPC Manitowoc holds, and worked extensively on the patenting processes and overall design, but he was poached by Sany and began working for the company in January 2010, as its head of global product development for crawler cranes.
Sany provocatively hung a giant poster of Lanning wearing a Sany-logo hat at their booth at Conexpo in 2011, over which a news report at the time noted Manitowoc was “not smiling”. And while company-hopping is not uncommon in the construction equipment industry, Manitowoc alleges that Sany specifically “targeted” Lanning and offered him a “substantial salary increase”, knowing him to be in possession of knowledge of the VPC and transformable VPC technologies, as well as trade secrets about how the transformable VPC could be used commercially to design a crane for current market requirements.
Sany America has launched a number of crawler cranes for the North American markets, but it is the 499 tonne (550 US ton) capacity SCC8500 that has provoked the legal case.
The crawler employs what Sany calls an Auto Counterbalance Equalization (ACE) System, which uses hydraulic cylinders to adjust the position of the counterweights. This can also be supplemented with the ‘Ultra Lift’ counterweight tray extension, for placement of additional counterweights, and with a second pair of hydraulic cylinders the counterweight beam is extendable 16m from the back of the crane.
The model was launched in the North America markets in March this year, and Manitowoc notes that the crane can be configured in entirely different ways, including with a travelling mast and with a lattice mast, with the VPC also transformed with the use of the Ultra Lift, and the company believes that the crane infringes on two of its patents. It also believes that trade secrets regarding the “commercial and desirable properties for such as crane”, divulged by Lanning, were used in the design of the SCC8500.
The trade secrets included technical information, designs, strategies, as well as customer names and pricing information, and Manitowoc alleges Lanning divulged these, despite having signed a confidentiality agreement in 2008.
The confidentiality agreement was binding for at least five years, or until the knowledge became public, and in an exit interview in 2009, Larry Weyers, Manitowoc’s EVP for the Americas, warned Lanning that if he disclosed any trade secrets legal action would be taken.
Speaking at the Bauma China trade fair last November, Manitowoc Cranes president Eric Etchart noted on the issue of patent infringement by rival companies, that as a publically listed company, Manitowoc has a fiduciary duty to its shareholders to protect its intellectual properties, and the investment they represent.
And indeed the filings make clear the scale of Manitowoc’s investment in the new cranes and the VPC technology: between 2009 and 2012, the majority of the wages it paid to employees performing engineering duties in the US were attributable to the 31000 and the in-progress cranes; and for the same period the majority of materials and supplies purchased in support of development of its cranes in the US were attributable solely to the 31000.
With the arrival of the SCC8500, Manitowoc believes that in addition to patent infringement and theft of trade secrets, its vital ‘first to market’ status is lost in the transformable VPC segment, especially important due to the “revolutionary nature” of the technology, and that Sany is “likely to capture a substantial portion of the market share that rightfully belongs to Manitowoc Cranes”. Advantages of ‘first to market’ with the transformable VPC were to have been early sales in the technology’s commercial cycle and reaching new customers while it was the only seller with the product in the market, while the impact of the SCC8500 will be price erosion for Manitowoc when it brings its new cranes to market.
The outcome for this would be damage to the crawler crane industry in America, due to the significant innovation costs borne by Manitowoc fro the development of the technologies. The company also believes there will be damage to its reputation as an innovator.
The International Trade Commission (ITC) has announced it will investigate the complaint, which would result in a sales ban of the crane if it is found to be infringing on patents. The ITC is known for moving quickly in its investigations and decisions. And in the federal court case filed in Delaware, where Manitowoc has demanded a trial by jury, the company is seeking damages to be trebled since the patent infringement was willful, which could result in a significant financial repercussions for Sany if it loses.
Whatever the outcomes, the investigation and the court case are set to have a significant impact on the crawler crane market in North America and in the rest of the world.