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Ineos sues Sinopec for trade secret violations, fears 'major harm' to its acrylonitrile business

By: Steve Toloken

March 21, 2014

Ineos Group AG is suing Chinese state-owned oil and petrochemical giant Sinopec, accusing the Chinese company of violating Ineos intellectual property and misusing trade secrets to build acrylonitrile factories.

Ineos said in a strongly-worded March 21 statement that it fears “major harm” to its global $3 billion acrylonitrile business, which it said generates $500 million in profit a year for the company and supports 5,000 jobs.

“We have good and valuable relationships with Sinopec and other Chinese companies across our business. But in this case, we have to take action to protect the interests of our stakeholders,” said Ineos Chairman Jim Ratcliffe. “The fundamental value of Ineos depends upon its technology. We have no option but to defend our hard-won intellectual property."

Sinopec has had a license to use Ineos acrylonitrile technology since 1984, according to the Ineos statement.

The Chinese company told the Financial Times newspaper that it has also successfully developed its own acrylonitrile catalyst and related technology at its research labs in Shanghai over the last 50 years and said it had “full proprietary intellectual property rights.”

One chemical industry consultant with experience with both Chinese and Western firms said it can be common for companies like Sinopec to feel they have made improvements in the technology that fall outside the original license. That could be a key issue to be debated in court, the consultant said, speaking anonymously.

In its statement, Rolle, Switzerland-based Ineos, however, said Sinopec’s “Ningbo Engineering Co. has broken a long-established technology agreement which, together with trade secret misuse by other Sinopec companies, has enabled development of a series of new world scale acrylonitrile plants without Ineos agreement or consent.”

Ineos said its acrylonitrile technology provides the basis for over 90 percent of world production for the chemical, which is a building block of ABS plastic and the carbon fiber used to manufacture the new Boeing 787 Dreamliner aircraft.

The Swiss company said “the prolific building of acrylonitrile plants in China will destroy [our] business.”

“We want to take our best technology to China but we need to know that it will be protected,” Ratcliffe said.

The company said it filed suit in the Beijing High Court and is pursuing a parallel arbitration case in Sweden. It said it has “every confidence” in China’s intellectual property system because the country files more patents than any other country.

Ineos, the world’s fourth-largest chemical company, manufactures acrylonitrile at two facilities in the United States and one each in the United Kingdom and Germany.

Ineos may be walking a bit of a fine line commercially with the lawsuit, as the two companies are intertwined in investments and business deals in China.

They broke ground last year on a 50/50 joint venture to build a phenol acetone plant in Nanjing, a $500 million investment that Ineos said is its largest to date in China. As well, Sinopec licenses Ineos technology in polypropylene and high density polyethylene.