Ineos Group AG claims there are at least three new acrylonitrile factories being built in China that are illegally using its technology, and it defended its high-stakes lawsuit against Chinese state-owned petrochemical giant Sinopec by saying it feared a wave of copycat factories there would threaten the future of its business.
Ineos, which claims that its technology provides the basis of 90 percent of the world’s acrylonitrile production, accused Sinopec in a lawsuit in China last week of violating Ineos intellectual property and misusing trade secrets to construct new facilities in China.
In a March 24 email to Plastics News, the Rolle, Switzerland-based company offered up new details of its legal position, specifically naming three factories in China connected with Sinopec that it says are illegally using Ineos technology.
It also suggested that the outcome of the legal battle could have major commercial implications since most of the world’s new acrylonitrile production through 2020 will be in China.
It accused Sinopec’s Ningbo Engineering Co. subsidiary of breaking agreements with Ineos and its predecessors that date back to the first license with Sinopec, in 1984, and include a 2007 updated contract.
“Ineos has clear evidence that SNEC has breached its agreement with Ineos,” the company said. “Specific examples of projects that are proceeding where Ineos believes to have uncovered breaches of the contract are Anqing 2, Secco 2 and Sailboat. These projects all involve SNEC. There are also several other earlier stage projects with SNEC involvement.”
Sinopec has an acrylonitrile facility at Anqing, Anhui province, which Ineos said is licensed to use its technology, but the company recently commissioned a second acrylonitrile plant there.
Secco refers to Shanghai SECCO Petrochemical Co. Ltd., which is partly-owned by Sinopec. Sailboat is Jiangsu Sailboat Petrochemical Co., Ltd.
Ineos said that the agreements with Sinopec also covered any engineering, design or construction work the company would do for other acrylonitrile projects.
“SNEC has agreed to maintain Ineos’s technology secret indefinitely and that all of SNEC’s acrylonitrile related work would be exclusively dedicated to technology licensed by Ineos,” Ineos said. “SNEC has been trusted with many technology updates over the years that SNEC committed to continue to protect under the terms of the 2007 agreement.”
Sinopec, in its defense, said that it developed its own acrylonitrile technology over 50 years of research at its labs in Shanghai, and said it had “full proprietary intellectual property rights.”
Some chemical industry observers said the court battle could turn on how to interpret the value of Sinopec’s research vs. the work of Ineos, and said that companies in Sinopec’s position often argue their work represents improvements that fall outside the terms of the original license.
In its comments Ineos rejected that argument, and also put the lawsuit in more commercial perspective. Ineos says China is the world’s main growth market now for the chemical, which is a building block of ABS plastic and the carbon fiber used to manufacture the new Boeing 787 Dreamliner aircraft.
Chinese demand for acrylonitrile is growing at twice the rate of the rest of the world, and Ineos said the country is expected to build the equivalent of 4.5 new acrylonitrile factories by 2020.
China is about 70 percent self-sufficient in acrylonitrile now. That’s expected to grow to 90 percent self-sufficiency by 2020, Ineos said.
“Currently Ineos leads the global acrylonitrile market, but from 2015 all global supply growth capacity is forecast to be in China,” the company said. “Our concern is that we will see a proliferation of acrylonitrile copy plants constructed which will undermine the global business and threaten the future of our plants in the United States and Europe.”
Ineos said its acrylonitrile business generates $500 million a year in profit for the company and supports 5,000 jobs in the United States and Europe.
While they will be arguing in court, the two companies are very 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.
Ineos also said it plans to build an acrylonitrile plant with Tianjin Bohai Chemical Industry Group Corp.