Sinopec: Infringement Accusations (2014)

Sinopec logo

Controversy

Sinopec Group was established in July of 1998 when China Petrochemical Corporation decided to invest a significant amount of money and change their name in order to become a different corporation. Sinopec is a state owned company, which means the state funds the company as well as holds the largest shareholder spot. The capital of the company is around $182 billion dollars. It ranked 5th in Fortune Global 500 in 2011. The company owned 75.84% of the shares, international shareholders owned 19.35% and domestic shareholders owned 4.81% (SG). Sinopec is a centralized company where employees are held at the highest standard to be expertise of their field providing the highest quality of work as well as the most efficient. The company covers different aspects of business such as: industrial investment, investment management, exploration production, and storage and transportation. The products they produce and continue to improve on the productions of these resources are: petroleum, oil, gas, kerosene, diesel, and acrylonitrile. In February 2012, Sinopec signed an agreement to a joint venture with Ineos Group AG allowing Sinopec to implement and use their advancement in technology for a new production plant, specifically the Innovene Process. The Swedish company, Ineos Group AG, is a top competitor in the market. The main focus of their business is the creation of the highest of quality in advanced technologies. In March 2014, Ineos filed a lawsuit for infringement of intellectual property in the Beijing High Court as well as arbitration-taking place in Sweden. Ineos Group AG is taking legal action because they believe Sinopec deliberately was “violating Ineos intellectual property and misusing trade secrets to build acrylonitrile factories.” (Toloken). Sinopec denies these accusations and states that “it had full proprietary intellectual property rights over the technology, stating it was developed over 50 years of research and there was no ground for the infringement alleged by INEOS”(icis). Sinopec has multiple joint ventures with several corporations that benefit them to be able to produce their products efficiently and effectively.

INEOS Group logo

Ineos Group is afraid that with the trade agreement broken, it will cause severe harm to their business that creates $500 million in profit a year while supporting over 5,000 jobs. The broken technology agreement allowed the Sinopec Group company to develop a new world scale acrylonitrile plant without Ineos Group’s knowledge or consent.

Stakeholders 

The main stakeholders hold positions in the company; Fu Chengyu who is the Chairman of Sinopec Group and holds the position as secretary of the party committee, Wang Tianpu holds the President of Sinopec as well as is a member in the party committee, Zhang Yaocang holds the Vice President role of Sinopec Group as well as a member of the party committee, Liu Yun is Chief accountant for Sinopec Group, and there are several other members of the party committee (sinopecgroup). These main stakeholders hold a position in both the party committee as well as a position in the company. The party committee of China Petrochemical Corporation mostly runs the company to make sure they are operating efficiently and effectively. The committee makes the decisions in the best interest for the company while people who hold roles in the company and the committees are there to implement the procedures necessary to accomplish these decisions. The other stakeholders involved is the Ineos Group AG because their entire business is licensing their developed technology to other businesses to implement in their processes. If someone were to adopt their technologies and claim it as their own it would only harm their business significantly.

Individualism

Individualism is the ideas of one individual’s own self-interest is the only moral rule that is not limited to authority or anyone else’s demand. It’s for a business to maximize profit and act in ways for their best interest within the confinements of the law. In the case between Ineos Group and the Sinopec Group, Sinopec Group was looking after their own self interest moving towards expanding their business by building a plant using the advance technology knowledge they had gained working with the Swedish company, Ineos Group AG. The production plant creates acrylonitrile, which acts as a building block to carbon fiber as well as plastic. Carbon fiber is used in many high value products such as automotive, aerospace, and defense industries. The rationality of Sinopec Group is in the process of expanding their business by creating a production plant, it opens the opportunity for new jobs that need to be filled in order to run the production plant. These new jobs will help produce income for these employees helping stabilize the economy through the spending of consumers. The goal of expanding the business is to maximize the profit of the shareholders, with the help of the new knowledge of advanced technology; the production plant will increase the profit the shareholder’s receive. Sinopec Group is the second leading business in the market for acrylonitrile, which Ineos Group is the current leading business in the market. Ineos Group controls an estimated 80% of the acrylonitrile business, in which Sinopec Group has to compete with them. Expansion of the business is the best interest for Sinopec to maximize their opportunity in increasing their profit exponentially.

Sinopec business associates

Utilitarianism

Utilitarianism is the idea of maximizing pleasure but minimizing pain. The point is to maximize the happiness in yourself and the others who you affect as well as taking future generations in account. In this case using this theory, Sinopec Group built a production plant in order to maximize their profit. The new production plant provides an immense amount of job opportunities for China, which most districts are heavily over populated. China is constantly growing in population and people are in need of jobs. This job creation will help stabilize China’s economy allowing the consumers to spend more on goods and services. It provides wealth to the stakeholders of the Sinopec Group. Some other long-term effects are job stability because the company will continue to increase in size providing jobs for future generations. These production plants create a product that is used in plastics as well as carbon fiber. These plants could spark an environmentally friendly business side of the company creating a plant for recycling plastic bottles and other such products that human’s dispose of. On the opposing side of this theory, Sinopec Group broke the long-term agreement by not informing Ineos Group that they (Sinopec Group) were planning to build the production plant. Sinopec is using the advanced technology that Ineos showed them when they signed a 50/50 joint venture. Sinopec manipulated Ineos to gain the knowledge of intellectual property in order to be the leading company within the market. This could potentially harm Ineos Group’s business as well as their stakeholder’s profit. Another serious issue is the pollution that will occur due to this plant. China is already an over populated nation with pollution issues but this plant will contribute to the pollution significantly, which will impair the health of residents living around the area as well as the future generations of their kids and may cause birth defects.

Kantianism
Kantianism is the idea of people should act if they have a moral obligation as well as looking at the circumstance to see if they were rational in their decision and had the right motivation. In this case, Sinopec’s moral obligation would be to acknowledge their agreement with Ineos Group and make sure they were informed before building the production plant that would be using their intellectual property. They must respect and value others involved in their decision. Sinopec had the right motivation of trying to expand their business, which would only create more jobs as well as help stabilize the economy but they lack the rationalism in their decision while having signed a joint venture with Ineos. Since they failed to follow their moral obligation, they are being accused of intellectual property infringement, which can result in enormous negative consequences for Sinopec.

Sinopec headquarters

Virtue Theory

The four virtues theory has four main characteristics that must be followed in order to be considered ethical. Sinopec Group did not follow all of the four main virtues, which are courage, honesty, temperance and justice. Courage is the risk-taking aspect and willingness to take a stand for right ideas and actions, which Sinopec took the risk of building a new production plant in hopes to expand their striving business. On the other hand, if they had an agreement for only one particular site to use the technology then they wouldn’t be standing up for the right actions. Honesty takes part of in agreements with other companies or organizations as well as the hiring and treatment of employees, customers, and other companies. This is the virtue they failed to comply to. Sinopec thought they had the legal right to build a production plant using the advance technology in order to have an effective and efficient process for their company without the knowledge of Ineos. They disregard the fact that they signed a 50/50 joint venture with Ineos in order to use their technology for their plants. Temperance is having reasonable expectations and desires throughout the company. Sinopec holds a high professional standard throughout the company in order to keep a professional and respectful image. If Sinopec actually did not comply with this virtue that could potentially harm the image and reputation that they currently hold. The last virtue is justice, which stands for hard work, quality products and good ideas with fair practices. Sinopec follows this virtue determined to be the best in the industry with a rapid growing business. They produce high quality and valued products across the world and implementing business database systems with the Ineos advancement in technology in order to have a successful business process.

References
“INEOS Could Pursue Damages over Sinopec ACN IP Suit." INEOS Could Pursue Damages over Sinopec ACN IP Suit. N.p., n.d. Web. 11 Nov. 2014. <http://www.icis.com/resources/news/2014/03/21/9765308/ineos-could-pursue-damages-over-sinopec-acn-ip-suit/>.

"News." Protect INEOS IP. N.p., n.d. Web. 11 Nov. 2014. <http://www.ineos.com/news/ineos-group/protect-ineos-ip/>.

"Stakeholders." Sinopec Group. N.p., n.d. Web. <http%3A%2F%2Fwww.sinopecgroup.com%2Fgroup%2Fen%2Fcompanyprofile%2FStakeholders%2F>.

"Sinopec Group." Company Profile. China Petrochemical Corporation, n.d. Web. 2 Oct. 2014. <http%3A%2F%2Fwww.sinopecgroup.com%2Fgroup%2Fen%2Fcompanyprofile%2F>.

Toloken, Steve. "Ineos Sues Sinopec for Trade Secret Violations, Fears 'major Harm' to Its Acrylonitrile Business - Plastics News." Plastics News. N.p., 24 Mar. 2014. Web. 02 Oct. 2014. <http://www.plasticsnews.com/article/20140320/NEWS/140329986/ineos-sues-sinopec-for-trade-secret-violations-fears-major-harm-to>.