Ineos Group AG,
the largest chemicals producer in the U.K., has filed a lawsuit to enforce its
IP rights against Beijing’s Sinopec, a large petroleum and chemical
corporation. Foreign companies have brought many cases against Chinese
companies for copyright, trade secret, or patent infringements to highlight
importance and promote the practice of strong IP enforcement worldwide. But this
suit is one of the first challenges brought by a foreign firm against a large state-owned
enterprise in China.
The case will
test the ability and willingness of Chinese courts to enforce IP rights and
technology agreements in China. Although China’s courts have reportedly become
more sophisticated in handling commercial disputes, IP theft in China is not
under control and the legal system for IP enforcement is not nearly as
effective as in foreign courts. The Global Intellectual Property Center (GIPC)
ranked China 17 out of 25 countries in its International IP Index.
China scored nearly 0 in its protection of trade secrets, market access, IP
enforcement.
Ineos’ lawsuit
may particularly highlight whether the court will enforce IP agreements against
state-owned enterprises. Leaders in Beijing have said they are ready to reform
China’s large state-owned enterprises, and this case will test the truth of those
promises. The scale of China’s state-owned entities gives the country the means
to significantly alter the global market. Ineos CEO Jim Ratcliffe stated, “If
they build a half-dozen copy plants, they’ll destroy the [our] business.” The
willingness of Ineos to bring this case is an encouraging development toward
ensuring IP enforcement in China, despite the risk legal action may pose to
business and political relationships.
On Ineos’ website,
Mr. Ratcliffe articulated the crux of the issues: “We want to take our best
technology to China but we need to know that it will be protected … the
fundamental value of Ineos depends upon its technology. We have no option but
to defend our hard won intellectual property.” As the Wall
Street Journal [subscription required] reported, “The thing to watch is
not necessarily the outcome … the question will be whether the Beijing court
proceeds in a manner that outside observers would conclude is fair, and
delivers a ruling that persuades technical experts that it got the case right.”
China’s demonstration that it will enforce IP agreements through a fair process
has huge implications for international trade, business, and investment, and
the case definitely bears watching.
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