IMS Insights Episode 49: Chemical Engineering Industry Bias, Supply Chain Disruption, & IP Disputes

Chemical engineering expert and IMS Elite Expert Terry Livingston examines common chemical industry misconceptions, petrochemical exportation, international supply chain disruption, and intellectual property litigation. (Part 2 of 3)

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Transcript

Hello, and welcome to the IMS Insights Podcast. I’m your host, Adam Bloomberg.

Today, we’re speaking with IMS Elite Expert Terry Livingston about common chemical industry misconceptions, supply chain disruption, and intellectual property litigation.

Terry Livingston is a chemical engineer with more than 20 years of experience in chemical plant design and operations. He has experience in oil and gas refineries, including the design of chemical and petrochemical manufacturing facilities. Terry’s experience also includes the storage and handling of chemicals, process-safety management, and process control failure.

Adam Bloomberg:

When multibillion dollar chemical companies sue each other each year it’s easy to see why jurors might not have patience or sympathy for chemical manufacturers. Especially given the fluctuating gas prices over the last few years. But beyond that, what are some of the more common misconceptions about the chemical industry?

Terry Livingston:

Adam, I think that many people have a picture of the chemical industry. And I want to go back to a movie in 1989. It was Batman, and they have a scene and access chemicals in which Jack Nicholson, as the Joker, is fighting these people. And ultimately, he gets exposed to chemicals. This is a dark chemical complex with a lot of stuff around, and it's in Gotham, and he falls into this vat of chemicals, and he's deformed. And I think many people look at the chemical industry sort of that way, a big ugly sort of mean industry that just does bad stuff. And unfortunately, that's really not an accurate reflection in the chemical industry. I've been in plants that are pristine, clean; they are well run. Most have thousands of chemical plants in the United States in most of the time. Most days, when you pick up a newspaper, none of them are in the headlines because they've done a great job of managing the materials.

Adam Bloomberg:

I've been into chemical plants, and the golden rule that I've heard is if you feel something dripping on you, don't look up.

Terry Livingston:

Yes, yes. And, you know, it is the case. We, as human beings, try very hard to be clean and to manage the chemical industry. It's a very high degree of commitment from most people in the chemical industry. But as another common day analogy, all of us want to try to be careful and clean and environmentally conscious. But we've all tried to pump gasoline into our car and doing the very best that we can; who of us can say that when I pull the nozzle out, a few little drops didn't actually hit the ground? We don't want it to, but the best of us, it's happened to all of us. And it's the same with the chemical industry. As hard as we may try, perfection is very difficult to achieve.

Adam Bloomberg:

We do a fair amount of work in toxic tort cases. And in the majority of those cases, experts need to explain the concept that chemicals are around us everyday. They’re part of our everyday lives depending on what it is – arsenic, could be in apples. Other chemicals in the water we consume or the showers we take, so it’s definitely something that has to be explained in a lot of cases. I wanted to switch gears and discuss supply chain issues, very relevant topic right now. Can you talk a little bit about the current state of supply chain issues, say in the United States versus internationally?

Terry Livingston:

Yes. Well, the United States is right now in a very fortunate position. We have a robust petrochemical industry. As a few years ago, we were energy independent. That is, we produced more fuel than our country needed, and we could be a net exporter of petrochemicals and petroleum. That does allow our chemical industry much greater flexibility in the supply chain because we can be independent as a country and most chemicals that we use in our everyday lives. And I'm thinking about my computer screen, where I'm watching you now, Adam. Your headphones are a product of the chemical industry. If there's carpet in your room that came from the chemical industry, the dye in your pretty shirt comes from the chemical industry. The trim and fittings in our automobiles, as you mentioned, cars, those largely come from the chemical industry. One specific example is a neonatal care unit. That unit is almost entirely synthetic, made very carefully with chemicals from this industry because they must be nearly perfect. And so things like a neonatal care unit would be impossible without the chemical industry. And getting back to your question, because we have a chain, we have a supply chain that's well integrated in the United States, we're in a much more favorable position than, say, Europe is. There's much discussion now that because of gas supply limitations, and I mean natural gas, not gasoline, because of natural gas supply limitations in Europe, some of that chemical manufacturing industry is going to migrate to North America because we're not limited in that way. 

Adam Bloomberg:

Right. Do you see this continuing in the next few years or the next decade? And, maybe a better question is, how long do you think something like this is going to last with these difficulties internationally?

Terry Livingston:

I think that it's going be at least a five-year horizon until the network and infrastructure is built in Europe and in some parts of Asia to allow them to become more flexible in their supply, and petrochemicals are critical to some economies in terms of importing. Japan comes to mind. Japan has almost no production capabilities of their own, almost all of their energies imported. We're in a very different situation, and I hope that we, as Americans appreciate that the luxury that we have and the opportunity we have to help ourselves.

Adam Bloomberg:

With your work in chemical cases, what are the primary causes of intellectual property disputes that you see?

Terry Livingston:

One is largely an attempt by companies to skirt methods and techniques that have been developed by another company. And the other is an attempt to make products that are very similar to protected products. And those tend to be the majority of the cases that I see where someone has established a method, a technique, or a product, and there's an attempt to get as close to that as possible but not infringe on it. And that's where disagreements go, you know, one party feels like we're sufficiently far away, that we're not infringing, and the other does not. 

Adam Bloomberg:

Right. Now within that, what are some, maybe, financial aspects of these disputes?

Terry Livingston:

They can be very significant if a company has developed, and sometimes it takes a lot of expenditure. For example, a pharmaceutical reagent may take $2 to $3 billion to develop. To get it through clinical trials and to get FDA certification. So the financial implications could be very large if that intellectual property is not protected. Same with the petrochemical operating regimes that some companies have. The profit or loss of a certain crude unit could be in the order of hundreds of thousands of dollars per day. And they have developed specific methods and techniques in order to allow them to be that efficient. So if their competitor gets it, they stand to lose a great margin of profitability.

Thank you to Terry Livingston for speaking with us today. 

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