Vaporizing the Competitors
E-CIG LAGGARD TRIES TO VAPORIZE COMPETITORS BY SUEING FOR PATENT INFRINGEMENT
E-cigarettes, those cigarette-lookalikes that vaporize liquid nicotine, are in the opinion of many a technological breakthrough that can help millions of people break their addiction to cigarettes. Others view the growing popularity of “vaping” (as the use of e-cigs is known) as a threat to decades of progress in the fight against smoking. As of yet, the Food and Drug Administration has not taken a definitive stand and has delayed issuing long-awaited regulation of the industry. Though the debate rages, one thing is clear: e-cigs are big money, and getting bigger. Last year, overall e-cig revenue was $2 billion, and it’s expected to reach $10 billion by 2017. Some analysts predict sales to rise to more than $50 billion within fifteen years.
It’s no wonder, then, why ‘old fashioned’ cigarette makers want to get in on the action. Recently, the industry has seen numerous takeovers by Big Tobacco of e-cig start-up companies. So, when colossal Imperial Tobacco Group Plc, the world’s fourth largest cigarette company but a laggard in the e-cig market, purchased the relatively small Chinese e-cig company Dragonite for $75 million in September of last year, the move could have been understood as a meager and belated attempt at catch up. However, that view would have been incorrect, because it was a lot more than that.
In most respects Dragonite wasn’t a particularly noteworthy e-cig company, except for one thing: the company’s co-founder was a man by the name of Hon Lik, the undisputed inventor of the e-cigarette. Consequently, among Dragonite’s assets were the four patents that comprise the whole of e-cigarette technology. Previously, Lik had tried to enforce his patents against the numerous other e-cig manufacturers who were capitalizing on his invention, but he quickly learned that patent enforcement is a very costly business. So Lik decided to sell his company and its valuable patents to Imperial, a company that had the financial wherewithal to pursue the lawsuits to the bitter end. With the purchase of Dragonite, Imperial may have done more than just catch up to its competitors. It may have outflanked them.
On March 5, 2014, Imperial Tobacco did what everyone knew it would do. Through its wholly-owned subsidiary Fontem Ventures BV, Imperial sued Lorillard Inc., NJOY Inc., Vapor Corp., and eight other U.S. makers of electronic cigarettes, alleging they infringed on Imperial’s four U.S. patents: No. 8,365,742, No. 8,375,957, No. 8,393,331, and No. 8,490,628. The patents cover rechargeable e-cigs, cartridge refill packs, batteries, and disposable e-cigs. The cases are Fontem Ventures BV v. LOEC Inc., 14-cv-01648; Fontem Ventures BV v. NJOY Inc., 14-cv-01645; and Fontem Ventures BV v. Vapor Corp. (VPCO:US), 14-cv-01650, U.S. District Court, Central District of California (Los Angeles).
No one expects it to end in the District Court because everything has come together to create the ‘perfect patent storm.’ We have huge companies capable of paying gargantuan legal bills fighting over intellectual property valuable enough to make it worth the fight. So sit back and enjoy the spectacle. This should be a good one.