Altria Settles Vaping Dispute, Reynolds Moves Ahead at PTAB

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By Malathi Nayak

Subsidiaries for tobacco companies Imperial Brands and Altria jointly filed Jan. 4 to end two patent infringement lawsuits even as Reynolds American Inc. has made progress in challenges to two of Imperial’s e-cigarette patents ( Fontem Ventures B.V. v. Nu Mark LLC , M.D.N.C., No. 1:16-cv-01259, Joint stipulation of dismissal 1/4/17 ).

Richmond, Va.-based e-cigarettee maker Altria Group Inc.'s Nu Mark LLC, and Imperial Brands plc’s Fontem Ventures B.V., filed a joint stipulation in the U.S. District Court for the Middle District of North Carolina to dismiss two suits brought by Fontem against Nu Mark last year. Fontem also sought a cut from sales of NuMark’s MarkTen XL and Green Smoke brands. Fontem and Altria told the court they had reached a settlement.

Three other patent infringement lawsuits filed last year by Amsterdam-based Fontem against Reynolds’s subsidiary R.J. Reynolds Vapor Co., seeking royalties on revenue from its Vuse Solo e-cigarettes, remain ongoing in the same federal court ( Fontem Ventures B.V. v. R.J. Reynolds Vapor Co., No. 1:16-cv-01255 (M.D.N.C. Oct. 26, 2016)).

Since 2014, Fontem has filed numerous patent infringement cases against e-cigarette companies, a move that put profits of the fast-growing e-cigarette industry at stake. It has previously settled its lawsuits with several companies, including Njoy Inc., Vapor Corp. and CB Distributors Inc.

The global e-cigarette and vapor market is expected to more than triple to $15.9 billion by 2019, from $5.2 billion in 2015, according to Bloomberg Intelligence.

Imperial Brands is known for its lucrative Blu e-cigarette business. Fontem bought the e-cigarette unit of Dragonite International Ltd, a company that was founded by the modern inventor of the e-cigarette, Hon Lik, in 2013. The deal helped it gain access to an extensive vaping product patent portfolio of Drangonit’s unit and earn royalties for Imperial.

Reynolds’ Defense Strategy

To push back, some e-cigarette companies have challenged the validity of Fontem’s patents at the Patent and Trademark Office. The agency’s Patent Trial and Appeal Board terminated NuMark’s challenge following its settlement with Fontem.

Reynolds has filed eight petitions challenging the validity of Fontem’s patents at the PTO. One was denied Jan 4, but Reynold’s succeeded in getting the PTAB to institute trials on two of its petitions Jan. 3 and Dec. 30, according to filings. The remaining five petitions, which were filed by Reynolds in August, are pending.

As of Oct. 31, 2016, 44 percent of 1,971 cases where the PTAB instituted trial on patent validity led to decisions that all claims were unpatentable, PTO data show. In 11 percent of case trials, the PTAB found some claims unpatentable. In just 1 percent of case trials, no instituted claims were found to be unpatentable. Other cases ended in settlements, dismissals or requests for adverse judgements.

Reynolds declined a request from Bloomberg BNA for comment. A spokesman for Altria said the company was pleased that its dispute with Fontem has been resolved. Fontem did not immediately respond to a request for comment.

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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