The two companies jointly announced on Monday morning a broad licensing agreement in which the parties will allow each other access to certain patents in common.
Key elements of the settlement and licensing agreement are:
• The agreement end all outstanding litigation, with continued access for Aker to Neptune's composition patents, in consideration of a royalty payment of $10 million payable over a period of 15 months.
• Neptune acquires rights to use Aker's select krill oil-related patent portfolio in consideration of a royalty payment of $4 million payable over the same 15-month period.
A previous cease fire between the parties was left open ended, with certain aspects of licensing—who pays whom and how much and for what—left undecided pending further patent rulings. This agreement once and for all extinguishes the lingering embers between the two parties.
Pioneer takes on later competitors
Neptune, which is based in Canada and is rebranding itself as Neptune Wellness Solutions, was the pioneer of krill oil as a dietary ingredient and the company did some of the early scientific work underpinning the phospholipid-based ingredient’s health properties. Neptune was also the holder of some of the first extraction and composition of matter patents, and pursued a policy of vigorously defending those with actions that included filing a case against Norwegian company Aker before the International Trade Commission. Aker, a later entrant that had the advantage of being vertically integrated with its own fishing fleet, responded by securing patents of its own in various markets, including the US, the EU and Australia. There ensued a years-long, arcane battle about whose patents were over broad, which patents improperly excluded prior art, whose innovations were material and not insubstantial and so forth.
Millions of words and dollars later today’s agreement finally puts out the fire between the two companies without one side being able to claim that it vanquished the other. It has often been remarked upon that innovation in the krill sphere has been lacking until only quite recently. Companies in the space have begun to offer higher concentrations of the base ingredient, and this development seems to have followed that first break in the standoff between Aker and Neptune, which was mirrored in side agreements between Neptune and the other two participants in the market, Enzymotec of Israel and Rimfrost of Norway. Money that was going to outfit phalanxes of attorneys could now be devoted to building a better category.
"Recognition and protection of intellectual property is critical to continue to invest in innovation and R&D, which is key to driving growth in the krill oil industry. This joint patent agreement signifies the importance of respecting IP, further strengthening our position as the leading innovators in the global krill oil market," said Matts Johansen, CEO of Aker BioMarine.
Jim Hamilton, CEO of Neptune, said part of the impetus for the agreement was to refocus on what the business was supposed to be about, and to leave aside the striving for ultimate, complete victory in the patent fight. Hamilton’s posting to the CEO billet at Neptune coincided with a thawing in relations between the two warring parties.
“In the end our job—and this is true for all the companies in the market—is first and foremost to help our customers and ultimately our consumers. The patent fight took time and attention away from that goal, and I’m very happy that both companies are leading in this effort,” Hamilton told NutraIngredients-USA.
Market trending back into positive territory
Hamilton said that the agreement comes at a propitious time in the omega-3s sphere, as the market is starting to show signs of renewed life after a number of consecutive quarters of flat to even negative growth especially in the vitally important North American market. One of the things that has helped turn that picture around was an advertising campaign managed by the Global Organization of EPA and DHA Omega-3s (GOED). Hamilton, who was previously president of the North American nutritional division at DSM, the biggest company in the market, strongly supported that effort. He said today’s agreement opens the door for cooperation of that sort to help build krill oil as a subcategory. The sector had benefited in the North American market in the past from the huge advertising push put on by Schiff Nutrition on its way to building its MegaRed brand into the best selling omega-3s SKU of all. That buoying effect for the krill market is all but over, as parent company Reckitt Benckiser sharply dialed back the advertising outlay after acquiring Schiff.
“That was an initiative that was personally very close to me. That was a good example of industry working together for the good of the category. [Today’s agreement] will open the door in the krill category for collaboration on media challenges, regulatory issues, and other challenges. When you have people sharing motivation for the betterment of industry what you get is growth,” he said.
Wider war still rages on
While the matter is now settled between Neptune and Aker, there are more moving parts to this war. Hamilton said he hopes a similar, final agreement can soon be reached with Enzymotec, putting to rest that phase of the conflict. But Aker and Rimfrost are still very much at odds, with the recent filing by Aker of an ITC case against Rimfrost and two collaborating companies alleging patent infringement in the North American market. And Aker yesterday filed a patent infringement lawsuit in Nevada against a Chinese company marketing krill oil in the United States. There will be more no that lawsuit in tomorrow's NutraIngredients-USA newsletter.