E-Cig Wars!

In 2012, I spoke about e-cigs being transformed from a cottage industry into big business after reading about Lorillard's takeover of US e-cig firm, Blu. With such a lot of future profit at stake from a product which is rocketing in popularity, you can understand why large companies have been jockeying for position in the past couple of years.

Imperial Tobacco were generally considered to have missed the starting gun in the market, with their competitors - especially BAT - placing their products in stores while Imperial's arms-length e-cig company were still at the drawing board stage.

However, at the back end of 2013 a deal was struck which was little-reported at the time.

Imperial Tobacco Group Plc, (IMT) Europe’s second-biggest tobacco company, agreed to buy Dragonite International Ltd. (329)’s electronic cigarette unit for $75 million as it seeks to close the gap on competitors in new products.

And the important footnote ...

Dragonite founder and executive director Hon Lik invented the electronic cigarette, according to the company’s web site. The company says it owns an “extensive portfolio” of global patents and pending patents covering e-cigarette technologies.

Fast forward to the past week and we find that this could have been an incredibly clever piece of business.

On Wednesday, March 5, 2014, Fontem Ventures B.V., a Netherlands-based, wholly-owned subsidiary of Imperial Tobacco Group, a British multinational tobacco company headquartered in Bristol, United Kingdom and the world’s fourth-largest cigarette company, filed suit against the following US e-cigarette companies: NJOY, Spark Industries (Cig2O). Vapor Corp., LOEC (Blu Cig/Lorillard). FIN Branding/Victory E-cigs. CB Distributors (21st Century Smoke), Logic Technology, VMR Products (V2 Cigs and Vapor Couture) and Ballantyne Brands (Mistic).  The suit alleges patent infringement, citing four patents that Fontem purchased as a part of a portfolio of intellectual property acquired in late 2013 from Dragonite International Limited, China, for $75 million.

Wow! Just wow!

With market analysts predicting sales in the billions for e-cigs, Imperial look to have either severely hampered their competitors, or saddled them with perpetual royalty payments. It will be interesting to watch how it pans out.

We have seen the same type of litigation used in other new technologies - the most publicised being spats between Apple and Samsung - but the fact that big industries obviously consider the potential rewards from e-cigs lucrative enough to go to these lengths must be like a kick on the plums for tobacco controllers and their hideous cheerleaders.


Of course, this is a US-based action and so not yet applicable here, but it begs the question as to whether Fontem are planning to pursue the same course in the EU. If they do, it will bring Imperial into battle with BAT as their Vype cigalike is almost identical to the Njoy mentioned above.

Where this leaves smaller (non-tobacco industry) manufacturers and sellers of e-cigs which don't resemble traditional cigarettes in the slightest - like my one - I don't know. But if their products contain any of these patents and Fontem comes after them, I expect they'll be too short of cash to defend it thanks to the EU imposing huge costs to their operations via the tobacco control industry's absurd TPD.

And if that leaves the market wide open for the tobacco industry to corner, who wants to be first to laugh at myopic anti-smoking dinosaurs for helping out their {cough}chums in Big Tobacco?

Interesting times, ladies and gentlemen.