Krill wars redux: Enzymotec ends settlement negotiations with Neptune, ITC case to go forward

01-Apr-2014 - Last updated on 28-Apr-2014 at 21:17 GMT

In a new phase of a long-standing krill oil patent dispute, Israel-based Enzymotec Ltd. has backed out of a settlement negotiation with Canada’s Neptune Technologies & Bioressources, both companies confirm. Enzymotec said it halted negotiations after a recent patent court ruling that it believes significantly weakens Neptune’s position.

"Our belief that Neptune's patents can be invalidated was recently reinforced by the USPTO institution, on March 24, 2014, of an inter partes review of Neptune's U.S. Patent No. 8,278,351. The USPTO concluded that there is reasonable likelihood that the petitioner will prevail in demonstrating unpatentability of the claims at issue. In addition, since no progress has been achieved during mediation, we have decided that it is not in our best interest to continue our efforts to try to negotiate a final settlement agreement with Neptune," said Dr. Ariel Katz, president and CEO of Enzymotec. "We believe we have meritorious defenses to all Neptune's patent claims, and we intend to continue to vigorously contest the complaints and to further challenge Neptune's patents."

Krill oil pioneer

Neptune was the pioneer in bringing krill oil to market as a phospholipid source of EPA and DHA for dietary supplements. The company filed the first patents in the field and did the first scientific work, and was the first to extract the oil at its facility in Sherbrooke, Quebec from the crustaceans that are caught in the Southern Atlantic Ocean near Antarctica.

Neptune acquired stiff competition from Enzymotec and from Aker BioMarine, a Norwegian company. Aker supplied the raw material for what became the single best selling omega-3 SKU of all, Schiff’s MegaRed line sold in the mass market channel. Later Rimfrost, a division of Norwegian fishing company Olympic Seafood, also joined the game.

Neptune pursued a policy of vigorously defending its patents, and sued Aker and the others in the United States, Europe and elsewhere. In response, Aker and the others acquired their own patents and sued to have Neptune’s patents reexamined in various jurisdictions.

Over, but not quite

It appeared the so-called krill wars where at an end when Aker signed a licensing agreement with Neptune in late 2013. Rimfrost had earlier entered into an agreement with Neptune, supplying it with krill oil to sell to Neptune’s customers after Neptune’s plant was destroyed by fire (the Sherbrooke plant is reportedly ready to resume production once the required permits are filed). At that time it was reported that Enzymotec and Neptune were in negotiations and the outlook seemed to be that a settlement was imminent.

With yesterday’s announcement, the struggle continues, with the next milestone being Neptune’s case against Enzymotec before the International Trade Commission (Aker was a party to this proceeding, too, before coming to its agreement with Neptune). In mid February, Neptune entered into an ITC mediation with Enzymotec, a process which has been unsuccessful. According to Neptune, the ITC hearing will commence on April 28, 2014, with a decision expected within three months.