Neptune gets partly favorable krill oil patent ruling, but royalty payouts await appeal

24-Mar-2015 - Last updated on 24-Mar-2015 at 15:44 GMT

Aker Biomarine operates a three-vessel fleet to harvest krill near Antarctica.

In what one side is billing as the final act in the krill wars in North America, the US Patent and Trademark Office has ruled to uphold certain claims of a longstanding patent held by Neptune Technologies and Bioressources. But the handle of the buried hatchet still protrudes, with at least one competing krill oil supplier saying it will appeal that decision.

Agreements hinge on ruling

If upheld, the ruling means that Aker BioMarine of Norway and Enzymotec of Israel would now start paying royalties as previously agreed. Even before those agreements, which were reached in late 2013 with Aker and spring of 2014 with Enzymotec, Neptune had come to terms with Norwegian company Rimfrost, the fourth player in the market. Rimfrost had helped Neptune cling to as much of its market share as possible by supplying it with krill oil during the reconstruction of Neptune’s production plant which was destroyed by an explosion and fire that killed three workers.

“This is a significant milestone that triggers the payment of ongoing royalties to Neptune by Aker and Enzymotec, based on their sales of licensed krill oil products in the US,” said Neptune president and CEO Jim Hamilton. “The decision clearly supports the validity and enforceability of Neptune's '351 composition of matter patent. Now that the positive decision has been rendered, we can turn our attention to building the industry and growing the krill oil market.”

But as so often has happened during the long and tangled history of this patent dispute, the other side has a different view. In a statement, Enzymotec said it intends to appeal the decision, and said that the patent ruling had actually invalidated most of the ’351 patent. According to Enyzomtec’s reading of the ruling, 26 of the 28 claims Neptune’s ’351 patent (US Patent 8,278,315) were ruled as unpatentable.

“We are pleased that almost all of the challenged claims in the IPR were determined unpatentable by the USPTO and we intend to challenge the patentability of the two remaining claims. Our recently granted patents and our license for Neptune's patents have strengthened our portfolio of intellectual property and will limit other players from entering the competitive krill oil market,” said Enzymotec CEO Dr Ariel Katz.

Enzymotec says it intends to appeal the USPTO decision regarding the two remaining challenged claims. And until that appeals process is complete, Enzymotec maintains is is not required to pay any royalties to Neptune. While not commenting specifically on a possible appeal or on the royalty issue, Aker did issue this statement attributed to US general manager Todd Norton:

“Aker BioMarine Antarctic, through past legal actions, was granted full freedom to operate in the sale of our Superba Krill products, and will continue to do so. We want to reassure our valued customers that this is a non-event for them and will not impact their ability to continue in the sale of their Superba Krill products.”

Tangled history

The history of the krill oil patent disputes is a long and tangled one. Neptune pioneered krill oil as a human nutrition ingredient and did some of the early scientific work in the field and also filed the first patents in markets around the globe. Without rehashing the entire patent dispute (which would take many chapters—think Wars of the Roses here), suffice it to say that Neptune’s subsequent competitors—Aker and Enzymotec—viewed those original patents as over broad and challenged them in various courts around the globe. Punch and counterpunch followed, with millions of dollars flowing to lawyers instead of to science or marketing efforts, until Aker and Enzymotec (temporarily, it seems) threw in the towel.

Investments beyond IP defense

Neptune, after its initial foray, went dark on the science front and recently had no money to spare to even consider new studies after the destruction of its lone production facility in the explosion and fire in November, 2012. In any case, in recent years Neptune has turned more attention toward developing the IP portfolio around its pharmaceutical candidates. Aker picked up the science ball on the dietary supplement front and did a number of subsequent studies on krill oil and has a number in the works, and Enzymotec published a krill oil study in 2014, too.

In addition to the investment in science, Aker has invested heavily in the production end of the sector. Aker is the world’s largest harvester of krill and, with a second vessel now online, has increased its production security in the challenging Antarctic environment where the krill is harvested. And the company, motivated in part by Neptune’s experience, has moved to install backup for its production, too. In a joint venture with Naturex, Aker is retrofitting an existing facility in the Houston, Texas area that is ramping up toward full production. Aker currently extracts all of its krill oil in a joint venture facility with Naturex in Valencia, Spain.

Australian patents

Enzymotec and Neptune are also still embroiled in a patent dispute in Australia, which until recently was one of the world’s most thriving markets for krill oil. (According to mostly anecdotal reports gathered at the Expo West trade show, the Australian krill oil market has seen a sudden, sharp dip caused by some negative publicity over some some substandard krill oil products finding their way to consumers.) A patent review is underway, Enzymotec said.