Friday, 1 March 2013

Further Context On Neptune’s Patents & Decision Timeframes

Neptune Technologies & Bioressources
TSX: NTB - NASDAQ: NEPT
Basic Shares: 60.0 million

Fully diluted: 67.5 million

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Tuesday’s continuation patent release from Neptune Technologies & Bioressources, prompted inquiries to our office to put this latest news in context of the big picture. We, as others, had questions about the potential timing of future events and how this story may unfold.
The day of the news release, we spoke with Neptune management and its in-house counsel to clarify some of our questions. The Howard Group subsequently submitted a draft blog to Neptune management and legal counsel for review to ensure we were correct on the legal points. What follows is the collaborative blog.  
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To recap the press release, Neptune announced that the U.S. Patent and Trademark Office (USPTO) granted it a new patent, number 8,383,675, that contains a single claim directed to a softgel containing krill oil extracted from Antarctic Krill and which contains phospholipids suitable for human consumption.
Neptune’s position is that anyone selling such a krill oil without a license from the company is infringing on the patent.
More importantly, the USPTO granted this new patent after considering all the evidence submitted by Neptune’s main competitor, Norway based Aker Biomarine, in its various challenges to the validity of other related Neptune patents. 
This patent provides Neptune with further patent coverage in the krill oil industry and complements two other issued patents covering various compositions of matter:
US Pat. 8,030,348 (Oct. 4, 2011) - Natural marine source phospholipids comprising polyunsaturated fatty acids and their applications
This patent covers a composition extracted from a marine or aquatic biomass, which possesses therapeutic properties and contains specific phospholipids(EPA and DHA attached)suitable for human consumption.
US Pat. 8,257,351 (Oct. 2, 2012) - Natural marine source phospholipids comprising polyunsaturated fatty acids and their applications
This patent covers a krill extract which possesses therapeutic properties and contains specific phospholipids (EPA and DHA attached) suitable for human consumption.
US Pat. 8,383,675 (Feb. 26, 2013) - Natural marine source phospholipids comprising polyunsaturated fatty acids and their applications
A capsule comprising an Antarctic krill oil containing phospholipids (EPA and DHA attached),omega-3 fatty acids andastaxanthin, and suitable for human consumption.
As patents provide their owners with limited monopolies to exclude others from selling products, these patents point to Neptune’s position as the dominant player in the krill market. 
As is well known, Neptune and Aker have been locked in a tug of war in front of the USPTO for a couple of years. This new patent is likely to become part of this battle. 
Indeed, the stakes of this battle are getting higher.  Also contained in Tuesday’s press release was the announcement that Neptune will add this patent to its complaint with the United States International Trade Commission (ITC), a specialized agency that has the ability to exclude patent infringers from importing products into the country. 
Importantly, the ITC has a mandate to handle cases quickly and are concluded approximately 16 months or less after the institution of the complaint.  

 
The ITC:
-       Institution of investigation: within 30 days after filing complaint;
-       Discovery is substantially expedited;
-       Trial takes place 8 to 9 months after institution;
-       There is no jury;
-       Judge Decision: 11 to 12 months after the institution of the investigation;
-       Can issue exclusion orders preventing infringing products, such as krill paste and krill oils, from entering the US.;
-      Can issue cease and desist orders stopping the sale of infringing products already in the US;

In short, Neptune believes this latest patent bolsters its chances of success in the expedited ITC proceeding that it is undertaking.