90 TOBACCO BUSINESS | JULY / AUGUST | 22 Dryft product didn’t infringe on the 908 patent “under any reasonable construction.” Swedish Match withdrew its complaint in June 2020, just days before the company and Kretek International were scheduled to formally begin claim construction proceedings. In August 2020, the court transferred the Western District of Kentucky action to California due to a lack of personal jurisdiction. In June 2021, the district judge for the Central District of California presiding over the patent infringement and trade secret actions dismissed The Art Factory AB and TillCe AB from the patent infringement case, again due to a lack of personal jurisdiction. Nilsson, who invented the 908 patent, provided a sworn declaration testimony confirming that nicotine polacrilex is not a free nicotine salt, meaning that Dryft was not part of the patent case Swedish Match was pursuing. The California court agreed, and in December 2021 the judge issued an order declaring that Dryft’s nicotine polacrilex was not within the scope of the claims of the 908 patent and therefore did not infringe. Despite another definitive win for Kretek International, Swedish Match is appealing the district court’s decision and continues to pursue related claims of trade secret theft. Kretek International denies those charges in the strongest possible terms. Standing in theWay of Choice At the center of the patent dispute involving Swedish Match and Kretek International is Ericsson, chairman and owner of TillCe AB. TillCe AB is a Sweden-based company that focuses on nicotine products developed to aid in harm reduction. In 2012 and 2013, Swedish Match passed on buying Ericsson’s method of manufacturing white snus. In 2013, Ericsson sold the snus factory he operated outside of the Swedish city of Helsingborg to Burger Söhne Holding AG. Previously, Ericsson had worked with Burger Söhne Holding AG to develop the 908 patent that would ultimately be the basis for Zyn. The patent application was filed in 2011 and was granted in Sweden in 2013. TheU.S. patent was granted in 2015. In 2019, Burger Söhne Holding AG sold its 50 percent share of the patent and its factory to Altria Group for a reported amount of $372 million. Altria Group and Ericsson still jointly own the patent for the Chinese market. Swedish Match first acknowledged its acquisition of Ericsson’s patent in 2016 when during an earnings call Swedish Match CEO Lars Dahlgren, commented, “During the quarter, we also completed a minor acquisition of patent rights for a portion product of nicotine, but without tobacco, a product that we have in small scale and with promising results previously tested under U.S. license.” This “minor acquisition” turned into much more, however, as detailed earlier in this story. Ericsson and his company, TillCe AB, have been caught in the middle of this ongoing legal battle that Ericsson says is more about anti-competition and consumer choice. “I said from day one, when Swedish Match started with arbitration against us, that this was an anti-competition case,” said Ericsson. “I’m taking these words from Senator [John] McCain. He was talking about [the] health insurance bill and said, ‘We have to stand behind the American people and not in front of them.’ Swedish Match would like to control the competition, and they are doing that jointly with Altria, who owns 50 percent of the patent. We have always stood behind the American people and supported [their] freedom to make a choice to stop smoking or find an alternative to smoking.” As Swedish Match and Kretek International continue to fight in court over the patent issues, the nicotine pouch market continues to grow in popularity as an alternative to traditional tobacco products. Over the past few years, even more manufacturers have entered into the competitive—and contentious—marketplace, including Rogue, an oral nicotine product manufactured and distributed by Swisher International. As nicotine pouches grew in popularity and more manufacturers entered the market, Swedish Match aggressively pursued its losing patent case with Kretek International and Dryft Sciences. After British American Tobacco (BAT) acquired Dryft in 2020, BAT filed its own lawsuit against Swedish Match, seeking a court ruling that it was not infringing on any patents or trade secrets. With Swedish Match being bought by PMI for $16 billion, one has to wonder if this case will finally come to an end or if it will mirror that of the Fontem/Hon Lik and IQOS patent cases and see the tobacco company using its newly acquired patent to wage “war” against other tobacco businesses. Though this is a very specific case, it’s one that’s becomingmore common in the tobacco industry and shows how complicated and costly these patent wars can become. As tobacco companies shift away from traditional products like combustible cigarettes, pipe tobacco and cigars, they are looking for the next big thing. Most of these next-generation products— nicotine pouches, electronic nicotine-delivery systems (ENDS) and heatnot-burn devices—were developed with patented technology and processes. Hoping to come out as a category king, more tobacco companies are using the same methods used by Silicon Valley and Big Tech to eliminate market competition using a method called “forum shopping,” which is the practice of choosing a court or jurisdiction based on how favorable its rules or laws are for the position being advocated. In a quest for a favorable ruling that will eliminate competition and clear a pathway toward product category dominance, there are far more victims in this costly patent war effort than there are winners. Casualties ofWar Who really wins in a patent war? According to a 2012 Businessweek article written by Larry Popelka, “only lawyers win in patent wars.” In the early days of the tobacco industry, patents didn’t have as big of a place in the industry, which was dominated by cigarette and cigar products. That has since changed, however, with the industry ditching combustible tobacco products and embracing tobacco technology and the production of vapor products and heat-not-burn devices. With this shift comes a shift in business practices that now sees many Big Tobacco companies taking a cue fromBig Tech as they play the patent game. These days, tobacco companies are spending millions of dollars and an inordinate amount of time and resources to protect or defend themselves against patent infringement claims. While winning a patent dispute can be a big win for any company, that win often comes at a cost to other smaller businesses and consumers. Patent trolling, a termmade popular by Intel’s Peter Detkin, could be the major threat many of today’s tobacco manufacturers will have to face at some point in time. Patent trolling is when a company works to enforce a patent against accused infringers far beyond the patent’s actual intended value. These individuals or businessesmisuse the legal systems by engaging other businesses or individuals in petty litigation and strategic lawsuits with the end goal of generating revenue. These lawsuits end up negatively impacting the U.S. consumer by limiting their choices for alternatives to traditional tobacco products that lack patents but come with higher health risks. The next time you read or hear of a patent case making headlines, ask yourself if this is a fight over intellectual property or if it’s one of anticompetition at the expense of the unknowing consumer. TB I said from day one, when Swedish Match started with arbitration against us, that this was an anti-competition case. I’m taking these words from Senator [John] McCain. He was talking about [the] health insurance bill and said, ‘We have to stand behind the American people and not in front of them.’ –Thomas Ericsson
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