In an October 29 press release, Japanese synthetics manufacturer and CoQ10 supplier Kaneka Corporation announced the filing of legal proceedings in Paris and Dusseldorf against unnamed Chinese CoQ10 suppliers and their European distributors for patent infringement. The lawsuit was initiated as part of Kaneka's "existing patent enforcement programme to enforce its proprietary rights in those countries in which its patents relating to coenzyme Q10 are in force," according to the release.

This is the second time in 2010 that Kaneka has filed a patent infringement lawsuit, and is similar to a 2009 case filed against Chinese CoQ10 suppliers Xiamen Kingdomway and Pacific Rainbow for infringement of its patent on Kaneka QH ubiquinol, a proprietary form of coenzyme Q10. The suits ended in settlements and Kingdomway and Pacific Rainbow agreed to stop selling their ubiquinol products in the United States. Whether this latest lawsuit and the 2009 case are related remains unclear, as Kaneka names no defendants in its release.

NBJ Bottom Line

The CoQ10 supply universe is small and competitive, with only a handful of players in China and Japan. According to Scott Steinford, president of ZMC-USA, the CoQ10 supply market stands at just over 200 metric tons in the U.S., with 60% of that business belonging to Chinese companies, including ZMC and Kingdomway, and 40% going to Japan with MGC and Kaneka. CoQ10 sales growth in the United States has leveled in recent years, climbing only 3% to $450 million in total sales in 2009, according to NBJ data, and raw material pricing is expected to stay stable through 2010 and 2011.

With such a small number of players in a limited sandbox, gaining share can become a cutthroat enterprise. Kaneka's "patent enforcement programme" seems to be a necessary weapon. Said Steinford in a recent interview with NBJ: "If you can't make the pie bigger, you have to cut out the other people who bake it." But a nebulous lawsuit against defendants as non-specific as "Chinese manufacturers and distributors," when there are only a few to accuse, looks odd. "Kaneka needs to explain who the defendants are," Steinford said. "Just to say every Chinese supplier—to throw out such a broad net—looks like a PR piece."
 

Related NBJ links:

Suppliers Move Up the Value Chain for Protection from Decreasing Margins

ZMC-USA: Supplement Manufacturers Can No Longer Buy from 'Cloaked' Suppliers