Ruyan Group Holdings Ltd, the inventor of electronic cigarettes, hailed a US regulatory agency's warning against other brands of e-cigarettes as good news in its fight against copycats.

Scott Fraser, vice president of Ruyan Group, said the announcement by the US Food and Drug Administration (FDA) will help Ruyan protect its intellectual property rights to its e-cigarette brand.

The FDA on July 22 reported that a laboratory test of e-cigarette samples of other brands found that they contained carcinogens and toxic chemicals such as diethylene glycol, an ingredient used in antifreeze.

The two American brands tested by FDA are Njoy and Smoking Everywhere. The former has been named in an IPR lawsuit initiated by Ruyn Group.

Invented in 2003 by Hon Lik, Ruyan's chief engineer, e-cigarettes are battery-operated devices that generally contain cartridges filled with nicotine, flavorings and other chemicals.

The electronic cigarette turns nicotine, which is highly addictive, and other chemicals into a vapor that is inhaled by the user.

Fraser said he was not surprised at the FDA's findings, and that he encouraged the FDA to test his company's e-cigarettes.

Praise for FDA

"The FDA is doing its job. They are concerned about consumer safety, and we support that," Fraser said.

"As the inventor, we also consider the safety of customers the top issue, and we are always testing our product," he said. "We understand the test results (of the other brands). The two copycats infringed on intellectual property. It is not surprising."

Ruyan considers its progress in North America a major achievement in 2008.

After months of intensive efforts by Ruyan America Inc, its US-based agent and distributor, the company established marketing and distribution channels to facilitate the North American launch of its product this year.

As the only legal company producing e-cigarettes in China, Ruyan has been fighting copycats since 2003.

Ruyan Group Executive Director Miu Nam said safety concerns are directly linked to copycats.

"The copycats pay less attention to the health of people and seldom conduct effective tests. Therefore, the quality of their products cannot be guaranteed," Miu said.

The company has filed eight lawsuits against copycat factories operating mostly in Zhejiang and Guangdong provinces. Many of the companies also sell counterfeit MP3s and cell phones, Ruyan has alleged.

Sixteen patents

Ruyan holds 16 patents on its e-cigarette.

The company is paying more attention to protecting its invention and utility patents abroad, since overseas markets account for half of the company’s annual sales.

Ruyan has registered patents in more than 50 countries, regions and territories, including North America and the European Union. The company also is using local distribution agencies in those countries to help protect its patents.

In February 2008, the company signed a cooperative agreement with Nicocig Ltd of the United Kingdom.

"It is anticipated that legal action against parties suspected of infringement of the company’s intellectual property rights in the United Kingdom is imminent," Ruyan’s 2008 annual report stated.

While overseas legal cases can cost in escess of $1 million, Ruyan partners said the biggest barrier in Ruyan’s IPR battle is not the money.

"The battle with traditional cigarette makers is the thorniest issue," said Liu Debin, president of China International Tendering Co and chairman of Genertec Consulting Co Ltd, an international promotions partner of Ruyan since 2005.

"Tobacco forces overseas are trying their best to suppress e-cigarettes by distributing rumors and urging governments -- the beneficiaries of tobacco taxes -- to establish high barriers to market entrance," Liu said.

Liu said that e-cigarette manufacturers should not regard the product as substitutes, but complements to traditional tobacco.

Domestic copycats

Another challenge is domestic copycat behavior, Miu of Ruyan said.

Ironically, most of the copycat brands abroad have their products manufactured in China.

"That often makes us embarrassed when we ask for more support from foreign governments to protect our Intellectual property rights," Miu said.

Liu of Genertec Consulting said the Chinese government understandably is focusing more on the economic slowdown.

"The Ministry of Commerce has made a lot of efforts in the past, but now they have a lot of more important things at hand, especially given that the e-cigarette industry has not fully formed," Liu said.

In 2008, Ruyan reported HK$277,897 in revenues for its atomizing cigarettes, reflecting a year-on-year growth rate of 105 percent.

In addition to retail outlets in Canada and the United States, Ruyan opened a shop under the "Luk Fook" brand name in New York in December 2007.

Ruyan plans to open another US shop in Las Vegas in the near future.
                                                                                                    Source: China Daily