The sugar company saw its shares drop 17 percent following the preliminary ruling, which could dent its competitive advantage in the US sucralose market.
The patent infringement complaint, filed last April, related to the sale and importation into the US of certain sucralose, sweeteners containing sucralose and related intermediate compounds.
The claim was against a number of manufacturers and importers of Chinese sucralose, including Changzhou Niutang and its American subsidiary, US Niutang.
Now Judge Charles Bullock, the Administrative Law Judge at the US International Trade Commission (ITC) in Washington DC, has rejected the infringement allegations.
Robert Gibber, general counsel of Tate & Lyle, said: “We intend to petition for an appeal of the decision by the full Commission.
“This is a complex case involving a huge amount of in-depth technical analysis and debate between scientific experts. We would not have proceeded with an ITC case unless we believed we had adequate evidence to demonstrate that our patents are being infringed.”
The judge’s ruling is to be reviewed by the ITC for a final decision, due no later than January 2009.
Sweetener market
Globally, the high intensity sweetener market is worth $1.3bn. Sucralose is the number one sweetener by value in food, with a 36 percent share. North America is the world’s largest market for high intensity sweeteners and sucralose is the leader with a 48 percent share of the market.
In the last financial year, up to the end of March 2008, sucralose accounted for 21 percent of Tate & Lyle’s operating profit.
Tate & Lyle’s original sucralose product patent was filed in 1976 but it has since expired, opening the product up to competitors. However, a spokesman for Tate & Lyle said there is still a “multi-layered patent matrix” in place for sucralose and the case related to the making of sucralose rather than the product itself.
During the ITC discovery process, which included a rigorous inspection of Niutang’s manufacturing facility and a two-week hearing before the Administrative Law Judge in February, Niutang said it “decisively demonstrated that the process it has developed to manufacture sucralose does not violate any of the three patents in question”.
A fourth patent was voluntarily dismissed by Tate & Lyle before the hearing began.
Licheng Wang Jr, general manager of Changzhou Niutang, said he was sure the commission would confirm Judge Bullock’s ruling.
He added: “We have always respected the intellectual property rights of other companies, and we have made significant investments in our own research, development and manufacturing processes.
“In fact, we have significantly expanded our capacity to produce sucralose to meet the rising demands of our customers.”
Competitive advantage
The ruling is potentially damaging for the company, which says that one of the key ways in which it defends its competitive advantage is its patent portfolio which includes process, product form and blend patents.
However, Karl Kramer, president of Tate & Lyle Sucralose, remained confident and said: “Intellectual property is just one of a number of different layers of protection which define Tate & Lyle’s formidable competitive advantage in the global sucralose business.
“Our facilities in the US and Singapore, which operate at a level of cost, efficiency and environmental stewardship surpassed by none, produce sucralose which meets the highest standards of quality, purity and hygiene.
“Our business is built upon long-standing relationships with some of the world’s leading food, beverage and pharmaceutical manufacturers, as well as the established Splenda brand which is renowned as a high quality, reliable and trusted product in a number of markets.”
Niutang produces food additives and claims to be a leading global manufacturer of aspartame, folic acid and, more recently, sucralose. Based in China, Niutang also has sales and quality control operations in the United States and Europe.