Chinese e-cigarette inventor fights for royalties

by Tom Hancock

AFP-JIJI

The Chinese inventor who dreamed up the electronic cigarette in a nicotine-induced vision says that despite its global popularity, copycat versions and legal disputes mean he has battled to cash in on his creation.

“Smoking is the most unhealthy thing in people’s everyday lives. . . . I’ve made a big contribution to society,” said Hon Lik, 57, in a cramped office in Beijing, sending tobacco-scented smoke into the air as he puffed on a battery-powered pipe.

“But I don’t live like a rich person, because of all the troubles our company has faced.”

Hon, a soft-spoken man from northwest China, is the co-founder of Ruyan, a company that has produced electronic cigarettes and cigars, starting at 68 yuan ($11), for more than a decade.

His patents are set to be sold in a $75 million deal with Britain’s Imperial Tobacco, but Hon says that he will see little of the windfall and that years of copyright disputes and negative publicity have eroded his profits.

His battles highlight rising competition in a market that has skyrocketed to $2 billion in global sales, according to research firm Euromonitor International.

E-cigarettes, as the devices are commonly known, heat a liquid nicotine solution to turn it into vapor.

Manufacturers say a lack of tar and other ingredients, as well as an absence of smoke, makes the devices safer than conventional cigarettes. Research from the British medical journal The Lancet in August called them more effective than nicotine patches in helping smokers quit.

Early e-cigarette designs were drawn up in the U.S. as early as the 1960s, but Hon is acknowledged among industry commentators as the first person to develop a viable commercial version.

He came up with his design in 2003 while working as a medical researcher and trying to quit a pack-a-day habit he had developed in his teens.

“In the evenings, I sometimes forgot to take off my nicotine patch, which gave me nightmares all night,” he said.

In one dream, Hon said he found himself drowning in a sea that turned into a cloud of vapor, giving him inspiration for the product, which he scribbled down on a bedside notepad.

After a year spent perfecting the design, he said, sales took off. By 2006, Ruyan was “producing 24 hours a day, with demand still exceeding supply.”

But that same year, media reports that described his products as addictive and causing heart attacks dented sales.

China’s tobacco sales administration accused the company of irresponsible advertising and recommended that Beijing shops stop selling its products.

Hon said China’s state-run tobacco industry — a powerful lobby that contributes as much as 10 percent to total government revenues, according to the U.S.-based Brookings Institution — was wary of the competition.

“All tobacco companies disliked our products, especially the large ones, and they have influence over governments,” Hon said, accusing them of driving some of the negative coverage.

“It’s like how the inventor of a perpetual motion machine would receive pressure from the energy industry.”

Rival firms sprang up in China and abroad. Hon maintains they are copycats infringing patents owned by Dragonite International, a Hong Kong-listed company of which he is chief executive.

The firm has filed lawsuits against several manufacturers in the United States, and Hon said at least one has agreed to settle out of court.

“They have made some small adjustments, but their basic structure is the same,” he said.

“If I received just 1 mao (2 cents) from each cigarette sold, that would be a huge amount.”

Hon’s invention has also faced setbacks in Asia, with Australia, Singapore, Taiwan and Thailand banning the sale of e-cigarettes on safety grounds.

His biggest fear is that governments will classify them as medical products, as in Hong Kong, where sales are low — potentially limiting the market by subjecting them to standards they were not designed to meet.

His latest gambit is to team up with Europe’s second-largest tobacco company, Imperial Tobacco, which has announced plans to pay $75 million for the e-cigarette patents owned by Dragonite, in which Hon says he only has a small shareholding.

The inventor said the proceeds will be invested back into the company, and he will not get any immediate financial benefit.

Eric Bloomquist, an independent tobacco industry analyst based in London, said the patents may have been strong enough to be attractive to Imperial but that they could also lose relevance as the product evolves.

“They found the patents compelling,” he said, but added that it was not clear “to what degree Dragonite’s patents are critical components to the newest standards in the market.”

Hon will remain in the e-cigarette business as adviser to Imperial — he says there is “nothing contradictory” about working with a tobacco company — and will also work on new products.

He hopes his invention can eventually replace the conventional cigarette entirely — and perhaps bring him the recognition he says he deserves.

“My fame will follow the development of the e-cigarette industry. Maybe in 20 or 30 years, I will be very famous.”

  • EQ

    A Chinese complaining of copycat versions of his product…Almost hilarious. Now he understands how others feel about Chinese making and selling illegal copies of just about anything others have invented. That said, I understand how he feels.

    • http://getironic.blogspot.com/ getironic

      That’s what happens when intellectual property is not respected.

      The next person with a great idea will just keep it to themselves, and everyone will be that much worse off.

      • Jeoshua

        And that’s exactly what happens when the modern intellectual property system gets its way. One person keeps control of an idea, and everyone is worse off for it.

        I believe that this guy should be allowed to live off his invention, sure, but the kind of device he made is not what people are producing and using anymore, just something that uses a similar idea to similar effect.

        Basically, if he wants to thrive as a business man, he should sell his product, grow his business, and make money off sales, not off taking money from anyone who sells something similar to something he sells.

      • http://getironic.blogspot.com/ getironic

        That really depends on the situation, how those laws are defined, and the time length to which they are valid.

        For example, I am opposed to this idea that a person’s intellectual property can be passed down indefinitely. The idea takes effort to create, but unlike physical property, it does not take any effort to maintain.

        Certainly the modern Western system requires reforms, but we must be vigilant to not use it as a straw man representation of legitimate intellectual property laws.