Washington vape company battles Chinese manufacturer over patent claims

Seattle-based vaporizer distributor Next Level Ventures filed a countersuit against Chinese vape manufacturer Shenzhen Smoore Technology Co. Ltd. in U.S. federal court, arguing that the Chinese maker of the popular CCELL vape technology used illegal antitrust practices to gain and maintain a dominant share of the American cannabis vaporizer hardware market.

The move by NLV is the latest in a multiyear legal fight dating back to 2021, when Smoore first filed suit in Chinese court against NLV’s overseas vape hardware supplier – a competitor of Smoore’s called Naixing – and simultaneously filed complaints in the U.S. with the International Trade Commission against NLV and 37 other vaporizer distributors, according to a summary in the new complaint.

In February 2022, the ITC ruled that Smoore failed to properly demonstrate any infringement on any of its patents, according to the latest NLV lawsuit. Nonetheless, Smoore filed a separate patent infringement lawsuit against NLV in October that year. The suit was granted a stay, but the stay was lifted this past March, according to court records. That case is now proceeding.

So NLV this month filed its own counterclaim in U.S. District Court in the Central District of California, denying all of Smoore’s claims and asserting that it was Smoore that stole NLV’s patented vaporizer tech. The new lawsuit from NLV requests a trial, punitive damages, and a court order prohibiting Smoore from infringing on U.S. patents on vaporizer technology held by NLV.

The new suit alleges that the Smoore broke antitrust laws in a number of ways in order to control the vaporizer market as much as possible, by illegally controlling pricing, supply, and driving competitors out of business.

“Unable to compete on the merits, Smoore resorted to a variety of anticompetitive and illegal tactics in an effort to maintain its dominant share of the cannabis closed vaporizer market,” the countersuit alleges. “These tactics have included knowingly fraudulent and abusive patent litigation and the imposition of unreasonably anticompetitive distribution requirements.”

After Smoore entered the vape hardware market in 2016, following the newly growing rush of recreational cannabis states after Colorado and Washington state legalized in 2012, the Chinese firm quickly gobbled up 80% market share, the suit claimed. But with new competition quickly emerging in the U.S., Smoore’s dominance was threatened, and it resorted to illegal tactics to keep its dominance, the suit charged.

“Beginning around 2018 or 2019, Smoore began losing market share to these upstart American competitors,” the suit charged. “Between 2018 and 2023, Smoore’s market share for its CCELL products dropped from over 80% to approximately 50-60%.”

Through its distribution agreements in the U.S., however, Smoore required its business partners to maintain certain price points that Smoore itself undercut as a competitor, while also requiring U.S. distributors to disclose their customer lists, the suit charged.

Smoore also barred its vape distributor partners from selling any competing hardware, such as vapes produced by NLV or other U.S. companies, the suit asserted, and would actively blackball U.S. distributors that didn’t play by its rules. The very lawsuit Smoore brought against NLV is an attempt to control the vape market by driving the U.S.-based firm out of business, NLV asserted.

All of that, NLV contended in its suit, gives Smoore “monopoly power” that is federally illegal.

“Smoore has been able to forestall competition in the closed cannabis oil vaporizer systems market, making it unlikely that any other entrant could have gained a meaningful market share,” NLV asserted in the suit.

Smoore representatives could not be reached for comment on Monday.

No future hearings are yet scheduled in the case, according to court records.