Procter & Gamble Wins Round In Patent Feud With Diaper Rival
Paragon Trade Brand Inc.’s stock price plummeted 36 percent Wednesday after a judge ruled that the company infringed on Procter & Gamble’s patents for Pampers and Luvs disposable diapers.
Paragon, the nation’s largest maker of private-label disposable diapers, plunged $7.37-1/2 at $12.87-1/2 on the New York Stock Exchange.
The drop came after U.S. District Court Judge Joseph Longobardi of Wilmington, Del., ruled Tuesday that Paragon infringed upon P&G’s two patents for improving the fit and comfort of disposable diapers by using an “inner leg gather” that prevents leaks.
He also rejected Paragon’s patent infringement claims against P&G.
Longobardi said Paragon must pay P&G lost-profit damages equal to 8 percent of its sales of diapers that infringed upon P&G’s patents, plus a 2 percent royalty on the remaining 98 percent of the infringing sales. Paragon also must pay P&G lost profits and other damages for infringing on the patents between March 1991 and Dec. 17, 1991.
Paragon, which had $580 million in sales in 1996, estimated its liability could be $160 million to $200 million. The company plans to appeal.
“We continue to believe that the patents asserted by P&G are invalid and not infringed by our products,” Bobby Abraham, chief executive of Norcross, Ga.-based Paragon, said in a news release.
The two companies agreed that Paragon can continue to make and distribute its diapers for six months while pursuing the appeals.
In a 1994 lawsuit, P&G said it was assigned the patents in 1987 and 1989 and that Paragon was selling diapers covered by the patents without authority or license.
P&G spokesman Scott Stewart said the judge’s decision was expected.
“Our company will not hesitate to take whatever action that is necessary to protect our investments and technologies,” he said.
In April, P&G and Paragon and settled lawsuits related to patents on feminine protection products. Terms of the settlement were not disclosed.
Paragon had sought a declaration that 10 of P&G’s patents were either invalid or not infringed upon by Paragon’s new line of feminine care products. P&G countersued for infringement of six of the patents.
Paragon also makes training pants, feminine care products, adult incontinence products, household cleaners and air freshener. Its products are distributed mainly through grocery and drug stores and warehouse clubs that market the products under their own store brand names. The products usually sell for less than national brands.
The company was spun off from forest products giant Weyerhaeuser Co. in 1993.
Alan Cyron, Paragon’s executive vice president and chief financial officer, said disposable diapers account for about 90 percent of the company’s sales.
He said Paragon may redesign its diapers if it loses the appeals. He also said Paragon was not sure how it will pay the award if the appeals are lost.