Thursday, May 7, 2009

NewPage and Verso Kiss and Make Up

North America’s two coated-paper giants have decided to stop fighting about who has the right to make high-bulk coated-groundwood papers.

Verso Paper revealed today that NewPage had granted it the right to use a NewPage patent for making high-bulk lightweight-coated (LWC) paper. The legal brouhaha started last summer when NewPage sent Verso a cease-and-desist letter claiming patent infringement and demanding that Verso stop selling its entire line of coated #5 papers.

Verso responded with a lawsuit asking a federal court to declare that it was not breaching the eight-year-old patent that had been issued to a predecessor of NewPage, Consolidated Paper. Verso and NewPage settled out of court in January.

“As part of the settlement, NewPage granted the Company an irrevocable, perpetual, nonexclusive, worldwide, royalty-free, and fully paid-up right and license for any and all purposes under the NewPage patent and any continuation, division, reissue or non-U.S. counterpart of the patent,” Verso stated in a filing today with the Securities and Exchange Commission.

The patent addressed the issue of how to bulk up offset LWC without sacrificing too much gloss (at least 40 on the TAPPI scale). For the most part, the patented method relied on tactics that are widely used among paper mills to bulk up paper – e.g. lower pressure in the supercalenders, use of a gap former, more groundwood pulp, and less coating. A more unusual feature of the patent’s recipe is the use of expensive plastic pigments in the coating “to provide increased stiffness and good gloss."

The patent apparently grew out of requests from publishers of weekly magazines, especially Time Inc., to help them save money on postage by supplying lighter paper without sacrificing bulk or quality. During the past decade, Time Inc., a major customer of both NewPage and Verso, has switched most of its weekly magazines from 32# LWC to 30#, to 28#, back to 30#, and recently to 29# -- at times roiling the entire North American LWC market because of its huge position.

With the settlement, Verso can go about its business as usual, and NewPage has no immediate worries about its patent being declared invalid. But that leaves them two other problems: customers and technology.

Ratebase cuts, shifts to supercalendered paper, and reductions in ad pages have resulted in weekly magazines buying far less high-bulk LWC than they did a few years ago.

And the combination of film coating with online "hot/soft" calendering has proven to be the easiest way to make high-bulk LWC with moderate gloss. Film-coated papers from such mills as Kruger, Catalyst, and SAPPI are often bulkier than the high-bulk sheets coming from companies like NewPage and Verso, which rely on an older, more expensive technology -- blade coating followed by offline supercalendering.

No comments: