DRUGS company GlaxoSmithKline has lost a crucial appeal in the US over patent rights for one of its best-selling products.

The pharmaceutical firm had been fighting a decision by a federal court in Washington DC upholding an earlier ruling that legal protection over its Augmentin antibiotic was now invalid.

The Anglo-US group has been battling for 19 months to stifle generic competition to Augmentin, once its second-biggest product with sales of almost $1bn in 2001.

A US court ruling in May last year that said Glaxo's patents in the US were invalid paved the way for generic copies to come on the market and sparked a sharp drop in sales.

Geneva, a subsidiary of Novartis, in Switzerland, led the way by launching its version of the drug across the Atlantic the following month.

It was followed by rival drugs groups Teva Pharmaceuticals, of Israel and Ranbaxy, of India, which won regulatory approval to market versions of the drug in the US.

The US Court of Appeals for the Federal Circuit ruled in favour of Novartis and Geneva late last week. The court ruling confirmed Geneva's claim that seven of Glaxo's patents for the drug were "improper and should not have been used to extend patent protection for GSK's product".

Sales of Augmentin in the US slumped 40 per cent following the initial ruling last year, and Glaxo has continued to lose market share to competitors.

But the company, which has a large plant in Barnard Castle, County Durham, told the London market yesterday it would remain in the market with Augmentin by focusing on newer versions of the drug.

Simon Bicknell, Glaxo's company secretary, said: "Glaxo continues to be committed to its newer Augmentin antibiotic medicines - Augmentin ES and XR -which now represent nearly 35 per cent of the total number of prescriptions being written for branded and generic Augmentin."

Shares in Glaxo rose 8p to stand at 1376p following the news, which analysts said did not come as a surprise.

Henk Potts, of Barclays stockbrokers, said Glaxo's statement that it had been able to hold on to one-third of market share cheered investors.