Philip Morris International is showing an iQOS electronic cigarette that heats tobacco sticks, but doesn’t burn them.
Fabrice Coffrini | AFP | Getty Images
Altria and Philip Morris International are no longer able to sell or import Iqos tobacco equipment in the US after the Biden government decided not to take action on an ongoing patent litigation.
Rival RJ Reynolds, a subsidiary of British American Tobacco, had filed a lawsuit with the United States’ International Trade Commission. In late September, the ITC ruled that the Iqos device infringed two of Reynolds’ patents. As part of the process, the Biden administration conducted a 60 day administrative review and decided not to take any action to reverse the ITC’s decision.
“Today’s announcement is a measure of the success of our IP rights enforcement to ensure we can continue to innovate as is common in innovation-based industries,” said Gareth Cooper, Assistant General Counsel of British American Tobacco, in a Explanation.
Altria launched the Iqos device in the United States two years ago, but began developing the product more than a decade ago before Philip Morris was spun off from the company. The device heats tobacco without burning it, which is supposed to give the user the same boost of nicotine without as many toxins as when smoking a cigarette.
Philip Morris sells the device in dozen of international markets and has licensed Altria to sell it in the United States. While Iqos isn’t a large part of Altria’s US business, it’s part of the company’s move away from traditional tobacco products that has seen falling demand. Altria said it counts 20,000 US consumers as users of the device, but they will no longer be able to purchase it in the US. The company is offering refunds to existing users.
This does not end the patent dispute between Reynolds, Altria and Philip Morris. Reynolds also filed two claims in the US Patent and Trademark Office regarding Iqos. Early decisions are expected in 2022, although decisions are open to appeal, which could drag the process out even longer. Stifel analyst Christopher Growe wrote in a customer note that he believes the ultimate US patent challenge will be successful for Iqos.
Philip Morris said his contingency plans for a return to the US are underway. The two companies could move manufacturing to the US or change the design far enough to avoid patent infringement claims.
“Although this decision will be disruptive in the short term, we continue to see great opportunities for IQOS and other FDA-cleared smoke-free products in the US in the years to come,” said Philip Morris in a statement.
British American Tobacco shares lost 1% early on Tuesday, while Altria and Philip Morris shares were both less than 1% lower.