ITC: IQOS Infringes on BAT Patents, U.S. Sales to End

The International Trade Commission (ITC) has upheld an initial determination from May 2021 that Philip Morris International’s IQOS device infringes on two patents owned by BAT subsidiary Reynolds American Inc. (RAI).

The agency has instituted an import ban and a cease-and-desist order preventing IQOS consumables and devices from being sold in the U.S. in 60 days. PMI’s U.S. partner, Altria Group, plans to continue to sell IQOS through the 60-day period in its existing markets.

BAT welcomed the ruling. “Infringement of our intellectual property undermines our ability to invest and innovate and thereby reduce the health impact of our business,” the company wrote in a statement. “We will therefore defend our IP robustly across the globe.”

The patents relate to an electronically powered device with a heater to generate an aerosol and expire in October 2026 and November 2031. BAT has filed similar cases globally, including in Germany, the U.K., Japan and Italy.

Morgan Stanley said the ruling would have limited financial impact on PMI and Altria, as IQOS in the U.S. is not a meaningful contributor to the companies’ earnings. The outcome of similar cases brought by BAT against PMI internationally, however, could have a greater impact. But so far, PMI has been successful defending cases in the U.K. and Greece.

The investment bank also noted that the IQOS ban applies to imported product, suggesting it may be overcome by shifting production to the U.S.

The ITC decision will now be reviewed by the U.S. Trade Representative. If the decision is not vetoed within 60 days (only a handful have ever been vetoed), it can be appealed to the U.S. Court of Appeals, but the import ban would still be in effect throughout an appeals process.