IQOS Pauses Expansion After Patent Ruling

    Photo: Kuznietsov Dmitriy

    Philip Morris USA has paused U.S. expansion of its IQOS heat-not-burn (HnB) cigarettes following an unfavorable U.S. International Trade Commission (ITC) ruling, reports The Winston-Salem Journal, citing the company’s second-quarter report.

    In April 2020, British American Tobacco subsidiaries R.J. Reynolds Tobacco Co., RAI Strategic Holdings and R.J. Reynolds Vapor Co. filed a patent infringement lawsuit against Philip Morris USA.

    The complaint focuses on three HnB technology patents held by the company. An additional two patents are involved in a separate legal proceeding before the patent and trademark office.

    In May, an ITC administrative law judge found that the IQOS system infringes two of the plaintiff’s patents and recommended imposition of a ban on the importation of the IQOS system.

    On July 27, the ITC accepted review of the administrative law judge’s findings and recommendations on certain issues, including issues relating to the patent infringement claims and potential remedies, including a ban on the importation of the IQOS electronic device, Marlboro HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.

    The ITC’s ultimate order is subject to review by the U.S. Trade Representative and federal court. Due to this uncertainty, PM USA has delayed further expansion of IQOS and Marlboro HeatSticks.

    IQOS is the only HnB product authorized for sale in the U.S., where it is sold by Altria. Last year, the U.S. Food and Drug Administration allowed the company to market IQOS as reducing consumers’ exposure to harmful chemicals found in cigarettes.

    The IQOS products debuted in test markets in Atlanta, Georgia, in October 2019 and Richmond, Virginia, in November 2019.

    During the second quarter, PM USA expanded retail distribution of Marlboro HeatSticks into the Triad and other metro areas of North Carolina as well as northern Virginia and Georgia.

    The expansion contributed to Marlboro HeatSticks’ retail sales volume jumping by nearly 40 percent, including reaching a 0.8 percent market share for overall cigarettes in Atlanta as well as 0.5 percent in Charlotte.