(Bloomberg) -- Philip Morris International Inc. and partner Altria Group Inc. have to stop importing their IQOS heated-tobacco sticks into the U.S. after a deadline passed without any action by the Biden administration to stop it.
Philip Morris and Reynolds America Inc. had each been talking with administration officials since September, when the International Trade Commission ordered the import ban in September after finding that IQOS infringed two Reynolds patents for electrically-powered devices with a heater to generate an aerosol. The order entered a sixty-day presidential review period.
In an email Monday, the Office of the U.S. Trade Representative confirmed no action was taken, which means the ban automatically took effect. The next step for Philip Morris and Altria is to seek a delay with the U.S. Court of Appeals for the Federal Circuit in Washington, the nation’s top patent court, which will hear any appeal of the underlying patent case.
Philip Morris said it’s disappointed in the results. “Our contingency plans to return IQOS to the U.S. market are underway,” it said in an emailed statement. “The U.S. patent office is also reviewing certain claims of the patents in question with initial rulings expected in 2022, albeit subject to an appeal process.”
Philip Morris could move production to the U.S. or redesign its products to avoid the ban -- but a redesign would need clearance from Customs and Border Protection and could lead to another round of legal wrangling.
Tai had to weigh the government’s interest in protecting intellectual-property rights against the public interest in lowering use of cancer-causing cigarettes. Only once in more than three decades has a U.S. president overruled an ITC decision on public policy ground, despite sometimes intense lobbying from the companies involved.
Reynolds, a subsidiary of British American Tobacco Plc, has said it was “advocating on behalf of our innovation” -- the easier argument to make. Administrations from both political parties have cited the need to protect patents and other intellectual property as key, particularly when it comes to economic competition with China.
Philip Morris hinged its pitch on two arguments -- the relative health benefits of alternatives to smoking and legal questions about the validity of the Reynolds patents.
The company argued that removing the product from shelves would not be in the interest of public health since there’s no like product on the market. IQOS is the only heated-tobacco product in the U.S. that the FDA has authorized to be marketed as reducing consumers’ exposure to harmful chemicals found in cigarettes.
Philip Morris has also argued that it would be unfair to face an import ban when the Patent and Trademark Office is taking a second look at the patents after determining there’s a “reasonable likelihood” that at least some of the patent claims are invalid. A final decision is expected by Jan. 25 on one of the two Reynolds patents in the case and in April for the other.
It’s a novel legal argument. The ITC in October suspended imposition of an import ban involving staples for robotic surgery because the PTO review board had said the patent was invalid and the decision was on appeal, but it’s never let the status of ongoing reviews stand in the way of its work.
(Updates with comment from Philip Morris in third paragraph.)
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