US Federal Court Supports ITC Ban on PMI's IQOS

Recently, a U.S. federal appeals court upheld the import ban imposed by the International Trade Commission (ITC) on products from under the brand name IQOS, owned by Philip Morris International (PMI). The court stated that PMI had waited too long to contest the ban's validity. However, PMI has stated that it still plans to begin selling IQOS products in the United States by May 2024.

Judge: PMI believes ITC abused its power but did not raise the issue to the court. The court considers this as a waiver.

The panel of judges believed that PMI had abandoned its argument - that ITC had abused its discretion by implementing the ban without consulting with FDA as required by law. PMI claimed that if the two agencies had consulted before the commission's decision, the import ban would not have been implemented.

PMI believes that the FDA approved these products because they are deemed beneficial to health and may likely convince the ITC not to implement a ban.

According to a draft document, PMI has expressed its opposition to a motion to temporarily halt the implementation of an import ban.

However, Judge Kara F. Stoll ruled that PMI's argument came too late, leading them to conclude that PMI withdrew their appeal on this argument.

Judge Stoll added that the panel believes that the ITC fulfilled its obligation to consult with the FDA by issuing a letter to the agency and publishing a notice in the Federal Register announcing that the committee was considering a ban on IQOS products and seeking comments.

Background: ITC alleges that IQOS infringes on Renault's patents and bans its imports.

According to court documents, the International Trade Commission (ITC) conducted an investigation into the tobacco heating system and tobacco stick of PMI's IQOS brand at the request of competitor Reynolds American Inc. in May 2020. The committee's task was to determine whether PMI's product had used a tobacco heating system and tobacco stick that infringed upon Reynolds American Inc.'s VUSE vaporization system patent.

In September 2021, the International Trade Commission discovered that IQOS products had violated the patent of Reynolds Tobacco. The commission subsequently issued an import ban, stating that the IQOS brand products violated Section 337 of the Trade Tariff Act of 1930, which prohibits the importation of products that infringe on US patents.

In December 2021, PMI appealed to the federal circuit court regarding the import ban and requested that the court revoke the ban. PMI argued in its appeal that the ban was inappropriate because the ITC failed to consult adequately with the FDA, and the commission's ruling incorrectly concluded that the IQOS product infringed on Reynolds Tobacco's patent.

PMI believes that the patent of Renault Tobacco is invalid due to obviousness, and therefore cannot be infringed upon.

However, in the opinion on Friday, the panel of experts rejected PMI's argument on patent invalidity. The appellate panel believed that the ITC's final conclusion on the validity of the patent was not arbitrary or capricious, and therefore could not be overturned.

Latest response: PMI still plans to sell its IQOS product in the United States in May 2024.

A representative from British American Tobacco, the parent company of Reynolds Tobacco, has informed Law360 that Reynolds will continue to "vigorously defend" its intellectual property and innovation portfolio.

A representative from PMI informed Law360 that the company was disappointed with the court's ruling, but they still intend to sell their IQOS products in the United States by May 2024.

The representative said, "Our commercial plan has made significant progress, including the development of sales, distribution, retail, consumer engagement, and support capabilities in the United States. Today's decision is an exception because opposite rulings have been made in Europe and Asia, deeming the same patent series invalid.

ITC declined to comment.

It has been reported that the patents in question are US Patent No. 9901123 and 9930915, which have been subject to a lawsuit.

Lawyer: Lessons for Chinese companies from patent disputes

According to Tang Shunliang, a seasoned lawyer in the field of new tobacco, and partner at Beijing Zhong Lun Wende (Kunming) Law Firm, in an article titled "Will China's electronic cigarette industry be the next to face a ban following IQOS being prohibited in the US?" published in the Juju Think Tank, he suggests that the patent dispute has important implications for Chinese electronic cigarette companies. Tang recommends that industry associations and core enterprises within the electronic cigarette industry should establish a patent-focused industry organization and work on the following areas.

The organization will leverage its resources and hire legal and intellectual property experts in the new tobacco field to form a powerful expert team, providing crisis management consulting to member companies and adopting various strategies to respond to foreign tobacco companies' patent blockade of the domestic market for heated but not burned cigarettes. When disputes occur in target market countries, the organization will provide timely patent consulting to domestic enterprises. In critical technological areas, the organization can establish an intellectual property alliance or patent pool to share some patents, benefit each other, and increase domestic product market share in the international market. Lawyer Tang believes that PMI can now circumvent regulatory restrictions on IQOS and enter the US market with ILUMA, but ILUMA still needs to submit to PMTA review.

References:

The Federal Circuit has upheld the International Trade Commission's ban on Philip Morris's IQOS devices.