Philip Morris International shows an iQOS electronic cigarette, which heats tobacco sticks but does not burn them.
Fabrice Coffrini | AFP | Getty Images
The decision is the result of a patent case filed by rival R.J. Reynolds. The trade agency found that the cigarette alternative infringed on two of Reynolds’ patents.
The import and sales ban will take effect in two months after an administrative review that requires President Joe Biden’s signature. Philip Morris said that it plans to appeal the trade agency’s decision, and an Altria spokesperson said that the two companies are working together on contingency plans.
“We continue to believe RJR’s patents are invalid and that IQOS does not infringe those patents,” an Altria spokesperson said in a statement to CNBC.
Altria launched the Iqos device in the United States two years ago, but it began development of the product more than a decade ago before Philip Morris International was spun off from the company. The device heats tobacco without burning it, which is meant to give users the same rush of nicotine without as many toxins as smoking a cigarette.
Philip Morris sells the device in dozens of international markets and has granted Altria a license to sell the it in the U.S. While Iqos doesn’t represent a large portion of Altria’s U.S. business yet, it’s part of the company’s shift away from traditional tobacco products, which have seen falling demand.
“Infringement of our intellectual property undermines our ability to invest and innovate and thereby reduce the health impact of our business,” Reynolds American spokesperson Kaelan Hollon said in a statement. “We will therefore defend our IP robustly across the globe.”
British American Tobacco, the parent company of Reynolds American, has already pursued similar legal action against Philip Morris in a handful of international markets. However, courts in the United Kingdom and Greece have sided with Philip Morris in those disputes. Bank of America Securities analyst Lisa Lewandowski wrote in a note to clients that she doesn’t expect Philip Morris or Altria to settle with British American Tobacco, given Philip Morris’ previous success against the claims.
Shares of the three tobacco companies were down 1% or less in premarket trading Thursday.
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