The British Are Coming...To Ban Altria's Newest Hit Product...

Gaston Kroub

A major salvo in the cigarette alternative patent wars has just been fired, with British American Tobacco’s RJ Reynolds Vapor Company’s twin-barreled patent assault against Altria’s global hit IQOS “tobacco heating system.” While distribution in the US has been limited for the IQOS devices and tobacco-containing HeatSticks so far, the products have already enjoyed success in global markets and are expected to present a “real growth opportunity” for Altria’s Philip Morris domestically. But not if RJ Reynolds has its way.

On April 9. the company asserted six patents against Altria entities in an Eastern District of Virginia complaint. Despite being a fairly standard notice pleading, the complaint does make some interesting assertions, particularly regarding Altria’s notice of the RJR patent rights. In particular, the complaint asserts that numerous Altria patent applications cite to the RJR patents. It also alleges that Altria has a practice of surveying competitor patents with the goal of determining freedom-to-operate. Neither of these allegations are unusual in competitor patent cases of course. But they do set the stage for getting discovery into Altria’s knowledge and possible analysis of the RJR patent threat prior to litigation. Also noteworthy is that RJR filed the complaint in the rocket docket of the Eastern District of Virginia, even as the interplay between this case and RJR other related filing is still uncertain at this early stage.

That second filing, also on April 9, was an ITC complaint. As is common in streamlined ITC actions, RJR only asserts three patents (U.S. Patent Nos. 9,839,238 (“the ’238 patent”), 9,901,123 (“the ’123 patent”) and 9,930,915 (“the ’915 patent”)) in that filing, while also arguing that its own Vuse products practice the claimed inventions from those patents. At first glance, of course, it is readily apparent that the Vuse products are more traditional e-cigarettes, as opposed to the IQOS system’s new twist on the smoking genre. But the important thing in patent law is the comparison of the claims of the asserted patents with the accused IQOS devices, even as ITC rules require RJR to identify domestic products that practice the asserted patents.

At first glance, the asserted patents seem broadly drawn, to basic features of the IQOS system. In addition to its claims for direct infringement, the complaint alleges that the Altria entities “represented to FDA that they would include with the IQOS® system detailed instructions directing end users to insert a tobacco stick into the IQOS® Holder, and to heat (but not ignite) the tobacco stick to produce an aerosol incorporating tobacco components and/or tobacco derived components” thereby inducing infringement as well. While we can assume that both infringement and validity will be hotly-challenged in this high-stakes two-front patent battle, it is important to remember that the goal of the ITC complaint is to halt importation of the infringing products. Which would give huge settlement leverage to RJR if it were successful.

Ultimately, these parallel cases are critical for both Altria and BAT investors to monitor going forward. If the products at issue really have such commercial promise domestically, successful patent assertion by BAT could have a material impact on Altria’s profits going forward. The tobacco patent war of 2020 is under way…