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Philip Morris, Altria, is banned from promoting Iqos tobacco units in the USA

Philip Morris International is showing an iQOS electronic cigarette that heats tobacco sticks, but doesn’t burn them.

Fabrice Coffrini | AFP | Getty Images

The US International Trade Commission ruled on Wednesday that Philip Morris International and Altria must stop selling and importing the Iqos tobacco device.

The decision is the result of patent litigation by rival RJ Reynolds. The trade authority found that the cigarette alternative infringed two of Reynolds’ patents.

The import and sales ban will take effect two months after an administrative review that requires President Joe Biden’s signature. Philip Morris said it plans to appeal the trade authority’s decision, and an Altria spokesman said the two companies were working together on contingency plans.

“We continue to believe that RJR’s patents are invalid and that IQOS is not infringing these patents,” an Altria spokesman said in a statement to CNBC.

Altria launched the Iqos device in the United States two years ago, but 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 supposed to give the user the same boost of nicotine without as many toxins as when smoking a cigarette.

Philip Morris sells the device in dozens of international markets and has licensed Altria to sell it in the United States. Although Iqos doesn’t represent a large part of Altria’s US business, it’s part of the company’s move away from traditional tobacco products that has seen falling demand.

“The infringement of our intellectual property undermines our ability to invest and innovate, thereby reducing the health impact of our company,” said Reynolds’ American spokesman Kaelan Hollon in a statement. “We will therefore defend our intellectual property robustly around the world.”

British American Tobacco, the parent company of Reynolds American, has already taken similar legal action against Philip Morris in a number of international markets. However, courts in the UK and Greece have sided with Philip Morris in these disputes. Bank of America Securities analyst Lisa Lewandowski wrote in a notice to her clients that given Philip Morris’ previous success against the claims, she does not expect Philip Morris or Altria to come to an agreement with British American Tobacco.

The stocks of the three tobacco companies fell 1% or less in pre-trading on Thursday.

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