Big Tobacco Is Spending More Time Fighting Over Patents

Much less dangerous nicotine merchandise like heated tobacco sticks have been meant to assist cigarette firms keep out of court docket. As an alternative, they’re inflicting a spike in patent lawsuits.

In September, the U.S. Worldwide Commerce Fee dominated that

Philip Morris International

PM 0.48%



MO 0.94%

should stop imports of IQOS heated tobacco sticks on account of a patent dispute with R.J. Reynolds Tobacco, which is owned by U.Ok.-listed British American Tobacco. The case is now in assessment and could be appealed. However within the worst-case state of affairs, IQOS will likely be banned from the profitable American tobacco market.

This may have much less influence on the product’s proprietor PMI than on Altria. The proprietor of the Marlboro model within the U.S. has a licensing settlement to distribute IQOS within the nation, which might doubtlessly contribute as much as 15% of gross sales by the tip of 2023, in line with estimates from brokerage Jefferies.

Producers are spending extra time combating like this, because the seek for cigarette options intensifies. Between 2005 and 2010, patent lawsuits with tobacco corporations on each side of the dispute averaged two a 12 months within the U.S., in line with information from analytics corporations MaxVal and LexisNexis. These instances often concerned the large corporations cracking down on smaller copycats. Since 2015, when the trade sharpened its give attention to smokeless merchandise, the annual tally has risen greater than 10-fold.

Philip Morris and BAT are furthest forward of their shift to smoke-free technologies, with respective targets to get greater than half and one-fifth of internet income from much less dangerous merchandise by the center of the last decade. They’re additionally at one another’s throats probably the most. The 2 have a patent dispute pending in Japan, one other key marketplace for smokeless merchandise. And though September’s U.S. ruling went in BAT’s favor, the maker of Newport cigarettes has not too long ago misplaced disputes towards its rival in Poland, the Czech Republic, Romania, Bulgaria, Greece and the U.Ok.


Can the tobacco trade revamp its picture? If that’s the case, how? Be a part of the dialog under.

One motive why tobacco corporations are warring is just because there’s extra mental property to defend. Up to now, tobacco firms could have patented cigarette papers, or their high-speed manufacturing know-how. However e-cigarettes and heated tobacco sticks have extra expertise of their design than flamable smokes. Philip Morris had 1,300 patents granted as of 2020, for instance, up from 170 in 2016.

BAT has been probably the most litigious main tobacco agency within the U.S. over the previous five-or-so years, submitting 35 patent lawsuits. However it’s nonetheless far behind PMI in shaking up its portfolio. The corporate spends £350 million a 12 months, equal to roughly $480 million, on analysis and growth associated to smoke-free merchandise—round a 3rd lower than PMI’s annual common because it first started pouring money into cigarette options in 2008. That is mirrored within the two firms’ valuations. Shares in Philip Morris commerce at 14.5 instances projected earnings, double its rival’s a number of.

Hyperactive patent attorneys can solely achieve this a lot for BAT’s flagging valuation. A extra beneficiant innovation finances is likely to be a sounder funding.

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Corrections & Amplifications
Philip Morris had 1,300 patents granted as of 2020. An earlier model of this text incorrectly stated Philip Morris filed 1,300 patents in 2020. (Corrected on Oct, 12, 2021)

Write to Carol Ryan at [email protected]

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Appeared within the October 13, 2021, print version as ‘Tobacco Trade Again in Courtroom.’

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