IP Law Daily, PATENT—Fed Cir.: Federal Circuit upholds import ban on Philip Morris ‘Heat-Not-Burn’ E-Cigarettes, (Apr 3, 2023)

By George Basharis, J.D.

The ITC had found Philip Morris’ IQOS technology used in electronic cigarettes infringed on patents held by rival RJ Reynolds.

The U.S. Court of Appeals for the Federal Circuit has affirmed a final ruling by the International Trade Commission (ITC) finding that electronic smoking devices using a technology known as IQOS and imported to the United States by Philip Morris and Altria infringed patents held by R.J. Reynolds. As a result of the ruling, the ITC had issued a limited exclusion order that prevented Phillip Morris and Altria from importing its IQOS products into the United States. In upholding the ban, the Federal Circuit found Philip Morris and its affiliates had violated the Tariff Act by importing and selling infringing tobacco products. The court rejected claims by Philip Morris that the ITC should have consulted with the Department of Health and Human Services (HHS) and the Food and Drug Administration (FDA) before handing down the ban. The court also rejected challenges to the ITC’s determinations of public interest, domestic industry, patent validity, and infringement (Philip Morris Products S.A. v. ITC, March 31, 2023, Stoll, K.).

Philip Morris and Reynolds are competing manufacturers of tobacco products, including heat-not-burn tobacco products. Heat-not-burn electronic cigarettes heat tobacco sticks but do not burn them. The products are claimed to be safer than traditional tobacco products, and the FDA has deemed IQOS products beneficial to public health because they release fewer toxins.

In 2020, Reynolds filed a complaint with the ITC claiming that the IQOS line of electronic tobacco products that are imported and sold by Philip Morris infringed on three of its patents—U.S. Patent Nos. 9,839,238 (the ’238 patent), U.S. Patent No. 9,901,123 (the ’123 patent), and U.S. Patent No. 9,930,915 (the ’915 patent). Reynolds also asserted that its VUSE line of vapor nicotine products, which are protected by its patents, established the economic and technical prongs of domestic industry, required elements under the Tariff Act.

In May 2021, the administrative law judge (ALJ) in his initial determination found Reynolds failed to prove infringement of the ’238 patent, but had shown that Philip Morris infringed the asserted claims of the ’123 patent and the ’915 patent. The ALJ also determined that Philip Morris had not shown the asserted claims of to be invalid, Reynolds had established the existence of a domestic industry with respect to both the asserted patents, and the public interest evidence did not weigh against entry of a remedy. The ALJ also recommended that the ITC issue a limited exclusion order. In September 2021, the Commission concluded in its final determination that Philip Morris had violated Section 337 of the Tariff Act as to claims 1-3, and 5 of the ’915 patent and claims 27-30 of the ’123 patent and issued a limited exclusion order banning the importation of infringing products by Philip Morris and its affiliates. Philip Morris appealed.

FDA consult. Philip Morris argued the ITC erred by failing to consult with Health and Human Services and the Food and Drug Administration, which oversees the regulation of tobacco products in the U.S. The court agreed with the ITC that Philip Morris had failed to preserve the issue for review. Nonetheless, the court found the ITC had satisfied its duty to consult with HHS and the FDA. The ITC published notice of its investigation in the Federal Register and, although the FDA did not respond formally, the ITC did receive input from the FDA on public interest. The court noted that the ALJ based his findings on scientifically reliable information from government authorities, including the FDA.

Public interest. Philip Morris argued that the ITC’s ban was an abuse of discretion because it ignored evidence on public interest. According to Phillip Morris, the ITC should have deferred to the FDA’s findings that IQOS products reduce the risks associated with traditional cigarettes and denied injunctive relief. But the ITC determined that banning the importation of IQOS electronic cigarettes would not adversely impact public health and welfare because of alternative non-tobacco therapies on the market that reduce the use of traditional tobacco products. The finding was supported by expert testimony, scientific evidence, and FDA documents regarding IQOS products.

Domestic industry. Philip Morris contended that Reynolds’ VUSE products did not satisfy the domestic industry requirement of the Tariff Act because the products had not been approved by the FDA for use in the U.S. when Reynolds filed its ITC complaint. The Federal Circuit rejected the argument, noting the plain language of the statute did not require protected articles to have regulatory approval.

Patent-specific claims. Philip Morris raised several patent-specific arguments. First, Philip Morris argued the ITC erred by not agreeing with Philip Morris that the ’123 patent was obvious over a prior invention. The prior invention claimed a method of heating a tobacco stick within an enclosure that encircled by heating elements. The ’123 patent claimed a method of heating tobacco by placing a heating element within the body of the enclosure. Philip Morris argued that the use of a central heating element in the prior art would have been obvious to a skilled artisan. However, the ALJ found that the prior art’s emphasis on placing the heating element around the outside of the e-cigarette housing without any discussion of using a central heating element was evidence that it would not have been obvious to modify the prior art to include a centered heater. On appeal, Philip Morris maintained that the ’123 patent itself bolstered its obviousness argument because it described the placement of the heater element as a “matter of design.” The Federal Circuit found the issue of obviousness to be close, but ultimately concluded that the ALJ’s and ITC’s conclusions and findings were reasonable and supported by the evidence.

The appeals court also rejected Philip Morris’ contention that the ITC’s decision was based on an erroneous construction of the ’915 patent. The accused IQOS products included a chamber into which a tobacco stick is inserted and heated by an electrical energy source. The heating chamber, or “receiving end,” is separated from the electronics chamber by an isolation barrier. The ’915 patent did not claim an isolation barrier, but the ALJ found the IQOS satisfied the “receiving end” limitation of the ’915 patent. The court agreed with the ALJ that the ’915 patent neither required nor prohibited an additional structure or element, such as an isolation barrier. Consequently, the court affirmed the ITC’s determination that the accused IQOS products infringed the ’915 patent.

Finally, Philip Morris argued that the ’915 patent had been invalidated by an electronic heat-not-burn device (the “Accord K”) developed and used publicly prior to the earliest possible priority date of the ’915 patent. The ALJ concluded that Philip Morris failed to establish by clear and convincing evidence that the ’915 patent was invalidated by the Accord K. To establish prior use, Philip Morris relied on the testimony of a former employee who claimed the device had been developed and used in Miami, Florida as early as 2006. The earliest priority date of the ’915 patent was 2011. Philip Morris sought to corroborate the former employee’s testimony by introducing various documents, including a presentation made in Miami. However, the allegedly corroborating documents did not establish a definite link to the Accord K device, and the ALJ concluded Philip Morris had failed to meet its evidentiary burden. The Federal Circuit agreed, rejecting Philip Morris’ claim that the ALJ applied an inappropriately heightened standard. Instead, the court found no error in the ALJ’s factual conclusions regarding the sufficiency of corroboration.

The Case is No. 22-1227.

Attorneys: Gregory G. Garre (Latham & Watkins LLP) for Philip Morris Products S.A., Philip Morris USA, Inc. and Altria Client Services LLC. Lynde Faun Herzbach (Office of the General Counsel) for the International Trade Commission. George A. Castanias (Jones Day) for RAI Strategic Holdings, Inc., R.J. Reynolds Vapor Company, and R.J. Reynolds Tobacco Company.

Companies: Philip Morris Products S.A.; Philip Morris USA, Inc.; Altria Client Services LLC; RAI Strategic Holdings, Inc.; R.J. Reynolds Vapor Company; R.J. Reynolds Tobacco Company

Cases: Patent FedCirNews GCNNews