New products: between the race for innovation and the patent war

A Bloomberg article analyzes the transformation of the tobacco and nicotine industry, where the issue of patents is becoming increasingly central. The activity of this sector has become more complex in recent years, moving from a simple and cheap production of cigarettes to a proliferation of new technological products, such as electronic cigarettes or heated tobacco.

The race for innovation and the explosion of new patents to offer new products, presented by manufacturers as "reduced risk" alternatives to smoking, has given rise to a large number of disputes between the owners of these new technologies. As Bloomberg points out, the tobacco industry, known for attracting the best marketing experts, is now competing for the best lawyers specializing in patents and business law.[1].

War in Ukraine pushes industry to look for new areas of expansion

The context of the invasion of Ukraine by Russia and the various declarations of exit from the Russian market made by the main manufacturers could intensify this situation of competition between the main tobacco companies. Indeed, Russia, which represents for example between 5 and 6% of the profits of Philip Morris International, is the fourth largest tobacco market in the world in terms of volume. International sanctions, resulting in a loss of earnings for tobacco companies, the latter will seek to compensate for the losses caused by the withdrawal in Russia, a particularly strategic region for the development of heated tobacco.

An intensification of patent filings

The Foundation for a Smoke-Free World, fully funded by Philip Morris International, commissioned a report from the consultancy Oxfist, which specializes in intellectual property. According to the latter, 73,758 patents related to new tobacco and nicotine products were published during the decade 2010-2020. A company like PMI, for example, filed more than twenty times more patents on heated tobacco between 2018 and 2020 than between 2008 and 2010. This intensification of patent filing is found among other manufacturers: in 2015, British American Tobacco filed 50 patents on these new products, compared to 350 in 2021. As Bloomberg points out, applications are generally filed upstream of the research and development phase. Obtaining the patent also gives its holder an exclusive right to market the innovation for a defined period of time.

Intellectual property expertise essential to win the innovation race

According to Oxfist’s founder, tobacco companies are new players in the patent space, and are recruiting talent from other sectors. For example, PMI has hired lawyers from Latham & Watkins, while Reynolds, a subsidiary of British American Tobacco, has turned to Jones Day, which works with players like Google on technology patent issues. Ignoring the intellectual property issue now can be particularly damaging to the companies’ future.

An increase in disputes over all new products

In 2021, Philip Morris was banned from importing its Heets mini-cigarettes into the United States. This ban followed an unfavorable decision in a legal battle with British American Tobacco. In 2020, Reynolds also filed a lawsuit against Philip Morris and Altria, accused of copying the technology developed for Vuse, its vaping product. The companies have sued each other on similar grounds in the American courts, demanding that the American Patent Office invalidate their competitors' patents and trademarks. The development of tobacco products, particularly smokeless ones, such as the tobacco pouch, is also not immune to this logic of patent wars between the major companies.

From oligopolistic functioning to increased logic of competition

These events indicate a change in the logic of patent filings by manufacturers. Until recent years, the purpose of patent filings was to control or even block the market for new products, the marketing of which was considered by manufacturers to be potentially harmful. Manufacturers have now repositioned themselves, displaying a public health discourse, centered around the notion of "risk reduction", and are part of a logic of conquering market shares. In this perspective, where the tobacco industry was characterized by an oligopolistic operation and market collusion, we are now seeing a major resurgence of major competition between manufacturers, particularly PMI, BAT and Reynolds.

FT

[1] Bloomberg, Marlboro Man Versus Joe Camel 2.0: Big Tobacco's Patent Fights, 03/30/2022, (consulted the same day)