British American Tobacco has recently won two victories in its global dispute with Philip Morris over heat-not-burn cigarette technology. The Court of Appeal in London has confirmed the revocation of four patents owned by Philip Morris. The Higher Regional Court Düsseldorf also invalidated a far-reaching injunction against BAT. Now, three years after the dispute began, the opponents are on equal footing. But an end to the dispute or a decisive breakthrough for either party remains elusive.
3 January 2023 by Amy Sandys
At the end of last year, BAT saw success in both the UK and Germany over its heat-not-burn cigarette technology. This marks something of a turnaround for the company, which during 2022 had fallen behind in its dispute with Philip Morris over the technology which both rivals use for their respective Glo and IQOS products.
In January 2022, the Regional Court Düsseldorf effectively banned BAT from selling its first-generation devices. Then, in October, the Technical Board of Appeal at the European Patent Office did not grant BAT’s important EP 33 98 460 B1. BAT had already sued over the patent at Munich Regional Court in 2020. The latter lawsuit, together with suits in the US and UK, marked the beginning of the global dispute between the two tobacco giants.
At the end of 2022, however, BAT scored two successes. In the UK, the Court of Appeal in London upheld a first-instance decision, confirming that four patents owned by tobacco product manufacturer Philip Morris are invalid for obviousness (case IG: CA-2021-000302). The four patents at issue, EP 32 48 483, EP 32 48 484, EP 32 48 485 and EP 32 48 486, all cover heat-not-burn technology for a new generation of cigarettes where the heated tobacco generates an aerosol containing nicotine.
In Germany, the Higher Regional Court Düsseldorf overturned the far-reaching injunction of Düsseldorf Regional Court from the beginning of 2022, finding that BAT’s products did not infringe Philip Morris’ EP 32 66 323 B1. Heat-not-burn cigarette products contain potentially lower toxic emissions than traditional cigarettes, which usually burn nicotine to create the aerosol.
The recently-developed cigarette technology is a lucrative market, with BAT and Philip Morris locked in a dispute since 2020. Heat-not-burn technology differs to vaping, which uses a battery-powered heating device to vaporise a liquid, flavoured or otherwise, in a reservoir.
Philip Morris is concentrating solely on expanding its smoke-free products business, which includes heat-not-burn cigarettes, investing over nine billion dollars into such products including its IQOS system. On the other hand, BAT continues to market a mixture of smoking paraphernalia, including vapes, e-cigarettes and traditional tobacco products. BAT first launched its Glo product in Japan in 2017.
In July 2021, the High Court invalidated the four patents belonging to Philip Morris (case ID: HP-2020-000011). In the same proceedings, Philip Morris defended the validity of its four patents while counterclaiming for infringement by BAT’s heat-not-burn Glo product. However, given that the court found all four patents invalid, the judge dismissed the counterclaim.
Since the trial, the EPO Opposition Division upheld EP 486 patent on amended claims. But the Court of Appeal judges dismissed the amended claims to focus purely on the claims heard in the original case. The EPO has also upheld EP 483 and EP 485 on amended claims, while it revoked EP 484.
In the UK, two actions remain pending in the dispute. In September 2022, the High Court heard an invalidation claim levelled by Philip Morris at BAT. This pertained to the latter’s EP 33 67 830, which covers induction heating technology. BAT counterclaimed for infringement based on Philip Morris’ new IQOS ILUMA product, while the latter also sought an arrow declaration.
Furthermore, another hearing is scheduled for March 2023 regarding two Philip Morris heat-not-burn patents: EP 37 41 225 and EP 32 66 323. The latter was also subject to a recent judgment in Germany. Parallel proceedings are also ongoing in Japan and the US.
In Germany, BAT was able to avert greater damage for the time being with a successful appeal decision at the Higher Regional Court Düsseldorf. The court overturned the far-reaching injunction of Düsseldorf Regional Court from the beginning of the year. In contrast to the judges in the first instance, the appeal judges found that BAT did not infringe EP 323 (case ID: I- 15 U 65/21). The patent protects an electrically heated smoking system with external heater.
In January 2022, the Regional Court Düsseldorf had prohibited BAT from selling its first generation of Glo heaters due to patent infringement. The judges also prohibited BAT from selling the corresponding Neo-Sticks because of indirect patent infringement. This would have effected the sale of newer Glo heaters in Germany.
Now BAT can sell the products in Germany again without restriction. The Higher Regional Court judges did not allow Philip Morris to appeal to the German Federal Court of Justice. However, it is generally expected that Philip Morris will apply to the court for permission to appeal. This is possible under German law, although rarely successful.
Before that, things were much worse for BAT in Germany. The Technical Board of Appeal at the EPO revoked the important EP 33 98 460 B1 (case ID: T 1617/21 – 3.2.01). This also forced the withdrawal of the infringement action at the Regional Court Munich, which had marked the beginning of the global dispute with Philip Morris. In early 2021, the High Court in London had also revoked EP 460 (case no: HP-2020-000012).
The Opposition Division had also recently revoked a divisional application of EP 460, EP 34 91 944 B1. BAT is likely to file an appeal. However, the EPO has not yet reached a decision on this matter. The High Court in London also revoked this patent in 2021.
An important future milestone is likely to be the appeal decision at the Higher Regional Court Karlsruhe. In December 2021, Mannheim Regional Court ruled that BAT did not infringe Philip Morris’ patent EP 22 82 649. Philip Morris appealed, but the court has not yet set a date for the oral hearing.
As such, the score sheet in Europe is currently fairly even. According to insiders, the same also applies to the disputes in the US and Japan. A trend reversal is not expected this year, even with the pending proceedings in Europe.
Once again, Kirkland & Ellis acted for BAT in the heat-not-burn cigarette proceedings in the UK, led by partners Jin Ooi and Nicola Dagg. In the UK, BAT was a new client for Kirkland at the commencement of proceedings in 2020.
The firm is also helping co-ordinate the litigation globally, with patent boutique Vossius & Partner running the German case. Vossius and BAT have had good relations for many years. Lawyers Thure Schubert and Kai Rüting, as well as patent attorney Elard Schenck zu Schweinsberg, initiated the first claims against Philip Morris in Germany in spring 2020.
For Philip Morris, Powell Gilbert partners Alex Wilson and Peter Damerell lead proceedings in the UK, with Hoyng ROKH Monegier running the cases over heat-not-burn technology in Germany.
Düsseldorf-based partners Kay Kasper and Tobias Hahn are running the German cases on the claimant as well as on the defendant side, since the dispute began in 2020. Furthermore, Dreiss partner and patent attorney Andreas Pfund is handling the technical aspects of the cases.
UK patent attorney firm HGF handles most of the EPO work for Philip Morris. German firm Dreiss and UK firm Reddie & Grose are also involved in some of Philip Morris’ patents. D Young & Co, Dehns and Venner Shipley handle most of the patent applications and opposition proceedings on behalf of BAT. (Co-author: Mathieu Klos)
For BAT/Nicoventures (UK proceedings)
8 New Square (London): Adrian Speck
11 South Square (London): Kathryn Pickard
Kirkland & Ellis (London): Jin Ooi, Nicola Dagg (both partners)
D Young & Co. (London): Darren Lewis
For Philip Morris (UK proceedings)
8 New Square (London): Andrew Lykiardopoulos
11 South Square (London): Tom Alkin
Powell Gilbert (London): Alex Wilson, Peter Damerell (both partners); associates: Alex Borthwick, Callum Beamish
Court of Appeal of England and Wales, London
Richard Arnold, Christopher Nugee, Christopher Floyd
For BAT/Nicoventures (German proceedings)
Vossius & Partner (Munich): Thure Schubert, Elard Schenck zu Schweinsberg (patent attorney), Christian-Leopold Zapp, Kai Rüting (Düsseldorf, all partners); associates: Matthias Jentsch, Ananda Landwehr (patent attorney)
In-house (London/Hamburg): Tracey Cooke (head of patents), Felix Heyde
For Philip Morris (German proceeding)
Hoyng ROKH Monegier (Düsseldorf): Tobias Hahn, Kay Kasper (both partners); associates: Valentin Wagner, Beatrix Kuhlmann
Dreiss (Stuttgart): Andreas Pfund (patent attorney and partner)
Higher Regional Court Düsseldorf, 15th civil senate
Ulrike Voß (presiding judge), Stephan Fricke, Andrea Fehre