Philip Morris USA (PM USA) filed a lawsuit yesterday in U. S. District Court against Mastic, N.Y.-based G Talks Smoke Shop for selling counterfeit versions of the company’s Marlboro® brand cigarettes. The lawsuit is aimed at stopping the sale of counterfeit cigarettes and the unauthorized use of PM USA’s trademarks. PM USA’s action follows purchases of 30 packs of counterfeit cigarettes made by company investigators at G Talks Smoke Shop earlier this week and a seizure today with Suffolk County Police of an additional 30 packs of counterfeit cigarettes bearing Marlboro® brand trademarks at this same retail location. These latest seizures are in addition to the 4,870 packs of counterfeit PM USA cigarettes seized on the Poospatuck reservation in 2009-2010.

“The sale of counterfeit cigarettes undermines the value of Philip Morris USA’s brands and the legitimate channels through which our products are distributed and sold,” said Joe Murillo, vice president and associate general counsel, Altria Client Services speaking on behalf of PM USA. “Selling counterfeit cigarettes is illegal, and we will take appropriate action to protect our brands.”

In New York, increased contraband activity is being fuelled by the highest excise tax in the United States, combined with the state’s continued lack of collection of excise taxes on cigarettes sold through Native American reservations.

On July 1st, New York’s state excise tax increased by $1.60 per pack, raising the tax from $2.75 to $4.35 per pack. This 60% increase in the state excise tax is in addition to the existing New York City excise tax of $1.50 per pack. However, today no excise tax is collected on cigarettes sold through about 200 outlets affiliated with tribal reservations, which has led to these outlets selling about one-third of the cigarettes sold in New York.

PM USA continues to advocate for legislative and regulatory solutions to New York’s contraband cigarette trade issues. “These continuing contraband issues in New York are an affront to legitimate business and are unacceptable to us and our consumers. We continue to urge the Governor to follow through on proposed regulations that would result in collection of taxes on cigarettes sold through Native American reservations starting on September 1. And we also urge the Governor to sign legislation passed by the New York Legislature S.8316 / A.11535 to ensure that all compacts receive the Legislature’s review and approval,” Murillo said.

To protect its brands and the legitimate trade channels through which they are distributed and sold, PM USA pursues numerous strategies to address the sale of counterfeit, illegally-imported, stolen and untaxed or under-taxed cigarettes

In New York, PM USA has taken a number of recent actions to protect its valuable trademarks, promote the lawful sale of its brands and to safeguard the integrity of the distribution system.

With this new lawsuit, PM USA currently has 16 counterfeit retailer lawsuits pending in the New York area against 39 defendants, all of whom sold counterfeit in 2009 and 2010. In Mastic specifically, PM USA has filed 4 cases against 8 defendants during 2009-2010.

The company has also provided information and support for a number of local, state and federal law enforcement investigations involving contraband trade in cigarettes in New York.

Philip Morris USA is an operating company of Altria Group, Inc. (NYSE: MO). More information on Philip Morris USA and its policies and positions on tobacco issues is available at www.philipmorrisusa.com.

(Financial Post, 12/07/2010)