Federal Court Orders Otamedia to Pay Philip Morris USA $173 Million in Damages for Trademark Infringement.

NEW YORK -- Internet Retailer Punished for Willful Infringement of Philip Morris USA Trademarks

The United States District Court for the Southern District of New York awarded Philip Morris USA (NYSE: MO) $173 Million in damages for infringement of its trademarks by Switzerland-based Internet cigarette retailer Otamedia. The judgment, issued by U.S. District Judge Gerard Lynch, includes both damages and attorney's fees. Although Philip Morris USA's ability to collect on its judgment against Otamedia is uncertain, the Company is exploring all of its available legal options for enforcement.

"We are pleased with the court's decision," said Virginia Murphy, senior vice president of compliance and brand integrity, Philip Morris USA. "We believe it sends a clear message that the law imposes significant penalties on those who infringe our intellectual property rights through unlawful Internet cigarette sales."

Philip Morris USA sought the award based on Otamedia's revenues from sales to U.S. consumers of illegally imported Philip Morris branded cigarettes in violation of federal and state law. In 2002, Philip Morris USA sued Otamedia for infringement of registered Philip Morris USA trademarks in violation of the Lanham Act, illegal importation of cigarettes bearing Philip Morris USA trademarks in violation of the Lanham Act and Imported Cigarette Compliance Act (ICCA) and infringement of unregistered trademarks and unfair competition in violation of the Lanham Act and New York State law.

In January 2003, the U.S. District Court entered Judgment against Otamedia on all claims and issued an injunction prohibiting Otamedia from continuing the sales. However, when Otamedia continued the sales in violation of the injunction, the court in August 2004 ordered Otamedia's yesmoke.com and yessmoke.com domain names to be transferred to Philip Morris USA, in an effort to further enforce the injunction. Since their transfer to Philip Morris USA, those websites no longer sell cigarettes, but instead redirect to Philip Morris USA's "Frequently Asked Questions" page (http://www.philipmorrisusa.com/en/ policies_practices/internet_sales/faqs.asp) (Due to its length, this URL may need to be copied/pasted into your Internet browser's address field. Remove the extra space if one exists.) that discusses issues surrounding Internet sales.

The $173 Million judgment was awarded to compensate Philip Morris USA for Otamedia's willful infringement, and penalize Otamedia for its defiance of the U.S. District Court's January 2003 injunction and an August 2002 cease and desist letter from Philip Morris USA. The judgment was issued late last week.

Philip Morris USA is an operating company of Altria Group, Inc. For more information about Philip Morris USA, our products, programs and positions on tobacco-related issues, please visit us at www.philipmorrisusa.com.