Trials@uspto.gov
`571-272-7822
`
`
`
`
`
`Paper 9
`Date: November 16, 2020
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`PHILIP MORRIS PRODUCTS, S.A.,
`Petitioner,
`
`v.
`
`RAI STRATEGIC HOLDINGS, INC.,
`Patent Owner.
`____________
`
`
`
`IPR2020-00919
`Patent 9,901,123 B2
`____________
`
`
`
`
`Before JO-ANNE M. KOKOSKI, ELIZABETH M. ROESEL,
`MICHELLE N. ANKENBRAND, Administrative Patent Judges.
`
`PER CURIAM
`
`DECISION
`Denying Institution of Inter Partes Review
`35 U.S.C. § 314
`
`
`
`
`571-272-7822
`
`
`
`
`
`Paper 9
`Date: November 16, 2020
`
`UNITED STATES PATENT AND TRADEMARK OFFICE
`____________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`_____________
`
`PHILIP MORRIS PRODUCTS, S.A.,
`Petitioner,
`
`v.
`
`RAI STRATEGIC HOLDINGS, INC.,
`Patent Owner.
`____________
`
`
`
`IPR2020-00919
`Patent 9,901,123 B2
`____________
`
`
`
`
`Before JO-ANNE M. KOKOSKI, ELIZABETH M. ROESEL,
`MICHELLE N. ANKENBRAND, Administrative Patent Judges.
`
`PER CURIAM
`
`DECISION
`Denying Institution of Inter Partes Review
`35 U.S.C. § 314
`
`
`
`
`
`IPR2020-00919
`Patent 9,901,123 B2
`
`
`I. INTRODUCTION
`Philip Morris Products, S.A. (“Petitioner”) filed a Petition to institute
`an inter partes review of claims 27–30 (the “challenged claims”) of U.S.
`Patent No. 9,901,123 B2 (“the ’123 patent,” Ex. 1001). Paper 2 (“Pet.”).
`RAI Strategic Holdings, Inc. (“Patent Owner”) filed a Preliminary Response.
`Paper 6 (“Prelim. Resp.”). With Board authorization, Petitioner filed a reply
`addressing certain issues raised in the Preliminary Response (“Reply,”
`Paper 7), and Patent Owner filed a Sur-reply (“Sur-Reply,” Paper 8).
`Institution of an inter partes review is authorized by statute when “the
`information presented in the petition . . . and any response . . . shows that
`there is a reasonable likelihood that the petitioner would prevail with respect
`to at least 1 of the claims challenged in the petition.” 35 U.S.C. § 314
`(2018); see 37 C.F.R. § 42.4 (2020). Upon consideration of the Petition, the
`Preliminary Response, the Reply, the Sur-Reply, and the evidence of record,
`we exercise our discretion under 35 U.S.C. §314(a) and deny institution of
`an inter partes review.
`A. Related Proceedings
`The parties indicate that the ’123 patent is involved in the following
`proceedings: (1) RAI Strategic Holdings, Inc. v. Altria Client Services LLC,
`No. 1:20-cv-00393-LO-TCB (E.D. Va.), and (2) Certain Tobacco Heating
`Articles and Components Thereof, U.S. International Trade Commission,
`Investigation No. 337-TA-1199. Pet. 5–6; Paper 5, 2.
`B. Real Parties-in-Interest
`Petitioner identifies Philip Morris Products, S.A., Philip Morris
`International, Inc., Altria Client Services LLC, and Philip Morris USA as the
`real parties-in-interest. Pet. 5. Patent Owner identifies RAI strategic
`
`2
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`IPR2020-00919
`Patent 9,901,123 B2
`
`Holdings, Inc., R.J. Reynolds Vapor Company, RAI Innovations Company,
`and R.J. Reynolds Tobacco Company as the real parties-in-interest.
`Paper 5, 1.
`C. The ’123 Patent
`The ’123 patent is titled “Tobacco-Containing Smoking Article,” and
`relates to smoking articles “that produce aerosols incorporating components
`derived from, or provided by, tobacco,” where the aerosols “are not
`necessarily produced as a result of burning of tobacco.” Ex. 1001, code
`(54), 4:45–49. Instead, the smoking articles produce such aerosols “as a
`result of the application of heat upon tobacco or materials that are in contact
`with tobacco.” Id. at 4:49–52. The ’123 patent explains that the smoking
`articles “produce visible aerosols that are ‘smoke-like’ in nature, and exhibit
`many of the sensory characteristics associated with those types of smoking
`articles that burn tobacco.” Id. at 4:52–55.
`Figure 3 of the ’123 patent is reproduced below.
`
`
`Figure 3 depicts a longitudinal cross-sectional view of one embodiment of
`an electrically powered, tobacco-containing smoking article described in
`the ’123 patent. Ex. 1001, 8:31–32. Smoking article 10 includes outer
`housing 20 that is “generally tubular in shape.” Id. at 19:46–49. Outer
`housing 20 “possesses a distal end 13 and a mouth-end 15,” and “is adapted
`
`3
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`IPR2020-00919
`Patent 9,901,123 B2
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`to incorporate a type of cigarette 150” that includes tobacco segment 89 and
`wrapping material 160. Id. at 27:36–44. Heating elements 70, 72, and 300
`are powered by power source 36 and controlled by electrically powered
`control components 50. Id. at 27:57–66. A portion of heating element 72 is
`elongated and extends into tobacco segment 89 to “be in close contact with a
`significant amount of substrate and aerosol-forming material within the
`tobacco.” Id. at 28:36–43. “[S]ensor 60, in concert with certain control
`circuitry within the controller 50, is preferably part of a puff-actuated
`controller adapted for regulating current flow through one or more of the
`resistance heating elements.” Id. at 20:63–67.
`The ’123 patent explains that, during use, “[a]ir is drawn through the
`air passageways or openings 32 in the cap 35 located at the distal end 13 . . .
`and into the outer container 20.” Id. at 29:2–5. The drawn air passes
`“through air passageway 45 that extends along the length of the power
`source 36 and the electronic controls components 50,” through an air
`passageway area within first heating element 70, air flow sensing region 60,
`second heating element 72, and cigarette 150, and into mouth-end piece 120.
`Id. at 29:5–11. Heat generated by heating elements 70, 72, and 300 acts on
`the tobacco to volatilize components thereof and cause the components to be
`entrained in the drawn air. Id. at 29:11–14. The ’123 patent teaches that
`“[t]ypically, during relevant periods of use, those heating elements can
`provide surface region temperatures of at least about 200º C., and often at
`least about 300º C. Those temperatures typically do not exceed 600º C.,
`often do not exceed about 500º C., and frequently do not exceed about
`400º C.” Id. at 29:18–23.
`
`4
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`IPR2020-00919
`Patent 9,901,123 B2
`
`D. Illustrative Claim
`Petitioner challenges claims 27–30 of the ’123 patent. Pet. 1, 7–8.
`Claim 27 is the only independent claim challenged, is illustrative of the
`claimed subject matter, and is reproduced below.
`
`27. An electrically-powered, aerosol-generating smoking
`article comprising:
`an electrical power source in the form of a battery within
`a tubular outer housing having a mount-end and an end
`distal to the mouth-end;
`at least one electrical resistance heater powered by said
`electrical power source, wherein at least a portion of the
`resistance heating element is elongated and extending
`downstream toward the mouth-end of the outer housing,
`the elongated portion of the resistance heating element
`positioned proximal to the center of the outer housing;
`a controller within the tubular outer housing and adapted
`for regulating current flow through the electrical
`resistance heater; and
`a cigarette-type device removably engaged with the
`mouth-end of the tubular outer housing and comprising
`a tobacco segment circumscribed by a wrapping
`material and comprising a tobacco material and an
`aerosol-forming material, wherein
`the elongated
`portion of the resistance heating element extends into
`the tobacco segment when the cigarette-type device is
`engaged with the mouth-end of the outer housing, such
`that during draw, aerosol-forming material can be
`volatilized to produce a visible mainstream aerosol
`incorporating tobacco components or tobacco-derived
`components that can be drawn into the mouth of the user
`of the smoking article.
`Ex. 1001, 34:31–58.
`
`5
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`IPR2020-00919
`Patent 9,901,123 B2
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`E. The Asserted Grounds of Unpatentability
`Petitioner asserts that the challenged claims are unpatentable on the
`following grounds:
`References
`Claims Challenged Statutory Basis
`27–30
`35 U.S.C. § 103 Morgan, 1 Adams, 2 Brooks3
`27–30
`35 U.S.C. § 103 Adams, Morgan, Brooks
`27–30
`35 U.S.C. § 103 Counts-962, 4 Brooks
`Pet. 7–8. Petitioner relies on the Declaration of Dr. Seetharama C. Deevi
`(“the Deevi Declaration,” Ex. 1003) in support of its contentions.
`II. ANALYSIS
`A. Patent Owner’s Request for Discretionary Denial
`Institution of an inter partes review under 35 U.S.C. § 314(a) is
`discretionary. See 35 U.S.C. § 314(a) (stating “[t]he Director may not
`authorize an inter partes review to be instituted unless the Director
`determines that the information presented in the petition . . . shows that there
`is a reasonable likelihood that the petitioner would prevail with respect to at
`least 1 of the claims challenged in the petition” (emphasis added)); Cuozzo
`Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016) (“[T]he agency’s
`decision to deny a petition is a matter committed to the Patent Office’s
`discretion.”); SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1356 (2018)
`(“[Section] 314(a) invests the Director with discretion on the question
`whether to institute review . . . .” (emphasis omitted)); Harmonic Inc. v. Avid
`
`
`1 U.S. Patent No. 5,249,586, issued Oct. 5, 1993 (Ex. 1005).
`2 U.S. Patent App. Pub. No. US 2007/0102013 A1, published May 10, 2007
`(Ex. 1007).
`3 U.S. Patent No. 4,947,874, issued Aug. 14, 1990 (Ex. 1006).
`4 U.S. Patent No. 5,144,962, issued Sept. 8, 1992 (Ex. 1008).
`
`6
`
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`IPR2020-00919
`Patent 9,901,123 B2
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`Tech., Inc., 815 F.3d 1356, 1367 (Fed. Cir. 2016) (“[T]he PTO is permitted,
`but never compelled, to institute an IPR proceeding.”).
`Patent Owner argues that we should exercise our discretion to deny
`institution in this case under 35 U.S.C. § 314(a) because a pending
`investigation at the International Trade Commission (“the ITC proceeding”)
`will address the ’123 patent before a final written decision will issue, and a
`district court case also is pending. Prelim. Resp. 60–65 (citing Apple, Inc. v.
`Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020)
`(precedential))). Patent Owner argues that the ITC proceeding “will address
`the ’123 patent—and specifically all the same grounds Petitioner asserts
`here” before the deadline for issuing a final written decision in this
`proceeding, and “a district court case is also pending, and waiting for the
`ITC’s determination.” Id. at 60. According to Patent Owner, “evaluation of
`each Fintiv factor . . . further confirms that denial of institution is
`warranted.” Id. at 62. Petitioner argues that “[a] ‘holistic’ evaluation [of the
`Fintiv factors] reveals that institution furthers the Board’s considerations of
`‘efficiency, fairness, and the merits.’” Reply 2 (citing Fintiv, Paper 11 at 6).
`Fintiv identifies the following factors that should be considered and
`balanced when the patent owner raises an argument for discretionary denial
`due to an earlier trial date:
`1. whether the court granted a stay or evidence exists that one
`may be granted if a proceeding is instituted;
`2. proximity of the court’s trial date to the Board’s projected
`statutory deadline for a final written decision;
`3. investment in the parallel proceeding by the court and the
`parties;
`
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`IPR2020-00919
`Patent 9,901,123 B2
`
`
`4. overlap between issues raised in the petition and in the parallel
`proceeding;
`5. whether the petitioner and the defendant in the parallel
`proceeding are the same party; and
`6. other circumstances that impact the Board’s exercise of
`discretion, including the merits.
`Fintiv, Paper 11 at 5–6. According to Fintiv, these factors relate to
`“efficiency, fairness, and the merits” and require the Board to take “a
`holistic view of whether efficiency and integrity of the system are best
`served by denying or instituting review.” Id. at 6. Our analysis of the Fintiv
`factors is set forth below.
`
`1. Factor 1: Likelihood of a Stay
`The ITC proceeding is not stayed, and neither party indicates that a
`stay is likely. The district court, however, has stayed its proceedings as to
`the ’123 patent until the determination in the ITC “becomes final.”
`Ex. 2030. Although the stay of the proceeding in the district court allays
`concerns about inefficiency and duplication of efforts as it relates to this
`proceeding, the possibility exists for duplicative efforts with the ITC
`proceeding. The record does not reflect that Petitioner requested a stay of
`the ITC proceeding pending a decision on institution in this proceeding.
`Thus, this factor neither weighs in favor of or against discretionary denial.
`We continue our analysis and consider whether the ITC would render a Final
`Determination before our final written decision in this proceeding (Fintiv
`factor 2), and the degree of overlap of the proceedings (Fintiv factor 4). See
`Fintiv, Paper 11 at 6 (explaining there is some overlap among the factors),
`8–9 (counseling that “an earlier ITC trial date may favor exercising authority
`to deny under NHK if the ITC is going to decide the same or substantially
`
`8
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`IPR2020-00919
`Patent 9,901,123 B2
`
`similar issues to those presented in the petition,” and to consider “whether
`the patentability disputes before the ITC will resolve all or substantially all
`of the patentability disputes between the parties”).
`2. Factor 2: Proximity of Trial Date to the Board’s Projected
`Statutory Deadline
`In the ITC proceeding, an evidentiary hearing is scheduled to begin on
`January 25, 2021, with a May 14, 2021 deadline for the Initial Determination
`and a September 15, 2021 due date for the Final Determination. Prelim.
`Resp. 63 (citing Ex. 2029, 3–4). If we were to institute an inter partes
`review, then the statutory deadline for our final written decision would be in
`November, 2021. Patent Owner argues that this timing “strongly favors
`denial of institution.” Id. at 62–63. Petitioner counters that, even though the
`“final written decision is due after the ITC’s target date,” the final written
`decision will issue “long before the district court will lift the stay and decide
`validity.” Reply 7. We agree with Patent Owner that the ITC is likely to
`reach a final determination ahead of the date of our final written decision.
`Thus, this factor weighs in favor of exercising discretion to deny institution.
`3. Factor 3: Investment in Proceedings
`Patent Owner argues that “[t]he vast majority of all key ITC pre-
`hearing events will occur even before the November 18, 2020 institution
`decision deadline, including completion of: fact discovery, claim
`construction and the Markman hearing, exchange of expert reports, and
`expert discovery.” Prelim. Resp. 64. Petitioner contends that “summary
`determination motions are not due until [after the Board’s institution
`decision], and any investment in claim construction is irrelevant because no
`
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`IPR2020-00919
`Patent 9,901,123 B2
`
`claim terms from the ’123 patent are at issue in the ITC.” Reply 6 (citing
`Ex. 2029, 1–2; Ex. 1038).
`Fintiv provides the following guidance with respect to factor 3:
`[I]f, at the time of the institution decision, the district court has
`issued substantive orders related to the patent at issue in the
`petition, this fact favors denial. Likewise, district court claim
`construction orders may indicate that the court and parties have
`invested sufficient time in the parallel proceeding to favor denial.
`If, at the time of the institution decision, the district court has not
`issued orders related to the patent at issue in the petition, this fact
`weighs against exercising discretion to deny institution under
`NHK.
`Fintiv, Paper 11 at 9–10. Fintiv explains that “[t]his investment factor is
`related to the trial date factor, in that more work completed by the parties
`and the court in the parallel proceeding tends to support the arguments that
`the parallel proceeding is more advanced, a stay may be less likely, and
`instituting would lead to duplicative costs.” Id. at 10. In this case, although
`there is no evidence that the ITC has issued any substantive orders related to
`the ’123 patent, the evidence shows that a claim construction hearing will be
`held in mid-November, and the parties have invested some effort leading up
`to that hearing. Still, significant effort remains at this stage of the ITC
`proceeding.
`We also find that Petitioner’s diligence in filing the Petition less than
`one month after Patent Owner filed its complaints in the ITC proceeding and
`the related district court action weighs against exercising discretion to deny
`institution. Fintiv, Paper 11 at 11 (“If the evidence shows that the petitioner
`filed the petition expeditiously, such as promptly after becoming aware of
`the claims being asserted, this fact has weighed against exercising the
`authority to deny institution under NHK.”). Accordingly, Fintiv factor 3
`
`10
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`IPR2020-00919
`Patent 9,901,123 B2
`
`weighs against exercising our discretion to deny institution. Fintiv, Paper 11
`at 10.
`
`4. Factor 4: Overlap of Issues
`Patent Owner asserts that “Petitioner relies on the exact same
`invalidity grounds in both forums,” and that Patent Owner “has asserted
`infringement of every claim challenged here.” Prelim. Resp. 64 (citing
`Ex. 1032, 17–18). Petitioner responds that Patent Owner’s arguments
`regarding overlap are premised on Petitioner’s preliminary contentions at the
`ITC, and its final contentions “do not raise the same grounds as the IPR.”
`Reply 4 (citing Ex. 1036; Ex. 1037). For example, Petitioner states that
`Counts-962 is not asserted as prior art in the ITC, and Adams “appears in the
`ITC as a secondary reference, but only with different primary references.”
`Id. Petitioner also argues that “the ITC proceeding will involve different
`expert testimony and supporting evidence,” and “Petitioner’s diligence
`makes it difficult, if not impossible, to fairly evaluate the amount of overlap
`at this early date.” Id. at 5. Patent Owner counters that “there is still
`significant overlap, which would cause duplication of effort.” Sur-Reply 7.
`Fintiv factor 4 evaluates “concerns of inefficiency and the possibility
`of conflicting decisions” when substantially identical prior art is submitted
`in both proceedings. Fintiv, Paper 11 at 12. As Petitioner notes, it does not
`assert Adams as a primary reference, and does not assert Counts-962 at all,
`in the ITC proceeding. Reply 4; see also Sur-Reply 7 (chart comparing the
`grounds at issue here and in the ITC). This lessens the concerns about
`duplicative efforts and the possibility of conflicting decisions. See Fintiv,
`Paper 11 at 12. Although there may be some overlap between the prior art
`challenges asserted before the Board and in the ITC proceeding, the
`
`11
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`IPR2020-00919
`Patent 9,901,123 B2
`
`challenges that do not overlap weigh marginally against exercising
`discretion to deny institution.
`5. Factor 5: Whether the Petitioner and the Defendant in the
`Parallel Proceeding are the Same Party
`Petitioner is a party in the ITC proceeding and the stayed district court
`action. Prelim. Resp. 64. This factor weighs in favor of exercising our
`discretion to deny institution.
`6. Factor 6: Other Circumstances, Including the Merits
`Patent Owner argues that “the Petition lacks merit for at least one
`reason for each ground,” and “Section 325(d) and efficiency considerations
`also favor denial.” Prelim. Resp. 65. Petitioner contends that “[t]he strong
`merits . . . also favor institution.” Reply 6. Based on our review of the
`arguments and evidence presented on the preliminary record, we find that
`the merits do not tip the scale either in favor of or against exercising
`discretion to deny institution. Accordingly, we find this factor is neutral.
`7. Balancing the Fintiv Factors
`We have considered the circumstances before us in view of the Fintiv
`factors. Because our analysis is fact driven, no single factor is determinative
`of whether we exercise our discretion to deny institution under § 314(a).
`Evaluating the Fintiv factors with a holistic view of whether the efficiency
`and integrity of the system are best served by denying or instituting review,
`we determine that the proximity of the anticipated ITC hearing date,
`combined with an anticipated final determination from the ITC prior to the
`Board’s final decision on validity of claims in dispute between the same
`parties, outweigh the relatively moderate investment to date in the ITC
`proceeding, the Petitioner’s diligence in filing the Petition less than one
`
`12
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`IPR2020-00919
`Patent 9,901,123 B2
`
`month after Patent Owner filed its complaints in the ITC proceeding and the
`related district court action, and the lack of complete overlap in the prior art
`asserted. Thus, we determine that the facts presented weigh in favor of
`exercising discretion to deny institution in this instance.
`III. CONCLUSION
`Taking into consideration the arguments in the Petition, the
`Preliminary Response, the Reply, the Sur-Reply, and the evidence of record,
`we exercise our discretion to deny institution under 35 U.S.C. § 314(a).
`IV. ORDER
`In consideration of the foregoing, it is hereby
`ORDERED that the Petition is denied as to all challenged claims, and
`no trial is instituted.
`
`
`
`
`
`13
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`IPR2020-00919
`Patent 9,901,123 B2
`
`PETITIONER:
`Jonathan M. Strang
`Matthew J. Moore
`Inge A. Osman
`Christopher W. Henry
`LATHAM & WATKINS LLP
`jonathan.strang@lw.com
`matthew.moore@lw.com
`inge.osman@lw.com
`christopher.henry@lw.com
`
`
`PATENT OWNER:
`
`David M. Maiorana
`Anthony M. Insogna
`Kenneth S. Luchesi
`Geoffrey K. Gavin
`Joshua R. Nightingale
`George N. Phillips
`JONES DAY
`dmaiorana@jonesday.com
`aminsogna@jonesday.com
`kluchesi@jonesday.com
`ggavin@jonesday.com
`jrnightingale@jonesday.com
`gphillips@jonesday.com
`
`
`
`
`
`
`14
`
`
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