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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`
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`PHILIP MORRIS PRODUCTS, S.A.,
`Petitioner
`
`v.
`
`RAI STRATEGIC HOLDINGS, INC.,
`Patent Owner
`
`Patent No. 9,901,123
`
`
`
`
`Inter Partes Review No. IPR2020-01602
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`
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`PATENT OWNER’S SUR-REPLY TO PETITIONER’S REPLY TO
`PATENT OWNER’S PRELIMINARY RESPONSE
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`TABLE OF CONTENTS
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`Patent Owner Sur-Reply
`IPR2020-01602
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`Page
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`TABLE OF AUTHORITIES ................................................................................... ii
`LIST OF PATENT OWNER EXHIBITS ............................................................... iii
`I.
`Introduction ..................................................................................................... 1
`II.
`The Board Should Deny Institution In View Of The Parallel ITC
`Proceeding ...................................................................................................... 1
`Factor 1 – Whether the Court Granted a Stay or Evidence Exists that One
`May be Granted if a Proceeding is Instituted ............................................. 2
`Factor 2 – Proximity of the Court’s Trial Date to the Board’s Projected
`Statutory Deadline for a Final Written Decision ........................................ 3
`Factor 3 – Investment in the Parallel Proceeding by the Court and the
`Parties ......................................................................................................... 4
`Factor 4 – Overlap Between Issues Raised in the Petition and in the
`Parallel Proceeding ..................................................................................... 4
`Factor 6 - Other Circumstances that Impact the Board’s Exercise of
`Discretion Including the Merits .................................................................. 6
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`A.
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`B.
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`C.
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`D.
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`E.
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`-i-
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`TABLE OF AUTHORITIES
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`Patent Owner Sur-Reply
`IPR2020-01602
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`Page
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`
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`CASES
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`Apple Inc. v. Fintiv, Inc.,
`IPR2020-00019, Paper No. 11 (PTAB Mar. 20, 2020) ...............................passim
`
`Comcast Cable Commc’ns, LLC v. Rovi Guides, Inc.,
`IPR2020-00800, Paper No. 10 (PTAB Oct. 22, 2020) ......................................... 2
`
`Fitbit, Inc. v. Koninklijke Philips N.V.,
`IPR2020-00771, Paper No. 14 (PTAB Oct. 19, 2020) ......................................... 2
`
`Google LLC v. EcoFactor Inc.,
`IPR2020-00946, Paper No. 11 (PTAB Nov. 18, 2020) .................................... 2, 3
`
`Inc. v. Masimo Corp.,
`IPR2020-01019, Paper 12 (PTAB Dec. 1, 2020) ................................................. 6
`
`NHK Spring Co. v. Intri-Plex Techs., Inc.,
`IPR2018-00752, Paper No. 8 (PTAB Sept. 12, 2018) .......................................... 2
`
`Philip Morris Prods., S.A. v. RAI Strategic Holdings, Inc.,
`IPR2020-00919, Paper No. 9 (PTAB Nov. 16, 2020) .......................................... 1
`
`Tex. Instruments Inc. v. Cypress Semiconductor Corp.,
`90 F.3d 1558 (Fed. Cir. 1996) .............................................................................. 3
`
`STATUTES
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`35 U.S.C. § 314 .......................................................................................................... 2
`
`OTHER AUTHORITIES
`
`Patent Trial and Appeal Board Consolidated Trial Practice Guide
`(Nov. 2019) ........................................................................................................... 2
`
`-ii-
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`
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`Patent Owner Sur-Reply
`IPR2020-01602
`
`Ex. 2003
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`LIST OF PATENT OWNER EXHIBITS
`Ex. 2001 Complaint from ITC Investigation No. 337-TA-1199
`Ex. 2002
`ITC Procedural Schedule in Certain Tobacco Heating Articles and
`Components Thereof, ITC Inv. No. 337-TA-1199 (U.S.I.T.C. June 11,
`2020)
`Excerpt of Respondents’ Pre-Hearing Brief in Certain Tobacco
`Heating Articles and Components Thereof, ITC Inv. No. 337-TA-
`1199 (U.S.I.T.C. Dec. 11, 2020)
`Ex. 2004 U.S. Patent Application Publication No. 2007/0267031
`Ex. 2005
`Excerpts of Respondents’ Joint Disclosure of Final Contentions in
`Response to Individual Interrogatory No. 12 (Final Invalidity
`Contentions) in Certain Tobacco Heating Articles and Components
`Thereof, ITC Inv. No. 337-TA-1199 (U.S.I.T.C. Sept. 18, 2020)
`
`
`Ex. 2006 Order Denying Respondents’ Motion for Leave to Amend Their
`Response to the Complaint in Certain Tobacco Heating Articles and
`Components Thereof, ITC Inv. No. 337-TA-1199 (U.S.I.T.C. Oct. 22,
`2020)
`
`
`Ex. 2007
`
`
`Ex. 2008
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`Ex. 2009
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`Excerpts of Deposition Transcript of Stewart M. Fox in Certain
`Tobacco Heating Articles and Components Thereof, ITC Inv. No.
`337-TA-1199 (U.S.I.T.C. Nov. 6, 2020)
`
`Excerpts of Ruyan Product Internal R&D Assessment (March 2007)
`
`Excerpts of Commission Staff Attorney’s Pre-Hearing Brief in
`Certain Tobacco Heating Articles and Components Thereof, ITC Inv.
`No. 337-TA-1199 (U.S.I.T.C. Jan. 4, 2021)
`
`-iii-
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`Patent Owner Sur-Reply
`IPR2020-01602
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`I.
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`Introduction
`This is Petitioner’s second IPR Petition on the ’123 patent. The Board
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`denied Petitioner’s first IPR Petition in view of the parallel ITC investigation. See
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`Philip Morris Prods., S.A. v. RAI Strategic Holdings, Inc., IPR2020-00919, Paper
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`No. 9 (PTAB Nov. 16, 2020). The considerations that led the Board to deny
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`institution on the first IPR Petition apply equally to this Petition. The Board
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`should reach the same conclusion here and deny institution.
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`Petitioner’s Reply glosses over Fintiv factors 1-3 and 5, suggesting that the
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`Board should ignore the ITC proceeding altogether. But then for Fintiv factor 4,
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`Petitioner—no longer ignoring the ITC proceeding—emphasizes that it dropped its
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`overlapping invalidity defense. What Petitioner failed to mention is that it forced
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`Patent Owner, the ITC administrative law judge (“ALJ”), and the Commission
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`Office of Unfair Import Investigations (“OUII”) to spend nearly a year heavily
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`litigating the validity of the exact same patent claims with respect to the exact
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`same alleged grounds of invalidity at issue in this Petition. Petitioner’s mid-trial
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`dropping of its ITC invalidity defense is too late. The Board should not reward
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`Petitioner’s gamesmanship.
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`II. The Board Should Deny Institution In View Of The Parallel ITC
`Proceeding
`Petitioner suggests that Fintiv is not applicable here because the ITC is not a
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`court. Reply at 1-3. But the Board’s Trial Practice Guide makes clear that denial
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`1
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`Patent Owner Sur-Reply
`IPR2020-01602
`may be appropriate given “events in other proceedings related to the same patent,
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`either at the Office, in district courts, or the ITC.” Patent Trial and Appeal Board
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`Consolidated Trial Practice Guide (Nov. 2019) at 58 & n.2 (citing NHK Spring Co.
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`v. Intri-Plex Techs., Inc., IPR2018-00752, Paper No. 8 at 19-20 (PTAB Sept. 12,
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`2018)). The precedential Fintiv decision likewise instructs panels that “an earlier
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`ITC trial date may favor exercising authority to deny institution under NHK.”
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`Apple Inc. v. Fintiv, Inc., IPR2020-00019, Paper No. 11 at 8 (PTAB Mar. 20,
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`2020).
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`Following this guidance, numerous panels of the Board have recently denied
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`institution under 35 U.S.C. § 314(a) in view of pending ITC investigations. See,
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`e.g., Fitbit, Inc. v. Koninklijke Philips N.V., IPR2020-00771, Paper No. 14 at 13-25
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`(PTAB Oct. 19, 2020); Comcast Cable Commc'ns, LLC v. Rovi Guides, Inc.,
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`IPR2020-00800, Paper No. 10 at 9-17 (PTAB Oct. 22, 2020); Google LLC v.
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`EcoFactor Inc., IPR2020-00946, Paper No. 11 at 5-16 (PTAB Nov. 18, 2020).
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`A.
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`Factor 1 – Whether the Court Granted a Stay or Evidence Exists
`that One May be Granted if a Proceeding is Instituted
`Petitioner argues that the district court’s stay pending resolution of the ITC
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`investigation “strongly favors institution because the parallel district court case is
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`stayed.” Reply at 4. But the Board has addressed this argument and rejected it.
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`See, e.g., Google LLC, IPR2020-00946, Paper No. 11 at 8-10 (considering Fintiv
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`factor 1 and “disagree[ing] with Petitioner’s assertion that the district court actions
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`Patent Owner Sur-Reply
`IPR2020-01602
`are the ‘more appropriate benchmark’ to consider for purposes of analyzing the
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`Fintiv factors in this case, such that the ITC investigation can, in effect, be
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`ignored”); see also Fintiv, IPR2020-00019, Paper No. 11 at 8.
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`As the Board explained, “ITC final invalidity determinations do not have
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`preclusive effect, but, as a practical matter, it is difficult to maintain a district court
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`proceeding on patent claims determined to be invalid at the ITC.” Id. at 8-9
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`(footnote omitted). ITC validity determinations can and often do carry weight in
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`district court litigation once affirmed by the Federal Circuit. After all, “[d]istrict
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`courts are not free to ignore holdings of [the Federal Circuit] that bear on cases
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`before them.” Tex. Instruments Inc. v. Cypress Semiconductor Corp., 90 F.3d
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`1558, 1569 (Fed. Cir. 1996).
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`B.
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`Factor 2 – Proximity of the Court’s Trial Date to the Board’s
`Projected Statutory Deadline for a Final Written Decision
`Petitioner’s Reply ignores the ITC proceeding despite the Board’s rejection
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`of this approach. See, e.g., Google LLC, IPR2020-00946, Paper No. 11 at 11
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`(considering Fintiv factor 2 and “disagree[ing] with Petitioner’s contention that
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`[its] analysis of this factor should focus on the district court cases, and not the ITC
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`investigation”); see also Fintiv, IPR2020-00019, Paper No. 11 at 8. The present
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`case is even more compelling than Fintiv. The Fintiv panel concluded that a trial
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`scheduled two months before the Board’s projected decision weighed in favor of
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`denial. Fintiv, IPR2020-00019, Paper No. 11 at 13. Here, the ITC evidentiary
`3
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`Patent Owner Sur-Reply
`IPR2020-01602
`hearing has already occurred—more than two months before the institution
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`decision and more than fourteen months before the Final Written Decision
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`deadline. The ALJ’s Initial Determination is due by May 14, 2021, and the
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`Commission Decision is due by September 15, 2021—almost seven months before
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`the Board’s projected Final Written Decision in April 2022. See Ex. 2002 at 4.
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`C.
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`Factor 3 – Investment in the Parallel Proceeding by the Court and
`the Parties
`All aspects of the ITC proceeding are nearly complete. Fact and expert
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`discovery are complete, claim construction briefing and the Markman hearing have
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`occurred, the parties’ pre-hearing briefs were filed, fact and expert witnesses
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`already testified, the ITC evidentiary hearing has occurred, and the parties have
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`filed their opening post-hearing briefs. Petitioner dismisses the significant
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`resources already invested by the parties in the ITC case. In fact, the entirety of
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`the ITC proceeding—including the ALJ’s investment in his decision and the
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`Commission’s investment in reaching its decision—will all be complete by
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`September 2021.
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`D.
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`Factor 4 – Overlap Between Issues Raised in the Petition and in
`the Parallel Proceeding
`Petitioner’s Reply misleadingly emphasizes that there is “zero overlap”
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`between this IPR and the ITC proceeding. Reply at 1, 5. There is zero overlap as
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`of the date of Petitioner’s Reply because Petitioner—in a desperate attempt to
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`4
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`Patent Owner Sur-Reply
`IPR2020-01602
`avoid denial of institution—narrowed its invalidity defense in the ITC in the
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`middle of the ITC trial, mere days before filing its Reply. Due to Petitioner’s
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`conduct, the Patent Owner, the ITC ALJ, and OUII spent nearly a year and an
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`enormous amount of resources litigating the exact same alleged invalidity grounds
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`presented in this Petition. See Exs. 2003, 2005, 2009. Petitioner’s so-called
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`attempt to eliminate inefficiency during trial is too little too late. See Ex. 1039.
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`Petitioner’s conduct is pure and utter gamesmanship, forcing Patent Owner to
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`litigate the Petition grounds in the ITC, then dropping them at the last minute to
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`disingenuously tell the Board that there is no overlap. It should be noted that
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`OUII’s prehearing brief fully opposed Petitioner’s invalidity grounds exactly as
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`presented in this Petition. See Ex. 2009 at 146-153 (“The Staff expects, however,
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`that the evidence will show that Hon ’043 does not anticipate or render obvious
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`any of claims 1-7, 9, 11-19, 21, 23-26 of the ’123 patent.”).
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`Petitioner’s conduct violates the spirit, if not the rule of Fintiv factor 4 and
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`should not be condoned. Factor 4 evaluates “concerns of inefficiency” when
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`substantially identical prior art is submitted in both proceedings. Fintiv, IPR2020-
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`00019, Paper No. 11 at 12. Condoning Petitioner’s strategy to wait until the last
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`minute of its ITC case to drop its overlapping invalidity defense would encourage
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`similarly situated parties to test the waters and waste judicial resources. Petitioner
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`contends that “this factor weighs even more heavily in favor of institution than a
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`5
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`Patent Owner Sur-Reply
`IPR2020-01602
`Sotera-style stipulation.” Reply at 5. But Petitioner makes no stipulation at all,
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`much less a narrow stipulation that it will not pursue, in any court, any ground
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`raised or that could have been raised in an IPR. Sotera Wireless, Inc. v. Masimo
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`Corp., IPR2020-01019, Paper 12 at 18-19 (PTAB Dec. 1, 2020). And unlike in
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`Sotera—where Petitioner’s stipulation “mitigate[d] any concerns of duplicative
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`efforts between the district court and the Board” (id. at 19)—all aspects of the
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`parallel proceeding are complete and concerns of duplicative efforts cannot be
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`mitigated.
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`E.
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`Factor 6 - Other Circumstances that Impact the Board’s Exercise
`of Discretion Including the Merits
`Petitioner dropped its invalidity defense in the ITC—including the exact
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`invalidity grounds presented in this Petition—yet now contends that this Petition
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`merits institution. Petitioner failed to mention that OUII rejected Petitioner’s
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`invalidity position and agreed with Patent Owner that Hon ’043 does not anticipate
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`or render obvious any of the claims at issue. See Ex. 2009 at 146.
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`Petitioner’s alleged invalidity grounds in its Petition and Reply are weak.
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`Petitioner alleges that “Patent Owner never addresses the fact that the claims do
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`not require direct contact between the wick and the heater.” Reply at 6. First,
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`Patent Owner did specifically address whether the claims require direct contact
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`between the wick and the heater. See, e.g., POPR at 28 (“Regardless of the
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`positioning of the absorbent fibrous material—whether in proximity to the heater
`6
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`Patent Owner Sur-Reply
`IPR2020-01602
`or in contact with the heater—the claim still requires that the liquid itself be
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`wicked into contact with the heater.”). Second, Petitioner confuses the feature of
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`the aerosol-forming material being wicked into contact with the heater—which the
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`independent claims require—with the wick itself being in contact with the heater—
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`which the independent claims do not require. Regardless of the position of Hon
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`’043’s wick, the liquid in the Hon device is delivered to the heater via airflow, not
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`wicking so Hon ’043 cannot anticipate the claims at issue. See id. at 29; Ex. 2009
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`at 146-153.
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`Petitioner recognizes this shortcoming and relies on a 1930s publication,
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`Whittemore, to replace the Hon ’043 heater assembly. But Petitioner has no basis
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`for its proposed substitution other than relying on hindsight and mischaracterizing
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`the Board’s findings in IPR2016-01268. Reply at 6-7 (citing Ex. 1022). There, the
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`Board determined that modifying Hon ’043 with Whittemore, as proposed, would
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`not have been obvious. See Ex. 1022 at 19. Contrary to Petitioner’s assertions, the
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`Board did not conclude that an alternative modification of substituting Hon’s entire
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`heater assembly with Whittemore’s heater assembly would have been a simple
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`substitution. Id. at 11-19; see also POPR at 33. In view of Petitioner’s weak
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`position on the merits, consideration of Fintiv factor 6 favors discretionary denial.
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`For the foregoing reasons, the Board should deny institution.
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`7
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`Date: February 19, 2021
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`Patent Owner Sur-Reply
`IPR2020-01602
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`Respectfully submitted,
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`By: /David M. Maiorana/
`David M. Maiorana, Reg. No. 41,449
`Kenneth S. Luchesi, Reg. No. 58,673
`David B. Cochran, Reg. No. 39,142
`JONES DAY
`North Point, 901 Lakeside Avenue
`Cleveland, OH 44114
`(216) 586-7499
`
`Anthony M. Insogna, Reg. No. 35,203
`JONES DAY
`4655 Executive Drive, Suite 1500
`San Diego, CA 92121
`
`Geoffrey K. Gavin, Reg. No. 47,591
`JONES DAY
`1420 Peachtree Street, N.E., Suite 800
`Atlanta, GA 30309
`
`Joshua R. Nightingale, Reg. No. 67,865
`JONES DAY
`500 Grant Street, Suite 4500
`Pittsburgh, PA 15219
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`George N. Phillips, Reg. No. 68,001
`JONES DAY
`250 Vesey Street
`New York, NY 10281
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`CERTIFICATE OF SERVICE
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`Patent Owner Sur-Reply
`IPR2020-01602
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`The undersigned hereby certifies that the foregoing Patent Owner’s Sur Reply
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`To Petitioner’s Reply To Patent Owner’s Preliminary Response was served via email
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`on the date below, upon the following:
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`
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`Jonathan Strang
`jonathan.strang@lw.com
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`Matthew Moore
`matthew.moore@lw.com
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`Christopher Henry
`christopher.henry@lw.com
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`Dated: February 19, 2021
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`/David M. Maiorana/
`Counsel for Patent Owner
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