Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 1 of 12 PageID# 29697
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`v.
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`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
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`Plaintiffs and Counterclaim Defendants,
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`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA INC.; and PHILIP MORRIS
`PRODUCTS S.A.,
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`Defendants and Counterclaim Plaintiffs.
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`Case No. 1:20-cv-00393-LO-TCB
`REDACTED
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`REPLY IN SUPPORT OF REYNOLDS’S MOTION IN LIMINE NO. 11
`TO EXCLUDE EVIDENCE AND TESTIMONY REGARDING
`PM/ALTRIA’S IQOS PRODUCTS
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 2 of 12 PageID# 29698
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`TABLE OF CONTENTS
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`II. 
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`INTRODUCTION ......................................................................................................................... 1 
`ARGUMENT ................................................................................................................................. 2 
`EVIDENCE ABOUT IQOS SHOULD BE LIMITED TO THE NARROW
`I. 
`PURPOSE OF DEMONSTRATING THE COMPETITIVE RELATIONSHIP
`BETWEEN THE PARTIES AS IT RELATES TO GEORGIA PACIFIC
`FACTOR NO. 5 ................................................................................................................. 2 
`FDA’S REVIEW OF THE IQOS PRODUCTS HAS NO RELEVANCE TO
`GEORGIA PACIFIC FACTOR 5 OR THE VALUE OF PM/ALTRIA’S
`ASSERTED COUNTERCLAIM PATENTS .................................................................... 3 
`PERMITTING EVIDENCE OF IQOS BEYOND ITS LIMITED RELEVANCE
`TO THE PARTIES’ COMPETITION UNDER GEORGIA PACIFIC FACTOR 5
`WILL UNFAIRLY PREJUDICE REYNOLDS AND LEAD TO A
`COLLATERAL MINI-TRIAL .......................................................................................... 4 
`CONCLUSION .............................................................................................................................. 7 
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`III. 
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`-i-
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 3 of 12 PageID# 29699
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`CASES
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`TABLE OF AUTHORITIES
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`Page
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`Ericsson, Inc. v. D-Link Sys., Inc.,
`773 F.3d 1201 (Fed. Cir. 2014)..................................................................................................4
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`Georgia-Pacific Corp. v. U.S. Plywood Corp.,
`318 F. Supp. 1116 (S.D.N.Y. 1970) ...........................................................................................2
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`Intelligent Verification Sys., LLC v. Microsoft Corp.,
`No. 2:12-cv-525, 2015 WL 1518099 (E.D. Va. Mar. 31, 2015) ................................................3
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`OTHER AUTHORITIES
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`Fed. R. Evid. 106 .............................................................................................................................6
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`Fed. R. Evid. 403 .....................................................................................................................4, 5, 6
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`-ii-
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 4 of 12 PageID# 29700
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`INTRODUCTION
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`PM/Altria cannot and does not contest that the upcoming trial in this case is limited to
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`whether Reynolds’s VUSE products infringe PM/Altria’s counterclaim patents; that, as a matter
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`of law, PM/Altria cannot prove its case by comparing VUSE to PM/Altria’s own IQOS products;
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`and that in any event, the patents at issue do not even cover IQOS. Nevertheless, PM/Altria argues
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`that it should have an unfettered ability to introduce evidence about IQOS before the jury, on the
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`ground that this evidence is relevant to (1) demonstrate the competitive relationship between
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`PM/Altria and Reynolds as it relates to the consideration of Georgia Pacific factor 5 in assessing
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`damages; and (2) suggest, based on the experience around FDA’s approval of IQOS, that
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` Dkt.
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`1001 (“Opp.”) at 1-5.
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`Reynolds does not object to the introduction of limited damages-related evidence that
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`Reynolds and PM/Altria are market competitors. But this evidence should be cabined to that
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`purpose only. This one Georgia Pacific factor certainly does not require the sort of broad-based
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`story of IQOS’s supposed benefits that PM/Altria seems intent on pursuing, but that will only lead
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`to jury confusion and a collateral trial about whether (as the ITC has found) the IQOS products
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`actually trade on Reynolds’s patented technology.
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`The second proffered ground for admissibility should be discarded outright. PM/Altria’s
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`counterclaim patents do not cover IQOS; that is undisputed. Accordingly, evidence about the
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`regulatory approval process for IQOS can shed no light whatsoever on whether features claimed
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`in the counterclaim patents are important to FDA.
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 5 of 12 PageID# 29701
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`I.
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`ARGUMENT
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`EVIDENCE ABOUT IQOS SHOULD BE LIMITED TO THE NARROW PURPOSE
`OF DEMONSTRATING THE COMPETITIVE RELATIONSHIP BETWEEN THE
`PARTIES AS IT RELATES TO GEORGIA PACIFIC FACTOR NO. 5
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`PM/Altria first argues that IQOS is relevant because “evidence regarding IQOS is
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`considered by both parties’ damages experts when analyzing Georgia Pacific Factor No. 5” (Opp.
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`at 1), which looks at “[t]he commercial relationship between the licensor and licensee, such as
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`whether they are competitors in the same territory in the same line of business.” Georgia-Pacific
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`Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970). The fact that Reynolds
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`and PM/Altria are competitors is hardly a disputed issue. As such, evidence concerning IQOS that
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`bears on this issue should be limited in scope. Indeed, PM/Altria need not say more about it than
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`what is set forth in the report of their expert Mr. Meyer in addressing Georgia Pacific Factor 5,
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`which PM/Altria touts in its opposition. See Opp. at 1 (citing Opp. Ex. A ¶¶ 346, 358-365).
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`Georgia-Pacific Factor 5 does not require or even contemplate the exhaustive evidence that
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`PM/Altria seems ready to introduce concerning IQOS’s regulatory authorizations, or the supposed
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`virtues of PM/Altria’s
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` IQOS products. Indeed, in the portions of Mr. Meyer’s
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`report cited by PM/Altria in its opposition, Mr. Meyer
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` See id. Evidence of IQOS is relevant
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`only for the limited purpose of discussing the competitive relationship between the parties to the
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`hypothetical negotiations, and PM/Altria should not be permitted to use this narrow ground of
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`limited relevance to force additional, irrelevant evidence and testimony into the case.1
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`1 PM/Altria claims that Reynolds’s “silen[ce] on Georgia Pacific Factor No. 5 . . . is fatal
`to its motion.” Opp. at 3. Not so. The dividing line is clear—the competitive relationship between
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 6 of 12 PageID# 29702
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`II.
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`FDA’S REVIEW OF THE IQOS PRODUCTS HAS NO RELEVANCE TO
`GEORGIA PACIFIC FACTOR 5 OR THE VALUE OF PM/ALTRIA’S ASSERTED
`COUNTERCLAIM PATENTS
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`PM/Altria next argues that IQOS is relevant as “evidence showing the regulatory benefits
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`RJR obtains using PMI/Altria’s patented technology, which is separately relevant to damages.”
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`Opp. at 3. This is where PM/Altria crosses the admissibility line even more dramatically.
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`PM/Altria can no longer turn to Georgia Pacific factor 5 to demonstrate relevance here, as its
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`alleged “regulatory benefits” do not relate to the competitive relationship inquiry under factor 5
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`(and PM/Altria does not argue otherwise). And PM/Altria’s contention that the FDA’s review of
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`the
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` IQOS products is somehow relevant to the value that its counterclaim patents
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`offer to Reynolds rests on flimsy, self-serving logic propped up by unreliable expert opinions.
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`First IQOS does not practice the counterclaim patents, so FDA’s evaluation of the IQOS
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`products provides no reliable information whatsoever about whether and to what extent FDA
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`would assign value to the claimed inventions.2 See Dkt. 870 (“Mot.”) at 5. This should end the
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`inquiry. Second, Ms. Ehrlich, PM/Altria’s regulatory expert, conceded that (a) she does not know
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`what the FDA considers in evaluating PMT and MRTP applications and/or how the FDA would
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`the parties related is relevant under Georgia Pacific factor 5, but any evidence regarding alleged
`“regulatory benefits” of IQOS that PM/Altria attempts to attribute to its patents is “clearly
`inadmissible on all potential grounds.” Intelligent Verification Sys., LLC v. Microsoft Corp., No.
`2:12-cv-525, 2015 WL 1518099, at *9 (E.D. Va. Mar. 31, 2015).
`2 PM/Altria asserts that “RJR’s argument that IQOS is irrelevant because it does not
`practice the Asserted Patents ignores the law,” and then appears to argue that the law “expressly
`states that: . . . (ii) FDA’s IQOS-related documents demonstrate the importance of battery
`performance, battery safety, and puff consistency to PMT authorization.” Opp. at 5. The sentence
`is unclear, but to the extent that PM/Altria is arguing that case law expressly states that FDA review
`of
` products, and generalized FDA statements about technology untethered to any
`evaluation of the asserted patents, are somehow still relevant to patent damages, not a single case
`offered by PM/Altria supports that notion.
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 7 of 12 PageID# 29703
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`view the patented technology; (b) she did not analyze any technical aspects of Reynolds’s PMTAs,
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`the asserted patent claims, or their quantitative value; and (c) she does not know how much more
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`likely PMTA authorization may be based on the patented technology.3 See Dkt. 877 at 1-2. Third,
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`Mr. McAlexander, PM/Altria’s technical expert, is unqualified to opine on whether or to what
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`extent the asserted patents have regulatory importance to the FDA in reviewing PMT and/or MRTP
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`applications. See Dkt. 885 at 1-3. Finally, Mr. Meyer, PM/Altria’s damages expert, arbitrarily
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`added a
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` kicker to his proposed reasonable royalty rate based solely on Ms. Ehrlich’s
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`speculative opinions about what is important to FDA, thus compounding the guesswork. See Dkt.
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`892 at 20-22. The Federal Circuit has instructed that “the ultimate reasonable royalty award must
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`be based on the incremental value that the patented invention adds to the end product.” Ericsson,
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`Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1226 (Fed. Cir. 2014). Here, FDA’s review of the
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` IQOS products cannot possibly reflect the incremental value of the patented inventions,
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`because those patents undisputedly do not cover IQOS.
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`III.
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`PERMITTING EVIDENCE OF IQOS BEYOND ITS LIMITED RELEVANCE TO
`THE PARTIES’ COMPETITION UNDER GEORGIA PACIFIC FACTOR 5 WILL
`UNFAIRLY PREJUDICE REYNOLDS AND LEAD TO A COLLATERAL MINI-
`TRIAL
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`All of PM/Altria’s Federal Rule of Evidence 403 arguments improperly rely on the “high
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`[sic] probative damages evidence about IQOS” (Opp. at 6), without distinguishing between IQOS
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`3 PM/Altria criticizes Reynolds for moving to exclude the testimony of Ms. Ehrlich in part
`because of her lack of personal knowledge about the FDA’s review methodology, but also to
`exclude FDA documents that allegedly “straightforwardly describe FDA’s methodology,” and
`then insinuates that Reynolds has taken conflicting positions that cannot be reconciled. Opp. at 4
`n.6. PM/Altria is wrong. Ms. Ehrlich’s unreliable, unsupported, and speculative opinions should
`be excluded, and she cannot rehabilitate those opinions now by relying on irrelevant evidence
`concerning FDA’s review of the IQOS products.
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 8 of 12 PageID# 29704
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`as evidence of the parties’ competitive relationship for Georgia Pacific Factor 5 from the IQOS
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`evidence relating to any alleged “regulatory benefits.” The narrowly-defined relevance of
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`“competition” evidence, however, does not confer any probative value to otherwise-irrelevant
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`“regulatory” evidence. Similarly, PM/Altria’s arguments concerning evidence of competition do
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`not rebut Reynolds’s Rule 403 arguments concerning other, irrelevant IQOS evidence.
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`PM/Altria first concludes that there is no undue prejudice to Reynolds because “whatever
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`prejudice [Reynolds] may suffer as a result of this evidence, it is not sufficiently unfair to
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`substantially outweigh the probative value (for the purpose of assessing damages) of competition
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`between the parties.” Opp. at 6 (quoting Fujifilm Corp. v. Motorola Mobility LLC, No. 12-cv-
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`3587, 2015 WL 12622055, at *5 (N.D. Cal. Mar. 19, 2015)). Notably, PM/Altria’s argument rests
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`solely on “the probative value . . . of competition between the parties”—it does not and cannot
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`rebut Reynolds’s claims of undue prejudice with respect to the irrelevant regulatory IQOS
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`evidence that PM/Altria seeks to introduce.4 Id. (emphasis added).
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`PM/Altria next denies that there is any risk of jury confusion, contending that “[t]he fact
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`that
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` presents no risk of confusion, and the Court’s
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`jury instructions will state that a product can compete with an accused product
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`, thereby impacting the royalty rate a party may accept.” Opp. at 7. Once
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`again, PM/Altria’s argument relates to evidence concerning “competition” only, and does not
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`address the significant risk of jury confusion caused by its improper attempts to connect the
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`4 That prejudice to Reynolds will only be exacerbated if PM/Altria is permitted to use
`regulatory evidence concerning IQOS while denying Reynolds the ability to introduce counter-
`evidence. See below discussion regarding PM/Altria’s MILs 8, 9 & 14.
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 9 of 12 PageID# 29705
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`damages issues in this case to general FDA comments about certain technology (not the patented
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`inventions) made during the FDA’s review of the
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` IQOS products.
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`Finally, PM/Altria contends that no mini-trial is necessary because (1) “both parties already
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`intend to call FDA experts” whose analysis “has included IQOS-related FDA documents;” and (2)
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`permitting reference to IQOS will not require discussion of the ITC litigation. Id. PM/Altria
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`conveniently forgets that its FDA expert’s opinions are also subject to a co-pending Daubert
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`motion, and its glib suggestion that introducing the ITC investigation will “generate the very jury
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`confusion [Reynolds] claims it seeks to avoid” is not well taken. Id. at 8. If PM/Altria actually
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`wants to avoid jury confusion concerning IQOS, then the correct outcome is for IQOS to be
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`excluded from this trial (beyond its limited use under Georgia Pacific factor 5). It is not, as
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`PM/Altria would have this Court believe, that PM/Altria can introduce the “good” evidence about
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`IQOS while also forcing Reynolds to remain silent about any “bad” evidence regarding, e.g.,
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`Reynolds’s pending patent infringement claims against IQOS (Dkt. 901, PM/Altria MIL 8), the
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`ITC’s exclusion and cease-and-desist orders against IQOS, resulting from the ITC’s determination
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`that IQOS infringes Reynolds’s patents (id., PM/Altria MIL 9), and any argument, evidence, or
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`testimony challenging FDA’s PMTA and MRTPA authorizations for IQOS (id., PM/Altria MIL
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`14). Essentially, PM/Altria wants permission to open the door on IQOS, and then slam the door
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`shut before Reynolds has a chance to respond. Such biased, incomplete presentation of evidence
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`would unfairly prejudice Reynolds, and should not be permitted. See, e.g., Fed. R. Evid. 106 &
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`403.
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 10 of 12 PageID# 29706
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`CONCLUSION
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`For the foregoing reasons, Reynolds respectfully asks this Court to grant Reynolds’s
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`Motion in Limine No. 11 to exclude evidence and testimony regarding PM/Altria’s IQOS Products
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`(other than for the limited purpose noted above relating to Georgia Pacific Factor 5).
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 11 of 12 PageID# 29707
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`Dated: February 25, 2022
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`Stephanie E. Parker
`JONES DAY
`1221 Peachtree Street, N.E.
`Suite 400
`Atlanta, GA 30361
`Telephone: (404) 521-3939
`Facsimile: (404) 581-8330
`Email: separker@jonesday.com
`
`
`Anthony M. Insogna
`JONES DAY
`4655 Executive Drive
`Suite 1500
`San Diego, CA 92121
`Telephone: (858) 314-1200
`Facsimile: (844) 345-3178
`Email: aminsogna@jonesday.com
`
`William E. Devitt
`JONES DAY
`77 West Wacker
`Suite 3500
`Chicago, IL 60601
`Telephone: (312) 269-4240
`Facsimile: (312) 782-8585
`Email: wdevitt@jonesday.com
`
`Sanjiv P. Laud
`JONES DAY
`90 South Seventh Street
`Suite 4950
`Minneapolis, MN 55402
`Telephone: (612) 217-8800
`Facsimile: (844) 345-3178
`Email: slaud@jonesday.com
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`Respectfully submitted,
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` /s/ David M. Maiorana
`David M. Maiorana (VA Bar No. 42334)
`Ryan B. McCrum
`JONES DAY
`901 Lakeside Ave.
`Cleveland, OH 44114
`Telephone: (216) 586-3939
`Facsimile: (216) 579-0212
`Email: dmaiorana@jonesday.com
`Email: rbmccrum@jonesday.com
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`John J. Normile
`JONES DAY
`250 Vesey Street
`New York, NY 10281
`Telephone: (212) 326-3939
`Facsimile: (212) 755-7306
`Email: jjnormile@jonesday.com
`
`
`Alexis A. Smith
`JONES DAY
`555 South Flower Street
`Fiftieth Floor
`Los Angeles, CA 90071
`Telephone: (213) 243-2653
`Facsimile: (213) 243-2539
`Email: asmith@jonesday.com
`
`Charles B. Molster
`THE LAW OFFICES OF
`CHARLES B. MOLSTER, III PLLC
`2141 Wisconsin Avenue, N.W. Suite M
`Washington, DC 20007
`Telephone: (202) 787-1312
`Email: cmolster@molsterlaw.com
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`Counsel for RAI Strategic Holdings, Inc. and
`R.J. Reynolds Vapor Company
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`Case 1:20-cv-00393-LO-TCB Document 1081 Filed 02/25/22 Page 12 of 12 PageID# 29708
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`CERTIFICATE OF SERVICE
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`I hereby certify that on this 25th day of February, 2022, a true and correct copy of the
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`foregoing was served using the Court’s CM/ECF system, with electronic notification of such filing
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`to all counsel of record.
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`/s/ David M. Maiorana
`David M. Maiorana (VA Bar No. 42334)
`JONES DAY
`901 Lakeside Ave.
`Cleveland, OH 44114
`Telephone: (216) 586-3939
`Facsimile: (216) 579-0212
`Email: dmaiorana@jonesday.com
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`Counsel for RAI Strategic Holdings, Inc. and
`R.J. Reynolds Vapor Company
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