Case 1:20-cv-00393-LMB-TCB Document 1367 Filed 06/28/22 Page 1 of 12 PageID# 33956
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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`PHILIP MORRIS PRODUCTS S.A.,
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`Plaintiff,
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`v.
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`R.J. REYNOLDS VAPOR COMPANY,
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`Defendant.
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`Civil Action No. 1:20-cv-00393-LMB-TCB
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`MEMORANDUM IN SUPPORT OF PHILIP MORRIS’ UNOPPOSED
`MOTION TO LIFT THE PARTIAL STAY ON PHILIP MORRIS’ CLAIM FOR
`PERMANENT INJUNCTIVE RELIEF
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`Case 1:20-cv-00393-LMB-TCB Document 1367 Filed 06/28/22 Page 2 of 12 PageID# 33957
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`I.
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`II.
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`III.
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`IV.
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`TABLE OF CONTENTS
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`Page
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`INTRODUCTION ...............................................................................................................1
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`FACTUAL BACKGROUND ..............................................................................................1
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`LEGAL STANDARD ..........................................................................................................3
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`ARGUMENT .......................................................................................................................4
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`A.
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`B.
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`The Court Should Lift The Partial Stay On Injunctive Relief .................................4
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`The Court Should Adopt The Parties’ Agreed Proposed Briefing Schedule ...........5
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`V.
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`CONCLUSION ....................................................................................................................7
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`TABLE OF AUTHORITIES
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`CASES
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`Amdocs (Israel) Ltd. v. Openet Telecom, Inc.,
`No. 10-cv-910-LMB, 2012 WL 12832376 (E.D. Va. Mar. 30, 2012) ........................................ 3
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`Arctic Cat Inc. v. Bombardier Recreational Prod. Inc.,
`876 F.3d 1350 (Fed. Cir. 2017) ................................................................................................... 6
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`Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc.,
`670 F.3d 1171 (Fed. Cir. 2012) ................................................................................................... 6
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`Centripetal Networks, Inc. v. Cisco Sys., Inc.,
`492 F. Supp. 3d 495 (E.D. Va. 2020) .......................................................................................... 6
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`Core Lab’ys LP v. Spectrum Tracer Servs., L.L.C.,
`532 F. App’x 904 (Fed. Cir. 2013) .............................................................................................. 3
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`Endo Pharms. Inc. v. Amneal Pharms., LLC,
`No. 12-CV-8115 et al., 2016 WL 1732751 (S.D.N.Y. Apr. 29, 2016) ....................................... 4
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`ePlus, Inc. v. Lawson Software, Inc.,
`No. 3:09-cv-620, 2011 WL 2119413 (E.D. Va. May 24, 2011) ................................................. 4
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`Health Diagnostic Lab., Inc. v. Bos. Heart Diagnostics Corp.,
`No. 14-cv-796, 2015 WL 13879824 (E.D. Va. Feb. 4, 2015) ..................................................... 3
`
`Murata Mach. USA v. Daifuku Co.,
`830 F.3d 1357 (Fed. Cir. 2016) ................................................................................................... 3
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`Pro Stage Gear, LLC v. Guangzhou Rantion Trading Co.,
`No. 17-cv-30, 2019 WL 10960473 (E.D. Tenn. Nov. 19, 2019) ................................................ 3
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`XY, LLC v. Trans Ova Genetics,
`890 F.3d 1282 (Fed. Cir. 2018) ................................................................................................... 6
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`STATUTES
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`35 U.S.C. § 283 ............................................................................................................................... 3
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`I.
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`INTRODUCTION
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`In its prayer for relief, Plaintiff Philip Morris Products S.A. (“Philip Morris”) asked the
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`Court to permanently enjoin Reynolds from “using, making, importing, offering for sale and/or
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`selling” the accused VUSE e-cigarettes if they are found to infringe the ’265 or ’911 patents. Dkt.
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`473 at 83. In May 2021, Judge O’Grady entered a partial stay, allowing the parties to complete
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`fact discovery on injunctive relief, but held further proceedings on injunctive relief in abeyance.
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`Dkt. 702. Now that the Court has entered final judgment on the jury’s verdict that (i) the Solo G2
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`product infringes the ’911 patent, (ii) the Alto product infringes the ’265 patent, and (iii) Reynolds
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`failed to show either patent was invalid, no good cause supports continuing the stay. Moreover,
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`Defendant R.J. Reynolds Vapor Co. (“Reynolds”) does not oppose lifting the stay.
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`Accordingly, Philip Morris respectfully moves the Court to lift the stay and enter the agreed
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`briefing schedule. Philip Morris also requests the Court’s guidance on whether (i) the Court would
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`like fact and/or expert declarations to be submitted with briefing on injunctive relief (as Reynolds
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`contends) and (ii) such briefing is limited to injunctive relief or should also address the appropriate
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`royalty rate for a compulsory license (as Reynolds contends).
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`II.
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`FACTUAL BACKGROUND
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`Philip Morris filed infringement counterclaims on June 29, 2020. Dkt. 40. On March 12,
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`2021, Judge O’Grady granted Philip Morris leave to add permanent injunctive relief as an
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`additional remedy for Reynolds’ infringement. Dkts. 464, 483. The parties then proceeded with
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`fact discovery, including on injunctive relief. As Philip Morris explained, Philip Morris is entitled
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`to a permanent injunction barring Reynolds’ future sales of Alto and Solo G2 cartridges in the U.S.
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`because such sales would irreparably harm Philip Morris,
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`135:18-22. As Philip Morris explained, and as the evidence at trial established, Reynolds
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` Ex. A (Trial Tr. 6/8 a.m.) at
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`1
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`. Ex. C (Trial Tr. 6/9 p.m.) at 570:17-
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`574:7. Reynolds derived particular benefits from its use of Philip Morris’s patented technology in
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`the infringing Solo G2 and Alto e-cigarettes, including to obtain PMT authorization (for the Solo
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`G2) and unfairly compete with Philip Morris in the market. Dkt. 1361. As the evidence at trial
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`confirmed,
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`. See, e.g., Ex. A (Trial
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`Tr. 6/8 a.m.) at 147:4-148:5; Ex. D (Trial Tr. 6/8 p.m.) 161:20-162:14.
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`On May 21, 2021, Reynolds moved to stay all proceedings related to injunctive relief after
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`Administrative Law Judge Cheney in the International Trade Commission rendered a decision
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`recommending that a limited exclusion order be entered barring entry of IQOS into the U.S.1 Dkt.
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`647 at 2-5. On June 7, 2021, Judge O’Grady granted Reynolds’ motion in part and entered “a
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`partial stay of further proceedings on PMP’s injunctive relief claim that allows only fact discovery
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`relating to the instant claim to proceed through its conclusion.” Dkt. 702 at 1. The parties
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`subsequently completed fact discovery on all issues, including injunctive relief. But the parties
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`did not conduct expert discovery on injunctive relief because, as Judge O’Grady recognized, expert
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`discovery was not authorized (id.) and is “typically handled through post-trial briefing and
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`declarations, as needed.” Dkt. 666 at 5 n.1.
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`On June 8, 2022, the parties began a jury trial on Philip Morris’ infringement claims. On
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`June 15, the jury returned a verdict that (i) the Solo G2 infringed the ’911 patent, (ii) the Alto
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`infringed the ’265 patent, and (iii) Reynolds had not shown the ’911 patent was invalid (Reynolds
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`1 The Commission subsequently affirmed ALJ Cheney’s decision. Philip Morris appealed that
`decision, which is in the midst of briefing and pending in the Federal Circuit.
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`2
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`did not challenge the validity of the ’265 patent). Dkt. 1361. The Court entered a final judgment
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`that same day. Dkt. 1362.
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`III. LEGAL STANDARD
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`Under 35 U.S.C. § 283, the Court “may grant injunctions in accordance with the principles
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`of equity to prevent the violation of any right secured by patent, on such terms as the court deems
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`reasonable.” As this Court has explained, “[w]hether injunctive relief is appropriate should [a]
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`plaintiff prevail” at a jury trial is “determined solely by the Court.” Amdocs (Israel) Ltd. v. Openet
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`Telecom, Inc., No. 10-cv-910-LMB, 2012 WL 12832376, at *1 (E.D. Va. Mar. 30, 2012).
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`As the Federal Circuit has held, the power to stay proceedings and, conversely, to lift a stay
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`“is incidental to the power inherent in every court to control the disposition of the causes on its
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`docket with economy of time and effort for itself, for counsel, and for litigants.” Core Lab’ys LP
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`v. Spectrum Tracer Servs., L.L.C., 532 F. App’x 904, 911 (Fed. Cir. 2013). To determine whether
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`a stay should issue, “courts normally consider the following non-exclusive factors: (1) whether a
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`stay will unduly prejudice or present a clear tactical disadvantage to the non-moving party;
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`(2) whether a stay will simplify the issues in question and trial of the case; and (3) whether
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`discovery is complete and a trial date has been set.” Health Diagnostic Lab., Inc. v. Bos. Heart
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`Diagnostics Corp., No. 14-cv-796, 2015 WL 13879824, at *1 (E.D. Va. Feb. 4, 2015); see also
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`Murata Mach. USA v. Daifuku Co., 830 F.3d 1357, 1361 (Fed. Cir. 2016). “When deciding
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`whether to lift a stay … district courts consider the same three factors.” Pro Stage Gear, LLC v.
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`Guangzhou Rantion Trading Co., No. 17-cv-30, 2019 WL 10960473, at *2 (E.D. Tenn. Nov. 19,
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`2019). “A district court may lift a stay if the circumstances that persuaded the court to impose the
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`stay in the first place have changed significantly.” Id.; see also Murata, 830 F.3d at 1361.2
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`2 All emphasis added and citations omitted unless otherwise noted.
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`3
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`IV. ARGUMENT
`A.
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`The Court Should Lift The Partial Stay On Injunctive Relief
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`Philip Morris requests that the Court exercise its inherent discretion to lift the partial stay
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`on injunctive relief. The circumstances that led Judge O’Grady to stay proceedings on injunctive
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`relief have significantly changed and, as discussed below, each factor supports lifting the stay.
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`Moreover, the requested relief is undisputed because Reynolds does not oppose lifting the stay.
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`First, lifting the partial stay will not prejudice or impose a clear tactical disadvantage to
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`Reynolds. Philip Morris’s infringement claims and Reynolds’ defenses have been fully tried, and
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`the Court has entered final judgment. Dkts. 1361, 1362. At this stage, further delayed adjudication
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`of injunctive relief claim will only prejudice Philip Morris, allowing Reynolds—
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`. Ex.
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`A (6/8 a.m. Trial Tr.) at 135:18-22, 147:18-20; see also Endo Pharms. Inc. v. Amneal Pharms.,
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`LLC, No. 12-cv-8115, 2016 WL 1732751, at *8 (S.D.N.Y. Apr. 29, 2016) (“Delaying Endo its due
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`remedy would impose further harm on it.”); ePlus, Inc. v. Lawson Software, Inc., No. 09-cv-620,
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`2011 WL 2119413, at *7 (E.D. Va. May 24, 2011) (“ePlus, on the other hand, will continue to
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`suffer irreparable harm each day Lawson continues to infringe its patents” and, thus, “to stay the
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`injunction would only prolong the harm to ePlus”). The first factor thus favors lifting the stay.
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`Second, lifting the partial stay will not impact any remaining issues or trial, which is
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`complete. While both parties will likely file Rule 50(b) motions for judgment as a matter of law,
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`those motions will be fully briefed within the parties’ agreed proposed briefing schedule on
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`injunctive relief (infra at 5-6) and, regardless, the Court indicated that it is “highly unlikely” that
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`any such motions will be granted. Ex. E (6/15 a.m. Trial Tr.) at 1084:11-19.
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`Third, trial and all necessary discovery on injunctive relief is complete. Fact discovery on
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`injunctive relief ended in 2021. See supra at 2. And, as discussed below, the parties agree that no
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`further formal fact discovery or expert discovery is necessary. See generally Ex. B; see also,e.g.,
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`Dkt. 702 (stating that expert discovery on injunctive relief has not been authorized); Dkt. 666 at 5
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`n.1; Ex. A (6/8 a.m. Trial Tr.) at 43:13-44:25, 47:21-48:12 (The Court: it “most likely will be the
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`case” that expert discovery on injunctive relief will not be necessary and the Court “would be
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`surprised if more [discovery] is needed”). The last factor favorslifting the stay.
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`In sum, because (1) trial is complete, (ii) no further discovery on injunctive relief is
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`necessary, and (111) Reynolds does not opposelifting the stay, the circumstances underlying the
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`stay have significantly changed. Thus, the Court should lift the stay and enter a briefing schedule.
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`B.
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`The Court Should Adopt The Parties’ Agreed Proposed Briefing Schedule
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`In view ofthe jury’s verdict of infringement and no invalidity, Philip Morris requests that
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`the Court set a schedule for briefing on Philip Morris’ request for injunctive relief. Philip Morris
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`has conferred with Reynolds andthe parties jointly propose the following briefing schedule:
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`Philip Morris’s opening brief|30 pages 21 calendar days after the Court’s order setting
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`the briefing schedule
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`briefis filed
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`briefis filed
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`Ex. B at 1-5. Further, the parties agree that no further formal discovery (e.g., depositions and
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`discovery requests), whether fact or expert, on injunctive relief is necessary. Jd. However, the
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`parties seek the Court’s guidance on two issues on whichthey do not agree.
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`First, the parties seek the Court’s guidance as to whether the Court would like the parties
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`to submit fact and expert declarations regarding the propriety of injunctive relief concurrently with
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`the briefs as proposed above. Philip Morris takes no position as to whether such declarations are
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`necessary to brief injunctive relief and defers to the Court’s preference. Reynolds intends to offer
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`such fact and expert declarations “as are appropriate” to address PMP’s positions. Ex. B at 2.
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`Second, while the parties agree they should brief the issue of an ongoing royalty for future
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`infringement if the Court finds that a permanent injunction is not warranted, the parties disagree
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`on the timing ofsuch briefing? Ex. B at 3. Reynolds contends that an ongoing royalty should be
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`briefed concurrently with injunctive relief because the issues “are substantively intertwined” and
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`separate briefing would be inefficient. Jd. Reynolds is wrong. The issues are not substantively
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`intertwined and, even if they were, Reynolds’ proposal puts the cart before the horse. It would be
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`moreefficient to brief injunctive relieffirst and then, if the Court finds that injunctive relief is not
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`warranted, separately brief an ongoing royalty. That is because, ifthe Court grants injunctiverelief
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`(as it should), an ongoing royalty is moot and no briefing on that issue would be required. Indeed,
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`it would be inefficient to brief an ongoing royalty, including submitting expert declarations to
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`establish the appropriate royalty rate, in the first instance because such briefing and expert opinions
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`are unnecessary if the Court grants injunctive relief. And, given the agreed page limits, it would
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`3 If the Court finds injunctiverelief is not warranted, the parties agree Phillip Morris can seek an
`ongoing royalty, which “is essentially a compulsory license for future use of the patented
`technology”that takes into accountthe post-verdict “change in the parties’ bargaining positions|]
`and ... economic circumstances.” Centripetal Networks, Inc. v. Cisco Sys., Inc., 492 F. Supp. 3d
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`495, 606 (E.D. Va. 2020). Such economic circumstances would includethe fact that Regardless of any pre-verdict
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`willfulness finding, Reynolds is now an adjudicated infringer of valid patents and, because there
`is “a substantial shift in the bargaining position of the parties” under such circumstances, courts
`typically award an ongoing royalty rate or “compulsory license” that is a multiple of the jury’s
`awarded royalty rate. See XY, LLC v. Trans Ova Genetics, 890 F.3d 1282, 1297 (Fed. Cir. 2018):
`Arctic Cat Inc. v. Bombardier Recreational Prod. Inc., 876 F.3d 1350, 1370 (Fed. Cir. 2017)
`(affirming ongoing royalty at twice the jury’s royalty rate); ActiveVideo, 694 F.3d at 1343
`(affirmingtrial court’s “post-verdict royalty calculation”that resulted in rate 2.4 times higher than
`jury’s rate); Bard Peripheral Vascular, Inc. v. W.L. Gore & Assocs., Inc., 670 F.3d 1171, 1193
`(Fed. Cir. 2012) (increasing jury’s 10% rate to ongoing royalty rates between 12.5% and 20%).
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`be wasteful to dedicate significant portions of the briefing to an issue (ongoing royalty) the Court
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`may not need to address at all.4
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`Accordingly, Philip Morris requests the Court (i) enter the agreed briefing schedule above,
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`(ii) provide guidance on the Court’s preference regarding fact/expert declarations, and (iii) order
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`that the initial briefing is limited to injunctive relief (and that the parties submit additional briefing
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`with expert declarations on the appropriate royalty rate for a compulsory license, if necessary, only
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`after the Court rules on Philip Morris’ request for injunctive relief).
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`V.
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`CONCLUSION
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`Philip Morris respectfully requests that the Court (i) lift the partial stay on injunctive relief,
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`(ii) enter the agreed proposed briefing schedule, (iii) provide guidance on the Court’s preference
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`regarding fact/expert declarations, and (iv) order that initial briefing is limited to injunctive relief
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`(and that the additional briefing with expert declarations on the appropriate royalty rate for a
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`compulsory license will be submitted, if necessary, after the Court rules on Philip Morris’ request
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`for injunctive relief).
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`Dated: June 28, 2022
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` Respectfully submitted,
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`By: /s/ Maximilian A. Grant
`Maximilian A. Grant (VSB No. 91792)
`max.grant@lw.com
`Lawrence J. Gotts (VSB No. 25337)
`lawrence.gotts@lw.com
`Matthew J. Moore (pro hac vice)
`matthew.moore@lw.com
`Jamie Underwood (pro hac vice)
`jamie.underwood@lw.com
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`4 If the Court adopts Reynolds’ proposal and finds the issues of injunctive relief and an ongoing
`royalty should be briefed concurrently, Philip Morris requests an additional (i) 15 days for each
`brief (opening, opposition, and reply briefs) (ii) 10 pages for opening and responsive briefs (i.e.,
`40 pages total for each brief); and (iii) 5 pages for Philip Morris’ reply brief (i.e., 20 pages total).
`Philip Morris agrees that expert declarations regarding an ongoing royalty (which, as discussed,
`should be separately briefed after injunctive relief is decided) are appropriate.
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`LATHAM & WATKINS LLP
`555 Eleventh Street, N.W., Suite 1000
`Washington, DC 20004
`Telephone: (202) 637-2200
`Facsimile: (202) 637-2201
`
`Clement J. Naples (pro hac vice)
`clement.naples@lw.com
`LATHAM & WATKINS LLP
`885 Third Avenue
`New York, NY 10022-4834
`Tel: (212) 906-1200; Fax: (212) 751-4864
`
`Gregory J. Sobolski (pro hac vice)
`greg.sobolski@lw.com
`LATHAM & WATKINS LLP
`505 Montgomery Street, Suite 2000
`San Francisco, CA 94111
`Telephone: (415) 391-0600
`Facsimile: (415) 395-8095
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`Counsel for Plaintiff Philip Morris Products S.A.
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`CERTIFICATE OF SERVICE
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`I hereby certify that on this 28th day of June, 2022, a true and correct copy of the foregoing
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`was served using the Court’s CM/ECF system, with electronic notification of such filing to all
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`counsel of record.
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`/s/ Maximilian A. Grant
`Maximilian A. Grant (VSB No. 91792)
`max.grant@lw.com
`LATHAM & WATKINS LLP
`555 Eleventh Street, N.W., Ste. 1000
`Washington, DC 20004
`Tel: (202) 637-2200; Fax: (202) 637-2201
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`Counsel for Plaintiff Philip Morris Products S.A.
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