Case 1:20-cv-00393-LMB-TCB Document 1385 Filed 07/12/22 Page 1 of 10 PageID# 34431
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`
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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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`
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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-LMB-TCB
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`
`REYNOLDS’S RESPONSE TO MOTION TO LIFT THE STAY
`ON PHILIP MORRIS PRODUCTS, S.A.’s CLAIM FOR PERMANENT INJUNCTION
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`Case 1:20-cv-00393-LMB-TCB Document 1385 Filed 07/12/22 Page 2 of 10 PageID# 34432
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`TABLE OF CONTENTS
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`INTRODUCTION ......................................................................................................................... 1
`ARGUMENT ................................................................................................................................. 2
`I.
`THE COURT SHOULD WITHHOLD ANY RULING ON FURTHER
`DISCOVERY UNTIL AFTER PMP’S INJUNCTION MOTION IS FILED. .................. 2
`THE COURT SHOULD DIRECT PMP TO BRIEF ITS REQUEST FOR
`ONGOING ROYALTY AT THE SAME TIME AS ITS REQUEST FOR
`PERMANENT INJUNCTION. ......................................................................................... 4
`CONCLUSION .............................................................................................................................. 5
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`II.
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`-i-
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`Case 1:20-cv-00393-LMB-TCB Document 1385 Filed 07/12/22 Page 3 of 10 PageID# 34433
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`CASES
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`TABLE OF AUTHORITIES
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`Page
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`Acumed LLC v. Stryker Corp.,
`551 F.3d 1323 (Fed. Cir. 2008)..................................................................................................3
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`Apple Inc. v. Samsung Elecs. Co.,
`735 F.3d 1352 (Fed. Cir. 2013)..................................................................................................3
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`BASF Plant Sci., LP v. Commonwealth Sci. & Indus. Rsch. Organisation,
`No. 2:17-CV-503-HCM, 2019 WL 8108116 (E.D. Va. Dec. 23, 2019), aff’d in
`part, rev’d in part and remanded, 28 F.4th 1247 (Fed. Cir. 2022)............................................3
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`Bright Data Ltd. v. Teso LT, UAB,
`No. 2:19-CV-00395-JRG, 2022 WL 488064 (E.D. Tex. Feb. 10, 2022) ..................................6
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`Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd., et al.,
`No. 2:09-cv-00290, 2014 WL 1320154 (W.D. Pa., Mar. 31, 2014), aff’d in
`relevant part, 807 F.3d 1283 (Fed. Cir. 2015) ...........................................................................5
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`eBay Inc. v. MercExchange, LLC,
`547 U.S. 388 (2006) ...................................................................................................................2
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`-ii-
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`INTRODUCTION
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`Philip Morris Products, S.A. (“PMP”) has moved to lift the stay on its request for injunctive
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`relief. (Dkt. 1372). Judge O’Grady entered that stay on June 7, 2021, pursuant to a motion from
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`Reynolds, which had questioned the need for further proceedings on this issue in light of the initial
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`determination by Chief Administrative Law Judge Cheney in the parallel ITC matter, finding the
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`IQOS product (on which PMP’s irreparable harm claim primarily rests) to infringe Reynolds’s
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`patents and recommending that importation of that product into the United States be barred. (Dkt.
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`649, 702.) Judge O’Grady observed at the time that “Judge Cheney’s initial ITC determination,
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`subject to final approval and appeal, undercuts the irreparable harm undergirding PMP’s claim for
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`injunctive relief.” (Dkt. 702.) Accordingly, he directed the parties to complete the remaining fact
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`discovery around the injunction claim, but otherwise held all further proceedings, including expert
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`discovery, in abeyance. (Id.) Since that Order was entered, the full Commission of the ITC upheld
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`Judge Cheney’s initial determination, affirming the finding that the IQOS product infringes
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`Reynolds’s valid patents, and further directing that importation of IQOS into this country is
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`banned.
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`Despite its firm belief that there is no good faith basis for PMP to even seek a permanent
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`injunction in view of the record and the stringent requirements set forth in eBay Inc. v.
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`MercExchange, LLC, 547 U.S. 388 (2006), Reynolds does not object to lifting the stay entered by
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`Judge O’Grady. But Reynolds does oppose PMP’s effort to place the issue of injunctive relief—
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`which would have devastating consequences to Reynolds—before this Court based on a record
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`that is not fully developed. As discussed briefly below, there is no basis for the Court to rule,
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`without even seeing PMP’s motion, that no further discovery will be appropriate on this critical
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`issue. Further, there is no basis to allow PMP to delay its related request for an ongoing royalty
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`until after the injunction request is fully briefed and decided; the ongoing royalty bears directly on
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`the adequacy of legal remedy prong of the eBay test, and the issues should be considered together.
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`ARGUMENT
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`I.
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`THE COURT SHOULD WITHHOLD ANY RULING ON FURTHER
`DISCOVERY UNTIL AFTER PMP’S INJUNCTION MOTION IS FILED.
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`PMP represents in its memorandum that “the parties agree that no further formal discovery
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`(e.g., depositions and discovery requests), whether fact or expert, on injunctive relief is necessary.”
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`(Dkt. 1372 at 5.) That statement does not accurately reflect Reynolds’s position.
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`There is no dispute among the parties that it is proper to include declarations from fact
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`and/or expert witnesses as part of the injunction briefing. PMP is apparently ambivalent about
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`whether it will use such declarations and “takes no position” in its motion as to their necessity.
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`Dkt. 1372 at 5-6. But it has no quarrel if Reynolds elects to do so. Indeed, PMP has previously
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`acknowledged to the Court that resolution of injunction requests typically “involves some
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`affidavits or perhaps something from an expert and that’s also done in the context of the briefing
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`to the Court.” (Dkt. 1372, Ex. A, 6/8/22 Hrg. Tr., at 44:23-25.) Caselaw uniformly confirms that
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`such declarations are appropriate. See, e.g., Apple Inc. v. Samsung Elecs. Co., 735 F.3d 1352,
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`1368 (Fed. Cir. 2013) (vacating district court’s causal nexus findings and remanding because
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`district court should have considered expert’s survey evidence in determining whether to grant
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`patentee’s motion for permanent injunction: “Here, the district court never reached that [causal
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`nexus] inquiry because it viewed Dr. Hauser’s survey evidence as irrelevant. That was an abuse of
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`discretion.”); Acumed LLC v. Stryker Corp., 551 F.3d 1323, 1326 (Fed. Cir. 2008) (noting “Stryker
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`submitted an opposition memorandum [to Acumed’s motion for a permanent injunction] supported
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`by the declarations of five physicians”); BASF Plant Sci., LP v. Commonwealth Sci. & Indus. Rsch.
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`Organisation, No. 2:17-CV-503-HCM, 2019 WL 8108116, at *14 (E.D. Va. Dec. 23, 2019), aff’d
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`-2-
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`in part, rev’d in part and remanded, 28 F.4th 1247 (Fed. Cir. 2022) (referencing expert testimony
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`on issues of permanent injunction and ongoing royalties).
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`As to the question whether further discovery will be required, however, that is not
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`something that Reynolds (or the Court) can fairly predict at this point. PMP’s injunction claim
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`will doubtless be a highly fact-bound exercise, and Reynolds does not know what supposed facts
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`PMP will put forth in its injunction motion. To date, PMP has offered contentions asserting that
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`its claim of irreparable harm is based on the supposed market competition between Reynolds’s
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`Alto/Solo G2 products (which are actually sold in this country) and PMP’s IQOS/VEEV products
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`(which are not).1 PMP reaffirms these contentions in its memorandum (Dkt. 1372 at 2), but the
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`facts that PMP will offer to support its bid for an injunction remain unknown. Injunction-specific
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`evidence was excluded from the trial, so there is no developed record on the issue. (See Dkt. 1184
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`at 33 (“evidence solely related to a request for an injunction will not be admissible”).) And PMP
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`has indicated that it may rely on facts Reynolds has never seen before, such as facts that are not
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`yet public, but may become public at some future date, presumably of PMP’s own choosing. (See
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`Dkt. 1372, Ex. B, 6/28/22 email of B. Sandford to A. Smith.) Reynolds asked what specific new
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`facts PMP intended to rely on, but PMP would not disclose that information. As such, Reynolds
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`made clear that, depending what PMP ultimately says in its injunction motion, further discovery
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`might be required. (See id.)
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`Reynolds has no intention of launching new discovery requests unilaterally or of using
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`discovery for any improper purpose, but this issue of injunctive relief is too important to foreclose
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`the possibility of further discovery without first knowing what PMP will say. Accordingly, this
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`1 When PMP originally offered contentions setting out the bases for its claim of irreparable harm,
`the only product it relied on was IQOS. After ALJ Cheney’s ruling in the ITC, however, PMP
`added new contentions relating to VEEV, a product that has never been sold in the United States.
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`Court should reserve any ruling about whether further discovery is necessary at this time, and
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`should afford Reynolds an opportunity to be heard on that issue after PMP’s injunction motion is
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`filed. If Reynolds ultimately asks for targeted discovery, and the Court agrees, then the Court can
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`address at that time any necessary modifications to the briefing schedule.
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`II.
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`THE COURT SHOULD DIRECT PMP TO BRIEF ITS REQUEST FOR
`ONGOING ROYALTY AT THE SAME TIME AS ITS REQUEST FOR
`PERMANENT INJUNCTION.
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`PMP has made clear that, if the Court agrees with Reynolds that the high standard for entry
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`of a permanent injunction is not met in this case, then PMP will pursue alternative relief in the
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`form of an ongoing royalty imposed on future sales by Reynolds of the Alto and Solo G2 products.
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`(Dkt. 1372 at 6-7.) PMP wants to present these requests in seriatim fashion, with full briefing and
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`adjudication of the injunction request going first, followed by full briefing and adjudication of the
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`request for ongoing royalty if the injunction is denied. (Id.)
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`PMP’s motivation is transparent: adequacy of legal remedy is a key factor in the eBay
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`analysis, so PMP does not want to show the Court its calculation of an ongoing royalty at the same
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`time it is arguing (for injunction purposes) that no monetary award will suffice. But there is no
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`secret here, and thus no reason to proceed in piecemeal fashion, which can only compound the
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`briefing to be considered by the Court and further drag out these proceedings. Moreover, PMP’s
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`calculation of an ongoing royalty is directly relevant to the adequacy of monetary relief prong of
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`eBay, and cannot be wholly set aside until later. See, e.g., Carnegie Mellon Univ. v. Marvell Tech.
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`Grp., Ltd., et al., No. 2:09-cv-00290, 2014 WL 1320154, at *26-39 (W.D. Pa., Mar. 31, 2014)
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`(considering issues of permanent injunction and ongoing royalty together, and concluding that
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`injunction should not be granted in view of lack of irreparable harm and adequate legal remedy in
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`the form of an ongoing royalty set at the same rate used by the jury in its calculation of damages
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`at trial), aff’d in relevant part, 807 F.3d 1283, 1302-1306 (Fed. Cir. 2015) (affirming imposition
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`of ongoing royalty); Bright Data Ltd. v. Teso LT, UAB, No. 2:19-CV-00395-JRG, 2022 WL
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`488064 (E.D. Tex. Feb. 10, 2022) (“In light of [patentee]’s assertions through its retained expert
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`that a running royalty and monetary relief could fairly and fully compensate it for future
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`infringement, the Court finds that [patentee] has not met its burden to establish that remedies at
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`law—i.e., monetary damages—are inadequate to compensate it for [accused infringer]’s
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`infringement or that its harm is irreparable.”).
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`Reynolds will proceed in whatever order the Court decides, but respectfully submits that
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`the issues of permanent injunction and ongoing royalty should be briefed together. If the Court
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`agrees, then Reynolds does not oppose the adjustments to the timing and page limits for briefing
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`that PMP has suggested. (Dkt. 1372 at 7, fn. 4.)
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`CONCLUSION
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`Reynolds respectfully requests that this Honorable Court (i) lift the stay entered June 7,
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`2021 relating to PMP’s claim for permanent injunctive relief; (ii) reserve ruling on whether
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`discovery relating to the injunction request is appropriate until after PMP files its injunction motion
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`and Reynolds has had an opportunity to be heard; (iii) direct that PMP’s requests for a permanent
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`injunction and ongoing royalty be briefed together; and (iv) enter the following schedule for
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`briefing:2
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`• 36 days for PMP’s opening brief (limited to 40 pages);
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`• 45 days for Reynolds’s opposition brief (limited to 40 pages); and
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`• 29 days for PMP’s reply brief (limited to 20 pages).
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`2 If the Court instead elects to proceed with only PMP’s request for permanent injunction at this
`time, then Reynolds agrees to the briefing schedule and page limits set out at p. 5 of PMP’s
`memorandum, subject to any need for modification if Reynolds moves for, and the Court allows,
`additional discovery.
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`Case 1:20-cv-00393-LMB-TCB Document 1385 Filed 07/12/22 Page 9 of 10 PageID# 34439
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`Dated: July 12, 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
`110 North Wacker
`Suite 4800
`Chicago, IL 60606
`Telephone: (312) 269-4240
`Facsimile: (312) 782-8585
`Email: wdevitt@jonesday.com
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`Respectfully submitted,
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`/s/ David M. Maiorana
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`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
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`
`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-LMB-TCB Document 1385 Filed 07/12/22 Page 10 of 10 PageID# 34440
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`CERTIFICATE OF SERVICE
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`I hereby certify that on this 12th day of July, 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/ 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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`-7-
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