Case 1:20-cv-00393-LMB-TCB Document 1391 Filed 07/19/22 Page 1 of 15 PageID# 34685
`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`PHILIP MORRIS PRODUCTS S.A.
`
`Plaintiff,
`
`Case No. 1:20-cv-00393-LO-TCB
`
`
`v.
`
`R.J. REYNOLDS VAPOR COMPANY
`
`Defendant.
`
`PHILIP MORRIS’ BRIEF IN SUPPORT OF SUBMISSION OF THE WILLFUL
`INFRINGEMENT ISSUE TO THE JURY
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`

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`Case 1:20-cv-00393-LMB-TCB Document 1391 Filed 07/19/22 Page 2 of 15 PageID# 34686
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`TABLE OF CONTENTS
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`
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`Page
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`I.
`
`INTRODUCTION ...............................................................................................................1
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`II.
`
`FACTUAL BACKGROUND ..............................................................................................1
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`C.
`
`The Similarities Between The Asserted Patents And Accused Products
`Were Apparent .........................................................................................................2
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`D. With Knowledge Of The Asserted Patents and The Similarities To The
`Accused Products, Reynolds Chose to Continue To Sell The Accused
`Products Without Permission ...................................................................................5
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`E.
`
`F.
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`Philip Morris sued Reynolds For Infringement On June 29, 2020 ..........................6
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`Reynolds’ Motion For Summary Judgment On Willfulness Was Denied ...............6
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`III.
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`LEGAL STANDARD ..........................................................................................................6
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`IV.
`
`ARGUMENT .......................................................................................................................8
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`A.
`
`B.
`
`C.
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`Reynolds deliberately infringed Philip Morris patents because it was
`desperate to have e-cigarette products on the market ..............................................8
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`There is no dispute that Reynolds knew of patents and infringement post-
`suit ..........................................................................................................................11
`
`There Is A Significant Risk Of Wasting Judicial Resources To Not Allow
`Willfulness To Go To The Jury And Prejudice .....................................................11
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`V.
`
`CONCLUSION ..................................................................................................................12
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`I.
`
`INTRODUCTION
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`There is more than sufficient evidence for the jury to find Reynolds willfully infringed the
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`asserted patents.
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`At the same time, Reynolds was also monitoring its competitors’ patents—particularly
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`those of its “fierce” competitor—Philip Morris. And there is no dispute Reynolds knew of the
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`applications that issued as the ’911 and ’265 patents, and knew of the issuance of the ’265 patent
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`by November 21, 2017 and the ’911 patent by December 4, 2018. While Reynolds was monitoring
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`Philip Morris’ patents, it purchased the Alto, Vibe, and Ciro products and conducted tear downs
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`of the physical devices, confirming that they knew both about the Philip Morris patents and the
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`specific shapes, materials, sizes, positions, and functions of the physical structures in the accused
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`devices. Consequently, Reynolds—informed by the monthly patent analysis of its in-house
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`counsel and the product tear downs of its extensive engineering team, both working for Dr.
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`Figlar—knew or should have known it was infringing Philip Morris’ asserted patents.
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`II.
`
`FACTUAL BACKGROUND
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`A.
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`Reynolds’ Heat-Not-Burn Products Failed So It Had To Pivot to E-Cigarettes
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` In the early 1980s, Reynolds sought to develop an alternative to combustible cigarettes
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`called heat-not-burn products. Tr. 6/9/22 pm at 112:1-11. Heat-not-burn products heat tobacco,
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`rather than burn it, which significantly reduces the amount of tar and nicotine found in smoke. Tr.
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`6/9/22 pm at 112:1-11. Reynolds’ heat-not-burn products failed. Tr. 6/9/22pm at 143:13-144:12
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`and 144:23-25, 145:11-13.
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`
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`Having invested over a billion dollars in two failed combustible cigarette alternatives,
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`Reynolds moved into the e-cigarette market. Tr. 6/9/22pm at 145:14-146:7. In 2013, Reynolds
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`launched its first e-cigarette product. Tr. 6/9/22pm at 118:23-119:10. “Reynolds had aspirations
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`to being number one in the vapor market.” Tr. 6/9/22pm at 105:20-21. Reynolds invested tens of
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`1
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`millions of dollars to develop the Solo and another $30 million in the PMTA application. Tr.
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`6/9/22pm at 121:3-7. Reynolds invested more to acquire the Alto, Vibe and Ciro and spent tens
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`of millions more on their PMTA applications. Tr. 6/9/22pm at 137:17-22.
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`B.
`
`Reynolds Has Had Knowledge of Philip Morris’ Asserted Patents Since
`Issuance
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`Reynolds and Philip Morris are “fierce” competitors. Tr. 6/8/22am at 135:18-19.
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`Throughout this period, Reynolds monitored Philip Morris’ patents. 6/24/21 Figlar Dep. at
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`132:21-133:10. Reynolds looked “at the full patent landscape” and “[kept] a close eye on the
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`patent literature,” including Philip Morris’ patents. Id. Reynolds’ in-house and outside counsel
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`would review competitor patents, and every time there was a “new iteration of patent publications,”
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`the lawyers would “compile it and send it out to the scientists” and other Reynolds employees “at
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`least on a monthly basis.” 6/24/21 Figlar Depo. at 134:5-134:17. Reynolds’ corporate witness,
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`Dr. Figlar, testified that it would be irresponsible for a company to ignore the research and patents
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`that are out there from competitors. Tr. 6/9/22pm at 130:1-4. As a result, Reynolds concedes that
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`it knew of the patent application that issued as the ’911 patent by December 3, 2013 and the
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`asserted ’911 patent by December 4, 2018, and it knew of the application that issued as the ’265
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`patent by October 30, 2014 and the ’265 patent by November 21, 2017. PX-613. There is no
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`evidence in the record that Reynolds took any steps to avoid infringement.
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`C.
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`The Similarities Between The Asserted Patents And Accused Products Were
`Apparent
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`The evidence shows that the similarities between the asserted patents and accused products
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`were, or should have been, readily apparent to the in-house counsel and many engineers at
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`Reynolds who had access to the monthly patent reports circulated at Reynolds.
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`During trial, Philip Morris and Reynolds’ technical experts explained in great detail the
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`many similarities between the products and the asserted Philip Morris patents. Those similarities
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`2
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`are plain even on cursory review, as shown in the table below comparing the products to the
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`embodiments of the ’911 patent disclosed in its application. For example, Dr. Abraham and Mr.
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`Kodama each explained that the “blind hole” in the Solo is the same as the “blind hole” in Figures
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`5 and 6 of the ’911 patent—they are both at the tip of the mouthpiece, shaped like a donut, and
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`have a cross-sectional width between 0.5 to 1mm:
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`Similarly, Dr. Abraham and Mr. Kodama demonstrated the striking similarity between the
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`“blind holes” in the Alto and the “blind holes” in Figures 3 and 4 because they are all at the tip of
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`the mouthpiece, in the same locations on opposite sides of the exit hole, and symmetric:
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`3
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`Reynolds disputed infringement of only two elements: (i) “blind hole” and (ii) “a largest
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`cross-sectional dimension x taken along a cross-section of the cavity in a direction perpendicular
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`to the longitudinal direction of the cavity, where x is 0.5 mm, or 1 mm, or between 0.5 and 1 mm.”
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`Reynolds’ first argument contradicts Judge O’Grady’s claim construction order. The Court ruled
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`that “blind hole” should be given its plain and ordinary meaning, and rejected Reynolds’ proposed
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`construction of “a hole that does not extend to the outside of the aerosol-generating system.” (Dkt.
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`360; Dkt. 223 at 28.) Judge O’Grady also confirmed there were no disclaimers based on the
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`prosecution history, including in view of the Rose ’975 patent. (Dkt. 360.) In his Daubert order,
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`the Court subsequently confirmed that the discussion of the Rose ’975 patent during the
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`prosecution history “did not expressly disclaim the subject matter of any blind-hole that also
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`contained additional spaces or cavities,” and did “not teach the level of explicit disavowal where
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`the invention excludes a particular embodiment, or where the history limits the invention to a
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`particular form.” (Dkt. 1184 and 23.) Indeed, Reynolds’ “blind hole” defense contradicts the plain
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`language of the claims, which does not include any requirement of a structure enclosed on all sides.
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`It also contradicts the specification and the file history, which confirm both that Figures 3, 4, 5 and
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`6 are all examples of the claimed “blind hole,” and that the discussion of the Rose reference in no
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`way limits the plain meaning of that term. Reynolds’ second argument is based on their expert’s
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`measurement of the dimensions of the cavity that contradicts the specification’s guidance and is
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`not even a cross-sectional dimension. Even worse, Reynolds’ expert admitted he performed no
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`functional testing on the accused products whatsoever, relying instead of positions that contradict
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`the ‘911 patent’s teachings and the Examiner’s unequivocal statements during prosecution.
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`(6/10/22 AM Tr. 87:9-13; 96:8-22.)
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`4
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`As for the ’265 patent, Mr. Walbrink demonstrated that the Vuse Alto cartridges are the
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`same as claims 1 and 4. Reynolds’ only non-infringement defenses hinge on suggesting to the jury
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`(i) that the “mouthpiece” is not connected to the rest of the device (even though Reynolds’ own
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`technical witness has testified otherwise (Tr. 6/10/22 am Not Received Yet)); (ii) that a “thin film”
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`is not “flat” when magnified under a powerful microscope (even though the claims do not use the
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`word “flat”); and (iii) that the claims require a specific “area” (even though “area” appears nowhere
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`in the claims).
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`There is no evidence in the record that Reynolds had identified or relied on any of the
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`purported noninfringement defenses pre-suit to develop a good faith basis for believing Reynolds
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`did not infringe either of the asserted patents.
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`D. With Knowledge Of The Asserted Patents and The Similarities To The
`Accused Products, Reynolds Chose to Continue To Sell The Accused
`Products Without Permission
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`Willful infringement requires specific intent. Intent can be proved by circumstantial
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`evidence. Motive is circumstantial evidence of intent. See Fuma Int’l LLC v. R.J. Reynolds Vapor
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`Co., No. 1:19-cv-260, 2021 U.S. Dist. LEXIS 198861 at *9 (M.D.N.C. Oct. 15, 2021) (holding
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`that “[t]he factfinder evaluates willfulness in light of the totality of the circumstances … [t]he
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`pre-patent conduct, which the Court need not summarize here, is highly probative of RJR's
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`intent and motives”); Patent Holding Co. v. TG (USA) Corp., No. 96-cv-74721, 1997 U.S. Dist.
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`LEXIS 22571, at *4 (E.D. Mich. Dec. 2, 1997) (“While the intent or motive of the infringer in a
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`patent suit is irrelevant to the first three questions, intent is central to the fourth issue of imposing
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`increased damages for willful infringement.”)
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`Despite the similarities between the asserted patents that Reynolds knew about and the
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`accused products Reynolds torn down so that it understood their physical structures, Reynolds
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`continued to sell the Accused Products. Reynolds knew that (1) it could not change the design
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`5
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`(Tr. 6/9/22pm 123:6-124:4 and 135:10-136:15), (2) Philip Morris would not license its technology
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`(Tr. 6/8/22am 147:12-148:5), and (3) it had no other products to sell (Tr. 6/9/22pm 131:8-15). As
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`a result, Reynolds had only two options–continue to sell the infringing products or take them off
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`the market. Given the $1.4 billion in revenue earned from the accused products, Reynolds had
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`strong financial motive to continue to sell the accused product despite Philip Morris’ patents.
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`VUSE Alto was purchased by Reynolds after both asserted patents issued and after Reynolds
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`admits it knew about both asserted patents; it has been Reynolds best-selling e-cigarette product
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`and a leader in the marketplace. Tr. 6/9/22pm 125:17-18.
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`E.
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`Philip Morris sued Reynolds For Infringement On June 29, 2020
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`Philip Morris counterclaimed for infringement of the ’911 and ’265 patents on June 29,
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`2020. Dkt. 40; 6/10/22am Tr. (not received yet). In its counterclaims, Philip Morris expressly
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`described how Reynold’s Solo and Alto product infringe the ’911 and ’265 patents – element-by-
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`element. With knowledge of this infringement, Reynolds has continued to sell the accused Solo
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`and Alto products.
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`F.
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`Reynolds’ Motion For Summary Judgment On Willfulness Was Denied
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`Reynolds motion for summary judgment of willfulness was denied “under the standard set
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`out in the well-known Halo Electronics case.” Dkt. 803 at 2-3. Judge O’Grady denied this motion
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`based on Reynolds’ pre-suit knowledge, statements to the FDA, failure to take any remedial
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`actions and inability to change the products. Id.
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`III. LEGAL STANDARD
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`“If the evidence as a whole is susceptible of more than one reasonable inference, a jury
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`issue is created and a motion for judgment as a matter of law should be denied.” Fry v. Rand
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`Constr. Corp., 964 F.3d 239, 244 (4th Cir. 2020), cert. denied, 141 S. Ct. 2595 (2021).
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`6
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`“Willfulness of behavior is a classical jury question of intent. When trial is had to a jury,
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`the issue should be decided by the jury.” WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed.
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`Cir. 2016). 1 After the Supreme Court’s Halo decision, “the concept of ‘willfulness’ requires a
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`jury to find no more than deliberate or intentional infringement.” Eko Brands, LLC v. Adrian
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`Rivera Maynez Enterprises, Inc., 946 F.3d 1367, 1378 (Fed. Cir. 2020) (citing Halo Elecs., Inc. v.
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`Pulse Elecs., Inc., 579 U.S. 93 (2016)). Moreover, “whether an act is ‘willful’ is by definition a
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`question of the actor’s intent, the answer to which must be inferred from all the circumstances.”
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`WCM Indus., Inc. v. IPS Corp., 721 F. App’x 959, 970 (Fed. Cir. 2018). This “subjective prong”
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`requires a finding “that the risk of infringement was either known or so obvious that it should have
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`been known to the accused.” Id. at 969.
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`During oral arguments on its Rule 50(a) Motion of No Willfulness, Reynolds invited the
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`Court to commit legal error by advocating for the wrong legal standard for willful infringement.
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`See Tr. 78:19-79:1 (arguing that “a jury determination of willful infringement … according to that
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`Bayer case, requires wanton, malicious and bad faith behavior”) (citing Bayer Healthcare LLC
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`v. Baxalta Inc., 989 F.3d 964, 988 (Fed. Cir. 2021)). In SRI Int’l, which was decided after Bayer,
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`the Federal Circuit expressly rejected that standard:
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`To eliminate the confusion created by our reference to the language
`“wanton, malicious, and bad-faith” in Halo, we clarify that it was
`not our intent to create a heightened requirement for willful
`infringement. Indeed, that sentence from Halo refers to “conduct
`warranting enhanced damages,” not conduct warranting a
`finding of willfulness. As we said in Eko Brands, “[u]nder Halo,
`the concept of ‘willfulness’ requires a jury to find no more than
`deliberate or intentional infringement.”
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`
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`1 All emphases added and internal citations and modifications omitted unless otherwise noted.
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`7
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`SRI Int'l, Inc. v. Cisco Sys., Inc., 14 F.4th 1323, 1330 (Fed. Cir. 2021) (reversing district court’s
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`grant of JMOL of no willfulness under the “wanton, malicious, and bad-faith” standard) cert.
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`denied, No. 21-1267, 2022 WL 1528531 (U.S. May 16, 2022). Under the operative and proper
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`legal standards, denial of Reynolds’ motion for JMOL is not a close one. But even under the now
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`discredited standard that Reynolds wrongly asks the Court to adopt, Reynolds’s motion should be
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`denied.
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`IV. ARGUMENT
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`A.
`
`Reynolds deliberately infringed Philip Morris patents because it was
`desperate to have e-cigarette products on the market
`
`Reynolds heat not burn products failed. Tr. 6/9/22pm 143:13-144:12 and 144:23-25,
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`145:11-13. Reynolds made a strategic decision to move into e-cigarettes and “Reynolds had
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`aspirations to being number one in the vapor market.” 6/9/22pm at 105:20-21. As a result,
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`Reynolds spent tens of millions of dollars on this market but lacked the necessary products to
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`compete. Tr. 6/9/22pm 131:8-15. Although the Solo product had limited success, Reynolds found
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`it necessary to go out to the market to purchase other e-cigarette designs such as the Alto, Vibe,
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`and Ciro so that it could have products that were on the market before the August 8, 2016 deadline
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`set by the Deeming Rule. Tr. 6/9/22pm 122:8-21. Reynolds made a multi-hundred million dollar
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`investment in the e-cigarette market.
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`At the same time, Reynolds was carefully monitoring its competitors’ patents- particularly
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`its “fierce” competitor Philip Morris-on a monthly. 6/24/21 Figlar Dep. played at trial, at 132:21-
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`133:10; 134:5-17; Tr. 6/9/22pm at 130:1-4; 6/8/22am at 135:18-22. For example, Reynolds knew
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`of the applications that issued as the ’911 and ’265 patents no later than December 3, 2013 and
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`October 30, 2014, respectively. PX-613. And Reynolds knew of the ’265 and ’911 patents on
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`November 21, 2017 and December 4, 2018, respectively. PX-613. And, as discussed above, and
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`as explained by the technical experts, the accused Solo and Alto products included specific shapes,
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`materials, sizes, positions and functions of the physical structures substantially similar to those
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`disclosed in the asserted patents.2
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`
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`There is no record evidence that Reynolds took any remedial actions. There is no evidence,
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`for example, that Reynolds checked with its suppliers about infringement, did any investigation of
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`noninfringement or invalidity, identified any noninfringement or invalidity defenses pre-suit, and
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`no evidence Reynolds tried to design around. Instead, the evidence shows that there is no
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`commercially viable design around. Dkt. 1291.3 As a result, a reasonable jury could conclude
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`that, because of its failed products, significant investments, aspirations to be number one in the
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`vapor market, and failure to take any remedial actions, Reynolds had strong motive to intentionally
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`infringe, specific intent to intentionally infringe, and deliberately chose to infringe rather than
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`remove its products from this highly regulated market. WCM, 721 F.App’x at 970-71.
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`The evidence shows Reynolds limited options gave it strong motive to intentionally
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`infringe. Reynolds knew that it could not change its design without obtaining FDA approval and
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`the applications it submitted were for products already on the market before the Deeming Rule.
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`Tr. 6/9/22pm 123:6-124:4 and 135:10-136:15; 151:12-152:3; 125:4-16. Reynolds knew Philip
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`Morris would not license its patents. Tr. 6/8/22am 147:12-148:5. Consequently, Reynolds was
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`faced with a Hobson’s choice – infringe the asserted patents or remove the products that would
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`make it $1.4 billion in just three-and-a-half years from the market. On this record, a reasonable
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`jury could conclude that Reynold intentionally chose to infringe, or was willfully blind to the risk
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`
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`2 The record for a judgement under 50(a) is not yet complete because the trial transcript for 6/10/22
`and Phillip Morris has not yet presented its rebuttal case on validity.
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`3 The jury is entitled to infer that Reynolds, represented by a large team of lawyers, would only
`stipulate to not present evidence on non-infringing alternatives and design-arounds if Reynolds
`had no such evidence to present.
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`9
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`of infringing patents it admitted knew about, rather than remove its products from the market. See
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`i4i Ltd. P’ship, 598 F.3d at 860 (that “Microsoft did not cease its infringing activity or attempt to
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`design around” supports a “jury’s finding as to the subjective” knowledge of infringement by the
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`infringer.).
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`Reynold’s sole evidence that it did not intentionally continue to use the patented technology
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`without permission is Dr. Figlar’s self-serving testimony that Reynolds had a corporate policy to
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`respect patent rights and it would not copy another company’s patents. Day 2, 128-131. But,
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`despite that policy, Reynold failed to present any evidence that it acted on its policy with regard
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`to the asserted patents, or that Reynolds actually took any actions to respect the property rights in
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`the two Philip Morris asserted patents Reynolds knew of. As a result, a reasonable jury could
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`conclude that, because Reynolds failed to act on its corporate policy or reasonably investigate the
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`patents it admittedly knew about, owned by it’s “fierce” competitor, Reynolds intentionally or
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`deliberately chose to infringe by putting its head in the sand. See i4i Ltd. P’ship, 598 F.3d at 860
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`(that “Microsoft did not cease its infringing activity or attempt to design around” supports a “jury’s
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`finding as to the subjective” knowledge of infringement by the infringer.).
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`Separately, it is the sole responsibility of the jury to evaluate credibility of the witnesses.
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`The jury is entitled to conclude that Dr. Figlar’s self-serving testimony lacks credibility. First, his
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`testimony that Reynold could not copy a competitor’s patent is irrelevant because Reynolds did
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`not even develop the designs in the Alto, Reynolds bought it. Second, Dr. Figlar gave facially
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`inconsistent testimony about Reynold’s product development.4 On direct examination, Dr. Figlar
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`testified that Reynolds had “its own formulations of e-liquid for the product” and “we develop all
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`
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`4 Given Dr. Figlar’s 100 deposition and 40 trials, the inconsistency cannot be explained by
`purported inexperience as a witness. Day 2 at 140-41.
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`of our own e-liquids, and we wanted to keep those proprietary because we thought that was, you
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`know, basically the Coca-Cola formula for us and these products.” Day 2 at 126-27. On cross-
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`examination, Dr. Figlar testified the black-and-white opposite, admitting that Reynolds
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`“purchased the liquids on the market at the time because … the FDA had locked the marketplace
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`and we would have to use the liquids that already were in those products on the marketplace as of
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`August 8, 2016.”. Tr. (Day 2, PM) 152:4-18. As a result, a reasonable jury is entitled to weigh
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`Dr. Figlar’s credibility and, on this record, could easily reject Dr. Figlar’s self-serving claims and
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`find Reynold’s intended to infringe.
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`B.
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`There is no dispute that Reynolds knew of patents and infringement post-suit
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`The record evidence is undisputed that Reynolds knew of the asserted patents and
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`infringement post-suit. Philip Morris’ infringement claims expressly notified Reynolds of its
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`infringement on an element-by-element basis. Tr. 6/10/22am (Not received yet). Despite having
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`knowledge of that infringement, Reynolds continued to sell the accused products without taking
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`any remedial actions. RJR’s actions during this litigation are also properly part of the “totality of
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`the circumstances.” WCM Indus., 721 F. App’x at 970. Thus, even if Philip Morris’ evidence of
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`willful infringement is limited to Reynold’s post-litigation conduct (it is not), that alone is
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`sufficient to present triable issues of willful infringement to the jury.
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`C.
`
`There Is A Significant Risk Of Wasting Judicial Resources To Not Allow
`Willfulness To Go To The Jury And Prejudice
`
`“Willfulness of behavior is a classical jury question of intent. When trial is had to a jury,
`
`the issue should be decided by the jury.” WBIP, LLC v. Kohler Co., 829 F.3d 1317, 1341 (Fed.
`
`Cir. 2016). Any decision by the Court to remove such a credibility-based and highly factual
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`inquiry based on the totality of the circumstances from the fact-finder will face close scrutiny on
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`appeal. That may be what Reynolds wants. At every turn, Reynolds has sought to delay
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`11
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`adjudication of Philip Morris’ infringement claims, which have already been unduly delayed
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`because of COVID. At the entry of this Courthouse are the words “Justice Delayed is Justice
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`Denied.” After all the delays to date, it would be justice denied of Philip Morris were to prevail
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`on its infringement and damages claims, and then be subject to a prolonged period of appeal,
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`remand and retrial based on a decision to remove the willfulness issue from the jury.
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`V.
`
`CONCLUSION
`
`For all the above reasons, Reynolds’ motion for judgment as a matter of law on no
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`willfulness should be denied.
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`Dated: June 11, 2022
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`
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`
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` Respectfully submitted,
`
`
`
`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
`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
`
`12
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`Case 1:20-cv-00393-LMB-TCB Document 1391 Filed 07/19/22 Page 15 of 15 PageID# 34699
`
`
`Counsel for Plaintiff Philip Morris Products
`S.A.
`
`
`
`13
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`