`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 1 of 11 PagelD# 34855
`
`EXHIBIT 2
`EXHIBIT 2
`
`
`
`
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 2 of 11 PageID# 34856
`
`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`Alexandria Division
`
`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
`
`Plaintiffs and Counterclaim Defendants,
`
`v.
`
`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA, INC.; and PHILIP MORRIS
`PRODUCTS S.A.,
`
`Defendants and Counterclaim Plaintiffs.
`
`
`
`
`
`
`
`Case No. 1:20cv00393-LO-TCB
`
`
`
`
`RAI STRATEGIC HOLDINGS, INC. AND R.J. REYNOLDS VAPOR COMPANY’S
`EIGHTH SUPPLEMENTAL OBJECTIONS AND RESPONSES TO ALTRIA CLIENT
`SERVICES LLC, PHILIP MORRIS USA, INC., AND PHILIP MORRIS PRODUCTS
`S.A.’S FIRST SET OF INTERROGATORIES (NO. 4)
`
`Pursuant to Federal Rules of Civil Procedure 26 and 33, RAI Strategic Holdings, Inc. and
`
`R.J. Reynolds Vapor Company (collectively, “Reynolds”) hereby supplement their responses to
`
`Altria Client Services LLC, Philip Morris USA, Inc., and Philip Morris Products S.A.’s
`
`(collectively, “Defendants” or “Counterclaim Plaintiffs”) First Set of Interrogatories (Nos. 1-11)
`
`as follows.
`
`PRELIMINARY STATEMENT AND
`OBJECTIONS TO DEFINITIONS AND INSTRUCTIONS
`
`Reynolds incorporates and reiterates its preliminary statement and objections to the
`
`Definitions and Instructions.
`
`INTERROGATORY NO. 4:
`
`For each RJR Accused Product, separately for each of the Counterclaim Asserted Patents,
`describe in detail all theories and bases under which Counterclaim Defendants contend damages
`should be measured, and explain in detail how such damages are computed, including identifying
`all Products for which damages should be awarded, whether and to what extent there have been
`
`1
`
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 3 of 11 PageID# 34857
`
`
`
`convoyed sales, the amount of any reasonable royalty that should be awarded, any royalty base
`and rate which Counterclaim Defendants contend is reasonable, how such amount, base, and rate
`are computed, the date(s) on which you contend the hypothetical negotiation would have occurred,
`the parties to the hypothetical negotiation, the appropriate time period(s) for which damages should
`be assessed, all facts and evidence that support or refute Counterclaim Defendants’ damages
`theories and bases, and identify the three (3) Persons most knowledgeable concerning such facts.
`Your response should include, but not be limited to, the bases for Your contentions regarding the
`factors set forth in Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 112
`(S.D.N.Y. 1970).
`
`OBJECTIONS:
`
`Reynolds objects to this interrogatory as premature because it seeks information that is the
`subject matter of expert reports and discovery that are not yet due. Reynolds objects to this
`interrogatory to the extent that the response will require information and discovery from
`Defendants/Counterclaim Plaintiffs that has not yet been made available to Reynolds. Reynolds
`objects to this interrogatory as unduly burdensome to the extent it seeks an identification of “all”
`facts and evidence that support or refute Counterclaim Defendants’ damages theories and bases.
`Reynolds objects to this interrogatory as composed of multiple discrete subparts under Fed. R.
`Civ. P. 33, which causes this interrogatory to count as more than one interrogatory.
`RESPONSE:
`
`
`
`Subject to and without waiving its objections, Reynolds responds as follows:
`
`Reynolds contends that no measure or computation of damages should be made with
`
`respect to the alleged infringement of the Counterclaim Asserted Patents by the RJR Accused
`Products because the Counterclaim Asserted Patents are not infringed either directly, indirectly,
`literally, or under the doctrine of equivalents as described in response to Interrogatory No. 1.
`Moreover, the claims of the Counterclaim Asserted Patents are invalid under one or more sections
`of the Patent Act, for the reasons described in response to Interrogatory No. 2. Damages can only
`be made upon a finding of infringement, 35 U.S.C. § 284, and there can be no infringement of an
`invalid patent. See, e.g., Viskase Corp. v. Am. Nat’l Can Co., 261 F.3d 1316, 1323 (Fed. Cir.
`2001).
`
`Reynolds maintains that Defendants/Counterclaim Plaintiffs must first set forth a damages
`
`theory and basis, explain in detail how they contend that such damages should be computed, and
`provide their positions concerning convoyed sales, the proper calculation of a reasonable royalty
`and associated details concerning the hypothetical negotiation, and the application of the Georgia-
`Pacific factors. When Defendants/Counterclaim Plaintiffs do so, Reynolds will respond.
`Reynolds notes that, if infringement of a valid patent is found, Defendants/Counterclaim Plaintiffs
`would be entitled to at least a reasonable royalty as a measure of damages.
`
`Reynolds further states that it understands that Defendants/Counterclaim Plaintiffs accuse
`
`the following products of infringing the listed patents, and thus will be entitled to damages should
`they prevail on the merits of any particular infringement claim:
`
`
`
`2
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 4 of 11 PageID# 34858
`
`
`
` U.S. Patent No. 6,803,545 (’545 Patent): VUSE Alto®, VUSE Solo®, and VUSE VibeTM,
`as well as their associated Flavor Packs.
` U.S. Patent No. 10,420,374 (’374 Patent): VUSE Solo®, VUSE Alto®, VUSE VibeTM, and
`VUSE Ciro®, as well as their associated Flavor Packs.
` U.S. Patent No. 9,814,265 (’265 Patent): VUSE Alto® and its associated Flavor Packs.
` U.S. Patent No. 10,555,556 (’556 Patent): VUSE VibeTM and its associated Flavor Packs.
` U.S. Patent No. 10,104,911 (’911 Patent): VUSE Solo®, VUSE Ciro®, and VUSE VibeTM,
`as well as their associated Flavor Packs.
`
`Reynolds states that the parties to the hypothetical negotiation would include R.J. Reynolds
`
`Vapor Company and the Counterclaim Defendant entities that owned the asserted patents at the
`time of the hypothetical negotiation.
`
`Reynolds further states that it is premature to identify the three persons most
`
`knowledgeable about its “damages theories and bases” because Reynolds will be formulating those
`theories in response to the damages theories and assertions of Defendants/Counterclaim Plaintiffs.
`Reynolds states that the following witnesses are generally knowledgeable about the RJR Accused
`Products, the facts concerning the market for those RJR Accused Products, and financial
`information concerning those RJR Accused Products: Kara Calderon (Reynolds’s marketing and
`distribution of the RJR Accused Products) and Nick Gilley (Reynolds’s financial information
`associated with the manufacture and sale of the RJR Accused Products).
`
`
`Reynolds will supplement its response to this interrogatory as discovery progresses and to
`
`the extent that Defendants/Counterclaim Plaintiffs provide their contentions with respect to any
`alleged damages that they claim to be entitled for alleged infringement by any RJR Accused
`Product of any asserted claim of the Counterclaim Asserted Patents in response to Reynolds’s
`Interrogatory No. 13 and/or in an expert report.
`
`FIRST SUPPLEMENTAL RESPONSE TO INTERROGATORY NO. 4 (Nov. 9, 2020):
`
`
`
`Subject to and without waiving its objections, Reynolds further responds as follows:
`
`
`
`Reynolds continues to object to Interrogatory No. 4 on the grounds that much of the
`
`information sought is properly the subject of expert testimony and is also information to be
`
`developed during discovery. Reynolds identifies Ryan Sullivan as an expert with information
`
`related to this Interrogatory. Reynolds incorporates by reference its forthcoming expert report in
`
`response to Defendants/Counterclaim Plaintiffs’ expected expert report on damages, currently due
`
`on December 25, 2020.
`
`
`
`Reynolds further states that it understands that Defendants/Counterclaim Plaintiffs accuse
`
`the following products of infringing the listed patents:
`
`
`
`3
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 5 of 11 PageID# 34859
`
`
`
` U.S. Patent No. 6,803,545 (’545 Patent): VUSE Alto®, VUSE Solo®, VUSE VibeTM, and
`VUSE Ciro®, as well as their associated Flavor Packs.
` U.S. Patent No. 10,420,374 (’374 Patent): VUSE Solo®, VUSE Alto®, VUSE VibeTM, and
`VUSE Ciro®, as well as their associated Flavor Packs.
` U.S. Patent No. 9,814,265 (’265 Patent): VUSE Alto® and its associated Flavor Packs.
` U.S. Patent No. 10,555,556 (’556 Patent): VUSE VibeTM and its associated Flavor Packs.
` U.S. Patent No. 10,104,911 (’911 Patent): VUSE Solo®, VUSE Ciro®, and VUSE VibeTM,
`as well as their associated Flavor Packs.
`
`
`
`Reynolds’s contentions regarding the Georgia-Pacific factors will be the subject of
`
`evaluation by its expert and will be set forth in Reynolds’s responsive expert report.
`
`Based on Defendants/Counterclaim Plaintiffs’ recently supplemented answers to
`
`Reynolds’s Interrogatory No. 13, Reynolds understands that Defendants/Counterclaim Plaintiffs
`
`seek damages in the form of a royalty based on a lump sum payment. Reynolds contends that
`
`damages should be measured in the form of a reasonable royalty. Reynolds expects that the royalty
`
`would be in the form of a running royalty based on Reynolds’s sales, if Defendants/Counterclaim
`
`Plaintiffs prevail in this matter.
`
`
`
`The parties to the hypothetical negotiation would include R.J. Reynolds Vapor Company
`
`and the Defendants/Counterclaim Plaintiffs who own the patents in question. Reynolds
`
`understands those parties to be Philip Morris USA, Inc. for the ’545 patent, Altria Client Services,
`
`LLC for the ’374 patent, and Philip Morris Products S.A. for the ’265, ’556, and ’911 patents.
`
`
`
`The hypothetical negotiation date for the ’545 patent is March 2013, the date of the first
`
`sale by Reynolds of its VUSE Solo product. The hypothetical negotiation date for the ’374 patent
`
`is September 24, 2019, the date of that patent’s issuance. The hypothetical negotiation date for
`
`the ’265 patent is August 2018, the date of the first sale by Reynolds of its VUSE Alto product.
`
`The hypothetical negotiation date for the ’556 patent is February 11, 2020, the date of the patent’s
`
`issuance. The hypothetical negotiation date for the ’911 patent is October 23, 2018, the date of
`
`the patent’s issuance.
`
`
`
`4
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 6 of 11 PageID# 34860
`
`
`
`
`
`The license contemplated at the hypothetical negotiation would be a non-exclusive license
`
`limited to the geographic territory of the United States only. It would also take into account the
`
`value and any advantages of the asserted claims of the patents.
`
`The damages period for the ’545 patent begins six years before Philip Morris USA, Inc.’s
`
`filing of its claim for patent infringement, or June 29, 2014. The damages period for the remaining
`
`patents begins on the dates when the alleged infringement began, as noted above regarding the
`
`hypothetical negotiation dates. Reynolds understands that, should Defendants/Counterclaim
`
`Plaintiffs prevail, they will be entitled to damages up to the time of final judgment, and, depending
`
`upon the form of the royalty, may be entitled to an ongoing royalty after final judgment until the
`
`expiration of any patents found to be valid and infringed.
`
`
`
`Reynolds states that the appropriate royalty base, the appropriate royalty rate, the
`
`calculation of reasonable royalty damages, and the question of convoyed sales will be the subject
`
`of expert testimony.
`
`
`
`Reynolds contends that the appropriate royalty base for the ’545 patent and the ’374 patent
`
`is the power units for the VUSE Solo, VUSE Vibe, VUSE Ciro, and VUSE Alto. Reynolds
`
`contends that the appropriate royalty base for the ’265 patent is the cartridges for the VUSE Alto
`
`product. Reynolds contends that the appropriate royalty base for the ’556 patent is the tanks for
`
`the VUSE Vibe product. Reynolds contends that the appropriate royalty base for the ’911 patent
`
`is the cartridges or tanks for the VUSE Solo, VUSE Vibe, and VUSE Ciro products.
`
`The amount of the reasonable royalty may be informed by the following agreements:
`
` The consideration that Altria Client Services LLC paid to Smart Chip Microelectronic
`
`Company Ltd. for intellectual property rights that included the ’374 patent;
`
`5
`
`
`
`
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 7 of 11 PageID# 34861
`
`
`
` The consideration that Philip Morris USA, Inc. paid to Wedegree Gmbh for the purchase
`
`of intellectual property rights that included the ’545 patent;
`
` The license agreement between Nu Mark LLC (an affiliate of Altria Client Services LLC
`
`and Philips Morris USA, Inc.) on the one hand and Fontem Holdings 1 B.V and Fontem
`
`Ventures B.V. on the other hand;
`
` The license agreement between R.J. Reynolds Vapor Company on the one hand and
`
`Fontem Holdings 1 B.V and Fontem Ventures B.V. on the other hand;
`
` The consideration paid by Reynolds to Minusa Holdings LLC for intellectual property
`
`rights; and
`
` The license discussed in the Confidential Project Agreement between R.J. Reynolds
`
`Tobacco Company and Numerical Design.
`
`
`
`With regard to Defendants/Counterclaim Plaintiffs demand for supplementation regarding
`
`non-infringing alternatives or design-around options, that information is not specifically requested
`
`by this interrogatory, except as relevant to the Georgia-Pacific factors. The issue of design-around
`
`options and non-infringing alternatives will be the subject of further discovery and expert
`
`testimony, including in Reynolds’s responsive expert report. The options and alternatives are also
`
`dependent upon claim construction issues to be decided by the Court. Furthermore, the existence
`
`of non-infringing alternatives or design-around options are also dependent upon receipt of
`
`complete infringement contentions from Defendants. However, Defendants have refused to
`
`provide such contentions until November 12, 2020, at the earliest. Thus, Reynolds’s expressly
`
`reserves the right to supplement its identification based upon Defendants’ contentions when they
`
`are served, the Court’s claim construction ruling, any other discovery received, and/or expert
`
`reports. Subject to the foregoing, Reynolds notes generally that each non-accused Reynolds
`
`
`
`6
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 8 of 11 PageID# 34862
`
`
`
`product could be a non-infringing alternative or provide a design-around option, with respect to
`
`the ’265, ’556, and ’911 patents that only accuse certain Reynolds products. Reynolds also notes,
`
`subject to further discovery and investigation, that the following design-around options exist:
`
`
`
`’545 patent: Non-infringing alternatives to the ’545 patent include, at least, using a pulse
`
`width modulated controller circuit of the type disclosed in the prior art, or alternatively not using
`
`pulse width modulation at all. Other non-infringing alternatives would include having battery
`
`protection circuitry as part of the power control circuitry, and not part of the controller.
`
`
`
`’374 patent: Non-infringing alternatives to the ’374 patent would include, at least, having
`
`a device that did not detect the rate and direction of a “blow” or exhale. Relatedly, non-infringing
`
`alternatives would also include using a pressure sensor that acts as a unidirectional air-conduction
`
`contact switch or a sensor, which includes the structure of an electret of a common electret
`
`capacitor microphone.
`
`
`
`’265 patent: The ’265 patent can be designed around at least by using a thermal resistor
`
`that is not in the shape of a dual coil or a sinuous line.
`
`
`
`’556 patent: The ’556 patent can be designed around at least by not using both “a first
`
`capillary material” and “a second capillary material,” or by changing the configuration of the “first
`
`capillary material” and the “second capillary material” in the cartridge.
`
`
`
`’911 patent: The ’911 patent can be designed around at least by eliminating any “blind
`
`hole recessed in a wall of the aerosol-forming chamber,” or by using a “blind hole” or “cavity”
`
`having dimensions that are outside the dimensions specified by the ’911 patent claims, i.e., “a
`
`largest cross-sectional dimension x taken along a cross-section of the cavity in a direction
`
`perpendicular to the longitudinal direction of the cavity, where x is 0.5 mm, or 1 mm, or between
`
`0.5 mm and 1 mm.”
`
`
`
`
`
`7
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 9 of 11 PageID# 34863
`
`
`
`Reynolds’s investigation is ongoing, and its response is based on information reasonably
`
`available to it at this time, and may require subsequent amendment, modification, or
`
`supplementation. Fed. R. Civ. P. 26(e). Reynolds reserves the right to supplement and/or amend
`
`this response as further information becomes available, and/or after responsive, non-privileged
`
`documents and contentions are otherwise produced.
`
`
`
`8
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 10 of 11 PageID#
`
`34864
`
`Dated: November 9, 2020
`
`Stephanie E. Parker
`JONES DAY
`1420 Peachtree Street, N.E.
`Suite 800
`Atlanta, GA 30309
`Telephone: (404) 521-3939
`Facsimile: (404) 581-8330
`Email: separker@jonesday.com
`
`Anthony M. Insogna
`JONES DAY
`4655 Executive Drive
`Suite 1500
`San Diego, CA 92121
`Telephone: (858) 314-1200
`Facsimile: (844) 345-3178
`Email: aminsogna@jonesday.com
`
`William E. Devitt
`JONES DAY
`77 West Wacker
`Suite 3500
`Chicago, IL 60601
`Telephone: (312) 269-4240
`Facsimile: (312) 782-8585
`Email: wdevitt@jonesday.com
`
`Sanjiv P. Laud
`JONES DAY
`90 South Seventh Street
`Suite 4950
`Minneapolis, MN 55402
`Telephone: (612) 217-8800
`Facsimile: (844) 345-3178
`Email: slaud@jonesday.com
`
`
`
`
`
` Respectfully submitted,
`
`
`/s/ David M. Maiorana
`David M. Maiorana (VA Bar No. 42334)
`Ryan B. McCrum
`JONES DAY
`901 Lakeside Avenue
`Cleveland, OH 44114
`Telephone: (216) 586-3939
`Facsimile: (216) 579-0212
`Email: dmaiorana@jonesday.com
`Email: rbmccrum@jonesday.com
`
`John J. Normile
`JONES DAY
`250 Vesey Street
`New York, NY 10281
`Tel: (212) 326-3939
`Fax: (212) 755-7306
`Email: jjnormile@jonesday.com
`
`Alexis A. Smith
`JONES DAY
`555 South Flower Street
`Fiftieth Floor
`Los Angeles, CA 90071
`Telephone: (213) 243-2653
`Facsimile: (213) 243-2539
`Email: asmith@jonesday.com
`
`Charles B. Molster, III (VA Bar No. 23613)
`The Law Offices of Charles B. Molster III PLLC
`2141 Wisconsin Ave., N.W., Suite M
`Washington, DC 20007
`Telephone: (703) 346-1505
`Email: cmolster@molsterlaw.com
`
`Counsel for Plaintiffs RAI Strategic Holdings,
`Inc. and R.J. Reynolds Vapor Company
`
`
`
`
`
`
`9
`
`
`
`
`Case 1:20-cv-00393-LMB-TCB Document 1398-2 Filed 07/20/22 Page 11 of 11 PageID#
`
`34865
`
`CERTIFICATE OF SERVICE
`
`
`
`I hereby certify that on November 9, 2020, the foregoing was served on counsel for
`
`Defendants/Counterclaim Plaintiffs using
`
`the
`
`following designated
`
`
`address:
`
`pmiedva.lwteam@lw.com.
`
`
`
`Dated: November 9, 2020
`
`
`
`
`
`/s/ David M Maiorana
`David M. Maiorana (VA Bar No. 42334)
`JONES DAY
`901 Lakeside Avenue
`Cleveland, OH 44114
`Telephone: (216) 586-3939
`Facsimile: (216) 579-0212
`Email: dmaiorana@jonesday.com
`
`
`
`
`
`