Case 1:20-cv-00393-LMB-WEF Document 1462-4 Filed 04/05/23 Page 1 of 6 PageID# 39593
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`Exhibit 4
`Public Redacted
`Version
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`Case 1:20-cv-00393-LMB-WEF Document 1462-4 Filed 04/05/23 Page 2 of 6 PageID# 39594
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`CONFIDENTIAL VERSION
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`UNITED STATES INTERNATIONAL TRADE COMMISSION
`Washington, D.C.
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`
`
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`Investigation No. 337-TA-1199
`
`
`In the Matter of
`CERTAIN TOBACCO HEATING
`ARTICLES AND COMPONENTS
`THEREOF
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`
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`COMMISSION OPINION
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`TABLE OF CONTENTS
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`I.
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`BACKGROUND ..................................................................................................... 1
`Procedural History .............................................................................................. 1
`A.
`The Parties ........................................................................................................... 8
`B.
`Complainants ................................................................................................... 8
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`1.
`Respondents ..................................................................................................... 8
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`2.
`C. The Asserted Patents ........................................................................................... 8
`The ’915 Patent ................................................................................................ 8
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`1.
`The ’123 Patent ................................................................................................ 9
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`2.
`The ’238 Patent .............................................................................................. 11
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`3.
`D. The Accused Products ....................................................................................... 12
`E.
`The Domestic Industry Products ..................................................................... 12
`II. COMMISSION REVIEW OF THE FINAL ID ................................................. 13
`III. ANALYSIS ............................................................................................................ 13
`A.
`Issues Under Review for the ’915 Patent ........................................................ 14
`The ALJ’s Claim Construction of “Electrical Energy Source” and
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`1.
`Additional Findings in the FID..................................................................... 14
`a. Order No. 28.................................................................................................. 15
`b. The FID ......................................................................................................... 16
`Analysis and Modified Construction of “Electrical Energy Source” ....... 17
`a. Indefiniteness ................................................................................................ 18
`b. Modified Construction of “Electrical Energy Source” ............................. 21
`c. Effect of the Modified Claim Construction ................................................ 27
`Issues Under Review for the ’123 Patent ........................................................ 29
`Non-Obviousness of Claims 27-30 ................................................................ 30
`a. The FID.......................................................................................................... 31
`b. Analysis ......................................................................................................... 33
`Economic Prong of the Domestic Industry Requirement .......................... 37
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`2.
`Issues Under Review for the ’238 Patent ........................................................ 38
`C.
`IV. REMEDY, THE PUBLIC INTEREST, AND BONDING ................................ 40
`A. Remedy ............................................................................................................... 40
`Limited Exclusion Order .............................................................................. 40
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`1.
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`2.
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`B.
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`1.
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`Case 1:20-cv-00393-LMB-WEF Document 1462-4 Filed 04/05/23 Page 3 of 6 PageID# 39595
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`CONFIDENTIAL VERSION
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`healthier than any other PRRPs. Hrg. Tr. 1434:2-5. Ms. Ehrlich further testified that it was
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`“possible that other potentially risk-reducing products offer similar exposure risk benefits to the
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`IQOS product, but the FDA has simply not made that determination.” Hrg. Tr. 1460:16-25. In
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`addition, both parties’ experts testified that there are thousands of alternatives currently available
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`in the United States for combustible cigarette smokers looking for potentially less harmful
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`alternatives to smoking cigarettes. Hrg. Tr. 454:8-12, 458:4-459:3, 1291:15-22, 1295:17-
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`1296:12; CX-528; CPX-211.
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`While Philip Morris touts the IQOS PMTA authorizations, it does not address the FDA’s
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`statements that any alleged benefit of IQOS is premised on robust adoption of IQOS combined
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`with the users’ complete cessation of combustible cigarette use, neither of which has been shown
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`to have occurred. FID at 106-107 (citing JX-0034 at 13 (“the benefits of reducing exposure to
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`harmful and potentially harmful chemicals require complete cessation of combusted cigarette
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`smoking”); Hrg. Tr. 1306:22-1308:3 (Philip Morris’s expert testifying that “if IQOS does not
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`receive robust adoption in the United States, the public health benefits of it cannot be realized”).
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`Philip Morris does not dispute that IQOS has not been robustly adopted. It simply argues that
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`IQOS will be robustly adopted in the United States in the future, however, this argument is
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`speculative and unsupported. PMIR at 69-75. In addition, Philip Morris’s own expert, Dr.
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`Rodu, testified that “no substantially safer product has had robust adoption in the United States”
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`and that “smokeless tobacco products, Snus products, e-cigarettes, none of them have had robust
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`enough adoption to allow enough smokers to live longer and healthier lives.” Hrg. Tr. 1308:4-
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`20.
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`In particular, IQOS has not been robustly adopted in the United States. At the time of the
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`evidentiary hearing, with just over a year of sales in the U.S. market, “IQOS devices sold have
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`been
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`-
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`655:2. Similarly,
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`CONFIDENTIAL VERSION
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`-
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` . . . [a]nd the net sales . . . on those units sold have been
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`.” Hrg. Tr. 655:24-
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`numbers, “
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`. Hrg. Tr. 656:8-12; CDX-0004C at 56. Based on these
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`-
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` Hrg. Tr. 656:19-24. Even if the focus is narrowed to
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`the regions where IQOS was being sold at the time of the evidentiary hearing, only
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`of smokers have purchased an IQOS device, and “the vast majority of those have either
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`abandoned IQOS or are dual users.” Hrg. Tr. 656:25-657:7; CDX-0004C.59. The Commission
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`finds that the minimal adoption of IQOS in the United States combined with the FDA’s premise
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`that robust adoption is needed to realize any benefit of IQOS supports the conclusion that the
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`exclusion of IQOS will not adversely affect the public health and welfare. 45
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`Based on all of the evidence regarding IQOS, especially statements by the FDA and
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`expert testimony of record including that there are thousands of alternative products available,
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`the Commission finds that the public health and welfare factor does not weigh against issuing a
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`remedy in this investigation.46
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`45 The Commission is not precluded from issuing a remedy simply because an infringing
`product is regulated by the FDA and there may be some benefit for certain individuals. See
`Certain Crystalline Cefadroxil Monohydrate, Inv. No. 337-TA-293, Notice at 2 (Jan. 10, 1990)
`(determining that the public-interest factors did not preclude excluding the infringing antibiotics
`and that LEO and CDOs were the appropriate remedy).
`46 Philip Morris contends that any ITC remedy would usurp the exclusive authority of the
`FDA to regulate tobacco products in the United States under the TCA and FDCA. PMIR at 47.
`Moreover, it contends that the Commission’s public interest analysis as to the public health and
`welfare amounts to “second-guessing” the FDA’s “exclusive jurisdiction over tobacco product
`harm assessment” and expertise in evaluating IQOS. Id. at 50-56. Philip Morris’s arguments,
`however, mistakenly view the FDA’s authority as mandating that its IQOS tobacco products
`must be made available for sale in the United States, notwithstanding the Commission’s findings
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`CONFIDENTIAL VERSION
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`appropriate. See 19 C.F.R. § 210.76(a)(1) (stating that “the public interest” may serve as a basis
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`for modification of remedial orders); see also Personal Data and Mobile Commc’ns Devices
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`Comm. Op. at 68 (finding “the Commission has established procedures that permit modification
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`or rescission of an exclusion order, as appropriate based on a reassessment of the changed facts
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`or public interest at such time. 19 C.F.R. § 210.76(a)(1).”).
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`Philip Morris also challenges the ALJ’s finding that IQOS adoption is not widespread
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`among U.S. consumers,
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`. We agree with the ALJ that the
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`evidence shows that the U.S. market for IQOS is not robust, and Philip Morris exaggerates the
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`level of adoption of IQOS. See PMIR at 69-75; FID at 123. Philip Morris repeatedly relies on
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`global evidence as to IQOS adoption and use instead of evidence regarding U.S. consumers. Id.
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`Philip Morris also relies on new evidence – that HeatSticks are now available in retail stores in
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`Georgia, North Carolina, South Carolina, and Virginia – and sales data for the second quarter of
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`2021 that was not presented at the evidentiary hearing. Id. at 72-74 (citing various webpages).
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`The evidence presented to the ALJ showed approximately
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` in the United
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`States, which is a small percentage of U.S. consumers, even if compared to U.S. combustible
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`cigarette smokers. FID at 123, 107; JX-0034 at 60, 62. Philip Morris’s new evidence allegedly
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`shows a
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`, but Philip Morris fails to provide any actual
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`numbers, underlying analysis, or context as to whether the IQOS users switched completely from
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`combustible cigarettes. PMIR at 72-73. This new evidence was also never subject to expert
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`review or cross-examination. Even if the
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`increase would result in an additional
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`percentage of U.S. consumers.
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` is considered, such an
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`, which is still a very small
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`CONFIDENTIAL VERSION
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`differential of the DI products and Accused Products is the best evidence upon which to evaluate
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`the possible need for a bond.
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`The Commission finds that Reynolds failed to demonstrate the necessity of a bond, so the
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`Commission sets a zero percent bond, or no bond, for any importations of infringing products
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`during the Presidential review period.
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`V.
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`CONCLUSION
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`For the reasons set forth herein, the Commission determines that Reynolds established a
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`violation of section 337 by Philip Morris with respect to claims 1-3 and 5 of the ’915 patent and
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`claims 27-30 of the ’123 patent. Accordingly, the investigation is terminated with a finding of a
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`violation of section 337. The Commission determines that the appropriate remedy is an LEO
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`barring importation of certain tobacco heating articles and components thereof that infringe
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`claims 1-3 and 5 of the ’915 patent and claims 27-30 of the ’123 patent, and CDOs directed to
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`respondents Philip Morris USA and ACS. The Commission further determines that the public
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`interest factors do not preclude that remedy, and the bond during the Presidential review period
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`is set at zero percent of entered value.
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`By order of the Commission.
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`Issued: September 29, 2021
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`
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`Lisa R. Barton
`Secretary to the Commission
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`80
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