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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`PHILIP MORRIS PRODUCTS S.A.
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`Case No. 1:20-cv-00393-LMB-WEF
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`ORAL ARGUMENT REQUESTED
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`
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`Plaintiff,
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`v.
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`R.J. REYNOLDS VAPOR COMPANY
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`
`Defendant.
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`REPLY IN SUPPORT OF PHILIP MORRIS PRODUCTS S.A.’S CROSS-MOTION TO
`LIFT THE STAY AS TO U.S. PATENT NO. 9,901,123
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`Case 1:20-cv-00393-LMB-WEF Document 1489 Filed 04/30/23 Page 2 of 13 PageID# 41685
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`TABLE OF CONTENTS
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`I.
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`II.
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`INTRODUCTION ...............................................................................................................1
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`ARGUMENT .......................................................................................................................3
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`A.
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`B.
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`The Court Should Lift The ’123 Stay Pursuant To 28 U.S.C. § 1659(a)
`Because The ITC’s Determination Is Now “Final” .................................................3
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`RJRV Provides No Basis For Maintaining The ’123 Patent Stay ...........................4
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`III.
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`CONCLUSION ....................................................................................................................8
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`
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`i
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`
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`TABLE OF AUTHORITIES
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`CASES
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`Certain Beverage Brewing Capsules, Components Thereof, & Prods. Containing the Same;
`Inv. No. 337-TA-929, Comm’n Notice (July 30, 2018) .............................................................. 7
`
`Certain Composite Wear Components & Prods. Containing Same,
`Inv. No. 337-TA-644, Comm’n Op. (Feb. 10, 2011) .............................................................. 2, 7
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`Certain Network Devices, Related Software & Components Thereof (II),
`Inv. No. 337-TA-945, Comm’n Order (Apr. 5, 2018) ................................................................ 7
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`Certain Tobacco Heating Articles & Components Thereof,
`Inv. No. 337-TA-1199, 2021 WL 2333742 (May 14, 2021) ................................................... 1, 6
`
`Kirsch Rsch. & Dev., LLC v. Epilay, Inc.,
`No. 20-cv-03773, 2021 WL 4732578 (C.D. Cal. May 7, 2021),
`reconsideration denied, 2021 WL 4704721 (C.D. Cal. Aug. 18, 2021) ..................................... 5
`
`Oyster Optics, LLC v. Ciena Corp.,
`No. 17-cv-05920, 2019 WL 4729468 (N.D. Cal. Sept. 23, 2019) .......................................... 4, 5
`
`Pathway Innovations & Techs., Inc. v. Adesso, Inc.,
`No. 15-cv-01538, Dkt. 17 (S.D. Cal. Jan. 11, 2016) ................................................................... 3
`
`Philip Morris Prods. S.A. v. Int’l Trade Comm’n,
`63 F.4th 1328 (Fed. Cir. 2023) .................................................................................................... 3
`
`SSJH Equip. SA. v. US Int’l Trade Comm’n,
`718 F.2d 365 (Fed. Cir. 1983) ..................................................................................................... 7
`
`Ultravision Tech., LLC v. CreateLED Elecs. Co.,
`No. 18-cv-00148, Dkt. 14 (E.D. Tex. Apr. 10, 2019) ................................................................. 3
`
`STATUTES
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`19 U.S.C. § 1337(k)(2)(B) .............................................................................................................. 7
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`28 U.S.C. § 1659(a) ................................................................................................................ 1, 3, 4
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`ii
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`I.
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`INTRODUCTION
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`RJRV does not dispute that, under the plain language of 28 U.S.C. § 1659(a), the ’123
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`patent stay should be lifted when the ITC’s determination becomes “final,” and that the ITC’s
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`determination is now final. And RJRV does not dispute that the purpose of the stay—namely, to
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`suspend the ’123 patent proceedings here until the ITC made its final determination—has been
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`satisfied. Those concessions should be dispositive. There is no longer a need or basis for the
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`statutory stay. This Court should lift that stay so that PMP can proceed here with its strong
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`invalidity challenge to asserted claims 27-30 of the ’123 patent.
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`Despite these concessions, and under the guise of judicial “efficiency,” RJRV asks the
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`Court to delay any proceedings on claims 27-30 of the ’123 patent. There should be no confusion,
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`however, that RJRV’s real aim is to further its commercial objective of keeping Philip Morris’
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`FDA-authorized HNB Products out of the hands of U.S. consumers. But, lifting the stay would
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`serve judicial efficiency because the issues to be resolved are narrow and straightforward. As the
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`ITC recognized, “Reynolds has stipulated that … [PMP’s primary prior art reference] Morgan
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`discloses each limitation of claims 27-30 except one,”—namely, a centered heater. Certain
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`Tobacco Heating Articles & Components Thereof, Inv. No. 337-TA-1199, 2021 WL 2333742, at
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`*27 (May 14, 2021). PMP has prior art that discloses this very element of the asserted claims. In
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`other words, PMP only needs a single finding of fact, whether from the Court or the jury, to
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`invalidate the asserted claims. If RJRV wants “efficiency,” the stay should be lifted and the issues
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`should be bifurcated in order to promptly resolve invalidity—and, only if it remains necessary, to
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`resolve issues of infringement and damages.
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`The Court should reject RJRV’s opposition for four reasons. First, RJRV argues that
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`PMP’s cross-motion somehow ignores Judge O’Grady’s December 2020 order, which RJRV
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`1
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`Case 1:20-cv-00393-LMB-WEF Document 1489 Filed 04/30/23 Page 5 of 13 PageID# 41688
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`contends stayed “the entire action.” Dkt. 1488 at 5. That is factually incorrect. That order
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`expressly stayed the ’542 and ’268 patents “pending the PTAB’s decision.” Dkt. 432. It did not
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`address (or mention) the ’123 patent. Id.
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`Second, RJRV argues the stay should remain in effect until after pending Federal Circuit
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`appeals on two patents (the ’542 and ’915) because it “may result in multiple additional trials.”
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`Dkt. 1488 at 1. But those two patents are not from the same patent family as the ’123; they relate
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`to distinct technical subject matter. As it previously held, this Court cannot rely “on speculation
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`about the Federal Circuit’s decision” or “weigh in on the strength of [RJRV’s] appeal[s]” (which
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`are weak). Dkt. 1471 at 7. Indeed, the probabilities of the Federal Circuit reversing the PTAB’s
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`invalidation of one patent is small (around 10 %) and the odds of the Federal Circuit doing so on
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`two patents is negligible (around 1%). There is no reason to hold validity proceedings on the ’123
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`patent in abeyance for appeals of unrelated patents that the PTAB already invalidated.
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`Third, RJRV asserts that, even if PMP invalidates the asserted claims of the ’123 patent in
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`this Court, “[r]ecission of an exclusion order is not automatic.” Dkt. 1488 at 9 n.4 (citing no
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`caselaw or other legal authority). That is legally erroneous. The ITC’s exclusion orders only
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`“continue[] in effect until the conditions that led to the order no longer exist.” Certain Composite
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`Wear Components & Prods. Containing Same, Inv. No. 337-TA-644, Comm’n Op. at 8 (Feb. 10,
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`2011). As a matter of law, a “district court’s invalidity ruling” after “issuance of [] remedial
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`orders … substantially change[s] the circumstances under which the [exclusion] orders were
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`issued,” such that they are rescinded as a matter of course. Id. at 9.
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`Finally, when RJRV contends that PMP is “exaggerating” the harm to it and U.S. adult
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`tobacco consumers if the ’123 patent proceedings—and thus the Limited Exclusion Order—remain
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`stayed, it is talking out of both sides of its mouth. The Court will recall that RJRV recently
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`2
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`represented that enjoining its flagship (yet to be authorized by the FDA) Alto e-cigarette would
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`“devastate” its business, lead to layoffs, and “injure public health.” Dkt. 1421 at 15-16; cf. Dkt.
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`1471 at 15 (finding that removing Alto from the market “could pose a risk of reversion to
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`combustible cigarettes and consequently harm the public health”). As applied to Philip Morris’
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`HNB Products, RJRV’s representations and the Court’s findings carry even greater weight
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`because, unlike RJRV’s Alto, the FDA has authorized IQOS.
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`The Court should grant PMP’s Cross-Motion and lift the stay as to the ’123 patent so that
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`PMP can proceed with its invalidity case.
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`II.
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`ARGUMENT
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`A.
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`The Court Should Lift The ’123 Stay Pursuant To 28 U.S.C. § 1659(a)
`Because The ITC’s Determination Is Now “Final”
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`RJRV effectively ignores § 1659(a), mentioning the statute once in passing. Dkt. 1488 at
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`5 (“Judge O’Grady first entered a stay as to the ’123 and ’915 patents per 28 U.S.C. § 1659(a) due
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`to the ITC litigation.”). But, as PMP explained, courts routinely grant motions (often unopposed)
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`to lift the statutory stay when an ITC determination becomes “final.” See, e.g., Pathway
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`Innovations and Techs., Inc. v. Adesso, Inc., No. 15-cv-01538, Dkt. 17 (S.D. Cal. Jan. 11, 2016);
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`Ultravision Tech., LLC v. CreateLED Elecs. Co., 18-cv-00148, Dkt. 14 (E.D. Tex. Apr. 10, 2019).
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`RJR does not dispute that law.
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`RJRV also does not dispute that the mandatory stay under § 1659(a) only remains in effect
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`until the ITC’s determination becomes “final”—and that condition is met here. The Federal Circuit
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`affirmed that determination on March 31 and PMP will not seek review of that decision. Philip
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`Morris Prods. S.A. v. Int’l Trade Comm’n, 63 F.4th 1328, 1332 (Fed. Cir. 2023). Applying these
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`undisputed facts to the statute should be dispositive. The purpose of Section 1659(a) was satisfied
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`when the ITC proceedings ended.
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`3
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`B.
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`RJRV Provides No Basis For Maintaining The ’123 Patent Stay
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`Rather than address the statute that formed the sole basis for Judge O’Grady’s stay order,
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`RJRV contends that the stay should continue for four reasons. Each fails.
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`First, RJRV argues that PMP “ignores” that Judge O’Grady’s December 2020 order
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`purportedly stayed “the entire action,” including all “the claims relating to Reynolds’s patents.”
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`Dkt. 1488 at 5 (citing Dkt. 432). Not so; the order is irrelevant to PMP’s Cross-Motion. Judge
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`O’Grady only affirmed Magistrate Judge Buchanan’s Order granting “[PMP’s] partial motion to
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`stay [RJRV’s] claims regarding U.S. Patent Nos. 9,814,268 and 10,492,542.” Dkt. 432. Judge
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`O’Grady’s order does not even mention the ’123 patent,1 which was stayed six months earlier (Dkt.
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`27) pursuant to § 1659.2
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`Second, RJRV argues the stay should continue because “PMP speculates” that the Federal
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`Circuit will affirm the PTAB’s invalidity decisions regarding the ’123, ’915, and ’542 patents.
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`Dkt. 1488 at 5-6. That is incorrect. As an initial matter, PMP’s pending appeal related to the ’123
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`patent is irrelevant because it does not involve asserted claims 27-30. Instead, that appeal (and the
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`underlying PTAB proceeding) solely involves claims 1-7, 9, 11-19, 21, and 23-26, which are not
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`asserted (or assertable) in this case—a fact that RJRV’s opposition conspicuously ignores. Dkt.
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`1485 at 3. As for the ’915 and ’542 patents, RJRV ignores PMP’s cases (see Dkt. 1485 at 10)
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`demonstrating that courts routinely lift stays despite pending Federal Circuit appeals. For example,
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`in Oyster Optics, LLC v. Ciena Corp., the trial court lifted a stay while an appeal of a PTAB
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`1 RJRV’s opposition and Magistrate Judge Buchanan’s underlying order also did not reference
`the ’123 patent. Dkts. 405, 426.
`2 In any event, Judge O’Grady’s December 2020 order supports PMP’s Cross-Motion. That order
`stayed only the ’268 and ’542 patents “pending the PTAB’s decision.” Dkt. 432. RJRV dismissed
`the ’268 patent with prejudice last week. Dkts. 1482, 1486. And the ’542 patent was not at issue
`in the ITC and was thus not the subject of the statutory stay. Dkt. 1485 at 10.
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`4
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`decision was pending at the Federal Circuit because it found “the patent claims at issue have
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`undergone an adversarial process [at the PTAB] concerning their validity” and continuing the stay
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`would not simplify matters. No. 17-cv-05920, 2019 WL 4729468, at *3 (N.D. Cal. Sept. 23, 2019).
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`Similarly, in Kirsch Rsch. & Dev., LLC v. Epilay, Inc., the district court gave no credence to a
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`parallel PTAB proceeding once the ITC proceeding on an asserted patent became final because
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`“the basis on which the Court stayed [the] case no longer exists.” No. 20-cv-03773, 2021 WL
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`4732578, at *2 (C.D. Cal. May 7, 2021), reconsideration denied, 2021 WL 4704721 (C.D. Cal.
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`Aug. 18, 2021) (lifting stay after final ITC determination despite pending IPR proceedings).
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`The same result follows here. The PTAB found the ’915 and ’542 patents invalid after an
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`“adversarial process concerning their validity.” Oyster, 2019 WL 4729468, at *3. RJRV’s
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`speculation that there “may” be multiple trials ignores the Federal Circuit’s 90% affirmance rate
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`(Dkt. No. 1485 at 10 n.6) and that the statistical probability of “piecemeal” litigation is remote.
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`Indeed, the odds of RJRV’s appeal succeeding for one patent is about 10%; the odds of it
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`succeeding on two patents is 1%. Instead, “all things being equal, the prospect for simplification
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`of patent matters in a case wanes greatly after the PTAB has issued its [Final Written Decision].”
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`Oyster, 2019 WL 4729468, at *3. Additionally, the ’915 and ’542 patents relate to different
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`technical subject matter (energy transfers from the battery to the heater in a smoking device) while
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`the ’123 patent asserted claims relate to the centered heater aspect of the device. And the ’915 and
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`’542 patents are indisputably from different patent families than the ’123 patent and have no
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`overlapping inventors; they are unrelated. The pending appeals of the PTAB’s invalidation of two
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`unrelated patents does not justify maintaining the stay on the asserted claims of the ’123 patent.
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`In reality, it is RJRV that asks the Court to rely on speculation by arguing that lifting the
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`’123 stay “may result in multiple additional trials” if the Federal Circuit vacates the PTAB’s
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`5
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`Case 1:20-cv-00393-LMB-WEF Document 1489 Filed 04/30/23 Page 9 of 13 PageID# 41692
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`decisions invalidating the ’915 and ’542 patents. Dkt. 1488 at 1. As discussed, lifting the stay as
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`to the ’123 patent asserted claims would be highly efficient, especially if invalidity and
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`infringement are bifurcated, so that the single threshold invalidity issue can be resolved first.
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`RJRV already stipulated that the prior art discloses every limitation of the ’123 patent asserted
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`claims save one, which relates to a centered heater. Certain Tobacco Heating Articles &
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`Components Thereof, Inv. No. 337-TA-1199, 2021 WL 2333742, at *27. PMP will present prior
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`art showing this was a straightforward and obvious element. Thus, it requires only a single finding
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`of fact from the Court or the jury—namely, that it would have been obvious to combine Morgan
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`with another prior art reference that taught a centered heater (there are several). Efficiency favors
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`lifting the stay to resolve invalidity now—and only then, if necessary, separately trying issues of
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`infringement and damages.
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`Third, RJRV contends that lifting the stay is not warranted because “the ITC has already
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`denied PMP’s attempt to stay its remedial order one patent at a time based exclusively on the
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`PTAB’s decision concerning the ’915 patent” and “invalidation of the asserted claims of the ’123
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`patent in this action would not result in an immediate lifting of the current exclusion order.” Dkt.
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`1488 at 8 (relying on Dkt. 1488-2); see also id. at 9 n.4 (“Recission of an exclusion order is not
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`automatic.”). RJRV’s unsupported statement of law is factually incorrect and legally erroneous.
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`As an initial matter, the subject ITC order was not based on the ’915 patent at all, much less
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`“exclusively,” as RJRV claims.3 Indeed, the ITC expressly refused to address the validity of the
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`3 The ITC denied the stay because it found PMP had not sufficiently raised a “difficult legal
`question” regarding the ITC’s consultation with the Department of Health and Human Services or
`RJRV’s satisfaction of the domestic industry requirement, neither of which is relevant to the
`validity of the ’915 patent. Dkt. 1488-2 at 5-13.
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`6
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`’915 patent because “the PTAB Final Written Decision is irrelevant to the issues actually
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`presented in the motion to stay.” Dkt. 1488-2 at 13; see also id. at 5.
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`In addition, “Section 337(k)(1) explains that any exclusion order or cease and desist order
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`continues in effect until the conditions that led to the order no longer exist.” Certain Composite
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`Wear Components, Inv. No. 337-TA-644, Comm’n Op. at 8 (rescinding limited exclusion order
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`(“LEO”) upon entry of a district court judgment of invalidity) (emphasis added). “Section
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`337(k)(2) specifically allows the Commission to modify or rescind a remedial order when the
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`Federal Rules of Civil Procedure ‘would permit relief from a judgment or order.’” Id. (quoting 19
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`U.S.C. § 1337(k)(2)(B)). Thus, when a patent underlying a LEO is held invalid in district court,
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`the Commission will rescind the order as a matter of course because the conditions under which
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`the LEO issued have “substantially” changed4:
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`The district court’s invalidity ruling for the [relevant] patent occurred
`subsequent to the Commission’s issuance of the remedial orders and has
`substantially changed the circumstances under which the orders were
`issued. Thus, the Commission has determined that the remedial orders
`should be rescinded pending resolution of the appeal at the Federal Circuit.
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`Id. at 9 (citing SSJH Equip. SA. v. US Int’l Trade Comm’n, 718 F.2d 365 (Fed. Cir. 1983)); see
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`also, e.g., Certain Beverage Brewing Capsules, Components Thereof, & Prods. Containing the
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`Same, Inv. No. 337-TA-929, Comm’n Notice at 2 (July 30, 2018) (rescinding LEO upon entry of
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`district court judgment of invalidity pending Federal Circuit appeal). RJRV’s opposition fails to
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`address any of PMP’s cited cases (see Dkt. 1488 at 8-9)—and provides no case or example where
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`the ITC did not rescind an LEO on entry of a district court judgment of invalidity.
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`4 Unlike a district court judgment of invalidity, the ITC will only rescind an LEO based on a patent
`invalidated by the PTAB after the Federal Circuit affirms the PTAB’s decision invalidating that
`patent. Certain Network Devices, Related Software & Components Thereof (II), Inv. No. 337-TA-
`945, Comm’n Order at 3 (Apr. 5, 2018) (rescinding LEO after Federal Circuit affirmed PTAB
`invalidity finding).
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`7
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`Fourth, PMP does not “exaggerate” the harm to PMP and the U.S. market if the ’123 patent
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`proceedings remain stayed and the LEO remains in place. The harm to PMP and U.S. adult tobacco
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`consumers is greater than that pertaining to removing RJRV’s VUSE Alto product from the
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`market. There are many e-vapor products on the market similar to Alto, including many that have
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`the FDA authorization Alto lacks. Dkt. 1406-10 ¶¶ 15-16; Dkt. 1469 at 10. But PMP’s IQOS
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`product is the sole HNB product with FDA authorization.
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`When it opposed PMP’s motion for a permanent injunction, RJRV represented to the Court
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`that removing its Alto e-cigarette from the U.S. market would (i) “devastate a substantial portion
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`of its e-cigarette business,” (ii) force RJRV “to consider layoffs of many employees,” and (iii)
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`“injure public health and thus harm the public interest.” Dkt. 1421 at 15-16. The Court noted that
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`RJRV has “taken the position that smoke-free alternatives,” which include PMP’s IQOS HNB
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`Products, “are a harm reducing alternative for adult cigarette users, and for that reason they may
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`provide a public health benefit to these users.” Dkt. 1471 at 14. The Court accepted RJRV’s
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`representations and found that PMP’s requested injunction “could pose a risk of reversion to
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`combustible cigarettes and consequently harm the public health.” Id. That finding applies with
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`greater force to PMP. Unlike RJRV’s Alto e-cigarette, PMP’s flagship HNB product has been
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`authorized by FDA. Dkt. 1406-10 ¶¶ 9-13. RJRV cannot have it both ways.
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`Under these circumstances, it would be unfairly prejudicial to PMP, and plainly harmful to
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`U.S. adult tobacco consumers seeking to switch from combustible cigarettes, to hold proceedings
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`on the ’123 patent validity in abeyance over RJRV’s meritless appeal of two invalid patents.
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`III. CONCLUSION
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`The Court should grant PMP’s Cross-Motion to lift the stay on the ’123 patent proceedings.
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`8
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`Dated: April 30, 2023
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`Respectfully submitted,
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`
`
`/s/ Maximilian A. Grant
`Maximilian A. Grant (VSB No. 91792)
`max.grant@lw.com
`Matthew J. Moore (pro hac vice)
`matthew.moore@lw.com
`Jamie Underwood
`jamie.underwood@lw.com (pro hac vice)
`LATHAM & WATKINS LLP
`555 Eleventh Street, N.W., Ste. 1000
`Washington, DC 20004
`Tel: (202) 637-2200; Fax: (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 K. Sobolski (pro hac vice)
`Greg.sobolski@lw.com
`LATHAM & WATKINS LLP
`505 Montgomery Street, Suite 2000
`San Francisco, CA 94111
`Tel: (415) 391-0600; Fax: (415) 395-8095
`
`Counsel for Plaintiff Philip Morris Products
`S.A.
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`9
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`Case 1:20-cv-00393-LMB-WEF Document 1489 Filed 04/30/23 Page 13 of 13 PageID# 41696
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`CERTIFICATE OF SERVICE
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`I hereby certify that on this 30th day of April, 2023, 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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`
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`
`
`/s/ Maximilian A. Grant
`Maximilian A. Grant (VSB No. 91792)
`max.grant@lw.com
`LATHAM & WATKINS LLP
`555 Eleventh Street, N.W., Ste. 1000
`Washington, DC 20004
`Tel: (202) 637-2200; Fax: (202) 637-2201
`
`10
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`