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`CONTAINS CONFIDENTIAL BUSINESS INFORMATION
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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`Alexandria Division
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`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
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`Plaintiffs and Counterclaim Defendants,
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`v.
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`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA, INC.; and PHILIP MORRIS
`PRODUCTS S.A.,
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`Defendants and Counterclaim Plaintiffs.
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`Case No. 1:20cv00393-LO-TCB
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`REDACTED
`FILED UNDER SEAL
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`MEMORANDUM IN SUPPORT OF PLAINTIFFS’ PARTIAL MOTION TO STAY
`FURTHER PROCEEDINGS ON THE CLAIM OF PHILIP MORRIS PRODUCTS S.A.
`SEEKING INJUNCTIVE RELIEF
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`TABLE OF CONTENTS
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`Page
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`INTRODUCTION ............................................................................................................. 1
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`STATEMENT OF FACTS ................................................................................................ 2
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`A.
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`PMP’s Claims Of Irre arable Harm And Inade uate Remed At Law Are
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`B.
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`C.
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`
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`STATEMENT OF LAW.................................................................................................... 7
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`ARGUMENT ..................................................................................................................... 8
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`A.
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`A Stay Pending Decision By The F1111 ITC Commission Is Wau‘anted, And
`Will Prevent The Palfies And The C01u1 From Wasting Resources-
`— ................................................ s
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`B.
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`A Brief Stay Will Not Prejudice Defendants ....................................................... 11
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`CONCLUSION ................................................................................................................ 12
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`TABLE OF AUTHORITIES
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`Page(s)
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`CASES
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`Apple Inc. v. Samsung Electronics Co., Ltd.,
`695 F.3d 1370 (2012) .................................................................................................................8
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`Apple Inc. v. Samsung Electronics Co., Ltd.,
`735 F.3d 1352 (2013) .................................................................................................................8
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`Apple Inc. v. Samsung Electronics Co., Ltd.,
`809 F.3d 633 (2015) ...................................................................................................................8
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`eBay Inc. v. MercExchange, LLC,
`547 U.S. 388 (2006) .......................................................................................................1, 2, 3, 9
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`Landis v. N. Am. Co.,
`299 U.S. 248 (1936) ...................................................................................................................7
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`STATUTES
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`19 U.S.C. §§ 1337(a)(1)-(2) ...............................................................................................1, 4, 5, 10
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`OTHER AUTHORITIES
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`Fed. R. Civ. P. 30(b)(6)....................................................................................................................9
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`INTRODUCTION
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`I.
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`Since the Court entered its Order on March 12, 2021 (Dkt. No. 483), allowing Defendant
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`Philip Morris Products S.A. (“PMP”) to add a claim for injunctive relief relating to its allegation
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`that three PMP patents are infringed by Reynolds’s VUSE line of vaping products, the parties have
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`been hard at work on injunction-related discovery. But much remains to be done, both in terms of
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`fact discovery around the bases for PMP’s claims on each of the eBay factors and (at least for
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`Reynolds) expert discovery to rebut those claims. On May 14, 2021, however, the presiding
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`Administrative Law Judge issued a decision in the parallel proceedings before the International
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`Trade Commission (“ITC”)
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`.
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`Specifically, Administrative Law Judge Clark S. Cheney issued a 132-page Initial
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`Determination in the ITC Investigation, finding that Defendants infringe
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`Reynolds’s U.S. Patent No. 9,901,123 (the “Robinson ’123 patent”) and
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`Reynolds’s U.S. Patent No. 9,930,915 (the “Worm ’915 patent”), and that those patents are not
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`invalid. (See 5/14/2021 Initial Determination, attached as Ex. A, at 25-64, 99-100, 131.)
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`Accordingly, Defendants violate Section 337 of the Tariff Act of 1930, as amended, 19 U.S.C. §§
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`1337(a)(1)-(2),
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`. (Id. at 125-26.) PMP’s claim for an injunction in this case
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` (Id. at 131.)
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`Reynolds respectfully requests that the Court issue an order
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`staying any further proceedings, including fact and expert discovery, relating to PMP’s claim for
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`injrmctive relief pending the full Commission’s decision. The requested stay will conserve
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`resources for all parties and the Court, as they work to prepare this matter for trial on the merits.
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`Moreover, the stay will not prejudice Defendants in any way. The decision of the full Commission
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`is expected in September 2021, so the requested stay is of limited duration. And, as Defendants
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`have assured the Court previously, there is no need for discovery around injunctive relief issues to
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`be completed before a trial on the merits of the rmderlying patent claims.
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`II.
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`STATEMENT OF FACTS
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`A.
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`PMP’s Claims OfIrreiarableHarmAndInadeiuateRemediAtLawAre
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`Shortly after PMP was allowed to add its claim for injunctive relief, Reynolds served
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`Interrogatory No. 23, seeking a complete description of PMP’s contentions on each of the
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`injrmction factors as to which it bears the burden of proof under eBay Inc. v. MercEx‘c/mnge,
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`LLC, 547 US. 388, 291 (2006). Specifically, Reynolds asked:
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`Separately for each of the [PMP
`[hiterrogatory No. 23.]
`cormterclairn patents], describe the complete factual and legal basis
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`_2_
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`for PMP’s contention that PMP is entitled to injunctive relief as
`stated in paragraph D of PMP’s Prayer for Relief of PMP’s second
`amended cormterclaims, including (a) any alleged irreparable injury
`PMP has or expects to suffer. including why PMP contends such
`injury is irreparable; (b) why remedies available at law, such as
`monetary damages, would be inadequate to compensate for any
`alleged injluy; (c) why an ongoing royalty would be inadequate to
`compensate for any alleged injury; ((1) why, considering the balance
`of hardship between PMP and Plaintiffs. a remedy in equity is
`warranted; (e) why the public interest would not be disserved by a
`peimanent injlulction; (f) the scope of any injunction, whether such
`injlmction should be limited or general and the products PMP
`contends should be covered by such a remedy; (g) identity of the
`three (3) individuals most knowledgeable of the foregoing: and (h)
`all Documents and things (by Bates number) PMP intends to rely on
`to support PMP’s contentions.
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`PMP responded to this Interrogatory on April 9, 2021, laying out in full its contentions on each of
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`the eBay factors and its support generally for its injimction request.
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`(See Philip Morris Products
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`S.A.’s Objections and Responses to Plaintiffs’ Sixth Set of Interrogatories (No. 23-24) (“PMP
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`Resp”), attached as Ex. B.)
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`On the critical issues of irreparable harm, lack of adequate remedy at law, and balance of
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`harms, PMP offered its narrative that Reynolds:
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`(PMP Resp. at 5-6 (emphasis added); see also id. at 16.)
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`_3_
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`Though long 011 rhetoric and utterly devoid of evidentiary support. PMP’s contention
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`responses make crystal clear that
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`contentions.
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`. This singular focus is repeated throughout PMP’S
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`As the Court is aware the parties are engaged in a parallel proceeding before the ITC‘. in
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`which Reynolds accuses the IQOS products of infringing certain of Reynolds’s patents. and seeks
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`an order barring importation and sale of those products in the United States. See In re Certain
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`Tobacco Heating Articles and Components Thereof; Inv. No. 337-TA-1199. An evidentiary
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`hearing took place in that matter in Janualy 2021‘ before Administrative Law Judge Clark S.
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`Cheney‘ and featured testimony from fact witnesses and 12 expert Witnesses, as well as
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`voluminous documents that were made a pan of the record. On May 14, 2021, Judge Cheney
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`issued the Initial Determination, in which he exhaustively reviewed the facts and applicable law,
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`and ultimately f01md in favor of Reynolds.
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`(See, e.g., Ex. A at 1.) Specifically, the ALJ f01md
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`that the IQOS products inflinge— two of the three patents asserted by
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`Reynolds—the Robinson ’123 patent_) and the Wonn ‘915 patent I
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`_)—and further rejected each of Defendants’ arguments challenging those patents
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`as invalid. ad- at
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`99-100)—
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`Defendants will seek review of the Initial Detennination with the full Commission,_
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`_The decision of the Commission is expected in September 2021.
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`— (EX. A at 102.) To the extent that PMP relies on the claimed
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`that:
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`III.
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`STATEMENT OF LAW
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`“[T]he power to stay proceedings is incidental to the power inherent in every court to
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`control the disposition of the causes on its docket with economy of time and effort.” Landis v. N.
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`Am. Co., 299 US. 248, 254 (1936). This Court has recognized and exercised this authority to stay
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`parts of this case in View of actions in parallel proceedings that may have a significant impact here.
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`For example,
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`the Court previously granted Defendants” motion to stay all proceedings on
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`Reynolds’s asserted ‘268 and ’542 patents in View of preliminary determinations made in parallel
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`proceedings before the Patent and Trademark Office relating to those patents, reasoning that the
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`resolution of the PTAB proceedings—if Defendants were successful—would obviate the need for
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`further proceedings on those patents in this case. (See Dkt. Nos. 375. 426. 432. 456.)
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`IV. ARGUMENT
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`A.
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`A Stay Pending Decision By The Full ITC Commission Is Warranted, And
`Will Prevent The Parties And The Court From Wasting Resources
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`As discussed above, PMP’s claims of irreparable harm and inadequate remedy at law
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` (See supra at pp. 3-4.)
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`PMP’s claim for injunctive relief would fail as a matter of law. See, e.g., Apple
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`Inc. v. Samsung Electronics Co., Ltd., 809 F.3d 633, 639-40 (2015) (“Apple IV”); Apple Inc. v.
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`Samsung Electronics Co., Ltd., 735 F.3d 1352, 1361-62 (2013) (“Apple III”); Apple Inc. v.
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`Samsung Electronics Co., Ltd., 695 F.3d 1370, 1374-75 (2012) (“Apple II”).
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`—, it would be a tremendous waste ofresources for the parties to continue
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`with finther fact and expelt discovery ar01md PMP’s injunction claim. As to fact discovely, the
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`parties are still working to complete document productions in response to injunction-specific
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`requests. Neither side has completed its production yet, and it appears that further motion practice
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`on document issues is likely, since PMP responded to Reynolds’s requests earlier this week, and
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`has refused to produce numerous categories of documents sought by Reynolds. And the other
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`Defendants (PM USA and Altria) have refused to produce any injlmction-related documents (It 0]],
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`despite the fact that both are involved with the commercialization of the IQOS products-
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`— (See, e.g., PMP Resp. at 5-7.) Moreover, the
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`parties are preparing to take the depositions of Rule 30(b)(6) Witnesses about, among other things,
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`their respective contentions regarding the eBay factors and the propliety of injlmctive relief.
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`Indeed, both sides filed motions to compel relating to those depositions, before seeing the ITC
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`Initial Determination. (See Dkt. Nos. 612, 615.)1
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`After all of the remaining fact discoveiy, both sides also apparently intend to offer expert
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`reports and testimony around these issues. Reynolds certame will, and Defendants indicated in a
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`filing this week that they may do so as well. (See Dkt. No. 624 at 7.) How are such witnesses and
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`—2
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`1 Obviously, if the Court were to grant this motion, those motions to compel depositions
`on the injlmctive relief issues would be rendered moot.
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`2
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`At a minimum, the resolution of these issues by the full Commission will help to guide the
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`parties’ remaining discovery efforts.
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`. If, instead, the parties go forward with
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`further fact and expert discovery on the injunction issues now,
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`, resulting in the needless waste of the parties’ and
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`the Court’s resources in the interim.
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`This Court has recognized that a stay is an appropriate tool to prevent just this sort of waste
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`of resources. For example, on Defendants’ motion, the Court agreed to stay all proceedings on
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`Reynolds’s ’268 and ’542 patents based on parallel proceedings before the PTAB. (See Dkt. Nos.
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`375, 426, 432, 456.) And those were merely situations where the PTAB proceedings might
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`someday have an impact on this litigation. For example, proceedings on the ’268 patent were
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`stayed because, even though Defendants lost their bid to have IPR proceedings instituted before
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`the PTAB, they are petitioning for review of that decision, which might lead to institution at some
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`indeterminate point in the future (there is no deadline by which the PTAB must decide the petition),
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`and which might at some time after that lead to a decision in Defendants’ favor on the validity of
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`that patent. (See Dkt. Nos. 375, 426, 432.) Similarly, the Court ordered (again at Defendants’
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`urging) that all proceedings on Reynolds’s ’542 patent will remain stayed in this case because the
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`PTAB has instituted post grant review proceedings on that patent, which might—at some point in
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`the future—lead to a decision in Defendants’ favor on validity. (See Dkt. Nos. 449, 450, 451,
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`456.)
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`If the circumstances warranted a stay as to Reynolds’s patents, then a stay is clearly
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`warranted here as to PMP’s claim for injunctive relief. Quite unlike the situation with Reynolds’s
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`patents, where there is merely the specter of a possible decision in the future that would favor
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`Defendants on invalidity, the ITC ALJ has rendered an actual decision, finding that the IQOS
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`products infringe
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` two valid Reynolds patents
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` Based on that decision, the only reasonable conclusion the Court can reach is that
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`. A stay of further proceedings on the injunctive relief claim, at least until the
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`full Commission rules in September 2021, is thus amply justified.
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`A Brief Stay Will Not Prejudice Defendants.
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`B.
`As discussed above, there are clear advantages to both sides from a stay of further
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`proceedings relating to PMP’s claim for injunctive relief. And such a stay would not prejudice
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`Defendants in any way. The decision of the full Commission is expected in September 2021, so
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`the stay would necessarily be of limited duration. Moreover, the stay relates solely to fact and
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`expert discovery on the injunctive relief issues. As Defendants have made clear, those issues are
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`separate, and do not need to be completed prior to trial on liability. (See, e.g., Dkt. No. 477 at 1.)
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`Thus, the stay will not delay any trial on the merits, which will be set in the ordinary course
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`consistent with the Court’s availability.
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`V.
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`CONCLUSION
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`For the reasons set forth above, Plaintiffs respectfully request that this Court enter an
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`Order staying all further proceedings on PMP’s request for injunctive relief.
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`Respectfully submitted,
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`
` /s/ David M. Maiorana
`David M. Maiorana (VA Bar No. 42334)
`Ryan B. McCrum
`JONES DAY
`901 Lakeside Ave.
`Cleveland, OH 44114
`Telephone: (216) 586-3939
`Facsimile: (216) 579-0212
`Email: dmaiorana@jonesday.com
`Email: rbmccrum@jonesday.com
`
`John J. Normile
`JONES DAY
`250 Vesey Street
`New York, NY 10281
`Telephone: (212) 326-3939
`Facsimile: (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 Avenue, 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
`
`
`Dated: May 21, 2021
`
`
`
`Stephanie E. Parker
`JONES DAY
`1221 Peachtree Street, N.E.
`Suite 400
`Atlanta, Georgia 30361
`Telephone: (404) 521-3939
`Facsimile: (404) 581-8330
`Email: separker@jonesday.com
`
`
`Anthony M. Insogna
`JONES DAY
`4655 Executive Drive
`Suite 1500
`San Diego, CA 92121
`Telephone: (858) 314-1200
`Facsimile: (844) 345-3178
`Email: aminsogna@jonesday.com
`
`William E. Devitt
`JONES DAY
`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
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`CERTIFICATE OF SERVICE
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`
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`I hereby certify that on this 21st day of May, 2021, 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/ David M. Maiorana
`David M. Maiorana (VA Bar No. 42334)
`JONES DAY
`901 Lakeside Ave.
`Cleveland, OH 44114
`Telephone: (216) 586-3939
`Facsimile: (216) 579-0212
`Email: dmaiorana@jonesday.com
`
`Counsel for Plaintiffs RAI Strategic Holdings,
`Inc. and R.J. Reynolds Vapor Company
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