Case 1:20-cv-00393-LO-TCB Document 720 Filed 06/16/21 Page 1 of 12 PageID# 17541
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`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`Civil No. 1:20-cv-00393-LO-TCB
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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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`BRIEF IN SUPPORT OF MOTION TO DISMISS COUNTERCLAIM AND
`AFFIRMATIVE DEFENSES BY PLAINTIFFS RAI STRATEGIC HOLDINGS, INC.
`AND R.J. REYNOLDS VAPOR COMPANY
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`TABLE OF CONTENTS
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`Page
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`INTRODUCTION ......................................................................................................................... 1
`BACKGROUND ........................................................................................................................... 1
`ARGUMENT ................................................................................................................................. 3
`CONCLUSION .............................................................................................................................. 6
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`CASES
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`TABLE OF AUTHORITIES
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`Page
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`Auto Servs. Co. v. KPMG, LLP,
`537 F.3d 853 (8th Cir. 2008) .....................................................................................................5
`
`Bond Opportunity Fund II, LLC v. Heffernan,
`340 F. Supp. 2d 146 (D.R.I. 2004).............................................................................................4
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`City of New York v. A-1 Jewelry & Pawn, Inc.,
`247 F.R.D. 296 (E.D.N.Y. 2007) ...........................................................................................3, 4
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`David’s Bridal, Inc. v. House of Brides, Inc.,
`No. 06-5660 (SRC), 2010 WL 323306 (D.N.J. Jan. 20, 2010)..................................................5
`
`Davis v. USX Corp.,
`819 F.2d 1270 (4th Cir. 1987) ...................................................................................................4
`
`DirecTV, Inc. v. Benson,
`333 F. Supp. 2d 440 (M.D.N.C. 2004) ......................................................................................4
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`Ellett Bros., Inc. v. U.S. Fid. & Guar. Co.,
`275 F.3d 384 (4th Cir. 2001) .....................................................................................................4
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`In re Fid. Tube Corp.,
`167 F. Supp. 402 (D.N.J. 1958), aff’d, 278 F.2d 776 (3d Cir. 1960) .........................................5
`
`Skinner v. First Am. Bank,
`64 F.3d 659 (4th Cir. 1995) (per curiam) ...............................................................................3, 4
`
`TecSec, Inc. v. Adobe Sys. Inc.,
`326 F. Supp. 3d 105 (E.D. Va. 2018) (O’Grady, J.) ..................................................................5
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`Whitfield v. Forest Elec. Corp.,
`772 F. Supp. 1350 (S.D.N.Y. 1991) ...........................................................................................4
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`STATUTES
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`18 U.S.C. § 2512 ..............................................................................................................................4
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`35 U.S.C. § 286 ................................................................................................................................2
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`TABLE OF AUTHORITIES
`(continued)
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`Page
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`35 U.S.C. § 287 ................................................................................................................................2
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`OTHER AUTHORITIES
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`Fed. R. Civ. P. 1 ...............................................................................................................................6
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`Fed. R. Civ. P. 15 .....................................................................................................................1, 3, 4
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`Fed. R. Civ. P. 41 .................................................................................................................1, 3, 4, 5
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`Fed. R. Civ. P. 54 .....................................................................................................................1, 4, 5
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`5 James Wm. Moore, et al., Moore’s Federal Practice ¶ 41.06-1 (1995) ........................................3
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`INTRODUCTION
`Plaintiffs RAI Strategic Holdings, Inc. and R.J. Reynolds Vapor Company (collectively,
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`Plaintiffs) move to dismiss their own counterclaim and certain defenses, as permitted by Federal
`Rules of Civil Procedure 41(c), 41(a)(2), and 15(a)(2). Plaintiffs have notified Altria Client Ser-
`vices LLC (Altria), Philip Morris USA, Inc. (PM USA), and Philip Morris Products S.A. (PMP)
`(collectively, Defendants) of their intent to withdraw a counterclaim and certain defenses, and they
`have attempted to resolve this matter without the Court’s intervention by proposing a stipulation
`of dismissal. But Defendants rejected the stipulation of dismissal and insisted on a stipulation of
`judgment—replete with numerous unnecessary recitals. Because judgment is improper under Fed-
`eral Rule of Civil Procedure 54(a), and because Defendants have refused to dispose of Plaintiffs’
`abandoned counterclaim and defenses amicably by agreement, Plaintiffs now seek this Court’s
`permission to dismiss their own counterclaim and certain defenses with prejudice. A proposed
`amended answer to PMP’s counterclaims withdrawing the defenses is attached as Exhibit A, and
`a proposed amended response to Altria’s and PM USA’s counterclaims withdrawing Reynolds
`counterclaim and the defenses are attached as Exhibit B.1
`BACKGROUND
`Plaintiffs brought this action on April 9, 2020, alleging that Defendants’ IQOS heat-not-
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`burn tobacco system infringed Plaintiffs’ patents. Defendants brought counterclaims alleging,
`among other things, that Plaintiffs’ VUSE e-cigarette products infringed five patents held by De-
`fendants and that the infringement was willful, such that Defendants are entitled to enhanced dam-
`ages.
`On June 2, 2021, both parties moved for summary judgment. See Pls.’ Partial Mot. for
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`Summary Judgment, Doc. 688 (June 2, 2021); Mot. for Summary Judgment by Altria Client Ser-
`vices LLC, Philip Morris Products S.A. & Philip Morris USA, Inc., Doc. 695 (June 2, 2021). The
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`1 Mark-ups showing the defenses and counterclaim Reynolds no longer is pursuing in its amended answers are at-
`tached as Exhibits L and M.
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`day before, on June 1, Defendants’ counsel asked Plaintiffs’ counsel if Plaintiffs intended to aban-
`don any counterclaim or defense.
` Email 6/1/2021 at 4:16 PM from J. Koh
`to
`RJREDVA@jonesday.com (Ex. C). Plaintiffs responded that they intend to not pursue, and to
`withdraw, the following:
`1) A counterclaim and affirmative defense that U.S. Patent No. 6,803,545 (“the ’545 Patent”)
`is unenforceable for inequitable conduct before the U.S. Patent and Trademark Office.
`See Pls.’ Am. Answer & Counterclaim to Defs. Altria Client Servs. LLC & Philip Morris
`USA, Inc.’s Am. Counterclaims, Doc. 274 at 19-26 (Oct. 30, 2020).
`2) The equitable defenses of estoppel, acquiescence, waiver, and unclean hands as to allega-
`tions that Plaintiffs infringed U.S. Patent No. 10,104,911 (“the ’911 Patent”) and U.S.
`Patent No. 10,555,556 (“the ’556 Patent”). See Pls.’ Answer to Def. Philip Morris Prod-
`ucts S.A.’s Second Am. Counterclaims, Doc. 523 at 18 (Mar. 26, 2021).
`3) The equitable defenses of estoppel, waiver, and acquiescence as to allegations that Plain-
`tiffs infringed U.S. Patent No. 10,420,374 (“the ’374 Patent”) and U.S. Patent No.
`9,814,265 (“the ’265 Patent”). See Doc. 274 at 19; Dkt. 523 at 18.
`4) The equitable defense of unclean hands as to allegations that Plaintiffs infringed U.S. Pa-
`tent No. 6,803,545 (“the ’545 Patent”).2 Doc. 274 at 19.
`5) The defense that damages are statutorily limited by a failure to satisfy the requirements of
`35 U.S.C. §§ 286 and 287 as to the infringement allegations for the ’911, ’556, and ’265
`Patents.3 See Doc. 523 at 18.
`6) The defense that the allegations of infringement as to the ’911, ’556, and ’265 Patents are
`barred to the extent they are founded on activities occurring outside the territorial reach of
`U.S. patent laws. Id. at 19.
`
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`2 Plaintiffs are not withdrawing their equitable defenses of estoppel, acquiescence, or waiver as to
`the ’545 Patent. See Doc. 274 at 19.
`3 Plaintiffs are not withdrawing their defense as to ’545 and ’374 Patents, which is covered by a
`stipulation. See Joint Pre-Trial Stipulation, Doc. 549 (Apr. 9, 2021).
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`7) The defense that the allegations of infringement as to the ’545 and ’374 Patents are barred
`to the extent they are founded on activities occurring outside the territorial reach of U.S.
`patent laws. Doc. 274 at 20.
`Email 6/1/2021 at 6:46 PM from J. Michalik to J. Koh (Ex. D).
`
`On June 2, Defendants responded by proposing a seven-page stipulation providing that
`“judgment” was to be entered on the withdrawn counterclaim and defenses. Email 6/2/2021 at
`12:35 AM from W. Orlady to J. Michalik (Ex. E); Defendants’ Proposed Stipulation (Ex. F). The
`proposed stipulation included numerous recitals alleging, in essence, that the counterclaim was
`frivolous. Plaintiffs’ counsel responded that it is not “appropriate or necessary to stipulate to judg-
`ment on the defenses Reynolds has indicated it does not intended to pursue.” Email 6/2/2021 at
`6:28 PM from J. Michalik to W. Orlady et al. (Ex. G). Plaintiffs therefore prepared a one-para-
`graph stipulation of dismissal with prejudice (rather than judgment), as provided in Fed. R. Civ. P.
`41(a)(1)(A)(ii). See Email 6/2/2021 at 7:24 PM from J. Michalik to W. Orlady et al. (Ex. H); Draft
`Stipulation (Ex. I) and Proposed Order (Ex. J). But Defendants rejected the stipulation—despite
`the fact that both Reynolds and PM USA have previously dropped claims and defenses by stipu-
`lation, without entry of judgment. See Joint Pre-Trial Stipulation, Doc. 549 (Apr. 9, 2021). De-
`fendants then moved for summary judgment on the withdrawn counterclaim and affirmative de-
`fenses. See Counterclaim Pls.’ Memo in Support of Mot. for Summary Judgment, Doc. 694 at 10-
`17, 29 (June 2, 2021). On June 14, Plaintiffs clarified that they would no longer pursue their
`equitable defense of unclean hands as to the ’265 Patent and ’374 Patent. Email 6/14/2021 at 3:05
`PM from J. Michalik to pmiedva.lwteam@lw.com (Ex. N).
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`Because of Defendants’ unwillingness to resolve this issue amicably by stipulation of dis-
`missal, Plaintiffs now ask this Court to dismiss their own abandoned counterclaim and defenses.
`ARGUMENT
`Plaintiffs simply seek to dismiss a counterclaim and certain defenses that they are no longer
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`pursuing. This Court is authorized to enter dismissal under Rules 15(a)(2), 41(c), and 41(a)(2) of
`the Federal Rules of Civil Procedure. “[S]imilar standards govern the exercise of discretion under
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`either rule”—Rule 15 or 41. Skinner v. First Am. Bank, 64 F.3d 659, at *2 (4th Cir. 1995) (per
`curiam). As a result, “whether plaintiff’s motion is made under Rule 15 or under Rule 41(a)(2),
`the choice of rules is largely a formal matter.” 5 James Wm. Moore, et al., Moore’s Federal Prac-
`tice ¶ 41.06-1, at 41-92 (1995).
`
`Rule 15(a) provides that where, as here, a responsive pleading has been filed, “a party may
`amend its pleading only with the opposing party’s written consent or the court’s leave. The court
`should freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). “Courts look favora-
`bly on requests to amend.” City of New York v. A-1 Jewelry & Pawn, Inc., 247 F.R.D. 296, 306
`(E.D.N.Y. 2007) (citing Ricciuti v. N.Y. City Transit Auth., 941 F.2d 119, 123 (2d Cir. 1991)).
`Indeed, courts routinely grant leave to amend to drop claims or defenses. See id. at 306-07 (“Be-
`cause the amendments eliminate claims, they do not require defendants to undertake additional
`discovery, or respond to new claims, theories, or facts, nor will the proposed amendment delay
`resolution of the dispute.”); Bond Opportunity Fund II, LLC v. Heffernan, 340 F. Supp. 2d 146,
`151 (D.R.I. 2004) (“[T]he motion to amend is granted to the extent that the proposed second
`amended complaint drops any claims against Gosman.”); DirecTV, Inc. v. Benson, 333 F. Supp.
`2d 440, 444 (M.D.N.C. 2004) (adopting magistrate’s recommendation that “as to Plaintiff's motion
`to amend the complaint to dismiss the claim brought under 18 U.S.C. § 2512, the motion should
`be granted”); Whitfield v. Forest Elec. Corp., 772 F. Supp. 1350, 1351 (S.D.N.Y. 1991) (“Pursuant
`to leave granted by me, Whitfield served an amended complaint, dropping the Title VII/2000e–5
`claim.”).
`
`Rule 41 likewise provides a basis for dropping counterclaims. See Fed. R. Civ. P. 41(a)(2)
`(“[A]n action may be dismissed at the plaintiff’s request only by court order, on terms that the
`court considers proper.”); id. 41(c) (stating that Rule 41 “applies to a dismissal of any counter-
`claim, crossclaim, or third-party claim”). “The purpose of [Rule 41] is freely to allow voluntary
`dismissals unless the parties will be unfairly prejudiced.” Davis v. USX Corp., 819 F.2d 1270,
`1273 (4th Cir. 1987). Indeed, a “motion to voluntarily dismiss a claim should not be denied absent
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`plain legal prejudice to the defendant.” Ellett Bros., Inc. v. U.S. Fid. & Guar. Co., 275 F.3d 384,
`388 (4th Cir. 2001).
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`As Rules 15(a), 41(a)(2), and 41(c) make clear, this Court should freely allow Plaintiffs to
`dismiss the abandoned counterclaim and defenses. Doing so will not pose any risk of prejudice to
`Defendants. In short, there is no reason in law or fact to not allow Plaintiffs to dismiss the with-
`drawn counterclaim and defenses. See Fed. R. Civ. P. 15(a)(2) (“freely give leave when justice so
`requires”).
`
`Defendants are not entitled to judgment on the withdrawn counterclaim and defenses for
`at least three related reasons. First, Rule 54 itself provides that “judgment” refers to a “decree and
`any order from which an appeal lies.” Fed. R. Civ. P. 54(a). In other words, the import of a
`judgment is that it allows the party against whom judgment was entered to immediately appeal.
`An order that disposes of some—but not all—of the claims typically cannot be immediately ap-
`pealed and thus does not constitute a judgment. See Auto Servs. Co. v. KPMG, LLP, 537 F.3d 853,
`856 (8th Cir. 2008) (“‘Judgment’ does not, however, encompass an order dismissing fewer than
`all of the opposing parties or claims….”). Second, a “judgment in its usual, conventional sense …
`involves a claim pressed and resisted (or the opportunity for resistance) by adversaries in court, a
`hearing and an adjudication”—not a voluntarily withdrawn claim or defense. In re Fid. Tube Corp.,
`167 F. Supp. 402, 404 (D.N.J. 1958), aff’d, 278 F.2d 776 (3d Cir. 1960). Third, under no circum-
`stances can a judgment be in the form of Defendants’ proposed stipulation because that stipulation
`of judgment is rife with recitals. Rule 54 expressly states that a “judgment should not include
`recitals of pleadings, a master’s report, or a record of prior proceedings.” Fed. R. Civ. P. 54(a)
`(emphasis added).
`
`Defendants point to two district-court orders to defend their contention that they are enti-
`tled to a judgment, but neither provides any support. See Email 6/2/2021 at 3:43 PM from W.
`Orlady to J. Michalik (Ex. K). In one, this Court “awarded summary judgment on [a party’s]
`affirmative defense of laches.” TecSec, Inc. v. Adobe Sys. Inc., 326 F. Supp. 3d 105, 111 (E.D.
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`Va. 2018) (O’Grady, J.). In the other, a New Jersey district court likewise granted summary judg-
`ment and in passing stated that “[j]udgment is entered in Plaintiff’s favor.” David’s Bridal, Inc. v.
`House of Brides, Inc., No. 06-5660 (SRC), 2010 WL 323306, at *12 (D.N.J. Jan. 20, 2010). Those
`cases are inapposite because they involved disputed claims and defenses that were resolved by a
`court. Neither involved a party’s attempt to voluntarily withdraw a claim or defense. As the
`numerous authorities above show, dismissal—not judgment—is the appropriate course when a
`party voluntarily withdraws a claim or defense.
`In sum, the straightforward dismissal requested by Plaintiffs could and should have been
`resolved by agreement of the parties and without the need for this Court’s intervention. Fed. R.
`Civ. P. 41(a)(1)(A)(ii) (permitting dismissal without court order by filing “a stipulation of dismis-
`sal signed by all parties who have appeared”). Yet Defendants have sought to take strategic ad-
`vantage of Plaintiffs’ abandonment of a counterclaim and certain defenses to get more than they
`are allowed under the Rules. See Fed. R. Civ. P. 1 (“These rules … should be construed, admin-
`istered, and employed by the court and the parties to secure the just, speedy, and inexpensive de-
`termination of every action and proceeding.”). The Court should reject that attempt and promptly
`dismiss the abandoned counterclaim and defenses with prejudice.
`CONCLUSION
`Plaintiffs’ abandoned counterclaim and defenses should be dismissed with prejudice and
`leave should be granted for Plaintiffs to file the attached amended answer and counterclaims.
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`Case 1:20-cv-00393-LO-TCB Document 720 Filed 06/16/21 Page 11 of 12 PageID# 17551
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`Dated: June 16, 2021
`
`Stephanie E. Parker
`JONES DAY
`1221 Peachtree Street, N.E.
`Suite 400
`Atlanta, GA 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, Minnesota 55402
`Telephone: (612) 217-8800
`Facsimile: (844) 345-3178
`Email: slaud@jonesday.com
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`
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`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
`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 Hold-
`ings, Inc. and R.J. Reynolds Vapor Company
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`CERTIFICATE OF SERVICE
`I hereby certify that on this 16th day of June, 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
`counsel of record.
`
`
`/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
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