Case 1:20-cv-00393-LMB-WEF Document 81 Filed 08/13/20 Page 1 of 27 PageID# 1416
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY
`
`
`Plaintiffs and Counterclaim
`Defendants,
`
`v.
`
`
`
`
`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA INC.; and PHILIP MORRIS
`PRODUCTS S.A.
`
`Defendants and Counterclaim
`Plaintiffs.
`
`Case No. 1:20-cv-00393-LO-TCB
`
`
`
`OPPOSITION TO PLAINTIFF/COUNTERCLAIM DEFENDANT
`R.J. REYNOLDS VAPOR COMPANY’S MOTION TO SEVER DEFENDANTS’
`INFRINGEMENT COUNTERCLAIMS AND TRANSFER THEM TO THE
`MIDDLE DISTRICT OF NORTH CAROLINA
`
`
`
`
`
`
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 81 Filed 08/13/20 Page 2 of 27 PageID# 1417
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`
`
`I.
`
`II.
`
`TABLE OF CONTENTS
`
`Page
`INTRODUCTION .............................................................................................................. 1
`
`FACTUAL BACKGROUND ............................................................................................. 3
`
`
`
`
`
`
`
`
`
`The Parties and Their Development of Smoking Alternative Products .................. 3
`
`
`
`
`
`Defendants’ Development of IQOS ............................................................ 3
`
`RJR’s Development of VUSE .................................................................... 4
`
`RJR Sues ACS, PM USA, and PMP in the ITC and EDVa.................................... 5
`
`RJR Concedes That There Are Overlapping Issues Between the Accused
`Products in RJR’s Claims and in Defendants’ Counterclaims in EDVa ................ 6
`
`ACS and Another Subsidiary File an Unrelated Suit in North Carolina ................ 6
`
`III.
`
`ARGUMENT ...................................................................................................................... 7
`
`
`
`Severance of Defendants’ Counterclaims Is Not Warranted .................................. 7
`
`
`
`
`
`
`
`
`
`The Issues Sought to Be Tried Are Not Significantly Different ................. 7
`
`The Issues Will Involve Overlapping Witnesses and Evidence ................. 9
`
`Defendants Will Be Prejudiced If Severance Is Granted .......................... 10
`
`RJR Will Not Be Prejudiced If Severance Is Not Granted ....................... 11
`
`
`
`The Case Should Not Be Transferred to MDNC .................................................. 12
`
`
`
`
`
`
`
`
`
`
`
`Defendants’ Choice of Venue Is Entitled to Substantial Deference ......... 13
`
`Witness Convenience and Access ............................................................. 14
`
`Convenience of the Parties ........................................................................ 15
`
`Interest of Justice ...................................................................................... 17
`
`PMP Has No Connection to MDNC ......................................................... 20
`
`IV.
`
`CONCLUSION ................................................................................................................. 20
`
`
`
`i
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`

`

`Case 1:20-cv-00393-LMB-WEF Document 81 Filed 08/13/20 Page 3 of 27 PageID# 1418
`
`
`
`TABLE OF AUTHORITIES
`
`Cases
`
`A&E Prods. Grp. L.P. v. Accessory Corp.,
`No. 00 CIV. 7271(LMM), 2002 WL 1041321 (S.D.N.Y. May 23, 2002) ................................. 7
`
`Acterna, LLC v. Adtech, Inc.,
`129 F. Supp. 2d 936 (E.D. Va. 2001) ....................................................................................... 16
`
`Adiscov, LLC v. Autonomy Corp., PLC,
`No. 2:11cv201, 2011 WL 11536971 (E.D. Va. Jun. 9, 2011) .................................................. 16
`
`Allstate Ins. Co. v. Electrolux Home Prods., Inc.,
`No. 4:16-cv-03666-RBH, 2017 WL 2216298 (D.S.C. May 19, 2017)....................................... 7
`
`Automated Tracking, Solutions, LLC v. Validfill, LLC,
`No. 3:15cv142-HEH, 2015 WL 9025703 (E.D. Va. Dec. 15, 2015) ........................................ 16
`
`Baergas v. New York,
`No. 04CIV2944(BSJ) (HBP), 2005 WL 2105550 (S.D.N.Y. 2005) .......................................... 7
`
`Bel IP LLC v. Boomerangit Inc.,
`No. 2:11-cv-188, 2011 WL 13228481 (E.D. Va. Aug. 26, 2011) ............................................ 11
`
`Broadcom Corp. v. Sony Corp.,
`No. 16-1052 JVS (JCGx), 2016 WL 9108039 (C.D. Cal. Dec. 20, 2016) ..................... 9, 10, 11
`
`Brooks v. S.C. Dept. of Corrections,
`No. 2:18-00721-TMC-MGB, 2020 U.S. Dist. LEXIS 102989 (D. S.C. Apr. 14, 2020) .......... 14
`
`Capital Sec. Sys., Inc. v. ABNB Fed. Credit Union,
`No. 2:14cv265, 2014 WL 5334270 (E.D. Va. Oct. 20, 2014) .................................................. 16
`
`Chrysler Credit Corp. v. Country Chrysler, Inc.,
`928 F.2d 1509 (10th Cir. 1991) ................................................................................................ 12
`
`Cobalt Boats, LLC v. Sea Ray Boats, Inc.,
`No. 2:15-cv-21, 2015 WL 1800274 (E.D. Va. Apr. 16, 2015) ................................................. 16
`
`Collins v. Straight, Inc.,
`748 F.2d 916 (4th Cir. 1984) .................................................................................................... 13
`
`comScore, Inc. v. Integral Ad Sci., Inc.,
`924 F. Supp. 2d 677 (E.D. Va. 2013) ................................................................................. 15, 16
`
`Contract Sec. Forces v. Phila. Indem. Ins. Co.,
`No. 1:17-cv-00814-LO-TCB, 2017 WL 115101506 (E.D. Va. Sept. 29, 2017) ...................... 14
`
`ii
`
`

`

`Case 1:20-cv-00393-LMB-WEF Document 81 Filed 08/13/20 Page 4 of 27 PageID# 1419
`
`
`
`Cornerstone Sys., Inc. v. Prestress Servs. Indus. of Tenn., LLC,
`No. 2:15-cv-02255-JPM-cgc, 2016 WL 367829 (W.D. Tenn. Jul. 7, 2016) ............................ 20
`
`CVI/Beta Ventures, Inc. v. Custom Optical Frames, Inc.,
`896 F. Supp. 505 (D. Md. 1995) ................................................................................................. 9
`
`Dantzler-Hoggard v. Graystone Acad. Charter Sch.,
`No. 12-0536, 2012 WL 2054779 (E.D. Pa. Jun. 6, 2012)......................................................... 11
`
`Gen. Elec. Co. v. Marvel Rare Metal Co.,
`287 U.S. 430 (1932) .................................................................................................................. 14
`
`Georgia-Pacific Corp. v. U.S. Plywood Corp.,
`318 F. Supp. 1116 (S.D.N.Y. 1970) .......................................................................................... 10
`
`Global Tel*Link Corp. v. Securus Techs., Inc.,
`No.3:13-CV-713, 2014 WL 860609 (E.D. Va. Mar. 5, 2014) .................................................. 16
`
`Gulf Oil v. Gilbert,
`330 U.S. 501 (1946) .................................................................................................................. 13
`
`Heinz Kettler GMBH & Co. v. Razor USA, LLC,
`750 F. Supp. 2d 660 (E.D. Va. 2010) ..................................................................... 12, 13, 16, 17
`
`HollyAnne Corp. v. TFT, Inc.,
`199 F.3d 1304 (Fed. Cir. 1999)................................................................................................. 15
`
`Intellectual Ventures I LLC v. Capital One Finance Corp., No PWG-14-111, 2014 WL 979198
`(S.D. Md. Mar. 12, 2014).......................................................................................................... 19
`
`Jalin Realty Capital Advisors, LLC v. A Better Wireless, NISP, LLC,
`No. 11-0165, 2012 WL 838439 (D. Minn. Mar. 12, 2012) ...................................................... 14
`
`JM & GW Enters. v. Matworks Co. LLC,
`No. PJM 18-3650, 2019 WL 2436751 (D. Md. June 11, 2019) ................................................. 7
`
`JTH Tax, Inc. v. Lee,
`482 F. Supp. 2d 731 (E.D. Va. 2007) ....................................................................................... 15
`
`Kraft Foods Holdings, Inc. v. Proctor & Gamble Co.,
`No. 07-cv-613-jcs, 2008 WL 4559703 (W.D. Wis. Jan. 24, 2008) ............................................ 9
`
`Lycos, Inc. v. TiVo, Inc.,
`499 F. Supp. 2d 685 (E.D. Va. 2007) ....................................................................................... 19
`
`Merial Ltd. v. Cipla Ltd.,
`681 F.3d 1283 (Fed. Cir. 2012)................................................................................................. 13
`
`iii
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`

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`Case 1:20-cv-00393-LMB-WEF Document 81 Filed 08/13/20 Page 5 of 27 PageID# 1420
`
`
`
`Mylan Pharms. Inc. v. Am. Safety Razor Co.,
`265 F. Supp. 2d 635 (N.D.W. Va. 2002) .................................................................................. 12
`
`N. Jersey Media Grp., Inc. v. Fox News Network, LLC,
`312 F.R.D. 111 (S.D.N.Y. 2015) .............................................................................................. 12
`
`Pragmatus AV, LLC v. Facebook, Inc.,
`769 F. Supp. 2d 991 (E.D. Va. 2011) ....................................................................................... 16
`
`Samsung Elecs. Co. v. Nvidia Corp.,
`No. 3:14cv757, 2015 WL 13723075 (E.D. Va. May 19, 2015) ............................................ 9, 15
`
`Sony Music Entm’t v. Cox Commc’ns, Inc.,
`No. 1:18-cv-950, 2018 WL 6059386 (E.D. Va. Nov. 19, 2018) .............................................. 19
`
`SRC Labs, LLC v. Microsoft Corp.,
`No. 1:17-cv-1172, 2018 WL 10425506 (E.D. Va. Feb. 26, 2018) ........................................... 16
`
`Stewart Org., Inc. v. Ricoh Corp.,
`487 U.S. 22 (1988) .................................................................................................................... 17
`
`Teva Pharm. USA, Inc. v. Mylan Pharm., Inc.,
`No. 1:17CV7, 2017 WL 958324 (N.D. W.Va. Mar. 10, 2017) ................................................ 19
`
`Trs. of the Plumbers & Pipefitters Nat’l Pension Fund v. Plumbing Servs., Inc.,
`791 F.3d 436 (4th Cir. 2015) .............................................................................................. 12, 14
`
`United Mine Workers of Am. v. Gibbs,
`383 U.S. 715 (1966) .................................................................................................................. 10
`
`Va. Innovation Scis., Inc. v. Samsung Elecs. Co.,
`928 F. Supp. 2d 863 (E.D. Va. 2013) ....................................................................................... 15
`
`Verizon Online Servs., Inc. v. Ralsky,
`203 F. Supp. 2d 601 (E.D. Va. 2002) ....................................................................................... 12
`
`Winner Int’l Royalty Corp. v. Wang,
`202 F.3d 1340 (Fed. Cir. 2000)................................................................................................. 12
`
`Statutes
`
`28 U.S.C. § 1404(a) ...................................................................................................................... 12
`
`
`
`
`
`
`
`iv
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`

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`
`
`I.
`
`INTRODUCTION
`
`Plaintiffs-Counterclaim Defendants (collectively “RJR”) brought this action and a related
`
`ITC action to stop Defendant-Counterclaim Plaintiff Phillip Morris Products SA’s innovative
`
`IQOS heated tobacco system from disrupting its core business in combustible cigarettes and
`
`overtaking its secondary line of business, VUSE e-vapor products. But the instant motion reveals
`
`RJR’s predicament in this action: it seeks to avail itself of this Court’s “rocket docket” in the hopes
`
`of promptly blocking the commercialization of IQOS, while at the same time seeking to evade its
`
`reach when Defendants-Counterclaim Plaintiffs assert counterclaims against RJR’s VUSE e-vapor
`
`products which, according to RJR’s own statements, directly compete with IQOS and practices
`
`the same patents asserted against IQOS. This position, of course, is entirely unprincipled and flies
`
`in the face of well-settled severance and transfer law.
`
`It is important for the Court to understand that there are the two distinct sets of
`
`Defendants—“Altria” on the one hand, and “Philip Morris” on the other—when evaluating the
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`present motion. Although these two companies shared a common corporate history, in 2008 they
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`separated into different publicly-traded companies with no overlapping ownership or management.
`
`Defendant-Counterclaim Plaintiff Phillip Morris Products SA (“PMP”) is an affiliate of Philip
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`Morris, Inc. and responsible for design and manufacture of the IQOS system. PMP is a Swiss
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`company headquartered in Switzerland; it has no U.S. presence whatsoever. Defendants-
`
`Counterclaim Plaintiffs Altria Client Services LLC (“ACS”) and Philip Morris USA (“PM
`
`USA”)—despite any confusion caused by the latter’s name—are both affiliates of Altria Group,
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`Inc. and unrelated to PMP. ACS and PM USA are the exclusive distributor for IQOS in the US.
`
`RJR did not have to sue these two sets of Defendants in the Eastern District of Virginia
`
`(“EDVa”). It could have chosen a different jurisdiction but it almost certainly sued here because
`
`of the fast time to trial. But now that each set of Defendants has filed counterclaims that they too
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`1
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`

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`seek to resolve promptly—RJR asks this Court to sever and transfer to the Middle District of North
`
`Carolina (“MDNC”), where the average time to case disposition is twice as long.
`
`Aside from the (in)equities, RJR’s two-part motion should be denied under well-settled
`
`severance and transfer law. The thrust of RJR’s severance motion is that (i) the accused IQOS
`
`product is “entirely different” than the accused RJR VUSE products, and (ii) having “ten total”
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`patents will “unnecessarily complicate this case,” turning this “already complex five-patent action
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`into an unwield[y] one.” Dkt. 67-1 at 9-10. RJR’s argument is meritless. First, RJR has
`
`represented to other tribunals just the opposite of what it tells this Court. RJR tells this Court that
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`the IQOS product is “entirely different” from VUSE, but RJR has represented to the ITC that IQOS
`
`and VUSE are “directly competitive” and “alternative[s]” to each other. Second, this case is not
`
`a “ten total” patent case as RJR claims; it is only a seven-patent case because three of RJR’s patents
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`are stayed and will remain stayed through any trial date. Finally, RJR is not prejudiced.
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`Defendants filed their counterclaims early in the case. On this record, RJR cannot begin to
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`approach its burden to establish the “exceptional circumstances” that warrant severance.
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`RJR’s transfer motion is even weaker. Neither Defendant PM USA nor PMP is involved
`
`in the MDNC case. As noted, PMP is a Swiss company with no U.S. presence that agreed to
`
`proceed in EDVa only to avoid motion practice; PMP is a complete stranger to the MDNC case
`
`and the district itself. Although the MDNC case was filed by Defendant ACS and U.S. Smokeless
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`Tobacco Company LLC—an entity that is not a party to this case (or the ITC action)—they are
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`represented by different counsel than those representing ACS and PM USA here. Putting aside
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`the difference in the parties, the cases are very different. None of the patents in the MDNC case
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`is related to the patents here and all the inventors are different. There is no significant relation
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`between this case and the MDNC case. RJR’s judicial efficiency argument is worse. The MDNC
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`2
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`
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`case is already a nine-patent case with three accused products, including RJR’s Velo smokeless
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`pouches, which are technologically unrelated to the products at issue here. The claimed features
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`in the two “overlapping products” are also different, and there are four products (IQOS, Velo, and
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`the VUSE Ciro and VUSE Solo) with no overlap. RJR’s proposal to convert a nine-patent case in
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`MDNC with three products to a 14-patent case with five products would not promote judicial
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`efficiency.
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`Finally, this Court is the home forum for ACS and PM USA; their decision to assert their
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`counterclaims in their home forum of Virginia is entitled to “substantial deference.” RJR fails to
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`meet its high burden to show that MDNC is “clearly more convenient” than ACS and PM USA’s
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`home forum. And foreign corporation PMP filed its counterclaims in EDVa only after agreeing
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`to proceed in this district on RJR’s claims. Having been hauled into two forums of RJR’s choosing
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`(the ITC and EDVa), PMP should not be required to litigate its counterclaims in a third forum just
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`because it serves RJR’s litigation strategy, particularly when this Swiss corporation has no
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`connection whatsoever to that forum. Plaintiffs’ motion should be denied.
`
`II.
`
`FACTUAL BACKGROUND
`
`
`The Parties and Their Development of Smoking Alternative Products
`
` Defendants’ Development of IQOS
`
`Defendants-Counterclaim Plaintiffs ACS and PM USA are Virginia corporations with their
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`principal place of business at 6601 West Broad Street, Richmond, Virginia, 23230—in this judicial
`
`district. Dkt. 39 (Counterclaims) at ¶¶ 7-8. For over two decades, ACS and PM USA have focused
`
`on tobacco harm reduction, such as the development of non-combustible smoking alternatives.
`
`Over the years, ACS and PM USA have amassed a substantial portfolio of intellectual property,
`
`covering numerous innovations relating to smoke-free technologies.
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`3
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`

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`Defendant-Counterclaim Plaintiff PMP, a Swiss entity with its principal place of business
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`in Neuchâtel, Switzerland (Dkt. 40 (Counterclaims) at ¶ 7), is a global leader and pioneer in smoke-
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`free products that are substantially less harmful than combustible cigarettes. PMP has invested
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`billions of dollars on research and development of smoking alternatives. PMP likewise holds
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`numerous patents on innovative smoke-free technologies. PMP has no corporate relationship with
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`ACS and PM USA, but contracted with them to be their exclusive distributor to commercialize
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`IQOS in the US.
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`PMP developed IQOS, a product that heats rather than burns tobacco to produce an aerosol
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`instead of smoke (known as a “Heat-Not-Burn” or “HNB” product). Independent studies have
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`confirmed that IQOS produces an aerosol with 90 to 95% less toxins than cigarette smoke.1 And,
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`to date, over 11.2 million smokers have switched to IQOS and given up smoking for good. This
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`number is growing daily. In 2019, the FDA authorized IQOS for commercialization in the U.S.,
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`determining that marketing IQOS “would be appropriate for the protection of the public health.”2
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`In July 2020, the FDA authorized the marketing of IQOS as a modified risk tobacco product,
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`becoming the first electronic nicotine product to receive such FDA authorization. To date, no
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`other electronic nicotine product has received either authorization from the FDA. IQOS therefore
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`poses a significant competitive threat to RJR’s VUSE line of products, discussed below.
`
` RJR’s Development of VUSE
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`Plaintiffs-Counterclaim Defendants RJR are North Carolina corporations with their
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`principal place of business at 401 North Main Street, Winston-Salem, North Carolina, 27101. Dkt.
`
`
`1 See, e.g., NZ Case, Gilchrist Br. ¶ 40, https://www.pmiscience.com/resources/docs/default-
`source/NCDC-vs-Morris/nz_brief-of-evidence-of-moira-gilchrist_february-2018.pdf.
`2 https://www.fda.gov/news-events/press-announcements/fda-permits-sale-iqos-tobacco-heating-
`system-through-premarket-tobacco-product-application-pathway.
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`4
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`69 ¶¶ 5-6. RJR advertises that it offers “alternatives to traditional combustible and smokeless
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`tobacco products.”3 Some of those alternatives are RJR’s four VUSE e-vapor products accused of
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`infringement in this case, the VUSE Solo, Ciro, Vibe, and Alto. Dkt. 69 ¶ 3. To date, RJR has
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`not obtained any FDA marketing authorization for any of their e-vapor products.
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`
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`RJR Sues ACS, PM USA, and PMP in the ITC and EDVa
`
`On April 9, 2020, RJR filed an action before the International Trade Commission alleging
`
`that Defendants’ IQOS product infringes three RJR patents (U.S. Patent Nos. 9,839,238;
`
`9,901,123; and 9,930,915) (“the ITC patents”). In the Matter of Certain Tobacco Heating Articles
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`and Components Thereof (Inv. No. 337-TA-1199) (“the ITC action”). That same day, RJR sued
`
`here (“the EDVa action”), alleging that Defendants’ IQOS product infringes the same three patents
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`it asserted in the ITC action plus three additional patents (U.S. Patent Nos. 8,314,591 (“the ’591
`
`patent”); 9,814,268 (“the ’268 patent”); and 10,492,542 (“the ’542 patent”)). Dkt. 1. Defendants
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`moved to stay all proceedings relating to the three patents asserted in the ITC action under 28
`
`U.S.C. § 1659(a). Dkt. 19. The Court granted the stay on June 19, 2020. Dkt. 27.
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`On June 29, 2020, ACS and PM USA answered and filed counterclaims alleging that RJR’s
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`VUSE Solo, Ciro, Vibe, and Alto products infringed U.S. Patent Nos. 6,803,545 (“the ’545
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`patent”) and 10,420,374 (“the ’374 patent”). Dkt. 39. PMP separately answered and filed its own
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`counterclaims alleging that RJR’s VUSE Solo, Ciro, Vibe, and Alto products infringed U.S. Patent
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`Nos. 9,814,265 (“the ’265 patent”); 10,104,911 (“the ’911 patent”); and/or 10,555,556 (“the ’556
`
`patent”). Dkt. 40. On July 13, 2020, RJR filed an amended complaint dropping its infringement
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`claims on the ’591 patent. Dkt. 52. On August 3, 2020, RJR answered both Defendants’ sets of
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`separate counterclaims. Dkt. 69, 70.
`
`
`3 https://www.rjrvapor.com/transforming-tobacco#section-0.
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`5
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`

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`
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`RJR Concedes That There Are Overlapping Issues Between the Accused
`Products in RJR’s Claims and in Defendants’ Counterclaims in EDVa
`
`In the ITC action, RJR (and ITC Complainant R.J. Reynolds Tobacco Company) alleges
`
`that its VUSE Solo and Vibe products and PMI’s IQOS product practice claims of the same three
`
`patents. In other words, according to RJR, the VUSE and IQOS products are so similar that they
`
`both use the same patented inventions from three different patents. In the ITC, RJR also asserts
`
`that their VUSE line of e-vapor products “directly” competes with and is an alternative to
`
`Defendants’ IQOS system. According to RJR, the same VUSE products accused of infringement
`
`in this case, the Vibe, Solo, Alto and Ciro, “are directly competitive with the [IQOS System]” and
`
`are all part of the same product category—called “potentially reduced-risk products.” Ex. 1 at 4,
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`2. In light of the overlap between the products, technology, parties and lawyers in the ITC and
`
`EDVa actions, the parties negotiated a discovery stipulation for the cross-use of discovery between
`
`the ITC and this Court. Ex. 2 at ¶ 44.4
`
`
`
`ACS and Another Subsidiary File an Unrelated Suit in North Carolina
`
`On May 28, 2020, ACS and non-party US Smokeless Tobacco Company LLC filed a
`
`separate lawsuit in MDNC (“the MDNC action”) alleging that RJR’s Velo smokeless nicotine
`
`pouch products and the VUSE Alto and Vibe infringe nine patents: U.S. Patent Nos. 7,798,319
`
`(“the ’319 patent”); 8,458,996 (“the ’996 patent”); 8,556,070 (“the ’070 patent”); 10,143,242 (“the
`
`’242 patent”); 10,264,824 (“the ’824 patent”); 10,299,517 (“the ’517 patent”); 10,485,269 (“the
`
`’269 patent”); 10,492,541 (“the ’541 patent”); and 10,588,357 (“the ’357 patent”). The MDNC
`
`action is unrelated to this action:
`
`• The Velo oral nicotine pouch products are not at issue in the EDVa or ITC action;
`
`
`4 No cross-use exists for the MDNC case, which is unsurprising given the differences in parties,
`products, and lawyers, discussed below.
`
`6
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`

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`• None of the patents asserted in the MDNC action are related to any of the patents at
`issue in the EDVa or ITC action;
`• There is no inventor overlap between the cases; and
`• Neither PM USA nor PMP are parties to the MDNC suit; PMP is an entirely distinct
`company unrelated to any parties to the MDNC suit.
`
`III. ARGUMENT
`
`
`Severance of Defendants’ Counterclaims Is Not Warranted
`
`This Court has discretion to sever claims “on just terms” under Rule 21, but there is a
`
`“presumption against severance.” Allstate Ins. Co. v. Electrolux Home Prods., Inc., No. 4:16-cv-
`
`03666-RBH, 2017 WL 2216298, at *2 (D.S.C. May 19, 2017); see also, e.g., JM & GW Enters. v.
`
`Matworks Co. LLC, No. PJM 18-3650, 2019 WL 2436751 (D. Md. June 11, 2019) (same). It is a
`
`“procedural device to be employed only in exceptional circumstances.” A&E Prods. Grp. L.P. v.
`
`Accessory Corp., No. 00 CIV. 7271(LMM), 2002 WL 1041321, at *2 (S.D.N.Y. May 23, 2002)
`
`(citation omitted). Separate trials are “the exception.” Baergas v. New York, No. 04CIV2944(BSJ)
`
`(HBP), 2005 WL 2105550, at *3 (S.D.N.Y. 2005) (citation omitted). The movant bears the burden
`
`of establishing that separate trials are necessary and that the movant will be “severely prejudiced”
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`absent severance. Allstate, 2017 WL 2216298, at *2. To determine whether severance of claims
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`is proper, courts in the Fourth Circuit consider (1) whether the issues sought to be tried separately
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`are significantly different from one another; (2) whether they require different witnesses and
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`different documentary proof; (3) whether the party opposing severance will be prejudiced if it is
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`granted; and (4) whether the party requesting severance will be prejudiced if the claims are not
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`severed. See, e.g., id. All four factors weigh against severance.
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` The Issues Sought to Be Tried Are Not Significantly Different
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`RJR contends that Defendants’ counterclaims are based on “entirely different facts” than
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`RJR’s claims because the counterclaims accuse VUSE of infringement, whereas RJR’s claims
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`Case 1:20-cv-00393-LMB-WEF Document 81 Filed 08/13/20 Page 13 of 27 PageID# 1428
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`accuse IQOS of infringement. Dkt. 67-1 at 10. RJR is wrong and its representations in the related
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`ITC action refute its position here. First, there are overlapping factual issues for damages. RJR
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`represented in the ITC that VUSE and IQOS are “directly competitive” “alternatives” and that
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`VUSE products are a “ready replacement” for IQOS. Ex. 1 at 3-5. RJR asserted that the relevant
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`market for non-combustible, potentially reduced-risk products includes both VUSE and IQOS. Id.
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`at 2. Thus, by RJR’s own admissions, there are overlapping factual issues on damages.
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`Second, there are overlapping factual issues for infringement, claim construction, and
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`validity. According to RJR, the technology in its asserted patents relate to both VUSE (e-vapor)
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`and IQOS (HNB) products. For example, RJR’s asserted ’268 patent describes e-vapor and HNB
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`products. See Dkt 52-1 (’268 patent) at 3:47-4:21, 4:26-37. RJR’s ’542 patent describes
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`“representative cigarettes or smoking articles,” including various e-vapor and HNB devices.5 Dkt.
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`52-5 (’542 patent) at 1:46-2:5. Similarly, the technology in Defendants’ asserted patents relate to
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`both e-vapor and HNB technology. See Dkt. 39-1 (’545 patent) at 1:8-11 (“electrically heated
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`smoking device”); Dkt. 39-2 (’374 patent) at 1:8-10 (“electronic substitutes of … conventional
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`tobacco burning counterparts”). RJR’s infringement claims and the patents themselves confirm
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`there are overlapping factual issues that will bear on infringement, claim construction, and validity.
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`Third, both RJR’s claims and Defendants’ counterclaims relate to the same transaction,
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`namely the parties’ attempt to resolve their intellectual property issues with respect to potentially
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`reduced-risk smoke-free alternatives to smoking. In fact, RJR’s lawyers described RJR’s claims
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`and Defendants’ counterclaims as part of the same “global patent dispute related to tobacco heating
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`and vaping products” between the parties.6 Courts have declined to sever counterclaims in similar
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`5 The three stayed RJR patents relate to e-vapor products such as VUSE, as confirmed by RJR’s
`claim that it has virtually marked its VUSE products with those patents. Dkt. 52 ¶¶ 14, 16, 18.
`6 See https://www.jonesday.com/en/practices/experience/2020/04/rj-reynolds-and-philip-morris-
`engage-in-patent-battle-related-to-tobacco-heating-products-and-vaping-products.
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`situations. See Broadcom Corp. v. Sony Corp., No. 16-1052 JVS (JCGx), 2016 WL 9108039, at
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`*3 (C.D. Cal. Dec. 20, 2016) (denying severance when negotiations regarding each party’s alleged
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`infringement related to a single transaction).
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`RJR’s reliance on CVI/Beta Ventures, Kraft Foods Holdings, and Samsung is misplaced;
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`these cases are readily distinguished. In CVI/Beta Ventures, the court severed a counterclaim
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`because it implicated different parties: two non-parties had an interest in the counterclaim and four
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`parties in the remaining case had no interest in the counterclaim. CVI/Beta Ventures, Inc. v.
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`Custom Optical Frames, Inc., 896 F. Supp. 505, 507 (D. Md. 1995). Here, Defendants’
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`counterclaims do not implicate any additional parties. In Kraft Foods Holdings, the court severed
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`counterclaims in order to transfer to a forum where infringement claims of a related patent (sharing
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`a common “parent” patent application) were pending between the same parties. Kraft Foods
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`Holdings, Inc. v. Proctor & Gamble Co., No. 07-cv-613-jcs, 2008 WL 4559703, at *1 (W.D. Wis.
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`Jan. 24, 2008). Here, there are no related patents in the MDNC action and that action does not
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`involve the same parties. Supra, Section II. And in Samsung, the court severed counterclaims
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`filed more than five months after the suit was filed, after a scheduling order was entered. Samsung
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`Elecs. Co. v. Nvidia Corp., No. 3:14cv757, 2015 WL 13723075, at *1 (E.D. Va. May 19, 2015);
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`see also Dkt. 65, 87 in No. 3:14cv757 (E.D. Va.). Here, Defendants filed their counterclaims as
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`soon as their response to the complaint was due—weeks before RJR filed its amended complaint—
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`and before any scheduling order was entered.
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`This factor weighs against severance.
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` The Issues Will Involve Overlapping Witnesses and Evidence
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`This factor dovetails with the first factor. Because there are common technical,
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`commercial, and damages issues between Defendants’ counterclaims and RJR’s claims, they will
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`necessarily invoke overlapping witnesses and evidence. RJR’s asserted patents include both e-
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`vapor and HNB products, indicating the potential for overlapping witnesses and evidence for
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`validity and infringement issues in both cases. And RJR’s representations that VUSE and IQOS
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`are “directly competitive” “alternatives” indicate that damages witnesses and evidence, such as
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`patent licenses relating to smoking alternatives, are overlapping in both cases. See Georgia-Pacific
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`Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1124 (S.D.N.Y. 1970) (competing products
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`relevant to determination of amount of reasonable royalty).
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`This factor weighs against severance.
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` Defendants Will Be Prejudiced If Severance Is Granted
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`Defendants will be prejudiced if their counterclaims are severed. They would have to
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`litigate against RJR in an additional separate case with another schedule and another trial, which
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`will unnecessarily increase the cost of litigating to all Defendants. Defendants filed their
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`counterclaims so that they could efficiently resolve their patent disputes with respect to potentially
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`reduced-risk smoke-free alternatives to smoking in a single proceeding. The Federal Rules of
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`Civil Procedure “strongly encourage[]” joinder of claims in the broadest possible scope. United
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`Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966). Severance will make it more difficult
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`to join dispositive issues between the parties, particularly in light of RJR’s representations that
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`VUSE and IQOS are “directly competitive” and “alternative[s].” And by not severing, “the parties
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`are more likely to take steps toward resolving the dispute.” Broadcom, 2016 WL 9108039, at *4.
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`Severing Defendan