Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 1 of 48 PageID# 22157
`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 1 of 48 PagelD# 22157
`
`EXHIBIT 1
`EXHIBIT1
`(PUBLIC)
`(PUBLIC)
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 2 of 48 PageID# 22158
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`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
`
`
`
`PHILIP MORRIS PRODUCTS S.A.’S SUPPLEMENTAL RESPONSE TO
`REYNOLDS’ SIXTH SET OF INTERROGATORIES (NO. 23)
`
`
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 3 of 48 PageID# 22159
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`
`Pursuant
`
`to Rules 26 and 33 of
`
`the Federal Rules of Civil Procedure,
`
`Defendant/Counterclaim Plaintiff Philip Morris Products S.A. (“Philip Morris”), by and through
`
`its undersigned attorneys, Latham & Watkins LLP, hereby provides its supplemental response to
`
`Plaintiffs/Counterclaim Defendants RAI Strategic Holdings, Inc. (“RAI”) and R.J. Reynolds
`
`Vapor Company (“RJRV”) (collectively, “Reynolds”) Sixth Set of Interrogatories (No. 23).
`
`PRELIMINARY STATEMENT
`
`Philip Morris objects to the Interrogatories to the extent that they seek or impose
`
`requirements or obligations on Philip Morris that are inconsistent with those set forth in the Federal
`
`Rules of Civil Procedure, the Local Civil Rules for the U.S. District Court for the Eastern District
`
`of Virginia, or any other applicable rules or orders governing this case, including the scope of
`
`discovery agreed to by the parties in any procedural or discovery stipulation, written or otherwise.
`
`Philip Morris also objects to the Interrogatories to the extent they seek information protected from
`
`disclosure by the attorney-client privilege and/or the work-product doctrine, the common interest
`
`privilege, any other evidentiary or discovery privilege or are otherwise protected from disclosure.
`
`Philip Morris’ investigation is ongoing. It therefore reserves the right to supplement and/or
`
`amend these responses as further information becomes available, and/or after responsive, non-
`
`privileged documents are otherwise produced.
`
`OBJECTIONS TO INSTRUCTIONS AND DEFINITIONS
`
`1.
`
`Philip Morris incorporates herein by reference its objections and responses to
`
`Reynolds’ Interrogatory Nos. 23-24 served on April 9, 2021, as if fully set forth herein.
`
`
`
`
`
`
`
`1
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 4 of 48 PageID# 22160
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`
`RESPONSES TO INTERROGATORIES
`
`INTERROGATORY NO. 23:
`
`Separately for each of the ’911, the ’265, and the ’556 Patents, describe the complete
`
`factual and legal basis 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 counterclaims, 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 injury; (c) why an ongoing royalty would be inadequate
`
`to compensate for any alleged injury; (d) why, considering the balance of hardships between PMP
`
`and Plaintiffs, a remedy in equity is warranted; (e) why the public interest would not be disserved
`
`by a permanent injunction; (f) the scope of any injunction, whether such injunction 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.
`
`OBJECTIONS TO INTERROGATORY NO. 23:
`
`
`
`Philip Morris incorporates all of its objections and reservations of rights as if specifically
`
`alleged herein. Philip Morris objects to this Interrogatory to the extent it seeks information
`
`protected from disclosure by the attorney-client privilege, the work-product doctrine, the common
`
`interest privilege, any other evidentiary or discovery privilege, or are otherwise protected from
`
`disclosure. Philip Morris objects to this Interrogatory to the extent the information requested
`
`therein is not within the possession, custody, and/or control of Philip Morris. Philip Morris objects
`
`to this Interrogatory to the extent the information requested calls for expert opinion or analysis.
`
`Philip Morris objects to this Interrogatory to the extent it calls for legal conclusions. Philip Morris
`
`2
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 5 of 48 PageID# 22161
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`objects to the phrase “limited or general” in this Interrogatory as vague and ambiguous and as not
`
`relevant to the present district court action. Philip Morris objects to this Interrogatory as it seeks
`
`the “identity of the three (3) individuals most knowledgeable of the foregoing.” Whether
`
`Reynolds’ infringement of the Philip Morris Asserted Patents and other bad acts warrant the
`
`issuance of a permanent injunction is a question of law, and, thus, is not a proper subject for a fact
`
`or expert witness.
`
`RESPONSE TO INTERROGATORY NO. 23 (April 9, 2021):
`
`Subject to and without waiving its objections, Philip Morris responds as follows:
`
`Pursuant to eBay Inc. v. MercExchange, LLC., 547 U.S. 388 (2006), in order to obtain an
`
`injunction for patent infringement in a district court case, a plaintiff must demonstrate that: (1) it
`
`has suffered irreparable harm; (2) remedies at law are inadequate to redress that harm; (3) the
`
`balance of equities favors injunctive relief; and (4) the public interest would not be disserved by
`
`such relief. Each of these four factors is satisfied in this matter. Accordingly, the Court should
`
`grant the injunction requested by Philip Morris.
`
`I.
`
`
`
`Irreparable Harm Exists That Cannot Be Redressed With Damages/Ongoing Royalty
`
`The compounded advantages Reynolds has reaped through its infringement of the Philip
`
`Morris Asserted Patents and the disadvantages from this infringement inflicted upon Philip Morris
`
`by its competitor has caused Philip Morris irreparable harm that is extensive but unquantifiable
`
`and thus cannot be redressed with damages or an ongoing royalty. Philip Morris is leading the
`
`charge for change with its smoke-free transformation. It has invested heavily in innovative smoke-
`
`free products and has spent years ensuring compliance with all regulatory obligations. Reynolds,
`
`on the other hand, failed in the U.S. heat not burn product (“HNB”) market, stole the technology
`
`claimed in the Philip Morris Asserted Patents, and uses that technology in its VUSE e-cigarettes.
`
`3
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 6 of 48 PageID# 22162
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`The Philip Morris Asserted Patents help drive sales of its competitor, and then force Philip Morris
`
`to compete against its own technology. Moreover, from its infringement, Reynolds receives two
`
`layers of regulatory advantage vital to the VUSE products’ continued existence. These combined
`
`harms caused by Reynolds have detracted, are detracting, and will continue to detract from the
`
`Philip Morris smoke-free ecosystem by hindering U.S. IQOS adoption, triggering loss of R&D,
`
`loss of market share, loss of business opportunities, and loss of profits and future sales. Such
`
`harms also undermine and dilute the branding, goodwill, and reputation of Philip Morris, its
`
`smoke-free transformation efforts, and its past, present, and future non-combustible product
`
`offerings in the United States.
`
`A.
`
`Philip Morris’s Smoke-Free Transformation And Products
`
`After years of planning, in 2016, Philip Morris announced that it was committing to a major
`
`corporate transformation — a move away from cigarettes and other combustible tobacco products
`
`and toward smoke-free alternatives to nicotine delivery that are less harmful than smoking
`
`combustible cigarettes. See, e.g., PMI’s Statement of Purpose, PMI (last visited Apr. 9, 2021),
`
`https://www.pmi.com/statement-of-purpose. This commitment changed, and continues to change,
`
`many key aspects of how the company conducts business, including but not limited to its research
`
`and development, operations, distribution, education, and marketing. Philip Morris has invested
`
`billions of dollars and countless working hours to support this transformation, with over $8 billion
`
`having been
`
`invested centrally by Philip Morris
`
`in smoke-free products
`
`to date.
`
`DEF_PUB_EDVA000056732 at DEF_PUB_EDVA000056734. Philip Morris has staked its
`
`product line, its branding, and its overall future on the pledge to go smoke-free – a decision that
`
`distinguishes Philip Morris
`
`from
`
`all
`
`other
`
`tobacco
`
`companies.
`
`
`
`See,
`
`e.g.,
`
`4
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 7 of 48 PageID# 22163
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`DEF_PUB_EDVA000056036
`
`at
`
`DEF_PUB_EDVA000056037-41;
`
`DEF_PUB_EDVA000055922 at DEF_PUB_EDVA000055926.
`
`The cornerstone of the Philip Morris transformation is the IQOS HNB, along with its other
`
`smoke-free options. Because Philip Morris initially devoted its resources to the development and
`
`distribution of an HNB as its flagship non-combustible, it was able to be the first mover in the
`
`modern-day HNB space in the U.S. market, and in many others. Worldwide, IQOS has proven to
`
`be a very successful product. As of February 2021, IQOS had over 17.6 million users in 64 diverse
`
`markets and, at a rate of 72%, has transitioned 12.7 million smokers away from combustible
`
`cigarettes – the most deadly form of tobacco use.
`
` DEF_PUB_EDVA000055958 at
`
`DEF_PUB_EDVA000055962.
`
`B.
`
`Reynolds’ Infringement Of/Dependence On Philip Morris’s Asserted Patents
`
`Reynolds, in contrast, has lagged far behind in its HNB development.
`
` See, e.g., Figlar ITC Dep. 119:18-120:19 (Sept. 25, 2020)1.
`
`
`
`
`
`
`
`
`
` RJRITC_001455874 at RJRITC_001455879; Gilley EDVA Dep. 161:11-165:17
`
`(Dec. 3, 2020).
`
`
`
`
`
`RJRITC_001455874 at RJRITC_001455898; Gilley EDVA Dep. 168:20-169:20. This market has
`
`emerged, and Reynolds, in fact, does find itself without a viable HNB to compete against the only
`
`
`1 Unless otherwise noted, all references to ITC materials relate to those from Certain Tobacco
`Heating Articles and Components Thereof, Inv. No. 337-TA-1199, and all references to EDVA
`materials relate to those in the present action.
`
`5
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 8 of 48 PageID# 22164
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`other HNB authorized for sale in the United States – the effective, successful, and FDA-authorized
`
`IQOS.
`
` Having failed as a meaningful market participant in the HNB arena, Reynolds instead
`
`focuses on its VUSE line of e-cigarettes as a primary non-combustible offering for the U.S. market.
`
`Reynolds’ VUSE products, however, infringe the Philip Morris Asserted Patents. Not only are the
`
`VUSE products infringing, they also have been illegal since 2016 because they are sold in the
`
`United States without premarket tobacco authorization (“PMTA”) from the U.S. Food and Drug
`
`Administration (“FDA”), which is required by the Deeming Rule, the Family Smoking Prevention
`
`and Tobacco Control Act (“TCA”), and the Food, Drug, and Cosmetic Act (“FDCA”). By
`
`comparison, IQOS already has earned two PMTA authorizations (with no illegal premarket sales)
`
`and an MRTP authorization. These authorizations, alone, render VUSE products inferior to IQOS.
`
`
`
` Stakes for Reynolds vis-à-vis the VUSE PMTAs are high. If the VUSE products fail to
`
`receive PMTA authorizations from FDA, Reynolds must remove them from the U.S. market. ITC
`
`Hr’g Tr. 99:11-16, 100:8-13 (Figlar); Figlar ITC Dep. 50:9-16; see DEF_PUB_EDVA000056808.
`
`As described in the expert reports submitted in this matter on behalf of Philip Morris, incorporated
`
`herein by reference, the Philip Morris Asserted Patents embody technology that is involved in and
`
`important to FDA’s review of these PMTAs and, in fact, could help Reynolds, its competitor,
`
`secure the very commercial existence of the VUSE product line. Consequently, Reynolds derives
`
`particular benefit from its infringement of the Philip Morris Asserted Patents – far more than a
`
`defendant would enjoy in a typical infringement situation, and far more than traditional damages
`
`can redress.
`
`6
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 9 of 48 PageID# 22165
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`
`How The Philip Morris Asserted Patents
`Bolster VUSE PMTAs and Drive Consumer Demand
`
`1.
`
`
`The technology claimed in the ’911 Patent, the ’556 Patent, and the ’265 Patent provide
`
`
`
`benefits that drive consumer demand for the VUSE products. These same benefits strengthen the
`
`VUSE PMTAs, yielding even more value to Reynolds for its infringement. The ’911 Patent, the
`
`’556 Patent, and the ’265 Patent each embody inventions that help prevent e-liquid from leaking
`
`into the user’s mouth or onto his/her skin. This is a vital safety feature because it prevents
`
`undesirable and potentially dangerous
`
`ingestion of or dermal exposure
`
`to nicotine.
`
`DEF_PUB_EDVA000057664 at DEF_PUB_EDVA000057665-66; Meyer Rep. ¶ 439; Ehrlich
`
`Rep. ¶¶ 94-97, 103-105, 107-109.
`
`
`
`Not surprisingly, this safety feature is one on which FDA focuses. FDA recommends that
`
`PMTAs address acute toxicity, which would include the ingestion of nicotine contained in e-
`
`liquids.
`
`
`
`DEF_PUB_EDVA000056808
`
`at
`
`DEF_PUB_EDVA000057048;
`
`DEF_PUB_EDVA000057712; Ehrlich Rep. ¶¶ 94-97, 103-105, 107-109. In fact, “given the
`
`health risks and hazards associated with exposure to e-liquids (including oral, dermal, and ocular
`
`dangers),” FDA also recommends that applicants provide nicotine warnings and include in their
`
`PMTAs information regarding oral, inhalation, dermal, and ocular routes of exposure.
`
`1199_RESP50000280 at 1199_RESP50000296; Ehrlich Rep. ¶¶ 94-97, 103-105, 107-109.
`
`
`
`Further, issues with e-liquid leakage during handling, use, or storage of an e-cigarette
`
`negatively impacts user satisfaction, which, in turn, lowers switch rates from combustible
`
`cigarettes – another area of FDA
`
`inquiry
`
`in PMTA evaluations.
`
` See, e.g.,
`
`DEF_PUB_EDVA000057862 at DEF_PUB_EDVA000057906 (“Information to consider may
`
`include nicotine
`
`exposure
`
`relative
`
`to other
`
`tobacco products,
`
`abuse
`
`liability,
`
`7
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 10 of 48 PageID# 22166
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`attractiveness/likeability of the product, likelihood of switching and/or use of multiple products”);
`
`Ehrlich Rep. ¶¶ 94-97.
`
`With regard to the ’911 Patent specifically, Reynolds’ own documents show that its
`
`unauthorized use of the technology claimed in that patent imbues meaningful benefits to VUSE
`
`consumers.
`
`Meyer Rep. ¶ 441.
`
`
`
`
`
` RJREDVA_000835874 at RJREDVA_000835874; Meyer Rep. ¶ 440. A
`
`RJREDVA_001271204 at RJREDVA_001271220;
`
`
`
`
`
` RJREDVA_001540117 at
`
`RJREDVA_001540127; Meyer Rep. ¶ 442.
`
`
`
` RJREDVA_001511280 at RJREDVA_001511284;
`
`Meyer Rep. ¶ 442.
`
`Documents from non-Reynolds sources reflect similar consumer benefits through the
`
`VUSE products’ use of the technology embodied in the ’911 Patent.
`
`
`
`
`
` RJREDVA_001543648 at
`
`RJREDVA_001543658, -63; Meyer Rep. ¶ 443. A product review by VapingDaily.com also
`
`identifies a major benefit of
`
`the VUSE Ciro as having “no issues with leaking.”
`
`DEF_PUB_EDVA000026007 at DEF_PUB_EDVA000026011; Meyer Rep. ¶ 444.
`
`
`
`With regard to the ’556 Patent specifically, it also provides more consistent puffs and more
`
`uniform aerosol delivery, regardless of how the device is held and how much e-liquid is left, which
`
`8
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 11 of 48 PageID# 22167
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`is another feature that FDA will consider as part of the PMTA review. Ehrlich Rep. ¶ 106.
`
`Consistent puffs and uniform delivery, particularly of nicotine, contribute to user satisfaction,
`
`which can facilitate switching to potentially reduced risk products, a key factor in FDA’s
`
`determination of whether a product is appropriate for the protection of public health – the standard
`
`for PMTA authorization. 1199_RESP00011697 at 1199_RESP00011745, -89; see id. at
`
`1199_RESP00011741; Ehrlich Rep. ¶ 106. Accordingly, FDA recommends that PMTAs include
`
`information about use topography, including number of puffs, puff duration, puff volume, and
`
`other relevant measures. Ehrlich Rep. ¶ 106.
`
`
`
`As with the ’911 Patent, it is clear from Reynolds’ own documents that the technology
`
`claimed in the ’556 Patent imbues meaningful benefits to VUSE consumers.
`
`
`
`
`
`
`
`RJREDVA_000763311 at RJREDVA_000763319, -22; Meyer Rep. ¶ 465. The VUSE products
`
`that utilize the technology claimed in the ’556 Patent also benefit from a reduction in wasted e-
`
`liquid. Meyer Rep. ¶ 469.
`
`
`
`With regard to the ’265 Patent specifically, it also provides protections regarding microbial
`
`contamination of e-liquids, about which FDA requests information in all PMTAs. Ehrlich Rep. ¶¶
`
`110-111. For example, in the Final PMTA Rule, FDA stated that:
`
`Some tobacco products, such as smokeless tobacco products and e-liquids, have
`been shown to contain microbial cell wall constituents ([1→3]-β-D-glucan) or
`microbial toxins, such as aflatoxins and endotoxins (Refs. 121 and 122). These
`microbial components or toxins may result in increased risk to public health
`because they are either carcinogenic in nature or associated with the development
`of respiratory symptoms, reduced lung function, inflammation and asthma.
`Therefore, [total aerobic microbial count (TAMC), total yeast, and mold count
`(TYMC)] data provide crucial information on the microbial load in the finished
`tobacco product and serve as an indicator for the potential of presence or absence
`of microbial toxins in the product.
`
`9
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 12 of 48 PageID# 22168
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`
`
`DEF_PUB_EDVA000056808 at DEF_PUB_EDVA000057013; DEF_PUB_EDVA000057712;
`
`Ehrlich Rep. ¶¶ 110-111. FDA’s concern about the danger of microbial contamination also can
`
`be seen in the IQOS PMTA determination. 1199_RESP00011697 at 1199_RESP00011787;
`
`Ehrlich Rep. ¶¶ 110-111.
`
`
`
`In addition, the ’265 Patent has notable environmental value, as it reduces the amount of
`
`materials used and optimizes processability. Walbrink Rpt. ¶ 32; Meyer Rpt. ¶ 74; Ehrlich Rep. ¶
`
`112. Reduction of ecological damage is a benefit that is reviewed by FDA in the context of the
`
`environmental assessment that must accompany every PMTA. RJRITC_001246805 at -833;
`
`PMP_ITC08571683 at PMP_ITC08571702-707; see DEF_PUB_EDVA000056497; Ehrlich Rep.
`
`¶ 112.
`
`
`
`As with the ’911 Patent and the ’556 Patent, Reynolds’ own materials (and those of its
`
`parent) show that the technology claimed in the ’265 Patent imbues meaningful benefits to VUSE
`
`consumers.
`
`RJREDVA_001285608 at RJREDVA_001285611, -41; Meyer Rep. ¶ 430.
`
`
`
`
`
`
`
`
`
`
`
`
`
` RJREDVA_001286318 at RJREDVA_001286341;
`
`RJREDVA_001285232
`
`at
`
`RJREDVA_001285234;
`
`RJREDVA_001617648
`
`at
`
`RJREDVA_001617650; Meyer Rep. ¶ 431. Reynolds’ website also describes the VUSE Alto as
`
`a “[l]arge capacity pod-based system with an innovative ceramic wick and alloy heating element.”
`
`DEF_PUB_EDVA000026026 at DEF_PUB_EDVA000026027; Calderon EDVA Dep. 258:4-
`
`10
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 13 of 48 PageID# 22169
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`261:5 (Nov. 12, 2020); Meyer Rep. ¶¶ 432-433; see DEF_PUB_EDVA000022858 at
`
`DEF_PUB_EDVA000022864. In
`
`
`
`
`
`.
`
`RJREDVA_001286156 at RJREDVA_001286166; Meyer Rep. ¶ 434. The CEO for British
`
`American Tobacco (Reynolds’ parent) declared in an October 16, 2018, Analyst Briefing
`
`presentation that the “[m]ajority of respondents claim Alto tastes better than competitive pod-
`
`mods.” DEF_PUB_EDVA000022766 at DEF_PUB_EDVA000022820; Meyer Rep. ¶ 433.
`
`How The Philip Morris Asserted Patents Will Bolster VUSE MRTPAs
`
`2.
`
`In addition to the exceptional and unquantifiable benefits Reynolds’s infringement of the
`
`
`
`Philip Morris Asserted Patents provides in conjunction with FDA’s review of the VUSE PMTAs,
`
`Reynolds derives further benefits from its infringement because that same technology is involved
`
`in and important to FDA’s review of Reynolds’ planned modified risk tobacco product applications
`
`(“MRTPA”). Ehrlich Rep. ¶¶ 141-147. Reynolds has no pending MRTPAs for its VUSE products
`
`(whereas IQOS already received MRTP authorization in July 2020),
`
`Figlar ITC Dep. 207:11-208:8; Ehrlich Rep. ¶¶ 141-147; 1199_RESP00012311.
`
`
`
`.
`
`
`
`
`
`. Figlar
`
`
`
` Figlar ITC Dep. 183:20-184:3;
`
`ITC Dep. 182:5-13; Ehrlich Rep. ¶¶ 141-147.
`
`Ehrlich Rep. ¶¶ 141-147.
`
`11
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 14 of 48 PageID# 22170
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`
`
`22; Ehrlich Rep. ¶¶ 141-147.
`
` Ehrlich Rep. ¶¶ 141-147.
`
`Figlar ITC Dep. 58:13-
`
`
`
`. Figlar ITC Dep. 58:13-22; Ehrlich Rep.
`
`¶¶ 141-147.
`
`114:14-19 (Figlar); Ehrlich Rep. ¶¶ 141-147.
`
` ITC Hr’g Tr.
`
`
`
` Figlar ITC Dep. 180:21-181:5; see 1199_RESP50000510
`
`at 1199_RESP50000517; Ehrlich Rep. ¶¶ 141-147.
`
`
`
`ITC Hr’g Tr. 114:14-19
`
`(Figlar); Figlar ITC Dep. 189:11-190:4; Ehrlich Rep. ¶¶ 141-147.
`
`
`
` Figlar ITC Dep. 52:4-21; Ehrlich Rep.
`
`
`
`¶¶ 141-147. Premarket authorization is a prerequisite for obtaining MRTP authorization.
`
`1199_RESP50000219 at 1199_RESP50000230; Ehrlich Rep. ¶¶ 141-147. If the VUSE products
`
`receive PMTA authorizations and Reynolds continues
`
` for these products, the
`
`Philip Morris Asserted Patents, again, could assist Reynolds, Philip Morris’s competitor, in
`
`obtaining another valuable set of regulatory authorizations. Ehrlich Rep. ¶¶ 141-147. As with the
`
`PMTA process, any advantage from the Philip Morris Asserted Patents is helpful, given that no e-
`
`cigarette has ever received MRTP authorization, which leaves applicants with a great deal of
`
`uncertainty that they are trying to mitigate in any way they can. 1199_RESP00011697;
`
`1199_RESP00011997; RJRITC_001488765; Ehrlich Rep. ¶¶ 141-147. MRTP authorization
`
`would provide an advantageous marketing tool for Reynolds, particularly if it could be the first e-
`
`cigarette on the U.S. market to bear modified risk claims. Ehrlich Rep. ¶¶ 141-147. Unless
`
`12
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 15 of 48 PageID# 22171
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`Reynolds obtains MRTP authorization for its VUSE products, it cannot legally advertise that any
`
`of those products are reduced risk or reduced exposure. 21 U.S.C. § 387k; 1199_RESP50000510;
`
`Ehrlich Rep. ¶¶ 141-147.
`
`Infringement, Illegality, Inferiority, And Dependence = Irreparable Harm
`
`C.
`
`The uniquely egregious situation confronted in this case whereby the VUSE products are
`
`not only infringing, but illegal, inferior, and dependent on the benefits of the Philip Morris Asserted
`
`Patents for their very survival causes Philip Morris significant, yet intangible, irreparable harm.
`
`Not only has Reynolds’ infringement of the Philip Morris Asserted Patents taken away Philip
`
`Morris’s right to exclude, it has provided an unseemly short-cut for Reynolds to save its VUSE
`
`products from regulatory extinction by further disadvantaging its competitor, Philip Morris, the
`
`legal holder of the technology, which also already has satisfied the necessary FDA requirements
`
`for IQOS. Thus, Reynolds reaps unjust rewards in both the patent and regulatory arenas through
`
`its bad acts against Philip Morris.
`
`
`
`Moreover, the presence of the patented features at issue in the products of Philip Morris’s
`
`competitor incorrectly communicates a message that the Philip Morris technology is
`
`commonplace, not innovative. The effects of Reynolds’ infringement on Philip Morris are made
`
`even more severe, given that
`
`. Reynolds’ actions, however, have
`
`
`
`13
`
`
`
`
`
`
`
`
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 16 of 48 PageID# 22172
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`
`These combined harms caused by Reynolds have detracted, are detracting, and will
`
`continue to detract from the Philip Morris smoke-free ecosystem by hindering U.S. IQOS
`
`adoption, triggering loss of R&D, loss of market share, loss of business opportunities, and loss of
`
`profits and future sales. Such harms also undermine and dilute the branding, goodwill, and
`
`reputation of Philip Morris, its smoke-free transformation efforts, and its past, present, and future
`
`non-combustible product offerings in the United States in which Philip Morris has invested so
`
`heavily.
`
`For example,
`
`
`
`, IQOS sales
`
`could have been even stronger absent the continued offering of the illegal VUSE products. See
`
`Compare Altria_IQOS_ITC_00360360 with RJRITC_001260028. From a regulatory, scientific,
`
`and sensorial use perspective, IQOS is superior to any of the VUSE products (and thus VUSE
`
`products cannot serve as IQOS substitutes). And when American smokers try IQOS, there is a
`
`considerable likelihood they will become exclusive users. In fact, FDA has found that, because
`
`the nicotine delivery levels in IQOS are similar to those found in combustible cigarettes, IQOS
`
`can deliver user satisfaction sufficient to facilitates a permanent transition away from traditional
`
`smoking.
`
`
`
`See
`
`1199_RESP00010301
`
`at
`
`1199_RESP00010311,
`
`-49;
`
`see
`
`DEF_PUB_EDVA000055958 at DEF_PUB_EDVA000055962 (noting worldwide IQOS switch
`
`rate of 72%).
`
`IQOS, however, is a novel product, whereas the VUSE products, as of Q4 2020, make up
`
`between 23%-32% of the U.S. e-cigarette market. When Reynolds floods the U.S. market with its
`
`illegal, sometimes very cheap, VUSE products that also infringe the Philip Morris Asserted
`
`Patents, the Philip Morris product is harmed and potential IQOS sales are preemptively diverted
`
`14
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 17 of 48 PageID# 22173
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`to the Reynolds’ devices that should not even be on the U.S. market in the first place. Reynolds’
`
`bad acts have long term implications for Philip Morris. Any IQOS unit sale that is lost due to
`
`Reynolds’ actions affects the customer base of Philip Morris, and lost unit sales can further result
`
`in lost future sales of IQOS consumables (i.e. HEETS) and accessories.
`
`These types of harms cannot be quantified, but rather reflect irreparable harm that cannot
`
`be converted to an estimate of monetary damages or an ongoing royalty. For example, it is not
`
`possible to predict how large of a market share IQOS might have achieved or how much the brand
`
`recognition of IQOS and Philip Morris would have grown absent Reynolds’ infringement and
`
`illegal sales. Accordingly, remedies at law are inadequate in this matter to redress Reynolds’
`
`infringement.
`
`II.
`
`The Balance Of Equities Weighs Heavily In Favor Of Injunctive Relief
`
`The balance of equities between Philip Morris and Reynolds favors Philip Morris heavily.
`
`Philip Morris has been deprived of its patent exclusivity and forced to compete against its own
`
`innovations that have been usurped by its competitor. Philip Morris also has fulfilled all regulatory
`
`requirements in a timely manner so that FDA could perform a thorough harm assessment of IQOS,
`
`and IQOS could be marketed lawfully. These legal and regulatory milestones are pivotal to the
`
`success of Philip Morris’s smoke-free transformation efforts and reputation in the U.S. market,
`
`which Philip Morris has spent billions of dollars and several years cultivating worldwide as part
`
`of an ambitious and unmatched corporate metamorphosis.
`
`
`
`In contrast, Reynolds has infringed the Philip Morris Asserted Patents, inuring exceptional
`
`value from that infringement via the regulatory bolstering of its VUSE products – all the while
`
`selling those products illegally. Holding Reynolds to account for its bad acts, however, will not
`
`mean the demise of Reynolds. Even if all VUSE products are removed from the U.S. market,
`
`15
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 18 of 48 PageID# 22174
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`Reynolds can continue to exist as a company as it still sells many other products in the United
`
`States, including a variety of combustible cigarette brands such as Newport, Camel, and Pall Mall
`
`(which, according to Reynolds’ “Brands” webpage “constitute about one third of cigarettes sales
`
`in the United States”); Camel snus; Eclipse HNBs; and VELO nicotine lozenges and pouches.
`
`Brands, Reynolds American (last visited Apr. 8, 2021), https://www.reynoldsamerican.com/
`
`brands.
`
`III.
`
`
`
`Public Interest Weighs Heavily In Favor Of Injunctive Relief
`
`Given that the VUSE products are infringing, illegal, and inferior to IQOS, the public
`
`interest also favors an injunction. Not only is Philip Morris the patent holder that deserves
`
`enforcement of its innovative IP, it also offers a superior, PMTA- and MRTP-authorized non-
`
`combustible product to U.S. consumers. To the extent American smokers seek a non-combustible
`
`product besides IQOS, there are other choices, including other e-cigarettes, from which they may
`
`select. Reynolds, in contrast, has reaped benefits from the use of the technology embodied in the
`
`Philip Morris Asserted Patents and is relying on that technology to strengthen its VUSE PMTAs
`
`to save its entire VUSE product line. All the while, Reynolds continues to flout U.S. law and
`
`endanger U.S. consumers by selling products that are illegal and are without any FDA harm
`
`assessment. Accordingly, the public interest would be affirmatively served by the issuance of a
`
`permanent injunction against the VUSE products.
`
`
`
`The Illegality Of E-Cigarettes, Like VUSE
`
`VUSE e-cigarettes are illegal, and the historical underpinnings of their illegal status are
`
`indisputable. On its effective date, the TCA immediately subjected to FDA’s authority under
`
`Chapter IX of the FDCA cigarettes, cigarette tobacco, roll-your-own tobacco, smokeless tobacco,
`
`and components, parts, and accessories of such products. 21 U.S.C. § 387a(b). On May 10, 2016,
`
`FDA issued the so-called “Deeming Rule,” which deemed certain additional products as “tobacco
`
`16
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 836-1 Filed 01/21/22 Page 19 of 48 PageID# 22175
`CONTAINS CONFIDENTIAL INFORMATION SUBJECT TO PROTECTIVE ORDER
`
`
`products,” including e-cigarettes and e-liquids. RJRITC_001246903 at RJRITC_001246904.
`
`Among other things, this meant in effect that all e-cigarettes had to have PMTA authorization in
`
`order to be sold legally in the United States.
`
`Because no e-cigarette was on the U.S. market as of February 15, 2007, all e-cigarettes
`
`sold as of the effective date of the Deeming Rule, August 8, 2016, were immediately rendered
`
`illegal. 1199_RESP00016448 at 1199_RESP00016459; RJRITC_001482215. Rather than
`
`requiring removal of all new deemed tobacco products from the market on the Deeming Rule’s
`
`effective date, FDA announced a compliance policy whereby new tobacco products in the newly
`
`deemed categories