Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 1 of 19 PageID# 26593
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`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`
`
`v.
`
`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
`
`Plaintiffs and Counterclaim Defendants,
`
`
`
`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
`REDACTED
`
`
`REYNOLDS’S OPPOSITION TO PM/ALTRIA’S DAUBERT MOTION TO
`EXCLUDE THE DESIGN-AROUND TESTIMONY OF DAVID CLISSOLD
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`
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`

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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 2 of 19 PageID# 26594
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`TABLE OF CONTENTS
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`Page
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`INTRODUCTION ......................................................................................................................... 1
`FACTUAL BACKGROUND ........................................................................................................ 2
`LEGAL STANDARDS ................................................................................................................. 4
`ARGUMENT ................................................................................................................................. 6
`PM/ALTRIA’S MOTION, WHICH IS PREDICATED ON THE ARGUMENT
`I.
`THAT REYNOLDS’S DESIGN-AROUNDS ARE NOT AVAILABLE NON-
`INFRINGING ALTERNATIVES, IS NOT AN ISSUE TO BE DECIDED BY
`DAUBERT REVIEW ........................................................................................................ 6
`MR. CLISSOLD’S OPINIONS ARE RELIABLE ............................................................ 7
`PM/Altria Misstates The Law In Arguing That The Design-Arounds Were
`A.
`Not “Available” Because They Were Not On Sale And Did Not Have
`Regulatory Approval As Of The Hypothetical Negotiation Dates. ....................... 7
`PM/Altria Mischaracterizes Mr. Clissold’s Design-Around Opinion In
`Arguing That It Should Be Excluded................................................................... 11
`CONCLUSION ............................................................................................................................ 13
`
`
`
`II.
`
`B.
`
`-i-
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 3 of 19 PageID# 26595
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`
`
`TABLE OF AUTHORITIES
`
`
`
`CASES
`
`Page
`
`Aqua Shield v. Inter Pool Cover Team,
`774 F.3d 766 (Fed. Cir. 2014)................................................................................................8, 9
`
`Asetek Danmark A/S v. CMI USA Inc.,
`852 F.3d 1352 (Fed. Cir. 2017)..................................................................................................5
`
`Baxter Int’l, Inc. v. Becton, Dickinson & Co.,
`No. 17 C 7576, 2020 WL 424918 (N.D. Ill. Jan. 27, 2020) ............................................6, 8, 11
`
`Carnegie Mellon Univ. v. Marvell Tech. Grp., Ltd.,
`Civ. No. 09-290, 2012 WL 3686736 (W.D. Pa. Aug. 24, 2012) ...........................................6, 8
`
`Covidien Sales LLC v. Ethicon Endo-Surgery, Inc.,
`No. 1:11-cv-871, 2020 WL 7040643 (S.D. Ohio Dec. 1, 2020) ....................................9, 11, 13
`
`DePuy Spine, Inc. v. Medtronic Sofamor Danek, Inc.,
`567 F.3d 1314 (Fed. Cir. 2009)................................................................................................10
`
`DUSA Pharms., Inc. v. Biofrontera Inc.,
`495 F. Supp. 3d 21 (D. Mass. 2020) ....................................................................................9, 10
`
`Fresenius Medical Care Holdings, Inc. v. Baxter Int’l., Inc.,
`No. C 03-1431 SBA, 2006 WL 1390416 (N.D. Cal. May 18, 2006) ........................................7
`
`Georgia-Pacific Corp. v. U.S. Plywood Corp.,
`318 F. Supp. 1116 (S.D.N.Y. 1970)...........................................................................................5
`
`i4i Ltd. P’ship v. Microsoft Corp.,
`598 F.3d 831 (Fed. Cir. 2010), aff’d, 564 U.S. 91 (2011) .........................................................4
`
`Mars, Inc. v. Coin Acceptors, Inc.,
`527 F.3d 1359 (Fed. Cir. 2008) recalled and amended on other grounds by
`Mars, Inc. v. Coin Acceptors, Inc., 557 F.3d 1377 (Fed. Cir. 2009) .....................................5, 7
`
`Minks v. Polaris Industries, Inc.,
`546 F.3d 1364 (Fed. Cir. 2008)..................................................................................................5
`
`- -
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 4 of 19 PageID# 26596
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`
`
`Open Text S.A. v. Box, Inc.,
`No. 13-cv-04910-JD, 2015 WL 393858 (N.D. Cal. Jan. 29, 2015) ...........................................9
`
`
`
`
`Page
`
`TABLE OF AUTHORITIES
`(continued)
`
`
`
`Prism Techs. LLC v. Sprint Spectrum L.P.,
`849 F.3d 1360 (Fed. Cir. 2017)..............................................................................................5, 8
`
`Salazar v. HTC Corp.,
`No. 2:16-CV-01096-JRG-RSP, 2018 WL 2033709 (E.D. Tex. Mar. 28, 2018) .......................9
`
`Sherwin-Williams Co. v. PPG Indus., Inc.,
`Civ. No. 17-1023, 2020 WL 1283465 (W.D. Pa. Mar. 18, 2020) ...........................................10
`
`Smart Skins LLC v. Microsoft Corp.,
`No. C15-544-MJP, 2016 WL 4148091 (W.D. Wash. July 1, 2016) ..........................................9
`
`Summit 6, LLC v. Samsung Elecs. Co.,
`802 F.3d 1283 (Fed. Cir. 2015)..................................................................................................5
`
`Warsaw Orthopedic, Inc. v. NuVasive, Inc.,
`778 F.3d 1365 (Fed. Cir. 2015)..................................................................................................9
`
`STATUTES
`
`35 U.S.C. § 284 ................................................................................................................................5
`
`OTHER AUTHORITIES
`
`Fed. R. Evid. 702 .............................................................................................................................4
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`-i-
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 5 of 19 PageID# 26597
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`
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`INTRODUCTION
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`Altria Client Services LLC, Philip Morris USA, Inc., and Philip Morris Products S.A.’s
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`(collectively, “PM/Altria”) motion to exclude the design-around opinions of David Clissold should
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`be denied because it is untimely, is not the proper subject of a Daubert motion, and
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`mischaracterizes the law and Mr. Clissold’s opinions.
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`First, PM/Altria’s motion seeks a ruling on the merits that RAI Strategic Holdings, Inc. and
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`R.J. Reynolds Vapor Company’s (collectively, “Reynolds”) design-arounds are not available non-
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`infringing alternatives, and therefore cannot be taken into account in the reasonable royalty
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`analysis. PM/Altria could have raised this issue in a summary judgment motion, but did not do
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`so. PM/Altria’s belated attempt to summarily dispose of Reynolds’s design-arounds is untimely
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`and should be denied.
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`Second, this issue is not the proper subject of a Daubert motion as the parties dispute
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`whether the design-arounds are viable non-infringing alternatives that the parties could have
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`considered during the hypothetical negotiation. This is a fact question for the jury.
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`Third, PM/Altria’s motion is based entirely on its argument that a non-infringing
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`alternative is not “available,” and therefore cannot be considered in a reasonable royalty analysis,
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`unless it was on the market or had regulatory approval before the hypothetical negotiation date.
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`The law does not support imposing such an absolute bar, and this Court should not do so. It is
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`proper to consider non-infringing alternatives in a reasonable royalty analysis, even alternatives
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`that are not on sale at the hypothetical negotiation date and that are only potentially available
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`during the remaining life of the patents. Of course, it makes perfect sense for hypothetical
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`negotiators to take into account the possibility that a non-infringing alternative will obtain
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`regulatory approval during the remaining life of the patents, just as it makes perfect sense to
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`-1-
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`consider non-infringing alternatives, even those that do not yet have regulatory approval, when
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`valuing the technical and economic contributions of a patent in a reasonable royalty analysis.
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`Fourth, contrary to PM/Altria’s arguments, Mr. Clissold did not testify that the design-
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`arounds could be sold prior to FDA approval. Rather, he opined that Reynolds could have included
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`the design-arounds in its original PMTA filings, such that they could be sold upon approval.
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`Because PM/Altria’s arguments are premised on a mischaracterization of the law and Mr.
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`Clissold’s testimony, PM/Altria’s motion should be denied.
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`FACTUAL BACKGROUND
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`Reynolds’s technical experts proffered opinions regarding design-around alternatives that
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`do not infringe U.S. Patent No. 10,104,911 (the “’911 Patent”) and U.S. Patent No. 9,814,265 (the
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`“’265 Patent”). These design-arounds merely modified
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`of the Accused Products.
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`Mr. Kodama proffered design-arounds to the asserted claims of the ’911 Patent
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`
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`Kodama (attached as Exhibit 1), at ¶¶ 177-198. While the claims recite a
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` Excerpts of March 24, 2021 Report of Mr. Kelly
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`Mr. Kodama described
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`a design with
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` Ex. 1, at ¶¶ 178, 180.1 Mr. Kodama explained that Reynolds could have
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` Ex. 1, at ¶ 183.
`
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`1 As explained in his report, Mr. Kodama contends that
` See Ex. 1, at ¶ 180.
`
`-2-
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` Ex. 1, at ¶ 185.
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`Dr. Suhling proffered design-arounds to the ’265 Patent that did not meet the claimed
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` Excerpts of March 24, 2021 Report of Jeffrey Suhling, Ph.D. (attached as
`
`Exhibit 2), at ¶¶ 199-208. While the asserted claims require
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` Dr.
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`Suhling
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` Ex. 2, at ¶ 199.
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`Ex. 2, at ¶¶ 200, 205-208.
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`Reynolds submitted an expert report from David Clissold, an expert on the FDA’s
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`regulation of tobacco products, including vaporizers and electronic cigarettes. Mr. Clissold
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`proffered various opinions in his report, including a rebuttal to PM/Altria’s proffered FDA expert,
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`Ms. Ehrlich, and opinions regarding the design-arounds described by Mr. Kodama and Dr.
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`Suhling. In particular, Mr. Clissold opined that the design-arounds could have been implemented
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`into the original PMTAs filed by Reynolds for each of the Accused Products. Excerpts of May 6,
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`2021 Report of Mr. David Clissold (attached as Exhibit 3), at ¶ 56. Reynolds filed its Solo PMTAs
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`in October 2019, its Vibe and Ciro PMTAs in April 2020, and its Alto PMTAs in September 2020.
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`-3-
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`Ex. 3, at ¶¶ 52-54. The hypothetical negotiation dates for the ’265 and ’911 Patents are August
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`2018 and October 2018, respectively. See Excerpts of March 24, 2021 Report of Ryan Sullivan,
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`Ph.D. (attached as Exhibit 4), ¶¶ 186-187.2
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`The parties’ damages experts agree that the reasonable royalty for the ’911 and ’265 Patents
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`should be valued based on
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`
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`Ex. 4, at ¶¶ 258-266. In his analysis, Reynolds’s damages expert, Dr. Sullivan, briefly cites to Mr.
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`Clissold’s design-around opinion. Ex. 4, at ¶ 286. In doing so, Dr. Sullivan merely states that the
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`design-arounds confirm the reasonableness of his valuation. Ex. 4, at ¶ 378. Dr. Sullivan does not
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`use the design-arounds to adjust his reasonable royalty rate up or down.
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`LEGAL STANDARDS
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`Rule 702 provides that an expert “may testify in the form of an opinion or otherwise” where
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`“(a) the expert’s … specialized knowledge will help the trier of fact to understand the evidence or
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`to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony
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`is the product of reliable principles and methods; and (d) the expert has reliably applied the
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`principles and methods to the facts of the case.” Fed. R. Evid. 702. “[I]t is not the district court’s
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`role under Daubert to evaluate the correctness of facts underlying an expert’s testimony.” i4i Ltd.
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`P’ship v. Microsoft Corp., 598 F.3d 831, 856 (Fed. Cir. 2010), aff’d, 564 U.S. 91 (2011). Instead,
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`“where the methodology is reasonable and its data or evidence are sufficiently tied to the facts of
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`the case, the gatekeeping role of the court is satisfied, and the inquiry on the correctness of the
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`2 PM/Altria’s damages expert, Mr. Meyer, contends that the hypothetical negotiation for
`the ’911 Patent would have taken place in August 2018, prior to the issuance of the patent. See
`April 26, 2021 Amended Report of Mr. Paul Meyer (Dkt. 892-1), ¶¶ 121-124. Dr. Sullivan
`disagrees since there could be no infringement of the ’911 Patent before its issuance (Ex. 4, at
`¶ 190), but that issue is not relevant to the instant motion.
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`-4-
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`methodology and of the results produced thereunder belongs to the factfinder.” Summit 6, LLC v.
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`Samsung Elecs. Co., 802 F.3d 1283, 1296 (Fed. Cir. 2015).
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`If a patentee is awarded damages after a finding of liability, the patentee is entitled to no
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`“less than a reasonable royalty.” 35 U.S.C. § 284. “There is no dispute here about the propriety
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`of using the common hypothetical-negotiation approach to calculating a reasonable royalty, under
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`which the finder of fact ‘attempts to ascertain the royalty upon which the parties would have agreed
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`had they successfully negotiated an agreement just before infringement began.’” Asetek Danmark
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`A/S v. CMI USA Inc., 852 F.3d 1352, 1362 (Fed. Cir. 2017) (quoting Lucent Techs., Inc. v.
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`Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009)).3 “A determination of the royalty stemming
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`from a hypothetical negotiation is often made by assessing factors such as those set forth in
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`Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).” Minks
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`v. Polaris Industries, Inc., 546 F.3d 1364, 1372, (Fed. Cir. 2008).
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`Non-infringing alternatives are one of many factors relevant to assessing reasonable royalty
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`damages. See, e.g., Prism Techs. LLC v. Sprint Spectrum L.P., 849 F.3d 1360, 1376 (Fed. Cir.
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`2017) (“A price for a hypothetical license may appropriately be based on consideration of the
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`‘costs and availability of non-infringing alternatives.’”). Specifically, where an alleged infringer
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`has or “probably could have designed” a non-infringing alternative, that may be a basis for
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`decreasing the royalty rate. Mars, Inc. v. Coin Acceptors, Inc., 527 F.3d 1359, 1373 (Fed. Cir.
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`2008) recalled and amended on other grounds by Mars, Inc. v. Coin Acceptors, Inc., 557 F.3d
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`1377, 1378 (Fed. Cir. 2009). In a reasonable royalty analysis (unlike a lost profits analysis), “[a]n
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`accused infringer need not have the ability to sell the non-infringing alternative before the
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`3 The parties’ experts agree that any damages for the ’545, ’265, ’911, and ’374 patents
`should be in the form of a reasonable royalty. Dkt. 892-1, § VI.C; Ex. 4, at ¶¶ 183-190.
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`-5-
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`alternative’s features can be compared to those of the accused product for valuation purposes.”
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`Baxter Int’l, Inc. v. Becton, Dickinson & Co., No. 17 C 7576, 2020 WL 424918, at *7 (N.D. Ill.
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`Jan. 27, 2020). Further, “the question of whether there is a noninfringing substitute is a question
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`of fact, such that a court should not determine the issue by way of a Daubert review.” Carnegie
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`Mellon Univ. v. Marvell Tech. Grp., Ltd., Civ. No. 09-290, 2012 WL 3686736, at *5 (W.D. Pa.
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`Aug. 24, 2012) (internal citation and quotation marks omitted).
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`ARGUMENT
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`I.
`
`PM/ALTRIA’S MOTION, WHICH IS PREDICATED ON THE ARGUMENT
`THAT REYNOLDS’S DESIGN-AROUNDS ARE NOT AVAILABLE NON-
`INFRINGING ALTERNATIVES, IS NOT AN ISSUE TO BE DECIDED BY
`DAUBERT REVIEW
`
`Although PM/Altria couches its motion as challenging the reliability of Mr. Clissold’s
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`expert testimony, PM/Altria’s motion, in effect, seeks a ruling that Reynolds’s design-arounds are
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`not non-infringing alternatives that can be considered in the reasonable royalty analysis. Indeed,
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`PM/Altria’s motion is predicated on the argument that Reynolds’s design-arounds are not available
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`non-infringing alternatives. That is a challenge on the merits of Reynolds’s damages contention.
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`PM/Altria could have raised—but chose not to raise—this issue on summary judgment. Now,
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`more than eight months after the summary judgment deadline, PM/Altria attempts to summarily
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`dispose of this merits-based contention. PM/Altria’s belated request should be denied.
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`Not only is PM/Altria’s challenge untimely, but it is not the proper subject of a Daubert
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`motion. Courts repeatedly have found that whether a design-around is a viable non-infringing
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`alternative is not an issue to be decided on Daubert review. See, e.g., Carnegie Mellon Univ., 2012
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`WL 3686736, at *5 (“the question of whether there is a ‘noninfringing substitute is a question of
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`fact,’ . . . such that a court should not determine the issue by way of a Daubert review”) (citations
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`omitted); Fresenius Medical Care Holdings, Inc. v. Baxter Int’l., Inc., No. C 03-1431 SBA, 2006
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`-6-
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`WL 1390416, *7 (N.D. Cal. May 18, 2006) (“While Baxter hotly debates whether the 2008H
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`model is, in fact, a viable alternative to the 2008K, this is not an issue for the Court to determine
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`under a Daubert review.”). As the parties dispute whether the design-arounds are non-infringing
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`alternatives that could be considered during the hypothetical negotiation, with Reynolds having
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`presented evidence demonstrating that the parties could have considered the design-arounds at the
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`hypothetical negotiation, this disputed issue is not the proper subject of a Daubert challenge.
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`II. MR. CLISSOLD’S OPINIONS ARE RELIABLE
`A.
`PM/Altria Misstates The Law In Arguing That The Design-Arounds Were
`Not “Available” Because They Were Not On Sale And Did Not Have
`Regulatory Approval As Of The Hypothetical Negotiation Dates.
`
`PM/Altria’s motion is predicated on the faulty legal argument that the design-arounds must
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`have been on sale or have FDA approval as of the hypothetical negotiation dates to be non-
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`infringing alternatives that could be considered in a reasonable royalty analysis. In particular,
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`PM/Altria contends that because Reynolds’s design-arounds were not on sale as of August 8, 2016
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`(the effective date of the FDA’s Deeming Rule) and had not received FDA approval as of the
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`hypothetical negotiation dates, they were not “available” non-infringing alternatives. Dkt. No.
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`922, at 1, 5-8. That is not the law.
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`Whether or not a design-around was on sale as of the hypothetical negotiation date is not
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`dispositive of whether the design is an “available” non-infringing alternative. Indeed, design-
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`arounds may be taken into consideration in a reasonable royalty analysis even if they are not on
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`the market as of the hypothetical negotiation date. For example, in Mars, Inc. v. Coin Acceptors,
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`Inc., the Federal Circuit held that the district court did not commit clear error in reducing the
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`royalty rate based on non-infringing alternatives that were not on the market. 527 F.3d 1359, 1373
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`(Fed. Cir. 2008) (“The district court considered the potential availability of noninfringing
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`alternatives, found that Coinco did not have—but probably could have designed—an acceptable
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`-7-
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`alternative, and reduced the blended royalty rate accordingly”); see also Carnegie Mellon Univ.,
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`2012 WL 3686736, at *4 (citation omitted) (“even though ‘[t]here was ... no available and
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`acceptable noninfringing alternative to which [the defendant] could have switched at the time of
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`the hypothetical negotiation,’ the fact that there was a possibility that the defendant ‘could have
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`come up with one’ was sufficient to justify the district court's reduction of a blended royalty rate”).
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`As another example, in Prism Techs. LLC v. Sprint Spectrum L.P., the Federal Circuit affirmed
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`the district court’s reasonable royalty calculation which considered potential design-arounds for
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`which the patentee’s expert testified that “in the absence of a license, [the accused infringer] would
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`have attempted to design around the patented invention.” 849 F.3d 1360, 1376 (Fed. Cir. 2017).
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`Design-arounds may be considered in a reasonable royalty analysis even if the accused
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`infringer did not have the ability to sell the non-infringing alternative: “[a]n accused infringer
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`need not have the ability to sell the non-infringing alternative before the alternative’s features can
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`be compared to those of the accused product for valuation purposes.” Baxter Int’l, Inc., 2020 WL
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`424918, at *7. Indeed, a reasonable royalty analysis can seek to value the patented invention by
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`considering the incremental economic benefit of the patented technology over non-infringing
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`alternatives.4 Aqua Shield v. Inter Pool Cover Team, 774 F.3d 766, 770–72 (Fed. Cir. 2014). The
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`reasonable royalty analysis considers what the parties to a hypothetical negotiation would have
`
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`4 PM/Altria’s expert also opined on the technical comparability and relative value of certain
`licensed patents to the asserted patents here. In doing so, he “considered the scope of the claims
`in the patents licensed in the various agreements and the technology claimed in the Asserted
`Patents, and assessed the likelihood that a competitor would (or would not) be able to design
`around the claims.” Joseph McAlexander Second Supplemental Opening Expert Report dated
`May 10, 2021 (attached as Exhibit 5), at ¶ 696; see also id., at ¶ 700 (explaining that “For my
`apportionment analysis … I considered the relative value of the technology claimed in the patents
`in the licensed patent families [and] considered the likelihood that one could feasibly and
`successfully design around the claims recited in the licensed patent(s).”)
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`-8-
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`considered in negotiating a license for the future use of the patented technology. Id. This properly
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`would include designs that, although not on the market at that time, could come to market during
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`the life of the patent. See, e.g., Covidien Sales LLC v. Ethicon Endo-Surgery, Inc., No. 1:11-cv-
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`871, 2020 WL 7040643, at *3 (S.D. Ohio Dec. 1, 2020) (emphasis added) (“As a matter of
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`common sense, it appears at least possible that such negotiations could be colored by whether the
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`licensee has developed a design (even if not ready yet to go to market) that is non-infringing.”)5
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`PM/Altria incorrectly argues that, as a matter of law, a product without FDA approval on
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`the hypothetical negotiation date cannot be an available non-infringing alternative. Dkt. No. 922,
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`at 5-8. The cases cited by PM/Altria do not stand for that proposition and, as explained above, an
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`accused infringer does not need to be able to sell the design-around at the time of the hypothetical
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`negotiation for it to be considered a non-infringing alternative in the reasonable royalty analysis.
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`PM/Altria primarily relies on DUSA Pharms., Inc. v. Biofrontera Inc., 495 F. Supp. 3d 21 (D.
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`Mass. 2020). Dkt. No. 922, at 5-6. But PM/Altria selectively quotes from that case ignoring that
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`the court was ruling on a summary judgment motion in which inferences are to be viewed in favor
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`of the non-movant. The Court merely stated that “[a]t this summary judgment stage . . . a
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`reasonable factfinder could conclude that a [device] . . . is not an acceptable non-infringement
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`alternative if it does not have FDA approval.” DUSA, 495 F. Supp. 3d at 30. Rather than setting
`
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`5 PM/Altria improperly relies on lost profits cases (e.g., DUSA, DePuy, and Ethicon) even
`though PM/Altria seeks a reasonable royalty, not lost profits. See, e.g., Dkt. No. 922, at 5, 6. Lost
`profits and reasonable royalty analyses differ. Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778
`F.3d 1365, 1374–75 (Fed. Cir. 2015). Indeed, something that may not be a non-infringing
`alternative in the lost profits context may be a non-infringing alternative in the reasonable royalty
`context. Covidien Sales LLC, 2020 WL 7040643, at *3; Salazar v. HTC Corp., No. 2:16-CV-
`01096-JRG-RSP, 2018 WL 2033709, at *3 (E.D. Tex. Mar. 28, 2018). PM/Altria’s reliance on
`lost profit cases, thus, is improper. Open Text S.A. v. Box, Inc., No. 13-cv-04910-JD, 2015 WL
`393858, at *4 (N.D. Cal. Jan. 29, 2015); Smart Skins LLC v. Microsoft Corp., No. C15-544-MJP,
`2016 WL 4148091, at *2 (W.D. Wash. July 1, 2016).
`
`-9-
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 14 of 19 PageID# 26606
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`forth any statement of law regarding non-infringing alternatives in view of FDA approval, DUSA
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`merely viewed the evidence in a non-movant’s favor on summary judgment.
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`The other cases relied on by PM/Altria also do not state that, as a matter of law, FDA
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`approval is required before a product could be a non-infringing alternative considered in a
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`reasonable royalty analysis. Dkt. No. 922, at 5-8. In DePuy Spine, Inc. v. Medtronic Sofamor
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`Danek, Inc., the Federal Circuit affirmed a lost profits award finding that substantial evidence
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`supported the jury’s findings. 567 F.3d 1314 (Fed. Cir. 2009). Although the Federal Circuit noted
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`that the jury heard testimony that marketing approval had not been sought from the FDA, in
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`considering all of the evidence, including the multiple unsuccessful attempts to develop a non-
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`infringing alternative, the Federal Circuit found that a reasonable jury could have concluded that
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`there was no acceptable non-infringing alternative. Id. at 1332. PM/Altria’s reliance on Sherwin-
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`Williams Co. v. PPG Indus., Inc. also is misplaced. Civ. No. 17-1023, 2020 WL 1283465 (W.D.
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`Pa. Mar. 18, 2020). In that case, the court found that no reasonable jury could find that an
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`alternative product existed because there was no evidence of any such product during the damages
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`period. Id. at *9. None of the cases cited by PM/Altria sets forth any rule of law requiring
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`regulatory approval of a product before it can be considered in a reasonable royalty analysis.
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`While PM/Altria’s motion is premised on the faulty argument that Reynolds’s design-
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`arounds are not non-infringing alternatives because they were not on sale or approved by the FDA
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`as of the hypothetical negotiation dates, PM/Altria does not dispute that Reynolds would be able
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`to sell the design-arounds upon FDA approval. Dkt. No. 922, at 10. PM/Altria argues that the
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`PMTA process has a “statistically low chance of success” to suggest that regulatory approval
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`would not be obtained and thus the design-arounds would not be available. Dkt. No. 922, at 10.
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`But even PM/Altria acknowledges that the FDA already has approved a PMTA for some of the
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 15 of 19 PageID# 26607
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`accused products.6 Dkt. No. 922, at 10-11. And Mr. Clissold opined that the probability of
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`authorization would not have been affected by including the design-arounds in the original
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`PMTAs. Ex. 3, at ¶ 57. Thus, the design-arounds, which merely modify
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` of the Accused Products, could have been considered by the parties during
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`the hypothetical negotiation. See, e.g., Baxter Int’l, Inc., 2020 WL 424918, at *7 (“An accused
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`infringer need not have the ability to sell the non-infringing alternative before the alternative's
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`features can be compared to those of the accused product for valuation purposes.”); Covidien, 2020
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`WL 7040643, at *3 (“As a matter of common sense, it appears at least possible that such
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`negotiations could be colored by whether the licensee has developed a design (even if not ready
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`yet to go to market) that is non-infringing.”)
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`As there is no dispute that the design-arounds could have been implemented into
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`Reynolds’s original PMTAs, and that Reynolds would be able to sell the design-arounds upon
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`FDA approval, there is no basis to exclude Mr. Clissold’s design-around opinions.
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`B.
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`PM/Altria Mischaracterizes Mr. Clissold’s Design-Around Opinion In
`Arguing That It Should Be Excluded.
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`PM/Altria devotes a substantial portion of its motion challenging an opinion that Mr.
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`Clissold did not proffer. In particular, PM/Altria takes issue with the purported opinion that
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`Reynolds could sell the ’265 and ’911 design-arounds prior to FDA authorization. Dkt. No. 922,
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`at 1, 8-12. But Mr. Clissold did not render such an opinion. Rather, Mr. Clissold opined that those
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`specific design-arounds could have been included in Reynolds’s original PMTAs, such that they
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`6 Ms. Ehrlich, PM/Altria’s proffered FDA expert, even has conceded that the FDA is likely
`to approve the PMTAs of some electronic nicotine delivery systems. See Excerpts of October 23,
`2020 Report of Ms. Stacy Ehrlich, served in Certain Tobacco Heating Articles and Components
`Thereof, Inv. No. 337-TA-1199 (attached as Exhibit 6), at ¶ 122.
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 16 of 19 PageID# 26608
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`could be sold upon FDA approval. Ex. 3, at ¶¶ 9, 56. PM/Altria’s mischaracterization of Mr.
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`Clissold’s opinion provides no basis for the exclusion of his actual opinion.
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`There is no dispute that Reynolds could have included the ’265 and ’911 design-arounds
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`in the original PMTAs, and then could have sold those design-arounds upon regulatory approval.
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`Dkt. No. 922, at 10. As discussed above and in more detail in Reynolds’s opposition to
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`PM/Altria’s motion to exclude Dr. Sullivan’s testimony, the parties to the hypothetical negotiation
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`could have considered the possibility of future regulatory approval of Reynolds’s design-arounds
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`in assessing a reasonable royalty for PM/Altria’s patents.7
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`PM/Altria seeks to confuse the issue by accusing Mr. Clissold of using various “options”
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`to try to contend that Reynolds could sell the ’265 and ’911 design-arounds before regulatory
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`approval. This is a mischaracterization of Mr. Clissold’s opinions. To make clear that a new
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`PMTA is not necessary for every design modification, Mr. Clissold merely pointed out that a
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`modified design could be included in an amendment to an existing PMTA application, or in a
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`supplement to an issued PMTA. Ex. 3, at ¶¶ 35-38. Mr. Clissold further explained that, in either
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`case, approval likely would proceed more quickly than with an entirely new PMTA, see id.; but
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`all that is beside the point. Mr. Clissold’s opinion is that Reynolds could have included the ’265
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`and ’911 design-arounds in its original PMTAs. Id., at ¶ 56. Whether or not Reynolds alternatively
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`could have amended or supplemented its PMTAs is immaterial to the fact that the design-arounds
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`could be considered by the parties to the hypothetical negotiation. Covidien, 2020 WL 7040643,
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`7 PM/Altria’s argument that Reynolds’s ’265 and ’911 design-arounds were economically
`unavailable, not only is irrelevant to its motion based on regulatory availability, but misses the
`point. Dkt. No. 922, at 7 n.6. No one is arguing that Reynolds would have pulled its products off
`the market while awaiting regulatory approval of the design-arounds. Instead, the point is that
`rational hypothetical negotiators setting a reasonable royalty would take into account the
`possibility that non-infringing designs could receive regulatory approval during the life of the
`patents, and that fact would have a downward pressure on the royalty rate.
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`Case 1:20-cv-00393-LO-TCB Document 957 Filed 02/11/22 Page 17 of 19 PageID# 26609
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`at *3 (“As a matter of common sense, it appears at least possible that such negotiations could be
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`colored by whether the licensee has developed a design (even