Case 1:20-cv-00393-LO-TCB Document 957-3 Filed 02/11/22 Page 1 of 9 PageID# 26634
`Case 1:20-cv-00393-LO-TCB Document 957-3 Filed 02/11/22 Page 1 of 9 PagelD# 26634
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`EXHIBIT 3
`EXHIBIT 3
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`(PUBLIC)
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`CONTAINS CONFIDENTIAL BUSINESS INFORMATION
`Case 1:20-cv-00393-LO-TCB Document 957-3 Filed 02/11/22 Page 2 of 9 PageID# 26635
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`UNITED STA TES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`Civil No. l:20-cv-00393-LO-TCB
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`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMP ANY,
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`Plaintiffs and Counterclaim Defendants,
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`V.
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`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA, INC.; and PHILIP MORRIS
`PRODUCTS S.A.,
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`Defendants and Counterclaim Plaintiffs.
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`EXPERT REPORT OF DAVID B. CLISSOLD, ESQ. IN RESPONSE TO
`AMENDED AND SUPPLEMENTED OPENING REPORT OF STACY EHRLICH
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`Dated c,s-/ 0 6 / ,,2,02/
`-------•-------J7'----_,__ _ _
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`David B. Clissold, Esq.
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`Case 1:20-cv-00393-LO-TCB Document 957-3 Filed 02/11/22 Page 3 of 9 PageID# 26636
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`9.
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`As discussed in more detail in my report, I understand that the Asserted Patents
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`have no relevance to PMTA review if Reynolds does not infringe, or if the patents are found
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`invalid. Ms. Ehrlich’s report contains no analysis establishing that the alleged benefits are, in
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`fact, a result of using a particular patent claim. Whether the particular benefits relied on by Ms.
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`Ehrlich are actually fairly attributable to the particular patent claims asserted against Reynolds is
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`a subject for the technical experts. Moreover, there is nothing in any FDA regulation or
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`guidance to suggest that the technology embodied in an Asserted Patent, and only that
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`technology, is required, or even preferable. I also understand that Reynolds’s technical experts
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`are providing design-around options for the ’374, the ’911, and the ’265 Patents. Relative to the
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`hypothetical negotiation dates, I conclude that the design-arounds could have been implemented
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`into the original PMTAs for Reynolds’ products prior to the submission of their PMTAs, and that
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`the timing of the review or the probability of authorization would not have been affected. The
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`hypothetical negotiating date for the ’545 patent is March 2013. This is more than a year before
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`FDA even proposed to regulate e-cigarettes, and thus e-cigarettes could incorporate this
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`technology or not, or change a product to include or replace the technology, with no FDA
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`regulatory consequence at that time.
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`V.
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`ANALYSIS
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`10.
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`The “Family Smoking Prevention and Tobacco Control Act” (“Tobacco Control
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`Act,” or “TCA”) amended the Federal Food, Drug, and Cosmetic Act (“FDC Act”), giving FDA
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`the authority to regulate tobacco products. “Tobacco product” is defined broadly to mean “any
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`product made or derived from tobacco that is intended for human consumption, including any
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`3
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`Case 1:20-cv-00393-LO-TCB Document 957-3 Filed 02/11/22 Page 4 of 9 PageID# 26637
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`despite the dire consequences that Ms. Ehrlich envisioned for FDA enforcement post- American
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`Pediatrics (Ehrlich at ¶¶ 33-40), products covered by a PMTA submitted before September 9,
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`2020 are at no imminent risk of FDA enforcement, be that by Warning Letter, import detention,
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`or tweet, and retailers may continue to sell such products freely.
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`35. Ms. Ehrlich asserts that if a product is “modified or redesigned” after August 8,
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`2016, it is treated by FDA as a new tobacco product and cannot be marketed without a PMTA
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`authorization. Ehrlich at ¶ 29. However, that does not necessarily mean that an applicant must
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`submit a new PMTA for any modification. To the contrary, an applicant seeking to modify a
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`product for which a PMTA has been submitted may seek to have changes authorized either by
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`filing an amendment to the original application or by submitting a supplemental PMTA.
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`36.
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`FDA has recognized that it may be appropriate to submit an amendment to a
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`pending PMTA to account for product modifications. For example, in 2019 FDA issued a
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`compliance policy guide stating that manufacturers could make certain modifications to their
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`tobacco products to address a voluntary industry battery standard and to comply with
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`requirements related to safe packaging of liquid nicotine products. Compliance Policy for
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`Limited Modifications to Certain Marketed Tobacco Products (Nov. 2019)
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`https://www.fda.gov/media/133009/download. FDA said it would not consider those changes to
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`create a “new” tobacco product and emphasized that it “does not intend to initiate enforcement
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`action against such modified products on the basis of these modifications.” Id. at 3, 8. The
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`agency advised that “[f]or such products modified after the submission of a marketing
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`application for the non-modified product, FDA recommends that manufacturers submit an
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`amendment to the original application that describes the modifications.” Id. at 5. Additionally,
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`under the draft PMTA regulations, an applicant may amend a PMTA after it has been submitted
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`but before it has been authorized.4
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`37.
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`In addition to the possibility of amending a PMTA, in proposed regulations FDA
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`explained that an applicant who modifies or redesigns a product with a PMTA “may, as an
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`alternative format of submitting” a full PMTA, “submit a supplemental PMTA to seek marketing
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`authorization for modifications to such product, which result in a new tobacco product under
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`910(a)(1) of the Federal Food, Drug, and Cosmetic Act.” 84 Fed. Reg. at 50612 (proposed 21
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`C.F.R. § 1114.15). A supplemental PMTA must include new information concerning the
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`modifications that create the new tobacco product, but the applicant can cross-reference the
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`previously submitted PMTA for the original tobacco product. Id. at 50566 (discussing proposed
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`21 C.F.R. § 1114.15). Because of the greatly reduced amount of information submitted in a
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`supplemental PMTA, FDA review of a supplemental PMTA can be expected to be much faster
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`than review of a full PMTA. As FDA explained, a supplemental PMTA “would reduce the
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`burden of submitting and reviewing an application.” Id. at 50568. Thus, an applicant with a
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`pending PMTA may be able to wait for the PMTA to be authorized and then submit the
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`“modification or redesign” as a supplemental PMTA. Among the changes or modification that
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`FDA indicated it would accept as a supplemental PMTA are “[c]hanges to coil configuration if
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`number of coils, coil gauge, material, and overall coil resistance remain unchanged” as well as
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`4 “FDA may request, or an applicant may submit on its own initiative, an amendment to a
`PMTA containing information that is necessary for FDA complete the review of a pending
`PMTA. An amendment must include the appropriate form and specify the STN assigned to the
`original submission and, if submitted other than at FDA’s request, the reason for submitting the
`amendment.” Proposed 21 C.F.R. § 1114.9(a)(1), 84 Fed. Reg. 50566 (Sep. 25, 2019).
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`“[c]hanges to amount of wicking material” and “[m]inor changes in wick ignition temperature.”
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`Id. at 50612.
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`38.
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`Taken together, the availability of these options demonstrates that there is at least
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`a possibility that FDA could exercise enforcement discretion with respect to modifications of
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`products that are currently on the market and the subject of a pending PMTA. Doing so would
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`be fully consistent with the Maryland district court’s remedial order and FDA’s interpretation of
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`that order. The district court noted that the “FDA shall have the ability to exempt New Products
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`from filing requirements for good cause on a case-by-case basis.” American Academy of
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`Pediatrics v. Food & Drug Administration, 399 F. Supp. 3d 479, 487 (D. Md. 2019). In
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`explaining how the American Academy court’s decision affected FDA’s enforcement priorities
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`for ENDS products, FDA stated that “FDA’s decision to exercise its enforcement authorities
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`with respect to particular products will be determined on a case-by-case basis, informed by the
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`enforcement priorities described in this Final Guidance and any other relevant factors.”
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`Enforcement Priorities for Electronic Nicotine Delivery Systems (ENDS) and Other Deemed
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`Products on the Market Without Premarket Authorization (Revised) at 9 (Apr. 29, 2020),
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`https://www.fda.gov/media/133880/download. In that guidance document, FDA cited Heckler v.
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`Chaney, 470 U.S. 821, 835 (1985) for the proposition that “the FD&C Act’s enforcement
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`provisions commit broad discretion to the Secretary to decide how and when they should be
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`exercised.” Id. at n. 20. Finally, despite the district court’s order, FDA’s 2019 compliance
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`policy guidance shows that FDA has in fact exercised enforcement discretion to allow
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`manufacturers to make certain safety-related changes to deemed products that were on the
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`market before August 8, 2016 without losing the protection of FDA enforcement discretion.
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`Compliance Policy for Limited Modifications to Certain Marketed Tobacco Products (Nov.
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`2019).
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`39.
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`I agree with Ms. Ehrlich that FDA has issued Warning Letters to some companies
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`that the agency believes are selling products that are in violation of the FDC Act.
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`40.
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`However, none of the materials cited by Ms. Ehrlich are based on, or even
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`discuss, FDA’s policy of enforcement for allegedly “changed” products “physically modified or
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`redesigned in any way after” August 8, 2016. Ehrlich at ¶ 29. For example, some of the
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`Warning Letters cited by Ms. Ehrlich are for products that did not exist on the effective date of
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`the deeming regulation and are thus irrelevant to the instant case. Other Warning Letters cite
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`“Additional Considerations,” including an ENDS products that “appears to imitate a food
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`product that is typically marketed toward and/or appealing to children” (Warning Letter to
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`Majestic Vapors, LLC MARCS-CMS 608448, July 20, 2020), one that “features a graphic
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`image that imitates cartoons that are commonly marketed toward and/or appealing to children,”
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`or those that make “modified risk” claims (Warning Letter to Cool Clouds Distribution, Inc.
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`d/b/a Puff Bar MARCS-CMS 608526, July 20, 2020). None of these factors are relevant to the
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`instant case.
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`41.
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`The Warning Letters discussed by Ms. Ehrlich in paragraph 36 and footnote 47
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`were issued to ten companies that submitted no premarket authorizations whatsoever for any of
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`over 100,000 products. Likewise, the Warning Letters discussed in footnote 49 were issued to
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`companies that submitted no premarket authorizations whatsoever. As stated above, Reynolds
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`has submitted PMTAs for all of its Vuse products.
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`42.
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`I agree that FDA has taken, and continues to take enforcement action against “bad
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`actors” in the e-cigarette market, including the issuance of Warning Letters and import alerts.
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`Case 1:20-cv-00393-LO-TCB Document 957-3 Filed 02/11/22 Page 8 of 9 PageID# 26641
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`technical experts are addressing whether the claimed benefits are, in fact, attributable to the
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`particular patent claims Defendants have asserted, and are also addressing whether those benefits
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`should more fairly be attributed to the prior art.
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`50.
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`I also understand that Reynolds’s technical experts are providing design-around
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`options for the ’374, the ’911, and the ’265 Patents. The VUSE Solo, Vibe, Alto, and Ciro are
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`accused of infringing the ’374 and the ’911 Patents, and the Vuse Alto is accused of infringing
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`the ’265 Patent.
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`51.
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`I have reviewed the relevant excerpts of the rebuttal opinions from Reynolds’
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`experts, Blalock, Kodama, and Suhling, and understand that the design-around options would
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`provide the same or similar benefits that Ms. Ehrlich claims for the ’374, the ’911, and the ’265
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`Patents.
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`52.
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`53.
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`54.
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`55.
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`Reynolds submitted the Vuse Solo PMTA in October 2019.
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`Reynolds submitted the Vuse Vibe and Vuse Ciro PMTAs in April 2020.
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`Reynolds submitted the Vuse Alto PMTA in September 2020.
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`I understand that reasonable royalties for patent infringement may be based on a
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`hypothetical negotiation between the patent holder and the accused infringer taking place at the
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`time the alleged infringement began, both parties assuming that the patent is valid and infringed.
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`I also understand that an accused infringer may provide evidence of non-infringing alternatives it
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`could have used rather than taking a license to the asserted patent, and that such evidence may be
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`relevant to an analysis of the reasonable royalty the accused infringer would have agreed to pay.
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`I have been informed that the hypothetical negotiation date for the ’374 Patent is September 24,
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`2019, the hypothetical negotiation date for the ’911 Patent is October 23, 2018, and the
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`hypothetical negotiation date for the ’265 Patent is August 2018.
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`56.
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`Therefore, the design-arounds could have been implemented into the original
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`PMTAs for each of these products prior to the submission of the PMTAs. And, if the technical
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`experts are correct that each design-around would work just as well as the allegedly infringing
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`design, the use of the design-around would not make PMTA approval less likely.
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`57.
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`I am aware of no information that would suggest that the timing of the review or
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`the probability of authorization would have been affected by including the planned design-
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`arounds in the original PMTA submissions
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`58.
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`Because Ms. Ehrlich seems to give special emphasis to the ’545 Patent, I address
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`it below.
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`B.
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`The ’545 Patent
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`59. While I agree that generally, battery safety is an important issue in FDA’s review
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`of a PMTA, that does not mean that the technology described in the ’545 patent is the only way
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`to demonstrate adequate “battery safety.” Ehrlich at ¶¶ 84-86. Reynolds’ technical experts have
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`concluded that the Vuse products do not infringe this patent, meaning that the technology
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`described in the Vuse PMTAs must describe another way to address FDA’s general concerns.
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`Rebuttal Expert Report of Dr. Travis Blalock, ’545 and ’374 Patents; Rebuttal Expert Report of
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`Dr. Thomas F. Fuller, ’545 Patent. I also agree that the FDA Guidance for Industry: Premarket
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`Tobacco Product Applications for Electronic Nicotine Delivery Systems and the proposed
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`regulations discuss the importance of providing information with respect to battery performance,
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`capacity, operating range, etc. Ehrlich at ¶¶ 86-90. However, there is nothing in any FDA
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`regulation or guidance to suggest that the technology embodied in the ’545 patent, and only that
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`technology, is required, or even the preferred means to obtain those objectives, including battery
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`safety. FDA leaves that up to the individual applicant. Until a PMTA is approved with this
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