A federal jury determined Wednesday that RJ Reynolds Vapor Co. owed tobacco industry rival Altria Client Services $95.23 million in damages related to an e-cigarette patent infringement claim.

The jury for the US Intermediate District of NC has determined that Reynolds Vapor’s top-selling Vuse Alto product infringes three patents cited in the lawsuit filed in May 2020.

Altria said in a statement that the damages cover past breaches through June 30, 2022.

“The post-trial proceedings will deal with ongoing damages until Altria’s patents expire in 2035,” Altria said.

“At trial, Altria urged the jury to find a royalty rate of 5.25%, which the jury accepted by returning its award for past damages.”

Murray Garnick, Altria’s General Counsel, said “patents are at the heart of innovation and we take the protection of our intellectual property very seriously.”

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“We are delighted that the jury recognized the importance of Altria’s innovation and the value of its patent rights.”

Reynolds said in a statement Thursday that he “intends to vigorously defend the remaining issues in court and, if necessary, we will appeal the decision to the United States Court of Appeals for the Federal Circuit.” for further examination”.

“We take allegations of infringement of the intellectual property rights of others seriously. Where necessary and appropriate, we will take all available steps to defend against claims that seek to undermine our investment in innovation and our ability to reduce the health impact of our business.

“For the same reason, we will continue to vigorously defend our intellectual property around the world.”

The details

The complaint relates to three patents granted to Altria Client Services by the U.S. Patent and Trademark Office based on filings dating back to April 2015.

Altria alleged that Reynolds Vapor violated Altria’s patents covering the pod assembly used in Vuse Alto.

“Reynolds Vapor’s infringement … was and continues to be willful, willful and unlicensed,” according to the lawsuit.

Altria and its U.S. subsidiary Smokeless Tobacco Co. said the Vuse e-cigarette and Smokeless Velo patents in dispute fall into three groups.

* Four patents involving e-vapor devices with associated battery, heater and liquid-filled pods.

* Two patents involving e-vapor devices with specific heater and mouthpiece designs. These patents target Reynolds Vapor’s Vuse Alto and Vibe styles.

* Three patents involving a container for a smokeless pouch product having a non-hermetic seal for freshness. These patents target Velo.

“The Vuse Alto is a flagship e-vapor product from RJR Vapor which (British American Tobacco) has repeatedly been pitched to investors as essential to Reynolds’ e-vapor business,” Altria said in May 2020.

Reynolds said in a May 2020 statement that he believes the lawsuit was filed in retaliation for patent infringement claims Reynolds filed in April 2020 for infringement by IQOS of six Reynolds patents.

In November 2021, the US Trade Representative upheld British American Tobacco Plc’s crucial legal victory in its patent infringement lawsuit against rival Philip Morris International Inc.

On September 29, 2021, the United States International Trade Commission issued a final determination regarding a violation of the Tariff Act of 1930 by Philip Morris USA Inc. and Altria Client Services LLC with respect to two BAT product patents.

As a result of the ITC’s decision, PM USA is not permitted to import PMI’s IQOS 2.4, IQOS 3, IQOS 3 Duo heat-not-burn cigarette products. It was also ordered to halt future sales of these products – marketed as Marlboro HeatSticks – already in the United States.

The next legal step is a likely appeal by Altria to the United States Court of Appeals for the Federal Circuit, which handles patent lawsuits. That process could take up to a year to reach a decision, with the likelihood of a successful appeal not favorable, according to industry analysts.

Innovation leader

Reynolds has been known for over 20 years as the industry leader in innovative tobacco and nicotine products, especially with electronic cigarettes.

Meanwhile, Altria ceased production of its NuMark e-cigarettes in December 2018 as part of its $12.8 billion investment in Juul Labs Inc’s then best-selling Juul e-cigarette.

NuMark was struggling to gain traction with US e-cigarette users, while Juul had a market share of over 70%.

Since acquiring that 35% stake in Juul, Altria has written down the value of the investment several times — most recently on July 28 to an estimated fair value of just $450 million.

At $450 million, the value of the investment represents just 3.5% of Altria’s initial outlay.

In explaining its decision, Altria raised the possibility of Juul Labs entering bankruptcy protection if Juul cannot “maintain adequate liquidity to fund anticipated cash requirements.”

Unsurprisingly, Altria noted the Food and Drug Administration’s June 23 decision to ban Juul products at retail.

Altria made the decision to write down the investment value even though a federal judge on June 24 issued a temporary stay of the FDA’s marketing denial order.

On July 6, the FDA agreed to temporarily suspend the order, allowing Juul to continue selling its e-cigarettes and related products. The FDA did not say how long the additional scientific review would take.

The shadow of a potential ban on Juul Labs e-cigarette products from US retail shelves has accelerated Vuse’s market share gains.

Vuse’s market share rose 39%, compared to 29.4% for Juul, according to the latest Nielsen analysis of convenience store data that covers the four-week period ending August 13.

Another lawsuit loss

Two U.S. business units of Reynolds are facing combined damages of $10.76 million following a June 15 federal jury verdict in a patent infringement lawsuit involving Vuse.

Philip Morris Products SA is an affiliate of Philip Morris International Inc., commonly identified as PMI.

The lawsuit in the Eastern District of Virginia involves PMI’s charges of infringement of Reynolds Vapor involving its Vuse Alto and Vuse Solo electronic cigarette products. The other defendant is RAI Strategic Holding Inc.

The PMI US e-cigarette patents are: a compact heater designed to increase vaporization efficiency; and a leak stopper for liquid used in electronic cigarettes.

The jury considered six main claims and 14 dependent claims.

For Vuse Alto, the jury determined that Reynolds infringed an independent claim and a dependent claim for the compact radiator. The jury approved $8 million in damages for those violations.

For the Vuse Solo G2 product, the jury determined that Reynolds infringed one independent claim and two dependent claims for the leak stopper.

However, the jury determined that Reynolds did not infringe two sets on one independent claim and three dependent claims for Vuse Alto involving the leak-stop device.

The jury found that Reynolds had failed to prove “by clear and convincing evidence” that the claims of the Philip Morris leak shutter patent were “invalid as being obvious”.

The jury awarded $2.76 million in damages for the patients’ breaches of the leaks.

Reynolds said in a statement that “we are pleased the jury has found that Vuse Alto does not infringe” the leak-stop device patent.

“We are, however, disappointed with the jury’s findings that the same patent was infringed by Vuse Solo and the (compact heater) was infringed by Vuse Alto.

“We intend to vigorously defend the remaining issues in court and, if necessary, appeal the decision to the United States Court of Appeals for the Federal Circuit for further review.

PMI said in a statement that the jury’s findings regarding patent infringement “constitute further demonstration of PMI’s position as the undisputed leader of innovation in new technologies that can help smokers switch to better alternatives.” “.

“This decision rejects an attempt by BAT to profit from our hard work and investments.”