RAI Strategic Holdings, Inc.

Patent Trials and Appeals Board

Nov 16, 2020

IPR2020-00919 (P.T.A.B. Nov. 16, 2020)

Trials@uspto.gov Paper 9
571-272-7822 Date: November 16, 2020

UNITED STATES PATENT AND TRADEMARK OFFICE
____________

BEFORE THE PATENT TRIAL AND APPEAL BOARD
_____________

PHILIP MORRIS PRODUCTS, S.A.,
Petitioner,

v.

RAI STRATEGIC HOLDINGS, INC.,
Patent Owner.
____________

IPR2020-00919
Patent 9,901,123 B2
____________

Before JO-ANNE M. KOKOSKI, ELIZABETH M. ROESEL,
MICHELLE N. ANKENBRAND, Administrative Patent Judges.

PER CURIAM
DECISION
Denying Institution of Inter Partes Review
35 U.S.C. § 314

IPR2020-00919
Patent 9,901,123 B2

2
I. INTRODUCTION
Philip Morris Products, S.A. (“Petitioner”) filed a Petition to institute
an inter partes review of claims 27–30 (the “challenged claims”) of U.S.
Patent No. 9,901,123 B2 (“the ’123 patent,” Ex. 1001). Paper 2 (“Pet.”).
RAI Strategic Holdings, Inc. (“Patent Owner”) filed a Preliminary Response.
Paper 6 (“Prelim. Resp.”). With Board authorization, Petitioner filed a reply
addressing certain issues raised in the Preliminary Response (“Reply,”
Paper 7), and Patent Owner filed a Sur-reply (“Sur-Reply,” Paper 8).
Institution of an inter partes review is authorized by statute when “the
information presented in the petition . . . and any response . . . shows that
there is a reasonable likelihood that the petitioner would prevail with respect
to at least 1 of the claims challenged in the petition.” 35 U.S.C. § 314
(2018); see 37 C.F.R. § 42.4 (2020). Upon consideration of the Petition, the
Preliminary Response, the Reply, the Sur-Reply, and the evidence of record,
we exercise our discretion under 35 U.S.C. §314(a) and deny institution of
an inter partes review.
A. Related Proceedings
The parties indicate that the ’123 patent is involved in the following
proceedings: (1) RAI Strategic Holdings, Inc. v. Altria Client Services LLC,
No. 1:20-cv-00393-LO-TCB (E.D. Va.), and (2) Certain Tobacco Heating
Articles and Components Thereof, U.S. International Trade Commission,
Investigation No. 337-TA-1199. Pet. 5–6; Paper 5, 2.
B. Real Parties-in-Interest
Petitioner identifies Philip Morris Products, S.A., Philip Morris
International, Inc., Altria Client Services LLC, and Philip Morris USA as the
real parties-in-interest. Pet. 5. Patent Owner identifies RAI strategic
IPR2020-00919
Patent 9,901,123 B2

3
Holdings, Inc., R.J. Reynolds Vapor Company, RAI Innovations Company,
and R.J. Reynolds Tobacco Company as the real parties-in-interest.
Paper 5, 1.
C. The ’123 Patent
The ’123 patent is titled “Tobacco-Containing Smoking Article,” and
relates to smoking articles “that produce aerosols incorporating components
derived from, or provided by, tobacco,” where the aerosols “are not
necessarily produced as a result of burning of tobacco.” Ex. 1001, code
(54), 4:45–49. Instead, the smoking articles produce such aerosols “as a
result of the application of heat upon tobacco or materials that are in contact
with tobacco.” Id. at 4:49–52. The ’123 patent explains that the smoking
articles “produce visible aerosols that are ‘smoke-like’ in nature, and exhibit
many of the sensory characteristics associated with those types of smoking
articles that burn tobacco.” Id. at 4:52–55.
Figure 3 of the ’123 patent is reproduced below.

Figure 3 depicts a longitudinal cross-sectional view of one embodiment of
an electrically powered, tobacco-containing smoking article described in
the ’123 patent. Ex. 1001, 8:31–32. Smoking article 10 includes outer
housing 20 that is “generally tubular in shape.” Id. at 19:46–49. Outer
housing 20 “possesses a distal end 13 and a mouth-end 15,” and “is adapted
IPR2020-00919
Patent 9,901,123 B2

4
to incorporate a type of cigarette 150” that includes tobacco segment 89 and
wrapping material 160. Id. at 27:36–44. Heating elements 70, 72, and 300
are powered by power source 36 and controlled by electrically powered
control components 50. Id. at 27:57–66. A portion of heating element 72 is
elongated and extends into tobacco segment 89 to “be in close contact with a
significant amount of substrate and aerosol-forming material within the
tobacco.” Id. at 28:36–43. “[S]ensor 60, in concert with certain control
circuitry within the controller 50, is preferably part of a puff-actuated
controller adapted for regulating current flow through one or more of the
resistance heating elements.” Id. at 20:63–67.
The ’123 patent explains that, during use, “[a]ir is drawn through the
air passageways or openings 32 in the cap 35 located at the distal end 13 . . .
and into the outer container 20.” Id. at 29:2–5. The drawn air passes
“through air passageway 45 that extends along the length of the power
source 36 and the electronic controls components 50,” through an air
passageway area within first heating element 70, air flow sensing region 60,
second heating element 72, and cigarette 150, and into mouth-end piece 120.
Id. at 29:5–11. Heat generated by heating elements 70, 72, and 300 acts on
the tobacco to volatilize components thereof and cause the components to be
entrained in the drawn air. Id. at 29:11–14. The ’123 patent teaches that
“[t]ypically, during relevant periods of use, those heating elements can
provide surface region temperatures of at least about 200º C., and often at
least about 300º C. Those temperatures typically do not exceed 600º C.,
often do not exceed about 500º C., and frequently do not exceed about
400º C.” Id. at 29:18–23.
IPR2020-00919
Patent 9,901,123 B2

5
D. Illustrative Claim
Petitioner challenges claims 27–30 of the ’123 patent. Pet. 1, 7–8.
Claim 27 is the only independent claim challenged, is illustrative of the
claimed subject matter, and is reproduced below.
27. An electrically-powered, aerosol-generating smoking
article comprising:
an electrical power source in the form of a battery within
a tubular outer housing having a mount-end and an end
distal to the mouth-end;
at least one electrical resistance heater powered by said
electrical power source, wherein at least a portion of the
resistance heating element is elongated and extending
downstream toward the mouth-end of the outer housing,
the elongated portion of the resistance heating element
positioned proximal to the center of the outer housing;
a controller within the tubular outer housing and adapted
for regulating current flow through the electrical
resistance heater; and
a cigarette-type device removably engaged with the
mouth-end of the tubular outer housing and comprising
a tobacco segment circumscribed by a wrapping
material and comprising a tobacco material and an
aerosol-forming material, wherein the elongated
portion of the resistance heating element extends into
the tobacco segment when the cigarette-type device is
engaged with the mouth-end of the outer housing, such
that during draw, aerosol-forming material can be
volatilized to produce a visible mainstream aerosol
incorporating tobacco components or tobacco-derived
components that can be drawn into the mouth of the user
of the smoking article.
Ex. 1001, 34:31–58.
IPR2020-00919
Patent 9,901,123 B2

6
E. The Asserted Grounds of Unpatentability
Petitioner asserts that the challenged claims are unpatentable on the
following grounds:
Claims Challenged Statutory Basis References
27–30 35 U.S.C. § 103 Morgan,1 Adams,2 Brooks3
27–30 35 U.S.C. § 103 Adams, Morgan, Brooks
27–30 35 U.S.C. § 103 Counts-962,4 Brooks
Pet. 7–8. Petitioner relies on the Declaration of Dr. Seetharama C. Deevi
(“the Deevi Declaration,” Ex. 1003) in support of its contentions.
II. ANALYSIS
A. Patent Owner’s Request for Discretionary Denial
Institution of an inter partes review under 35 U.S.C. § 314(a) is
discretionary. See 35 U.S.C. § 314(a) (stating “[t]he Director may not
authorize an inter partes review to be instituted unless the Director
determines that the information presented in the petition . . . shows that there
is a reasonable likelihood that the petitioner would prevail with respect to at
least 1 of the claims challenged in the petition” (emphasis added)); Cuozzo
Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2140 (2016) (“[T]he agency’s
decision to deny a petition is a matter committed to the Patent Office’s
discretion.”); SAS Inst. Inc. v. Iancu, 138 S. Ct. 1348, 1356 (2018)
(“[Section] 314(a) invests the Director with discretion on the question
whether to institute review . . . .” (emphasis omitted)); Harmonic Inc. v. Avid

1 U.S. Patent No. 5,249,586, issued Oct. 5, 1993 (Ex. 1005).
2 U.S. Patent App. Pub. No. US 2007/0102013 A1, published May 10, 2007
(Ex. 1007).
3 U.S. Patent No. 4,947,874, issued Aug. 14, 1990 (Ex. 1006).
4 U.S. Patent No. 5,144,962, issued Sept. 8, 1992 (Ex. 1008).
IPR2020-00919
Patent 9,901,123 B2

7
Tech., Inc., 815 F.3d 1356, 1367 (Fed. Cir. 2016) (“[T]he PTO is permitted,
but never compelled, to institute an IPR proceeding.”).
Patent Owner argues that we should exercise our discretion to deny
institution in this case under 35 U.S.C. § 314(a) because a pending
investigation at the International Trade Commission (“the ITC proceeding”)
will address the ’123 patent before a final written decision will issue, and a
district court case also is pending. Prelim. Resp. 60–65 (citing Apple, Inc. v.
Fintiv, Inc., IPR2020-00019, Paper 11 (PTAB Mar. 20, 2020)
(precedential))). Patent Owner argues that the ITC proceeding “will address
the ’123 patent—and specifically all the same grounds Petitioner asserts
here” before the deadline for issuing a final written decision in this
proceeding, and “a district court case is also pending, and waiting for the
ITC’s determination.” Id. at 60. According to Patent Owner, “evaluation of
each Fintiv factor . . . further confirms that denial of institution is
warranted.” Id. at 62. Petitioner argues that “[a] ‘holistic’ evaluation [of the
Fintiv factors] reveals that institution furthers the Board’s considerations of
‘efficiency, fairness, and the merits.’” Reply 2 (citing Fintiv, Paper 11 at 6).
Fintiv identifies the following factors that should be considered and
balanced when the patent owner raises an argument for discretionary denial
due to an earlier trial date:
1. whether the court granted a stay or evidence exists that one
may be granted if a proceeding is instituted;
2. proximity of the court’s trial date to the Board’s projected
statutory deadline for a final written decision;
3. investment in the parallel proceeding by the court and the
parties;
IPR2020-00919
Patent 9,901,123 B2

8
4. overlap between issues raised in the petition and in the parallel
proceeding;
5. whether the petitioner and the defendant in the parallel
proceeding are the same party; and
6. other circumstances that impact the Board’s exercise of
discretion, including the merits.
Fintiv, Paper 11 at 5–6. According to Fintiv, these factors relate to
“efficiency, fairness, and the merits” and require the Board to take “a
holistic view of whether efficiency and integrity of the system are best
served by denying or instituting review.” Id. at 6. Our analysis of the Fintiv
factors is set forth below.
1. Factor 1: Likelihood of a Stay
The ITC proceeding is not stayed, and neither party indicates that a
stay is likely. The district court, however, has stayed its proceedings as to
the ’123 patent until the determination in the ITC “becomes final.”
Ex. 2030. Although the stay of the proceeding in the district court allays
concerns about inefficiency and duplication of efforts as it relates to this
proceeding, the possibility exists for duplicative efforts with the ITC
proceeding. The record does not reflect that Petitioner requested a stay of
the ITC proceeding pending a decision on institution in this proceeding.
Thus, this factor neither weighs in favor of or against discretionary denial.
We continue our analysis and consider whether the ITC would render a Final
Determination before our final written decision in this proceeding (Fintiv
factor 2), and the degree of overlap of the proceedings (Fintiv factor 4). See
Fintiv, Paper 11 at 6 (explaining there is some overlap among the factors),
8–9 (counseling that “an earlier ITC trial date may favor exercising authority
to deny under NHK if the ITC is going to decide the same or substantially
IPR2020-00919
Patent 9,901,123 B2

9
similar issues to those presented in the petition,” and to consider “whether
the patentability disputes before the ITC will resolve all or substantially all
of the patentability disputes between the parties”).
2. Factor 2: Proximity of Trial Date to the Board’s Projected
Statutory Deadline
In the ITC proceeding, an evidentiary hearing is scheduled to begin on
January 25, 2021, with a May 14, 2021 deadline for the Initial Determination
and a September 15, 2021 due date for the Final Determination. Prelim.
Resp. 63 (citing Ex. 2029, 3–4). If we were to institute an inter partes
review, then the statutory deadline for our final written decision would be in
November, 2021. Patent Owner argues that this timing “strongly favors
denial of institution.” Id. at 62–63. Petitioner counters that, even though the
“final written decision is due after the ITC’s target date,” the final written
decision will issue “long before the district court will lift the stay and decide
validity.” Reply 7. We agree with Patent Owner that the ITC is likely to
reach a final determination ahead of the date of our final written decision.
Thus, this factor weighs in favor of exercising discretion to deny institution.
3. Factor 3: Investment in Proceedings
Patent Owner argues that “[t]he vast majority of all key ITC pre-
hearing events will occur even before the November 18, 2020 institution
decision deadline, including completion of: fact discovery, claim
construction and the Markman hearing, exchange of expert reports, and
expert discovery.” Prelim. Resp. 64. Petitioner contends that “summary
determination motions are not due until [after the Board’s institution
decision], and any investment in claim construction is irrelevant because no
IPR2020-00919
Patent 9,901,123 B2

10
claim terms from the ’123 patent are at issue in the ITC.” Reply 6 (citing
Ex. 2029, 1–2; Ex. 1038).
Fintiv provides the following guidance with respect to factor 3:
[I]f, at the time of the institution decision, the district court has
issued substantive orders related to the patent at issue in the
petition, this fact favors denial. Likewise, district court claim
construction orders may indicate that the court and parties have
invested sufficient time in the parallel proceeding to favor denial.
If, at the time of the institution decision, the district court has not
issued orders related to the patent at issue in the petition, this fact
weighs against exercising discretion to deny institution under
NHK.
Fintiv, Paper 11 at 9–10. Fintiv explains that “[t]his investment factor is
related to the trial date factor, in that more work completed by the parties
and the court in the parallel proceeding tends to support the arguments that
the parallel proceeding is more advanced, a stay may be less likely, and
instituting would lead to duplicative costs.” Id. at 10. In this case, although
there is no evidence that the ITC has issued any substantive orders related to
the ’123 patent, the evidence shows that a claim construction hearing will be
held in mid-November, and the parties have invested some effort leading up
to that hearing. Still, significant effort remains at this stage of the ITC
proceeding.
We also find that Petitioner’s diligence in filing the Petition less than
one month after Patent Owner filed its complaints in the ITC proceeding and
the related district court action weighs against exercising discretion to deny
institution. Fintiv, Paper 11 at 11 (“If the evidence shows that the petitioner
filed the petition expeditiously, such as promptly after becoming aware of
the claims being asserted, this fact has weighed against exercising the
authority to deny institution under NHK.”). Accordingly, Fintiv factor 3
IPR2020-00919
Patent 9,901,123 B2

11
weighs against exercising our discretion to deny institution. Fintiv, Paper 11
at 10.
4. Factor 4: Overlap of Issues
Patent Owner asserts that “Petitioner relies on the exact same
invalidity grounds in both forums,” and that Patent Owner “has asserted
infringement of every claim challenged here.” Prelim. Resp. 64 (citing
Ex. 1032, 17–18). Petitioner responds that Patent Owner’s arguments
regarding overlap are premised on Petitioner’s preliminary contentions at the
ITC, and its final contentions “do not raise the same grounds as the IPR.”
Reply 4 (citing Ex. 1036; Ex. 1037). For example, Petitioner states that
Counts-962 is not asserted as prior art in the ITC, and Adams “appears in the
ITC as a secondary reference, but only with different primary references.”
Id. Petitioner also argues that “the ITC proceeding will involve different
expert testimony and supporting evidence,” and “Petitioner’s diligence
makes it difficult, if not impossible, to fairly evaluate the amount of overlap
at this early date.” Id. at 5. Patent Owner counters that “there is still
significant overlap, which would cause duplication of effort.” Sur-Reply 7.
Fintiv factor 4 evaluates “concerns of inefficiency and the possibility
of conflicting decisions” when substantially identical prior art is submitted
in both proceedings. Fintiv, Paper 11 at 12. As Petitioner notes, it does not
assert Adams as a primary reference, and does not assert Counts-962 at all,
in the ITC proceeding. Reply 4; see also Sur-Reply 7 (chart comparing the
grounds at issue here and in the ITC). This lessens the concerns about
duplicative efforts and the possibility of conflicting decisions. See Fintiv,
Paper 11 at 12. Although there may be some overlap between the prior art
challenges asserted before the Board and in the ITC proceeding, the
IPR2020-00919
Patent 9,901,123 B2

12
challenges that do not overlap weigh marginally against exercising
discretion to deny institution.
5. Factor 5: Whether the Petitioner and the Defendant in the
Parallel Proceeding are the Same Party
Petitioner is a party in the ITC proceeding and the stayed district court
action. Prelim. Resp. 64. This factor weighs in favor of exercising our
discretion to deny institution.
6. Factor 6: Other Circumstances, Including the Merits
Patent Owner argues that “the Petition lacks merit for at least one
reason for each ground,” and “Section 325(d) and efficiency considerations
also favor denial.” Prelim. Resp. 65. Petitioner contends that “[t]he strong
merits . . . also favor institution.” Reply 6. Based on our review of the
arguments and evidence presented on the preliminary record, we find that
the merits do not tip the scale either in favor of or against exercising
discretion to deny institution. Accordingly, we find this factor is neutral.
7. Balancing the Fintiv Factors
We have considered the circumstances before us in view of the Fintiv
factors. Because our analysis is fact driven, no single factor is determinative
of whether we exercise our discretion to deny institution under § 314(a).
Evaluating the Fintiv factors with a holistic view of whether the efficiency
and integrity of the system are best served by denying or instituting review,
we determine that the proximity of the anticipated ITC hearing date,
combined with an anticipated final determination from the ITC prior to the
Board’s final decision on validity of claims in dispute between the same
parties, outweigh the relatively moderate investment to date in the ITC
proceeding, the Petitioner’s diligence in filing the Petition less than one
IPR2020-00919
Patent 9,901,123 B2

13
month after Patent Owner filed its complaints in the ITC proceeding and the
related district court action, and the lack of complete overlap in the prior art
asserted. Thus, we determine that the facts presented weigh in favor of
exercising discretion to deny institution in this instance.
III. CONCLUSION
Taking into consideration the arguments in the Petition, the
Preliminary Response, the Reply, the Sur-Reply, and the evidence of record,
we exercise our discretion to deny institution under 35 U.S.C. § 314(a).
IV. ORDER
In consideration of the foregoing, it is hereby
ORDERED that the Petition is denied as to all challenged claims, and
no trial is instituted.

IPR2020-00919
Patent 9,901,123 B2

14
PETITIONER:
Jonathan M. Strang
Matthew J. Moore
Inge A. Osman
Christopher W. Henry
LATHAM & WATKINS LLP
jonathan.strang@lw.com
matthew.moore@lw.com
inge.osman@lw.com
christopher.henry@lw.com

PATENT OWNER:

David M. Maiorana
Anthony M. Insogna
Kenneth S. Luchesi
Geoffrey K. Gavin
Joshua R. Nightingale
George N. Phillips
JONES DAY
dmaiorana@jonesday.com
aminsogna@jonesday.com
kluchesi@jonesday.com
ggavin@jonesday.com
jrnightingale@jonesday.com
gphillips@jonesday.com