Legal Analysis | RJ Reynolds' Patent No. 202 337 Case: Chinese E-cig Companies May Face Risk of Being Picked Off One by One

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On June 11, 2024, Reynolds American filed an application with the US International Trade Commission (ITC) requesting a ban on 42 companies, including Chinese e-cigarette manufacturers, from selling e-cigarettes that infringe on its 202 patent in the United States.

With the defense date at the end of July rapidly approaching, Chinese e-cigarette companies, as usual, have not shown strong unity in facing the trend. If they continue to maintain a wait-and-see attitude and do not take the initiative to attack, they will face the risk of being beaten by competitors.

China's E-cig Industry Never Formed Unified Response Mechanism in Past 20 Years

Through recent communication with the companies being sued and analysis of similar cases in the past, it can be seen why Chinese e-cigarette companies have been frequently sued in the United States, yet have almost no public successful court rulings. There are several reasons for this phenomenon.

1. It is difficult for companies to unite in response. When facing patent litigation in the United States, companies vary in market share, brand ownership, and compliance levels; bosses have different levels of understanding; in addition, the professionalism of the legal and IPR departments selected by the responsible law firm, their understanding of the case itself, and the varying levels of knowledge on how to choose a law firm and litigation strategy all contribute to companies being unable to unite for defense, some even have a free-rider mentality. 
2. Some companies are abandoning defense strategies. With the intensification of competition in the US market and increasing enforcement of compliance laws, some Chinese e-cigarette manufacturing companies with small market shares in the United States have already prepared to give up defense in the face of high legal fees. 
3. Some companies are employing delaying tactics for litigation involving the US Patent US11925202B2, filed on March 31, 2023 and granted on March 12, 2024, citing the earliest priority of US7,726,320 filed on October 18, 2006 with an expiration date of October 18, 2026. Some companies plan to use delaying tactics to deal with the situation at minimal cost. However, if Raynolds initiates patent infringement compensation litigation in state courts, hefty compensation may be involved. 
4. Competition among companies is prevalent. Some e-cigarette companies believe that Raynolds's main target is a few large companies and not weaker brands. If the major brands are prohibited, the smaller brands still have room for some growth, including entering the US market through non-compliant means, which may increase sales. However, based on Raynolds's previous illegal trade 337 investigations and the attack in the second round of patent number 202, no company in this 337 investigation can stand alone. 
5. Lack of a mature legal team. Patent litigation has a distinct characteristic: inheritability of technical backgrounds. Over the years, multinational tobacco companies have formed long-term relationships with at least a few patent firms, whose lawyers are adept at patent technology and do not require assistance from company lawyers or IPR, saving on the cost of learning technology and communication with company IPR. 

Clearly, Chinese e-cigarette companies have limited reserves and investment in foreign law firms to serve themselves before encountering litigation. The analysis of patent infringement (FTO) in target markets is mainly handled by domestic teams.

So, if a strong American law firm is chosen to respond temporarily, but lacks experience in the e-cigarette industry, the price is usually higher because they need to spend a lot of time learning quickly in order to compete with Raynolds's lawyers.

In addition, companies lacking experience in patent litigation in legal departments are also lacking in areas such as choosing litigation strategies, briefing overseas lawyers, and controlling costs.

If Counterattack is not Strong Enough, ITC may Issue a Ban in about 6 Months

In Raynolds's complaint, it first takes a moral high ground by labeling e-cigarettes from China as "illegal", therefore any measures to stop this "illegal" activity are deemed as "just". Raynolds also mentions that the ITC's ban on e-cigarettes from China will not affect the "public interest", as e-cigarette consumers will not switch to smoking traditional cigarettes, and the production of VUSE is enough to meet consumer demand.

It is challenging for judges to be influenced by previous e-cigarette patent-related judgments, posing a significant challenge to defense attorneys, as Reynolds has already won a ban on IQOS entry into the US using a related patent. This has delayed IQOS's entry into the US market for at least 3 years.

The legal battle between the two major tobacco companies has lasted for over 5 years. Despite reaching a global settlement, BAT and PMI, BAT's heated tobacco product represented by Glo, does not have a competitive advantage compared to IQOS. IQOS is rapidly gaining market share. In this situation, BAT is targeting the vapor market, with Chinese e-cig companies being identified as their top competitor.

Therefore, Raynolds's ambition towards Vapor is largely reflected in the "202 Patent" 337 investigation case. It is anticipated that before it expires in 2026, Chinese e-cigarette companies will find it difficult to compromise or settle unless the defendant companies present a very strong defense to obstruct the injunction or force Raynolds to withdraw the lawsuit.

Efforts to Change the Judge's Perspective on 202 Patent Case

Lawyers' understanding of the industry from past patent litigation cases related to e-cigarettes (HNB) in the United States and Europe has positioned them at a certain height, shifting from a passive to an active stance. They have constructed a persuasive argument system that can convince judges, avoiding getting caught up in specific technical details disputes. This approach has proven to be very effective in influencing the final judgment of the judges.

In this case, the technology protected by Patent 202 is not authorized in other countries and regions, specifically designed as a "trap" for disposable large-mouth vapor products in the United States, intentionally flawed.

1. Find "contradictions" from past precedents.

As in previous cases, BAT successfully invalidated a key patent of PMI. Its lawyers launched an attack on PMI's divisional application at the outset.

It is apparent that in formulating its various Patents and their claims sets, Philip Morris has not been guided by what it considers its true invention (if any) to be. Instead, Philip Morris' motivation is to maximise its chances of a finding of infringement by mining its Grandparent Application for individual features, which it then crafts together in a myriad of different ways to create a claim set that (so far as possible) maps onto the resistiveheating glo device.

In approaching its patent portfolio in the way that it does, Philip Morris is taking advantage of the system of "divisionals". The divisionals system was put in place as a way to permit a patentee who has included more than one invention in its original application the opportunity to correct that and avoid the objection of multiplicity of inventions that would otherwise be raised by the patent office.

The system of divisionals allows a patentee who has filed a patent application to file further patent applications based on the original application and to claim the priority date of the original application. Provided that the original application is still pending (e.g., it has not proceeded to grant or been withdrawn), there is no limit to the number of divisional applications that the patentee can file. 

Interestingly, ALRAIA, along with PMI, counter-attacked in a lawsuit against Raynolds company for patent infringement.

Plaintiffs’ attempted enforcement of the Asserted Patents against ACS and PM USA is barred by one or more of the equitable doctrines, such as estoppel, acquiescence, waiver, and  unclean hands.

Apparently concerned by the commercial threat posed by IQOS, RJR is now attempting to stop IQOS with this case. But in its haste to stop IQOS, RJR committed two fatal errors. First, it asserted meritless patent claims. Second, it overlooked the fact that its own e-vapor products infringe multiple patents owned by ACS, PM USA and co-defendant PMP。

Denied. Plaintiffs filed for the ’542 patent in September 2019 and attempted to draft claims directed at the Accused Products, but the claims are far removed from the alleged invention possessed at the time of filing and described by the inventors when they filed the original patent application on August 9, 2011 and are therefore invalid for, among other things, lack of written description, anticipation, and obviousness.

In the PMI "556 Patent" case, Raynolds challenged the validity of the patent by arguing that using materials with different apertures to "optimize the performance of aerosol flow in a device" (the main dispute being the diversion of e-liquid) is a routine technical means for someone with ordinary skill in the field, according to comparative document teachings. The judge agreed with this opinion.

Due to space constraints, we are unable to delve into the specific details of the cases. Patent 202 also includes issues such as estoppel, unclean hands, lack of written description, obviousness, as mentioned in the aforementioned precedents.

2. The defense of non-infringement may not have an opportunity, but that does not mean it is being completely abandoned.

In patent litigation and invalidation proceedings, lawyers who thoroughly understand the technical features of the product and the patent in question will undoubtedly force the patentee to explain the claims, and can only do so in conjunction with the specification and drawings. At this point, positioning oneself from the perspective of "a person skilled in the art" and attacking preparedness in terms of unclear claims, lack of support for claims in the specification, and obviousness of claims can be effective.

The "202 Patent" is almost tailor-made for disposable e-cigarettes, making it difficult for companies involved in lawsuits to argue against infringement. Some industry professionals even believe that Raynolds's monopoly on the underlying principles of vapor in the patent is invalid because they are not familiar with Raynolds and PMI's early reserves, competition, and evolution in heating technology, including the focus of litigation disputes in the past five years.

The protection scope of Claim 1 of Patent No. 202 is very broad, covering almost all e-cigarettes that store e-liquid in porous materials such as cotton (sponge) and aerosolize it through capillary action to the heating element.

The claim 1 of patent number 202 states the following:

Feature A: A smoking article that generates aerosol, powered by electricity, consisting of an outer housing with two ends and a mouthpiece at one end.

However, another study published this year found that using e-cigarettes does not increase a person's chance of quitting smoking or prevent relapse. It was also found to be less effective than nicotine gum and other replacement therapies. Other research suggests that young people are unlikely to start using tobacco-flavored e-cigarettes. Most children start with candy, fruit, and mint flavors.

An electric, aerosol-generating smoking device, including:

- A casing with two ends; a mouthpiece located at one end;

Feature B: An electrical power source arranged within the outer casing; an electrical resistance heater positioned within the outer casing, the electrical resistance heater being configured for electrical connection with the electrical power source.

- A power source set within the casing; a resistance heater located in the casing, which is configured to be electrically connected to the power source.

Feature C: A storage compartment defined within the outer casing, the storage compartment being configured for storage of a liquid aerosol-forming material and arranged such that the liquid aerosol-forming material can be wicked into contact with the electrical resistance heater to volatilize the liquid aerosol-forming material.

- A storage chamber within the casing, designed for holding a liquid that forms aerosols, and set up so that this liquid can be drawn into contact with the resistance heater by capillary action to vaporize the aerosol-forming liquid.

Feature D: An air passageway through at least a part of the casing, arranged so that air drawn into the casing combines with the volatilized liquid aerosol-forming material to produce an aerosol that can be inhaled through the mouthpiece by the user of the electric, aerosol-generating smoking article; and

- An airway through a portion of the casing, designed so that air pulled into the casing mixes with the vaporized liquid to create an aerosol, which can be drawn into the user's mouth through the mouthpiece.

Feature E: A controller configured to activate current flow through the electrical resistance heater in response to a draw on the electric, aerosol-generating smoking article.

- A controller designed to activate the flow of current through the resistance heater in response to a user's draw on the device.

For this case, from the perspective of the product involved and the patent in question, there is no technical difficulty for a patent attorney. However, considering comprehensive defenses, including invalidation, if one can have a clear understanding of the electronic cigarette litigation and the trajectory of technological development, the response will undoubtedly be more efficient. Especially in terms of the generalization of claims and the relationship between the implementation examples, the clarity and implementability of the scope of protection, different levels of understanding will lead to different perspectives on the issues.

3. Patent invalidation could become a lifeline.

RJ Reynolds' lawsuit this time has made many enemies, and its patent No. 202 will also become a target. If various companies commission different law firms, and many companies adopt the strategy of invalidation defense, unless a team of lawyers achieves the best invalidation attack, it will only bring fragmented chaos to the judge, that is, if the lawyers cannot achieve the most concise and shortest proof path, it will ultimately backfire, making the judge more convinced of the patentability of patent No. 202.

The most critical features of patent No. 202, C+D, as long as the lawyers are familiar enough with the technological development trajectory of atomization and heating (whether it is HNB or Vapor, the essence is non-combustion without oxygen), and the detailed features of different products, simplify them, and use their own spears to attack their shields, they can be effective. In addition, looking at the existing technology of the earliest electronic cigarettes, it is not only the C+D features that may lack novelty in the claims of patent No. 202.

Conclusion

RJ Reynolds' patent No. 202, Section 337 case, targets dozens of companies from various countries, determined to succeed. It is different from the patent litigation between it and PMI in the past. This time, it is entrusted to JONES DAY (Zhongda), a century-old law firm known for litigation. The entrustment includes not only patent lawyers but also lawyers in the field of trade regulation. Judging from the content of the application and the cited documents, they have prepared more content on illegal trade, which also makes up for the lack of patent confidence.

The patent litigation in the US electronic cigarette market will continue, and the case of RJ Reynolds' patent No. 202 is undoubtedly the most typical example, and it is also an opportunity for Chinese electronic cigarette companies to fight back. If they cannot win the lawsuit, and let RJ Reynolds taste the sweetness and follow up, electronic cigarette companies will continue to be passive and beaten. Only by turning defeat into victory like the "Hainengda case" can we win the respect of our opponents!

About the Author 

Counsellor Tang Shunliang is a partner at Tianyuan Law Firm and has extensive experience in the field of tobacco and e-cigarette law. With over ten years of professional experience in patent disputes, legal legislation, and compliance, Tang Shunliang has a deep understanding of the technology and patent landscape of tobacco and e-cigarettes. He has successfully represented clients in numerous domestic and international compliance issues, particularly achieving significant accomplishments in complex patent infringement disputes. Additionally, he has served as a legal advisor for well-known Chinese e-cigarette and tobacco companies for a long period of time.