Philip Morris Products S.a. v. Rai Strategic Holdings, Inc.

N OTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
PHILIP MORRIS PRODUCTS S.A.,
Appellant
v.
RAI STRATEGIC HOLDINGS, INC.,
Appellee
______________________
2022-1846
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. IPR2020-
01602.
______________________
Decided: September 14, 2023
______________________
G ABRIEL K. BELL , Latham & Watkins LLP, Washing-
ton, DC, argued for appellant. Also represented by
MAXIMILIAN A. G RANT , J ONATHAN M. STRANG, D AVID
ZUCKER; T AKASHI O KUDA, New York, NY; G REGORY
SOBOLSKI, San Francisco, CA.
G REGORY A. CASTANIAS , Jones Day, Washington, DC,
argued for appellee. Also represented by AMELIA A.
D EG ORY ; ROBERT BREETZ, D AVID B. COCHRAN, K ENNETH
Case: 22-1846 Document: 38 Page: 1 Filed: 09/14/2023

-- 1 of 6 --

PHILIP MORRIS PRODUCTS S. A. v.
RAI STRATEGIC HOLDINGS, INC.
2
L UCHESI, D AVID MICHAEL MAIORANA , Cleveland, OH;
J OSHUA R. N IGHTINGALE, Pittsburgh, PA.
______________________
Before CHEN, STOLL , and CUNNINGHAM , Circuit Judges.
CHEN, Circuit Judge.
Philip Morris Products, S.A. (Philip Morris) appeals an
inter partes review (IPR) final written decision of the Pa-
tent Trial and Appeal Board determining Philip Morris did
not meet its burden of proving certain claims of U.S. Patent
No. 9,901,123 (’123 patent) unpatentable under 35
U.S.C. § 103. See Philip Morris Prods., S.A. v. RAI Strate-
gic Holdings, Inc., No. IPR2020-01602, 2022 WL 1022576
(P.T.A.B. Mar. 30, 2022) (Board Decision). Contrary to
Philip Morris’s arguments, the Board’s decision in this case
did not contradict its findings in a prior Board decision, nor
did the Board legally err in its motivation to combine anal-
ysis. Because substantial evidence otherwise supports the
Board’s findings, we affirm.
BACKGROUND
The ’123 patent, assigned to RAI Strategic Holdings,
Inc. (Reynolds), generally relates to tobacco smoking de-
vices, including electronic cigarettes. ’123 patent col 4
ll. 42–45, col. 5 ll. 7–10. In 2016, before the present IPR
proceeding for the ’123 patent was initiated, R.J. Reynolds
Vapor Company (Reynolds VC), a sister corporation of
Reynolds, filed an IPR petition against another company’s
electronic cigarette patent, U.S. Patent No. 8,365,742 (’742
patent), challenging several claims over a combination of
Hon1 and Whittemore.2 Specifically, Reynolds VC argued
that a skilled artisan would have replaced Hon’s heating
element with Whittemore’s wick and heating wire. The
1 Chinese Patent No. CN 2719043.
2 U.S. Patent No. 2,057,353.
Case: 22-1846 Document: 38 Page: 2 Filed: 09/14/2023

-- 2 of 6 --

PHILIP MORRIS PRODUCTS S. A. v.
RAI STRATEGIC HOLDINGS, INC.
3
Board disagreed and upheld the claims, concluding that
Reynolds VC had failed to show Hon’s heating efficiency
needed improvement. The Board also found that a compar-
atively more plausible substitution would have been to re-
place Hon’s entire atomizer, as opposed to Reynolds VC’s
proposal to replace only Hon’s heating element.
In the present case, Philip Morris filed an IPR petition
against several claims of Reynolds’s ’123 patent. While
Philip Morris’s petition, like Reynolds VC’s above-de-
scribed IPR, argued that a skilled artisan would have been
motivated to combine Hon and Whittemore, Philip Morris
proposed a different combination of these references, by re-
placing Hon’s entire atomizer with Whittemore’s wick and
heating wire. The Board, however, found unpersuasive
Philip Morris’s argument that a skilled artisan would have
been motivated to simplify Hon in the manner Phillip Mor-
ris proposed.
Philip Morris timely appealed the Board’s decision to
this court, arguing that the decision was arbitrary and ca-
pricious because (1) it contradicts the reasoning in the ’742
patent IPR decision, (2) there was legal error in the Board’s
motivation to combine analysis, and (3) the decision was
otherwise not supported by substantial evidence. We have
jurisdiction under 28 U.S.C. § 1295(a)(4)(A).
D ISCUSSION
As to Philip Morris’s first argument, we see no contra-
diction between the Board’s analysis of Hon and Whitte-
more and its earlier decision on the ’742 patent. In the
prior IPR, the issue before the Board was whether a skilled
artisan would have replaced Hon’s heating element with
Whittemore’s wick and heating wire. The patent owner’s
overarching argument there was that a skilled artisan
would not have combined Hon and Whittemore at all. See
J.A. 2801 (patent owner arguing that Hon and Whittemore
“have different modes of operation, and in at least some
ways, Hon[] is more thermally efficient.”). In this context,
Case: 22-1846 Document: 38 Page: 3 Filed: 09/14/2023

-- 3 of 6 --

PHILIP MORRIS PRODUCTS S. A. v.
RAI STRATEGIC HOLDINGS, INC.
4
we view the Board in that case as agreeing with the patent
owner’s expert testimony that a more plausible “simple
substitution,” compared to the petitioner’s proposed substi-
tution, would be to replace Hon’s entire atomizer (because
replacing only Hon’s heating element would lead to a re-
dundant design). See J.A. 2806–07. But the Board there
did not go so far as to find that replacing Hon’s entire at-
omizer with Whittemore’s wick and heating wire would
have been an obvious simple substitution under KSR Inter-
national Co. v. Teleflex, Inc., 550 U.S. 398 (2007). Moreo-
ver, that particular combination theory was not before the
Board in the prior IPR, as no party made that argument.
In re Magnum Oil Tools Int’l, Ltd., 829 F. 3d 1364, 1381
(Fed. Cir. 2016) (holding that the PTO does not have au-
thority to “raise, address, and decide unpatentability theo-
ries never presented by the petitioner”).
In contrast, in the presently appealed IPR, the issue
before the Board was whether a skilled artisan would have
replaced Hon’s entire atomizer with Whittemore’s wick and
heating wire. The Board thus analyzed a different combi-
nation theory, with expert testimony3 specifically directed
to this combination. Because the Board did not conclude in
the prior IPR that replacing Hon’s atomizer would have
been obvious, it was not arbitrary and capricious for the
Board to conclude that Philip Morris did not meet its bur-
den here.
3 We similarly find no abuse of discretion by the
Board in relying on Reynolds’s expert in the presently ap-
pealed IPR. Even considering the statements made by
Reynolds VC’s expert in the prior IPR, it is evident that
each expert was testifying about a distinct modification of
Hon (i.e., replacing Hon’s heating element versus replacing
Hon’s entire atomizer), and thus the respective expert
statements must be understood to be referring to the spe-
cific combination at issue.
Case: 22-1846 Document: 38 Page: 4 Filed: 09/14/2023

-- 4 of 6 --

PHILIP MORRIS PRODUCTS S. A. v.
RAI STRATEGIC HOLDINGS, INC.
5
Philip Morris also argues, separate and apart from the
prior IPR decision, the Board’s finding of no motivation to
combine Hon and Whittemore is based on legal error and
the decision otherwise lacks substantial evidence. We dis-
agree. Philip Morris claims the Board allegedly required it
to prove that its proposed combination was superior to
other prior art combinations. We do not think that is a fair
reading of the Board’s decision. Philip Morris argued to the
Board that a skilled artisan would be motivated to first re-
move Hon’s piezoelectric element, a simplification Hon
teaches. But Philip Morris further asserted that once the
piezoelectric element was removed, there would be diffi-
culty in forming an aerosol and thus a skilled artisan would
further “simplify” Hon by removing Hon’s entire atomizer
and replacing it with Whittemore’s wick and heater. Since
the proposed combination was based on a purported sim-
plification of Hon beyond what Hon itself teaches, we inter-
pret the Board’s statement that “Petitioner does not show
persuasively that replacing Hon’s atomizer with Whitte-
more’s wick and heater would have simplified the device as
compared with the modifications Hon expressly teaches” as
determining Philip Morris had not proven the obviousness
theory that it had advanced. Board Decision, 2022 WL
1022576, at *12. We do not view the Board’s statement as
a rejection of the combination merely because Hon itself
teaches other simplifications distinct from the proposed
combination.
We also conclude that substantial evidence supports
the Board’s decision to reject Philip Morris’s proposed com-
bination, because the Board reasonably relied on expert
testimony and its own analysis of the R.J. Reynolds To-
bacco Co. (RJR) teardown report.4 Specifically, the Board
4 The RJR teardown report documents a disassem-
bling of a Ruyan device, which is an implementation of
Hon.
Case: 22-1846 Document: 38 Page: 5 Filed: 09/14/2023

-- 5 of 6 --

PHILIP MORRIS PRODUCTS S. A. v.
RAI STRATEGIC HOLDINGS, INC.
6
relied on expert testimony to find that Hon’s heater pro-
duces more aerosol at a higher efficiency while using less
power than Whittemore’s wick and heater design, and
found that nothing in the RJR teardown report supports a
view that the Ruyan device (an implementation of Hon)
failed to produce sufficient aerosol that would warrant re-
placement of the atomizer. See Board Decision, 2022 WL
1022576, at *12–14. This is substantial evidence. To the
extent Philip Morris argues that the Board failed to con-
sider record evidence of the alleged cost and simplicity of
Whittemore’s wick and heater or testimony regarding rea-
sonable expectation of success, we do not believe the Board
erred in dismissing these arguments as conclusory and
lacking factual substantiation.
We have considered Philip Morris’s remaining argu-
ments and find them unpersuasive. For the foregoing rea-
sons, we affirm.
AFFIRMED
Case: 22-1846 Document: 38 Page: 6 Filed: 09/14/2023

-- 6 of 6 --