“‘These specific, targeted allegations are sufficient to disavow the contradictory statements … in which Philip Morris self-reported that its products do not combust,’ wrote the CAFC.”
On Wednesday, April 12, in a precedential decision, the United States Court of Appeals for the Federal Circuit (CAFC) reversed a district court’s dismissal of a Florida vape company’s patent lawsuit against tobacco company Phillip Morris.
Healthier Choices Management (HCM) filed the appeal to the CAFC after a district court ruled in Phillip Morris’s favor, dismissing the patent infringement case. HCM alleged that Phillip Morris infringed on its patent for an electronic pipe, U.S. Patent No. 10,561,170.
The CAFC reversed the district court’s dismissal of the original complaint and its denial of HCM’s motion to amend the complaint. Additionally, the appeals court vacated the award of attorneys’ fees to Phillip Morris.
The main dispute between the two companies is whether one of Phillip Morris’s products initiates a combustion reaction. HCM alleged that the product in question from Phillip Morris does induce a combustion reaction, while Philip Morris claimed that the product is combustion-less.
If the product does involve combustion, it would bolster HCM’s case that Phillip Morris infringed on its patent.
However, the district court agreed with Phillip Morris that an attached exhibit from HCM proved that Phillip Morris’s product does not use combustion. Thus, there was no infringement found and the case was dismissed.
The district court also denied HCM’s motion to file an amended complaint.
As a result of the district court ruling, HCM appealed to the CAFC, arguing that the district court erred in dismissing the case, denying its motion to amend its case. HCM also asked that if the case be remanded that it be assigned to a different judge, and the company contested the attorney fees that Phillip Morris was awarded.
Before the CAFC, Phillip Morris argued that the district court’s dismissal of this case was proper because HCM tried to cherry-pick certain sentences from the exhibit it presented while disavowing others. Thus, the tobacco company asked the CAFC to uphold the decision because “the court must accept as true all statements contained in an exhibit that was attached to and relied on by the complaint absent the plaintiff’s express disavowal of any such statements.”
HCM presented Phillip Morris’s own characterization of the ‘combustion-less’ product as evidence that it did in fact include combustion. But, HCM disagreed with certain statements within the exhibit.
The CAFC disagreed with Phillip Morris’s argument, citing Eleventh Circuit precedent. According to the CAFC, the HCM complaint plausibly alleged that Phillip Morris’s testing found that combustion occurs. While the allegations are not conclusory, the CAFC found them to be specific enough while acknowledging that Phillip Morris claims elsewhere in the testing that it is combustion-less.
“These specific, targeted allegations are sufficient to disavow the contradictory statements … in which Philip Morris self-reported that its products do not combust,” wrote the CAFC.
Based on the CAFC’s decision to reverse the district court’s dismissal of the original complaint, it vacated the court’s award of attorneys’ fees.
In the CAFC’s first mention of HCM’s amended complaint, the appeals court wrote that it, “presents an even stronger case in favor of HCM.”
In its amended complaint, HCM removed references to the aforementioned contested report from Phillip Morris.
Instead, the CAFC wrote, “HCM’s proposed amended complaint includes allegations, more explicit than those in its original complaint, regarding how the IQOS system initiates combustion of at least a portion of the HeatStick.”
Nonetheless, Phillip Morris convinced the district court that the contested report was so central to HCM’s argument that the court should also deny its motion to file an amended complaint.
But the CAFC saw the case very differently. By including specific allegations that contradict that document and expressly removing all citations to that document, HCM’s amended complaint “expressly disavow[s] or reject[s] as untrue” Philip Morris’s claim that the IQOS system does not combust,” wrote the appeals judges.
The CAFC also determined that Phillip Morris’s testing cannot solely determine whether combustion and thus infringement occurred because the tobacco company very narrowly defines combustion.
“We determine that HCM’s amended complaint, like its original complaint, stated a valid claim for patent infringement notwithstanding consideration of the MRTPA exhibit,” wrote the CAFC.
While the CAFC’s ruling opens the case back up for litigation, Phillip Morris did notch one small win.
HCM asked the appeals court to assign a new judge to the case if remanded. The vape company argued the district judge would find it difficult to put aside his previous views and contested that reassignment would preserve the appearance of justice.
While the district judge used strong language in favor of the tobacco company, Phillip Morris argued that reassignment was not necessary because this does not prove that the judge would have difficulty putting aside previous views.
In the end, the CAFC sided with Phillip Morris and denied HCM’s request for reassignment. So, the case will go back to Judge Timothy C. Batten of the United States District Court for the Northern District of Georgia.
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