IP Law Daily, PATENT—Fed. Cir.: District court erred in dismissing patent infringement complaint against Philip Morris, (Apr 12, 2023)

By Patricia K. Ruiz, J.D.

Philip Morris argued the complaint failed to disavow an exhibit’s repeated statements as to combustion.

A patent-holder sufficiently pled its allegations of patent infringement involving an electronic nicotine-delivery device, held the U.S. Court of Appeals for the Federal Circuit, vacating the lower court’s dismissal of the complaint. The court found that the patent-holder sufficiently disavowed statements within an included exhibit, which stated that the allegedly infringing product did not initiate a combustion reaction (Healthier Choices Management Corp. v. Philip Morris USA, Inc., April 12, 2023, Stoll, K.).

’170 patent. Healthier Choices Management Corp. (HCM) sued Philip Morris USA, Inc., and Philip Morris Products S.A. (Philip Morris, collectively) for allegedly infringing at least one claim of U.S. Patent No. 10,561,170, which is directed to an electronic nicotine-delivery device. Two independent claims of the ’170 patent are relevant to the instant appeal: (1) Claim 1: An electronic pipe comprising: a battery, an electronic module, a combustible material reservoir, and a heating element fixed in the combustible material reservoir; combustible material loaded into the combustible material reservoir; wherein the pipe is structured to transmit an electric current from the battery to the heating element, the heating element initiating a combustion reaction in the combustible material reservoir; and (2) Claim 5: A method of at least partially combusting a combustible material for inhalation, comprising: providing an electronic pipe comprising a battery, an electronic module, a combustible material reservoir, and a heating element fixed in the combustible material reservoir; loading the combustible material into the combustible material reservoir; activating the electronic pipe such that the electric current is transmitted from the battery to the heating element; initiating, by way of the heating element, a combustion reaction in the combustible material reservoir, the combustion reaction at least partially combusting the combustible material.

Alleged infringement. Philip Morris manufactures an electronic nicotine-delivery system, the iQOS system, which heats tobacco filled sticks wrapped in paper (HeatSticks) to generate a nicotine-containing aerosol. It markets the system as a “heat-not-burn” system, meaning the tobacco is heated at a low enough temperature that the tobacco does not burn, therefore, Philip Morris argued, preventing combustion. HCM alleged in its original complaint that the IQOS system infringes Claims 1 and 5 of the ’170 patent, asserting that the IQOS system does in fact initiate a combustion reaction that at least partially combusts the HeatStick by transmitting an electrical current from the battery to the heating blade in the IQOS system. Philip Morris moved to dismiss the complaint for failure to state a claim, arguing that an exhibit HCM attached to its original complaint—a Modified Risk Tobacco Product Application (MRTPA) submitted by Philip Morris to the FDA—conclusively demonstrated the IQOS system does not initiate a combustion reaction, as required by the asserted claims. The district court agreed and granted the motion to dismiss. HCM moved for leave to file an amended complaint, attaching its amended complaint and an expert declaration. The district court determined HCM did not plausibly allege in either the original or the amended complaint that the IQOS system initiates a combustion reaction, as required by the claims, and denied HCM’s motion. The district court granted a motion by Philip Morris to recover attorney’s fees.

Documents attached to complaint. HCM appealed, arguing (1) the district court erred in dismissing its original complaint; (2) the district court erred in denying HCM’s motion for leave to amend its complaint; and (3) if remanded, the case should be reassigned to a different district judge. HCM also challenged the award of attorney’s fees. Philip Morris argued that, under Eleventh Circuit precedent, the court must accept as true all statements contained in an exhibit attached to and relied on by the complaint absent the plaintiff’s express disavowal of any such statements. It argued HCM failed to disavow the MRTPA’s repeated statements that the IQOS system is a heat-not-burn system and thus that there is no combustion.

Under Eleventh Circuit law, a district court can consider exhibits attached to a complaint in ruling on a motion to dismiss, and if the allegation of the complaint about a particular exhibit conflict with the contents of the exhibit itself, the exhibit controls. Thus, this occurs when a plaintiff attaches a document to his complaint and his allegations about what the document is or says contradict the document itself. However, this does not mean that factual assertions on the same subject made in a complaint always control, such as when the plaintiff attaches a report to the complaint the plaintiff alleges is false or when a complaint contains specific, well-pleaded allegations that either do not appear in the attached exhibit or that contradict conclusory statements in the exhibit. The Eleventh Circuit has also held that a conclusory, general allegation in the complaint might not suffice in the face of specific, material, uncontroverted facts stated in an exhibit. However, the court noted that the Eleventh Circuit has never required a plaintiff seeking to disavow statements in an attachment to its complaint recite certain magic words to do so.

Allegations were sufficient. Applying this precedent, the court found that HCM’s original and amended complaints recite sufficient allegations to raise a facially plausible case of patent infringement. The allegations in its original complaint specifically rejected the notion that the IQOS system does not initiate a combustion reaction and explains in detail why it disagrees with Philip Morris’s characterization in the MRTPA of its IQOS system as combustion-less. The complaint plausibly alleges that Philip Morris’s own testing concludes that the “presence of 3% of the two important combustion markers . . . indicates that at least some combustion occurs.” These allegations are neither general nor conclusory, the court found, and are specific enough under Eleventh Circuit precedent to disavow the MRTPA’s statements that the IQOS system does not initiate a combustion reaction. The court held that, in its original complaint, HCM stated a valid claim for patent infringement under Eleventh Circuit precedent notwithstanding attachment of the MRTPA exhibit.

The court found that HCM’s amended complaint presents an even stronger case in favor of HCM, as it 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. It also included a declaration form a technical expert. The allegations in the proposed amended complaint and attached expert report are specific enough to disavow the MRTPA’s statements regarding no combustion and raise a plausible allegation of patent infringement. The court reversed the district court’s dismissal of the original complaint and its denial of HCM’s motion for leave to amend its complaint and vacated the award of attorney’s fees.

The Case is No. 22-1268.

Attorneys: Barry P. Golob (Cozen O'Connor P.C.) for Healthier Choices Management Corp. Adam Banks (Weil, Gotshal & Manges LLP) for Philip Morris USA, Inc. and Philip Morris Products S.A.

Companies: Healthier Choices Management Corp.; Philip Morris USA, Inc.; Philip Morris Products S.A.

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