Healthier Choices Management Corp. v. Philip Morris USA, Inc. et al, Civil Action No. 1:20-cv-04816-TCB (N.D. Ga., Apr. 14, 2023)

The Federal Circuit reversed-in-part, vacated-in-part, and remanded three related Northern District of Georgia decisions involving a patent directed at an electronic nicotine-delivery device.  The panel’s decision, authored by Judge Stoll, reverses and remands District Judge Timothy Batten’s orders granting the competitors’ motion to dismiss and the owner’s motion for leave to amend and vacates the earlier awarded attorneys’ fees, but denies the Plaintiff’s request for reassignment.

The case involves a single patent directed at an electronic nicotine-delivery device, more commonly known as a vape or an e-cigarette. See Healthier Choices Management Corp. v. Philip Morris USA, Inc. et al, Civil Action No. 1:20-cv-04816-TCB, Dkt. 1 (N.D. Ga. Nov 30, 2020).  Plaintiff Healthier Choices Management (“HCM”) sued Philip Morris for infringement of U.S. Patent No. 10,561,170 (“the ’170 Patent”).  Dkt. 1 ¶¶ 24-25.  The complaint alleges that Philip Morris’s IQOS system infringes at least claims 1 and 5 of the ’170 Patent.  The relevant disputed language claims a patented pipe system includes a heating element that initiates a combustion reaction.  Despite certain public statements included in exhibits to the complaint stating that the IQOS system is a “heat-not-burn” system, and thus combustion-less, Plaintiff asserts the IQOS system indeed initiates a combustion reaction by transmitting an electrical current from the battery to the heating blade, and thus infringes.  Dkt. 1 ¶¶ 26, 45.

At the district court level, Philip Morris successfully moved to dismiss for failure to state a claim under Rule 12(b)(6).  Philip Morris argued that an exhibit HCM attached to its original complaint conclusively demonstrated that its IQOS system did not initiate a combustion reaction, as required for patent infringement.  The exhibit in question cited to portions of a Modified Risk Tobacco Product Application (MRTPA) that Philips Morris submitted to the FDA.  According to Philip Morris, the cited portions conclusively confirmed its IQOS system is a so-called heat-not-burn system, thereby making HCM’s infringement claims implausible.  The District Court agreed, finding the information within the exhibit sufficient to prevent both the Complaint and the proposed Amended Complaint from pleading a plausible claim for infringement. 

On April 14, 2023, the Federal Circuit overturned the decision below and vacated the award of attorneys’ fees, but disagreed that the case should be reassigned.  Dkt. 85.  Reviewing the 12(b)(6) motion de novo, the Federal Circuit applied Eleventh Circuit law to find both the original and the proposed amended complaint sufficiently disavowed and contradicted the MRTPA’s statements about the IQOS system’s combustion reaction. 

“Eleventh Circuit law is thus clear: if a plaintiff’s complaint contains only a conclusory allegation that is directly contradicted by more concrete statements in an attachment to the complaint, the statements in the attachment will control. See, e.g., Griffin Indus., Inc. v. Irvin, 496 F.3d 1189, 1205 (11th Cir. 2007). In contrast . . . a plaintiff can sufficiently disavow statements in attachments to a complaint where the complaint makes a specific contention contradicting those statements.”

Dkt. 85, at 10 (citing Saunders v. Duke, 766 F.3d 1262 (11th Cir. 2014), Hoefling v. City of Miami, 811 F.3d 1271 (11th Cir. 2016), and Gill as Next Friend of K.C.R. v. Judd, 941 F.3d 504 (11th Cir. 2019)).

Reversing the lower court’s decision, the Federal Circuit found HCM made concrete statements sufficient to disavow the contradictory statements attached to its original complaint.  The Federal Circuit opinion points out that HCM in fact “explains in detail why it disagrees with Philip Morris’s characterization in the MRTPA of its IQOS system as combustion-less” in a way that is “specific enough” to disavow the MRTPA’s statements.  Dkt. 85, at 11.  As such, the opinion held the original complaint plausibly alleges a valid claim for patent infringement.  Id.  Turning to the amended complaint, the Court found an “even stronger case in favor of HCM” again based on the sufficiency of the plaintiff’s disavowal.  Id.

Although the lower court was persuaded by Philip Morris’s contention that the exhibit was so central to the complaint that it should have been treated as if attached to the amended version, the Federal Circuit was not.  Indeed, the Federal Circuit concluded that, regardless of the MRTPA’s statement’s centrality, HCM’s amended allegations were also specific enough to disavow it.  Regardless, the Court pointed out that HCM’s amended version removed the MRTPA exhibit and any citations to it. Id. at 13. In addition, the proposed amended complaint included new and explicit allegations regarding infringement and support from a technical expert not found in the original complaint.  The Court found this complete excision, together with specific allegations, sufficient to “expressly disavow or reject as untrue the relevant portions of the MRTPA.” Id. at 16.

Plaintiff’s winning streak ran out, however, with their request for reassignment to a different district court judge on remand.  There, the Federal Circuit weighed the Eleventh Circuit’s three factor test for reassignment, finding none favors HCM.  In particular, the court was unpersuaded that an earlier adverse ruling would severely impact Just Batten’s ability to rule fairly on remand. 

The order reminds us of the insignificance of reciting specific “magic words” to disavow statements.  Instead, “by including specific allegations that contradict that document” the prior statement may be sufficiently disavowed.  Here, the Plaintiff’s specific allegations, the technical expert’s declaration, and the complete removal of the document were enough to reject as untrue the disputed exhibit.  No “magic words” or incantation required.