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The Federal Circuit on Monday scrutinized R.J. Reynolds Vapor Co.'s challenge to a $95 million damages award in a dispute over Philip Morris’ vape patents, grilling the company on its claim that the sum lacks evidentiary support.

R.J. Reynolds' attorney, Jason Burnette of Jones Day, argued before the three-judge panel that Altria Client Services LLC's damages expert manipulated data from unrelated licensing agreements to inflate the award. According to Burnette, a correct interpretation of those agreements would peg the royalty rate at 0.21%, amounting to $3.67 million, instead of the 5.25% rate that led to the $95 million figure.

But U.S. Circuit Judge Sharon Prost pushed back, suggesting the jury may have been justified in accepting the higher rate due to the evidence presented. "They’ve got 5.25, maybe it’s shaky," she said, but emphasized that Reynolds failed to offer a robust alternative.

“It’s not Reynolds’ burden to prove the royalty rate,” Burnette countered, maintaining that Altria bore the responsibility to substantiate its claim with substantial evidence.

Mark Perry of Weil Gotshal & Manges LLP, representing Altria, underscored that Reynolds raised no objections during the trial to the damages testimony. He also defended the 5.25% rate, stating it was supported by both licensing agreements and other trial evidence.

The dispute centers on three Altria patents for pod-style vapes, which the jury found R.J. Reynolds had infringed with its Vuse Alto product. While Altria never launched its own product, it accused Reynolds of copying its design to produce a top-selling device.

Reynolds also argued in its briefs that the patents were invalid due to obviousness, citing a Juul vape product, and that evidence failed to substantiate infringement. These arguments, however, did not feature prominently in Monday’s proceedings.

Complicating the case further, Reynolds recently secured a sublicense to the disputed patents through Juul, which itself licenses the patents from Altria. The company argued that this sublicense nullifies its liability for ongoing royalties. However, U.S. District Judge William Osteen rejected this argument last Friday, ruling that the sublicense postdates the infringement and damages findings.

Although the ruling, which remains sealed, leaves unresolved questions about ongoing royalties, attorneys for both sides told the Federal Circuit that the decision does not alter the substance of the appeal.

The patents at issue are U.S. Patent Nos. 10,299,517; 10,485,269; and 10,492,541.

Sitting on the Federal Circuit panel were U.S. Circuit Judges Sharon Prost, William Bryson, and Jimmie Reyna.

Representing R.J. Reynolds are attorneys from Jones Day and Womble Bond Dickinson, while Altria is represented by a team from Weil Gotshal & Manges LLP.

The case is Altria Client Services LLC v. R.J. Reynolds Vapor Co., case number 23-1546, in the U.S. Court of Appeals for the Federal Circuit.