Swedish Match North America LLC v. Modoral Brands Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Modoral Brands Inc. (North Carolina)
  • Defendant: Swedish Match North America LLC (Delaware), Pinkerton Tobacco Co. LP (Delaware), Nyz Ab (Sweden), and Helix Innovations GmbH (Switzerland)
  • Plaintiff’s Counsel: Jones Day
• Case Identification: 2:21-cv-05013, C.D. Cal., 09/29/2021
• Venue Allegations: Plaintiff alleges venue is proper because Defendants are subject to personal jurisdiction in the district, have directed business related to the patent-in-suit to the district, and have previously admitted that venue is proper in the district in related litigation.
• Core Dispute: Plaintiff seeks a declaratory judgment that its nicotine pouch products do not infringe Defendants' patent related to smokeless nicotine delivery systems and that the patent is invalid.
• Technical Context: The technology concerns tobacco-free oral nicotine pouches, which are marketed as a potentially less risky alternative to traditional combustible cigarettes.
• Key Procedural History: This declaratory judgment action was precipitated by a November 17, 2020 notice letter from Defendants' counsel to Plaintiff's parent company. The letter accused the "DRYFT" line of nicotine pouches, now owned and sold by Plaintiff, of infringing the patent-in-suit. The complaint also notes that Defendants have sued Plaintiff's predecessor-in-interest, Dryft Sciences, LLC, for infringement of the same patent.

Case Timeline

Date	Event
2011-03-29	’908 Patent Priority Date
2012-03-28	’908 Patent PCT Filing Date
2015-10-20	’908 Patent Issue Date
2020-09-15	Modoral enters Asset Purchase Agreement for Dryft assets
2020-11-17	Defendants send notice letter alleging infringement
2020-12-14	Original Complaint for Declaratory Judgment Filed
2021-06-17	Corporate restructuring results in Helix owning patent interest
2021-09-29	Amended Complaint for Declaratory Judgment Filed

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 9,161,908 - Pouch Containing Nicotine In Free Salt Form, issued October 20, 2015

The Invention Explained

• Problem Addressed: The patent's background section describes a challenge in developing smoking alternatives: nicotine in its "base" form is readily absorbed by the body but is chemically unstable, while nicotine "salts" are stable but are not easily absorbed through oral membranes (’908 Patent, col. 3:4-10). Prior art products like "snus" were also noted for releasing nicotine too slowly and incompletely (’908 Patent, col. 2:36-47).
• The Patented Solution: The invention is a smokeless oral pouch containing a powder with three key components: a stable "free nicotine salt," a "pH adjusting agent" (e.g., sodium carbonate), and a filler (’908 Patent, col. 4:63-65, Abstract). When a user places the pouch in their mouth, saliva permeates the pouch and dissolves the powder. The pH adjusting agent raises the local pH of the saliva, which converts the stable nicotine salt into its unstable but readily absorbable nicotine base form "in situ," just before absorption (’908 Patent, col. 3:11-16; col. 6:55-62). This design aims to combine the storage stability of a nicotine salt with the rapid bioavailability of a nicotine base.
• Technical Importance: This approach seeks to provide a product that is shelf-stable yet delivers nicotine rapidly and completely to the user, potentially mimicking the satisfaction from smoking without the associated harmful components of tobacco combustion (’908 Patent, col. 2:48-53).

Key Claims at a Glance

• The complaint seeks a declaratory judgment of non-infringement and invalidity of the ’908 patent generally, without specifying claims. The analysis focuses on the patent's sole independent claim, Claim 1.
• Claim 1 recites:
  • A product for oral delivery of nicotine comprising a powder core inside a water-insoluble pouch.
  • The powder contains: (a) at least one "free nicotine salt," (b) at least one "pH adjusting agent," and (c) at least one filler.
  • The pouch is permeable to saliva and the dissolved powder components.
  • The product, upon contact with water, yields a pH of at least 6.
  • The powder is "substantially free from adsorbed and/or absorbed nicotine."

III. The Accused Instrumentality

Product Identification

• The accused products are "Modoral's nicotine pouch products" (Compl. ¶35), which are sold under the "Velo" brand (Compl. ¶9). These products were acquired from Dryft Sciences, LLC, and were previously marketed under the "DRYFT" brand name (Compl. ¶¶ 11, 16).

Functionality and Market Context

• The products are described as "tobacco leaf-free," "smokeless," and "spit-free" oral nicotine pouches offered in various flavors and strengths (Compl. ¶9). The complaint positions them as providing adult consumers with a "wide range of potentially less risky products compared to traditional combustible cigarettes" (Compl. ¶10). No probative visual evidence provided in complaint. The complaint does not provide further technical detail on the specific formulation or mechanism of action of the accused products.

IV. Analysis of Infringement Allegations

As this is a complaint for declaratory judgment of non-infringement, it does not contain affirmative infringement allegations or a claim chart. The complaint makes a general assertion that "Modoral contends that it does not infringe, directly, or indirectly, any valid and enforceable claim of the ’908 patent" (Compl. ¶35) and seeks a judicial declaration to that effect (Compl. p. 9). The complaint does not provide a detailed, element-by-element narrative explaining its theory of non-infringement.

• Identified Points of Contention: Based on the claim language and the nature of the technology, the dispute over infringement will likely raise several key technical and legal questions for the court.
  • Scope Questions: A primary dispute may arise over the meaning of "free nicotine salt." The patent defines this as a salt that "does not form any combination with any other component in the product" (’908 Patent, col. 3:38-41). The factual analysis will question whether the nicotine compound in Modoral's Velo/DRYFT products meets this definition or if it is bound, complexed, or otherwise combined with other ingredients in a way that takes it outside the claim scope.
  • Technical Questions: A key question for the court will be whether the accused product's formulation includes a "pH adjusting agent" that functions as claimed. The analysis will require evidence of whether an ingredient in the accused product raises the local pH to at least 6 to convert a nicotine salt to a nicotine base, as required by Claim 1.
  • Scope Questions: The interpretation of the negative limitation "substantially free from adsorbed and/or absorbed nicotine" will be critical. The court will need to determine the scope of "substantially free." The plaintiff may argue its product contains nicotine that is adsorbed or absorbed to a degree sufficient to place it outside this limitation, while the defendant may argue the term allows for trace or incidental levels.

V. Key Claim Terms for Construction

• The Term: "free nicotine salt"

• Context and Importance: This term is at the heart of the invention. The patent's entire theory rests on starting with a stable "free" salt and converting it to a base upon use. The definition of "free" will be critical to determining infringement. Practitioners may focus on this term because the plaintiff's non-infringement position could depend on arguing its nicotine formulation is not "free" as the patentee defined it.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The patent states that by using a "suitable" salt, the "nicotine source is not volatile or prone of oxidation and thereby stable during storage eliminating the need for a combination" (’908 Patent, col. 3:41-45). A party could argue any stable salt not intentionally complexed for stability purposes is "free."
  • Evidence for a Narrower Interpretation: The patent explicitly defines "free" nicotine salt as one that "does not form any combination with any other component in the product" (’908 Patent, col. 3:38-41). It also contrasts the invention with prior art where nicotine is "bound to, adsorbed to, absorbed into, enclosed into or forming a complex" (’908 Patent, col. 2:60-63). This language supports a narrower definition that excludes any such interactions.

• The Term: "substantially free from adsorbed and/or absorbed nicotine"

• Context and Importance: This negative limitation is designed to distinguish the invention from prior art where nicotine was deliberately absorbed onto a carrier like cellulose (’908 Patent, col. 2:7-14). The term "substantially" introduces ambiguity that is a common focus of claim construction.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation (i.e., allowing for more incidental absorption): A party could argue that "substantially free" is a relative term meant only to distinguish from prior art that relied on absorption as a primary mechanism, and that incidental contact between nicotine and filler materials does not violate the limitation.
  • Evidence for a Narrower Interpretation (i.e., requiring almost no absorption): The patent claims a powder mixture where the salt is "free." A party could argue that any level of absorption beyond de minimis amounts would mean the salt is no longer "free," and thus the limitation requires a very strict separation of the nicotine salt from any absorptive carrier.

VI. Other Allegations

• Indirect Infringement: The complaint makes a blanket denial of any direct or indirect infringement under 35 U.S.C. § 271(a), (b), or (c) (Compl. ¶¶ 35, 37). It does not, however, plead specific facts to counter potential allegations of inducement or contributory infringement, such as facts related to product instructions or user knowledge.
• Willful Infringement: As a declaratory judgment plaintiff, Modoral does not face a direct allegation of willfulness in its own complaint. However, the complaint explicitly acknowledges receipt of a "formal notice" letter from Defendants' counsel on November 17, 2020, which alleged that "DRYFT infringes at least one claim of the ’908 patent" (Compl. ¶16). This admission of pre-suit knowledge could be used by the Defendants to support a potential counterclaim for willful infringement.

VII. Analyst’s Conclusion: Key Questions for the Case

• A core issue will be one of claim construction and technical fact: Does the specific chemical formulation of Modoral's Velo/DRYFT products fall within the patent’s definition of a "free nicotine salt," or is the nicotine bound or complexed in a way that places it outside the claim scope? This will require a detailed factual analysis of the accused product's composition.
• The case will also turn on the interpretation of a negative limitation: What is the scope of "substantially free from adsorbed and/or absorbed nicotine"? The court's construction of this term will be critical in determining whether the interaction between nicotine and other powder ingredients in the accused product constitutes infringement.
• Finally, a key evidentiary question will be one of functionality: Does an ingredient in Modoral's pouches function as a "pH adjusting agent" to convert a nicotine salt into a nicotine base by raising the local pH to at least 6, as required by the claims, or does the product achieve nicotine delivery through a distinct, non-infringing technical pathway?