FENNEMORE CRAIG, P.C. Andrew M. Federhar (Bar No. 6567) 2 Ray K. Harris (Bar No. 7408) afederha@fclaw.com 3 rharris@fclaw.

com 2394 East Camelback Road, Suite 600 4 Phoenix, AZ 85016 (602) 916-5301 / (602) 916-5972 (Fax)
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LATHAM & WATKINS LLP Perry J. Viscounty* Ryan R. Owens* 7 perry.viscounty @lw.com ryan.owens@lw.com 8 650 Town Center Drive, 20th Floor Costa Mesa, CA 92626-1925 9 (714) 540-1235 / (714) 755-8290 (Fax) *Pro hac vice applications pending
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Attorneys for Plaintiff NJOY, Inc. UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA NJOY, INC., a Delaware corporation, Plaintiff, v. Civil Action No. Complaint For: (1) Patent Infringement (35 U.S.C. 271) (2) Trade Dress Infringement (15 U.S.C. 1125) Demand For Jury Trial

VICTORY ELECTRONIC CIGARETTES CORPORATION, a Nevada corporation; 19 VICTORY ELECTRONIC CIGARETTES INC., a Nevada corporation,
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Defendants.

Plaintiff NJOY, Inc. (NJOY), for its Complaint against Victory Electronic Cigarettes Corporation and Victory Electronic Cigarettes, Inc. (collectively, Defendants), alleges as follows: THE PARTIES 1. NJOY is a Delaware corporation with its principal place of business at

15211 North Kierland Blvd., Suite 200 Scottsdale, AZ 85254.

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2.

On information and belief, Victory Electronic Cigarettes Corporation is a

Nevada corporation with its principal place of business at 1880 Airport Drive, Ball Ground, GA 30107. 3. On information and belief, Victory Electronic Cigarettes, Inc. is a Nevada

corporation with its principal place of business at 1880 Airport Drive, Ball Ground, GA 30107 and it is a wholly owned subsidiary of Victory Electronic Cigarettes Corporation. 4. On information and belief, Defendants were the agents of each other and, at

all times mentioned, acted within the course and scope of such agency. JURISDICTION AND VENUE 5. This Court has subject matter jurisdiction over NJOYs claims for patent

and trademark infringement pursuant to 15 U.S.C. 1121(a) and 28 U.S.C. 1331 and 1338(a). 6. On information and belief, this Court has general and specific personal

jurisdiction over Defendants because (1) Defendants have (a) conducted substantial business in the State of Arizona; (b) derived financial benefits from residents of the State of Arizona, including by marketing and selling infringing products to residents of the State of Arizona and otherwise placing infringing products into the stream of commerce, with the knowledge or understanding that such products are sold in the State of Arizona, including within this district; (c) purposely availed themselves of the privilege of conducting business within the State of Arizona; and (d) sought protection and benefits from the laws of the State of Arizona; and (2) the causes of action arise directly from the Defendants business contacts and other activities in the State of Arizona. 7. Venue is proper in this judicial district under 28 U.S.C. 1391 and 1400

because Defendants have, among other things, committed infringing acts in this district and generally conduct business in this district. NATURE OF ACTION 8. Electronic cigarettes, which allow users to inhale a mixture of nicotine,

carriers, and flavorings and exhale vapor, are rapidly gaining popularity in the United
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States. Industry analysts anticipate electronic cigarette sales will reach $2 billion this year within the United States, up from $500 million in 2012. 9. NJOY, the leading independent electronic cigarette company in the United

States, has remained on the forefront of the industry with its best-in-class and patented electronic cigarettes and unique product packaging and branding. 10. NJOY's leading product is its NJOY King Cigarette (NJOY Cigarette),

which embodies various forms of intellectual property that NJOY has developed and vigorously protected. For example, NJOY has (1) obtained a patent for the technology used to simulate the natural burn of a traditional cigarette (U.S. Patent No. 8,539,959 (the 959 Patent)); and (2) developed substantial common law trade dress rights in the NJOY Cigarettes product packaging (the NJOY Case), which consumers immediately recognize as indicating the source of the products contained therein as originating from NJOY. 11. Beyond developing the innovative NJOY Cigarette and NJOY Case, NJOY

has garnered widespread media acclaim and developed a deep connection with its loyal consumer base. For example, NJOY has received numerous industry awards and countless reviewers have raved about NJOYs high quality and paradigm-shifting NJOY Cigarette and NJOY Case. Further increasing NJOY's sterling reputation and brand recognition, numerous famous investors, such as Sean Parker (of Facebook fame) and Bruno Mars (a Grammy Award winning Pop star), as well as market luminary Douglas Teitelbaum, have joined NJOY in its mission to render traditional cigarettes obsolete. 12. Capitalizing on its strong reputation, NJOY has experienced tremendous

sales of its NJOY Cigarette since its launch in December 2012 with millions of units being sold across the nation and in all 50 states. NJOY has also heavily advertised the NJOY Cigarette and NJOY Case, including during the Super Bowl and Academy Awards, one of which sparked significant publicity for showing a man smoking an NJOY Cigarette, an activity banned from television with traditional cigarettes for several decades.
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13.

Defendants, on the other hand, have unfairly attempted to gain an

advantage in the electronic cigarette market by infringing NJOYs rights and attempting to trade off NJOYs reputation for high quality electronic cigarettes. 14. Rather than develop their own technology and branding identity,

Defendants have blatantly copied NJOYs (1) lighting technology in their disposable electronic cigarette (the Victory Cigarette), thereby infringing the 959 Patent; and (2) NJOY Case in their product case (the Victory Case), thereby infringing NJOYs trade dress rights in the NJOY Case. 15. Accordingly, to stop Defendants unlawful conduct and obtain

compensation for the violations that have already occurred, NJOY brings this Complaint against Defendants for patent infringement in violation of 35 U.S.C. 271, et seq., and federal trade dress infringement in violation of 15 U.S.C. 1125, et seq. FACTS COMMON TO ALL CLAIMS FOR RELIEF The NJOY Cigarette 16. NJOY is a market leader in the electronic cigarette industry because, among

other things, it offers consumers a product that is both familiar to, yet vastly different than, a traditional cigarette. Specifically, the NJOY Cigarette resembles a traditional cigarette in look, size, feel (including a paper wrapping and soft tip in place of a fibrous filter), and taste. Indeed, NJOYs leading advertisement for its NJOY Cigarette, which aired during the Super Bowl and Academy Awards, features a man enjoying what appears to be a traditional cigarette (but is an NJOY Cigarette) with the announcer stating that: You know what the most amazing thing about this cigarette is? It isnt one. Introducing the NJOY King, the first electronic cigarette with the look, feel, and flavor of the real thing. . . . Cigarettes, youve met your match. A key frame from the commercial is as follows:1

See www.njoy.com/how-it-works (Last visited Nov. 14, 2013)

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17.

At the heart of the NJOY Cigarettes similarity to cigarettes is its lighted tip

that radiates a familiar red glow from the tip and surrounding sides of the cigarette and simulates the familiar burn of a traditional cigarette when the user inhales. The NJOY Cigarette so closely resembles a traditional cigarette that people often mistake it for a traditional cigarette. For example, consumers enjoying it in bars and clubs (where traditional cigarettes are largely banned) have developed a unique social ritual to alert security guards that their cigarette is an NJOY Cigarette. Specifically, consumers will inhale from the NJOY Cigarette, thereby activating the red tip, and then quickly press it to their forehead to clearly indicate that it is not actually burning and is therefore electronic and not prohibited. 18. Not only have consumers recognized the value of the NJOY Cigarettes

similarity to cigarettes, including the lighted tip technology, by purchasing millions of NJOY Cigarettes since their launch, but the United States Patent and Trademark Office (USPTO) issued NJOY a patent for this technology. On September 24, 2013, the USPTO duly and legally issued the 959 Patent, entitled Electronic Cigarette Configured to Simulate the Natural Burn of a Traditional Cigarette. NJOY is the sole owner of the 959 Patent. A true and correct copy of the 959 Patent is attached hereto as Exhibit A. /// /// ///
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The NJOY Case 19. To further deepen consumer loyalty and goodwill, distinguish its products

from competitors, and allow consumers to quickly identify NJOYs products on crowded store shelves, NJOY developed a distinctive product case. The NJOY Case is a highly unique product packaging that appears as follows:

20.

NJOY designed its highly stylish and unique NJOY Case to serve as a

source identifier of its products. As revealed by numerous studies, cigarette packaging functions as a badge product because users consistently carry it with them throughout the day and often publicly display it while smoking. As explained by a cigarette package designer, [a] cigarette package is unique because the consumer carries it around with him all day . . . its a part of a smokers clothing, and when he saunters into a bar and plunks it down, he makes a statement about himself.2 21. Badge products allow users to associate themselves with a particular brand

and that brands identity and personality, as well as quickly identify the source of the product. As one study succinctly stated, when a cigarette pack is displayed in a store, it

See, e.g., M. Wakefield, et al, The Cigarette Pack as Image: New Evidence from Tobacco Industry Documents, Tobacco Control (March 2002, Volume 11, suppl. 1). 28 (Last visited Nov. 14, 2013)
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is the sum of its contents, the pack, and its associated imagery, that is purchased by the consumer.3 22. Accordingly, NJOY developed its uniquely proportioned NJOY Case to

allow users to easily identify NJOY as the source of the products contained therein and proudly affiliate themselves with the NJOY brand. As intended, consumers have become attached to the NJOY Case and recognize it as a source identifier uniquely tied to NJOY. For example, numerous reviewers of electronic cigarettes post videos to YouTube discussing and describing their experiences with the NJOY Cigarette and NJOY Case. In many of these videos, the reviewers rave about the unique nature of the NJOY Case and spend a significant amount of time discussing the case, rather than the NJOY Cigarette (the actual target of the review).4 23. NJOY has also heavily advertised its NJOY Case and it routinely features it

as the focal point of advertisements, which also tout its unique nature:5

Id. See, e.g., hwww.youtube.com/watch?v=h1AjbJvcz4o (Last visited Nov. 14, 2013) 5 See, e.g., www.njoy.com/how-it-works (Last visited Nov. 14, 2013) 28
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24.

As a result of the NJOY Cases unique design, extensive advertising, and

extraordinary sales, the trade and consuming public have come to recognize the distinctive styling and look and feel of the NJOY Case as representing products originating solely from NJOY. Accordingly, the NJOY Case is entitled to trade dress protection. Defendants Infringing Activities 25. Rather than innovate and develop its own distinctive technology, style, and

brand, Defendants have improperly piggybacked on NJOYs success and reputation by blatantly copying NJOYs patented technology and protectable trade dress to sell its Victory Cigarette and Victory Case throughout the nation (including Arizona) through their online storefront (victoryecigs.com) and various convenience stores. 26. The Victory Cases overall appearance strongly shows Defendants

wrongful and willful intent to confuse consumers into believing that there is an affiliation, connection, or relationship between Victory and NJOY when there is not. A simple comparison of the cases confirms Defendants intentional copying:

/// /// /// ///

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27.

Moving beyond the products overall appearances, Defendants copied the

exact dimensions and proportions of the NJOY Case, as well as the white hinge on the flip-top lid:

(Width: 1.5 inches) 28.

(Height: 3.5 inches)

(Depth: 0.406 inches)

Further, Defendants copied various other features of the NJOY Case and

NJOYs marketing practices to confuse consumers into thinking that the Victory label is an NJOY sub-brand. For example, Defendants copied many of the smaller features of the NJOY Case, such as the inclusion of a stylized crown on the flip top lid:

29.

Even the name of Defendants brand Victory heightens the potential for

consumer confusion as it may be understood to be a sub-brand offered by NJOY in connection with its widely publicized mission to render traditional cigarettes obsolete.6

See, e.g., www.forbes.com/sites/marcbabej/2013/07/18/njoy-the-e-cigarette-that-aimsto-snuff-out-smoking/; mobile.nytimes.com/2013/10/27/business/the-e-cigarette-industry28 waiting-to-exhale.html

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30.

Defendants also copied NJOYs practice of providing an informational

insert in the NJOY Case that provides information about the NJOY Cigarette and NJOYs recycling program. Not only did they copy these practices, Defendants slavishly copied the actual text of NJOYs informational insert, such as the following sentences: 1) From its size, feel and look to its amazing taste, the [NJOY/Victory] King gives you everything you love about the smoking experience. So, go ahead, give it a try. 2) To begin take one long slow puff on the cigarette no lighting or charging required. The tip will light up reach each time you puff 3) [NJOY/Victory] . Send [NJOY/Victory] eight used

[NJOY/Victory] Kings electronic cigarettes and well send you one FREE [NJOY/Victory] King!7 31. Consumers understanding and expectations of the electronic cigarette

industry further increases the likelihood that consumers will view the Victory Cigarette as an NJOY sub-brand. As a preliminary matter, the relative youth and innovative nature of the electronic cigarette industry heightens the potential for consumer confusion between two products sold in identical cases. As one commentator noted, [p]eople are easily confused when it comes to electronic cigarette brands. They have been launched on the market so quickly and so many tobacco brands have already embraced the movement that for many smokers making the difference between the brands is a true challenge.8 32. Consumers have also grown to expect that a cigarette company will offer

several sub-brands at different price points to capture different segments of the market. For example, Reynolds America (the second largest tobacco company in the United States) offers a wide variety of brands at various price points, such as Camel ($4.61),

Attached as Exhibit B is a copy of both parties informational inserts. Defendants copied other sections of the product insert as well and the above are just a few examples. 27 8 www.esontechnologies.com/blog/2013/electronic-cigarette-marketing-by-tobacco28 companies (Last visited Nov. 14, 2013)
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L&M ($4.14), and Pall Mall ($4.09). Similarly, the Lorillard Tobacco Company offers the Newport ($4.19) and Maverick ($4.09) brands, while Altria (the parent company of Philip Morris USA (amongst others)) offers Marlboro cigarettes at various price points with slightly different product packaging, such as traditional ($5.32) and Special Blend, 72s, and Edge ($4.42). Given this and the other numerous similarities between the NJOY and Victory Cases, consumers will likely be misled into believing that the Victory Cigarette ($6.99) is a sub-brand of the more expensive NJOY Cigarette ($7.99). 33. Shortly after learning about the Victory Case, NJOY sent a cease and desist

letter (Cease and Desist Letter) to Defendants. Attached as Exhibit C is a true and correct copy of NJOYs Cease and Desist Letter. However, Defendants never responded to NJOYs Cease and Desist Letter and continue to willfully infringe NJOYs intellectual property rights. NJOY Is Suffering Harm from Defendants Continuing Infringement and Unlawful Conduct 34. Due to NJOYs renown and consumers recognition of its NJOY Case,

consumers will likely suffer confusion and mistakenly believe that Defendants and their goods are endorsed, approved, or sponsored by, or affiliated, connected, or associated with NJOY. Defendants will thus enjoy the benefits of NJOYs reputation and goodwill based on this consumer confusion, to NJOYs detriment. 35. Defendants continued use of the Victory Case in commerce violates

NJOYs valuable intellectual property rights in the NJOY Case, and Defendants knowing, intentional, and willful use of NJOYs trade dress is damaging NJOY. 36. Because of Defendants continuing willful infringement and unlawful

conduct, NJOY is now forced to bring this Complaint to protect its valuable intellectual property rights. NJOY has had to retain counsel and incur attorneys fees and costs (and it continues to incur those fees and costs) to prosecute this lawsuit and pursue its claims.

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37.

NJOYs interest in protecting its intellectual property rights and its products

from consumer confusion outweigh any harm to Defendants. The public interest is best served by granting NJOYs requested relief against Defendants. 38. Defendants are direct competitors of NJOY and they are infringing NJOYs

intellectual property in an emerging and new market to improperly erode and interfere with NJOYs sales. FIRST CLAIM FOR RELIEF Patent Infringement 35 U.S.C. 271 39. 40. NJOY incorporates by reference the factual allegations set forth above. On September 24, 2013, the USPTO duly and legally issued the 959 Patent

for an invention entitled Electronic Cigarette Configured to Simulate the Natural Burn of a Traditional Cigarette. NJOY is the owner of the 959 Patent and holds all rights and interests in the patent. 41. On information and belief, Defendants have been and currently are

infringing the 959 Patent by, among other things, making, using, selling, and/or offering to sell, within the territorial boundaries of the United States, products that are covered by one or more claims of the 959 Patent, including without limitation an electronic cigarette with a lighted tip as described and claimed in the 959 Patent. Such products include, without limitation, the Victory Cigarette. 42. As a direct and proximate result of Defendants infringement of the 959

Patent, NJOY has been and will continue to be irreparably damaged and deprived of its rights in the 959 Patent. Thus, NJOY is entitled to its actual damages and a permanent injunction against further infringement pursuant to 35 U.S.C. 283 and 284. 43. Defendants acts make this an exceptional case under 35 U.S.C. 285, and

NJOY is thus entitled to an award of attorneys fees and costs. SECOND CLAIM FOR RELIEF Trade Dress Infringement 15 U.S.C. 1125(a) 44.
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NJOY incorporates by reference the factual allegations set forth above.

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45.

NJOY has established a unique, protectable, and recognizable trade dress

for the NJOY Case, such that the trade and the general public recognize the NJOY Case as originating from NJOY. 46. On information and belief, Defendants intended to, and did in fact, confuse

and mislead consumers into falsely believing that Defendants products originated from, were licensed, sponsored, or approved by, or were somehow affiliated, connected, or associated with NJOY. 47. In fact, there is no connection, association, or licensing relationship

between NJOY and Defendants, nor has NJOY ever authorized, licensed, or provided permission to Defendants to use the NJOY Case trade dress in any manner whatsoever. 48. Defendants actions constitute trade dress infringement in violation of 15

U.S.C. 1125(a). 49. As a direct and proximate result of Defendants wrongful conduct, NJOY

has been damaged and, unless Defendants are enjoined, will continue to be damaged. 50. On information and belief, Defendants activities have caused, and will

cause, irreparable harm to NJOY for which it has no adequate remedy at law, in that (1) NJOYs trade dress rights comprise unique and valuable property rights that have no readily determinable market value; (2) Defendants infringement constitutes an interference with NJOYs goodwill and customer relationships and will substantially harm NJOYs reputation as a source of high quality goods and services; and (3) Defendants wrongful conduct, and the damages resulting to NJOY, are continuing. Accordingly, NJOY is entitled to injunctive relief pursuant to 15 U.S.C. 1116(a). 51. Pursuant to 15 U.S.C. 1117(a), NJOY is entitled to an order: (1) requiring

Defendants to account to NJOY for any and all profits derived by Defendants from their actions, to be increased in accordance with the applicable provisions of law; and (2) awarding all damages sustained by NJOY caused by Defendants conduct.

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52.

Defendants conduct was intentional and without foundation in law, and

thus, pursuant to 15 U.S.C. 1117(a), NJOY is entitled to an award of treble damages against Defendants. 53. Defendants acts make this an exceptional case under 15 U.S.C. 1117(a),

and NJOY is thus entitled to an award of attorneys fees and costs. PRAYER WHEREFORE, NJOY prays for a judgment that: A. B. Defendants have infringed the 959 Patent in violation of 35 U.S.C. 271. Defendants have willfully infringed NJOYs trade dress in violation of

15 U.S.C. 1125(a). C. Defendants, their officers, agents, servants, employees, successors, and

assigns, their subsidiary and related entities, attorneys, and all other persons, firms, associations, and entities who are in active concert or participation with them, be permanently enjoined from: 1. 2. D. infringing the 959 Patent; and infringing NJOYs trade dress.

Within thirty (30) days after the entry and service on Defendants of an

injunction, Defendants must, pursuant to 15 U.S.C. 1116(a), file with this Court and serve upon NJOYs counsel, a report in writing and under oath setting forth in detail the manner and form in which Defendants have complied with the injunction. E. NJOY be awarded damages as follows: 1. pursuant to 35 U.S.C. 284, all damages adequate to compensate NJOY for Defendants infringement of the 959 Patent, and in no event less than a reasonable royalty for Defendants acts of infringement; 2. pursuant to 15 U.S.C. 1117(a), NJOYs actual damages, as well as all of Defendants profits or gains of any kind from their acts of trade dress infringement, including a trebling of those damages;
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F.

This case be adjudged an exceptional case under 35 U.S.C. 285, and

NJOY be awarded attorneys fees, expert witness fees, costs, and expenses incurred in this action. G. This case be adjudged an exceptional case under 15 U.S.C. 1117(a), and

NJOY be awarded its reasonable attorneys fees. H. NJOY be awarded pursuant to 35 U.S.C. 284 and 15 U.S.C. 1117(a) all

of its costs, disbursements, and other expenses incurred due to Defendants unlawful conduct. I. J. appropriate. JURY DEMAND Pursuant to Rule 38 of the Federal Rules of Civil Procedure, NJOY hereby demands a trial by jury. NJOY be awarded interest. NJOY be awarded any other relief as the Court may deem just and

Dated: November 20, 2013

Respectfully submitted, FENNEMORE CRAIG, P.C. Andrew M. Federhar Ray K. Harris LATHAM & WATKINS LLP Perry J. Viscounty* Ryan R. Owens*

By s/ Andrew M. Federhar Andrew M. Federhar *Pro hac vice applications pending Attorneys for Plaintiff NJOY, Inc.

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