Defendants Have Long Acknowledged Internally the Existence of a

Market for a Genuinely Less Hazardous Cigarette19 1766. Over the past four decades, the cigarette company Defendants have repeatedly

¶recognized consumer interest in smoking cigarettes that are truly less hazardous. See Harris WD, 140:3-145.

In a June 1966 report by Philip Morris researcher Myron E. Johnston, Jr., sent to top scientists Helmut Wakeham and Robert Seligman, Johnston noted: "If we could develop a . . . 'healthy' cigarette that tasted exactly like a Marlboro, delivered the nicotine of a Marlboro, and was called Marlboro, it would probably become the best selling brand." 1000338644–8671 at 8651 (US 21487).
Similarly, in a May 25, 1966 report to Lorillard President J.E. Bennett, Alexander Spears, then Lorillard's Director of Basic Research and later its Chief Executive Officer, wrote that the development and marketing of a cigarette that yielded tar with "little or no tumorigenic [capable of causing tumors] response [in mouseskin painting tests], would be regarded as a highly significant development by the scientific community":

Undoubtedly, such a product would place the corporation in a highly enviable position, and in the writer's opinion a two or threefold increase in sales could result within a short period. . . . On the other hand, if we fail to pursue this research and/or a competitor marketed a cigarette whose smoke condensate gave little tumorigenic response, the writer is of the opinion that a significant sales loss could result.

687

In discussing one scientist's conception of a "safe cigarette" in its "Long Range Strategic Plan; External Forecast; 1979-1983," RJR noted internally: "If this concept received national consumer media, such as Reader's Digest, the dynamics of demand in the marketplace could change dramatically." 500676525-6577 at 6540 (US 22087).
Lorillard also recognized that the first cigarette company to market a less hazardous cigarette successfully would reap substantial and unilateral financial rewards. In a November 1977 letter, Benito Vila of Lorillard wrote to company marketing executive Richard E. Smith that since "I don't know of any smoker who at some point hasn't wished he didn't smoke," "I am 100% sure we would have a gigantic brand" if Lorillard could develop an acceptable alternative method to deliver nicotine. 01244294-4299 at 4294 (US 21419).
An undated draft memorandum, titled "Notes on Group Research and Development Conference, March 1978," found in the files of S.J. Green, who served as a scientist, manager, and director of BATCo's Research and Development Department in the late 1970's, recognized that a "reduced biological activity" cigarette could be made and offered many "marketing opportunities":

Cigarettes of substantially reduced biological activity (SRBA) can be made by product modification and will continue to present a range of marketing opportunities. By SRBA is meant cigarettes where epidemiology would show no greater incidence of disease for smokers than non-smokers. But there remains a need for credible biological tests to facilitate developments. Credibility will continually evolve but could be provided by outside independent medical and scientific advice. . . . Defensive research will need to be provided for as far ahead as can be seen and this may well include social aspects.

688

Similarly, in a March 14, 1983 interoffice memorandum from RJR's R.A. Lloyd, Jr.,

¶Brand Manager, to Mike McKee, a Manager in the New Brands and Strategic Research Department,

¶Lloyd commented on recent patents applied for or granted to Philip Morris and Imperial Tobacco

¶Company:

It is quite likely that smoking devices similar to those described in these patents or other new products perceived as "safer" will be introduced to the marketplace within the next few years by major tobacco companies. The company which can introduce such products, which also supply a degree of user satisfaction which approaches that of current cigarette products, will become the dominate [sic] company in the industry almost overnight. It is reasonable to assume that the company who introduces such a product might capture as much as 25 share points in the first year if supply could keep pace with demand.

¶501541129-1132 at 1131 (US 21740).

And again in 1990, Philip Morris indicated to the Altria Board of Directors that "[w]e believe there is a potential consumer demand for a radically new smoking device that will provide a pleasurable smoking experience, address consumer concerns about health risks and social acceptability, and still be a profitable business venture." 2046741061-1074 at 1061 (US 22185).
In early 2001, B&W stated that the development and marketing of potentially reduced exposure cigarettes, "[f]rom a strategic standpoint, . . . represent both a defensive need as well as an offensive opportunity." 271098692-8695 at 8694 (US 22033) (Confidential).