Case 1:19-cv-01410-MN Document 327 Filed 10/10/24 Page 1 of 6 PageID #: 13010
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF DELAWARE
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`VB ASSETS, LLC,
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`Plaintiff,
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`v.
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`AMAZON.COM SERVICES, LLC,
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`Defendant.
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`C.A. No. 19-1410-MN
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`PLAINTIFF VB ASSETS, LLC’S SUPPLEMENTAL BRIEF REGARDING
`AN ONGOING ROYALTY RATE
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`SMITH, KATZENSTEIN & JENKINS LLP
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`Neal C. Belgam (No. 2721)
`Jason Z. Miller (No. 6310)
`1000 North West Street, Suite 1501
`Wilmington, Delaware 19801
`(302) 652-8400
`ncb@skjlaw.com
`jzm@skjlaw.com
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`Attorneys for Plaintiff VB Assets, LLC
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`Dated: October 10, 2024
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`Of counsel:
`WILSON SONSINI GOODRICH & ROSATI P.C.
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`James C. Yoon
`Ryan R. Smith
`650 Page Mill Road
`Palo Alto, CA 94304
`jyoon@wsgr.com
`rsmith@wsgr.com
`
`Matthew A. Macdonald
`Jamie Otto
`Alexander J. Turner
`953 East Third Street, Suite 100
`Los Angeles, CA 90013
`matthew.macdonald@wsgr.com
`jotto@wsgr.com
`aturner@wsgr.com
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`Bradley T. Tennis
`1700 K Street NW, Fifth Floor
`Washington, DC 20006
`btennis@wsgr.com
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`Mikaela E. Evans-Aziz
`One Market Plaza, Spear Tower, Suite 3300
`San Francisco, CA 94105
`mevansaziz@wsgr.com
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`

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`Case 1:19-cv-01410-MN Document 327 Filed 10/10/24 Page 2 of 6 PageID #: 13011
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`VB Assets, LLC respectfully submits this brief and declaration from Brett Reed regarding
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`an ongoing royalty rate in response to the Court’s Order, D.I. 325, and requests a post-verdict
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`ongoing royalty rate of $0.60 on the ’681 patent and $0.25 on the ’176 and ’097 patents.1 VB
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`Assets also respectfully requests that the Court apply these ongoing royalty rates to the user figures
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`belatedly disclosed by Amazon in December 2023 in its post-trial briefing2—figures that were
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`significantly higher than those demonstrated by the documents that Amazon produced in the
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`case—and that Amazon be required to produce consistent data going forward so that VB Assets is
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`fairly compensated for Amazon’s true number of users. As set forth in VB Assets’s Reply Brief
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`raising this issue, Mr. Reed has shown that accounting for Amazon’s previously withheld user data
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`would result in another $20.5 million to VB Assets, even at the jury-awarded rates of $0.40 and
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`$0.22. VB Assets also submits Mr. Reed’s updated pre-judgment interest calculation of
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`$7,137,894, and post-judgment interest calculation of $6,930 per day (or $2.335M through today),
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`both based only on the method and judgment amount specified in the Court’s Order. Reed ¶ 1.
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`“[T]here is a fundamental difference between a reasonable royalty for pre-verdict
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`infringement and damages and for post-verdict infringement.” XY, LLC v. Trans Ova Genetics,
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`L.C., 890 F.3d 1282, 1297 (Fed. Cir. 2018). However, the royalty rate reflected in the jury verdict
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`is the “starting point.” Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., 2017 WL 3034655,
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`at *7 (E.D. Tex. July 18, 2017) (Bryson, J., Fed. Cir.). Courts routinely award higher rates due to
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`a “change in the parties’ bargaining positions, and the resulting change in economic circumstances,
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`resulting from the determination of liability” and, optionally, other Georgia-Pacific factors. XY,
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`LLC v. Trans Ova Genetics, LC, 2019 U.S. WL 1403160, at *5 (D. Colo. March 28, 2019)
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`1 VB Assets provides less than four pages of legal argument and a slightly over one-page Reed
`Declaration, excluding exhibits. VB Assets respectfully requests that if Amazon again submits
`new evidence not available to VB Assets at trial that VB Assets have a brief opportunity to respond.
`2 See VB Assets’s Reply Brief at 1, 6, 8 (D.I. 318); Reed. Supp. Decl. ¶¶ 6-7 (D.I. 320-1).
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`1
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`Case 1:19-cv-01410-MN Document 327 Filed 10/10/24 Page 3 of 6 PageID #: 13012
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`(increasing the rate and finding that an ongoing royalty at the jury-awarded rate would “likely be
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`error because the jury was considering a reasonable rate for pre-verdict infringement and the
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`Federal Circuit has emphasized that the verdict itself is a changed circumstance that strengthens
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`the patentee’s bargaining position”); ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694
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`F.3d 1312, 1342 (Fed. Cir. 2012) (more than doubling rate and finding that a verdict creates a
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`“substantial shift in the bargaining position of the parties.”).
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`The jury adopted Mr. Reed’s calculation in its entirety, reflecting a royalty rate of $0.40
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`for the ’681 patent and $0.22 for the ’097 and ’176 patents. The following changed circumstances
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`support a higher ongoing rate: (1) Amazon’s reliance on the patented technology for growth and
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`post-verdict product development; (2) Amazon’s increasing costs to attract and retain users as its
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`market matures; and (3) Amazon’s post-verdict infringement. Any post-verdict financial losses
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`associated with Alexa are irrelevant because there has been no material change in Amazon’s
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`profitability or strategy post-verdict. The jury considered evidence that Amazon’s longstanding
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`strategy was to grow Alexa through discounts and promotions despite substantial losses. E.g., Trial
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`Tr. 492:17-493:3; PTX 301. Amazon is apparently continuing this strategy. Reed Ex. 3. Moreover,
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`Mr. Reed’s model was based on the benefit of the infringed technology to Amazon through reduced
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`need for discounting and promotion to grow or maintain its user base—not on profitability.
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`Amazon is still aggressively investing in Alexa and so still is reaping that benefit.3
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`First, Amazon’s continued and even increased financial commitments show a change in
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`3 Amazon may argue that VB Assets’s shift to an IP licensor supports a lower rate, but it does not.
`Mr. Reed opines that VB Assets is in at least as strong a negotiating position now as VoiceBox
`was then. Reed ¶ 2. The jury saw evidence of the change in VB Assets’s position between 2014
`and 2017, but found the same rate methodology applicable for both hypothetical negotiations
`relevant at that time. This is because the patent valuation is not based on VB Assets’s opportunity
`cost as a competitor, but rather the avoided cost of attracting and retaining users for Amazon.
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`2
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`Case 1:19-cv-01410-MN Document 327 Filed 10/10/24 Page 4 of 6 PageID #: 13013
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`bargaining position that would give VB Assets significant additional leverage in a post-verdict
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`negotiation. As the Court observed, “Following trial, and seemingly un[faz]ed by the jury’s
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`infringement verdict, Amazon has continued selling and marketing the accused products.” D.I. 325
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`at 33. And Amazon not only continues to sell Alexa-enabled products but continues to invest in
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`and expand its infringing business, including investing billions in an AI-enabled “Remarkable
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`Alexa.”4 Far from winding down this business, it is continuing to invest more—making Amazon
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`more dependent than ever on VB Assets’s patented technology. Given this investment, Amazon’s
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`incentive to maximize the number of Alexa users is even higher than before as indicated by the
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`fact that Amazon is now subsidizing up to $40-$50 per Echo. Reed Ex. 3 (listing current “Echo
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`Loss” as potentially $40 to $50). While in 2014 at the time of the hypothetical negotiation
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`considered by the jury Amazon was only just launching Alexa, now there have been over 10 years
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`of Echo sales and Alexa usage to confirm Amazon’s commitment to this business segment, which
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`would put VB Assets in an even stronger bargaining position because Amazon would be unwilling
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`to put its multi-billion dollar investment at risk. Moreover, Amazon has traded on Alexa’s ability
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`to be helpful and natural by maintaining context. Amazon’s ability to upsell people to Remarkable
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`Alexa thus depends in part on that reputation it has cultivated by using the patented technology.
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`Second, Amazon’s costs to attract and retain users have only increased over time. The jury
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`award was based on a $0.40 royalty rate for the ’681 patent which, in turn, was based on the
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`evidence presented to the jury that Amazon was losing approximately $20 per Echo device. That
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`$20 reflects losses over the period 2014 to April 2022, but Amazon’s losses were indeed increasing
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`over that period. There is thus now reason to believe that Amazon’s losses per device are even
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`4 Engadget, “Amazon’s Remarkable Alexa will reportedly run on Claude AI and cost $5-10 per
`month,” available at https://www.engadget.com/ai/amazons-remarkable-alexa-will-reportedly-
`run-on-claude-ai-and-cost-5-10-per-month-122532161.html.
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`3
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`Case 1:19-cv-01410-MN Document 327 Filed 10/10/24 Page 5 of 6 PageID #: 13014
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`higher than $20. See Reed ¶ 3 & Ex. 3. Amazon’s current prices for its Echo products now suggest
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`that losses may be as high as $40-50 for some devices, and that the overall per device loss is likely
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`at least $30. Reed ¶ 4 and Ex. 3. Given that losses increased from $20 to as high as $40-$50 (but
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`at least $30), these changed circumstances support a 50% increase in the royalty rate for the ’681
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`patent, i.e., from $0.40 to $0.60, under the same methodology considered by the jury. Finally on
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`costs, Mr. Reed further demonstrates why increased inflation in the 2021-2024 time period driving
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`costs to a level approximately 12% above expectations would itself support a larger royalty rate of
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`$0.45 for the ’681 patent and $0.25 for the remaining infringed patents. Reed ¶ 4.
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`Third, Amazon’s continued willful infringement post-verdict is a changed circumstance
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`warranting an ongoing royalty above the jury-awarded rate. The post-verdict hypothetical
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`negotiation essentially compensates for what a court would do in a post-verdict infringement
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`lawsuit, and where a defendant continues to infringe valid patents as Amazon does here and forces
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`serial litigation, enhancement becomes more likely and supports a higher rate. See Paice LLC v.
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`Toyota Motor Corp., 609 F. Supp. 2d 620, 626-27 (E.D. Tex. 2009) (willful infringement
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`“significantly change[s] the ongoing royalty negotiation calculus” because the potential for
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`enhancement and the impact of res judicata places the adjudged infringer at a severe disadvantage);
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`Telcordia Techs., Inc. v. Cisco Sys., Inc., 2014 WL 1457797, at *4 (D. Del. Apr. 14, 2014)
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`(“without consideration of the changed legal status, there is essentially no downside to losing”).
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`VB Assets respectfully requests that the Court: (1) update the interest calculations; (2) grant
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`an ongoing royalty of $0.60 for the ’681 patent and $0.25 for the remaining infringed patents (and
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`no lower than the jury rate); and (3) order the ongoing rates to be applied to the user figures
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`belatedly reported by Amazon and to consistent, auditable data from Amazon going forward.
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`4
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`Case 1:19-cv-01410-MN Document 327 Filed 10/10/24 Page 6 of 6 PageID #: 13015
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`SMITH, KATZENSTEIN & JENKINS LLP
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`/s/ Neal C. Belgam
`Neal C. Belgam (No. 2721)
`Jason Z. Miller (No. 6310)
`1000 North West Street, Suite 1501
`Wilmington, Delaware 19801
`(302) 652-8400
`ncb@skjlaw.com
`jzm@skjlaw.com
`
`Attorneys for Plaintiff VB Assets, LLC
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`Dated: October 10, 2024
`
`
`Of counsel:
`WILSON SONSINI GOODRICH
`& ROSATI P.C.
`
`James C. Yoon
`Ryan R. Smith
`650 Page Mill Road
`Palo Alto, CA 94304
`jyoon@wsgr.com
`rsmith@wsgr.com
`
`Matthew A. Macdonald
`Jamie Otto
`Alexander J. Turner
`953 East Third Street, Suite 100
`Los Angeles, CA 90013
`matthew.macdonald@wsgr.com
`jotto@wsgr.com
`aturner@wsgr.com
`
`Bradley T. Tennis
`1700 K Street NW, Fifth Floor
`Washington, DC 20006
`btennis@wsgr.com
`
`Mikaela E. Evans-Aziz
`One Market Plaza
`Spear Tower, Suite 3300
`San Francisco, CA 94105
`mevansaziz@wsgr.com
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`5
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