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`_________________________________
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`__________________________________
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`TIZ, INC. D/B/A PROVI
`
`Petitioner,
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`v.
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`JASON K. SMITH D/B/A DUST BOWL
`
`Patent Owner
`
`DECLARATION OF BRIAN ALBENZE
`REGARDING PETITION FOR COVERED BUSINESS METHOD REVIEW
`OF U.S. PATENT NO. 10,467,585
`
`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S. Patent & Trademark Office
`P.O. Box 1450
`Alexandria, VA 22313-1450
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`I.
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`U.S. Patent No. 10,467,585
`Declaration of Brian Albenze
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`INTRODUCTION
`1.
`I have been working for companies in the beverage alcohol market for
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`31 years, particularly, in the distribution of wines, spirits and beer.
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`2.
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`Currently, I am the Executive Vice President of Commercial Strategy,
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`at Breakthru Beverage Corp. Breakthru is a leading beverage wholesaler in North
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`America. It represents a portfolio of premier wine, spirit and beer brands totaling
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`over $5 billion in annual sales. Breakthru partners with the industry’s leading
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`suppliers, such as Duckhorn Vineyards, Rodney Strong Vineyards, Guinness,
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`Miller Coors, and others.
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`3.
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`In my role at Breakthru, I manage and lead the company’s commercial
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`platform for the sale of alcoholic beverages. I also work closely with sales and
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`Information Technologist personnel to support the development of tools and
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`technologies to facilitate the company’s sales force and diverse customer base. I
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`am responsible for scaling any new technology across our footprint and measuring
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`the effectiveness of all tools deployed.
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`4.
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`Prior to working at Breakthru, I was the President of Connecticut
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`Distributors, Inc. (“CDI”) from 2011 to 2015. CDI is a division of The Charmer
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`Sunbelt Group, and was founded in 1933. It is one of the largest wine and spirits
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`distributors in the state of Connecticut. As President, I was accountable for
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`developing and delivering an annual net profit target. I was also responsible for
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`U.S. Patent No. 10,467,585
`Declaration of Brian Albenze
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`developing and implementing its annual business plan with a focus on creating
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`long-term corporate strategies. In my role there, I lead and operated the second
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`largest wine and spirit distributor in Connecticut, which includes a team of 277
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`professionals in sales, marketing, finance, operations, human resources, and
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`purchasing. I was also accountable for developing and delivering an annual net
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`profit target.
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`5.
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`Prior to my role at CDI, I was employed by its parent The Charmer
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`Sunbelt Group (“CSG”) from 2002 to 2011. The Charmer Sunbelt Group is also a
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`distributor of fines spirits and wines. While there, I was the Director of Business
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`Development. As the Director of Business development, I was responsible for
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`working with senior management teams of CSG, Diageo and Moet Hennessy USA
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`(“MHUSA”) to align strategies, develop organizational design, negotiate contracts,
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`and deliver operating annual plans.
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`6.
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`Before working at CSG, I was an employee at National Distributing
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`Company in various roles across various commodities (Beer, Wine, Spirits, Fine
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`Wine). I started my career with The Gallo Winery in their management
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`development program. This included intensive industry sales, finance, and
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`marketing training. I spent four years in various sales and management roles
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`working in Indiana and Wisconsin. My curriculum vitae is attached as Appendix
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`U.S. Patent No. 10,467,585
`Declaration of Brian Albenze
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`A.
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`7.
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`I received a Bachelors in Arts (B.A.) degree in Logistics in 1989 from
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`John Carroll University and have worked in the distribution of wines and spirits
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`ever since. Through my extensive experience in this market, I have developed
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`deep knowledge and vast expertise on the relationships between suppliers,
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`distributors and retailers, and the industry as a whole.
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`8.
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`I have been retained by counsel for Tiz Inc., which does business as
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`Provi, (“Petitioner”) for the above-captioned covered business method review
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`proceeding. I understand that this proceeding involves U.S. Patent No.
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`10,467,585, entitled “Beverage Product Acquisition and Inventory Management
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`System” by Jason K. Smith, filed on March 4, 2016, and which, according to the
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`front page of the patent, is related to Provisional application No. 62/132,623, filed
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`March 13, 2015 (“the ’585 Patent”).
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`9.
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`I have reviewed and am familiar with the ’585 Patent, which I
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`understand is marked PROVI-1001. I have also reviewed excerpts of the file
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`history, which I understand is marked PROVI-1002.
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`U.S. Patent No. 10,467,585
`Declaration of Brian Albenze
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`DISTRIBUTION OF BEVERAGE ALCOHOL OVERVIEW
`II.
`The Three-Tier Structure
`A.
`10. When Prohibition ended in 1933, with the passage of the 21st
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`Amendment, states were given power to regulate the sale and distribution of
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`alcohol. Thirty-two states developed a three-tier distribution structure. These
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`states are referred to as “open states.” The three tiers refer to: suppliers,
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`wholesalers (distributors), and retailers (merchants). Based on this three-tier
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`structure, suppliers can sell their beverage alcohol products only to distributors.
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`Distributors then sell to the beverage alcohol to retailers, and only retailers may
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`sell beverage alcohol to consumers.
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`11. Brewers, wine makers and distillers, for example, are suppliers.
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`Southern Wine & Spirits of America, National Wine and Spirits Corp., and The
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`Charmers Sunbelt Group are distributors of wine and spirits. Retailers range from
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`family-owned bars and restaurants to multi-location franchises, such as TGI
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`Friday’s.
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`12. Because of this three-tier marketplace, a supplier cannot communicate
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`with a retailer, so the retailer must purchase beverage alcohol products from a
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`distributor. Consequently, a distributor courts one or more suppliers with the hope
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`of acquiring rights to distribute the beverage alcohol brands manufactured by the
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`suppliers. When successful, the distributor and supplier typically enter into an
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`agreement in which exclusive rights to distribute the particular beverage alcohol
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`brand are granted to the distributor in a certain territory. Because of this practice, a
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`distributor is not permitted or capable of distributing all beverage alcohol products
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`to a retailer. A distributor can only distribute beverage alcohol brands for which it
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`is licensed by the supplier.
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`13.
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`In addition to these supplier-distributor exclusive agreements, each
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`tier of the structure is regulated by the state government and licensed separately.
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`The state government places restriction on where a distributor is permitted to
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`distribute beverage alcohol products. For example, distributors cannot distribute
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`beverage alcohol products across state borders. Due to exclusive contracts coupled
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`with government regulations, one distributor may be the only distributor for a
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`particular beverage alcohol brand in any given area.
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`14. Not all states are open states. Some are government alcohol
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`monopoly states. These states are referred to as “control states.” In control states,
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`the state government is the distributor of beverage alcohol products.
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`15. Based on my review of the ’585 Patent, it encompasses the beverage
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`alcohol marketplace in open states because, among other things, the claims state
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`that “each beverage product is associated with a single distributor.”
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`U.S. Patent No. 10,467,585
`Declaration of Brian Albenze
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`III. THE ’585 PATENT
`16. The ’585 Patent encompasses the three-tier structure that has been
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`used to manage beverage alcohol inventory and fulfillment for nearly 90 years.
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`See, ‘585 Patent, 30-35 (describing relationships between suppliers, distributors
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`and retailers). The patent particularly emphasizes the relationship between the
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`distributor and the retailer. For example, FIG. 30 together with the claims, depict
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`the ability to identify or select a distributor for a particular beverage alcohol
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`product by retailer, Bar Nuvo. See e.g., ‘595 Patent, claim 1, id. 14:1-3
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`(identifying . . . respective distributors associated with each product. . .); claim 6,
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`14:57-60 (“identifying . . .a first distributor for fulfilling a first portion of the
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`purchase request….”).
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`17. As stated above, in open states, distributors of beverage alcohol can
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`only sell certain alcohol brands, i.e., those to which the distributor has rights to
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`market from the supplier, thus there usually existed a particular distributor for a
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`particular beverage alcohol brand or product.
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`18. Claim 1 in the ’585 Patent recites “a method of optimizing
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`computerized inventory orders over a distributed network.” Below is a chart that
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`shows the steps of claim 1 in the left column, and my personal experience as a
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`distributor working for CDI from 2002 to 2011, in the right column. Indeed, the
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`manual process I outline below based on my experience is still performed by
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`U.S. Patent No. 10,467,585
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`distributors to this day and was performed by distributors before my career started
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`in 1989.
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`19.
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`In the beverage alcohol marketplace, all of the steps represented in
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`claim 1 were done manually by the retailer and the distributor, as shown in the
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`chart below. Beverage Media was the most used trade publication that connected
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`suppliers, distributed and retailers of beverage alcohol when I started my career in
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`this field. I personally used Beverage Media, as did my retailers.
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`Claim 1 Limitation
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`My Personal Experience As Distributor
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`A method of optimizing computerized inventory
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`Inventory orders were optimized in person between
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`orders over a distributed network
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`retailer and its distributor.
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`[a] receiving, from a first user device connected
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`The marketplace network for beverage alcohol has
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`to the distributed network, a list of one or more
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`been based on relationships between suppliers,
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`products, the list including a par value and an
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`distributors and retailers since the 21st Amendment.
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`inventory value associated with each of the one or
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`A retailer’s beverage product inventory was
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`more products, the par value and inventory value
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`managed manually by either the retailer itself, or
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`corresponding to a single delivery location
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`more usually by the sales representative of the
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`distributor, who personally visited the retailer
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`establishment. Beginning in 1989, I personally
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`managed the inventory of my retailer-accounts by
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`manually assessing their par and on-hand inventory
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`values for the brands that we fulfilled for the
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`particular retailer. Some of my retailer-accounts
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`were bars with only one delivery location. I also
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`called on many independent retail accounts with
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`single operators. As an example Munster Liquors in
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`IN is an example of an independent retailer who I
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`called on in 1990.
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`[b] responsive to receiving the list of one or more
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`After assessing the par and on-hand inventory, I
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`products, determining, by one or more processors,
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`would determine which beverage brands should be
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`an inventory order for the single delivery location
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`replenished and would discuss an inventory order
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`based, at least in part, on the associated par value
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`with the retailer. When the retailer conducted his
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`and the associated inventory value of each of the
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`own manual accounting of his par and on-hand
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`one or more products
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`inventory, he would either call me by telephone or
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`discuss his inventory order with me in person
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`during my visit. Either way, a manually-prepared
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`list of beverage alcohol products would be created
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`either by me or the retailer.
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`[c] receiving, from a second user device
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`Promotions were sometimes available from the
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`connected to the distributed network, a set of
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`supplier or the distributor. For example, sometimes
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`available promotions
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`the promotions were discounts if permitted by the
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`state. Price of beverage alcohol is regulated by the
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`state. Available promotion would be communicated
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`to retailers orally or in print, usually in trade
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`journals. The most prevalent trade journal when I
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`began my career was Beverage Journal owned by
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`Beverage Media, sometimes called Bev. Media for
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`short.
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`[d] responsive to receiving the set of available
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`Retailers typically had subscriptions to Bev Media,
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`promotions, transmitting, over the distributed
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`as did distributors. Available promotions
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`network by the one or more processors, the set of
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`associated with beverage alcohol brands were
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`available promotions associated with at least one
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`published in Bev Media monthly.
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`of the one or more products to the first user device
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`[e]receiving, from the first user device, a selection
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`The retailer selected the promotions based on the
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`of at least one promotion of the set of available
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`selection of the alcohol beverage brands it ordered
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`promotions
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`through the distributor.
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`[f]automatically adjusting, by the one or more
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`When I applied promotions to the inventory order
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`processors, a price of at least one of the one or
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`for my retailer-account, I adjusted the price of the
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`more products associated with the at least one
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`beverage alcohol products to account for the
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`promotion to the inventory order
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`discount manually in 1990.
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`[g]outputting to a display on the first user device,
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`After the discount was applied, I would manually
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`an updated inventory order including the adjusted
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`present an updated inventory order to the retailer
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`price of the at least one of the one or more
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`due to the application of the promotion.
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`products associated with
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`the at
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`least one
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`promotion
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`[h]receiving, by the one or more processors, a
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`Retailers usually confirmed their orders orally,
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`user confirmation for the updated inventory order
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`while I was visiting their establishment in person.
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`for delivery of the one or more products to the
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`Sometimes, a retailer would follow up by telephone
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`single delivery location
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`to confirm its order.
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`[i]identifying, by the one or more processors,
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`Beverage Media and other trade journals included
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`respective distributors associated with each
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`information about beverage alcohol brands, pricing,
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`product of the one or more products within the
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`available promotions for select brands, and an
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`updated inventory order, wherein each of the
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`index of distributors who had the rights to distribute
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`products is associated with a single distributor
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`the advertised beverage alcohol products.
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`[j]generating, by the one or more processors, a
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`Because distributors are exclusive to certain
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`plurality of distributor specific inventory orders
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`beverage alcohol brands and territories under
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`for each distributor identified as providing a
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`contract with the suppliers, including the
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`product within the updated inventory order,
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`distributors that employed me, my retailer-accounts
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`wherein the plurality of distributor specific
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`had other distributors for brands my company did
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`inventory orders each include a different format
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`not have rights to distribute. Consequently, each
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`distributor had a specific portion of the retailer’s
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`inventory orders to fulfill, and separate orders
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`would be generated for each distributor’s products.
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`[k]transmitting by the one or more processors, the
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`Most of my retailer-accounts gave their specific
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`plurality of distributor specific inventory orders
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`orders to me in person during my visit. Others
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`to each of
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`the
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`identified distributors
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`for
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`would telephone me to give me their orders. My
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`company would fulfill the order and deliver the
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`fulfillment of the updated inventory order for the
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`products to the retailer. I would receive only
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`delivery location
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`specific orders for the products that my distribution
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`company had rights to market. Brands distributed
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`by other distributing companies, for example,
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`Southern Wine and Spirits, would receive other
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`specific inventory orders.
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`20. Exhibit PROVI-1031 is an historical essay detailing the 75th
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`anniversary of Beverage Media. This description of Beverage Media comports
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`with my knowledge and experience using the Beverage Media publication and the
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`beverage alcohol industry. As explained, the Beverage Media publication dates
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`back to 1938, when it was previously called Bar & Grill Journal. PROVI-1031, at
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`4 D. Ross, Beverage Media, 75th Anniversary Historical Essay. Because of its
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`widespread use in the industry, Beverage Media was called the bible of the
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`beverage alcohol market. The information in this article comports with my
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`understanding.
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`21. When I started my career, the Beverage Media publication was issued
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`monthly, and it contained information about beverage alcohol products, pricing,
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`and available promotions. For example, PROVI-1032 is a true and accurate copy
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`of an excerpt of Bev Media for brands offered by CDI in Connecticut in September
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`2020. This Bev Media excerpt is my personal copy. As depicted in PROVI-1032,
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`the Bev Media publication provides information on the beverage product brands
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`offered by CDI, including price information and promotions (or savings). On page
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`133a, CDI’s contact information is provided for placing an order. Based on my
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`experience in distribution for 31 years, PROVI-1032, although dated September
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`2020, is consistent the information provided in Bev Media in 1989, when I started
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`my career in this field. Bev Media was then and is now a catalog that publishes
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`beverage alcohol information and the associated distributors for beverage alcohol
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`brands and their location and contact information so retailers could place orders..
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`22.
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`I typically carried Beverage Media to inventory inspections at the
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`retailer. It was helpful to have during the visual inspections because it had
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`information on available promotions that I would discuss with the retailer.
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`23. The Beverage Media catalog also contained an index of distributors
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`associated with the product brands and contact information in the publication. This
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`index was particularly helpful to retailers, who consulted the index to identify
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`distributors associated with particular beverage alcohol brands, and because almost
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`all retailers had to purchase their inventory needs from more than one distributor.
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`For example, when I worked at CSG back in 2002, we did not have rights to sell
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`Titos Vodka. When my retailer wanted to purchase Tito’s Vodka, it was required
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`to purchase it from a different distributor; one with rights from the supplier of the
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`brand. The Beverage Media index provided information to enable the
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`identification and selection of distributor based on beverage alcohol brands. Also,
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`as distributors’ rights to sell beverage alcohol brands were (and still are) based on
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`territory, it was important for the retailer to select a distributor in its state. The
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`index published by Beverage Media also was organized by location to enable the
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`retailer to choose a distributor that can fulfill the order and deliver the products to
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`its location. As shown in the Bev Media exhibit, PROVI-1032 at page 147a, the
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`header recites “Connecticut Distributors” of which CDI was one.
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`24. Moving to claim 6 of the ‘585 patent, my review reveals that claim 6
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`describes identifying a distributor that can fulfill a retailer’s order for particular
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`brands, which is something that has long been performed manually in the beverage
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`alcohol industry. Claim 6 recites:
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`Claim 6 Limitation
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`My personal experience
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`A method of identifying a product
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`Distributors had to be identified and selected by
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`distributor based on electronic location
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`location because of state regulations and
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`information comprising
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`restrictions in supplier-distributor agreements.
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`[a] registering, by one or more processors, a
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`Retailers and distributors subscribed to
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`merchant with a content management
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`Beverage Media, which managed content
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`system containing beverage products,
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`related to beverage alcohol brands, the suppliers
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`distributor, sales representative, and
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`who manufactured the brands, and the
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`supplier information
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`distributors, who had rights to sell those brands.
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`[b] responsive to registering the merchant,
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`Retailers and distributors provided their
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`determining a location of the merchant
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`location to subscribe to Beverage Media.
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`based on electronic location information
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`[c] providing, over a network, the merchant
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`Beverage Media provided access to the retailer
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`with access to at least one of the beverage
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`and distributor (or whomever subscribed) with
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`inventory, distributor, sales representative,
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`information about distributor and supplier, such
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`and supplier information stored on the
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`as available brands and which distributors had
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`content management system
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`marketing rights to distribute those brands.
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`[d]receiving, by the one or more processors,
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`Distributors received by telephone, in person, or
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`a purchase request for a first beverage
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`by mail, purchase requests for beverage alcohol
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`product and a second beverage product from
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`brands. Because distributors had (and still do
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`the merchant
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`today) exclusive right to sell only certain brands
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`in certain territories, a retailer, such as a bar,
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`would send purchase requests to multiple
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`distributors to fulfill all of its inventory needs.
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`[e] responsive to receiving the purchase
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`Most of the time, a retailer requested purchase
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`request, automatically identifying, by the
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`orders to be fulfilled by multiple distributors
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`one or more processors, a first distributor
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`because of the exclusive agreements and
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`for fulfilling a first portion of the purchase
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`territory restrictions in the distributor supplier
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`request corresponding to the first beverage
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`agreements. Thus, often times, each beverage
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`product based on the electronic location
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`alcohol product was associated with a single
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`information, and a second distributor for
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`fulfilling a second portion of the purchase
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`distributor due, in part, to the restrictions on
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`request corresponding to the second
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`territory in the supplier-distributor agreements.
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`beverage product, wherein each beverage
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`product is associated with a single
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`distributor
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`[f] transmitting, via the network, the
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`Retailers must work with individual distributors
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`purchase request to the first identified
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`in each state because distributors cannot
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`distributor and the second identified
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`distribute beverage alcohol products across
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`distributor for fulfilment of the purchase
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`state lines. Distributors are contracted with
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`request and delivery of the first beverage
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`suppliers for limited territories in which they
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`product and the second beverage product to
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`can market certain brands. Retailers used to
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`the location of the merchant
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`consult (and still do) Beverage Media and other
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`trade publications to identify a distributor in
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`their location, and send purchase orders to
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`distributors permitted to fulfill the request and
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`deliver the beverage product based on the
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`location of the retailer.
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`25. Claim 14 of the ’585 Patent generally describes a computer readable
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`medium having a stored computer program with instructions to receive a purchase
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`order from a merchant, identifying a distributor, generate a suborder for each
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`distributor, transmit the suborder and confirm the order, has been done manually
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`for nearly a century. This claim, like the others, has long been performed manually
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`in the beverage alcohol market.
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`26. Below I discuss certain elements in the claims that mimic the three-
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`tier structure of open states.
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`27. The element “each of the plurality of beverage products is offered by
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`a single distributor” mirrors that distributors are typically in exclusive agreements
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`with suppliers in the beverage alcohol industry. Because of these exclusive
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`contracts, beverage alcohol brands are associated with a particular distributor in a
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`particular territory. In other words, distributor A may have rights to offer Smirnoff
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`vodka but cannot offer Grey Goose vodka because those rights were licensed to
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`distributor B. If a retailer bar, for example, needs to stock both Smirnoff and Grey
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`Goose in its bar, it must purchase the Smirnoff from distributor A and the Grey
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`Goose from distributor B. Thus, each product is offered by a single distributor.
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`This is a result of the exclusive arrangements that are commonplace in the
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`beverage alcohol marketplace. This is also the reason that the index of distributors
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`and associated brands and territories published in Beverage Media was helpful.
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`28. The claims also recite the following similar elements: “beverage
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`product order from a single geographical location” (claim 14), “the par value
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`and inventory value corresponding to a single delivery location” (claim 1) and
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`“fulfillment of the purchase request and delivery . . .to the location of the
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`merchant” (claim 14).
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`29. As mentioned, these elements, which all relate to a “location” mimic
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`that in the beverage alcohol market, distributors are limited in where they can
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`market and deliver beverage alcohol products, by their agreements with suppliers
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`and also state regulations. For example, distributors cannot distribute beverage
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`alcohol across state lines and the rights granted to a distributor from the supplier is
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`almost always limited to territory. These limitations on location result in
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`distributors being permitted to distribute and deliver alcohol to only permitted
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`merchant locations.
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`30.
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`I have also reviewed the dependent claims 2-5, 7-13 and 15-19, which
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`also mimic the longstanding practice of distributing beverage alcohol. For
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`example:
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`a. claim 2 refers to managing inventory of the retailer, which was often
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`done manually by the distributor in person at the retailer;
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`b. claims 3, 10, 11, 16 and 17 refer to promotions available for certain
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`beverage products that were published in Beverage Media monthly;
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`c. claim 4 refers to the beverage distributor party of the three tier
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`relationship;
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`d. claim 5 relates to the approved distributor, which was due to supplier-
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`distributor agreements and state regulations;
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`e. claims 7 and 8 relate to the limitations on the location at which a
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`distributor can distribute and delivery beverage alcohol;
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`f. claim 9 refers to identifying multiple distributors permitted to
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`distribute the merchant beverage alcohol products, and retailer input
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`as done by reference to Beverage Media;
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`g. claim 12 refers to retailers’ line of credit with distributors;
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`h. claim 13 refers to the need for multiple orders due to the need for
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`distribution from multiple distributors due to supplier-distributor
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`agreements, and that each distributor had its own formatted purchase
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`order;
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`i. claim 15 refers to confirmation of orders, which was done orally in
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`person or by telephone, or in writing;
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`j. claim 18 refers to the association of a particular beverage product with
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`a particular distributor, which was published in Beverage Media and
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`reflects the agreements distributors had with suppliers; and
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`k. claim 19 relates to an order corresponding to a single merchant,
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`which reflected many of my retailer accounts for family owned bars.
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`IV. CONCLUSION
`31. Based on my 31 years of experience, the claims in the ’585 Patent
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`mimic the relationships and encompass the economic practice of marketing
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`beverage alcohol under the three-tier structure and interrelationships between
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`suppliers, distributors and retailers, which has existed since the 1930s.
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`32.
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`I have personal experience as a sales representative to various
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`distributors going back to the 1990s of taking part in the manual performance of
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`the steps recited in the claims, and know that such steps also have long been
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`performed prior to the 1990s. The management of a retailer’s inventory to the
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`purchase and fulfillment of an inventory order was all done manually by pen and
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`paper and in person. It was also done by telephone. The ’585 Patent merely
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`automates the process on a computer.
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`I declare and state that all statements made herein of my own knowledge are
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`true and that all statements made on information and belief are believed to be true,
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`and further that these statements were made with the knowledge that willful false
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`statements and the like so made are punishable by fine or imprisonment, or both,
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`under Section 1001 of Title 18 of the United States Code.
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`Date: September 15, 2020
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`Brian Albenze
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`Appendix
`Appendix
`A
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`PROVI-1030 – Page 23
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`
`
`BRIAN ALBENZE
`
`55 SCONSET DR. FAIRFIELD, CT 06824
`PHONE: 203.292.5484 MOBILE: 443.610.6444 E-MAIL:BALBENZE@BREAKTHURBEV.COM
`
` PRESIDENT, CONNECTICUT DISTRIBUTORS INC.
`
`EXECUTIVE PROFILE
`
` Innovative executive with strong leadership skills.
` Strong business acumen skilled in both strategic and operational activities
`combined with proven track record of building high performance teams that
`deliver business value.
` Demonstrated track record in partnering with senior executives across
`functions and business units to drive success in Go to Market initiatives and
`SAP implementation.
` Flexible to changing priorities and thrives on challenges to overcome
`obstacles
` Experience leading change in both process and mergers.
` Results‐oriented management style that promotes open communication.
` Experienced and confident speaker for business presentations.
`
`Strategic Planning
`Infrastructure & Operations
`Talent Management
`Project & Program Management
`Sales Management
`Supplier and Customer Relations
`Change Management
`Budget & Cost Control
`
`CAREER BACKGROUND
`
`BREAKTHRU BEVERAGE GROUP 2016‐ Present
`A leading distributor in the United States and Canada of spirits, wines, beer, and non‐alcoholics, with annual revenue of $6.1B
`Executive Vice President ‐Commercial Excellence
`Reporting to the CEO, lead the companyʹs commercial platform and capabilities as well as drives supplier strategy.
`Works closely with sales and IT to support the development of best‐in‐class tools and technologies to enable
`Breakthru Beverage’s sales force. Along with executive team colleagues, drives strategy for key commercial
`activities such as sales team effectiveness, commercial business strategy, communications and branding.
`
`Major Contributions
` Introduced a performance based compensation model across tied to measurable metrics, leading to greater
`accountability,
` Scaled a digital p