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`UNITED STATES PATENT AND TRADEMARK OFFICE
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`____________
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`BEFORE THE PATENT TRIAL AND APPEAL BOARD
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`____________
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`AMERICAN NATIONAL MANUFACTURING INC.,
`Petitioner,
`
`v.
`
`SLEEP NUMBER CORPORATION
`f/k/a SELECT COMFORT CORPORATION,
`Patent Owner.
`____________
`
`Case No. IPR2019-00500
`
`Patent No. 9,737,154
`____________
`
`
`
`
`DECLARATION OF CRAIG S. MILLER, JR. IN SUPPORT OF
`PETITIONER’S OPPOSITION TO PATENT OWNER’S MOTION FOR
`ADDITIONAL DISCOVERY
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`
`
`WA 13785030.1
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`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 1
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`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`I, Craig Miller Jr., declare and state as follows:
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`1.
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`I am the President of Petitioner American National Manufacturing, Inc.
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`and am familiar with the allegations that have been put forward by Sleep Number
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`Corporation f/k/a Select Comfort Corporation (“Sleep Number”) in seeking
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`additional discovery. I make this declaration to correct several misstatements that
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`have been made by Sleep Number to the Board regarding my interactions with Sleep
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`Number.
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`2.
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`Since 1996, American National Manufacturing Inc. has been
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`manufacturing a full line of air adjustable mattresses under the American National
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`Brand and later in the Dreamworks brand and Instant Comfort brand as well as other
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`private label brand air mattresses including the Nautilus Sleep System. Effectively,
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`all of the beds sold then and now generally included air control units; however, the
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`primary driving factor for the consumer in the sale of these products is the mattresses
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`3.
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`In March 2006, Kirk Stoa of Select Comfort approached me and asked
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`if I would consider working with them rather than against them. During the
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`discussion, he asked if I would consider providing technical consultation regarding
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`product development. At the time, Sleep Number had significant product failures
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`related to the structural integrity of the air chambers in their product lines.
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`Specifically, Sleep Number’s air chambers tended to fail in ways related to the
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`2
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`WA 13785030.1
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`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 2
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`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`sealing of their air chambers. In addition, the overall construction of their air
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`mattresses created issues with “rolling to the middle,” where a user would slide into
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`the middle area between two air chambers placed side-by-side. This was in addition
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`to significant and widespread reports of mold and mildew which formed on their air
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`chambers. The latter issue related to mold and mildew led to class action lawsuit
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`against Sleep Number which was covered in the news media, for example a 2008
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`Consumerist article which may be found at https://consumerist.com/2008/05/17/the-
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`sleep-number-difference-is-mold/. As American National did not have these
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`problems, Sleep Number had hoped that I would be able to share my technical
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`knowhow on mattress construction and my relationships with component
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`manufacturers within the industry to address these issues. They promised me to pay
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`a significant amount money for my expertise and —we settled on $1.25 million for
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`3 years with automatic one (1) year extensions at the rate of $500,000.00 per year.
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`4.
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`Exhibit 2037 is a copy of the consultant contract that Sleep Number
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`offered me. As the discussions regarding consulting evolved, I was surprised when
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`the scope went beyond me simply providing technical assistance—one of the
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`provisions expressly barred myself and American National Manufacturing from
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`selling any additional consumer air mattresses during the period of the consultancy
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`beyond the list of pre-existing customers which we had prior to signing the contract.
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`3
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`WA 13785030.1
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`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 3
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`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`In short, we could not seek any new customers for our consumer air adjustable
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`mattresses. I, however, was willing to accept that non-compete provision due the
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`fact that American National Manufacturing Inc. had significant manufacturing
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`presence in the medical air bed space, and that area was not covered by the non-
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`compete. I also accepted the non-compete provision, because I believed at the time
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`that Sleep Number would actually carry out their promise and pay me the full amount
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`of the contract with automatic 1 year renewals and possible royalty steams as stated
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`within the contract—that turned out to be false unfortunately. Regardless, I accepted
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`the consultant role and signed the contract. This agreement essentially required
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`that I abandon my business plans for launching and expanding a direct to consumer
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`business featuring our air adjustable mattresses, with the exception of only selling
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`to a few existing customers. Approximately 6 months after signing the original
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`agreement which permitted American National to sell our Air Adjustable mattresses
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`to certain customers on Exhibit A of the agreement, I was contacted by Kirk Stoa
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`regarding two of our pre-existing customers on the agreed to Exhibit A. As it turned
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`out Select Comfort had simply changed their mind and wanted us to make two
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`concessions. Kirk told me that in the spirit of the agreement and our commitment to
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`working together long term we are asking you to exit your agreement with AH Beard
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`to make way for Select Comfort to enter the Australian market. Regrettably I agreed,
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`4
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`WA 13785030.1
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`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 4
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`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`and we took back large amounts of product from AH Beard and issued them credit
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`to help Select Comfort have a clear path to the Australian market. There was no
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`additional compensation of any kind made for this concession; it was simply a good
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`faith gesture on my part for what I thought was going to be a long term mutually
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`beneficial relationship which turned out to be false. As demonstrated in Exhibit
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`1034, which is a true and correct copy of a business record from American National
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`Manufacturing, the monthly direct to consumer sales by Nautilus, a company we
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`acquired, were as high as
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` units per month before the consulting agreement,
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`while current monthly sales of the accused consumer products have never reached
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`those levels. Thus, this business has never fully recovered from the non-compete
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`and from Sleep Number’s other anticompetitive activities.
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`5.
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`From 2006 to 2011, I provided my services to Sleep Number under the
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`consultant agreement. I gave advice regarding the construction and configuration
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`of their mattress components and how to manufacture air chambers to avoid issues
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`of mold and other quality control issues.
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`6.
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`I was never retained to provide any advice into the programming or
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`configuration of their air controllers. That is due to the fact that I do not have any
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`knowledge regarding computer code or how to program any of the electronic
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`components. At no time have I or anyone else at American National Manufacturing
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`5
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`WA 13785030.1
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`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 5
`
`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`ever seen or examined any of Sleep Number’s source code for any of their air
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`controllers.
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`7.
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`To the extent air controllers had anything to do with my consultancy
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`agreement, it was Sleep Number who sought our air controllers. Indeed, per their
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`demand, I provided three of our air controllers to Sleep Number in 2006 as part of
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`the agreement. Interestingly, I believe that Sleep Number accused one of these
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`legacy controllers as infringing the ‘747 and the ‘154 patents in the District Court
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`case, despite the air controller predating both patents by several years. Additionally,
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`as part of the consultancy, I introduced Sleep Number to AMN’s air controller
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`suppliers, Arco and Providence in as early as February 2008. I was not present at
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`these meetings because Sleep Number excluded me from these meetings.
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`8.
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`I would later find out that Sleep Number was using these industry
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`contacts I provided to steal component suppliers away from American National. For
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`instance under the consultancy, I introduced Sleep Number to American National’s
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`air chamber component manufacturer East Rock, who at the time was the supplier
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`of vulcanized air chambers. Sleep Number engaged East Rock to manufacturing air
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`chamber designs that I helped create for Sleep Number. As part of that engagement,
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`Sleep Number, without consulting me, insisted that East Rock never again do any
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`business with me or American National Manufacturing.
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`6
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`WA 13785030.1
`
`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 6
`
`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`9.
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`The consultancy agreement was amended on January 22, 2009 because
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`Sleep Number decided to renegotiate the contract because they allegedly could not
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`afford the automatic annual one (1) year renewals at $500,000.00 per year beginning
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`after year 3 of the original term. The amendment essentially changed the total value
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`of my consulting efforts for the 5-year term from what should have been
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`$2,250,000.00 to $1,400,000.00. The amendment also eliminated the automatic
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`renewal period and established a termination date of December 31, 2011. This
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`amendment also contained a change in the competitive activities section whereas
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`American National and I could begin selling our products to new customers other
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`than those larger companies named in the amendment that Sleep Number did not
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`want to compete with. On December 31, 2011 American National Manufacturing
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`and I was released from the non-compete portion of the contract.
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`10. At no time have I ever copied any of the Sleep Number’s products. My
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`designs for mattress construction were American National Manufacturing’s and my
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`own, prior to ever engaging in the consultancy relationship. Many of my designs
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`were never adopted by Sleep Number, because they felt that it would be too
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`expensive or add too much cost to their products. As was found by the jury in the
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`District of Minnesota, our statement that our products are better quality than Sleep
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`Number is not false—our construction techniques and designs are superior to theirs.
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`7
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`WA 13785030.1
`
`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 7
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`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`11. The development of the air controllers used by American National
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`never incorporated any Sleep Number technology, in part because under the
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`consultancy agreement, I never disassembled their pumps, examined their
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`schematics, or examined their source code. Instead, the programming and design of
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`American National Manufacturing’s accused pumps were carried out in partnership
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`with Arco, Providence, and Medisphere.
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`12. The programming of each of the accused pumps were done solely by
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`Arco, Providence, Elysen, and Medisphere. Beyond the desired overall function of
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`the controllers, no one at American National Manufacturing, including myself, ever
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`had any direct input on the code or programming for the air controllers.
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`13. Arco, Providence, Elysn, and Medisphere are all third-party companies
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`with no direct or
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`indirect common ownership with American National
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`Manufacturing. Currently, Arco, Providence, Elysn, and Medisphere all own the
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`respective source code that they authored.
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`14. As I have been involved in the manufacturing of air beds and other sleep
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`surfaces for over 30 years, I have personal knowledge regarding the overall
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`consumer air bed market. Based on my knowledge, I believe that Sleep Number
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`Corporation f/k/a Select Comfort Corporation possesses 95% of the consumer air
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`bed market. The remaining 5% of the consumer air bed market is shared between
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`8
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`WA 13785030.1
`
`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 8
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`
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`Case No. IPR2019-00500
`Patent No. 9,737,154
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`AMN, InnoMax, Responsive Surface Technology LLC (“ReST”), and Boyd
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`Specialty Sleep Systems.
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`15.
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` Sleep Number substantially, exclusively sells air adjustable consumer
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`beds and accessories and has publically disclosed its sales revenue for 2018 at over
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`1.5 billion. Without disclosing actual numbers, American National’s revenue from
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`air adjustable consumer beds and accessories is substantially less than 15 million
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`thus far in 2019.
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`I declare under penalty of perjury under the laws of the United States of
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`America that the foregoing is true and correct.
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`Date: October 30, 2019
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`
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`By /s/ Craig S. Miller, Jr.
`CRAIG S. MILLER, JR.
`
`
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`
`9
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`WA 13785030.1
`
`American National Manufacturing Inc.
`Exhibit 1033
`IPR2019-00500
`Page 9
`
`