Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 1 of 26 PageID# 29894
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
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`
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`v.
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`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
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`Plaintiffs and Counterclaim Defendants,
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`
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`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA INC.; and PHILIP MORRIS
`PRODUCTS S.A.,
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`Defendants and Counterclaim Plaintiffs.
`
`Case No. 1:20-cv-00393-LO-TCB
`REDACTED
`
`
`REPLY IN SUPPORT OF REYNOLDS’S MOTION
`TO EXCLUDE THE TESTIMONY OF PAUL K. MEYER
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`

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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 2 of 26 PageID# 29895
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`TABLE OF CONTENTS
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`PAGE
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`A.
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`B.
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`C.
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`INTRODUCTION ......................................................................................................................... 1
`ARGUMENT ................................................................................................................................. 3
`I.
`MR. MEYER’S ROYALTY OPINIONS AS TO THE ’545, ’265, AND ’911
`PATENTS ARE UNFOUNDED, UNRELIABLE, AND SHOULD BE
`EXCLUDED. ..................................................................................................................... 3
`Mr. Meyer Disregards The Most Comparable Fontem–RJRV Agreement As Well
`As The Purported Comparable Amount Paid Under The
`
`Agreement. ......................................................................................................................... 4
`Mr. Meyer Does Not Establish Any Baseline Comparability Of The License From
`Which He Derives His
` Rate.................................................................................... 5
`Mr. Meyer’s Claimed Market Value Of The Fontem Portfolio Lacks Factual
`Support. .............................................................................................................................. 7
`Mr. Meyer Ignores That The
` Rate
`. ......... 10
`MR. MEYER’S
`INCREASE FOR THE ’545 RATE IS ARBITRARY. .................. 12
`Mr. Meyer’s “Judgment And Experience” Do Not Render His
` Kicker
`Admissible. ...................................................................................................................... 13
`Mr. Meyer’s Arbitrary
`Kicker Lacks Any Factual Or Methodological
`Predicate. .......................................................................................................................... 13
`PM/Altria’s Other Experts Do Not Make The
` Kicker Any Less Arbitrary. .............. 14
`C.
`III. MR. MEYER’S ’374 ROYALTY RATE IS ARBITRARY AND UNRELIABLE. ...... 15
`A.
`Mr. Meyer Improperly Uses
`. ........................................................ 15
`B.
`Altria Internal Documents And Cost Savings Do Not Support A
` Royalty
`Rate. ................................................................................................................................. 18
`Mr. Meyer Fails To Apportion His
` Rate. ............................................................... 19
`C.
`CONCLUSION ............................................................................................................................ 20
`
`
`D.
`II.
`A.
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`B.
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`-i-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 3 of 26 PageID# 29896
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`
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`
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`CASES
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`TABLE OF AUTHORITIES
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`Page
`
`Acceleration Bay LLC v. Activision Blizzard Inc.,
`No. 1:16-cv-0453-RGA, 2019 WL 4194060 (D. Del. Sept. 4, 2019) ..................................9, 10
`
`ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc.,
`694 F.3d 1312 (Fed. Cir. 2012)..................................................................................................7
`
`Atl. Thermoplastics Co. v. Faytex Corp.,
`5 F.3d 1477 (Fed. Cir. 1993)....................................................................................................17
`
`Bayer Healthcare LLC v. Baxalta Inc.
`989 F.3d 964, 983 (Fed. Cir. 2021)..........................................................................................14
`
`Corning Optical Commc’ns Wireless Ltd. v. Solid, Inc.,
`No. 5:14-cv-03750-PSG, 2015 WL 5655192 (N.D. Cal. Sept. 24, 2015) ...............................14
`
`Exmark Mfg. v. Briggs & Stratton Power Prod. Grp., LLC,
`879 F.3d 1332 (Fed. Cir. 2018)....................................................................................13, 14, 20
`
`Gallagher v. S. Source Packaging, LLC,
`568 F. Supp. 2d 624 (E.D.N.C. 2008)........................................................................................6
`
`GPNE Corp. v. Apple, Inc.,
`No. 12-CV-02885-LHK, 2014 WL 1494247 (N.D. Cal. Apr. 16, 2014) ....................13, 14, 15
`
`Hanson v. Alpine Valley Ski Area, Inc.,
`718 F.2d 1075 (Fed. Cir. 1983)................................................................................................16
`
`In re Koninklijke Philips Patent Litig.,
`No. 18-cv-01885-HSG, 2020 WL 7398647 (N.D. Cal. Apr. 13, 2020) ..................................16
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`LaserDynamics, Inc. v. Quanta Computer, Inc.,
`694 F.3d 51 (Fed. Cir. 2012)....................................................................................................16
`
`LifeNet Health v. LifeCell Corp.,
`No. 2:13cv486, 2014 WL 5529679 (E.D. Va. Oct. 31, 2014) .................................................18
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`Limelight Networks, Inc. v. XO Commc’ns, LLC,
`No. 3:15-cv-720-JAG, 2018 WL 678245 (E.D. Va. Feb. 2, 2018)..........................................20
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`
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`-ii-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 4 of 26 PageID# 29897
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`TABLE OF AUTHORITIES
`(continued)
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`Page
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`MiiCs & Partners, Inc. v. Funai Elec. Co.,
`No. CV 14-804-RGA, 2017 WL 6268072 (D. Del. Dec. 7, 2017) ....................................14, 17
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`Mondis Tech., Ltd. v. LG Elecs., Inc.,
`No. 2:07-CV-565-TJW-CE, 2011 WL 2417367 (E.D. Tex. June 14, 2011) ...........................17
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`Network-1 Techs., Inc. v. Alcatel-Lucent USA, Inc.,
`No. 6:11-cv-492-RWS-KNM, 2017 WL 4769037 (E.D. Tex. Oct. 23, 2017) ..........................7
`
`Open Text S.A. v. Box, Inc.,
`No. 13-cv-04910-JD, 2015 WL 349197 (N.D. Cal. Jan. 23, 2015) .........................................13
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`Plastic Omnium Advanced Innovation and Research v. Donghee America, Inc.,
`387 F. Supp. 3d 404 (D. Del. 2018) .........................................................................................19
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`Speedfit LLC v. Woodway USA, Inc.,
`No. 13-CV-1276 (KAM)(AKT), 2019 WL 1436306 (E.D.N.Y. Mar. 29, 2019) ....................13
`
`Sportspower Ltd. v. Crowntec Fitness Mfg. Ltd.,
`No. 8:17-cv-02032-JLS-KES, 2020 WL 3213704 (C.D. Cal. Feb. 3, 2020) ...........................19
`
`Summit 6, LLC v. Samsung Elecs. Co.,
`(802 F.3d 1283, 1296 (Fed. Cir. 2015) ......................................................................................7
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`Tyger Const. Co. Inc. v. Pensacola Const. Co.,
`29 F.3d 137 (4th Cir. 1994) .......................................................................................................9
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`VS Techs., LLC v. Twitter, Inc.,
`No. 2:11cv43, 2011 WL 4744572 (E.D. Va. Oct. 5, 2011) .....................................................14
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`OTHER AUTHORITIES
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`Rule 702 ...........................................................................................................................................3
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`-iii-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 5 of 26 PageID# 29898
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`INTRODUCTION
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`Mr. Meyer’s opinions regarding the royalties for the ’545, ’265, ’911, and ’374 patents
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`should be excluded because they are not supported by the facts of this case and they do not employ
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`reliable methodology. Specifically, Mr. Meyer sets the rates for the first three patents based upon
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`a purported market value of an entire Fontem patent portfolio, despite the lack of evidence that
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`. Then he arbitrarily increases the rate for one of those patents, the
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`’545 patent, by 50%. Mr. Meyer sets the rate for the fourth patent to that of
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` which he also fails to apportion when setting the rate for the ’374 patent.
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`Those fundamental errors render Mr. Meyer’s opinions inadmissible under Rule 702.
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`First, Mr. Meyer’s uses a
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` rate to set his baseline royalties for Reynolds’s
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`hypothetical non-exclusive U.S. license to the ’545, ’265, and ’911 patents, but that starting rate
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`is untethered to the facts. Mr. Meyer opines that there was a “market-based value” of
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` “for
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`Fontem’s licensed patent portfolio.” But not one license in the record
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` Indeed, there are two, and only two Fontem licenses produced in this case: Fontem–RJRV
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`and
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`. RJRV agreed to pay
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` under the Fontem–
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`RJRV agreement. Similarly,
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` agreed to pay Fontem
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`use either of these payments in discerning the “market value” of the comparable Fontem patents.
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`Instead, Mr. Meyer opts for another number,
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`, that appears in an entirely different
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`context in the
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` agreement. That
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` is not an appropriate starting point
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`. But Mr. Meyer does not
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`because the rate was
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`. No other Fontem agreement has been produced showing that anyone paid
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` for
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`-1-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 6 of 26 PageID# 29899
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`Fontem’s portfolio. None. Nevertheless, Mr. Meyer assumes that nine other Fontem licenses paid
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` solely because of a Fontem representation that
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`. But that representation does not specify which, if any,
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`licenses were actually subject to the representation, or the rate paid by any particular licensee. Mr.
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`Meyer cites eight press releases announcing Fontem settlements with others as support for his
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`guesswork, but those actually indicate that Fontem’s representation about
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` did
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`not apply because seven of the other settlements were global licenses. Mr. Meyer’s speculation as
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`to royalty rates in licenses that he has never seen is impermissible.
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`Second, Mr. Meyer’s 50% increase of the rate for the ’545 patent (increasing from
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`to
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`) based upon its purported importance to FDA approval of Reynolds’s accused products is
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`plucked out of thin air and lacks any factual support. Mr. Meyer does not provide any explanation
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`for his selection of a
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` bump other than his say-so. That arbitrary opinion too should be excluded.
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`Third, with respect to the ’374 patent, Mr. Meyer’s start and end point of
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`. Mr. Meyer’s adoption of that
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` is
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`unreliable because an unaccepted offer is not proof of an established rate for a patent. And
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`rightfully so. While it may show what the patentee was willing to accept, it says nothing about
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`what any willing licensee would pay. Mr. Meyer’s “confirmatory” approaches do not save his
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`opinions. He looks to one of two
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` and ignores
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` But both of those illustrations show an effective rate
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` And
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`in any event,
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`. Instead
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`-2-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 7 of 26 PageID# 29900
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`. Mr. Meyer’s
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`other approach, assessing cost-savings to confirm the value of the ’374 patent, impermissibly looks
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`at the savings to Altria, the patentee, as opposed to Reynolds, the accused infringer. The cost
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`savings to Altria say nothing about the value of the patent to Reynolds.
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`Finally, Mr. Meyer fails to apportion that
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` rate he grabs from
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` to set the rate for the ’374 patent alone. Mr. Meyer’s claim to
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`have done so is a sham. After explaining his purported bases for a
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` rate for the ’374 patent
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`family, Mr. Meyer arbitrarily decides that actually
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` (doubling the rate) would be reasonable, so
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`that he could then “apportion” that amount by halving it to assign his starting rate of
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` to the
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`’374 patent alone. Such illusory “apportionment” is not apportionment at all.
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`Thus, Mr. Meyer’s opinions on the ’545, ’265, ’911, and ’374 patents should be excluded.1
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`ARGUMENT
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`I.
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`MR. MEYER’S ROYALTY OPINIONS AS TO THE ’545, ’265, AND ’911
`PATENTS ARE UNFOUNDED, UNRELIABLE, AND SHOULD BE EXCLUDED.
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`PM/Altria’s opposition fails to establish that Mr. Meyer’s royalty opinions for the ’545,
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`’265, and ’911 patents are “based on sufficient facts or data” and the “product of reliable principles
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`and methods ... reliably applied ... to the facts of the case”; thus, those opinions should be excluded
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`under Rule 702. Mr. Meyer opines that the hypothetical negotiation for the ’545, ’265, and ’911
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`patents would result in a non-exclusive license covering U.S. sales of the accused VUSE products.
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`See Dkt. 892-1, ¶ 132. He purports to set the royalty using a comparable license approach, which
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`looks to real-world transactions comparable to the hypothetical negotiation. Id. ¶¶ 191-95. Mr.
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`1 Reynolds also reserves its right to challenge other aspects of Mr. Meyer’s opinions. Contrary to
`PM/Altria’s suggestions otherwise, Reynolds’s decision not to challenge an aspect of Mr. Meyer’s
`opinions via Daubert motion is not a concession of agreement or propriety.
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`-3-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 8 of 26 PageID# 29901
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`Meyer opines that there are two such licenses, the Fontem–RJRV agreement and the
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` agreement. Id. Both RJRV and
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` agreed to pay Fontem
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`. But Mr. Meyer uses neither of those amounts to set
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`his royalty rates.
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`Mr. Meyer instead uses a non-comparable rate of
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`from the
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` There is no evidence any party ever paid,
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`or even agreed to pay, a
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` royalty rate for a comparable license. Mr. Meyer speculates that
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`other Fontem licensees paid
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`, but Mr. Meyer has never seen any other Fontem license. As
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`a result, Mr. Meyer’s royalty opinion is untethered to the facts of this case and is unreliable.
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`A. Mr. Meyer Disregards The Most Comparable Fontem–RJRV Agreement As Well As
`The Purported Comparable Amount Paid Under The
` Agreement.
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`Mr. Meyer admits that the Fontem–RJRV agreement in which RJRV paid
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`
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` is the agreement most comparable to the hypothetical negotiation here. As he explains,
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`the “Fontem–RJRV Agreement is economically comparable to the license that would be agreed
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`upon at the Hypothetical Negotiations for the ’545, ’911, and ’265 Patents …,” including because
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`it includes the “same licensee: RJRV”; “cover[s] the same products—the Accused VUSE
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`Products”; includes parties with the “same commercial relationship [as] competitors”; and
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`. Dkt. 892-1, ¶¶ 215-219. He also claims
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`that the
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` agreement contains an economically comparable license, whereby
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`. Mr. Meyer opines that the
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`two Fontem licenses, Mr. Meyer opines that
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`-4-
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`. Id., ¶¶ 258-262. But as between the
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` made to
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 9 of 26 PageID# 29902
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`Fontem is less relevant than the
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` RJRV paid to Fontem.” Id., ¶ 267.
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`Given these admissions, Mr. Meyer’s failure to use the Fontem–RJRV agreement in setting
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`his royalty rates is unreliable. And, despite PM/Altria’s suggestion that Mr. Meyer did use the
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`Fontem–RJRV agreement, his report unambiguously states that he did not. See id., ¶¶ 236, 239,
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`242 (stating, though the Fontem–RJRV rate “may provide a baseline royalty, I use the royalty rate
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`from the
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`.”); see also Section I.C.2, below. PM/Altria’s cases
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`suggesting that Mr. Meyer can consider
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`, despite it not being the most relevant
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`agreement, are inapposite. The problem with Mr. Meyer’s approach is not that he considered
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` but that he did so to the exclusion of the more relevant Fontem–RJRV
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`agreement. See Dkt. 892, 12 (citing LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51,
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`80 (Fed. Cir. 2012); ePlus, Inc. v. Lawson Software, Inc., 700 F.3d 509, 522-23 (Fed. Cir. 2012)).2
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`B. Mr. Meyer Does Not Establish Any Baseline Comparability Of The License From
`Which He Derives His
` Rate.
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`Even setting aside Mr. Meyer’s error in relying solely on the
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` agreement,
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`Mr. Meyer does not actually use what
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` paid for the comparable non-exclusive U.S.
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`license. Mr. Meyer contends that the
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` agreement is economically comparable
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`because it “
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`” Dkt. 892-1, ¶ 262. It is undisputed that
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`claimed economically comparable license—
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` for that
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`. Id., ¶ 248; see also Dkt. 892-5, §§ 6.1-6.2. But Mr. Meyer does not use
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`that
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`. PM/Altria’s opposition is notably silent on this error.
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`2 Unless otherwise noted, all internal quotation marks and citations are omitted, and emphasis is
`added.
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`-5-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 10 of 26 PageID# 29903
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`Instead, Mr. Meyer sets his baseline royalties using a
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` agreement. But to start, the provision Mr. Meyer points to does not set a
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` rate. Rather,
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`it sets a
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`. What is more, that
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` did not apply to a license comparable to the non-exclusive U.S. license that Mr. Meyer opines
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`would apply here. Mr. Meyer never contends otherwise. The
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` See Dkt. 892-1, ¶ 248; Dkt. 892-5, §§ 3.2.2, 6.3.1-6.3.3.
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`Neither of those situations are economically comparable to the hypothetical non-exclusive U.S.
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`license here and neither of those situations
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`3 (see Dkt. 892-6, 169:19-170:11).
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`Critically, Mr. Meyer never even contends that the
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` rate applied to a situation
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`comparable to the hypothetical license here, and it is too late to do so now.4 Having failed to opine
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`that
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` license for
`
` is economically comparable, Mr.
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`Meyer’s opinions based on that non-comparable license should be excluded.
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`PM/Altria asserts that whether a license agreement is sufficiently comparable is a matter
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`for cross-examination instead of exclusion. Dkt. 1011, 11-14. Mr. Meyer’s error here is not just
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`a matter of degree of comparability; it is an error in methodology warranting exclusion and
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`3 PM/Altria’s reliance on Bio-Rad Lab’ys., Inc. v. 10X Genomics Inc. to support the notion that it
`is immaterial that
` is misplaced. 967 F.3d 1353 (Fed. Cir.
`2020). Unlike here, the rate used in that case applied to future comparable sales. See id., 1375-
`76.
`4 Cf., e.g., Gallagher v. S. Source Packaging, LLC, 568 F. Supp. 2d 624, 630-31 (E.D.N.C. 2008)
`(concluding that expert opinion may not be supplemented following the close of discovery merely
`to avoid dispositive motions practice, and compiling cases).
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`-6-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 11 of 26 PageID# 29904
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`PM/Altria’s cited authority does not provide otherwise. See id.5 Mr. Meyer selects a rate for a
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`license that he never identifies as economically comparable, making the error one of unsound
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`methodology as opposed to one of accuracy or degree, and rendering the opinions excludable. See
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`Dkt. 892, 12. Not one of PM/Altria’s cases support the admissibility of an expert opinion where
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`the expert ignores not only the most comparable agreement in favor of a less comparable
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`settlement, but the expert then goes on to ignore what was actually paid under the less comparable
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`settlement and to adopt a rate for a license not even alleged to be comparable as Mr. Meyer does
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`here. PM/Altria does not explain how such methodology is sufficiently reliable to permit
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`admission under Rule 702.
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`C. Mr. Meyer’s Claimed Market Value Of The Fontem Portfolio Lacks Factual Support.
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`PM/Altria claims that the
`
` rate Mr. Meyer elects to use is supported because it is:
`
`(a) consistent with a purported nine prior Fontem licenses that have not been produced here; and
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`(b) consistent with the
`
` under the Fontem–RJRV agreement. Dkt. 1011, 5.
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`Both of those excuses are demonstrably false.
`
`1. There are no other Fontem licenses in the record. The nine prior Fontem licenses
`
`
`5 For example, PM/Altria cites ActiveVideo Networks, Inc. v. Verizon Commc’ns, Inc., 694 F.3d
`1312, 1333 (Fed. Cir. 2012), and Network-1 Techs., Inc. v. Alcatel-Lucent USA, Inc., No. 6:11-cv-
`492-RWS-KNM, 2017 WL 4769037, at *4 (E.D. Tex. Oct. 23, 2017), but the parties did not
`challenge the expert’s methodology in either of those cases. Similarly, though the Federal Circuit
`in Summit 6, LLC v. Samsung Elecs. Co., noted “that one approach may better account for one
`aspect of a royalty estimation does not make other approaches inadmissible” (see Dkt. 1101, 11-
`12), the court also explained that “a reasonable or scientifically valid methodology is nonetheless
`unreliable where the data used is not sufficiently tied to the facts of the case” (802 F.3d 1283, 1296
`(Fed. Cir. 2015)). Indeed, in Bio-Rad cited by PM/Altria, the Federal Circuit explained that “[it]
`has often excluded licenses that are technologically or economically non-comparable.” 967 F.3d
`at 1373. Similarly, in Ericsson, Inc. v. D-Link Sys., Inc., the Federal Circuit explained that
`“[t]estimony relying on licenses must account for such distinguishing facts when invoking them
`to value the patented invention” in order for “the fact that a license is not perfectly analogous” to
`go “to the weight of the evidence, not its admissibility.” 773 F.3d 1201, 1227 (Fed. Cir. 2014).
`
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`-7-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 12 of 26 PageID# 29905
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`Mr. Meyer refers to are not in the record. Mr. Meyer has never seen them. Dkt. 892-3, 40:3-11;
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`see also id., 44:13-21. The only Fontem licenses produced here are Fontem–RJRV and
`
`. Mr. Meyer speculates that other licensees paid
`
` for comparable U.S. licenses to
`
`the Fontem portfolio solely based upon a
`
`
`
`. That kind of speculation warrants exclusion. See Dkt. 892, 16 (citing MLC Intell.
`
`Prop., LLC v. Micron Tech., Inc., 10 F.4th 1358, 1366-68 (Fed. Cir. 2021)). PM/Altria tellingly
`
`does not address that case law, which affirmed the exclusion of expert testimony that unseen
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`agreements contain or reflect a particular royalty rate based upon a most favored rate provision.
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`Further, Fontem’s representation was that
`
`
`
`
`
` Dkt.
`
`892-5, § 6.10.9. Fontem did not identify how many—if any—prior agreements were covered by
`
`that representation. Mr. Meyer’s conclusion as to the applicability of the representation to other
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`unseen Fontem licenses is actually contradicted by the limited evidence available. The eight press
`
`releases he cites indicate that the representation,
`
` (id.), does
`
`not even apply. While one press release is silent on its geographic scope, the other seven are
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`global, and at least one references only a single payment and not any running royalty. See Dkt.
`
`960-6. It would be entirely inappropriate to allow Mr. Meyer to base his opinions on any Fontem
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`license that has not been produced. Such speculation warrants exclusion, not cross-examination.
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`See Dkt. 892, 19 (citing EVM Sys., LLC v. Rex Med., L.P., No. 6:13-CV-184, 2015 WL 4911090,
`
`at *8 (E.D. Tex. Aug. 17, 2015) (excluding opinions as to the contents of agreements based upon
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`“[s]ummaries of secondary reports about alleged license agreements” because those “are not actual
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`licenses, and there is no guarantee that the information contained in such reports is authentic.”).
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`-8-
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 13 of 26 PageID# 29906
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`Indeed, Reynolds does not even have the licenses to cross-examine Mr. Meyer with—they have
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`never been produced, warranting exclusion. Cf. Tyger Const. Co. Inc. v. Pensacola Const. Co., 29
`
`F.3d 137, 142 (4th Cir. 1994) (“An expert’s opinion should be excluded when it is based on
`
`assumptions which are speculative and are not supported by the record.”).
`
`2. The Fontem–RJRV agreement contradicts Mr. Meyer’s rate. PM/Altria’s argument
`
`that a
`
` rate is “consistent” with what RJRV paid to Fontem is based on fiction, not fact.
`
`First, PM/Altria and Mr. Meyer speculate that a
`
` rate for the Fontem portfolio is
`
`“consistent” with a purported
`
` conclusion that the RJRV
`
`rate was at least
`
` Dkt. 1011, 14. Setting aside the fact that
`
` is not the same as
`
`
`
`no
`
` analysis has been produced here. See Dkt. 892-3, 103:22-25 (Mr. Meyer explaining
`
`); see also Dkt. 892-6, 173:20-21.
`
`
`
`As a result, it is unknown whether an
`
` analyzed the Fontem–RJRV agreement,
`
`as opposed to some other agreement. See Dkt 892- 6, 173:10-13 (PM/Altria’s Rule 30(b)(6)
`
`representative testifying that
`
`
`
`).6 Acceleration Bay LLC v. Activision Blizzard Inc., No. 1:16-cv-0453-RGA, 2019 WL
`
`4194060 (D. Del. Sept. 4, 2019) is inapposite. In that case, the expert did not rely on conjecture
`
`as to an undisclosed license analysis. Instead, he relied on a license the court found to be
`
`comparable, the terms of which were fully disclosed in produced drafts and fact witness testimony.
`
`Id. at *6. That case does not permit Mr. Meyer to “rely” on an analysis that he cannot be sure ever
`
`
`6 PM/Altria misrepresents that Dr. Sullivan
`
` See Dkt. 1011, 15 (emphasis in original). Dr. Sullivan’s
`testimony was that the only subsequent Fontem agreement in the record was the Fontem–RJRV
`agreement. See Ex. 1, 214:22-215:10. As Dr. Sullivan noted though, he
`
` Id., 229:12-230:3.
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`
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 14 of 26 PageID# 29907
`
`
`even occurred.
`
`Even assuming that the
`
` did analyze the Fontem–RJRV agreement, there is no
`
`evidence of the
`
` conclusions on the effective royalty rate or that
`
` calculated
`
`an effective royalty rate at all. See Dkt. 892-6, 173:20-24. PM/Altria therefore seeks to infer the
`
` conclusion based upon only
`
`
`
` See Dkt. 892-5, §§ 6.10.2-6.10.4. But there is no evidence the
`
` actually
`
`made such a determination. See Dkt. 892-6, 173:20-24 (PM/Altria’s corporate representative
`
`testifying
`
`
`
`). And even if she did, there is no evidence of how or what rate she calculated. For instance,
`
`she did not have access to internal Reynolds sales or forecast data, which conservatively
`
`demonstrates
`
` See Dkt. 960, 5-6; Dkt. 960-1, ¶¶ 264-265.
`
`Second, Mr. Meyer’s calculations of an effective rate for the Fontem–RJRV agreement
`
`between
`
` and
`
`, do not support a rate of
`
` either. Not only is
`
` not
`
`the same as
`
`, but Mr. Meyer’s calculations to get to those rates are unreliable and overstate
`
`what was paid. As just one error, he omits a minimum of seven years of sales from the equation
`
`to drive the rate up. Mr. Meyer cites no basis for doing so. He admits that, had he included the at
`
`least seven more years of covered sales, the effective royalty rate would have been much lower.
`
`(Dkt. 892-3, 128:5-129:8 (Mr. Meyer acknowledging that
`
`
`
`)). Indeed, accounting conservatively for sales only through 2025 yields an
`
`effective rate of
`
` which is entirely inconsistent with a rate of
`
` See Dkt. 892-2, ¶ 265.
`
`Thus, neither the
`
` nor Mr. Meyer’s calculations evidence a
`
`D. Mr. Meyer Ignores That The
`
` Rate
`
`Further evidencing the unreliability of Mr. Meyer’s opinion, he ignores the
`
`
`
`-10-
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`.
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 15 of 26 PageID# 29908
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`
`
`Dkt. 892-5, § 6.3.1. Mr. Meyer’s report never explains why. He gave a non-sensical explanation
`
`. See
`
`during his deposition, testifying that
`
`
`
`
`
`
`
` Ex. 2, 93:22-94:18;
`
`Dkt. 892-5). But, Mr. Meyer has not seen the “nine prior licenses” that he refers to (see Section
`
`I.C.1, above) and has no evidence of what any prior licensee paid or did not pay, or whether those
`
`licenses had
`
`. And the
`
`is not inconsistent with
`
`
`
`
`
` Dkt. 892-5, §§ 6.3.1-6.3.2.
`
`PM/Altria arguments do not fare any better than Mr. Meyer’s. PM/Altria claims that the
`
` “conflicts with the agreed-upon royalty structure.” Dkt. 1011, 17. But
`
`PM/Altria contended in its interrogatory responses only that the reasonable royalties for the ’545,
`
`’265, and ’911 patent would be a “running royalty based on Reynolds’ sales” (see Ex. 3; Ex. 4.),
`
`which of course can take the form of a percentage of net sales or a per unit amount. See Ex. 5,
`
`¶ 214. Further, PM/Altria’s claim that there is no evidence of
`
` as a basis to ignore the
`
` is irrelevant. Dkt. 1011, 17. Regardless of
`
` and Mr. Meyer provides no basis in fact to ignore it. PM/Altria also argues that the
`
` is “inconsistent with the
`
` in the record” for
`
`
`
`
`
`
`
`
`
`
`
`and
`
` by Reynolds. Id. PM/Altria’s attorneys cite no evidence or opinion by Mr. Meyer
`
`to this effect, because Mr. Meyer did not disclose such an opinion. Those
`
` were
`
`
`
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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 16 of 26 PageID# 29909
`
`
`for
`
`with any
`
` and RJRV’s products. They have nothing to do
`
`
`
`
`
`. The fact is the
`
`. Dkt. 892-5, 1, § 6.3.1. One cannot be divorced from the other.
`
`PM/Altria’s reliance on Carucel Invs., L.P. v. Novatel Wireless, Inc., is misplaced. No. 16-
`
`cv-118-H-KSC, 2017 WL 1215838, at *13 (S.D. Cal. Apr. 3, 2017). That case did not involve an
`
`expert cherry-picking
`
`
`
` as Mr. Meyer does here. Carucel instead involved
`
`an expert’s adoption of a royalty rate without accounting for a separate total royalty cap, which is
`
`necessarily dependent upon a given product’s expected sales and is separate from the royalty rate
`
`itself. Similarly, Immersion Corp. v. HTC Corp., involved criticism of an expert for adopting a
`
`per unit royalty set for future sales—the only royalty in the license—as opposed to relying on a
`
`separate settlement fee, which the evidence confirmed was not a royalty. No. 12-259-RGA, 2015
`
`WL 834209, at *2 (D. Del. Feb. 24, 2015). In both cases, the expert adopted the entire running
`
`royalty used in the agreement, unlike what Mr. Meyer does here.
`
`Accordingly, because Mr. Meyer’s opinions on the ’545, ’265, and ’911 royalties are not
`
`based upon facts and are not the product of reliable methodology, they should be excluded.
`
`II. MR. MEYER’S
`
` INCREASE FOR THE ’545 RATE IS ARBITRARY.
`
`PM/Altria fails to identify any factual or methodological basis to support Mr. Meyer’s 50%
`
`rate increase (from
`
` to
`
`) for the ’545 royalty rate. See Dkt. 1011, 18-20. Indeed, PM/Altria
`
`does not dispute that Mr. Meyer failed to explain why he chose a
`
` increase. Instead, PM/Altria
`
`argues, (1) that Mr. Meyer’s “judgment and experience” support his opinion; (2) that mathematical
`
`precision is not required; and (3) that Mr. Meyer properly relied on PM/Altria’s experts, including
`
`Ms. Ehrlich. Id. None of those arguments permits admission of Mr. Meyer’s
`
` increase.
`
`
`
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`

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`Case 1:20-cv-00393-LO-TCB Document 1092 Filed 02/25/22 Page 17 of 26 PageID# 29910
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`
`
`A. Mr. Meyer’s “Judgment And Experience” Do Not Render His
`
` Kicker Admissible.
`
`As set out in Reynolds’s motion, the Federal Circuit has held that it is “not enough” for an
`
`expert “to explain the advantages of the [patented technology]” and then choose a royalty rate
`
`“plucked … out of nowhere.” Exmark Mfg. v. Briggs & Stratton Power Prod. Grp., LLC, 879
`
`F.3d 1332, 1350-51 (Fed. Cir. 2018). That is true even where the expert analyzes the Georgia-
`
`Pacific factors. Id. at 1351; see also Speedfit LLC v. Woodway USA, Inc., No. 13-CV-1276
`
`(KAM)(AKT), 2019 WL 1436306, at *8 (E.D.N.Y. Mar. 29, 2019). For all of PM/Altria’s
`
`attempts to distinguish these cases by asserting that “Mr. Meyer did not perform a ‘superficial
`
`analysis’” and “followed a ‘discernable methodology’ based on record evidence” (Dkt. 1011, 19),
`
`PM/Altria points to nothing Mr. Meyer actually relied upon to come up with his
`
` figure.
`
`Unable to identify any methodology, PM/Altria claims Mr. Meyer’s experience justifies
`
`his
`
` increase. Indeed, that is the only explanation Mr. Meyer provided at his deposition for his
`
`rate adjustments. See Ex. 2, 225:9-20 (“
`
`
`
`
`
`
`
`”). But courts consistently hold that experience, alone, cannot support the
`
`selection of a royalty. See, e.g., Open Text S.A. v. Box, Inc., No. 13-cv-04910-JD, 2015 WL
`
`349197, at *6 (N.D. Cal. Jan. 23, 2015) (“[The expert] cites her ‘experience’—an abstraction not
`
`visible to the eyes of the Court, the jury, and opposing counsel, or testable in the crucible of cross-
`
`examination.”). “Mr. [Meyer]’s ‘30 years of experience’ alone does not constitute a sufficiently
`
`reliable and testable methodology to prevent exclusion under Daubert.” GPNE Corp. v. Apple,
`
`Inc., No. 12-CV-02885-LHK, 2014 WL 1494247, at *4 (N.D. Cal. Apr. 16, 2014).
`
`B. Mr. Meyer’s Arbitrary
`
` Kicker Lacks Any Factual Or Methodological Predicate.
`
`Similarly, PM/Altria argues for admission of the
`
` kicker because mathematical