Case 1:20-cv-00393-LMB-TCB Document 1398-10 Filed 07/20/22 Page 1 of 2 PageID# 34912
`Case 1:20-cv-00393-LMB-TCB Document 1398-10 Filed 07/20/22 Page 1 of 2 PagelD# 34912
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`EXHIBIT 10
`EXHIBIT 10
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`Case 1:20-cv-00393-LMB-TCB Document 1398-10 Filed 07/20/22 Page 2 of 2 PageID# 34913
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`NuMark, and obviously we're talking about, you know, two of the
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`patents in this case that I have comparability on, the '911 and
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`'265.
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`But Fontem saying, about these other licensees, that
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`Fontem's representing and warrants to the licensee, which is
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`NuMark, that all license arrangements prior to the effective
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`date -- this date is December of 2016 -- that basically they've
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`been subject to, A, a running royalty at a rate equal to or
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`higher than the rate set forth on the cover page hereof, and
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`that's the 5-and-a-quarter percent. So it's Fontem telling
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`So, the top of section 6.10.9 there's "all licensed
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`arrangement." That's referring to those prior nine agreements
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`NuMark, everybody else is paying 5-and-a-quarter percent.
`02:40PM 12 Q.
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`that you discussed earlier?
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`this running royalty rate of 5.25 shown on Slide 25?
`02:41PM 18 A.
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`patent families comparable to two patents in this case.
`02:41PM 20 Q.
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`royalty?
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`That's my understanding.
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`And what are the patents, again, that are associated with
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`It's the Fontem portfolio, which includes, you know, two
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`Now, have you seen any evidence, Mr. Meyer, that any of
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`these prior Fontem licensees actually paid that 5.25 percent
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`Well, I never saw the licenses, so I haven't seen those.
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`So I'm always looking for ways to corroborate things, you know,
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`can I check it some other way? So I went back to the Reynolds
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`No, because I knew that that portfolio was broader, so I
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`had to go deeper and apportion that 5-and-a-quarter percent
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`Okay. Well, let's go to Slide 28, and you have a table
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`here with three columns and they're labeled A, B, and C. Can
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`you just walk the jury through each one of these and how you
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`So we obviously have the two patents, and our starting
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`point is 5-and-a-quarter percent, but we know that includes more
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`patented technology than these two patents, and so
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`Mr. McAlexander, who I listened to testify today, I worked with
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`him on this and he -- because he's an engineer, he went in and
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`he analyzed that Fontem portfolio -- he described that to the
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`jury this morning -- and he provided these apportionment
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`factors.
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`And he told me that for the '911, that basically that
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`matches up to 35 percent of the 5-and-a-quarter percent and that
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`for the compact heater, the '265, it's 10 percent, so he gives
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`me the apportionment based on his analysis so I can reduce that
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`5-and-a-quarter downwards, so I'm only focusing on the amount
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`ultimate reasonable royalty that you calculated?
`02:43PM 2 A.
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`downwards.
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`went about apportioning the 5.25 percent rate?
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`that relates to the two patents in this case.
`02:44PM 23 Q.
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`Can you just briefly explain what that is?
`02:44PM 25 A.
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`And then Column C is entitled "Baseline Royalty Rate."
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`Right. So now I've taken our comparable licenses that
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
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`negotiating documents, the 200 documents that were produced by
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`Reynolds from its files, and I said, "What's in here that may
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`give me some assurance that what Fontem told NuMark was
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`accurate?"
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`And so I went to the September 8th, 2018 revisions from
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`Reynolds -- this is Reynolds speaking to us -- and Reynolds is
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`reporting, the range of royalty rates previously negotiated by
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`Fontem, a number of which are based on 5-and-a-quarter percent
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`of net sales.
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`So this is Reynolds telling all of us here in court that
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`they understood that Fontem had told them that a number of those
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`licensees in the nine are paying 5-and-a-quarter percent.
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`are technically comparable -- I think both sides agree on
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`that -- and I'm making them economically comparable, so I went
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`through and identified the 5-and-a-quarter. I'm now matching it
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`up so I can tell the Court that that's the baseline royalty rate
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`before I look at all the other Georgia-Pacific factors. I've
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`got to go back and see if any other factors impact that rate
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`upwards or downwards, because once again we're back in the
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`hypothetical. We have a starting point baseline, but now we
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`And you mentioned the Georgia-Pacific factors. Let's go
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`to Slide 29, which is similar to one of the earlier slides we
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`discussed today.
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`When adjusting the baseline royalty rate, what factors
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`Well, I went through all 14, but these three that have
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`been marked there in green were the ones that, to me, stood out
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`and warranted sort of separate analysis, and I looked deeper
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`into these, but I looked at all of them and I reported
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`conclusions on every factor, but these are the ones that I think
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`need to finish the analysis.
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`did you find important to your analysis?
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`are important to the Court.
`02:45PM 21 Q.
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`right?
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`And when you say "these three," just for the record,
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`we're looking at Factor 4, Factor 9 and Factor 10; is that
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`That's right. Those are important.
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`All right. Let's start with those and walk through each
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`That's what it tells us.
`02:42PM 14 Q.
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`through earlier today?
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`for your analysis?
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`case.
`02:42PM 25 Q.
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`And what you're reading from, Mr. Meyer, that's PX 677,
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`is that the same September 8th draft agreement that we walked
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`Yes, sir.
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`Now, did you use that 5.25 percent as the starting point
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`It was the starting point. It's my testimony that based
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`upon market prices, market rates, these three sources give us --
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`because we have comparability to the '911 and '265, they give us
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`a starting point rate to use to figure out the royalty in this
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`And did you use the 5.25 percent of net sales as the
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`06/09/2022 08:41:09 PM
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
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`Scott L. Wallace, RDR, CRR, Official Court Reporter
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