Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 1 of 37 PageID# 24836
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`RAI STRATEGIC HOLDINGS, INC. and
`R.J. REYNOLDS VAPOR COMPANY,
`
`Plaintiffs and Counterclaim Defendants,
`
`v.
`
`ALTRIA CLIENT SERVICES LLC; PHILIP
`MORRIS USA INC.; and PHILIP MORRIS
`PRODUCTS S.A.,
`
`Defendants and Counterclaim Plaintiffs.
`
`Case No. 1:20-cv-00393-LO-TCB
`
`REDACTED
`
`MEMORANDUM IN SUPPORT OF REYNOLDS’S MOTION TO
`EXCLUDE THE TESTIMONY OF PAUL K. MEYER
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 2 of 37 PageID# 24837
`
`TABLE OF CONTENTS
`
`
`Page
`
`
`Introduction .................................................................................................................................... 1
`Factual Background ....................................................................................................................... 2
`
`Hypothetical Negotiation Framework.................................................................... 2
`
`Mr. Meyer’s Analysis of the ’545, ’265, and ’911 Patents .................................... 3
`
`Mr. Meyer’s Analysis Of The ’374 Patent............................................................. 7
`Legal Standard ............................................................................................................................. 10
`Argument ..................................................................................................................................... 11
`I.
`MR. MEYER’S ROYALTY OPINIONS AS TO THE ’545, ’265, AND ’911
`PATENTS ARE UNFOUNDED, UNRELIABLE, AND SHOULD BE
`EXCLUDED. ................................................................................................................... 11
`
`Mr. Meyer Fails To Consider The Most Relevant License Agreement. .............. 12
`
`Mr. Meyer Inappropriately Adopts A Royalty Rate No One Ever Paid. ............. 16
`MR. MEYER’S
` INCREASE TO THE ’545 ROYALTY RATE
`IS ARBITRARY. ............................................................................................................. 20
`
`Mr. Meyer’s Reliance On Ms. Ehrlich Is Misplaced. .......................................... 20
`
`Mr. Meyer Fails To Justify His
` Increase. ...................................................... 21
`III. MR. MEYER’S ROYALTY OPINION FOR THE ’374 PATENT IS
`ARBITRARY AND UNRELIABLE. .............................................................................. 23
`
`The
` Agreement Does Not Support Mr. Meyer’s ’374 Royalty
`Rate Opinion. ....................................................................................................... 23
`Mr. Meyer’s Alternative Sources For His Royalty Rate Are Improper And
`Cannot Support His ’374 Royalty Opinion. ......................................................... 25
`Mr. Meyer’s Decision To Apportion The Entire
`
`To The ’374 Patent Is Inconsistent With The Underlying Facts. ........................ 28
`Conclusion ................................................................................................................................... 30
`
`
`II.
`
`
`
`
`
`-i-
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`

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`
`
`
`
`CASES
`
`TABLE OF AUTHORITIES
`
`Page
`
`Boeing Co. v. United States,
`86 Fed. Cl. 303 (2009) .............................................................................................................29
`
`Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp.,
`509 U.S. 209 (1993) .................................................................................................................10
`
`Cooper v. Smith & Nephew, Inc.,
`259 F.3d 194 (4th Cir. 2001) ...................................................................................................10
`
`Daubert v. Merrell Dow Pharm.,
`509 U.S. 579 (1993) ...........................................................................................................10, 11
`
`Digital Reg of Tex., LLC v. Adobe Sys., Inc.,
`No. C 12-1971 CW, 2014 WL 4090550 (N.D. Cal. Aug. 19, 2014) .......................................26
`
`E.E.O.C. v. Freeman,
`778 F.3d 463 (4th Cir. 2015) ...................................................................................................10
`
`ePlus, Inc. v. Lawson Software, Inc.,
`700 F.3d 509 (Fed. Cir. 2012)..................................................................................................12
`
`Ericsson, Inc. v. D-Link Sys., Inc.,
`773 F.3d 1201 (Fed. Cir. 2014)..........................................................................................21, 29
`
`EVM Sys., LLC v. Rex Med., L.P.,
`No. 6:13-CV-184, 2015 WL 4911090 (E.D. Tex. Aug. 17, 2015) ..........................................19
`
`Exmark Mfg. v. Briggs & Stratton Power Prod. Grp., LLC,
`879 F.3d 1332 (Fed. Cir. 2018)..........................................................................................21, 30
`
`Fujitsu Ltd. v. Belkin Int’l, Inc.,
`No. 10-CV-03972-LHK, 2012 WL 5835741 (N.D. Cal. Nov. 16, 2012) ................................22
`
`Golden Bridge Tech. v. Apple Inc.,
`No. 5:12-CV-04882-PSG, 2014 WL 2194501 (N.D. Cal. May 18, 2014) ..............................21
`
`Hanson v. Alpine Valley Ski Area, Inc.,
`718 F.2d 1075 (Fed. Cir. 1983)....................................................................................11, 24, 25
`
`-ii-
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 4 of 37 PageID# 24839
`
`
`In re Innovatio IP Ventures, LLC Pat. Litig.,
`No. 11 C 9308, 2013 WL 5593609 (N.D. Ill. Oct. 3, 2013) ....................................................21
`
`
`
`In re Koninklijke Philips Pat. Litig.,
`No. 18-CV-01885-HSG, 2020 WL 7398647 (N.D. Cal. Apr. 13, 2020) .................................24
`
`LaserDynamics, Inc. v. Quanta Computer, Inc.,
`694 F.3d 51 (Fed. Cir. 2012)..................................................................................11, 12, 13, 25
`
`Limelight Networks, Inc. v. XO Commc’ns, LLC,
`No. 3:15-cv-720-JAG, 2018 WL 678245 (E.D. Va. Feb. 2, 2018)..........................................29
`
`Lucent Techs., Inc. v. Gateway, Inc.,
`580 F.3d 1301 (Fed. Cir. 2009)................................................................................................12
`
`Medtronic, Inc. v. Bos. Sci. Corp.,
`No. CIV 99-1035 RHK/FLN, 2002 WL 34447587, at *12 (D. Minn. Aug. 8,
`2002) ........................................................................................................................................28
`
`Microsoft Corp. v. Corel Corp.,
`No. 5:15-CV-05836-EJD, 2017 WL 6492468 (N.D. Cal. Dec. 19, 2017) ..............................25
`
`MLC Intell. Prop., LLC v. Micron Tech., Inc.,
`10 F.4th 1358 (Fed. Cir. 2021) ................................................................................................16
`
`Nease v. Ford Motor Co.,
`848 F.3d 219 (4th Cir. 2017) ...................................................................................................10
`
`Open Text S.A. v. Box, Inc.,
`No. 13-cv-04910-JD, 2015 WL 349197 (N.D. Cal. Jan. 23, 2015) ...................................22, 30
`
`Oracle Am., Inc. v. Google Inc.,
`No. C 10-03561 WHA, 2012 WL 850705 (N.D. Cal. Mar. 13, 2012) ....................................28
`
`Prism Techs. LLC v. Sprint Spectrum L.P.,
`849 F.3d 1360 (Fed. Cir. 2017)................................................................................................25
`
`Rembrandt Soc. Media, LP v. Facebook, Inc.,
`22 F. Supp. 3d 585 (E.D. Va. 2013) ........................................................................................11
`
`ResQNet.com, Inc. v. Lansa, Inc.,
`594 F.3d 860 (Fed. Cir. 2010)............................................................................................11, 12
`
`-iii-
`
`

`

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`
`
`Riles v. Shell Expl. & Prod. Co.,
`298 F.3d 1302 (Fed. Cir. 2002)................................................................................................11
`
`
`
`Shure Inc. v. ClearOne, Inc.,
`No. CV 19-1343-RGA-CJB, 2021 WL 4748744 (D. Del. Oct. 8, 2021) ................................26
`
`Small v. WellDyne, Inc.,
`927 F.3d 169 (4th Cir. 2019) ...................................................................................................10
`
`Speedfit LLC v. Woodway USA, Inc.,
`No. 13-CV-1276, 2019 WL 1436306 (E.D.N.Y. Mar. 29, 2019) ............................................21
`
`Tyger Constr. Co. v. Pensacola Constr. Co.,
`29 F.3d 137 (4th Cir. 1994) .....................................................................................................10
`
`Uniloc USA, Inc. v. Microsoft Corp.,
`632 F.3d 1292 (Fed. Cir. 2011)..........................................................................................20, 22
`
`United States v. Baller,
`519 F.2d 463 (4th Cir. 1975) ...................................................................................................10
`
`Whitserve, LLC v. Computer Packages, Inc.,
`694 F.3d 10 (Fed. Cir. 2012)..............................................................................................18, 24
`
`Wi-LAN Inc. v. LG Elecs., Inc.,
`No. 18-CV-01577-H-BGS, 2019 WL 5681622 (S.D. Cal. Nov. 1, 2019) ...............................24
`
`STATUTES
`
`35 U.S.C. § 284 ..............................................................................................................................11
`
`OTHER AUTHORITIES
`
`Fed. R. Evid. 702 .......................................................................................................................1, 10
`
`-iv-
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`

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`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 6 of 37 PageID# 24841
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`
`
`INTRODUCTION
`
`RAI Strategic Holdings, Inc. and R.J. Reynolds Vapor Company (“RJRV”) (collectively,
`
`“Reynolds”) respectfully move the Court for an order under Federal Rule of Evidence 702
`
`excluding certain testimony of Paul K. Meyer, damages expert for Altria Client Services LLC
`
`(“ACS”), Philip Morris USA Inc. (“PMUSA”), and Philip Morris Products S.A. (“PMP”)
`
`(collectively, “PM/Altria”). Specifically, Reynolds moves to exclude Mr. Meyer’s opinions
`
`regarding royalties for the alleged infringement of U.S. Patent Nos. 6,803,545 (’545 patent);
`
`9,814,265 (’265 patent); 10,104,911 (’911 patent); and 10,420,374 (’374 patent).1,2
`
`In order for expert testimony to be admissible under Rule 702, it must be based on a reliable
`
`methodology and supported by the facts of the case. For patent infringement damages, that means
`
`experts must use a reliable methodology based on facts to assess the value of the patents at issue.
`
`Experts may do this by considering executed license agreements that are economically and
`
`technologically comparable. But, in doing so, they cannot ignore the most relevant agreement in
`
`favor of a less relevant agreement simply to inflate the royalty rate as Mr. Meyer seeks to do here
`
`for three patents. Relatedly, experts cannot rely solely on proposals or other self-serving estimates
`
`of a patent’s value as Mr. Meyer does for another patent. Mr. Meyer’s testimony regarding a
`
`royalty for the ’545, ’265, ’911, and ’374 patents should be excluded because it violates both of
`
`these fundamental rules, making his opinions unsupported and unreliable.
`
`In particular, with respect to the ’545, ’265, and ’911 patents, Mr. Meyer effectively
`
`ignores the most comparable license agreement involving the same licensee (RJRV) and the same
`
`
`1 Reynolds disputes Mr. Meyer’s opinion as to a royalty for the ’556 patent, but Reynolds does not
`challenge that opinion in this motion.
`2 Pursuant to L.R. 7(E), undersigned counsel certifies that they conferred with PM/Altria’s counsel
`on January 11, 2022, and that they were unable to reach a resolution prior to the filing of this
`motion.
`
`-1-
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`

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`
`VUSE products at issue here. Instead, he looks to an admittedly less relevant license, involving a
`
`
`
`different licensee and different products, as the sole baseline for his opinion. Even worse, he does
`
`not rely upon the royalty actually paid under that less comparable license. Instead, he cherry-picks
`
`a number that appears in the agreement that (1) corresponds to a potential license that is not
`
`comparable to the hypothetical license here, and (2) was never paid (or even expected to be paid).
`
`With respect to the ’374 patent, Mr. Meyer’s opinion is similarly unreliable because he
`
`selects a rate from a promotional illustration of potential royalties prepared by the seller of the
`
`’374 patent. The use of that rate, which was never agreed to or paid, is unsupportable.
`
`Thus, Mr. Meyer’s royalty opinions regarding these four patents should be excluded.
`
`FACTUAL BACKGROUND
`
`In light of PM/Altria’s burden on the issue of damages, Mr. Meyer prepared an opening
`
`expert report setting forth his opinions regarding a purported reasonable royalty for each of the
`
`five patents asserted by PM/Altria, using a hypothetical negotiation framework.
`
` Hypothetical Negotiation Framework
`
`Both Mr. Meyer (for PM/Altria) and Dr. Sullivan (for Reynolds) agree that the reasonable
`
`royalty for any infringement by Reynolds in this case can be assessed by looking to what the
`
`parties, as willing participants, would have agreed to in hypothetical negotiations at the time of
`
`first infringement. See Excerpt of Apr. 26, 2021 Amended and Supplemental Opening Report of
`
`Paul K. Meyer (attached as Exhibit 1), § VI.C; Excerpts of March 24, 2021 Report of Ryan
`
`Sullivan, Ph.D. (attached as Exhibit 2), § 9.
`
`Mr. Meyer opines that at the hypothetical negotiations for the patents in suit, the parties
`
`would have agreed to nonexclusive licenses in the United States in exchange for running royalties.
`
`See Ex. 1, ¶¶ 23, 130; see also Excerpts of May 7, 2021 Deposition of Paul K. Meyer (attached as
`
`-2-
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`

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`
`Exhibit 3), 52:1-5. He identifies three separate hypothetical negotiations for the four patents
`
`
`
`discussed here on the dates and between the parties listed below:
`
`• First Negotiation: ’545 Patent. The ’545 hypothetical negotiation is between
`
`licensor PMUSA and licensee RJRV, and would have occurred in March 2013.
`
`Ex. 1, ¶¶ 121-122.
`
`• Second Negotiation: ’265 and ’911 Patents. The ’265 and ’911 hypothetical
`
`negotiation is between licensor PMP and licensee RJRV, and would have occurred
`
`in August 2018. Id., ¶¶ 123-124.3
`
`• Third Negotiation: ’374 Patent. The ’374 hypothetical negotiation is between
`
`licensor ACS and licensee RJRV, and would have occurred in September 2019.
`
`Id., ¶¶ 127-128.
`
` Mr. Meyer’s Analysis of the ’545, ’265, and ’911 Patents
`
`In rendering his opinion on reasonable royalties for the ’545, ’265, and ’911 patents,
`
`Mr. Meyer discusses prior license agreements and the economic and technical comparability of
`
`those licenses to the license that PM/Altria and Reynolds would have agreed to at the hypothetical
`
`negotiations. Specifically, Mr. Meyer discusses an agreement between Fontem and RJRV and an
`
`agreement between
`
`. See Id., § VI.D.2. Nu Mark is a non-party and
`
`wholly-owned subsidiary of Altria Group. Id., ¶ 37. Thus, Nu Mark is a related entity to ACS and
`
`PMUSA (see id., ¶ 33), but it is not related to PMP.
`
`1. The Fontem–RJRV Agreement. The Fontem–RJRV agreement effective on
`
`September 24, 2018, was executed in connection with the settlement of litigation between Fontem
`
`
`3 Reynolds disagrees that the ’911 hypothetical negotiation would have occurred in August 2018,
`since the patent had not yet issued by then, but Reynolds does not address that error in this motion.
`
`-3-
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`

`

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`
`Ventures B.V. and Fontem Holdings 1 B.V. (collectively, “Fontem”) and RJRV. See Fontem–
`
`
`
`RJRV agreement (attached as Exhibit 4). Under the agreement, RJRV paid a
`
`
`
` for a nonexclusive license to Fontem’s entire patent portfolio. Ex. 1, ¶¶ 198, 200;
`
`Ex. 4, §§ 3, 5. Mr. Meyer contends that the Fontem–RJRV agreement covers patents that are
`
`“technically comparable to technology claimed in the ’545, ’911, and ’265 Patents.” E.g., Ex. 1,
`
`¶¶ 201-204. Mr. Meyer also contends that “the Fontem–RJRV Agreement is economically
`
`comparable to the license that would be agreed upon at the Hypothetical Negotiations for the ’545,
`
`’911, and ’265 Patents”—it involves “the same licensee: RJRV” and “cover[s] the same products”
`
`(i.e., “each Accused VUSE Product (the Solo, Vibe, Ciro, and Alto)”) that would be at issue in the
`
`hypothetical negotiation here. Id., ¶¶ 215-217, 267; see also id., ¶¶ 218-219 (discussing the other
`
`reasons why the Fontem–RJRV agreement is economically comparable).
`
`2. The
`
` Agreement.
`
`
`
`
`
`The licensee was
`
` (not the hypothetical licensee here, or even a party to the current
`
` See
`
` agreement (attached as Exhibit 5).
`
`lawsuit). The products covered by the
`
` license were
`
`, which are not at issue in this lawsuit.
`
` Ex. 1, ¶ 248; see also Ex. 5, §§ 3, 6. That
`
`. See Ex. 3, 83:21-84:1.
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`-4-
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`
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`Ex. 5, § 6.3.
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
` Id.; see also Ex. 1, ¶ 248.
`
` Ex. 1, ¶ 248; see also Ex. 3, 89:9:13, 98:18-22; Excerpts of Nov. 18,
`
`2020 30(b)(6) Deposition of Michael Manson (attached as Exhibit 6), 169:19-170:11. Even at the
`
`time of execution, Nu Mark never intended to make “material” future royalty payments. See
`
`Excerpt of Altria Group, Annual Report (Form 10-K) (Feb. 27, 2017) (attached as Exhibit 7), 99
`
`(“Under the terms of the agreement, in January 2017, Nu Mark made an upfront payment of
`
`$21 million and will make future royalty payments in amounts that Altria … does not expect to be
`
`material.”).
`
`3. Mr. Meyer’s Derivation Of A Rate For The ’545, ’265, And ’911 Patents.
`
`Mr. Meyer Uses Baseline Royalty Rates Derived From
`
` Instead Of
`
`Fontem–RJRV: Mr. Meyer acknowledges that the Fontem–RJRV agreement involved the same
`
`licensee and same VUSE products as the hypothetical negotiations here (see Ex. 1, ¶¶ 216, 267)
`
`and he admits that RJRV’s payment to Fontem is more relevant than
`
`
`
` (id., ¶ 267). But despite those admissions, Mr. Meyer ignores that most comparable
`
`Fontem–RJRV agreement in actually setting an RJRV royalty here. Instead, Mr. Meyer elects to
`
`use a number listed in the
`
` agreement as the basis for his reasonable royalty. See
`
`id., ¶¶ 236, 239, 242.
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`-5-
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`

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`
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`Even worse though, after ignoring the most comparable Fontem–RJRV license, Mr. Meyer
`
`
`
`ignores what
`
` actually paid too. As noted,
`
` for its U.S. license.
`
`But instead of deriving a rate from what was actually paid, Mr. Meyer instead looks to
`
`
`
`
`
`. See id., ¶¶ 248, 266.
`
`To reach his ultimate royalty opinions, Mr. Meyer then relies on Mr. McAlexander,
`
`PM/Altria’s technical expert, to purportedly apportion the
`
` rate among five of the many
`
`patent families licensed under the
`
` agreement. See id., ¶¶ 266, 270-273
`
`(assigning five Fontem families 10%, 10%, 35%, 35%, and 10% of the value of the full Fontem
`
`portfolio). 4 Mr. Meyer then compares the technology covered by the ’545, ’265, and ’911 patents
`
`with specific Fontem patent families to assign a portion of the
`
` rate to each of the ’545, ’265,
`
`and ’911 patents. Id., ¶¶ 274-281 (citing to input from Mr. McAlexander and Dr. Abraham).
`
`Specifically, Mr. Meyer concludes that the ’545 patent is comparable to a family worth 35% of the
`
`Fontem portfolio, resulting in a
`
` (i.e.,
`
` x 0.35); the ’265 patent is
`
`comparable to a family worth 10% of the Fontem portfolio, resulting in a
`
` (i.e.,
`
` x 0.10); and the ’911 patent is comparable to a family worth another 35% of the Fontem
`
`portfolio, resulting in a
`
`(i.e.,
`
` x 0.35). Id.
`
`Adjustments To Further Increase The Rates: Finally, Mr. Meyer discusses the
`
`Georgia-Pacific factors to increase the royalties for the ’545, ’265 and ’911 patents to
`
`
`
` respectively. See id., § VI.E. & ¶¶ 513, 523, 530. Then, as to the ’545 patent, Mr. Meyer
`
`
`4 There are numerous flaws in Mr. Meyer and Mr. McAlexander’s apportionment among the
`Fontem families as well as in Mr. Meyer’s application of the Georgia-Pacific factors, but Reynolds
`does not challenge those issues in this motion given the fundamental flaw in Mr. Meyer’s election
`to derive a rate from the inapplicable
` number listed in the
` agreement.
`
`-6-
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`

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`further opines that the parties would have agreed that Reynolds pay an additional
`
`
`
`royalty to
`
`account for the technology’s “importance to the Accused VUSE Products receiving PMTA
`
`authorization from the FDA.” Id., ¶ 514.
`
`Mr. Meyer’s Conclusion: Finally, Mr. Meyer multiplied the resulting royalty rates by the
`
`royalty base of VUSE sales to reach his ultimate royalty opinions. See id., ¶¶ 515, 524, 531.
`
` Mr. Meyer’s Analysis Of The ’374 Patent
`
`As to the ’374 patent, Mr. Meyer purportedly relies on a
`
`
`
`. However, what he actually relies on is not any royalty rate that any party
`
`agreed to pay in that agreement or for a license to the ’374 patent alone. Instead, he relies on a
`
`theoretical depiction of a potential royalty stream for the ’374 patent family
`
`1. The
`
` Agreement.
`
` See Intellectual Property Purchase Agreement Between
`
` (attached as Exhibit 8).
`
`.
`
`
`
`
`
`
`
`
`
`151:14-153:4.
`
` See Ex. 1, ¶¶ 136-139; see also Ex. 3,
`
` Ex. 1, ¶ 148.
`
`
`
`
`
`
`
`
`
`
`
` See Ex. 8, Arts. 2.3, 3; see also Ex. 1, ¶ 142; Ex. 3,
`
`158:12-22.
`
`
`
` See Excerpts of March 22, 2021 Deposition of Henry Lam (attached as
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`-7-
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`

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`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 13 of 37 PageID# 24848
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`
`Exhibit 9), 53:19-54:3; see also Ex. 3, 148:19-149:2.
`
` See Ex. 8, Appendix B.
`
`See id., Appendix B at 17; see also Ex. 1, ¶ 154.
`
`
`
`
`
`
`
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`
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`2. Mr. Meyer’s Conclusion For The ’374 Patent. Mr. Meyer says that he relies on the
`
` as the basis for his royalty opinion as to the ’374 patent. See Ex. 1, ¶ 28.
`
`But in reaching his royalty opinion, he does not use the
`
` Instead, he begins with a
`
` royalty rate, relying, at least in part,
`
`
`
`
`
` See Ex. 3, 153:25-155:15.
`
`He concludes that
`
` is a reasonable royalty for the ’374 patent, even though no one ever paid
`
`such a royalty rate for that patent family, and, indeed, there is no evidence a license was ever
`
`offered at that rate for that family, let alone for the ’374 patent by itself.
`
`In an attempt to bolster his unsupported use of the
`
` rate, Mr. Meyer claims the rate is
`
`consistent with: (1) ACS internal documents, and (2) a cost-savings estimate. See Ex. 1, ¶¶ 155,
`
`172. First, Mr. Meyer asserts that
`
` Id., ¶ 155.
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`-8-
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`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 14 of 37 PageID# 24849
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`
`See id., ¶ 155 n.273; see also ALTRIA_IQOS_EDVA_000000830 (attached as Exhibit 10).
`
`
`
`Second, Mr. Meyer claims that the alleged cost savings from use of the ’374 patent supports
`
`his
`
` royalty rate. See Ex. 1, ¶ 172. But, to determine that alleged cost savings, he improperly
`
`looks at the cost savings to ACS (patentee) and its product as opposed to RJRV (accused infringer)
`
`and the accused products. See id., ¶¶ 150, 172. In particular, he claims that the ’374 patent would
`
`save
`
` for ACS for its Nu Mark products. Id., ¶ 150.
`
`Finally, Mr. Meyer claims to apportion the illustrative
`
` royalty rate for the ’374 patent
`
`family, and assigns (albeit indirectly) the full value to the ’374 patent alone.
`
`
`
`
`
`marked its products with the issued ’321 patent
`
` Id., ¶ 148. Nu Mark
`
`
`
`. See Altria Website, Nu Mark Patent Information, via Internet Archive (as displayed
`
`10/2/2018),
`
`http://web.archive.org/web/20181002235800/http://www.altria.com/About-Altria/
`
`our-companies/nu-mark/Documents/NuMark-Patents.pdf
`
`(accessed 1/3/2022)
`
`(attached as
`
`Exhibit 11); see Ex. 2, ¶ 133 (citing PM/Altria’s corporate testimony by Eric Hawes). However,
`
`when “apportioning” the
`
` Mr. Meyer essentially assigns 0% to
`
`the ’321 patent actually used by Nu Mark and the entire
`
` to the ’374 patent to drive up the
`
`damages.5 Ex. 1, ¶¶ 154-155, 169.
`
`
`5 After Mr. Meyer’s discussion of the alleged support for a
` rate (e.g., Ex. 1, ¶¶ 154, 155),
`Mr. Meyer then claims out of nowhere “[f]or example, a royalty rate of
` or higher would be
` rate downward, in part to reflect
`supported” (id., ¶ 170) and claims that he apportioned that
`the value of the ’321 patent (id., ¶ 171). However, Mr. Meyer’s arbitrary doubling is completely
`speculative and unsupported, making clear the purpose of that arbitrary doubling was really to
`make it appear as though he was apportioning value to the ’321 patent, when in effect, he does
`not—he simply apportions the
` in full to the ’374 patent.
`
`-9-
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 15 of 37 PageID# 24850
`
`
`
`* * *
`
`
`
`Reynolds moves to exclude Mr. Meyer’s opinions as to damages attributable to
`
`infringement of the ’545, ’265, ’911, and ’374 patents.
`
`LEGAL STANDARD
`
`PM/Altria, as the proponent of testimony, bears the burden of establishing admissibility.
`
`See Cooper v. Smith & Nephew, Inc., 259 F.3d 194, 199 (4th Cir. 2001). Expert testimony must
`
`be “based on sufficient facts or data” and the “product of reliable principles and methods ... reliably
`
`applied ... to the facts of the case.” Fed. R. Evid. 702. “When an expert opinion is not supported
`
`by sufficient facts to validate it in the eyes of the law, or when indisputable record facts contradict
`
`or otherwise render the opinion unreasonable, it cannot support a jury’s verdict.” Brooke Grp. Ltd.
`
`v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 242 (1993). Thus, expert testimony
`
`amounting to nothing “more than subjective belief or unsupported speculation” must be excluded.
`
`Daubert v. Merrell Dow Pharm., 509 U.S. 579, 590 (1993); see also E.E.O.C. v. Freeman, 778
`
`F.3d 463, 466 (4th Cir. 2015).
`
`Because jurors may give undue weight to expert opinions, courts exercise a gatekeeping
`
`function under Rule 702 to admit only those opinions that are reliable and well-founded. See, e.g.,
`
`United States v. Baller, 519 F.2d 463, 466 (4th Cir. 1975); see also Small v. WellDyne, Inc., 927
`
`F.3d 169, 176 (4th Cir. 2019) (“[I]t is critical for district courts to diligently assess the admissibility
`
`of expert testimony.”). The Court’s gatekeeping role—including scrutinizing the details of
`
`calculations and assumptions—is particularly important in the damages arena because jurors may
`
`be less able to parse those technical aspects of an expert’s damages opinion. See Tyger Constr.
`
`Co. v. Pensacola Constr. Co., 29 F.3d 137, 145 (4th Cir. 1994). Cross-examination cannot remedy
`
`prejudice occasioned by the admission of unreliable expert testimony. See Nease v. Ford Motor
`
`-10-
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 16 of 37 PageID# 24851
`
`
`Co., 848 F.3d 219, 231 (4th Cir. 2017); see also Rembrandt Soc. Media, LP v. Facebook, Inc., 22
`
`
`
`F. Supp. 3d 585, 595 (E.D. Va. 2013) (“His testimony would be unreliable under Daubert, and
`
`allowing such inflated numbers before a jury would be prejudicial even if Facebook has the
`
`opportunity to cross-examine the expert … .”).
`
`Reasonable royalty damages under 35 U.S.C. § 284 may be approximated using a
`
`hypothetical negotiation framework, looking to what royalty the parties would have agreed to
`
`when the alleged infringement began. See ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 868
`
`(Fed. Cir. 2010). The hypothetical negotiation analysis must be based on “sound economic and
`
`factual predicates.” Riles v. Shell Expl. & Prod. Co., 298 F.3d 1302, 1311 (Fed. Cir. 2002). As
`
`such, an expert’s proposed royalty rate should be excluded as “arbitrary and speculative” where it
`
`is “untethered from the patented technology at issue and the … licenses thereto” (LaserDynamics,
`
`Inc. v. Quanta Computer, Inc., 694 F.3d 51, 81 (Fed. Cir. 2012)), such as where experts “rely on
`
`unrelated licenses to increase the reasonable royalty rate above rates more clearly linked to the
`
`economic demand for the claimed technology.” ResQNet.com, 594 F.3d at 872-73. Similarly,
`
`experts may not rely on license proposals as evidence of an established rate because “[t]he fact
`
`that licenses were offered at a particular rate does not show that that rate was the ‘established’ rate,
`
`since the latter requires actual licenses, not mere offers to license.” Hanson v. Alpine Valley Ski
`
`Area, Inc., 718 F.2d 1075, 1078 (Fed. Cir. 1983).
`
`ARGUMENT
`
`I.
`
`MR. MEYER’S ROYALTY OPINIONS AS TO THE ’545, ’265, AND ’911
`PATENTS ARE UNFOUNDED, UNRELIABLE, AND SHOULD BE EXCLUDED.
`
`Mr. Meyer extrapolates his royalty rate opinions as to the ’545, ’265, and ’911 patents from
`
`the
`
` agreement. His error in doing so is threefold. First, Mr. Meyer ignores the
`
`admittedly most relevant license agreement in this case, the Fontem–RJRV agreement, and instead
`
`-11-
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 17 of 37 PageID# 24852
`
`
`looks to a less comparable litigation settlement between parties not involved in this action—
`
`
`
`. Second, Mr. Meyer ignores what
`
` actually paid
`
` and instead derives his rate from
`
` Third,
`
`
`
`
`
`
`
` Based on any of
`
`these defects, Mr. Meyer’s opinion should be excluded.
`
` Mr. Meyer Fails To Consider The Most Relevant License Agreement.
`
`Courts must “examine[] whether the licenses relied on by the patentee in proving damages
`
`are sufficiently comparable to the hypothetical license at issue in suit.” Lucent Techs., Inc. v.
`
`Gateway, Inc., 580 F.3d 1301, 1325 (Fed. Cir. 2009). In particular, the Federal Circuit has
`
`explained that “the trial court should not rely on unrelated licenses to increase the reasonable
`
`royalty rate above rates more clearly linked to the economic demand for the claimed technology,”
`
`and courts should instead look to “the most reliable license.” ResQNet.com, 594 F.3d at 872-73
`
`(emphasis added). Ignoring the most relevant license agreement in favor of less relevant
`
`agreements makes an expert’s opinion, like Mr. Meyer’s, unreliable. See LaserDynamics, 694
`
`F.3d at 80 (“Relying on this irrelevant [license] evidence to the exclusion of the many licenses
`
`expressly for the [asserted] Patent served no purpose other than to ‘to increase the reasonable
`
`royalty rate above rates more clearly linked to the economic demand for the claimed
`
`technology.’”); see also ePlus, Inc. v. Lawson Software, Inc., 700 F.3d 509, 522-23 (Fed. Cir.
`
`2012) (affirming exclusion of opinion where expert “ignored the settlements that produced smaller
`
`rates” despite their greater relevance). But that is exactly what Mr. Meyer does here—ignores the
`
`most relevant Fontem–RJRV license and instead relies on the
`
` license.
`
`Mr. Meyer acknowledges that the Fontem–RJRV agreement is “highly instructive when
`
`-12-
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 898 Filed 01/21/22 Page 18 of 37 PageID# 24853
`
`
`determining a reasonable royalty for a license to the ’545, ’911, and ’265 Patents.” Ex. 1, ¶ 193.
`
`
`
`Indeed, that agreement involves the same licensee (RJRV), and the same covered products at issue
`
`here. See id., ¶¶ 216, 267. Mr. Meyer recognizes this, and that royalties based on the Fontem–
`
`RJRV agreement provide “an accurate and reliable indicator of the value of the technology claimed
`
`in the [’545, ’911, and ’265 patents].” Id., ¶¶ 236, 239, 242; see also id., ¶ 267 (explaining that
`
`the “the
`
` payment that
`
` is less relevant than the
`
`
`
`royalty RJRV paid to Fontem” because “the
`
` royalty is attributable to the
`
`Accused VUSE Products and therefore reflects more accurate sales levels and market share”)
`
`(emphasis added).
`
`Nevertheless, Mr. Meyer inexplicably opts to use only the