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`Case 1:20-cv-00393-LO-TCB Document 898-1 Filed 01/21/22 Page 1 of 179 PagelD# 24873
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`EXHIBIT 1
`EXHIBIT1
`(PUBLIC)
`(PUBLIC)
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`Case 1:20-cv-00393-LO-TCB Document 898-1 Filed 01/21/22 Page 2 of 179 PageID# 24874
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`
`
`
`
`RAI Strategic Holdings, Inc.
`and
`R.J. Reynolds Vapor Company
`v.
`Altria Client Services LLC,
`Philip Morris USA, Inc.,
` and Philip Morris Products S.A.
`
`
`Civil Action No. 1:20-cv-00393-LO-TC
`
`Amended and Supplemental Opening Expert Report
`of Paul K. Meyer
`
`TM Financial Forensics, LLC
`April 26, 2021
`
`
`
`c;al{t:1a-
`
`Paul K. Meyer
`
`~
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`CONFIDENTIAL BUSINESS INFORMATION – SUBJECT TO THE PROTECTIVE ORDER
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`Case 1:20-cv-00393-LO-TCB Document 898-1 Filed 01/21/22 Page 3 of 179 PageID# 24875
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`I. 
`
`INTRODUCTION.............................................................................................................. 5 
`
`A.  Assignment .......................................................................................................................... 5 
`B.  Background and Experience ................................................................................................ 6 
`II.  MATERIALS CONSIDERED .......................................................................................... 9 
`
`III.  SUMMARY OF OPINIONS ........................................................................................... 10 
`
`IV.  THE PARTIES AND THEIR RELATED ENTITIES ................................................. 13 
`
`A.  Altria Group, Inc. ............................................................................................................... 13 
`1.  Altria Client Services LLC ......................................................................................................... 13 
`2.  Philip Morris USA, Inc. .............................................................................................................. 14 
`3.  Nu Mark LLC ............................................................................................................................. 14 
`4. 
`JUUL Labs, Inc. .......................................................................................................................... 16 
`B.  Philip Morris International, Inc. ......................................................................................... 16 
`1.  Philip Morris Products S.A. ........................................................................................................ 17 
`C.  Reynolds American, Inc. .................................................................................................... 19 
`1.  RAI Strategic Holdings Inc. ........................................................................................................ 20 
`2.  R.J. Reynolds Vapor Company ................................................................................................... 20 
`3.  R.J. Reynolds Tobacco Company ............................................................................................... 21 
`V.  BACKGROUND INCLUDING THE ASSERTED PATENTS AND ACCUSED
`PRODUCTS .............................................................................................................................. 22 
`
`A.  The United States E-Vapor Market .................................................................................... 22 
`B.  The Asserted Patents .......................................................................................................... 25 
`C.  The Accused VUSE Products ............................................................................................ 33 
`VI.  ANALYSIS AND OPINIONS ......................................................................................... 36 
`
`A.  Reasonable Royalty Analysis ............................................................................................ 36 
`B.  Royalty Base ...................................................................................................................... 38 
`1.  The Royalty Base For The Asserted Patents ............................................................................... 38 
`2.  Additional Economic Considerations That Inform The Appropriate Royalty Base ................... 41 
`C.  Overview Of The Hypothetical Negotiations .................................................................... 43 
`D.  Patent Acquisitions and Agreements ................................................................................. 46 
`1. 
` .............................................................. 47 
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`2.  Agreements Containing Licenses to Patents Covering Patented Comparable Technology ........ 66 
`3.  Agreements to Which Plaintiffs are a Party that are Not Comparable to the Hypothetical
`Negotiation Licenses ........................................................................................................................... 95 
`4.  Agreements to Which Reynolds is a Party that are Not Comparable to the Hypothetical
`Negotiation License ............................................................................................................................ 98 
`E.  Georgia-Pacific Factor Analysis ..................................................................................... 103 
`Factor 1: The Royalties Received By The Patentee For The Licensing Of The Patents In Suit,
`Proving Or Tending To Prove An Established Royalty .................................................................... 104 
`Factor 2: The Rates Paid By The Licensee For The Use Of Other Patents Comparable To The
`Patent-In-Suit .................................................................................................................................... 105 
`Factor 3: The Nature And Scope Of The License, As Exclusive Or Non-Exclusive; Or As Restricted
`Or Non-Restricted In Terms Of Territory Or With Respect To Whom The Manufactured Products
`May Be Sold ...................................................................................................................................... 106 
`Factor 4: The Licensor’s Established Policy And Marketing Program To Maintain His Patent
`Monopoly By Not Licensing Others To Use The Invention Or By Granting Licenses Under Special
`Conditions Designed To Preserve That Monopoly ........................................................................... 107 
`Factor 5: The Commercial Relationship Between The Licensor And Licensee, Such As, Whether
`They Are Competitors In The Same Territory In The Same Line Of Business; Or Whether They Are
`Inventor And Promoter ..................................................................................................................... 108 
`Factor 6: The Effect Of Selling The Patented Specialty In Promoting Sales Of Other Products Of
`The Licensee; The Existing Value Of The Invention To The Licensor As A Generator Of Sales Of His
`Non-Patented Items; And The Extent Of Such Derivative Or Convoyed Sales ................................ 115 
`Factor 7: The Duration Of The Patent And The Term Of The License ............................................ 121 
`Factor 8: The Established Profitability Of The Product Made Under The Patent; Its Commercial
`Success; And Its Current Popularity ................................................................................................. 121 
`Factor 9: The Utility And Advantages Of The Patent Property Over The Old Modes Or Devices, If
`Any, That Had Been Used For Working Out Similar Results; And .................................................. 125 
`Factor 10: The Nature Of The Patented Invention; The Character Of The Commercial Embodiment
`Of It As Owned And Produced By The Licensor; And The Benefits To Those Who Have Used The
`Invention ........................................................................................................................................... 125 
`Factor 11: The Extent To Which The Infringer Has Made Use Of The Invention; And Any Evidence
`Probative Of The Value Of That Use ................................................................................................ 162 
`Factor 12: The Portion Of The Profit Or Of The Selling Price That May Be Customary In The
`Particular Business Or In Comparable Businesses To Allow For The Use Of The Invention Or
`Analogous Inventions ........................................................................................................................ 164 
`Factor 13: The Portion Of The Realizable Profit That Should Be Credited To The Invention As
`Distinguished From Non-Patented Elements, The Manufacturing Process, Business Risks, Or
`Significant Features Or Improvements Added By The Infringer ...................................................... 165 
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`Factor 14: The Opinion Testimony Of Qualified Experts ................................................................. 166 
`Factor 15: The amount that a licensor (such as the patentee) and a licensee (such as the infringer)
`would have agreed upon (at the time the infringement began) if both had been reasonably and
`voluntarily trying to reach an agreement; that is, the amount which a prudent licensee – who
`desired, as a business proposition, to obtain a license to manufacture and sell a particular article
`embodying the patented invention – would have been willing to pay as a royalty and yet be able to
`make a reasonable profit and which amount would have been acceptable by a prudent patentee who
`was willing to grant a license ........................................................................................................... 166 
`1.  The First Hypothetical Negotiation ........................................................................................... 167 
`2.  The Second Hypothetical Negotiation ...................................................................................... 170 
`3.  The Third Hypothetical Negotiation ......................................................................................... 176 
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`Case 1:20-cv-00393-LO-TCB Document 898-1 Filed 01/21/22 Page 6 of 179 PageID# 24878
`
`I.
`
`INTRODUCTION
`A.
`
`Assignment
`
`1.
`
`TM Financial Forensics, LLC (“TMF”) has been retained by Latham & Watkins, LLP
`(“Counsel”) on behalf of Plaintiffs Altria Client Services, LLC (“ACS”), Philip Morris
`USA, Inc. (“PM USA”) and Philip Morris Products S.A. (“PMP”) (collectively,
`“Plaintiffs”) to provide expert opinions regarding damages in this case. Specifically, I
`was asked to opine on the amount and nature of damages related to Reynolds’ (defined
`below) infringement of U.S. Patent Nos. 6,803,545 (“the ’545 Patent”), 10,420,374 (“the
`’374 Patent”), 9,814,265 (“the ’265 Patent”), 10,104,911 (“the ’911 Patent”) and
`10,555,556 (“the ’556 Patent”). I will collectively refer to these five patents as “the
`Asserted Patents.” I will collectively refer to the ’545 and ’374 Patents as the “Altria
`Asserted Patents,” and the ’265, ’911, and ’556 Patents as the “PMP Asserted Patents.”
`
`2. Defendants RAI Strategic Holdings, Inc. (“RAISH”) and R.J. Reynolds Vapor Company
`(“RJRV”) (collectively, “Reynolds” or “Defendants”) filed a patent infringement lawsuit
`against ACS, PM USA, and PMP on April 9, 2020.1 All of Reynolds’ asserted patent
`claims have been dismissed or stayed.2
`
`3. On June 29, 2020, ACS, PM USA, and PMP filed counterclaims against Defendants for,
`among other things, infringement of the Asserted Patents.3
`
`4.
`
`I submitted an expert report in this matter dated February 24, 2021 (“Initial Report”)
`setting forth my analysis of Plaintiffs’ damages related to Reynolds’ alleged infringement
`
`
`1 RAI Strategic Holdings, Inc. and R.J. Reynolds Vapor Co. v. Altria Client Services, LLC.; Philip Morris USA Inc.;
`Altria Grp., Inc.; Philip Morris Int’l Inc.; and Philip Morris Prods. S.A., No. 1:20-cv-393, Complaint for Patent
`Infringement, April 9, 2020 (“Complaint”). RAISH and RJRV subsequently amended the complaint, dropping U.S.
`Patent No. 8,314,591 (“the ’591 Patent”) and removing Altria Group, Inc. and Philip Morris International Inc. as
`defendants. RAI Strategic Holdings, Inc. and R.J. Reynolds Vapor Co. v. Altria Client Services, LLC.; Philip Morris
`USA Inc.; and Philip Morris Prods. S.A., No. 3:20-cv-257, Am. Complaint, July 13, 2020 (“Amended Complaint”).
`2 Order Granting Defendants’ Unopposed Motion to Invoke the Statutory Stay of Plaintiffs’ Claims Relating to U.S.
`Patent Nos. 9,839,238; 9,901,123; and 9,930,915 Pursuant to 28 U.S.C 1659; Order Granting Defendants’ Motion to
`Stay, December 4, 2020; Order Granting Defendants’ Motion to Lift the Stay, February 16, 2021.
`3 Altria Client Services LLC and Philip Morris USA Inc.’s Partial Answer to Complaint and Counterclaims, June 29,
`2020 (“Altria and PM USA Counterclaims”); Philip Morris Products S.A.’s Partial Answer to Complaint and
`Counterclaims, June 29, 2020 (“PMP Counterclaims”). On July 27, 2020, after RAISH and RJRV amended their
`Complaint, Altria, PM USA and PMP filed an answer to the Amended Complaint and counterclaims. Altria Client
`Services LLC and Philip Morris USA Inc.’s Partial Answer to the Amended Complaint and Counterclaims, July 27,
`2020 (“Altria and PM USA Amended Counterclaims”); Philip Morris Products S.A.’s Partial Answer to the Amended
`Complaint and Counterclaims, July 27, 2020 (“PMP Amended Counterclaims”).
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`of the Asserted Patents. I understand that, since the date of my Initial Report, additional
`depositions have been taken and documents have been produced, including updated
`Reynolds’ sales data. Accordingly, I have prepared this Amended and Supplemental
`Report (“Report”) to account for the additional evidence received after February 24, 2021.
`I have also made corrections to certain footnote citations.
`
`5.
`
`This Report and accompanying Attachments are intended to supersede and replace my
`Initial Report and accompanying Attachments. Certain of Attachments 4 through
`Attachment 19 from my Initial Report have been updated to reflect additional Reynolds’
`sales data through December 31, 2020, and are indicated with a “.U”.4
`
`6. My opinions in this Report and the accompanying attachments regarding the appropriate
`amount of damages for RJRV’s infringement of the Asserted Patents do not include
`prejudgment interest. Plaintiffs may be entitled to prejudgment interest for RJRV’s
`infringement of the Asserted Patents, and I reserve the right to provide opinions related
`to prejudgment interest for any damages award in this case. I also reserve the right to
`provide further analysis and opinions regarding the appropriate ongoing royalty rate for
`any future infringement by RJRV of the Asserted Patents.
`B.
`
`Background and Experience
`
`7.
`
`8.
`
`I am a founding member and the President of TMF and the leader of the intellectual
`property practice. TMF is a business, economic, financial, and damages consulting
`company that provides services to government agencies, business entities, and counsel.
`
`I am a Certified Public Accountant, Certified Fraud Examiner, Certified Licensing
`Professional and Accredited in Business Valuation (CPA-ABV). I have held positions at
`Stanford University in the Graduate School of Engineering including as Adjunct
`Professor, where I have taught a course covering accounting, quantitative methods,
`valuation, and financial issues for almost 25 years. I am a member of the Advisory Board
`
`
`4 In addition to incorporating updated sales data to include actuals for Q4 2020, I have also updated the unit sales
`calculations throughout this report and accompanying attachments. I include actuals for Q4 2020 unit sales and
`based on new information since the filing of my Initial Report, I adjust the reported units on Reynold’s product line
`P&L’s to incorporate e-commerce units, return units, and the number of individual Cartridge units sold in the
`cartridge refill packs for each of the Accused VUSE Products. I have also updated Attachment 1, Attachment 2
`with additional testimony and Attachment 3 with additional documents considered since my Initial Report.
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`Case 1:20-cv-00393-LO-TCB Document 898-1 Filed 01/21/22 Page 8 of 179 PageID# 24880
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`for the McIntire School of Commerce at the University of Virginia. I am a former
`member of the Board of Trustees of the University of San Francisco.
`
`9.
`
`In 1979, I graduated from the University of Virginia, McIntire School of Commerce, with
`a Bachelor of Science degree in Commerce with a concentration in accounting and
`quantitative methods.
`
`10. Prior to founding TMF, I was a Managing Director at Navigant Consulting, Inc. (“NCI”)
`and a co-leader of NCI’s national intellectual property practice. NCI was an international
`consulting company, which now has parts owned by Guidehouse and Ankura. Before
`joining NCI in February 2004, I was co-founder and President of Tucker Alan Inc.
`(“TAI”). TAI was a business, economic, financial, valuation, and damages consulting
`company with approximately 350 employees and 13 offices in the United States.
`
`11. Prior to founding TAI in July 1994, I worked for Peterson Consulting, an international
`consulting firm. At Peterson Consulting, I held various positions including Executive
`Vice President and Member of the Board of Directors. Before joining Peterson
`Consulting in 1981, I worked for an international public accounting and consulting firm.
`
`12.
`
`I am certified in business valuation (CPA-ABV) by the American Institute of Certified
`Public Accountants (“AICPA”), which required prior valuation engagement experience
`and successful completion of an exam administered by the AICPA. I have valued
`intangible and other assets, including various forms of intellectual property such as
`patents, for over 30 years. These valuations spanned many industries and technologies
`including but not limited to integrated circuits, software, computer hardware, mobile
`handsets, tablets, notebooks, telecommunications, satellite television, consumer goods,
`pharmaceuticals, social media platforms, medical devices, Wi-Fi, video on demand,
`DRAM, RISC microprocessors, flash memory, IGBTs, MOSFETs, ASICs, SLICs,
`encryption, GPS chips, stand-by power, v-chips, power controllers, small size LCD
`panels, DVRs, VCRs, audio processing and graphics chips. Additionally, I have
`consulted on patent disputes, other intellectual property disputes, and other disputes
`requiring an assessment of the amount and nature of damages related to various products,
`including but not limited to household cleaning products, skin care, food supplements,
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`13.
`
`14.
`
`15.
`
`children’s learning games, alcoholic beverages, tobacco, video games, work tools, fashion
`dolls and accessories, golf clubs, board games, and athletic shoes and apparel.
`
`I have provided valuation services to support entities’ “licensing in” and “licensing out”
`transactions related to patented technologies and other intellectual property. My analyses
`have involved valuation analytics based on various methodologies, including the market,
`income, and cost approaches. I have also valued contracts and tangible property assets in
`disputes and other situations. These assignments have involved valuing patent portfolios;
`researching the relevant industry, product(s), and component(s); studying the underlying
`and competing technologies; analyzing sales, profitability, and market shares; and
`determining potential royalties.
`
`I have almost 40 years of experience consulting on financial, accounting, economic,
`licensing, and damages matters. I have prepared or analyzed hundreds of claims for lost
`profits and reasonable royalties, and have analyzed other financial and economic impacts,
`in patent infringement cases. Based on that work as well as my educational and
`employment background described above, I am extremely experienced in the matters
`related to the scope of the work that I was asked to perform in this case.
`
`I have lectured on intellectual property valuation, licensing, and infringement damages in
`national forums, including at the Sedona Patent Conference, USC Intellectual Property
`Institute, Santa Clara University, Stanford Law School, University of Texas Advanced
`Patent Law Institute (at the United States Patent and Trademark Office, “USPTO”), and
`Licensing Executive Society. I have been qualified as an expert, and have testified on
`many occasions, in both U.S. federal district court and International Trade Commission
`(“ITC”) proceedings.
`
`16. My curriculum vitae, which contains further information about my education, experience,
`and qualifications, is included as Attachment 1.U to this Report. A listing of cases in
`which I have testified as an expert witness at trial, arbitration, and/or deposition in the last
`four years is included as Attachment 2.U to this Report.
`
`17. TMF is being compensated for my work in this case at my customary hourly rate of $750.
`I am also being reimbursed for reasonable travel and out-of-pocket expenses. TMF’s
`compensation does not depend on the nature of my opinions or the outcome of this case.
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`TMF’s work on this matter was performed by me or TMF employees working under my
`supervision. TMF is also being compensated for the work of each TMF employee
`working under my supervision in this case at a rate lower than my hourly rate of $750.
`
`II. MATERIALS CONSIDERED
`
`18.
`
`In forming the opinions in this Report, I considered all materials referenced in this Report
`and Attachment 3.U to this Report. I also relied on the education, experience, and
`knowledge that I have gained from working in the field.
`
`19. The materials referenced in this Report are exemplary and intended to aid understanding.
`I may rely at trial on the materials referenced in this Report, as well as other documents
`and items produced in this case; deposition exhibits; deposition and trial testimony of the
`Parties and third parties; the Parties’ responses to discovery requests; and publicly
`available materials. I reserve the right to use visual aids, demonstratives, and physical
`evidence at the trial in this case, including any materials that I considered in forming the
`opinions described in this Report.
`
`20.
`
`In preparing my Initial Report, I interviewed the following individuals:
`
` Eric Hawes, Director of Heated Tobacco at Altria (Dec. 9, 2020 and Feb. 22, 2021);
` Liu Loi Ying (“Andy”) Engineering Director and former Executive Director (from
`2011-2013) at Minilogic Device Corporation Limited (“Minilogic”) and the sole
`inventor named on the ’374 Patent5 (Dec. 4, 2020);
` Arno Rinker, former co-founder of Wedegree GmbH (“Wedegree”) and the sole
`inventor named on the ’265 Patent (Dec. 7, 2020);
` Dr. John Abraham, technical expert providing opinions related to the ’911 and ’556
`Patents (Dec. 1, 2020 and Feb. 22, 2021);
` Mr. Joseph McAlexander, technical expert providing opinions related to the ’545
`and ’374 Patents (Dec. 5, 2020, and Feb. 20, 2021, and Feb. 23, 2021); and
` Dr. Henry Walbrink, technical expert providing opinions related to the ’265 Patent
`(Jan. 28, 2021); and
` Stacy Ehrlich, attorney with Kleinfield Kaplan and Becker LLP, providing opinions
`related to regulatory review of e-vapor and potentially reduced risk products (Feb.
`24, 2021).
`
`
`5 http://www.megalogic.com.hk/about-us/management-team?lang=en: DEF_PUB_EDVA000021958-959 (at 958-
`959).
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`21.
`
`I understand that certain discovery remains ongoing as of the date of this Report. I
`therefore reserve the right to amend, modify, or supplement my opinions if additional
`information becomes available, including any information identified by Reynolds or any
`third party; testimony from depositions yet to taken; any opinions rendered by Reynolds’
`experts; or any relevant orders from the Court. I also reserve the right to provide rebuttal
`opinions in response to opinions from any expert and testimony from any fact witness.
`
`III.
`
`SUMMARY OF OPINIONS
`
`22. Under 35 U.S.C. § 284, Plaintiffs are entitled to damages adequate to compensate for
`RJRV’s infringement, but in no event less than a reasonable royalty for RJRV’s use of
`the inventions claimed in the Asserted Patents.
`
`23.
`
`In this case, a reasonable running royalty is the appropriate form of damages to
`compensate Plaintiffs for RJRV’s use of the inventions claimed in the Asserted Patents.
`
`24. For purposes of my analysis, I determined three separate hypothetical negotiation dates.
`The First Hypothetical Negotiation would be in March 2013 for the ’545 Patent; the
`Second Hypothetical Negotiation would be in August 2018 for the ’265, ’911, and ’556
`Patents; and the Third Hypothetical Negotiation would be in September 2019 for the ’374
`Patent.
`
`25. As part of my analysis, I determined the appropriate royalty base for each Asserted Patent.
`For the ’545, ’374, and ’556 Patents, the appropriate royalty base includes sales of the
`Power Units and Cartridges of the relevant Accused VUSE Products (all capitalized terms
`defined below). For the ’265 and ’911 Patents, the appropriate royalty base includes sales
`of Cartridges (defined below) for the relevant Accused VUSE Products.
`
`26. As part of my reasonable royalty determination, I performed analyses within the structure
`of the Georgia-Pacific factors to determine the appropriate reasonable royalty for each
`Asserted Patent. My conclusions and opinions as to baseline and agreed-upon reasonable
`royalty rates for each Asserted Patent are summarized in Table 1, below.
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`Table 1: Summary of Royalty Rates
`
`Baseline Rate
`
`Reasonable Royalty Rate
`
`-
`-
`-
`-
`-
`
`Patent No.
`
`6,803,545
`
`9,814,265
`
`10,104,911
`
`10,420,374
`
`10,555,556
`
`27. The baseline royalty rate for the ' 545, '265, and '911 Patents is derived from my analysis,
`
`suppo1ted by technical input received from the technical experts retained by Plaintiffs, of
`
`These baseline royalty rates are also supported by the consideration RJRV paid in the
`
`Fontem-RJRV Agreement (defined below). I then applied the Georgia-Pacif,.c factor
`
`analyses and considerations to these baseline royalty rates to determine the reasonable
`
`royalty rates resulting from the Hypothetical Negotiations set forth above for each
`
`Asse1ted Patent.
`
`28. The baseline royalty rate for the '374 Patent is derived from my analysis, suppo1ted by
`
`technical input received from Mr. McAlexander,
`
`(defined below). I then applied the Georgia-Pacific factor analyses
`
`and considerations to this baseline royalty rate to detem1ine the reasonable royalty rate
`
`resulting from the Hypothetical Negotiation for the ' 374 Patent.
`
`29. The reasonable royalty rate for the ' 556 Patent is derived from my analysis, suppo1ted by
`
`technical input received from Dr. Abraham, of the cost savings and benefits over the prior
`
`6 As addressed in Ge01gia-Pacific factor 15, it is also my opinion that, taking into account the '545 Patent's
`additional significant value to RJRV to obtain PMTA authorization from the FDA (as discussed below . the
`appropriate reasonable royalty rate would be ■ which results in total royalty damages of
`.
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`art enabled by using the technology claimed in the '556 Patent.
`
`I then applied the
`
`Georgia-Pacific factor analyses and considerations to this royalty rate to detennine the
`
`royalty rate resulting from the Hypothetical Negotiation for the ' 556 Patent.
`
`30. Overall Opinion: The damages period, accused products, reasonable royalty rates, and
`
`total royalty damages (through December 31, 2020) for each Asse1ted Patent is
`summarized in Table 2 below.7
`
`Table 2: Summary of Damages Through December 31, 20208
`
`Patent
`
`6,803,545
`
`9,814,265
`
`10,104,911
`
`10,420,374
`
`10,555,556
`
`Damages
`Period
`6/29/2020 -
`12/31/2020
`
`8/1/2018 -
`12/31/2020
`
`10/23/2018 -
`12/31/2020
`
`9/24/2019 -
`12/31/2020
`
`2/ 11/2020 -
`12/31/2020
`
`Accused VUSE
`Products
`Solo, Vibe,
`Ciro, Alto
`
`Alto
`
`Solo, Vibe,
`Ciro, Alto
`
`Solo, Vibe,
`Ciro, Alto
`
`Vibe
`
`Total Royalties Owed Through December 31, 2020
`
`Total Royalty
`
`Dama es -----
`
`-■
`
`7 This summary of damages does not include any ongoing royalty that Reynolds would owe Plaintiffs for any futlll'e
`infringement of the Asse1ted Patents.
`8 Attachment SA.U. I have updated Table 2 to account for updated sales data produced after the date of my Initial
`Repo1i and the parties' stipulation regarding pre-suit damages for the ' 545 Patent. (see RAJ Strategic Holdings, Inc.
`and R.J. Reynolds Vapor Co. 11. Altria Client Sen1ices, LLC.; Philip Mon'is USA Inc.; and Philip Morris Prods. S.A .,
`No. l:20-cv-393 , Joint Pre-Trial Stipulation, April 9, 2021).
`9 A addressed in Georgia-Pacific factor 15, it is also my opinion that, taking into account the '545 Patent' s
`additional significant value to RJRV to obtain PMTA authorization from the FDA (as discussed below , the
`appropriate reasonable royalty rate would be ■ which results in total royalty damage
`.
`10 Based on my opinion of a reasonable royalty rate of■ for the ' 545 Patent that accounts for the ' 545 Patent's
`additional significant value to RJRV to obtain PMTA authorization from the FDA (as addressed below), total
`royalty damages would be -
`.
`
`CONFIDENTIAL BUSINESS INFORMATION -
`SUBJECT TO PROTECTIVE ORDER
`
`12 of 178
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`Case 1:20-cv-00393-LO-TCB Document 898-1 Filed 01/21/22 Page 14 of 179 PageID# 24886
`
`IV. THE PARTIES AND THEIR RELATED ENTITIES
`A. Altria Group, Inc.
`
`31. Non-party Altria Group, Inc. (“Altria Group”) is a holding company that was incorporated
`in the Commonwealth of Virginia in 1985.11 Altria Group’s reportable segments include
`smokable products, smokeless products, and wine.12
`
`32. The tobacco products of Altria Group’s subsidiaries fall into two categories: smokable
`and smokeless tobacco products.13 Smokable tobacco products consist of combustible
`cigarettes manufactured and sold by PM USA, machine-made large cigars and pipe
`tobacco manufactured and sold by Middleton.14 Smokeless tobacco products consist of
`moist smokeless tobacco and “snus” products manufactured and sold by U.S. Smokeless
`Tobacco Company LLC, as well as oral nicotine pouches manufactured and sold by Helix
`Innovations LLC.15
`
`33. Altria Group’s wholly-owned subsidiaries include ACS, Nu Mark, and PM USA, among
`others.16 ACS is the current assignee of the ’374 Patent.17 PM USA is the current
`assignee of the ’545 Patent.18
`1. Altria Client Services LLC
`34. ACS is a wholly-owned subsidiary of Altria Group.19 ACS provides various support
`services to Altria Group and its subsidiaries in areas such as legal, regulatory, consumer
`
`
`11 Altria Group, Inc. Form 10-K for the fiscal year ended December 31, 2019: p. 1: DEF_PUB_EDVA000022103-
`269 (at 105).
`12 Altria Group, Inc. Fo