Case 1:20-cv-00393-LO-TCB Document 957-4 Filed 02/11/22 Page 1 of 14 PageID# 26643
`Case 1:20-cv-00393-LO-TCB Document 957-4 Filed 02/11/22 Page 1 of 14 PagelD# 26643
`
`EXHIBIT 4
`EXHIBIT 4
`(PUBLIC)
`(PUBLIC)
`
`

`

`Case 1:20-cv-00393-LO-TCB Document 957-4 Filed 02/11/22 Page 2 of 14 PageID# 26644
`
`INTENSITY
`
`INTENSITY, LLC
`12730 High Bluff Drive, Suite 300
`San Diego, California 92130
`telephone 858.876.9101
`
`www.intensity.com
`
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF VIRGINIA
`ALEXANDRIA DIVISION
`
`Case No. 1:20-cv-00393
`
`REPORT OF
`RYAN SULLIVAN, Ph.D.
`
`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.
`
`____________________________________
`Ryan Sullivan, Ph.D.
`March 24, 2021
`
`CONFIDENTIAL BUSINESS INFORMATION, SUBJECT TO PROTECTIVE ORDER
`
`

`

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`9.
`
`Hypothetical Negotiations
`
`(183) A reasonable royalty can be determined through an analysis of what a willing licensor and a
`willing licensee would have bargained for during an arm’s-length, hypothetical negotiation
`occurring on the eve of infringement.425 I understand that the date of the hypothetical
`negotiation for the patents-in-suit would be the eve of first alleged infringement by Reynolds.
`In this case, the first infringement by Reynolds occurred on separate dates for each of the
`patents-in-suit. Therefore, the hypothetical negotiation for each of the asserted patents would
`occur at different points in time.
`
`(184) As discussed in Section 2.2, RJRV is the manufacturer for all of the VUSE accused products
`and their associated flavor packs. Thus, at the hypothetical negotiations for each of the
`patents-in-suit, RJRV would act as the licensee. To the extent that RAI is present at any of
`the hypothetical negotiations, my opinion remains unchanged.
`
`(185) Reynolds’ first alleged infringement of the ’545 patent occurred on or around March 2013,
`when the accused version of Reynolds’ VUSE Solo product launched. See Section 5. Thus,
`the hypothetical negotiation for the ’545 patent would occur on or around March 2013. As
`discussed in Section 4.1, PM USA is the assignee of the ’545 patent. Thus, the hypothetical
`negotiation for the ’545 patent would take place between PM USA as the licensor and RJRV
`as the licensee.
`
`(186) Reynolds’ first alleged infringement of the ’265 patent occurred on or around August 2018,
`when Reynolds’ VUSE Alto product launched. See Section 5. Thus, the hypothetical
`negotiation for the ’265 patent would occur on or around August 2018. As discussed in
`
`425
`
`Applied Med. Resources Corp. v. U.S. Surgical Corp., 435 F.3d 1356, 1361 (Fed. Cir. 2006). (“When an established royalty
`does not exist, a court may determine a reasonable royalty based on ‘hypothetical negotiations between willing licensor
`and willing licensee.’ Fromson, 853 F.2d at 1574.”)
`Rite-Hite Corp. v. Kelley Co., Inc., 56 F.3d 1538, 1554 (Fed. Cir. 1995). (“A patentee is entitled to no less than a reasonable
`royalty on an infringer’s sales for which the patentee has not established entitlement to lost profits. 35 U.S.C. § 284 (1988);
`Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075, 1078, 219 USPQ 679, 681-82 (Fed.Cir.1983) (‘If actual damages cannot
`be ascertained, then a reasonable royalty must be determined.’). The royalty may be based upon an established royalty, if
`there is one, or if not, upon the supposed result of hypothetical negotiations between the plaintiff and defendant. Id. at
`1078, 219 USPQ at 682. The hypothetical negotiation requires the court to envision the terms of a licensing agreement
`reached as the result of a supposed meeting between the patentee and the infringer at the time infringement began. Id.”)
`State Indus., Inc. v. Mor-Flo Indus., Inc., 883 F.2d 1573, 1580 (Fed. Cir. 1989). (“The determination of a reasonable royalty,
`however, is based not on the infringer's profit margin, but on what a willing licensor and licensee would bargain for at
`hypothetical negotiations on the date infringement started. Radio Steel & Mfg. Co. v. MTD Prod., Inc., 788 F.2d 1554, 1557,
`229 USPQ 431, 433 (Fed.Cir.1986).”)
`
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`Section 4.2, PMP is the assignee of the ’265 patent. Thus, the hypothetical negotiation for the
`’265 patent would take place between PMP as the licensor and RJRV as the licensee.
`
`(187) Reynolds’ first alleged infringement of the ’911 patent occurred on or around October 23,
`2018, the issuance date of the patent. See Section 4. Thus, the hypothetical negotiation for
`the ’911 patent would occur on or around October 23, 2018. As discussed in Section 4.3,
`PMP is the assignee of the ’911 patent. Thus, the hypothetical negotiation for the ’911 patent
`would take place between PMP as the licensor and RJRV as the licensee.
`
`(188) Reynolds’ first alleged infringement of the ’374 patent occurred on or around September 24,
`2019, the issuance date of the patent. See Section 4. Thus, the hypothetical negotiation for
`the ’374 patent would occur on or around September 24, 2019. As discussed in Section 4.4,
`ACS is the assignee of the ’374 patent. Thus, the hypothetical negotiation for the ’374 patent
`would take place between ACS as the licensor and RJRV as the licensee.
`
`(189) Reynolds’ first alleged infringement of the ’556 patent occurred on or around February 11,
`2020, the issuance date of the patent. See Section 4. Thus, the hypothetical negotiation for
`the ’556 patent would occur on or around February 11, 2020. As discussed in Section 4.5,
`PMP is the assignee of the ’556 patent. Thus, the hypothetical negotiation for the ’556 patent
`would take place between PMP as the licensor and RJRV as the licensee.
`
`(190) The Meyer Report contends that there would be a single hypothetical negotiation for the ’265,
`’911, and ’556 patents occurring in August 2018 between PMP as licensor and RJRV as
`licensee.426 While I disagree with the Meyer Report’s claim that the parties would negotiate
`licenses for patents that did not yet exist (and, thus, the negotiation not occurring on the eve
`of infringement), the conclusions of my analysis would not change if, for some reason, it were
`determined that the appropriate date for the hypothetical negotiations for the’265, ’911, and
`’556 patents would occur in August 2018 as the Meyer Report contends.
`
`426
`
`Meyer Report, 2/24/2021, ¶¶ 121–124.
`
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`13. Market Approach
`
`13.1. Overview
`I utilize a market approach to evaluate royalties for the ’545, ’265, ’374, and ’911 patents.
`
`(258)
`
`(259) The market approach is a method of ascertaining value by comparing historical transactions
`involving assets similar to the asset being evaluated.579 The market approach is based on the
`premise that the value of an asset may be determined by reference to how others in the
`marketplace have valued the same or similar assets.580 The market approach is a generally
`accepted and widely used methodology for valuation of both tangible and intangible assets,
`including patents.581
`
`579 Smith, Gordon and Russell Parr (2000), Valuation of Intellectual Property and Intangible Assets, (Third Edition), New York, NY:
`John Wiley & Sons, Inc., at 175. (“The market approach provides indications of value by studying transactions of property
`similar to the property for which a value conclusion is desired.”)
`Anson, Weston (2005), Fundamentals of Intellectual Property Valuation: A Primer for Identifying and Determining Value,
`Chicago, IL: American Bar Association, at 34. (“[Under the market approach], intangible assets are valued by comparing
`recent sales or other transactions involving similar assets in similar markets. . .The market approach utilizes actual transaction
`values derived from the sale or license of similar assets.”)
`Corbett, Michaelyn, Mohan Rao, and David Teece (2006), “A Primer on Trademarks and Trademark Valuation,” in Daniel
`Slottje, ed., Economic Damages in Intellectual Property: A Hands-On Guide to Litigation, New Jersey: John Wiley & Sons, Inc.,
`at 291. (“The market approach references a market with comparable transactions to determine the fair market value of an
`asset.”)
`Financial Accounting Standards Board, Original Pronouncements as Amended, Statement of Financial Accounting Standards
`No. 157: Fair Value Measurements, 11/15/2007, at FAS157–10. (“The market approach uses prices and other relevant
`information generated by market transactions involving identical or comparable assets or liabilities[.]”
`580 Murphy, William, John Orcutt, and Paul Remus (2012), Patent Valuation: Improving Decision Making through Analysis,
`Hoboken, NJ: John Wiley & Sons, Inc., at 16. (“Market methods seek to determine the value of an asset by reference to how
`other buyers and sellers have valued the same or similar assets.”)
`Smith, Gordon and Russell Parr (2000), Valuation of Intellectual Property and Intangible Assets, (Third Edition), New York, NY:
`John Wiley & Sons, Inc., at 170. (“The market approach is the most direct and the most easily understood appraisal
`technique. It measures the present value of future benefits by obtaining a consensus of what others in the marketplace
`have judged it to be.”)
`Razgaitis, Richard (2003), Valuation and Pricing of Technology-Based Intellectual Property, Hoboken, NJ: John Wiley & Sons,
`Inc., at 59. (“One of the traditional approaches to the valuation for anything is commonly known as the market (or,
`sometimes, the comparables) method. The simple underlying idea is that there exists a historical transaction that was valued
`by other parties that can be used as a direct prediction of the value of the present opportunity.”)
`581 Anson, Weston (2005), Fundamentals of Intellectual Property Valuation: A Primer for Identifying and Determining Value,
`Chicago, IL: American Bar Association, at 30. (“[T]here are some basic, traditional methods of valuation: the three most
`popular are the market approach, the income approach, and the cost approach . . . [These are] three accepted and traditional
`methodologies[.]”)
`Smith, Gordon and Russell Parr (2000), Valuation of Intellectual Property and Intangible Assets, (Third Edition), New York, NY:
`John Wiley & Sons, Inc., at 173 (“The cost, income, and market approaches are the tools for valuation. Virtually any type of
`
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`(260) Under the market approach, patent royalties may be estimated using the terms of license
`agreements that are comparable582 to the license resulting from the hypothetical negotiation.583
`Adjustments to the terms of comparable agreements can be made where appropriate to
`account for technological and economic differences that may exist between the license
`resulting from the hypothetical negotiation.584 For example, some of the economic issues that
`
`property can be valued using them.”), 175 (“Three generally accepted valuation methodologies are useful for valuing
`intellectual property and intangible assets. They are the market, cost, and income approaches.”).
`Murphy, William, John Orcutt, and Paul Remus (2012), Patent Valuation: Improving Decision Making through Analysis,
`Hoboken, NJ: John Wiley & Sons, Inc., at 16. (“The three basic valuation methodologies are income methods, market
`methods, and cost methods. Sometimes different names are used or some new valuation methodology is claimed, but all
`valuation methodologies can be traced back to these three fundamental approaches to valuation analysis.”)
`Razgaitis, Richard (2003), Valuation and Pricing of Technology-Based Intellectual Property, Hoboken, NJ: John Wiley & Sons,
`Inc., at 59. (“One of the traditional approaches to the valuation for anything is commonly known as the market (or,
`sometimes, the comparables) method.”)
`Financial Accounting Standards Board, Original Pronouncements as Amended, Statement of Financial Accounting Standards
`No. 157: Fair Value Measurements, 11/15/2007, at FAS157–10. (“Valuation techniques consistent with the market approach,
`income approach, and/or cost approach shall be used to measure fair value.”)
`Murphy, William, John Orcutt, and Paul Remus (2012), Patent Valuation: Improving Decision Making through Analysis,
`Hoboken, NJ: John Wiley & Sons, Inc., at 190. (“Market methods are regularly used to value patents.”)
`582 Throughout my report, I use the term comparable to refer to agreements or transactions that are sufficiently similar to the
`hypothetical negotiation such that differences between the agreement or transaction on the one hand, and the hypothetical
`negotiation on the other hand, can be reliably accounted for.
`583 Razgaitis, Richard (2003), Valuation and Pricing of Technology-Based Intellectual Property, Hoboken, NJ: John Wiley & Sons,
`Inc., at 60. (“[Applied to] technology licensing, the market valuation approach is the use of the terms of one or more
`comparable license agreements to estimate the value of the subject technology licensing opportunity . . . In many cases,
`applying the market valuation approach leads to numerous, say a dozen or more, agreements in the same broad technology
`category but no one of which, for different reasons, is exactly or near exactly comparable. In this circumstance, one may yet
`be able to estimate a royalty range from this family of agreements.”)
`Anson, Weston (2010), IP Valuation and Management, Chicago, IL: American Bar Association, at 199. (“[The comparables
`method] can be a superb way to establish royalty rates, given that sufficient comparable data and sufficient detail on the
`comparable pieces of data are available. In this method, royalties are established by comparing a licensing royalty rate to
`other licensing royalty rates that have been negotiated in the market.”)
`Corbett, Michaelyn, Mohan Rao, and David Teece (2006), “A Primer on Trademarks and Trademark Valuation,” in Daniel
`Slottje, ed., Economic Damages in Intellectual Property: A Hands-On Guide to Litigation, New Jersey: John Wiley & Sons, Inc.,
`at 292. (“The market approach is often helpful in determining running royalty rates in specific licensing transactions based
`on similar transactions in the marketplace.”)
`Anson, Weston (2005), Fundamentals of Intellectual Property Valuation: A Primer for Identifying and Determining Value,
`Chicago, IL: American Bar Association, at 207. (“Strong, but not necessarily definitive, evidence of the market rate for a
`license exists if the plaintiff has an established history of negotiating licenses for products comparable to the one that has
`been infringed. The historical evidence, however, is only a guide, a starting point.”)
`Frank, Peter, Vincent O’Brien, and Michael Wagner (2007), “Patent Infringement Damages,” in Roman Weil, et. al., ed.,
`Litigation Services Handbook: The Role of the Financial Expert, (Fourth Edition), Hoboken, NJ: John Wiley & Sons, Inc., at 22.
`(“[The third, fourth, fifth, and seventh factors of the court in Georgia-Pacific] raise fact (or descriptive) issues, and the analyst
`should evaluate them to judge how, if at all, observed royalty rates apply to the infringed product. If similarities exist between
`an actual license and the hypothetical license, the observed royalty rate can provide a starting point to ascertain the
`appropriate hypothetical rate. If differences exist between the licensing situations, the expert can make appropriate
`adjustments.”)
`
`584
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`may impact the terms of a license that can be considered in a hypothetical negotiation analysis
`include exclusivity, geography, time period, market size, and competitive environment, among
`others.585
`
`(261)
`
`Indeed, the Federal Circuit has approved “of a methodology that values the asserted patent
`based on comparable licenses…Such a model begins with rates from comparable licenses and
`then ‘account[s] for differences in the technologies and economic circumstances of the
`contracting parties.’”586 In other words, agreements may be considered comparable if they are
`sufficiently similar such that adjustments can be made to accurately reflect the outcome of
`the hypothetical negotiation.
`
`(262)
`
`In addition, several Georgia-Pacific factors relate to royalties received by the patentee (factor
`1), rates paid by the licensee (factor 2), the patentee’s licensing practices and policies (factor
`4), and the portion of a selling price that may be customary for the contribution of an invention
`in the industry (factor 12). See Section 16.
`
`(263) The Fontem-RJRV agreement is sufficiently comparable to the circumstances of the
`hypothetical negotiations for the ’545, ’265, ’374, and ’911 patents for several reasons. As I
`
`Anson, Weston (2010), IP Valuation and Management, Chicago, IL: American Bar Association, at 52. (“[A]djustment and
`analysis of comparables that do exist are almost invariably necessary, and these adjustments in the hands of an experienced
`IP valuation analyst can be used to arrive at an accurate value.”)
`Corbett, Michaelyn, Mohan Rao, and David Teece (2006), “A Primer on Trademarks and Trademark Valuation,” in Daniel
`Slottje, ed., Economic Damages in Intellectual Property: A Hands-On Guide to Litigation, New Jersey: John Wiley & Sons, Inc.,
`at 292. (“Any market approach analysis will likely require reasonable adjustments.”)
`Leonard, Gregory and Lauren Stiroh (2005), “A Practical Guide to Damages,” in Gregory Leonard and Lauren Stiroh, ed.,
`Economic Approaches to Intellectual Property: Policy, Litigation, and Management, White Plains, NY: National Economic
`Research Associates, Inc., at 49. (“Market-based royalty determination methods must take explicit account of the
`idiosyncrasies of the particular patent being licensed, the parties to the negotiation, the alternatives to the technology at
`issue, and the timing of the hypothetical negotiation.”)
`585 Anson, Weston (2010), IP Valuation and Management, Chicago, IL: American Bar Association, at 205. (“Issues such as
`exclusivity, geography, time period, market size, and competitive environment all have to be considered in any analysis of
`hypothetical negotiation at the time when the cause of litigation occurred.”)
`586 Commonwealth Scientific and Industrial Research Organisation v. Cisco Systems, Inc., 809 F.3d 1295, 1303 (Fed. Cir. 2015).
`(Quoting Finjan, Inc. v. Secure Computing Corp., 626 F.3d 1197, 1211 (Fed. Cir. 2010).)
`See also:
`LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51, 79 (Fed. Cir. 2012). (“Actual licenses to the patented technology
`are highly probative as to what constitutes a reasonable royalty for those patent rights because such actual licenses most
`clearly reflect the economic value of the patented technology in the marketplace.”)
`Apple Inc. v. Motorola, Inc., 757 F.3d 1286, 1325 (Fed. Cir. 2014). (“As we have held many times, using sufficiently comparable
`licenses is a generally reliable method of estimating the value of a patent.”)
`Ericsson, Inc. v. D-Link Systems, Inc., 773 F.3d 1201, 1227 (Fed. Cir. 2014). (“This court has recognized that licenses may be
`presented to the jury to help the jury decide an appropriate royalty award.”)
`
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`
`explain in more detail below, the Fontem-RJRV agreement involves the same licensee as the
`hypothetical negotiations, i.e., RJRV. The Fontem-RJRV agreement also involves the same
`products as the hypothetical negotiations, i.e., VUSE products. Furthermore, the Fontem-
`RJRV agreement covers patents relating to e-cigarette technology. Additionally, I understand
`that the ’545 patent is technically comparable to patents in the Fontem Spray Atomizer family,
`the ’265 patent is technically comparable to the Fontem patents in the Air Channel family,
`the ’374 patent is technically comparable to the Fontem patents in the Reed Switch family,
`and the ’911 patent is technically comparable to the Fontem patents in the Shell Design
`family.587 However, there are also differences between the Fontem-RJRV agreement and the
`circumstances of the hypothetical negotiations, such as the duration of the license, that must
`be accounted for as I describe below.
`
`(264) Fontem licensed RJRV
`. See Section 12.2.1.
`Product sales covered under the Fontem-RJRV license would have included at least the sales
`of VUSE Solo, VUSE Vibe, VUSE Ciro, and VUSE Alto from their date of first sale by RJRV
`because the date of first sale of each of the accused products was before the agreement’s
`effective date of 9/24/2018.588 The date of first sale of VUSE Solo, VUSE Vibe, VUSE Ciro,
`and VUSE Alto occurred in 2013, 2016, 2017, and 2018 respectively. See Section 5 and
`Attachment D-4.
`
`(265)
`
`I calculate the effective percentage royalty rate paid by RJRV based on actual VUSE sales
`through 2020 and projected VUSE sales through 2025. Specifically,
`
`
`
`
`587
`
`
`
`
`
`
`
`588
`
`
`
`I understand that the ’374 patent also cites several of the Reed Switch family patents, which is another indication that the
`patents in the Reed Switch family are technically comparable to the ’374 patent. See:
`For the ’374 and ’545 patent: Interview with Travis N. Blalock. See Attachment A-5.
`For the ’265 patent: Interview with Jeffrey C. Suhling. See Attachment A-6.
`I understand that U.S. Patent No. 8,156,944 in the Shell Design Family includes similar disclosures about using a cavity or
`groove to help reduce liquid leakage. See:
`For ’911 patent: Interview with Kelly R. Kodama. See Attachment A-7.
`See also: Meyer Report, 2/24/2021, ¶¶ 200–202.
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA-001521387).
`(Indicating that current products included, among other things,
`
`
`
`
`
`
`
`
`See also Section 5.1.
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`.589 See Attachments D-4 and D-5. The reason I utilize sales until
`2025 is that RJRV has produced sales projections that extend until 2025.590 Using projections
`until 2025 results in an upper bound percentage royalty rate for all patents licensed as part
`of the Fontem-RJRV agreement of
` In other words, this percentage royalty rate is higher
`than the effective percentage royalty rate from the Fontem-RJRV agreement because it is
`calculated based on a lower revenue base.591
`
`-
`
`(266) There are a number of factors to consider in evaluating the Fontem-RJRV agreement relative
`to the hypothetical negotiations for the ’545, ’265, ’374 and ’911 patents, including the
`following:
`a. Parties. The Fontem-RJRV agreement involves Fontem as the licensor and RJRV as the
`licensee. See Section 12.2.1. At the hypothetical negotiations for the ’545, ’265, ’374 and
`’911 patents, PM USA / PMP would be the licensor and RJRV would be the licensee. See
`Section 9. Since RJRV is the licensee for the Fontem-RJRV agreement as well as at the
`hypothetical negotiations, the royalty described in the Fontem-RJRV agreement is
`reflective of RJRV’s willingness to pay for a license.
`
`b. Products. Products covered by the Fontem-RJRV agreement included
`
`.592 As discussed above,
`product sales covered under the Fontem-RJRV license would have included at least the
`sales of VUSE Solo, VUSE Vibe, VUSE Ciro, and VUSE Alto
`1111
`.593 These are the same products that are at issue in this matter. See Section 5.
`c. Licensed technology. As discussed above, I understand that there are similarities between
`the Fontem Spray Atomizer family and the ’545 patent, the Fontem Air Channel family
`and the ’265 patent, the Fontem Reed Switch family and the ’374 patent, and the Fontem
`
`589
`
`590
`
`591
`
`592
`
`593
`
`I evaluate sales in 2018-Q4 present value terms because the effective date of the Fontem-RJRV agreement was in Q4-2018.
`Accordingly the parties would have viewed sales in 2018-Q4 present value terms.
`See: Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA-
`001521385).
`See Attachment B-5.
`I understand that the information contained within the spreadsheets are extracted from an RJRV database. I also
`understand that the forecasts are created in the ordinary course of business and are used by RJRV to make business
`decisions. Interview with Scott Peddycord. See Attachment A-4.
`1111
`If sales through the last to expire patent marked on the VUSE products are used, the effective royalty rate would be
`
`See Attachment D-5.
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521391).
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA-001521387).
`(Indicating that current products included, among other things,
`
`
`
`
`
`
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`
`Shell Design family and the ’911 patent family.594 I also understand that Counterclaim
`Plaintiffs’ expert Mr. McAlexander alleges that “the technology claimed in the Spray
`Atomizer, Shell Design, Reed Switch, Body Sensitive Sensor & Atomizer, and Air Channel
`Patents in the Fontem-RJRV and
` Agreements are not comparable to the
`technology claimed in the '374 Patent.”595 However, according to Dr. Blalock, I understand
`that the patents in the Reed Switch patent family are technically comparable to the ’374
`patent.596
`
`The Fontem patents are more widely licensed than the ’545, ’265, ’374, and ’911 patents.
`See Section 12. Furthermore, I understand that the Fontem Spray Atomizer, Air Channel,
`and Reed Switch families are at least as valuable as the ’545, ’265, and ’374 patents,
`respectively.597 I also understand that the claims made by Counterclaim experts that the
`’911 patent is more valuable than the Shell Design family are unsubstantiated, as they do
`not account for the value of the absence of a detailed dimensional requirement for the
`interior structure of an e-cigarette device from the claims of the Shell Design family
`patents.598
`
`d. Number of patents. The
` related to the Fontem-RJRV agreement
`. Specifically, the licensed patents
`covered
`listed in Exhibit A of the Fontem-RJRV agreement include
`
`.599
`
`
`
`Furthermore, the Fontem-RJRV agreement also covered
`
`.600
`
`e. License duration. The Fontem-RJRV agreement states that the agreement would
`
`
`
`
`
`
`594
`
`
`
`595
`596
`597
`
`598
`599
`
`
`
`600
`
`For the ’374 and ’545 patent: Interview with Travis N. Blalock. See Attachment A-5.
`For the ’265 patent: Interview with Jeffrey C. Suhling. See Attachment A-6.
`For ’911 patent: Interview with Kelly R. Kodama. See Attachment A-7.
`See also: Meyer Report, 2/24/2021, ¶¶ 200–202..
`McAlexander Report, 2/24/2021, ¶ 727.
`Interview with Travis N. Blalock. See Attachment A-5.
`For the ’374 and ’545 patent: Interview with Travis N. Blalock. See Attachment A-5.
`For the ’265 patent: Interview with Jeffrey C. Suhling. See Attachment A-6.
` Interview with Kelly R. Kodama. See Attachment A-7
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA-001521415–
`420).
`See also:
`Meyer Report, 2/24/2021, ¶ 197.
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521391,
`RJREDVA_001521395).
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`CONFIDENTIAL BUSINESS INFORMATION, SUBJECT TO PROTECTIVE ORDER
`
`
`
`601 The
`last to expire patent in the Spray Atomizer family marked on VUSE products expires on
`June 11, 2027, the last to expire patent in the Air Channel family marked on VUSE
`products expires on January 28, 2030, the last to expire patent in the Reed Switch family
`marked on VUSE products expires on September 19, 2027, and the last to expire patent
`in the Shell Design family marked on VUSE products expires on June 13, 2028. See
`Attachment D-1. Damages herein are calculated through December 31, 2020, the latest
`date for which sales of the accused products have been provided.
`
`f. Exclusivity. The Fontem-RJRV agreement conferred a non-exclusive license to the
`licensed technology.602 Similarly, the parties at the hypothetical negotiations would likely
`agree to a non-exclusive license to the asserted patents. See Section 11.1.
`
`g. Geography. The territory for the Fontem-RJRV agreement is the
`
`.603
`
`
`
` See Section 11.3.
`
`h. Relationship between the parties. Fontem and RJRV were competitors at the time the
`Fontem-RJRV agreement was executed with its blu e-cigarette product.604 As such,
`royalties reflecting a competitive relationship are already built into the royalties specified
`in the Fontem-RJRV agreement. As described in Section 10, there would be some degree
`of a competitive relationship between RJRV and PMP/PM USA at the time of the
`hypothetical negotiations. Therefore, no further adjustment for a competitive relationship
`is necessary to compare the Fontem-RJRV agreement to the hypothetical negotiation.
`
`
`601
`602
`
`
`
`
`
`
`603
`604
`
`
`
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521400).
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521395).
`Exceptions to sublicensing include,
`
` See:
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521396).
`. See:
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521407–
`412).
`Fontem-RJRV US Settlement and License Agreement, 9/24/2018 (RJREDVA_001521385–1559, at RJREDVA_001521385).
`Fontem Press Release, “Fontem Acquires Leading Vaping Brand blu eCigs,” 7/1/2015,
`https://www.fontemventures.com/news/fontem-acquires-leading-vaping-brand-blu-
`ecigs/#:~:text=blu%20eCigs%2C%20the%20number%20one,blu%20to%20the%20Fontem%20family.
`
`
`
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