By Timothy S. Donahue
Top Takeaways:
- Royalty relief: A federal judge ruled Reynolds no longer owes Altria ongoing Vuse Alto royalties after obtaining a JUUL sublicense.
- Big money: Reynolds had been ordered to pay Altria 5.25% of Vuse Alto’s positive net sales after a $95.2 million patent verdict.
- Past stays put: The sublicense does not erase the original infringement damages or royalties owed before the December 2023 deal.
Reynolds found a way out of its Altria royalty bill.
A licensing deal with Juul Labs has relieved R.J. Reynolds Vapor Co. of its obligation to pay royalties to Altria Client Services for Vuse Alto, according to a new ruling in a long-running patent dispute between the tobacco rivals.
A federal judge in North Carolina ruled that a December 2023 intellectual-property sublicense Reynolds obtained from Juul Labs covers the Altria patents at issue and eliminates Reynolds’ ongoing royalty obligation from the date the sublicense became effective.
The decision marks a significant win for Reynolds after years of litigation stemming from a 2022 jury verdict finding that Vuse Alto infringed patents held by Altria.
In September 2022, a federal jury awarded Altria approximately $95.2 million for past infringement. U.S. District Judge William Osteen subsequently ordered Reynolds to pay an ongoing royalty of 5.25% of Vuse Alto’s positive net sales until the relevant patents expire in 2035.
In December 2024, the Federal Circuit affirmed the underlying judgment, and in October 2024, the U.S. Supreme Court declined Reynolds’ request to review the case. But Reynolds had already opened another front.
In December 2023, Reynolds obtained a sublicense from Juul Labs covering intellectual property that Juul had previously licensed from Altria. In July 2024, Reynolds returned to the district court, arguing that the sublicense authorized its continued use of the technology and that it no longer needed to pay Altria royalties.
Altria disagreed, arguing that what it characterized as an after-the-fact sublicense could not extinguish the court-ordered royalty obligation.
The district court initially declined to wipe away the original damages award or the royalties accrued through December 2023 but determined that further proceedings were necessary to decide whether the Juul sublicense affected royalties after Reynolds obtained it. The court held an evidentiary hearing in April.
The court has now ruled in Reynolds’ favor on that remaining issue.
The result leaves the original infringement judgment intact while cutting off what could have been years of additional payments. The patents underlying the royalty order extend through 2035.
