Key Points
- A U.S. federal court ruled that an effective Juul sublicense can eliminate future infringement and end Reynolds’ ongoing Vuse Alto royalty obligation to Altria.
- A 2022 jury awarded Altria approximately $95.2 million after finding that Vuse Alto infringed three patents.
- Reynolds had been required to pay an ongoing royalty equal to 5.25% of positive net sales of covered Vuse Alto products.
- Altria said the new ruling relieves Reynolds of obligations involving potentially “hundreds of millions of dollars” in royalties.
2Firsts
September 1, 2026
According to Law360 on August 31, 2026, the U.S. District Court for the Middle District of North Carolina ruled that a patent sublicense between R.J. Reynolds Vapor Co. and Juul Labs Inc. relieves Reynolds of its obligation to continue paying royalties to Altria Client Services LLC over its Vuse Alto products. The August 14 ruling had initially been sealed and became public after the parties submitted a proposed redacted version.
The decision is the latest development in a long-running vape patent dispute. In September 2022, a federal jury found that Reynolds’ Vuse Alto infringed three Altria pod-related patents and awarded Altria approximately $95.2 million in past damages.
The court subsequently imposed an ongoing royalty equal to 5.25% of Vuse Alto’s positive net sales.
2022 Patent Verdict Created a 5.25% Ongoing Royalty
The 2022 jury awarded Altria $95,233,292 for infringement through June 30, 2022.
The parties subsequently agreed that Reynolds would pay a 5.25% running royalty on positive net sales of Vuse Alto pods and power units from July 1, 2022 through entry of judgment.
In January 2023, the court ordered Reynolds to continue paying a 5.25% royalty on positive net sales of covered Vuse Alto products until expiration of the last relevant patent.
That arrangement meant Reynolds’ royalty payments would continue to rise with covered Vuse Alto sales.
Juul Sublicense Becomes Key to Ending Future Royalties
R.J. Reynolds later entered into an intellectual property sublicense with Juul.
Reynolds argued that the agreement authorized its use of the relevant patent rights and therefore eliminated future infringement and the associated ongoing royalty obligation.
U.S. District Judge William L. Osteen Jr. agreed in his August 14 opinion.
The court reasoned that a valid license or sublicense can prevent future infringement. If a licensee or sublicensee complies with the agreement while practicing the patent, the underlying use is effectively authorized by the patent holder.
As a result, once Reynolds obtained a valid sublicense through Juul, its continued use of the relevant patent rights no longer supported an ongoing infringement royalty.
Court Rejects Altria’s Argument That Entire Sublicense Was Invalid
Altria argued that because the court had previously found part of the Reynolds-Juul sublicense invalid, the entire agreement should be treated as void.
The court rejected that position.
Judge Osteen pointed to a severability clause in the agreement, concluding that Juul and Reynolds intended invalid or unenforceable provisions to be removed without invalidating the remainder of the contract.
The court therefore found that problems with one portion of the sublicense did not eliminate the agreement as a whole.
Altria Says Hundreds of Millions in Royalties Are at Stake
The financial implications could be significant.
In an August 28 joint filing over how much of the ruling should be made public, Altria argued for full disclosure and said the public had a right to understand why the court had relieved Reynolds of an obligation involving “hundreds of millions of dollars” in royalties.
Reynolds argued that redactions were appropriate because earlier filings involving the licensing arrangements had also been sealed.
Counsel for the parties did not immediately respond to Law360 requests for comment.
Altria, Juul and Reynolds Are Linked Through a Complex IP History
Altria previously held an approximately 35% minority economic interest in Juul.
In March 2023, Altria exchanged its entire Juul stake for a non-exclusive, irrevocable global license to certain Juul heated tobacco intellectual property, ending its equity investment in the company.
The present dispute, however, involves a separate layer of intellectual property rights.
According to Law360, Juul maintains that an earlier agreement with Altria gave it rights to sublicense certain Altria patents. Reynolds relied on a later sublicense from Juul to argue that its future Vuse Alto sales were authorized rather than infringing.
The case illustrates how legacy investment agreements, patent licenses and sublicenses can continue to affect commercial liabilities even after corporate ownership relationships have ended.
Ruling Ends Future Royalty Issue, Not Earlier Infringement Verdict
The new ruling does not overturn the 2022 jury finding that Vuse Alto infringed Altria patents, nor does it erase the approximately $95.2 million award for past infringement.
Instead, the court addressed a narrower commercial and legal issue:
whether a later valid sublicense from Juul could eliminate future infringement and the continuing royalty obligation attached to it.
The court concluded that it could.
For Reynolds, the decision potentially removes a 5.25% royalty burden from future covered Vuse Alto sales. For Altria, it could end a royalty stream that had previously been expected to continue through the life of the relevant patents.
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