According to a Law360 report dated August 31, 2026, the U.S. District Court for the Middle District of North Carolina ruled that a patent sublicense agreement between R.J. Reynolds Vapor and Juul Labs relieves Reynolds of the obligation to continue paying ongoing patent royalties to Altria Client Services (a subsidiary of Altria Group) for its Vuse Alto products. Previously, a jury had found that Vuse Alto infringed three of Altria’s patents and awarded approximately $95.23 million in past damages; the court subsequently ordered Reynolds to pay ongoing royalties at a rate of 5.25% of Vuse Alto’s net sales. This ruling means the obligation for future royalties can be terminated due to the valid sublicense—an obligation Altria claims could amount to hundreds of millions of dollars.
Key Summary
- A U.S. federal court ruled that a valid patent sublicense between R.J. Reynolds and Juul precludes future infringement, thereby exempting Reynolds from continuing to pay Altria royalties for Vuse Alto.
- In 2022, a jury found Vuse Alto infringed three Altria patents and awarded Altria approximately $95.23 million in past damages.
- The court had previously ordered Reynolds to pay ongoing royalties of 5.25% on net sales of Vuse Alto products.
- Altria stated that the future royalty obligations eliminated by this ruling involve “hundreds of millions of dollars” and argued that the ruling should be made public in its entirety.
Federal Court Rules on Vuse Alto Patent Royalties
September 1, 2026. According to a Law360 report dated August 31, 2026. The U.S. District Court for the Middle District of North Carolina ruled that a patent sublicense agreement between R.J. Reynolds Vapor Co. and Juul Labs Inc. relieves Reynolds of the obligation to continue paying ongoing patent royalties to Altria Client Services LLC (a subsidiary of Altria Group) for Vuse Alto products. The ruling was issued under seal on August 14 and was subsequently disclosed after both parties submitted proposed redacted versions for public release.
This ruling concerns a long-running patent lawsuit regarding e-cigarettes. In September 2022, a U.S. federal jury found that R.J. Reynolds’ Vuse Alto infringed upon three pod-related patents held by Altria and awarded Altria approximately $95.23 million in damages for past infringement.
2022 Infringement Ruling Led to a 5.25% Ongoing Royalty
The court subsequently ordered Reynolds to pay ongoing royalties at a rate of 5.25% of Vuse Alto’s positive net sales.
Following the court’s earlier ruling—in which the jury found Reynolds liable for infringing three of Altria’s patents and awarded $95,233,292 in compensation for infringement up to June 30, 2022—the parties agreed that Reynolds would continue paying royalties at 5.25% of positive net sales for Vuse Alto pods and devices for the period between July 1, 2022, and the date of the final judgment.
In January 2023, the court further ruled that, starting from the date of the final judgment and continuing until the expiration of the last of the relevant patents, Reynolds must pay Altria ongoing royalties of 5.25% on positive net sales derived from Vuse Alto products manufactured, sold, imported, or exported in the United States.
Consequently, under this long-term royalty arrangement, higher sales volumes for Vuse Alto resulted in higher royalty payments from Reynolds to Altria.
Juul Sublicense Became the Key Issue in Ending Future Royalties
Subsequently, R.J. Reynolds entered into an intellectual property sublicense agreement with Juul.
Reynolds argued that this agreement granted it the necessary authorization to practice the relevant patents; therefore, its future activities would no longer constitute infringement, and it should no longer be liable for ongoing royalties based on infringement.
U.S. District Judge William L. Osteen Jr. accepted this argument in a ruling issued on August 14.
The court held that as long as a license or sublicense remains valid and the licensee utilizes the relevant patents in accordance with the agreement, the patent holder has effectively authorized the activity, meaning future use does not constitute patent infringement.
In other words, once Reynolds obtained a valid sublicense through Juul, its continued sale of the relevant Vuse Alto products no longer constituted unauthorized use of the patents, thereby eliminating the legal basis for ongoing infringement royalties.
Court Upholds Severability of Reynolds-Juul Sublicense
Altria had argued that because the court previously ruled certain parts of the sublicense agreement between Reynolds and Juul invalid, the entire agreement should be deemed void.
The court rejected this argument.
Judge Osteen held that the agreement contained a severability clause, clearly reflecting the intent of Juul and Reynolds: if certain terms were found invalid or unenforceable, those terms could be severed while the remainder of the agreement stayed in effect.
Consequently, the court ruled that the invalidity of specific provisions was insufficient to overturn the entire sublicense arrangement.
Altria Says Future Royalty Losses Could Reach Hundreds of Millions
The commercial impact of this ruling could be significant.
In a joint filing submitted to the court on August 28, Altria argued that the ruling should be made public in its entirety, asserting that the public has a right to know why the court relieved Reynolds of the obligation to pay “hundreds of millions of dollars in royalties” to Altria.
Reynolds, however, contended that given the number of documents previously sealed in the litigation, it was appropriate to continue releasing the ruling in a redacted format.
Neither party immediately responded to requests for comment from Law360.
Altria, Juul and Reynolds Have a Complex IP Relationship
Altria previously held a minority stake of approximately 35% in Juul.
In March 2023, Altria exchanged its entire minority stake in Juul for a non-exclusive, irrevocable global license to certain Juul heated-tobacco intellectual property, formally exiting its equity investment in Juul.
However, this case concerns a different layer of intellectual property relationships.
According to Law360 reports, Juul claimed that under an earlier agreement with Altria, it retained the right to sublicense certain Altria patents. It was based on this sublicense granted by Juul that R.J. Reynolds argued its future sales of Vuse Alto would not constitute infringement of the relevant patents.
Thus, this case illustrates a key commercial characteristic of intellectual property transactions in the tobacco and e-cigarette industries: even in the absence of a direct licensing agreement between companies, historical investment agreements, patent licenses, and sublicense arrangements can alter subsequent infringement liability and the flow of royalties.
Ruling Ends Future Royalty Obligation but Does Not Reverse Past Infringement
The ruling alters future royalty obligations but does not overturn the prior finding of infringement.
It is important to note that this ruling does not overturn the 2022 jury verdict finding Vuse Alto to be infringing, nor does it vacate the previously awarded historical damages of approximately $95.23 million.
The core issue addressed by this ruling is:
Whether the valid sublicense subsequently granted by Juul to Reynolds was sufficient to terminate future infringement and the resulting ongoing royalty obligations.
The court answered in the affirmative.
For Reynolds, this means that future sales of Vuse Alto will no longer incur the 5.25% royalty burden associated with the relevant patents; for Altria, it means that the royalty revenue previously expected to continue until the expiration of the relevant patents may now terminate early.
