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Settlement Fees...

samanthasamantha Posts: 2,991Administrator, Moderator admin
edited June 6 in New Members Start Here
Hi everyone!

I know many of you, including our team here at V2, are displeased with the settlement fees that appear at checkout. Below is an outline of what these fees are and why they are listed at checkout... our goal is to be as transparent as possible and keep open, two-way communication with our loyal customers.

The fees displayed at checkout are "Tobacco Settlement Fees" and represent the royalties we have to pay to Fontem for their patent on the e-cig design.

We published an article about the FONTEM settlement back in April of 2016: http://www.vmrproducts.com/settlement/

Like most vapor company's, instead of rolling the royalty into our prices, we itemize it on the checkout page so customers can see the cost that BIG TOBACCO has added to our products. It's really sad and unfortunate that this is being done to people choosing a reliable, smoke-free alternative. This money doesn't go to us and it is my hope that this point doesn't get lost on everyone.

To further clarify, EVERY e-cig or vaporizer company that sells e-cigs is paying a royalty to Fontem. This was the result of a lawsuit from FONTEM that brought NJOY to bankruptcy in 2016. It has hurt all of us e-cig and vaporizer manufacturers across the board. More importantly, it has hurt our customers who are using new, innovative products as an alternative. Not to mention, VMR has specifically improved and refined vapor technology by our R&D department over the last several years. And I'm not going to get into the legal fees that were associated in dealing with this case, but your imagination could likely help you arrive at a fair conclusion. 

If any of you have any questions regarding this matter, please feel free to share in the comments below and I will do my best to address them. Thank you for your time and attention. Hope you all have a great day!

-samantha
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Comments

  • rbaker1009rbaker1009 Posts: 1,150Member
    edited June 7
    Thanks for this clarification Samantha, I had no idea this settlement was industry wide. Now that I get that this issue affects all vape companies and comes from big tobacco I'm pissed at them, not you :). Bastards simply will not get their hands out of our pockets. 

    Just one question: Does this have any end date or revenue target? surely this fee will not be added forever. 
  • samanthasamantha Posts: 2,991Administrator, Moderator admin
    Hey everyone - We have a blog post that offers even more insight to this topic as well - def would recommend reading it: https://www.v2.com/blog/2017/06/v2-settlement-fee-truth/

    @rbaker1009 - Thought I responded to you but don't see my comment on thsi thread; the settlement or patent fee apparently is something we will have to pay always as long as we are using the original "ecig technology" so the answer unfortunately may not be a great one. I am still doing some digging and trying to get to the bottom of your inquiry. Will keep you all posted. 
  • samanthasamantha Posts: 2,991Administrator, Moderator admin

    When completing your purchase on our eCommerce site, you may have noticed a settlement fee included with the final cost of your order. Depending on how often you shop, this fee may be new to you; however, it’s been part of the checkout process since April 2016. Because the reasoning behind this fee has affected the industry as a whole, there have been numerous articles published about it. But rather than supplying you with more legal jargon, we’re going to break it down in a way that makes sense.

    What is this “settlement fee?”

    In short, it’s the result of an agreement between VMR Products (“V2”) and Fontem Ventures in early April, 2016. Fontem Ventures is a subsidiary of a company called Imperial Brands plc, that acquired the rights to the original electronic cigarette patents from yet another company called Dragonite International Ltd., in 2013.

    Dragonite was co-founded by a gentleman whose name may be familiar to you – Chinese pharmacist and inventor, Hon Lik. For those unfamiliar with Mr. Lik, he created the first working electronic cigarette in 2003. According to a Bloomberg article published in 2016, Imperial purchased all rights to his original patents for a sum of $75 million.

    With the rights to Mr. Lik’s original design in hand, Fontem Ventures began suing vape companies all over the world alleging patent infringement. The Economist covered this in a 2014 article. In the United States, Fontem Ventures focused on the major players (including, of course, V2); alleging that the technology used in current vapor products violated Mr. Lik’s 2003 patents.

    Did V2 lose this lawsuit?

    No, V2 did not lose this lawsuit. Only a few companies, including big tobacco ones, have chosen to continue fighting these allegations in court, based in part on the claim that the technology in Lik’s patents is outdated. But as the litigation dragged on with no end in sight, V2 made the difficult choice to settle with Fontem Ventures. Ultimately, we felt the cost of the settlement would be less expensive in the long run and allow us to get back to making amazing and cutting-edge products for our customers.

    As a condition of the settlement, V2 agreed to pay a royalty fee to Fontem Ventures on the sale of products which use technology related to the patents. V2 has elected to apply a proportionate fee to its customers separately at checkout to account for the unanticipated cost, which unfortunately is not permitted to be factored into the overall cost of the product(s) during the checkout procedure.

    Well, that stinks.

    We agree! That’s why we’ve made a number of changes over the past year to help offset the cost, most notably the addition of flat-rate priority shipping and free domestic shipping.

    Social media makes spreading misinformation easier than ever, so it’s important for reliable sources to be as direct and transparent as possible. We hope this post has helped to clear up some of the current misconceptions regarding the settlement fee and what it means. We’d love to hear your thoughts about what Fontem Ventures is doing with Hon Lik’s prior patents, so let us know in the comments!

  • MSmith447MSmith447 Posts: 232Member
    Big tobacco is at it again trying to destroy and possibly take over the vapor industry. wow. Because my dad's best friend is a patent attorney, I know how expensive and insane fighting a patent infringement can be so it makes sense you all came to a settlement. The settlement fee has to be cheaper than fighting for years to come... the legal costs have to be in the seven-figure range. It's crazy how fast it adds up. In fact, I now question why I never became an attorney. lol I mean on one hand, it's a genius move to make an obnoxious amount of money... but then on the other hand, it blows my mind that companies like Fontem bought the ecigarette patent to purely go after vapor companies and sue the hell out of them. I mean NJOY is a huge company and they forced them to file bankruptcy?? That is insane. I appreciate V2 fighting the good fight... it's why I think I am going to come back to them. Haven't been in the forum in a long time. Many things have changed but glad to see you guys are still going strong.
  • rbaker1009rbaker1009 Posts: 1,150Member
    This is an enlightening breakdown, I've been misinformed until reading this.

    I agree that the best use of VMR's resources is to settle and let the companies that are better capitalized continue the fight. It's ironic that some of those companies are big tobacco firms who sell vape products.
  • rbarron316rbarron316 Posts: 47Member
    @samantha

    Uh, V2 is an ecig company?  I found your site on Pinterest.  Have been using your EX blanks to make decorative necklaces.  You know, loop some fishing line through 10 blanks filled with different colors of dye to make a nice necklace.

    Your Series 3 blanks I fill up with fireflies and line my sidewalk to produce a lit path at night.  Never fear, I let them out at dawn to allow them some playtime.

    Too, I use my eliquids and mix with paint.  Then produce nice scratch and sniff paintings.

    The batteries.  I use my manual longs as little mini flashlights.  The tips are surprisingly bright in a dark environment.

    Soooo.. that being said, I don't think the settlement fee applies to me as I am not using anything relative to ecigs/vaping/smoking.  

    In any event, I do appreciate your detailed explanation.  I knew a bit about the settlement and Fontem before.  I do have a couple of questions.  

    This really is a royalty and not any type of fine or penalty.  Is this in perpetuity? In other words, will the settlement fees/royalties ever go away or is it really permanent?  If permanent, fine, but I think it will allow your customers some resolution and sense that if it not going away, no reason to complain about it, but learn to accept what is.  

    Too, it seems the fees are being applied on the list price and not the ultimate selling price of the purchase.  Hard to determine, though, as the fees bounce around percentage-wise.  Too, it may vary on products (hardware vs liquids vs accessories).  

    The following article, if not already somewhere on your site, will provide a nuts and bolts of what happened.

    http://www.vapingpost.com/2016/04/05/fontem-ventures-gives-a-patent-battle-to-the-vape-industry/ 
  • Gracey217Gracey217 Posts: 6Member
    SETTLEMENT FEES ARE A SHAM- we buy their products and we pay their judgments! As a lawyer, I can tell you that the customer is getting totally used as a piggy bank in this case, in a blatant attempt to have us pay for their wrongdoing . This is a tale of big business choosing exorbitant profits over customer retention and customer loyalty. However, VMR, the parent company of the two saying however, VMR, the parent company of V2 Cigs, is just as much the boogie man as they claim big tobacco to be. They're trying to sell a tale of big tobacco being at fault for this fee we pay, when in fact that is not the case! Not even close.

    First of all, you should know that Most products purchased are not even part of the infringement case, yet the customer still must pay for the wrongdoing V2 it's parent Co.. Make no mistake, when there is an infringement action, or a breach of contract action, negligence action, whatever it may be… If a settlement occurs, the defendant is excepting liability and/or wrongdoing. They're making it to termination that their chances of winning the case are less than the cost of a difference. They know they're going to use, or they know if it best they have found not liable, they will have spent more in attorneys fees than is worthwhile, cost-benefit analysis. In this case, it is clear that in thiss action a cost-benefit analysis leans toward the the former rather than the latter occurring in this cause of action. But instead of them paying for their mistakes and their greed, if the customer wants to continue shopping for you things with this company, they are in no one certain terms, forcing us to absorb their losses

    See Link:

    https://www.google.com/amp/www.vapingpost.com/2016/04/05/fontem-ventures-gives-a-patent-battle-to-the-vape-industry/

    The following link leads to an article that is most enlightening with regard to the settlement between the original patent holder, the fourth largest cigarette company in the world who purchased it, and the E-cig , companies including this one, who have been using this technology without any recompense .

    Yes, the settlement and release will certainly have tightly drafted confidentiality agreements and will state specifically that v2's Patent company does not except any liability, intent, or even fault resulting from the unsanctioned use of the patent holder intellectual property.

    That is just legalese to save face and to discourage further litigation. At the end of, v2 lost a patent infringement lawsuit, and as a result of the settlement having a financial impact on this compan. Instead of absorbing the cost for their misdeeds, During which time they most certainly profited greatly, they are know using us, the customer, pay for their mistakes, omissions, or at worst, their intentional use of oh someone else's ideas without permission or payment.

    OTHER CUSTOMER LOSSES;

    Free sjipping? Only if you live in a handful of states that does not require an adult to sign for nicotine-based products. If your state does require that, despite the site stating free shipping for all these orders… It actually cost five dollars to get a signature.

    Vape FOR FREE??

    Over the past year or so, , we have now seen Vape4Free rewards points that s kept customers coming back because of great discounts customers earned by receiving a portion of what would spend on a prior order as a reward towards future orders, has now been reduced to only a quarte of its once attractive value. Now the Vape for free points does not even cover the settlement fee, and if you are unfortunate enough to live in a signature required state… Well you're still looking at a significant out on.


    NO MORE COUPONS IF YOU ARE LOYAL TO V2!!

    I think the most insulting move yet (Albert certainly not the most hard on the pocketbook) has been the discontinuation of the ability to use coupons if you are already a customer! That's right, you heard me… If you are a customer of the two, no more coupon codes! Instead, only new customers get the benefit of the coupon code, while I was loyal customers are taking it four ways from Sunday ! V2 has stopped allowing good, loyal customers from getting the benefit of coupon codes!!! WHAT??? Why? Now, coupons are only to entice you customers. It's getting harder and harder to remain a loyal customer of this company that continues to punish people who are loyal to the company and a myriad of ways. V2 will need to make a decision at some point, as customers will undoubtably find better options if this company doesnt honor those who support its profit base most significantly.
  • rbaker1009rbaker1009 Posts: 1,150Member
    edited June 11
    @Gracey217

    Your grammar and spelling errors are so pronounced that it's difficult to believe you posses the detail required to pass the Bar. This is likely why you have mistaken assumptions and make blatantly incorrect statements that no attorney or person with any rudimentary legal knowledge would. 

    "If a settlement occurs, the defendant is excepting liability and/or wrongdoing"

    I'm assuming you mean "accepting" not "excepting". Either way, that is incorrect. A settlement does not assign or imply liability or wrongdoing, far from it. 

    "They know they're going to use, or they know if it best they have found not liable, they will have spent more in attorneys fees than is worthwhile, cost-benefit analysis. In this case, it is clear that in thiss action a cost-benefit analysis leans toward the the former rather than the latter occurring in this cause of action"

    In this painful "paragraph" you make an assumption you say is clear. It is not clear that they thought they were going to lose. Since the settlement is sealed the only thing that an outsider to the case can know is that the case was settled. 

    I have been through a patent lawsuit resulting from technology my company invented. Patent lawsuits usually boil down to who has the most money to continue the litigation, not those who have infringed and those who have been infringed upon. VMR is up against much deeper pockets, I don't fault them for settling, it very well may have allowed then to continue as a viable concern. 

    While I agree with some of the points you raise your incoherent rant is so filled with hyperbole you render your message laughable.

    What is clear is that you lack basic legal and business knowledge, not to mention a command of the English language and critical thinking skills. 
  • Navy20Navy20 Posts: 1,052Member ✭✭
    Well said @rbaker1009 . . .
  • rbarron316rbarron316 Posts: 47Member
    edited June 12
    @Gracey217

    Wow.  Some deep feelings there.  I've watched some of the contention since I joined this board in March.  I guess customers who've been part of V2 for a long time are missing some previous benefits.  To someone new, as am I, you never know what you are missing if you never had it in the first place.

    Frankly, I think their prices are decent, especially compared to tobacco prices. I've been pleased to make some purchases during at least 3 sales since March. Frankly, asking people to join will get you to Elite status very quickly.  For anyone who now vapes as opposed to purchasing tobacco, you are coming out way ahead.  As I read some of the comments, I wonder why the complaints about coupons, free stuff, and other costs is such a big deal compared to the cost of purchasing tobacco products.  One clearly is saving, both financially and better quality of health/life standpoint.

    My only issues with V2 since March are they have some inventory issues and quality control issues.  I trust inventory may be due to most of the product coming from China.  I read one post from V2 where they indicated an oopsie on an order from the manufacturer that was sent by boat rather than plane.  It takes these container ships 3 weeks to travel the ocean, you know?  Some quality control problems are clear to me based upon my purchases.  Some of the batteries just have issues. I can spell out the specific item and know that it was made in a different facility or a different production line as the production flaw is identical each time.   You experiment, you learn, and hopefully you don't make the same purchase mistake twice.

    Patent cases are a fact of life worldwide.  Fighting them is a gamble.  You win some, you lose some. When you lose, though, you can be expected to pay a penalty and future royalties. Rather than fight this and possibly incur a huge judgement, along with future royalties, V2 negotiated a quick end.   

    Let's just hope someone doesn't come out of the woodworks who lays claim to purchasing the rights for the invention of the wheel. 

     

      

  • Andries_V2cigsAndries_V2cigs Posts: 668Administrator admin
    edited June 12
    VMR invests greatly into infrastructure and we run tight margins... if we reduce those margins, we lose ability to finance growth... the settlement fees were passed to the consumer, to enable the company to remain financially strong. We have 200 people globally (the majority of which are based here in South Florida) we don't want to reduce our workforce, we don't want to pay our workers minimum wage, we don't want to reduce our engineering team, file less patents, reduce employee benefits, lose our ability to get bank financing, all these things would happen if we did not pass the settlement costs onto the end consumer. I know it sucks, because it does (Gracey) but I have a mission to make the best ecigs with the best technology improvements and maintain a competitive edge against the encroaching threat of Big Tobacco, and to do this we had to pass settlement costs on... This was my decision, and I take full responsibility for it!

    Regardless, you go down to your local convenience store and try to buy 80 Big Tobaccco carts (BLU, Mark Ten, VUSE, Logic, etc.) cartridges for only $1.69 per cartridge (V2 Classic 80-pack at $135.32)... you will find that buying from Big Tobacco will cost you 3X more for the same amount of vape, even after our the settlement fee surcharges. 

    At VMR we do the best with what we have, and what we have are great engineers and proprietary technology, that has remained competitive in the market for many years despite the attacks of BT. That infrastructure costs money, and we need your help to fight the battle. You can find cheaper low end generic vapes on the web that were imported by companies too small to be sued by big tobacco and be forced to pay, but that is not what VMR and V2 are all about!

    We are trying to build the Apple of eCigs... we appreciate your support. 
  • samanthasamantha Posts: 2,991Administrator, Moderator admin
    edited June 13
    It looks like our CEO, Andries^ covered about everything. 

    As a part of the settlement, there are many details we cannot share publicly. But it was the smartest decision for us to do... Thanks to our executive leadership, we are aiming to offer the best, most innovative products... not to be the cheapest. To offset prices, we still do offer a variety of savings incentives that we encourage customers to take advantage of. We offer SEVERAL annual storewide sales where we give 20-30% off everything on V2.com (some exceptions apply sometimes). This combined with our V4F program PLUS our weekly sales give customers the chance to vape V2 and save some money. I completely understand economic restraints and we want to keep all of our veteran and new customers... but we are trying our best to provide discounts to our loyal customers... but we also need to stay in business. And like many others have mentioned, being smoke-free with quality products is worth it to many of our customers. And V2 customers are spending less than they would for tobacco products... which we look at as a plus. 

    @Gracey217 - I completely understand some of your frustrations and appreciate your honesty, but I hope you can understand where we are coming from as a business entity. It's also important to note that vape companies are taking 1 of 2 approaches to this incurred legal patent cost... 1) Increasing all of their prices to cover the fees or 2) adding a transparent surcharge at checkout. We decided to go with the latter. Neither are great options but it is all we have to choose from... We encourage you to reconsider V2 and if I can provide you any additional savings tips/tricks, please PM me and I would love to help. 
  • David1886David1886 Posts: 345Member
    edited August 9
    @rbarron316 @Navy20 @samantha @Andries_V2cigs

    I agree with you comments as even with the extra small additional fees V2 charge it's customers you are receiving quality products, great customer service and fantastic warranty replacement periods.

    The extra small fees customers are charged allows V2 to invest in new technologies and release new products faster that make your vaping experience better than any other product sold by other companies.

    Compare the price to analog cigarettes and you are saving a fortune where I live in Australia a packet of cigarettes is about $20.00 USD as the Australian Government has imposed a huge tax which they claim is to reduce the amount of people from smoking but are anti e-cigarette as presumably will loose a lot of revenue received for taxing analog cigarettes as more people convert to vaping.
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