V2 and the Settlement Fee: The Truth
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to continue fighting these allegations in court, based in part on the claim that the technology in Lik’s patents is outdated.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!
Tags: legal
Don’t like paying the settlement fee but look at it rather like an additional “tax” on those of us who choose to “smoke”. It would have been nice to get some knowledge of this before being added.
Not regarding to this particular issue, I have noticed a huge difference in the cartridges over the past few years in that they either do not last very long or don’t work at all and V2 has not been responsive when I’ve brought this up to them.
Hi Jane, thanks for sharing your thoughts on the settlement fee. We weren’t at liberty to discuss the settlement prior to its inclusion on the site. Sorry we weren’t able to give you a heads up.
With regard to the carts’ quality, we’re sorry to hear you’re having issues. Please contact customer service again with regard to this. We’ll do what we can to make it right.
So no,, you guys lost because you gave in and gave up to the asshole.
Sorry you feel that way. We wouldn’t term it exactly the way you did, but we did feel “giving in” would give us a better opportunity to move forward.
For those of us that have been with you for a long time that extra charge seems like a punishment and since we are on a fixed income but trying to stay away from cigs we do without other things but on top of that you raised the prices of cartridges, you are shipping much slower so we are not really thrilled withV2 right now but we like your products the best so we will continue but the settlement fee is exorbitant!!!
Cheri, thank you for your long-time support of V2. We are sorry you feel that way and please feel free to reach out to us directly regarding any shipping issues.
Why am I paying the settlement fee on e-liquid?
“V2 agreed to pay a royalty fee to Fontem Ventures on the sale of products which use technology related to the patents”
And if you really want to do something to offset the cost why do you continue to reduce discounts – such as the monthly coupon, or most notably for me personally, the membership status guidelines? I recently earned the 1000 points necessary to bump me up to “elite” status, only to discover I have now started all over. And the irony is that years ago, I had a membership status that equated to a 10% discount. When your company restructured your membership guidelines (V4F), I was moved into a category which allotted only a 5% discount. For the last couple years I’ve continued to buy your products, slowly collecting your V4F rewards… looking forward to the day I would once again have a 10% discount under the “elite” membership. I finally reached the goal as V2 laid out, and suddenly the reward requirement to the next membership level doubles. Come on.
Hi Dita. With regard to the settlement fee and to what products it is applied, unfortunately patent law requires that the fee be extended to all products sold in connection with the technology in addition to the technology itself.
If you’re having trouble with your Vape4Free membership, please contact your representative for the program. But do keep in mind that just like airlines or any other loyalty program, we do periodically have to re-adjust the levels at which a customer reaches elite status. It sounds like you’ve just missed status a couple of times now, so give your rep a shout and see if they can help you out at all.
Thanks for your loyalty and for being a continued customer of V2!
Thanks for the reply.
I just wanted to add that I have contacted V2 regarding the membership status switch. And didn’t hear anything back via email. Then I discussed it with a V2 support person on social media via DM. Again, no word regarding the V4F rewards. No one appears to want to address the issue. If you have a specific representative I could contact, I’d be happy to try again. Thanks.
Dita, we don’t see any unread messages on our social media accounts from you regarding V4F, but please feel free to send us your contact info and we will have someone reach out to you. You can also check out our forum for answers at https://forum.v2.com/. Thank you for choosing V2!
Sorry for the delay. I’ve been slammed with work. Thanks for the reply. I went ahead and sent another message through your Facebook account. If I hear back, I’ll let you know.
Apologies if I missed it in the article, but how much longer will customers have to pay this settlement fee?
Unfortunately Michael, it’s really more of a “royalty fee”, so it won’t go away anytime soon. It is possible it might be removed at some point if Fontem loses or sells the right to the patent, but I wouldn’t hold my breath.
Yeah, the “Settlement Fee” is a pain. I do understand that you were unable to make any comments on an ongoing litigation so you had to “spring” it on us without notice. With my normal monthly order, the fee usually amounts to @ 10-12 dollars and the free 2-day shipping does offset a portion of that. Now, that being said, I’ll let you know that using V2 is STILL much cheaper than what I was spending on cigarettes. And, I’m convinced it’s safer. When I switched from tobacco to vaping a little over 4 years ago, I was smoking about 6 cartons a month. I recently saw my old brand being sold for $70 a carton! At my old consumption level, that’s just about 4 times what I’m spending to vape. And I haven’t missed tobacco one day since the switch. So, I’ll eat the extra $12 without complaint. Also, I usually cash in my V4F points every other month which covers the fee.
My preferred style are the Classic Red 1.8% pre-filled carts. I’ve tried other flavors, but Reds are best for me. I recently acquired a Series 3 pen and I like it a lot for home use. Like some of the other commenters in this thread, I’ve noticed a “supply problem” lately which results in about a 10 day delay in shipping. I hope you can improve your inventory system and correct this in the future. Thanks for making a great product!
Michael, we are happy to have you as a loyal customer! Thank you for choosing V2.