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CALDERWOOD & HARKNESS LLP Attorneys at Law

One Fountain Square, 11th Floor Detroit, Michigan 48226 Telephone: (313) 555-4800 Facsimile: (313) 555-4801

May 28, 2025

Via Email and First-Class Mail

Tanya Whitcomb, Claims Adjuster Northbridge Specialty Insurance Company 200 Harbor Boulevard Stamford, CT 06902

Re: Settlement of Pinnacle Innovations LLC v. Vantage Mobility Systems Corp., No. 2:24-cv-00187-JRG (E.D. Tex.)

Insured: Vantage Mobility Systems Corp.

Policy No.: NSI-CGL-2024-08821

Claim/Coverage Reference: intellectual Property Infringement Defense Sublimit

Dear Ms. Whitcomb:

I. Purpose and Introduction

This firm, Calderwood & Harkness LLP, represents Vantage Mobility Systems Corp. ("VMS") as defense counsel of record in the above-referenced patent infringement action pending before the Honorable Judge J. Rodney Gilstrap in the United States District Court for the Eastern District of Texas. The purpose of this letter is twofold: first, to advise Northbridge Specialty Insurance Company ("Northbridge") of a proposed settlement that has been negotiated between VMS and the plaintiff, Pinnacle Innovations LLC ("Pinnacle"), on terms that we believe are favorable to VMS and consistent with Northbridge's interests as VMS's liability insurer; and second, to formally request Northbridge's confirmation of, and commitment to fund, its indemnity payment obligation arising under the applicable policy in connection with the proposed settlement.

By way of background, Calderwood & Harkness LLP assumed the defense of VMS in this matter effective January 15, 2025, succeeding prior defense counsel, Hargrove Dunn LLP of Dallas, Texas. This engagement is carried under Calderwood & Harkness LLP Matter No. 1007-00003. All billing and case management have been coordinated with Northbridge's designated panel management team since the transition of defense counsel.

We note and acknowledge Northbridge's coverage confirmation letter dated February 12, 2025, authored by your office and countersigned by Ms. Ellen Richter, Senior Coverage Counsel, in which Northbridge confirmed coverage for the defense of the action involving U.S. Patent No. 9,847,312 B2 (the "'312 Patent"), subject to VMS's satisfaction of its self-insured retention and further subject to a reservation of rights. We address the reservation of rights in Section VI of this letter, below.

II. Background of the Litigation

Pinnacle Innovations LLC is a Texas limited liability company organized under the laws of the State of Texas and operating as a non-practicing entity — that is, Pinnacle does not manufacture, sell, or otherwise commercialize products or services embodying the patented technology. Rather, Pinnacle's principal business activity consists of the acquisition and assertion of patent rights against operating companies.

Pinnacle filed its original complaint in this action on February 28, 2024, in the United States District Court for the Eastern District of Texas. The complaint asserts claims of patent infringement under 35 U.S.C. § 271 based on U.S. Patent No. 9,847,312 B2, titled "System and Method for Aggregated Vehicle Telemetry Data Transmission Over Cellular Networks," which was issued by the United States Patent and Trademark Office on March 6, 2018. The '312 Patent was originally assigned to DataStream Automotive, Inc., a now-dissolved Illinois corporation. Pinnacle acquired the '312 Patent and related prosecution history by assignment from DataStream Automotive's successor-in-interest, and the assignment was recorded at the USPTO on August 14, 2023 — approximately five months prior to the filing of the complaint.

In its complaint, Pinnacle asserts infringement of independent Claims 1, 7, and 14 of the '312 Patent and certain claims dependent thereon. The accused instrumentalities are VMS's DriveLink™ 4.0 telematics control unit, a hardware device installed in commercial fleet vehicles, and VMS's FleetPulse™ cloud-based data analytics platform, which receives, aggregates, and processes telemetry data transmitted by the DriveLink™ 4.0 units. Pinnacle alleges both literal infringement and infringement under the doctrine of equivalents.

VMS, through its then-counsel Hargrove Dunn LLP, filed its Answer and Counterclaims on April 15, 2024. VMS denied all allegations of infringement and asserted affirmative defenses and counterclaims of invalidity under 35 U.S.C. §§ 102 and 103 (anticipation and obviousness), non-infringement, and inequitable conduct during prosecution of the '312 Patent before the USPTO.

The Court held a Markman hearing on claim construction on November 14, 2024. After extensive briefing and argument, the Court entered its Claim Construction Order on December 19, 2024. The claim construction outcome was, on balance, favorable to VMS. Specifically, the Court adopted VMS's proposed constructions for the claim terms "adaptive interval" and "aggregated data packet," both of which narrowed the scope of the asserted claims and strengthened VMS's non-infringement position. However, the Court's construction of the term "network congestion metric" was less definitive. The Court construed this term by reference to its ordinary meaning in the relevant art without adopting either party's proposed construction in full, leaving the scope of this claim element ambiguous and preserving a measure of infringement risk for VMS at trial.

Fact discovery in the case closed on March 28, 2025. As of the date of this letter, the parties have exchanged all document productions, completed fact depositions, and served initial infringement and invalidity contentions. The Court's current scheduling order set an expert report deadline of May 30, 2025, and a trial date of October 6, 2025. Both deadlines will be mooted and vacated upon the filing of a stipulated dismissal in connection with the proposed settlement.

III. Summary of Defense Assessment and Settlement Rationale

Throughout the course of the litigation, VMS's defense team has maintained a careful and ongoing assessment of the merits and risks of the case. In forming our settlement recommendation, we relied in significant part on the analysis of VMS's retained defense technical expert, Dr. Franklin Yeoh of Greystone Technical Consulting LLC. Dr. Yeoh holds a Ph.D. in Electrical Engineering from the University of Michigan and has more than twenty years of experience in vehicle telematics and connected vehicle systems. He was engaged to assess both the invalidity and non-infringement defenses.

With respect to invalidity, Dr. Yeoh assessed a 65–70% probability that VMS would succeed in invalidating at least one independent claim of the '312 Patent at trial under 35 U.S.C. §§ 102 or 103. This assessment was based primarily on two prior art references: (1) Tanaka et al., U.S. Patent No. 8,214,097, titled "Method for Transmitting Aggregated Sensor Data in a Vehicular Network," issued July 3, 2012, which discloses a substantially similar data aggregation and transmission architecture; and (2) Morales, PCT Application WO 2014/036281, titled "Congestion-Aware Telemetry Scheduling for Connected Vehicles," published March 13, 2014, which discloses adaptive interval scheduling responsive to network congestion conditions. In combination, these references arguably render the asserted claims obvious under the standards set forth in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007).

With respect to non-infringement, Dr. Yeoh assessed a 55–60% probability that VMS would prevail following the Court's Markman ruling. While the favorable constructions of "adaptive interval" and "aggregated data packet" significantly bolstered VMS's non-infringement position, the ambiguity in the Court's construction of "network congestion metric" introduced residual risk that a jury could find that VMS's FleetPulse™ platform meets this limitation, particularly under the doctrine of equivalents.

Despite these favorable — though not dispositive — defense assessments, the economics of continued litigation weighed heavily in favor of settlement. Our office estimated that the cost to take this matter through trial, including expert reports, rebuttal reports, Daubert motions, pre-trial briefing, trial preparation, and a trial of five to seven days in marshall, Texas, would range from approximately $2.8 million to $3.4 million in additional attorneys' fees and expenses. These estimates were shared with Northbridge in our most recent quarterly litigation budget report dated April 15, 2025. Moreover, the uncertainties inherent in a jury trial in the Eastern District of Texas — a jurisdiction well known for its historically plaintiff-favorable patent verdict statistics — counseled in favor of a resolution that eliminates trial risk entirely.

The proposed settlement of $385,000 represents a fraction of the projected cost-to-trial and, moreover, avoids the risk, however modest, of an adverse verdict that could result in a damages award substantially in excess of the settlement amount. We believe the settlement is eminently reasonable and well within the range of commercially rational outcomes.

VMS's majority private equity sponsor, Ridgeline Capital Partners Fund IV, LP ("Ridgeline"), has provided its written consent approving the proposed settlement, dated May 22, 2025. This consent was required under Section 7.04(c) of the VMS Operating Agreement, which mandates sponsor approval for any litigation settlement in which VMS's total payment obligation exceeds $250,000. A copy of the Ridgeline consent is enclosed with this letter for Northbridge's records.

IV. Settlement Terms

Following arms-length negotiations conducted over the course of several weeks between counsel for VMS and counsel for Pinnacle, the parties have reached agreement on the following material terms. These terms are set forth in the enclosed draft Settlement Agreement and Mutual Release (the "Settlement Agreement"), a copy of which is enclosed for Northbridge's review and consent. The principal terms of the Settlement Agreement are as follows:

1. Settlement Payment. VMS shall pay to Pinnacle a lump-sum settlement payment in the amount of Three Hundred Eighty-Five Thousand Dollars ($385,000.00). The settlement payment is non-refundable and not subject to any contingency, offset, or reduction.

2. Payment Deadline. The settlement payment shall be due and payable within thirty (30) calendar days after the full execution of the Settlement Agreement by both parties.

3. Covenant Not to Sue. Pinnacle shall grant to VMS, its affiliates, successors, assigns, customers, distributors, and end users a perpetual, irrevocable covenant not to sue under U.S. Patent No. 9,847,312 B2 and all patents and patent applications in the Pinnacle portfolio as of the effective date of the Settlement Agreement. The covenant runs with the patents and shall be binding on Pinnacle's successors and assigns.

4. Mutual General Releases. Each party shall grant to the other party a mutual general release of all claims, counterclaims, demands, and causes of action arising from or related to the litigation, including all claims that were asserted or could have been asserted in the action.

5. No License Grant. The Settlement Agreement provides for a covenant-not-to-sue structure and does not include any license grant, express or implied, under any patent or other intellectual property right. This distinction is noted for purposes of clarity with respect to any applicable coverage provisions.

6. No Admission. Neither party makes any admission of liability, infringement, validity, invalidity, or enforceability of any patent, or any other wrongdoing, by entering into the Settlement Agreement.

7. Confidentiality. The amount and specific terms of the Settlement Agreement shall be maintained as confidential by both parties. The parties may, however, disclose the existence of a settlement (as distinct from its terms) in regulatory filings, financial statements, or as otherwise required by law or agreement.

8. Dismissal. Within fourteen (14) days of confirmation of receipt of the settlement payment, the parties shall file a joint stipulation of dismissal with prejudice of all claims and counterclaims in the action, pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii).

9. Fees and Costs. Each party shall bear its own attorneys' fees, costs, and expenses incurred in connection with the litigation and the settlement.

We believe these terms are favorable to VMS and consistent with Northbridge's interests as VMS's liability insurer. In particular, the covenant-not-to-sue structure (rather than a license), the absence of any admission of liability or infringement, and the mutual release of all claims serve to protect both VMS and Northbridge from any further exposure arising from the '312 Patent or the underlying litigation.

V. Insurance Coverage Analysis and Indemnity Request

We now turn to the application of the insurance coverage to the proposed settlement and VMS's formal request for indemnity funding from Northbridge.

The applicable policy is Northbridge Specialty Insurance Company Commercial General Liability Policy No. NSI-CGL-2024-08821 (the "Policy"), with the intellectual Property Infringement Defense sublimit endorsement. The relevant coverage parameters are as follows:

The allocation of the proposed $385,000 settlement payment as between VMS and Northbridge is as follows:

The $310,000 indemnity obligation is well within the $500,000 per-occurrence sublimit applicable to the IP Infringement Defense coverage. Moreover, we confirm that, based on information available to this firm, no prior claims have been made against the aggregate sublimit under the Policy, and accordingly the full $1,000,000 aggregate sublimit remains available.

We further note, for the avoidance of doubt, that defense costs incurred in this matter have been paid by VMS outside the Policy sublimit and are not charged against either the per-occurrence or aggregate sublimit. Accordingly, Northbridge's financial obligation in connection with the proposed settlement is limited to the $310,000 indemnity portion described above.

Formal Indemnity Request. On behalf of VMS, we hereby formally request that Northbridge confirm its agreement to fund the Three Hundred Ten Thousand Dollar ($310,000.00) indemnity portion of the settlement payment, in accordance with its obligations under the Policy.

Payment Mechanics. We respectfully request that Northbridge advise us of its preferred payment mechanics at its earliest convenience. Specifically, we ask that Northbridge indicate whether it prefers to (a) remit the $310,000 indemnity payment directly to the trust account of Pinnacle's counsel of record, Fenton & Reyes Linley CPAs LLP PLLC, by wire transfer, or (b) remit the $310,000 to VMS (or to this firm's IOLTA account on behalf of VMS) for onward remittance to Pinnacle's counsel together with VMS's $75,000 SIR portion. We are prepared to accommodate either approach and will coordinate with Pinnacle's counsel accordingly.

Required Documentation. If Northbridge requires any additional documentation in connection with its approval and funding of the settlement — such as a settlement consent form executed by VMS, a release or indemnification agreement in favor of Northbridge, a sworn proof of loss, or any other form customarily required by Northbridge in connection with settlement indemnity payments — we ask that Northbridge provide such forms to our office promptly so that we may complete and return them without delay.

Timing. We respectfully request that Northbridge provide its confirmation of the indemnity obligation at its earliest convenience, and in any event sufficiently in advance of the thirty (30) calendar day payment deadline that will commence upon full execution of the Settlement Agreement, to permit timely remittance of the settlement payment. We anticipate that the Settlement Agreement will be fully executed within approximately five to seven business days of Northbridge's confirmation, and accordingly we ask that Northbridge endeavor to provide its response on or before June 11, 2025, to allow adequate time for payment processing and coordination.

VI. Reservation of Rights

We acknowledge and have reviewed the reservation of rights set forth in Northbridge's coverage confirmation letter dated February 12, 2025. We understand that Northbridge confirmed coverage for the defense of the '312 Patent action subject to, among other things, reservations regarding the applicability of certain policy exclusions and conditions, including but not limited to the expected-or-intended-injury exclusion and the prior-knowledge exclusion.

We wish to draw Northbridge's attention to the fact that nothing in the proposed settlement terms implicates any of the coverage exclusions or conditions referenced in the reservation of rights. Specifically:

• The settlement involves no admission of liability, infringement, or validity by VMS. VMS has not conceded, and does not concede, that any act of infringement occurred, that the '312 Patent is valid, or that VMS bears any liability to Pinnacle.

• The settlement does not include any license grant under the '312 Patent or any other patent. The covenant-not-to-sue structure was deliberately selected to avoid any implication of a license, which might otherwise raise questions under certain policy provisions.

• There has been no judicial finding of infringement, validity, or willfulness. The case has not proceeded to trial, and no verdict or judgment has been entered.

• The settlement is a commercial resolution of disputed claims, entered into by VMS to avoid the cost and uncertainty of continued litigation, and does not reflect or constitute an acknowledgment that the insured occurrence giving rise to Pinnacle's claims was expected or intended by VMS.

In light of the foregoing, we respectfully request that Northbridge confirm that its reservation of rights does not affect, diminish, or otherwise limit its obligation to fund the $310,000 indemnity portion of the settlement payment. To the extent that Northbridge has any concerns regarding the applicability of any reserved coverage defense to the proposed settlement, we ask that Northbridge raise those concerns with us promptly so that they may be addressed prior to execution of the Settlement Agreement.

VII. Enclosures

Enclosed with this letter, please find the following documents for Northbridge's review:

1. Draft Settlement Agreement and Mutual Release between Pinnacle Innovations LLC and Vantage Mobility Systems Corp., dated as of May 2025 (marked "DRAFT — SUBJECT TO INSURER REVIEW AND CONSENT"), for Northbridge's review and consent.

2. Copy of written consent of Ridgeline Capital Partners Fund IV, LP, dated May 22, 2025, approving the proposed settlement in accordance with Section 7.04(c) of the VMS Operating Agreement.

A fully executed copy of the Settlement Agreement will be provided to Northbridge promptly upon execution by both parties.

VIII. Request for Response and Contact Information

We respectfully request that Ms. Whitcomb, or the appropriate Northbridge representative, confirm Northbridge's agreement to fund the $310,000 indemnity payment and provide any comments, questions, or requested revisions regarding the enclosed draft Settlement Agreement at Northbridge's earliest convenience. We are mindful of the parties' mutual interest in finalizing this settlement promptly and efficiently, and we are committed to working cooperatively with Northbridge to address any outstanding issues.

Should you wish to discuss the settlement terms, the coverage analysis, or any other aspect of this matter by telephone, we would be pleased to make ourselves available at your convenience. The primary contact for this matter is:

Marcus Delgado, Partner Calderwood & Harkness LLP One Fountain Square, 11th Floor Detroit, MI 48226 Telephone: (313) 555-4817

Email: mdelgado@calderwoodharkness.com

Please also copy the following individual on all correspondence related to this matter:

Rachel Nguyen, VP & Associate General Counsel Vantage Mobility Systems Corp. 4200 Innovation Drive Auburn Hills, MI 48326

Email: rnguyen@vantagemobility.com

We thank you for Northbridge's continued cooperation in the defense and resolution of this matter and look forward to receiving your prompt response.

Sincerely,

CALDERWOOD & HARKNESS LLP

By: ________

Marcus Delgado Partner One Fountain Square, 11th Floor Detroit, MI 48226 Telephone: (313) 555-4817

Email: mdelgado@calderwoodharkness.com

cc: Rachel Nguyen, VP & Associate General Counsel, Vantage Mobility Systems Corp. Catherine Bloom, Billing Partner, Calderwood & Harkness LLP (internal)

Enclosures (2)

Coverage Parameter	Amount
IP Infringement Defense Per-Occurrence Sublimit	$500,000
IP Infringement Defense Aggregate Sublimit	$1,000,000
Self-Insured Retention (SIR)	$75,000
Component	Amount
Total Settlement Amount	$385,000
Less: VMS Self-Insured Retention	($75,000)
Northbridge Indemnity Obligation	$310,000

CALDERWOOD & HARKNESS LLP Attorneys at Law
One Fountain Square, 11th Floor Detroit, Michigan 48226 Telephone: (313) 555-4800 Facsimile: (313) 555-4801
May 28, 2025
Via Email and First-Class Mail
Tanya Whitcomb, Claims Adjuster Northbridge Specialty Insurance Company 200 Harbor Boulevard Stamford, CT 06902
Re: Settlement of Pinnacle Innovations LLC v. Vantage Mobility Systems Corp., No. 2:24-cv-00187-JRG (E.D. Tex.)
Insured: Vantage Mobility Systems Corp.
Policy No.: NSI-CGL-2024-08821
Claim/Coverage Reference: intellectual Property Infringement Defense Sublimit
Dear Ms. Whitcomb:
I. Purpose and Introduction
This firm, Calderwood & Harkness LLP, represents Vantage Mobility Systems Corp. ("VMS") as defense counsel of record in the above-referenced patent infringement action pending before the Honorable Judge J. Rodney Gilstrap in the United States District Court for the Eastern District of Texas. The purpose of this letter is twofold: first, to advise Northbridge Specialty Insurance Company ("Northbridge") of a proposed settlement that has been negotiated between VMS and the plaintiff, Pinnacle Innovations LLC ("Pinnacle"), on terms that we believe are favorable to VMS and consistent with Northbridge's interests as VMS's liability insurer; and second, to formally request Northbridge's confirmation of, and commitment to fund, its indemnity payment obligation arising under the applicable policy in connection with the proposed settlement.
By way of background, Calderwood & Harkness LLP assumed the defense of VMS in this matter effective January 15, 2025, succeeding prior defense counsel, Hargrove Dunn LLP of Dallas, Texas. This engagement is carried under Calderwood & Harkness LLP Matter No. 1007-00003. All billing and case management have been coordinated with Northbridge's designated panel management team since the transition of defense counsel.
We note and acknowledge Northbridge's coverage confirmation letter dated February 12, 2025, authored by your office and countersigned by Ms. Ellen Richter, Senior Coverage Counsel, in which Northbridge confirmed coverage for the defense of the action involving U.S. Patent No. 9,847,312 B2 (the "'312 Patent"), subject to VMS's satisfaction of its self-insured retention and further subject to a reservation of rights. We address the reservation of rights in Section VI of this letter, below.
II. Background of the Litigation
Pinnacle Innovations LLC is a Texas limited liability company organized under the laws of the State of Texas and operating as a non-practicing entity — that is, Pinnacle does not manufacture, sell, or otherwise commercialize products or services embodying the patented technology. Rather, Pinnacle's principal business activity consists of the acquisition and assertion of patent rights against operating companies.
Pinnacle filed its original complaint in this action on February 28, 2024, in the United States District Court for the Eastern District of Texas. The complaint asserts claims of patent infringement under 35 U.S.C. § 271 based on U.S. Patent No. 9,847,312 B2, titled "System and Method for Aggregated Vehicle Telemetry Data Transmission Over Cellular Networks," which was issued by the United States Patent and Trademark Office on March 6, 2018. The '312 Patent was originally assigned to DataStream Automotive, Inc., a now-dissolved Illinois corporation. Pinnacle acquired the '312 Patent and related prosecution history by assignment from DataStream Automotive's successor-in-interest, and the assignment was recorded at the USPTO on August 14, 2023 — approximately five months prior to the filing of the complaint.
In its complaint, Pinnacle asserts infringement of independent Claims 1, 7, and 14 of the '312 Patent and certain claims dependent thereon. The accused instrumentalities are VMS's DriveLink™ 4.0 telematics control unit, a hardware device installed in commercial fleet vehicles, and VMS's FleetPulse™ cloud-based data analytics platform, which receives, aggregates, and processes telemetry data transmitted by the DriveLink™ 4.0 units. Pinnacle alleges both literal infringement and infringement under the doctrine of equivalents.
VMS, through its then-counsel Hargrove Dunn LLP, filed its Answer and Counterclaims on April 15, 2024. VMS denied all allegations of infringement and asserted affirmative defenses and counterclaims of invalidity under 35 U.S.C. §§ 102 and 103 (anticipation and obviousness), non-infringement, and inequitable conduct during prosecution of the '312 Patent before the USPTO.
The Court held a Markman hearing on claim construction on November 14, 2024. After extensive briefing and argument, the Court entered its Claim Construction Order on December 19, 2024. The claim construction outcome was, on balance, favorable to VMS. Specifically, the Court adopted VMS's proposed constructions for the claim terms "adaptive interval" and "aggregated data packet," both of which narrowed the scope of the asserted claims and strengthened VMS's non-infringement position. However, the Court's construction of the term "network congestion metric" was less definitive. The Court construed this term by reference to its ordinary meaning in the relevant art without adopting either party's proposed construction in full, leaving the scope of this claim element ambiguous and preserving a measure of infringement risk for VMS at trial.
Fact discovery in the case closed on March 28, 2025. As of the date of this letter, the parties have exchanged all document productions, completed fact depositions, and served initial infringement and invalidity contentions. The Court's current scheduling order set an expert report deadline of May 30, 2025, and a trial date of October 6, 2025. Both deadlines will be mooted and vacated upon the filing of a stipulated dismissal in connection with the proposed settlement.
III. Summary of Defense Assessment and Settlement Rationale
Throughout the course of the litigation, VMS's defense team has maintained a careful and ongoing assessment of the merits and risks of the case. In forming our settlement recommendation, we relied in significant part on the analysis of VMS's retained defense technical expert, Dr. Franklin Yeoh of Greystone Technical Consulting LLC. Dr. Yeoh holds a Ph.D. in Electrical Engineering from the University of Michigan and has more than twenty years of experience in vehicle telematics and connected vehicle systems. He was engaged to assess both the invalidity and non-infringement defenses.
With respect to invalidity, Dr. Yeoh assessed a 65–70% probability that VMS would succeed in invalidating at least one independent claim of the '312 Patent at trial under 35 U.S.C. §§ 102 or 103. This assessment was based primarily on two prior art references: (1) Tanaka et al., U.S. Patent No. 8,214,097, titled "Method for Transmitting Aggregated Sensor Data in a Vehicular Network," issued July 3, 2012, which discloses a substantially similar data aggregation and transmission architecture; and (2) Morales, PCT Application WO 2014/036281, titled "Congestion-Aware Telemetry Scheduling for Connected Vehicles," published March 13, 2014, which discloses adaptive interval scheduling responsive to network congestion conditions. In combination, these references arguably render the asserted claims obvious under the standards set forth in KSR International Co. v. Teleflex Inc., 550 U.S. 398 (2007).
With respect to non-infringement, Dr. Yeoh assessed a 55–60% probability that VMS would prevail following the Court's Markman ruling. While the favorable constructions of "adaptive interval" and "aggregated data packet" significantly bolstered VMS's non-infringement position, the ambiguity in the Court's construction of "network congestion metric" introduced residual risk that a jury could find that VMS's FleetPulse™ platform meets this limitation, particularly under the doctrine of equivalents.
Despite these favorable — though not dispositive — defense assessments, the economics of continued litigation weighed heavily in favor of settlement. Our office estimated that the cost to take this matter through trial, including expert reports, rebuttal reports, Daubert motions, pre-trial briefing, trial preparation, and a trial of five to seven days in marshall, Texas, would range from approximately $2.8 million to $3.4 million in additional attorneys' fees and expenses. These estimates were shared with Northbridge in our most recent quarterly litigation budget report dated April 15, 2025. Moreover, the uncertainties inherent in a jury trial in the Eastern District of Texas — a jurisdiction well known for its historically plaintiff-favorable patent verdict statistics — counseled in favor of a resolution that eliminates trial risk entirely.
The proposed settlement of $385,000 represents a fraction of the projected cost-to-trial and, moreover, avoids the risk, however modest, of an adverse verdict that could result in a damages award substantially in excess of the settlement amount. We believe the settlement is eminently reasonable and well within the range of commercially rational outcomes.
VMS's majority private equity sponsor, Ridgeline Capital Partners Fund IV, LP ("Ridgeline"), has provided its written consent approving the proposed settlement, dated May 22, 2025. This consent was required under Section 7.04(c) of the VMS Operating Agreement, which mandates sponsor approval for any litigation settlement in which VMS's total payment obligation exceeds $250,000. A copy of the Ridgeline consent is enclosed with this letter for Northbridge's records.
IV. Settlement Terms
Following arms-length negotiations conducted over the course of several weeks between counsel for VMS and counsel for Pinnacle, the parties have reached agreement on the following material terms. These terms are set forth in the enclosed draft Settlement Agreement and Mutual Release (the "Settlement Agreement"), a copy of which is enclosed for Northbridge's review and consent. The principal terms of the Settlement Agreement are as follows:
1. Settlement Payment. VMS shall pay to Pinnacle a lump-sum settlement payment in the amount of Three Hundred Eighty-Five Thousand Dollars ($385,000.00). The settlement payment is non-refundable and not subject to any contingency, offset, or reduction.
2. Payment Deadline. The settlement payment shall be due and payable within thirty (30) calendar days after the full execution of the Settlement Agreement by both parties.
3. Covenant Not to Sue. Pinnacle shall grant to VMS, its affiliates, successors, assigns, customers, distributors, and end users a perpetual, irrevocable covenant not to sue under U.S. Patent No. 9,847,312 B2 and all patents and patent applications in the Pinnacle portfolio as of the effective date of the Settlement Agreement. The covenant runs with the patents and shall be binding on Pinnacle's successors and assigns.
4. Mutual General Releases. Each party shall grant to the other party a mutual general release of all claims, counterclaims, demands, and causes of action arising from or related to the litigation, including all claims that were asserted or could have been asserted in the action.
5. No License Grant. The Settlement Agreement provides for a covenant-not-to-sue structure and does not include any license grant, express or implied, under any patent or other intellectual property right. This distinction is noted for purposes of clarity with respect to any applicable coverage provisions.
6. No Admission. Neither party makes any admission of liability, infringement, validity, invalidity, or enforceability of any patent, or any other wrongdoing, by entering into the Settlement Agreement.
7. Confidentiality. The amount and specific terms of the Settlement Agreement shall be maintained as confidential by both parties. The parties may, however, disclose the existence of a settlement (as distinct from its terms) in regulatory filings, financial statements, or as otherwise required by law or agreement.
8. Dismissal. Within fourteen (14) days of confirmation of receipt of the settlement payment, the parties shall file a joint stipulation of dismissal with prejudice of all claims and counterclaims in the action, pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(ii).
9. Fees and Costs. Each party shall bear its own attorneys' fees, costs, and expenses incurred in connection with the litigation and the settlement.
We believe these terms are favorable to VMS and consistent with Northbridge's interests as VMS's liability insurer. In particular, the covenant-not-to-sue structure (rather than a license), the absence of any admission of liability or infringement, and the mutual release of all claims serve to protect both VMS and Northbridge from any further exposure arising from the '312 Patent or the underlying litigation.
V. Insurance Coverage Analysis and Indemnity Request
We now turn to the application of the insurance coverage to the proposed settlement and VMS's formal request for indemnity funding from Northbridge.
The applicable policy is Northbridge Specialty Insurance Company Commercial General Liability Policy No. NSI-CGL-2024-08821 (the "Policy"), with the intellectual Property Infringement Defense sublimit endorsement. The relevant coverage parameters are as follows:
The allocation of the proposed $385,000 settlement payment as between VMS and Northbridge is as follows:
The $310,000 indemnity obligation is well within the $500,000 per-occurrence sublimit applicable to the IP Infringement Defense coverage. Moreover, we confirm that, based on information available to this firm, no prior claims have been made against the aggregate sublimit under the Policy, and accordingly the full $1,000,000 aggregate sublimit remains available.
We further note, for the avoidance of doubt, that defense costs incurred in this matter have been paid by VMS outside the Policy sublimit and are not charged against either the per-occurrence or aggregate sublimit. Accordingly, Northbridge's financial obligation in connection with the proposed settlement is limited to the $310,000 indemnity portion described above.
Formal Indemnity Request. On behalf of VMS, we hereby formally request that Northbridge confirm its agreement to fund the Three Hundred Ten Thousand Dollar ($310,000.00) indemnity portion of the settlement payment, in accordance with its obligations under the Policy.
Payment Mechanics. We respectfully request that Northbridge advise us of its preferred payment mechanics at its earliest convenience. Specifically, we ask that Northbridge indicate whether it prefers to (a) remit the $310,000 indemnity payment directly to the trust account of Pinnacle's counsel of record, Fenton & Reyes Linley CPAs LLP PLLC, by wire transfer, or (b) remit the $310,000 to VMS (or to this firm's IOLTA account on behalf of VMS) for onward remittance to Pinnacle's counsel together with VMS's $75,000 SIR portion. We are prepared to accommodate either approach and will coordinate with Pinnacle's counsel accordingly.
Required Documentation. If Northbridge requires any additional documentation in connection with its approval and funding of the settlement — such as a settlement consent form executed by VMS, a release or indemnification agreement in favor of Northbridge, a sworn proof of loss, or any other form customarily required by Northbridge in connection with settlement indemnity payments — we ask that Northbridge provide such forms to our office promptly so that we may complete and return them without delay.
Timing. We respectfully request that Northbridge provide its confirmation of the indemnity obligation at its earliest convenience, and in any event sufficiently in advance of the thirty (30) calendar day payment deadline that will commence upon full execution of the Settlement Agreement, to permit timely remittance of the settlement payment. We anticipate that the Settlement Agreement will be fully executed within approximately five to seven business days of Northbridge's confirmation, and accordingly we ask that Northbridge endeavor to provide its response on or before June 11, 2025, to allow adequate time for payment processing and coordination.
VI. Reservation of Rights
We acknowledge and have reviewed the reservation of rights set forth in Northbridge's coverage confirmation letter dated February 12, 2025. We understand that Northbridge confirmed coverage for the defense of the '312 Patent action subject to, among other things, reservations regarding the applicability of certain policy exclusions and conditions, including but not limited to the expected-or-intended-injury exclusion and the prior-knowledge exclusion.
We wish to draw Northbridge's attention to the fact that nothing in the proposed settlement terms implicates any of the coverage exclusions or conditions referenced in the reservation of rights. Specifically:
• The settlement involves no admission of liability, infringement, or validity by VMS. VMS has not conceded, and does not concede, that any act of infringement occurred, that the '312 Patent is valid, or that VMS bears any liability to Pinnacle.
• The settlement does not include any license grant under the '312 Patent or any other patent. The covenant-not-to-sue structure was deliberately selected to avoid any implication of a license, which might otherwise raise questions under certain policy provisions.
• There has been no judicial finding of infringement, validity, or willfulness. The case has not proceeded to trial, and no verdict or judgment has been entered.
• The settlement is a commercial resolution of disputed claims, entered into by VMS to avoid the cost and uncertainty of continued litigation, and does not reflect or constitute an acknowledgment that the insured occurrence giving rise to Pinnacle's claims was expected or intended by VMS.
In light of the foregoing, we respectfully request that Northbridge confirm that its reservation of rights does not affect, diminish, or otherwise limit its obligation to fund the $310,000 indemnity portion of the settlement payment. To the extent that Northbridge has any concerns regarding the applicability of any reserved coverage defense to the proposed settlement, we ask that Northbridge raise those concerns with us promptly so that they may be addressed prior to execution of the Settlement Agreement.
VII. Enclosures
Enclosed with this letter, please find the following documents for Northbridge's review:
1. Draft Settlement Agreement and Mutual Release between Pinnacle Innovations LLC and Vantage Mobility Systems Corp., dated as of May 2025 (marked "DRAFT — SUBJECT TO INSURER REVIEW AND CONSENT"), for Northbridge's review and consent.
2. Copy of written consent of Ridgeline Capital Partners Fund IV, LP, dated May 22, 2025, approving the proposed settlement in accordance with Section 7.04(c) of the VMS Operating Agreement.
A fully executed copy of the Settlement Agreement will be provided to Northbridge promptly upon execution by both parties.
VIII. Request for Response and Contact Information
We respectfully request that Ms. Whitcomb, or the appropriate Northbridge representative, confirm Northbridge's agreement to fund the $310,000 indemnity payment and provide any comments, questions, or requested revisions regarding the enclosed draft Settlement Agreement at Northbridge's earliest convenience. We are mindful of the parties' mutual interest in finalizing this settlement promptly and efficiently, and we are committed to working cooperatively with Northbridge to address any outstanding issues.
Should you wish to discuss the settlement terms, the coverage analysis, or any other aspect of this matter by telephone, we would be pleased to make ourselves available at your convenience. The primary contact for this matter is:
Marcus Delgado, Partner Calderwood & Harkness LLP One Fountain Square, 11th Floor Detroit, MI 48226 Telephone: (313) 555-4817
Email: mdelgado@calderwoodharkness.com
Please also copy the following individual on all correspondence related to this matter:
Rachel Nguyen, VP & Associate General Counsel Vantage Mobility Systems Corp. 4200 Innovation Drive Auburn Hills, MI 48326
Email: rnguyen@vantagemobility.com
We thank you for Northbridge's continued cooperation in the defense and resolution of this matter and look forward to receiving your prompt response.
Sincerely,
CALDERWOOD & HARKNESS LLP
By: ________
Marcus Delgado Partner One Fountain Square, 11th Floor Detroit, MI 48226 Telephone: (313) 555-4817
Email: mdelgado@calderwoodharkness.com
cc: Rachel Nguyen, VP & Associate General Counsel, Vantage Mobility Systems Corp. Catherine Bloom, Billing Partner, Calderwood & Harkness LLP (internal)
Enclosures (2)
Coverage Parameter | Amount
IP Infringement Defense Per-Occurrence Sublimit | $500,000
IP Infringement Defense Aggregate Sublimit | $1,000,000
Self-Insured Retention (SIR) | $75,000
Component | Amount
Total Settlement Amount | $385,000
Less: VMS Self-Insured Retention | ($75,000)
Northbridge Indemnity Obligation | $310,000

CALDERWOOD & HARKNESS LLP Attorneys at Law

CALDERWOOD & HARKNESS LLP

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