HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No. 20-23391-CIV-COOKE/GOODMAN

ADT LLC, and The ADT Security Corporation,

Plaintiffs,

v.

Vivint Smart Home, Inc. f/k/a Mosaic

Acquisition Corp.; and Legacy Vivint Smart 

Home, Inc. f/k/a Vivint Smart Home, Inc.

Defendants.

___________________________________

EXPERT REPORT OF ERIC MATOLO, PH.D.

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Table of Contents

I. Introduction.................................................................................................................... 2

A. Assignment....................................................................................................................... 2

B. Education, Experience, and Qualifications...................................................................... 2

C. Information & Materials Relied Upon ............................................................................. 4

II. Summary of Conclusions............................................................................................... 4

III. Case Background: Plaintiffs, Defendants, and Allegations ....................................... 5

A. Plaintiff............................................................................................................................. 5

1. ADT, LLC ................................................................................................................... 5

2. The ADT Security Corporation................................................................................... 6

B. Defendant ......................................................................................................................... 6

C. Plaintiff’s Allegations Against Defendant ....................................................................... 6

IV. Royalty Analysis............................................................................................................. 7

A. Royalty as a Measurement of Damages........................................................................... 7

B. Royalty Determination Methods...................................................................................... 9

1. Market Measures for Royalty Rate ........................................................................... 10

a) Trademark licenses.................................................................................................... 10

b) Dealer Revenue Sharing Agreements........................................................................ 11

C. Royalty Calculation – ADT Market Measure ................................................................ 13

1. ADT Dealer Revenue Sharing Model ....................................................................... 13

2. Adjustments to ADT Dealer Revenue Sharing Model.............................................. 16

3. Calculation of Royalty Rate Related to Defendants.................................................. 17

D. Royalty Calculation – Industry Representative Market Measure .................................. 18

1. Representative Dealer Revenue Sharing Model........................................................ 18

2. Adjustments to Representative Dealer Revenue Sharing Model .............................. 22

3. Calculation of Royalty Rate Related to Defendant – Industry Market Measure....... 22

E. Conservative Nature of The Royalty Calculation .......................................................... 24

F. Lost Dealer Revenue to ADT......................................................................................... 25

G. Vivint Revenues............................................................................................................. 25

V. Pre-Judgment Interest................................................................................................. 26

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I. Introduction

A. Assignment

I have been engaged by Shook Hardy & Bacon, LLP, counsel for ADT LLC and The 

ADT Security Corporation (collectively “ADT” or “Plaintiff”), to provide expert analysis 

and, if necessary, expert testimony in the above listed matter pending in the United States 

District Court for the Southern District of Florida, under Case No. 20-23391-CIVCOOKE/GOODMAN. I understand ADT has accused Vivint Smart Home, Inc. and 

Legacy Vivint Smart Home, Inc. (collectively, “Vivint” or “Defendant”)1 of false and 

deceptive sales practices, including false affiliation with ADT.

2

I have been asked to analyze and opine, from an economic perspective, on the 

appropriateness and quantification of royalty damages relating to ADT’s claims of 

violation of the Lanham Act, and common law Unfair Competition, as alleged in ADT’s 

Amended Complaint.3 The analysis of the royalty damages was conducted through an 

evaluation of evidence relevant to the facts of the case available at the time of submitting 

this report.4

On December 20, 2017, ADT and Vivint’s predecessor settled a lawsuit initiated by ADT 

relating to the same alleged unlawful conduct by Vivint sales representatives during the 

years leading up to and including 2017.

5

 The analysis here relates to Vivint’s conduct 

occurring subsequent to December 20, 2017.

B. Education, Experience, and Qualifications

I am a Vice President at Cirque Analytics, LLC, an economic consulting firm with U.S. 

offices in California, Washington D.C., and Jackson Hole. Cirque Analytics provides 

1 Vivint Smart Home, Inc. f/k/a Mosaic Acquisition Corp., and Legacy Vivint Smart Home, Inc. f/k/a Vivint 

Smart Home, Inc.

2 First Amended Complaint, ¶1.

3 First Amended Complaint, ¶1. My opinions and conclusions regarding royalty damages are not intended to 

provide any indication regarding the appropriateness or reasonableness of any other form of remedy.

4 I understand discovery is ongoing in this case. If additional relevant information becomes available, we will 

update our analysis and opinions appropriately.

5 First Amended Complaint, ¶2.

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economic, financial, and statistical research and analysis to private and public sector 

clients in the United States and abroad.

I hold a Ph.D. and an M.A. in economics from the University of California at Santa 

Barbara, and a B.A. in economics/mathematics from the University of California at Santa 

Barbara. I have been actively employed in the area of economic analysis and/or 

economic instruction for over 14 years. After completing graduate education, I worked 

as an economist and expert for the economics consulting firm Nathan Associates. I am, 

or have been, a member of multiple professional associations, including the American 

Bar Association, American Economic Association, Licensing Executives Society, Los 

Angeles Intellectual Property Law Association, and the Orange County Intellectual 

Property Law Association. I have taught economics at the University of Southern 

California and have served as a referee for the International Journal of the Economics of 

Business. I have also written articles on intellectual property damages.

I have conducted economic analyses for a variety of situations, including anticompetitive 

conspiracy, contracts disputes, economic and fiscal impacts, intellectual property (e.g., 

patents, trademarks, trade dress, trade secrets, false advertising, and/or copyrights), and 

labor disputes. This experience includes analyses of lost profits, reasonable royalties, and 

unjust enrichment. The various products and intellectual property rights I have analyzed 

have covered many different industries, including semiconductor technology, software, 

wireless technology, apparel, medical devices, medical instruments, concession services, 

music and entertainment, automotive, energy management systems, consulting services, 

and various consumer goods. I have provided expert analysis for projects in the context 

of litigation as well as projects involving business matters outside of litigation. For 

litigation matters, I have provided expert analysis for both plaintiffs and defendants. 

Cirque Analytics charges $525 per hour for work in this matter. Professional staff 

members employed by Cirque Analytics working under my direction have hourly billing 

rates that range from $250 to $675. Neither my compensation nor Cirque Analytics’ is 

contingent upon the outcome of this case.

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My curriculum vitae is attached to this report as Appendix A. Also included in 

Appendix A are lists of the matters involving testimony at deposition or trial in the past 

four years, along with lists of publications for at least the past ten years.

C. Information & Materials Relied Upon

In preparing this report, I have reviewed various documents and materials provided to me 

in this case. Those documents include, but are not limited to, information provided by 

ADT, information provided by Vivint, publicly available product and company 

information, and the First Amended Complaint. Additionally, I have interviewed Susan 

Gates, Director – Financial Planning and Analysis for ADT; Frank Cona, Vice President 

and Chief IP Counsel for ADT; Kenneth Rosen, Senior Director of Dealer Sales for 

ADT; Michael Barnes, Founding Partner of Barnes Associates, Inc.; and Brandon Hess, 

President of Crorzar LLC. The complete set of documents, materials, and information 

received are listed in this report and/or in the attached Appendix B. My analysis and 

conclusions are based on the information available to me. I understand discovery is 

ongoing. If additional relevant information becomes available, I will update our analysis 

accordingly.

II. Summary of Conclusions

For the purposes of the analysis, I have assumed that Defendant will be found liable for 

violation of the Lanham Act and/or the Unfair Competition claim, as alleged by 

Plaintiffs. Given this assumption, I have conducted my analysis and prepared this report. 

Based on my analysis and review of the evidence and the facts of the case available todate, I have determined the following:

• Damages to Plaintiff can be modeled in the form of a running royalty; and

• Plaintiff's damages in the form of a royalty amount to approximately 22 percent of 

revenues earned from home monitoring, security and automation products/services for 

accounts generated during the timeframe I have been instructed by counsel to consider

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which is from December 20, 2017 to present.6

 Based on the relationship of the parties 

and the theoretical royalty framework, the royalty would be economically applicable 

to Vivint’s direct-to-home commercial footprint as it overlaps with ADT’s footprint.

III. Case Background: Plaintiffs, Defendants, and Allegations

A. Plaintiff

ADT, LLC is a subsidiary of ADT, Inc., a Delaware corporation formerly known as 

Prime Security Services Parent, Inc.7 ADT, Inc. is a provider of monitored security, 

interactive home and business automation, and related monitoring services across the 

United States and Canada.8

 ADT, Inc.’s additional subsidiaries include ADT Holdings, 

Inc., Prime Security Services Borrower, LLC, Prime Security Services Holdings, LLC, 

and the ADT Security Corporation.9

 ADT was founded in 1874, with a mission “to help 

[its] customers protect and connect to what matters most—their families, homes, and 

businesses.”10 Excluding contracts monitored but not owned, ADT, Inc. currently serves 

approximately 7.2 million residential and business customers, making it the largest 

provider of monitored security for homes and small businesses in the U.S. and Canada.11 

1. ADT, LLC

Plaintiff ADT, LLC (dba ADT Security Services), a subsidiary of ADT, Inc., is a 

Delaware limited liability company with its principal place of business at 1501 Yamato 

Road, Boca Raton, Florida.12 ADT, LLC is an operating company that runs the ADT 

6 I offer no opinion in this report as to whether Plaintiffs should be awarded additional damages in the form of 

compensatory damages due to lost accounts or reinstallations, enhanced damages, punitive damages, litigation costs, 

attorney fees, injury to reputation or goodwill, or other relief. Moreover, by calculating the damages, we do not 

imply nor hold the opinion that damages, instead of a permanent injunction, would be an adequate remedy to 

compensate Plaintiffs for wrongful conduct by the defendants and those acting in concert with them.

7 Form 10-K, ADT Inc., FYE 2017, p. 1, Exhibit 21.

8 Form 10-K, ADT Inc., FYE 2017, p. 2.

9 Form 10-K, ADT Inc., FYE 2017, Exhibit 21.

10 Form 10-K, ADT Inc., FYE 2017, p. 2.

11 Form 10-K, ADT Inc., FYE 2017, p. 2.

12 First Amended Complaint, ¶12. See https://www.adt.com/about-adt/legal/trademark.

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alarm services business in the United States, and uses the ADT Trademarks under license 

from The ADT Security Corporation.

13

2. The ADT Security Corporation

Plaintiff The ADT Security Corporation is a holding company that owns the ADT 

trademarks.14 Similar to ADT, LLC, The ADT Security Corporation is a subsidiary of 

ADT, Inc., and is a Delaware corporation with its principal place of business located at 

1501 Yamato Road, Boca Raton, Florida.15

B. Defendant

Vivint is a provider of home systems for security, home automation, and energy 

management.16 The company sells, services, and monitors smart home and security 

systems across the U.S. and Canada.17 Headquartered in Provo, Utah,18 Vivint has 

grown to be one of the largest security companies in North America.19

C. Plaintiff’s Allegations Against Defendant

Vivint and ADT are direct competitors in the market for residential security services and 

equipment. The companies market substantially similar goods and services to largely the 

same residential customer base.20 Additionally, Vivint operates in every state where ADT 

sells alarm systems.21 ADT alleges that through unauthorized use of the ADT trade 

name, Defendants are taking over ADT accounts.22 ADT further alleges this 

unauthorized use may have been part of Defendants’ business strategy, which includes

presentation of false and/or misleading statements to customers. Vivint aims to have 

13 First Amended Complaint, ¶12.

14 First Amended Complaint, ¶11.

15 First Amended Complaint, ¶11.

16 Vivint, “About Vivint,” https://www.vivint.com/company/about-us.

17 Form 10-K, Vivint Smart Home, Inc., FYE 2020, p. 93.

18 Form 10-K, Vivint Smart Home, Inc., FYE 2020, p. 45.

19 Form 10-K, Vivint Smart Home, Inc., FYE 2020, p. 93.

20 First Amended Complaint, ¶27.

21 First Amended Complaint, ¶27; Vivint, “Vivint Service Locations,” accessed Jul. 8, 2021, 

https://www.vivint.com/locations; ADT, “ADT Security Local Service Areas,” accessed on Aug 9, 2021, 

https://www.adt.com/local.

22 First Amended Complaint, ¶¶1-4, 28-35.

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customers believe that they are affiliated with ADT and are performing upgrades to the 

ADT systems, when in fact the accounts are actually being transferred to Vivint.

23 

According to Plaintiff, Defendant’s practices of using false sales pitches to confuse 

customers, including unauthorized use of ADT’s trade name, violates the Lanham Act,

and constitutes unfair competition.24

According to Plaintiff, Defendant’s sales agents would utilize false tactics to deceptively 

gain the trust of the ADT customers and gain access into their homes. Once inside, the 

sales agents would trick customers into signing a new contract with Vivint under the 

guise that their current ADT equipment was simply being upgraded.25 These deceptive 

practices would often result in the customers ultimately terminating their existing ADT

contracts, and signing new contracts with Vivint.

26 In some cases, the customers 

unknowingly ended up with a new Defendant alarm system, but contractual obligations to 

both the Defendant and ADT.

27

IV. Royalty Analysis

A. Royalty as a Measurement of Damages

Defendant may have knowingly and deliberately attempted to use false and misleading 

sales presentations to establish the appearance of an affiliation with ADT.

28 Under an 

assumption of liability, this in fact would be the case. Defendant doing so is an 

indication of value associated with ADT’s intangible assets. In other words, Defendant’s

attempts to claim an affiliation with ADT suggests that Defendant values the use of 

ADT’s intangible assets, namely its commercial reputation, brand value, goodwill, and 

trade name.

23 First Amended Complaint, ¶¶1-4, 28-35.

24 First Amended Complaint, ¶1.

25 First Amended Complaint, ¶¶1-4, 28-35.

26 First Amended Complaint, ¶¶1-4, 28-35.

27 First Amended Complaint, ¶35.

28 First Amended Complaint, ¶¶1-4, 28-37.

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Over the last 30 to 40 years, intangible assets, on average for companies, have become an 

increasingly greater component of corporate value. For example, in the mid-1970s, 

intangible assets were generally around 17 percent of corporate value, and by the mid2000s, that number had grown to 80 percent.29 According to ADT, our “brands are 

among the most respected, trusted, and well-known brands in the monitored security 

industry” and the “strength of our brands is a key competitive advantage and contributor 

to our success.”30 In addition, third party security industry analysts have identified the 

ADT brand as an iconic brand and the most trusted, recognized, and experienced name 

for home security.31 

Owners of intangible assets that are willing to grant usage rights to third parties typically 

require fair compensation for use or the option to use such assets. Royalties are a 

common method for owners of intangible assets, e.g. trade names, to be compensated for 

allowing others to have the option to use the intangible assets. In fact, ADT works with 

third-party dealers to obtain of a portion of its new customers.32 For example, 

historically, third-party dealers have accounted for approximately 40 percent of ADT’s 

new customers in 2015, and approximately 50 percent of new accounts in 2017.

33 And, 

as will be discussed more fully below, when ADT dealers sign up customers, they retain 

a portion of the contract revenue and ADT receives a portion, effectively creating a 

royalty payment obligation for the dealer to obtain the right to show potential customers 

his/her affiliation with ADT.34

29 Parr, R.L. (2007). Royalty Rates for Licensing Intellectual Property. Hoboken, NJ: John Wiley & Sons, Inc.

30 Form 10-K, ADT Inc., FYE 2017, p. 3.

31 See http://www.thehomesecurityadvisor.com/do-just-adt-stickers-and-signs-prevent-crimes/; See also

http://www.securitysales.com/in-depth/adt_execs_plans_2017/.

32 Form 10-K, ADT Inc., FYE 2020, p. 6.

33 Form 10-K, The ADT Corporation, FYE 2015, p. 4; and Form 10-K, ADT Inc., FYE 2017, p. 15.

34 It is understood that use of the ADT name can be powerful for dealers and result in increased sales. (See, 

e.g., An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About Alarm Dealer Programs," 

accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarm-dealer-programs/ (“The kind of 

branding you get by becoming an authorized dealer for ADT can be a very powerful force for your sales team and 

could potentially help close a few extra sales.”)).

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More broadly, it is not uncommon that home security companies work with third-party 

dealers to obtain new customers.35 Brinks and Alert 360 are examples of additional 

companies that work with dealers. Also discussed below, for other alarm company 

dealers, when they sign up customers, they retain a portion of the contract revenue and 

the home security company receives a portion following revenue share arrangements 

similar to the ADT dealer arrangement.

Thus, given the value of ADT’s intangible assets (e.g. intellectual property and brand 

value), the general significant nature of intangible assets in terms of portion of corporate 

value, Defendant’s decision to use such assets owned and used by Plaintiff, and the 

typical royalty method of compensation for third-party use of intangible assets, it is 

reasonable to consider royalties as a form of damages for Defendant’s attempts to 

affiliate with ADT during their sales routines.

B. Royalty Determination Methods

In determining the economic value of intangible assets, one, or a combination of three 

forms of economic measures are generally considered: income measures; cost measures; 

and market measures.36

Income measures relate to an evaluation of revenue and/or profits tied to the sales of 

products and services covered by the assets.37 Cost measures relate to the amount of 

resources spent to develop and commercialize the assets, or the amount of resources that 

would be required to pursue and adopt an alternative set of intangible assets rather than 

the set of assets-in-suit.38 Market measures include established transactional market 

outcomes related to the assets, or similar assets, which have occurred in the 

35 An Insider's Guide to Security Dealer Programs, "Alarm Dealer Program Comparison," accessed Jun. 30, 

2021, http://www.alarmprogramadvisor.com.

36 Glick, Mark A., Lara A. Reymann, and Richard Hoffman, Intellectual Property Damages: Guidelines and 

Analysis, (2003), p. 104.

37 Glick, Mark A., Lara A. Reymann, and Richard Hoffman, Intellectual Property Damages: Guidelines and 

Analysis, (2003), pp. 104-105.

38 Glick, Mark A., Lara A. Reymann, and Richard Hoffman, Intellectual Property Damages: Guidelines and 

Analysis, (2003), pp. 118-119.

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marketplace.39 Market measures, when available, are often valuable sources of 

information for intangible asset valuation exercises because the measures account for 

market realities that cannot always be easily quantified by a third-party examiner based

on other available information. An important requirement of a true market measure or 

the fair market value of a property, business, security, or intangible asset is that the value 

for the asset being valued was derived though a potential buyer and seller operating 

through an arm’s length transaction, based on comparable types and levels of commerce. 

An arm’s length transaction is “one in which the buyers and sellers of a product act 

independently and do not have any relationship to each other. The concept of an arm’s 

length transaction assures that both parties in the deal are acting in their own self-interest 

and are not subject to any pressure or duress from the other party. It also assures third 

parties that there is no collusion between the buyer and seller.”40 Supply chains can, and 

commonly have, multiple commercial levels. Moreover, “[i]n general, family members 

and companies with related shareholders are said not to be transacting at arm’s length.”41

Thus, in selecting a market measure it is first important to ensure that it is a true arm’s 

length transaction. Secondly, an important requirement for appropriate use of market 

measures is to properly account for any differences between the facts surrounding the 

market measure and those relating to the asset valuation task at hand.

1. Market Measures for Royalty Rate

a) Trademark licenses

I am aware of certain trademark licenses entered into by home security companies. These 

licenses typically involve a running royalty rate as a percentage of sales. While these 

agreements are informative as to the structure of the royalty rate (i.e., % of sales), 

material differences between the licenses and the arrangement at issue here prevent them 

from being proper market measures.

39 Glick, Mark A., Lara A. Reymann, and Richard Hoffman, Intellectual Property Damages: Guidelines and 

Analysis, (2003), pp. 113-118.

40 Investopedia, “Arm’s Length Transaction,” https://www.investopedia.com/terms/a/armslength.asp.

41 Investopedia, “Arm’s Length Transaction,” https://www.investopedia.com/terms/a/armslength.asp.

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One notable difference is that some of the trademark licenses are not arm’s length but 

rather transactions between affiliated entities. Another difference is the trademark 

licenses are not necessarily agreements between competitors, whereas ADT and Vivint 

compete for customer accounts. This is relevant because the opportunity cost of licensing 

is greater when licensing to a competitor. A third difference between the established 

trademark agreements and an arrangement between ADT and Vivint is that some of the 

trademark licenses require the licensee to expend resources to building and maintaining 

the company and the brand. Here, Vivint is using the fully developed and funded ADT

company brand.

b) Dealer Revenue Sharing Agreements

As discussed above, ADT works with third-party dealers in order to obtain new 

customers. Thus, ADT has an established ADT dealer revenue sharing agreement and 

model in place with its own third-party dealers which it utilizes to effectively establish 

dealer royalty payments. The dealer revenue sharing agreement which ADT has in place 

for hundreds of dealers42 is an established market transaction model that indicates what 

contract revenue sharing portion ADT is willing to accept and what revenue sharing 

portion dealers are willing to pay for the dealers to be able to use ADT’s intangible assets 

and sell security and monitoring contracts with an affiliation with ADT. The dealer 

revenue sharing agreement was agreed upon between ADT and its dealers in an arm’s 

length transaction, given ADT and its dealers have significantly different interests, are 

operated by entirely different decision makers, and negotiated the agreement with only 

their own self-interest in mind. Secondly, the ADT dealer revenue sharing agreement is 

highly comparable to what is at issue in this case, namely, Vivint’s use of the ADT trade 

name, brand, reputation and goodwill.43 Vivint is taking full advantage of ADT’s brand, 

reputation, and goodwill without paying for it as ADT’s authorized dealers do via their 

agreement. Thus, a royalty valuation model suitable for the claims at issue in this case 

would be a market measure approach, using ADT’s established dealer revenue sharing 

model as the benchmark market measure. 

42 Form 10-K, ADT Inc., FYE 2020, p. 6.

43 First Amended Complaint, ¶1.

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However, despite the similarities between ADT’s dealer revenue sharing model and a 

royalty applicable for Defendants, there are some differences that need to be accounted 

for. For example, factored into the actual ADT revenue sharing model is the fact that 

ADT incurs costs to provide the alarm service, whereas with a royalty arrangement 

related to Defendants, ADT would not incur such costs. Therefore, to properly apply the 

market measure approach, certain adjustments will need to be made to the established 

ADT model.

More broadly, as also discussed above, home security companies commonly work with 

third-party dealers in order to obtain new customers. In other words, similar to ADT,

other industry participants have established dealer revenue sharing agreements and 

models in place with their own third-party dealers. Collectively, the industry dealer 

revenue sharing agreements in place serve as established market transaction models. The 

dealer revenue sharing agreements agreed upon between home security companies and 

the dealers are also analyzed to develop an industrywide representative model. The 

representative industry model may serve as an alternative market measure and a crosscheck against the ADT-specific market measure. 

As with the ADT dealer revenue sharing model, there are some differences between 

dealer revenue sharing models and a royalty applicable for Defendant that need to be 

accounted for. Therefore, to properly apply the market measure approach, certain 

adjustments (to account for ADT not incurring monitoring costs for the accounts Vivint 

obtains) will need to be made to the established representative dealer model. Ultimately, 

the dealer agreement structure that reasonably serves as the benchmark is a representative 

dealer arrangement comprised of average industry terms. 

The royalty for modeling damages will be computed in the next section through the 

following three steps: (i) outlining the ADT dealer revenue sharing model, including the 

effective running royalty in the dealer relationships; (ii) identifying the adjustments that 

need to be made to the model; and (iii) applying the adjustments and computing the 

royalty applicable for Defendant. Following the royalty based on the established ADT 

dealer model, is the alternative royalty calculation based on the industry representative 

dealer revenue sharing model.

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C. Royalty Calculation – ADT Market Measure

1. ADT Dealer Revenue Sharing Model

ADT’s dealer revenue sharing model is used to determine the portion of customer 

contract revenue retained by the dealer and the portion owed to ADT. The model is 

based on a representative security and monitoring system and service package based on 

common features.44 Typically, in return for obtaining a new customer contract, ADT 

dealers retain a portion of the contract revenue through two forms of payment; first is an 

up-front payment, and second is an ongoing share of the recurring monthly contract 

revenue.45 The up-front payment is based on a multiple of the monthly contract amount 

and is subject to a charge-back period, typically around 12-15 months, where the dealer 

must pay back any up-front payment if a contract is cancelled within the charge-back 

period.46

ADT has created an analytical model to identify the value (the Net Present Value, or 

“NPV”47) to ADT of the dealer relationship. This model allows ADT to identify the 

value of various categories of dealers, such as the size of dealers measured by monthly 

contract volume. The ADT dealer model can and has been used to identify alternative 

compensation structures that are economically equivalent to ADT (in terms of NPV). 

More specifically, the model can be used to identify an alternative amount of up-front 

versus ongoing payments to dealers that still results in the same NPV to ADT.48 To 

maintain the NPV to ADT, any reduction in the up-front payment amount would be offset 

with a particular corresponding increase in the portion of the ongoing revenue share, and 

44 As discussed below, the model accounts for the mix of purchased ADT security systems/contracts.

45 Interview of Susan Gates; interview of Kenneth Rosen; Form 10-K, ADT Inc., FYE 2020, pp. 6-7.

46 Interview of Susan Gates of ADT; interview of Kenneth Rosen of ADT; Form 10-K, ADT Inc., FYE 2020, 

p. 6.

47 NPV analysis is a method of evaluating projects and investments by discounting future costs and benefits on 

a common basis (i.e. to the same time period using an appropriate discount rate) so they can be compared “applesto-apples” (Goolsbee, A., Levitt, S., & Syverson, C. (2013). Microeconomics. New York, NY: Worth Publishers). 

In other words, given that a dollar today is not the same as a dollar tomorrow, NPV analysis accounts for risk and 

time value of money.

48 I understand ADT has used this model to create an alternative payment structure for new dealers that desire 

larger up-front payments in exchange for less ongoing payments (interview of Susan Gates of ADT). This model 

was created in the ordinary course of business as of 2016 and continued to serve as a benchmark through at least 

2019 (interview of Susan Gates of ADT).

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vice versa. Thus, the ADT model can be used to identify a fully running royalty payment 

structure (that is, no up-front payment) that provides value that is economically 

equivalent to ADT (i.e., with the same NPV).

The model used to determine account NPV and ADT dealer revenue sharing is based on a 

variety of inputs and parameters to fully account for the performance of a customer 

account. Enumerated below are the inputs and parameters used in ADT’s dealer revenue 

sharing model to determine the NPV of an account and portion of account revenue 

retained by the dealer versus that retained by ADT itself:49

• Recurring Account Revenue

o Monthly recurring revenue paid by customers

 Average recurring amount based on average ADT Pulse and 

Automation signup rates50,51

 Billed amount used to compute recurring revenue share

 Cost-adjusted amount used to compute up-front payment based on 

multiple

• Incremental Costs

o Costs to Serve

 Maintenance, customer service & monitoring, billing & collection, 

etc.

• Dealer Revenue Sharing Parameters

o Up-front cost multiple (# of months)

o Recurring revenue percentage

• Attrition and Contract Life

o Annual attrition rates

49 Interview of Susan Gates of ADT; ADT00010352.

50 ADT Pulse is a more advanced automated system and service integrated with climate and light control and 

video (https://www.adtpulse.com/home/what-is-pulse.html).

51 ADT’s authorized dealer program accounts for roughly 40 percent of its new customers (Form 10-K, The 

ADT Corporation, FYE 2015, p. 4). Hence, we have relied on inputs used in the ADT dealer revenue sharing model 

(specifically the ADT Pulse and Automation sign up rates) to estimate the royalty rather than the average revenue 

across all customers because the latter accounts for revenues that were not necessarily originated by ADT’s 

authorized dealers.

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o Charge-back period and charge-back rates

o Typical contract life (# of years)

• Discount rate and Taxes

o Weighted average cost of capital

o Corporate tax rate

******* 

Table 1 (and attached Exhibit 1) summarizes the calculations from ADT’s dealer revenue 

sharing model for a representative high-level ADT dealer and customer contract. For 

example, as shown in Table 1, for a high-level dealer (i.e., dealer generating high number 

of accounts), the recurring revenue sharing retained by the dealer is of the 

recurring contract revenue from the customer and an up-front payment based on a 35.6 

month multiple.52 The remaining contract revenue, factoring in attrition, charge-backs, 

incremental costs, and resales, results in NPV payments to ADT amounting to 

for the account.

To model the royalty applicable in this case, the revenue sharing can be converted to a 

revenue sharing equivalent with no up-front model. For instance, using ADT’s dealer 

revenue sharing model, holding the high-level representative account NPV constant at 

, converting the up-front payment and recurring revenue sharing model to 

recurring revenue-only revenue sharing yields percent retained by the dealer and 

 percent retained by ADT.53

52 I understand the “500+” high-level category would apply for Vivint given the size of Vivint.

53 The share retained by ADT is 42 percent based on the average dealer (see Exhibit 1).

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2. Adjustments to ADT Dealer Revenue Sharing Model

This percent figure does not represent the royalty suitable for this case as it is 

applicable to the scenario where ADT provides monitoring services and incurs the related 

500+ 500+

Revenue

Pulse Take Rate

Automation

Billed RPU/MRR

Funded RPU/MRR

Gross Multiple

Charge-back period

% Charge-back

Net Funded Multiple

Cost to Serve

Maintenance

Customer Service (incl. monitoring)

Bad Debt

Billing & Collection

Total

Revenue Sharing

Attrition

Yr1

Yr2

Yr3

Yr4

Yr5

Yr6

Yr7

Yr8

Yr9

Yr10

Yr11

Yr12

Yr13

Yr14

Yr15

Tax Rate

WACC

NPV Incr. (15 yr)

ADT Dealer Revenue Sharing Model

A-1 Grid Terms If ADT Only Paid Revenue Sharing 

Complete version with notes and sources attached as exhibit

Table 1

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costs. To determine a royalty applicable to the hypothetical licensees (i.e., Defendants in 

this case) where ADT is not providing the monitoring service, an additional adjustment is 

applied to the royalty figure; this adjustment, and ultimate royalty, will be computed in 

the following section.

3. Calculation of Royalty Rate Related to Defendants

As shown in Table 1 (and attached Exhibit 1), the representative monthly recurring 

contract revenue figure is . Applying the percent ADT revenue share royalty 

to the monthly contract revenue figures yields , as seen in Table 2 (and attached 

Exhibit 2).

54 However, in a royalty arrangement with Defendants, ADT would not incur 

the incremental costs to service/monitor the contracts sold by Defendants, thus it would 

not be expected that ADT would receive revenue sharing to cover such costs. Therefore, 

the ADT revenue sharing figure can be reduced to maintain the NPV levels as established 

by the revenue sharing model. In other words, a reduction in the monthly outlay (i.e., 

cost to serve) by ADT for an account should be offset by a reduction to the monthly 

monies received for an account (i.e., recurring contract revenue) to maintain the NPV. 

As shown in Table 2 (and attached Exhibit 2), reducing the ADT revenue sharing 

figure to account for ADT’s avoidance of the servicing costs yields a net revenue 

sharing amount to ADT of .55 This adjusted recurring revenue sharing 

figure for ADT, taken as a percentage of monthly contract revenue ( ), represents a 

22 percent royalty per Table 2 (and attached Exhibit 2).

56

54 Applying the 42 percent dealer average royalty yields (see Exhibit 2).

55 Reducing the figure (based on the dealer average royalty) by results in a net revenue sharing 

amount to ADT of (see Exhibit 2). It would not be appropriate to deduct profits in addition to costs, given 

that Vivint’s deceptive business practices result in less alarm monitoring profit to ADT, for which ADT would 

demand a sufficiently higher royalty, not a discount, to be equally well-off.

56 The dealer average revenue sharing figure represents a 26.3 percent royalty (see Exhibit 2).

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Based on the above computations, it is determined that a 22 percent royalty, applicable to 

net sales, is appropriate for this case.57 Since the defendants have not in fact paid any 

royalty to ADT, they have benefited from the avoidance of royalty via these payments. 

That is, Defendants profits are higher than they would have been by at least the amount 

of avoided royalty.

D. Royalty Calculation – Industry Representative Market Measure

1. Representative Dealer Revenue Sharing Model

This section addresses the alternative royalty calculation based on the industry 

representative dealer revenue sharing model. As with the ADT model, as part of the 

dealer revenue share arrangement, in return for obtaining a new customer contract, 

dealers typically retain a (majority) portion of the contract revenue value through two 

possible forms of payment; first is an up-front payment, and second is an ongoing share 

of the recurring monthly contract revenue.58 The up-front payment is subject to a chargeback period, typically around 12 months, where the dealer must pay back any up-front 

payment if a contract is cancelled within the charge-back period.59

57 Given the computation of the 22 percent royalty, the appropriate royalty base would be the contract revenue 

paid by customers.

58 See, e.g., An Insider's Guide to Security Dealer Programs, "Alarm Dealer Program Comparison," accessed 

Jun. 30, 2021, http://www.alarmprogramadvisor.com.

59 See, e.g., An Insider's Guide to Security Dealer Programs, "Alarm Dealer Program Comparison," accessed 

Jun. 30, 2021, http://www.alarmprogramadvisor.com; An Insider's Guide to Security Dealer Programs, "Top 10 

Things to Know About Alarm Dealer Programs," accessed Jun. 30, 2021, 

http://www.alarmprogramadvisor.com/top-10-things-alarm-dealer-programs/.

High-level Dealer Dealer Average

Monthly Recurring Contract Revenue

Revenue Sharing Only (no up-front payment)

ADT Revenue Share Royalty

Avoided Service Costs

Net Revenue Sharing

Royalty Rate 21.9% 26.3%

Calculation of Royalty Rate

Complete version with notes and sources attached as exhibit

Table 2

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An analytical model may be created to identify the value (the Net Present Value, or 

“NPV”) to the home security company of the dealer relationship. This model allows for 

the identification of the incremental value of dealers and corresponding accounts from 

dealers for home security companies. Modeling contracts based on the NPV is common 

industry practice for dealer programs.60 Furthermore, the model addressed here may be 

used to identify alternative compensation structures that are economically equivalent to 

home security companies (in terms of NPV). More specifically, the model can be used to 

identify an alternative amount of up-front versus ongoing payments to dealers that still 

results in the same NPV to the home security company. Thus, the model can be used to 

identify a fully running royalty payment structure (that is, no up-front payment) that 

provides value that is economically equivalent to the home security company (i.e., with 

the same NPV).61

As with the ADT model, the model used to determine incremental account NPV and 

dealer revenue sharing is based on a variety of inputs and parameters to account for the 

performance of a customer account. The inputs and parameters used in a representative

dealer revenue sharing model to determine the NPV of an account and portion of account 

revenue retained by the dealer versus that retained by the home security company itself

are as follows:

• Recurring Account Revenue

o Monthly recurring revenue paid by customers

 Average recurring amount

 Billed amount used to compute recurring revenue share

 Cost-adjusted amount used to compute up-front payment based 

on multiple

60 See, e.g., An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About Alarm Dealer 

Programs," accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarm-dealer-programs/

(“All security dealer programs value contracts based on the present value of the future stream of revenues.”).

61 This modeling approach is used in practice as shown by the ADT model discussed above. 

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• Incremental Costs

o Costs to Serve

 Maintenance, customer service & monitoring, etc.

• Dealer Revenue Sharing Parameters

o Up-front cost multiple (# of months)

o Recurring revenue percentage

• Attrition and Contract Life

o Annual attrition rate

o Charge-back period and charge-back rate

o Typical contract life (# of years)

• Discount rate

o Weighted average cost of capital

*******

To construct the representative industry dealer model, input and parameter values were 

selected to represent the industry overall. To account for industry fluctuations and 

multiple years of alleged wrongdoing, when available, values over the last three years 

were considered. Review of company specific and industrywide data allowed for the 

identification and calculation of industry averages and norms for each input and 

parameter. The figures and corresponding calculations are discussed in more detail in the 

attached exhibits.

Table 3 (and attached Exhibit 3) summarizes the calculations from the dealer revenue 

sharing model for a representative dealer and customer contract, including the upfront 

payment. For example, as shown in Table 3 (and attached Exhibit 3), the recurring 

revenue sharing retained by the dealer is 3 percent of the recurring contract revenue from 

the customer and an up-front payment based on a 35 month multiple. The remaining 

contract revenue, factoring in attrition, charge-backs, and incremental costs results in 

incremental NPV (pre-tax) payments to the home security company amounting to $658

for the account.

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To model the royalty applicable in this case, the revenue sharing can be converted to a 

revenue sharing equivalent with no up-front model. For instance, using the representative

dealer revenue sharing model, holding the representative account NPV constant at $658, 

converting the up-front payment and recurring revenue sharing model to recurring 

revenue-only revenue sharing yields 54.6 percent retained by the dealer and 45.4 percent

retained by the home security company. This adjustment is summarized in Table 4 (and 

attached Exhibit 4).

Description Value

Attrition rate: 11.9%

Customer relationship (years): 15.0

Recurring Monthly Revenue (RMR): $50.0

Ongoing revenue share to dealer: 3.0%

Monthly costs to serve: $10.5

WACC: 9.5%

Present value of total RMR, net of costs & rev. share: $2,049

Upfront multiple to dealer: 35.0

Interactive pass-through %: 10.0%

Upfront multiple to dealer net of pass-through: 31.5

Charge-back %: 11.7%

Upfront payment to dealer after pass-through & charge-back: $1,391

Total Net Present Value: $658

Table 3

Home Security Systems Industry Dealer Revenue Sharing

With Upfront Payment and Ongoing Revenue Sharing

Complete version with notes and sources attached as exhibit

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2. Adjustments to Representative Dealer Revenue Sharing Model

This 45.4 percent figure does not represent the royalty suitable for this case as it is 

applicable to the scenario where the security company provides monitoring services and 

incurs the related costs. To determine a royalty applicable to the hypothetical licensee 

(i.e., Defendant in this case) where the security company (i.e., Plaintiff in this case) is not 

providing the monitoring service, an additional adjustment is applied to the royalty 

figure; this adjustment, and ultimate royalty, will be computed in the following section.

3. Calculation of Royalty Rate Related to Defendant – Industry 

Market Measure

As shown in Table 3 (and attached Exhibit 3), the representative monthly recurring 

contract revenue figure is $50. Applying the 45.4 percent ADT revenue share royalty to 

the monthly contract revenue figures yields $22.7, as seen in Table 5 (and attached 

Exhibit 5). However, in a royalty arrangement with Defendants, ADT would not incur 

the incremental costs to service/monitor the contracts sold by Defendants, thus it would 

Description Value

Attrition rate: 11.9%

Customer relationship (years): 15.0

Recurring Monthly Revenue (RMR): $50.0

Ongoing revenue share to dealer: 54.6%

Monthly costs to serve: $10.5

WACC: 9.5%

Present value of total RMR, net of costs & rev. share: $658

Upfront multiple to dealer: -

Interactive pass-through %: -

Upfront multiple to dealer net of pass-through: -

Charge-back %: -

Upfront payment to dealer after pass-through & charge-back: $0

Total Net Present Value: $658

Table 4

Home Security Systems Industry Dealer Revenue Sharing

No Upfront Payment and Ongoing Revenue Sharing Only

Complete version with notes and sources attached as exhibit

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not be expected that ADT would receive revenue sharing to cover such costs. Therefore, 

the ADT revenue sharing figure can be reduced to maintain the NPV levels as established 

by the revenue sharing model. In other words, a reduction in the monthly outlay (i.e., 

cost to serve) by ADT for an account should be offset by a reduction to the monthly 

monies received for an account (i.e., recurring contract revenue) to maintain the NPV. 

As shown in Table 5 (and attached Exhibit 5), reducing the $22.7 ADT revenue sharing 

figure to account for an alarm company’s avoidance of the $10.5 servicing/monitoring

costs yields a net revenue sharing amount to ADT of $12.2.

62 This adjusted $12.2

recurring revenue sharing figure for ADT, taken as a percentage of monthly contract 

revenue ($50), represents a 24.4 percent royalty per Table 5 (and attached Exhibit 5).

63

Based on the above computations, according to the industry representative model, it is 

determined that a 24.4 percent royalty, applicable to net sales, is appropriate for this 

62 It would not be appropriate to deduct profits in addition to costs, given that Vivint’s deceptive business 

practices result in less alarm monitoring profit to ADT, for which ADT would demand a sufficiently higher royalty, 

not a discount, to be equally well-off.

63 The relevant cost to consider is the recurring cost for monitoring. Based on the ADT dealer revenue sharing 

model this figure may be lower than the $10.5 used in the model here. Company financial disclosures used for the 

industry cost figures present cost to serve figures that encompass addition costs such as portions of acquisition costs 

and service calls which may generate additional revenue. Examples of these costs are summarized in Exhibit 3.3. 

Using these greater cost figures in the model yields a royalty of approximately 21 percent (see Alternative Exhibits 

3-5).

Description Industry Figures

Recurring Monthly Revenue (RMR): $50.0

Revenue Sharing % (no upfront payment): 45.4%

Alarm Company Revenue Share: $22.7

Avoided Service Costs: $10.5

Net Revenue Sharing: $12.2

Royalty Rate: 24.4%

Table 5

Calculation of Royalty Rate

Complete version with notes and sources attached as exhibit

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case.64 This conclusion is generally in line with the royalty based on the ADT model. 

Recall that the ADT model computes different rates based on dealer size and the average 

dealer range returns 26.3 percent and the high performing dealer calculation returns 21.9 

percent (see Table 2).

E. Conservative Nature of The Royalty Calculation

There is another difference between the determination of the royalty applicable for ADT 

dealers and that applicable for Defendant. In comparing Defendant’s alleged violations 

and ADT dealers’ sales processes, the sales strategies for dealers are more restricted and 

limited to the guidelines set forth by ADT. For example, all ADT dealers are monitored 

by ADT, and required to follow certain business practices, and adhere to dealer program 

guidelines and dealer agreement.

65 In addition, dealers typically are required to agree to 

exclusivity with the security company, including ADT.

66 Also, dealers are typically 

required to follow the same high-quality standards for sales and installation as those 

imposed for the company-owned field offices. In addition, all marketing and advertising 

materials are to be pre-approved by the security company.

These restrictions explained and reinforced through ADT dealer training.67 The benefit 

for ADT with these restrictions is that the company can better monitor the performance 

and representation of the dealers, thereby better protecting its brand. In other words, 

ADT dealer guidelines and contracts, together with training reinforcement, increase the

value to the home security company of authorized dealer arrangements beyond simply 

revenue sharing.68 While ADT training and various programs are in place that dealers 

must to attend and abide by, these are intended to benefit ADT by ensuring that dealers 

64 Given the computation of the 24.4 percent royalty, the appropriate royalty base would be the contract 

revenue paid by customers.

65 Interview of Kenneth Rosen of ADT.

66 See, e.g., An Insider's Guide to Security Dealer Programs, "Alarm Dealer Program Comparison," accessed 

Jun. 30, 2021, http://www.alarmprogramadvisor.com; Form 10-K, ADT Inc., FYE 2020, p. 6.

67 Interview of Kenneth Rosen of ADT.

68 Interview of Kenneth Rosen of ADT.

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follow the established protocol and do not tarnish the brand in any way.69 On the other 

hand, Defendant is not under any obligation to follow ADT policies, nor are they subject 

to the monitoring and standards set forth by ADT. 

This lowered degree of control by ADT would require a higher royalty payment than that 

reflected in the actual ADT dealer relationships and revenue sharing structure. Thus, the 

royalty calculated above necessarily understates the actual royalty that would apply.70 I 

am not aware of a means to reasonably determine the amount by which the calculated 

royalty (the 22 percent) understates the royalty applicable to Defendant’s actions in this 

case. This premium may only exist in concept, as I understand that ADT would not in 

actuality agree to accept a royalty of any amount to grant Defendant permission to 

undertake the accused actions of this case.71 Thus, I conclude that a royalty applicable to 

the accused actions in this case is at least 22 percent. 

F. Lost Dealer Revenue to ADT

As discussed above, ADT and its dealers share the revenue and, thus, the value of the 

monitoring contracts. As such, there is a connection between the avoided royalty 

discussed above and royalty revenue received by ADT. Whatever royalty was avoided 

by Defendants was at the same time lost to ADT. Thus, any calculation of avoided 

royalty is also a calculation of lost royalties, and lost royalty-based profits, to ADT.72

G. Vivint Revenues

Given the computation of the 22 percent royalty, the appropriate royalty base would be 

the contract recurring monthly revenue paid by customers. The allegations, and thus 

royalty, at issue relate to Vivint’s direct to home (i.e., door to door) sales. Vivint public 

filings provide information on new subscribers by year. In addition, information relating 

to the direct to home sale channel’s contribution to total Vivint sales is available. With 

the targeting of ADT customers, market share data can be applied to isolate the share of 

direct to home sales potentially related to prior ADT customers. These calculations are 

69 Interview of Kenneth Rosen of ADT.

70 Interview of Kenneth Rosen of ADT; interview of Frank Cona of ADT.

71 Interview of Frank Cona of ADT.

72 Recall, the royalty calculation discussed above is net of ADT’s costs related to security monitoring.

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summarized below in Table 6 (and attached Exhibit 6). With the structure of the market 

measures, from an economic perspective, it would be inappropriate to apply further 

adjustment to the contract revenue based strictly on customers identified as switching to 

Vivint solely due to use of the brand. 

Application of the 22 percent royalty rate yields $25.4 million.

V. Pre-Judgment Interest

We are aware that pre-judgment interest may be awarded on damages. If asked, we will 

compute pre-judgment interest at trial.

August 9, 2021 

_________________ 

Eric Matolo

Year ended 

December 31,

New 

Subscribers 

% Direct-toHome 

Direct-toHome 

Subscribers

Cumulative 

DTH 

Subscribers

Annual 

Revenue (RMR 

@ $50)

ADT Market 

Share (net of 

Vivint)

ADT Share

2020 343,434 39% 133,939 491,705 $295,022,802 18.75% $55,316,775

2019 316,403 57% 180,350 357,765 $214,659,246 18.75% $40,248,609

2018 322,574 55% 177,416 177,416 $106,449,420 18.75% $19,959,266

Total: $616,131,468 18.75% $115,524,650

Table 6

Vivint Customer Breakdown Table

Complete version with notes and sources attached as exhibit

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52
Jackson Hole, WY Irvine, CA Los Angeles, CA Washington, DC 

ERIC MATOLO, PH.D.

Vice President

4 Park Plaza, Suite 1930 

Irvine CA 92614 

www.cirqueanalytics.com

T: (949) 594-1603 E: matolo@cirqueanalytics.com

Dr. Matolo specializes in the economic analysis of complex business matters. He is a consulting 

and testifying expert, and conducts expert analyses relating to antitrust, class certification, 

commercial damages, intellectual property, and labor. Examples of Dr. Matolo’s experience 

include matters involving breach of contract, patent infringement, trademark infringement, 

copyright infringement, unfair competition, false advertisement, misappropriation of trade secrets, 

anticompetitive conspiracy, unlawful monopolization, wrongful termination, malpractice, pyramid 

scheme, economic and fiscal impacts of business operations, and business operations forecasts. 

Dr. Matolo’s project experience includes matters covering a wide range of industries.

Dr. Matolo has also taught economics at the University of Southern California and served as a 

referee for the International Journal of the Economics of Business. 

EDUCATION

Ph.D. University of California, Santa Barbara. Economics, 2008 

M.A. University of California, Santa Barbara. Economics, 2004

B.A. University of California, Santa Barbara. Economics/Mathematics, 2003

PROFESSIONAL EXPERIENCE

2021-Present Cirque Analytics LLC, Vice President

2007-2021 Nathan Associates Inc.

Vice President: 2018 - 2021 

Principal Economist: 2015 - 2018 

Managing Economist: 2009 - 2015 

Senior Economist: 2007 - 2009 

2013-2015 University of Southern California, Economics Lecturer 

Appendix A

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Eric Matolo, Ph.D.

Vice President

2 | Page

SELECTED CONSULTING EXPERIENCE

Antitrust and Competition

 Evaluated economic damages related to breach of contract involving cloud storage 

services.

 Evaluated antitrust harm involving alleged anticompetitive exclusive agreements relating 

to non-lethal weapons projectiles.

 Analyzed lost profits damages related to alleged unlawful monopolization involving foot 

care devices.

 Evaluated common impact and damages, and unjust enrichment, related to an alleged 

undisclosed automotive defect.

 Evaluated relevant markets, market power, common impact, and direct purchaser damages 

involving a horizontal exclusive agreement among manufacturers of neuromodulator 

products for cosmetic use.

 Evaluated business practices in the context of allegations regarding a supplier of nutritional 

and personal care products operating a pyramid scheme. 

 Evaluated damages related to allegations of interference and anticompetitive conspiracy 

regarding technology used in DRAM memory. 

 Evaluated relevant markets and market power, and evaluated licensing structure as part of 

affirmative defenses for patent misuse for tying and double royalties, all related to the 

manufacture of flash memory devices.

Commercial Disputes / General Litigation

 Evaluated economic damages related to breach of contract involving solar energy projects.

 Evaluated economic damages related to breach of fiduciary duties and fraudulent 

acquisition of government contracts. 

 Evaluated economic damages related to alleged breach of contract involving enterprise 

software for loan generations, processing, and servicing. 

 Evaluated lost profits damages related to alleged breach of joint venture and nondisclosure agreements, and misappropriation of trade secrets involving mobile device 

application technology.

 Evaluated lost profits and impact to company value damages related to alleged breach of 

contract, intentional interference, and unfair competition involving long distance 

connection and conference calling solutions.

 Evaluated damages related to alleged breach of contract and unfair competition involving 

liquid repair and protection products for engine, cooling system, transmission, power 

steering system, body, and/or tire leaks or corrosion. 

 Statistical sampling and damages evaluations regarding malpractice claims relating to class 

certification.

 Evaluated lost profits and disgorgement of profits damages related to alleged breach of 

contract, theft of trade secrets, and unfair competition associated with unlawful and unfair 

solicitation and raiding of employees in the virtualization and cloud computing 

infrastructure solutions industry.

Appendix A

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Eric Matolo, Ph.D.

Vice President

3 | Page

 Evaluated replacement cost and lost profits damages related to alleged intentional 

interference involving femtocell wireless communications product suppliers. 

 Evaluated damages related to alleged breach of contract involving retail automotive tires 

and wheels.

 Evaluated damages related to allegations of breach of written contract and negligence 

regarding technology used in aerospace equipment. 

 Evaluated lost profits from counterclaims of fraud, breach of contract, and interference 

related to disaster recovery and construction services.

 Evaluated sampling and statistical analysis of lost revenue resulting from an alleged breach 

of contract related to medical billing practices.

 Evaluated lost profits damages related to an alleged breach of contract for concession 

services at amusement parks

Employment and Labor 

 Evaluated economic damages related to alleged wage violations in the trucking industry. 

 Evaluated economic impact of alleged wrongful termination from city police force.

 Evaluated economic impact of alleged wrongful termination from industrial solutions 

industry position. 

 Evaluated economic impact of alleged breach of contract and wrongful constructive 

discharge from renewable energy and land lease industry position. 

 Evaluated economic impact of alleged wrongful termination from restaurant chain.

 Evaluated common impact and damages related to alleged unpaid wages owed to cellular 

phone retail store employees due to a flawed commission system.

 Evaluated lost profits and disgorgement of profits damages related to alleged unlawful and 

unfair solicitation and raiding of employees and theft of trade secrets the virtualization and 

cloud computing infrastructure solutions industry. 

 Evaluated economic impact of alleged wrongful termination from public transportation 

operating agency. 

 Evaluated economic impact of alleged wrongful termination from school district.

 Evaluated cost savings and defendant’s profits related to allegations of theft of trade secrets 

by departing employees in the naval engineering and design industry. 

Impact Analysis

 Analyzed the impact of changes in the oil and gas industry on the current and future state 

of Oklahoma and Texas economies, and the impact of the changes in the state economies 

on Class II gaming in Oklahoma. 

 Analyzed the financial, economic, and fiscal impacts of a proposed multipurpose resort 

facility in the State of California.

 Performed economic impact study to evaluate and quantify the regional and state economic 

and fiscal impacts of a proposed multipurpose resort facility in the State of Arizona.

 Analyzed the regional economic and fiscal impacts of a proposed multipurpose resort 

facility in the State of Washington.

Appendix A

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 Performed economic impact study to evaluate and quantify the regional and state economic 

and fiscal impacts of gaming and business operations located in the State of Oklahoma. 

Patents

 Evaluated lost profits and reasonable royalty damages related to alleged patent 

infringement involving VoIP technology. 

 Evaluated reasonable royalty damages involving surgical template systems.

 Evaluated lost profits, price erosion, and reasonable royalty damages related to alleged 

patent infringement involving online account security/user authentication technology.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

video game character animation technology.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

wireless telecommunication technology in the context of industry standards and FRAND 

licensing commitments.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

consumer wellness products.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

video compression technology in the context of industry standards and FRAND licensing 

commitments.

 Analyzed lost profits and reasonable royalty damages related to alleged patent infringement 

involving mobile phone accessories.

 Evaluated lost profits and reasonable royalty damages related to alleged patent 

infringement involving real-time monitoring and visualization systems used with electric 

power grids. 

 Evaluated lost profits and reasonable royalty damages related to alleged patent 

infringement involving child car seats, strollers, and travel systems.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

balloon catheters.

 Analyzed reasonable royalty damages related to alleged patent infringement involving 

navigation applications used in mobile devices. 

 Evaluated lost profits and reasonable royalty damages related to alleged patent 

infringement and unfair competition involving padded protective athletic apparel. 

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

accused module location technology in Microsoft’s .NET Framework. 

 Researched and analyzed reasonable royalty rates for patent license agreements covering 

802.11 technologies. 

 Evaluated lost profits and reasonable royalty damages related to alleged patent 

infringement involving artificial disc implants.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

elevator technology. 

 Evaluated damages related to allegations of patent infringement, unfair competition, and 

Lanham Act violations involving bone plate implants, screws and instruments. 

Appendix A

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 Evaluated reasonable royalty damages related to alleged patent infringement involving 

light emitting diode semiconductor technology.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

electronic sourcing and procurement business software.

 Evaluated reasonable royalty damages related to alleged patent infringement involving 

wireless technology. 

 Evaluated a reasonable royalty related to alleged patent infringement involving wireless 

technology in the context of industry standards and FRAND licensing commitments. 

 Evaluated damages associated with claims of patent infringement regarding modem 

technologies. 

 Evaluated lost profits and reasonable royalty damages related to alleged patent 

infringement involving artificial vertebral disc implants.

 Evaluated reasonable royalty damages in connection with allegations of patent 

infringement related to a component of a tortilla production line. 

 Evaluated relevant markets and market power, and evaluated licensing structure as part of 

affirmative defenses for patent misuse for tying and double royalties, all related to the 

manufacture of flash memory devices.

 Evaluated reasonable royalty and unjust enrichment damages in connection with 

allegations of design patent infringement related to branded athletic hats. 

 Evaluated lost profits, reasonable royalty, unjust enrichment, and corrective advertising 

damages related to allegations of patent infringement, trademark infringement, trade dress 

infringement, false advertising, and unfair competition related to massage furniture and 

products. 

 Evaluated market value of technology and unjust enrichment damages related to an 

inventorship dispute regarding spinal implant systems. 

Trademarks, Trade dress, Trade secrets, Copyrights

 Evaluated damages related to alleged use of a fraudulently registered trademark involving 

credit unions. 

 Analyzed damages related to alleged trademark infringement and false advertising 

involving hamburger chain restaurants. 

 Evaluated lost profits damages related to alleged breach of joint venture and nondisclosure agreements, and misappropriation of trade secrets involving mobile device 

application technology.

 Analyzed damages related to alleged Lanham Act violations and tortious interference 

involving homeopathic over-the-counter ear and eye care products.

 Analyzed damages related to alleged false advertising involving rehab services. 

 Analyzed damages related to alleged Lanham Act violations involving makerspaces. 

 Analyzed defendants’ profits damages related to alleged trade dress infringement and 

unfair competition involving aftermarket automotive products. 

 Evaluated defendants’ profits damages related to alleged trademark infringement, unfair 

competition, false advertising, trade dress infringement, and trade secrets misappropriation 

involving non-lethal weapons projectiles. 

Appendix A

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 Analyzed damages related to alleged Lanham Act violations and unfair competition 

involving home security, monitoring, and automation systems and services. 

 Analyzed defendant’s profits and lost profits damages related to alleged trademark 

infringement, false designation of origin, unfair competition, and cybersquatting involving 

edible fruit arrangements and gifts.

 Analyzed defendants’ profits and lost profits damages related to alleged trademark 

infringement, trademark counterfeiting, false designation of origin, trade dress 

infringement, unfair competition, and copyright infringement involving mobile phone 

accessories.

 Analyzed defendants’ profits and lost profits damages related to alleged trademark 

infringement, trademark counterfeiting, false designation of origin, unfair competition, and 

copyright infringement involving fashion jewelry. 

 Analyzed defendants’ profits damages related to alleged trademark infringement, false 

designation of origin, and unfair competition involving marketing and business 

development publishing and training services.

 Evaluated lost profits and disgorgement of profits damages related to alleged theft of trade 

secrets associated with unlawful and unfair solicitation of employees in the virtualization 

and cloud computing infrastructure solutions industry.

 Evaluated damages related to alleged trademark infringement and unfair competition 

involving retail automotive tires and wheels. 

 Evaluated damages related to allegations of patent infringement, unfair competition, and 

Lanham Act violations involving bone plate implants, screws and instruments. 

 Evaluated damages related to copyright infringement involving music composition. 

 Evaluated damages associated with claims of trademark and trade dress infringement 

related to advertising and marketing services through mobile wireless communications.

 Evaluated lost profits, reasonable royalty, unjust enrichment, and corrective advertising 

damages related to allegations of patent infringement, trademark infringement, trade dress 

infringement, false advertising, and unfair competition related to massage furniture and 

products. 

 Evaluated lost royalty revenue and unjust enrichment related to allegations of trademark 

infringement involving children’s clothing. 

 Evaluated cost savings and unjust enrichment damages in connection with allegations of 

misappropriation of trade secrets related to electronic engineering and design packages 

used in US naval craft architecture.

Appendix A

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PUBLICATIONS & PRESENTATIONS

“Expert Evidence in IP Litigation: What You Must Know and Do in the 2019 Landscape,” The 

Knowledge Group Webcast, January 10, 2019. 

“Economic Considerations for Automotive Product Liability Matters,” Bowman and Brooke LLP 

CLE Series, October 2018. 

“FRAND Commitments and Royalties for Standard Essential Patents,” with S. Bosworth and R. 

Mangum. In A. Bharadwaj, et al. (Eds.), Complications and Quandaries in the ICT Sector: 

Standard Essential Patents and Competition Issues, 2017. 

“Corrective Advertising in Lanham Act Damages: The Use and Misuse of Past Advertising 

Expenditures,” with S. Bosworth and R. Mangum. The Trademark Reporter, May-June 2017. 

“Patent Uncertainty and Firm Behavior,” 2008, manuscript. 

“Patents as Real Options: An Empirical Analysis,” 2008, manuscript. 

PAST & CURRENT PROFESSIONAL MEMBERSHIPS

American Bar Association

American Economic Association

Licensing Executive Society

Los Angeles Intellectual Property Law Association

Orange County Intellectual Property Law Association 

HONORS & AWARDS

Distinguished Research Fellowship, Department of Economics, UCSB, 2007 

Research Grant, Department of Economics, UCSB, 2007 

Graduate Fee Fellowship, Department of Economics, UCSB, 2005 

Outstanding Teaching Assistant Award, Department of Economics, UCSB, 2004 

National Scholars Honor Society Award of Achievement, 2004-2007

Appendix A

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TESTIMONY & REPORTS

Katzkin Leather, Inc. v. Roadwire, LLC, and Classic Soft Trim, Inc., United States District Court, 

Central District of California, Western Division (2021). Submitted expert report on damages on 

behalf of Plaintiff. 

M.A. Mobile Ltd. v. Indian Institute of Technology Kharagpur, United States District Court, 

Northern District of California (2019). Submitted expert report on damages on behalf of 

Defendant. 

ADT LLC v. Security Networks, LLC, and Vision Security, LLC, United States District Court, 

Southern District of Florida (2019). Provided deposition testimony and submitted expert report on 

damages on behalf of Plaintiff.

ADT LLC and ADT US Holdings, Inc. v. Northstar Alarm Services LLC, and Vision Security, LLC, 

United States District Court, Southern District of Florida (2019). Provided deposition testimony 

and submitted expert report on damages on behalf of Plaintiffs. 

Adriana Guzman, et al. v. Chipotle Mexican Grill, Inc., et al., United States District Court, 

Northern District of California (2019). Provided deposition testimony and submitted expert report 

on damages on behalf of Defendants. 

TechShop, Inc. v. Dan Rasure, et al., United States District Court, Northern District of California 

(2018-2019). Provided trial testimony, deposition testimony, and submitted expert reports on 

damages on behalf of Plaintiff.

Juan Pablo Aldana Lira v. Chipotle Mexican Grill, Inc., et al., United States District Court, 

Northern District of California (2018). Provided deposition testimony and submitted expert report 

on damages on behalf of Defendants. 

Advanced Flow Engineering, Inc. v. Injen Technology Company, Ltd., et al., United States District 

Court, Central District of California (2017). Submitted expert report on damages on behalf of 

Plaintiff.

United Tactical Systems, LLC v. Real Action Paintball, Inc., et al., United States District Court, 

Northern District of California (2017). Submitted expert reports on behalf of Plaintiff and CounterDefendant. 

Edward L. Blendermann v. LifeWave, Inc., United States District Court, Southern District of 

Florida (2017). Submitted expert report on damages on behalf of Defendant. 

Paul B. Butler v. Porsche Cars North America, Inc., United States District Court, Northern District 

of California, San Jose Division (2017). Submitted expert report in support of motion for class 

certification.

Mitsubishi Electronic Corp., et al. v. Sceptre, Inc., United States District Court, Central District of 

California (2015). Provided deposition testimony and submitted expert report on damages and 

FRAND royalties on behalf of Defendant. 

Appendix A

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Yunxia Wang, Fengqin Xu, and Qun Xu, et al. v. EFT Holdings, Inc., and Jack J. Qin, et al., United 

States District Court, Central District of California (2015). Provided deposition testimony and 

submitted a declaration in support of motion for class certification.

Bar’s Products, Inc. v. Bar’s Products International, LTD., et al., United States District Court, 

Eastern District of Michigan (2012-2014). Provided trial testimony, deposition testimony, and 

submitted expert report on damages on behalf of Counterclaimant. 

Synthes USA, LLC et al v. Diverse Surgical Supplies, Inc., et al, United States District Court, 

District of Arizona (2010 - 2012). Provided deposition testimony and submitted expert reports on 

damages on behalf of Plaintiff.

Synthes USA, LLC et al v. Syntec Scientific (USA) Corporation, Whittemore Enterprises, Inc., et 

al, United States District Court, Central District of California, Western Division (2011). Submitted 

expert report on damages on behalf of Plaintiff.

Appendix A

Case 1:20-cv-23391-JG Document 119-16 Entered on FLSD Docket 01/09/2023 Page 36 of

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ADT LLC, et al. v. Vivint Smart Home, Inc., et al.

• First Amended Complaint, Oct. 13, 2020.

• Form 10-K, The ADT Corporation, FYE 2015.

• Form 10-K, ADT Inc., FYE 2017.

• Form 10-K, ADT Inc., FYE 2020.

• Form 10-K, Vivint Smart Home, Inc., FYE 2020.

• Form 1-S/A, Vivint Smart Home, Inc., 2020.

• Form 10-K, Monitronics International, FYE 2017.

• Form 10-K, Monitronics International, FYE 2018.

• Form 10-K, Monitronics International, FYE 2019.

• Form 10-K, Monitronics International, FYE 2020.

• Parr, R.L. (2007). Royalty Rates for Licensing Intellectual Property . Hoboken, NJ: John Wiley & Sons, Inc.

• Glick, Mark A., Lara A. Reymann, and Richard Hoffman, Intellectual Property Damages: Guidelines and 

Analysis, (2003).

• Goolsbee, A., Levitt, S., & Syverson, C. (2013). Microeconomics. New York, NY: Worth Publishers.

• ADT, "ADT Security – Trademark," accessed on Aug. 9, 2021, https://www.adt.com/aboutadt/legal/trademark.

• ADT, "Pulse," accessed on Aug 9, 2021, https://www.adt.com/pulse.

• ADT, “ADT Security Local Service Areas,” accessed on Aug 9, 2021, https://www.adt.com/local.

• ADT News, "ADT Reports First Quarter Fiscal 2016 Results," https://news.adt.com/news-releases/news-releasedetails/adt-reports-first-quarter-fiscal-2016-results.

• Vivint, "About Us," accessed on Aug. 9, 2021, https://www.vivint.com/company/about-us.

• Vivint, “Vivint Service Locations,” accessed Jul. 8, 2021, https://www.vivint.com/locations.

• The Home Security Advisor, "ADT Stickers and Signs – Do They Prevent Crimes?," accessed on Aug. 9, 

2021, http://www.thehomesecurityadvisor.com/do-just-adt-stickers-and-signs-prevent-crimes/.

• Security Sales & Integration, "ADT execs Outline Ambitious Plans for 2017," accessed on Aug. 9, 2021, 

http://www.securitysales.com/in-depth/adt_execs_plans_2017/.

• An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About Alarm Dealer Programs," 

accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarm-dealer-programs/.

• An Insider's Guide to Security Dealer Programs, "Alarm Dealer Program Comparison," accessed on Aug 9, 

2021, http://www.alarmprogramadvisor.com.

• Barnes Associates, "Security Alarm Industry Overview & Update," Barnes Buchanan Conference, April 2021.

• ADT000010352.

• Trademark Agreement between ADT US Holdings, Inc. and ADT Security Systems, Oct. 1, 2016.

• Trademark Agreement between ADT US Holdings, Inc. and ADT Puerto Rico, LLC., Oct. 1, 2012.

• Trademark Agreement between ADT Canada Inc. and ADT Security Services Canada, Inc., Jul. 7, 2015.

• Trademark Agreement between ADT US Holdings Inc. and ADT Canada Inc., Jul. 7, 2015.

Bates-stamped Documents

License Agreements

Publicly Available Materials

Appendix B - Materials Cited

SEC Filings

Legal Materials

Academic

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ADT LLC, et al. v. Vivint Smart Home, Inc., et al.

Appendix B - Materials Cited

• US PTO Notice of Recordation of Assignment between ADT Holdings, Inc. and The ADT Security Corporation, Jul. 

18, 2018.

• US PTO Notice of Recordation of Assignment between ADT US Holdings, Inc. and ADT Holdings, Inc., Jun. 27, 2018.

• Trademark Agreement between The ADT Security Corporation and ADT Security Systems, Dec. 31, 2017.

• Interview of Susan Gates of ADT.

• Interview of Frank Cona of ADT.

• Interview of Kenneth Rosen of ADT.

• Interview of Michael Barnes of Barnes Associates.

• Interview of Brandon Hess of Crorzar.

Interviews

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ADT LLC, et al. v. Vivint Smart Home, Inc., et al.

Revenue

Pulse Take RateAutomationBilled RPU/MRRFunded RPU/MRRGross MultipleCharge-back period% Charge-backNet Funded Multiple

Cost to Serve

MaintenanceCustomer Service (incl. monitoring)Bad DebtBilling & CollectionTotal[1]

Revenue SharingAttrition

Yr1Yr2Yr3Yr4Yr5Yr6Yr7Yr8Yr9Yr10Yr11Yr12Yr13Yr14Yr15

Tax RateWACCNPV Incr. (15 yr)See ADT000010352.[1] Total differs from source document due to rounding. [2] Computed by Cirque Analytics.

ADT Dealer Revenue Sharing Model

A-1 Grid Terms If ADT Only Paid Revenue Sharing 

Notes & Sources:

Exhibit 1

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ADT LLC, et al. v. Vivint Smart Home, Inc., et al.

High-level Dealer Dealer Average

Monthly Recurring Contract Revenue[1]

Revenue Sharing Only (no up-front payment)[2]

ADT Revenue Share Royalty[3]

Avoided Service Costs[1]

Net Revenue Sharing[4]

Royalty Rate[5] 21.9% 26.3%

Notes & Sources:

[1] See Exhibit 1.[2] Calculated by subtracting the revenue sharing percentage to the dealer (see Exhibit 1) from 100%.

Calculation of Royalty Rate

Exhibit 2

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Description Value

Attrition rate:[1] 11.9%

Customer relationship (years):[2] 15.0

Recurring Monthly Revenue (RMR):[3] $50.0

Ongoing revenue share to dealer:[4] 3.0%

Monthly costs to serve:[5] $10.5

WACC:[6] 9.5%

Present value of total RMR, net of costs & rev. share:[7] $2,049

Upfront multiple to dealer:[8] 35.0

Interactive pass-through %:[9] 10.0%

Upfront multiple to dealer net of pass-through:[10] 31.5

Charge-back %:[11] 11.7%

Upfront payment to dealer after pass-through & charge-back:[12] $1,391

Total Net Present Value:[13] $658

Notes & Sources:

[1] See Exhibit 3.1. Average of the Industry-wide figures is used.

[3] See Exhibit 3.2.

[5] Based on 79% margin for existing subscribers. (Vivint 2020 10-K, p. 12)

[6] Based on average of WACC for selected alarm companies. Data from Barnes 

Associates.

[10] Equal to [8]*(1-[9]).

[12] Equal to [3]*[10]*(1-[11]).

[13] Equal to [7] minus [12].

[9] An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About Alarm Dealer Programs," 

accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarm-dealer-programs/.

[11] Typical charge-back period is 12 months. (http://www.alarmprogramadvisor.com/top-10-things-alarmdealer-programs/). Thus annual attrition rate applied.

Exhibit 3

Home Security Systems Industry Dealer Revenue Sharing

With Upfront Payment and Ongoing Revenue Sharing

[8] Barnes Associates, "Security Alarm Industry Overview & Update," Barnes Buchanan Conference , April 

2021 at slide 66.

[2] Based on studies performed by ADT to determine expected life of customer relationship (ADT 2020 10-K, 

p. 66).

[4] Industry publication indicates dealers may earn 10% when attrition is less than 5%, and earn 5% when 

attrition is less than 10%. (An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About 

Alarm Dealer Programs," accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarmdealer-programs/) Based on the inverse 1 to 1 relationship between attrition and revenue share, the revenue 

shared is 3% when attrition is 12%.

[7] Prevent value of contract recurring revenue, revenue share, and costs. Calculation based on growing 

annuity formula.

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Exhibit 3.1

Attrition Rate [1]

Company 2017 2018 2019 2020 Average

Vivint 11.0% 12.3% 13.9% 12.4% 13.2%

BRINKS 15.7% 17.1% 17.0% 14.9% 16.0%

ADT 13.7% 13.3% 13.4% 13.1% 13.3%

Rest of Market N/A 11.1% 11.5% 11.2% 11.4%

Industry Avg N/A 11.6% 12.1% 11.7% 11.9%

[1] Attrition rate is the aggregate number of canceled smart home and security subscribers during the 12-month period divided by the monthly 

weighted average number of Total Subscribers.

See Vivint 2020 10-K, page 53; Monitronics International 2018 10-K, page 22; Monitronics 2020 10-K page 30; ADT 2020 10-K page 54; ADT 

2018 10-K page 43; and Barnes Associates, "Security Alarm Industry Overview & Update," Barnes Buchanan Conference, April 2021 at slide 

31.

Notes & Sources:

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Company 2017 2018 2019 2020 2017 - 2020 Average

Vivint [1] $54.92 $52.67 $51.44 $48.95 $52.00

BRINKS [2] $44.04 $45.27 $45.12 $44.50 $44.73

ADT [3] $48.65 $48.16 $49.07 $52.81 $49.67

Exhibit 3.2

Recurring Monthly Revenue (RMR)

Notes & Sources:

See Vivint 2020 10-K, page 61; Vivint 2020 1-S/A, page 73; Monitronics International 2017 10-K, page 27; Monitronics International 

2018 10-K, page 26; Monitronics 2020 10-K, page 32; and Exhibit 3.2a.

[1] Average Monthly Service Revenue per user in the Vivint 10-K filings is defined as the contracted recurring monthly service 

billings, divided by the total subscribers for the period.

[3] See Exhibit 3.2a

[2] Values for BRINKS are found in 10-K filings as Average RMR per subscriber. No further information is given as to how the figure 

is calculated.

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Exhibit 3.2a

ADT RMR per Subscriber

Year Average Subscriber Count[1] Total RMR RMR per Subscriber

[2]

2020 6,500,000 $343,243,000 $52.81

2019 6,850,000 $336,128,000 $49.07

2018 7,200,000 $346,751,000 $48.16

2017 6,882,500 $334,810,000 $48.65

Notes & Sources:

See ADT 2020 10-K, page 4; ADT 2019 10-K, page 2; ADT 2018 10-K, page 40; ADT 2017 10-K, pages 2 and 41; and 

https://news.adt.com/news-releases/news-release-details/adt-reports-first-quarter-fiscal-2016-results.

[1] Average Subscriber Count is manually calculated as ( (Beginning Subscriber Balance + Ending Subscriber Balance) / 2 ) for 

the year.

[2] RMR per Subscriber is calculated as the Total RMR for a given year, divided by the average number of subscribers for the 

same year.

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Exhibit 3.3

Avoided Monthly Service Cost

Year Vivint Cost to Serve per 

Subscriber [1]

BRINKS Estimated Cost to 

Serve per Subscriber [2]

Average Cost to Serve 

per Subscriber

2018 - 2020 Average $13.50 $10.72 $12.26

2020 $10.50 $11.17 $10.84

2019 $13.73 $10.57 $12.15

2018 $16.27 $11.32 $13.80

2017 N/A $9.82 $9.82

Notes & Sources:

See Vivint 2020 10-K, pages 54 and 61; and Exhibit 3.3a.

[1] Vivint Cost to Serve per Subscriber is the average monthly service cost incurred during the period, including monitoring, customer 

service, field service and other support costs, field service and other support costs, less total non-recurring smart home services billings 

and cellular network maintenance fees, divided by total subscribers for the period.

[2] Brinks Estimated Cost to Serve per subscriber is calculated by dividing the total "Cost of Services" for the period, by the total number 

of Subscriber for the same period, divided by 12 months. See Exhibit 3.3a.

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Exhibit 3.3a

BRINKS Cost to Serve

Year Average Subscriber Count

[1] Cost of Services Estimated Cost to Serve per

Subscriber [2]

2020 890,689 $119,390,000 $11.17

2019 884,754 $112,274,000 $10.57

2018 948,873 $128,939,000 $11.32

2017 1,011,394 $119,193,000 $9.82

Notes & Sources:

See Monitronics International 2020 10-K, pages 30-31; and Monitronics International 2018 10-K, pages 22 and 25 .

[1] Average Subscriber Count is calculated as ( (Beginning Subscriber Balance + Ending Subscriber Balance) / 2 ) for 

the year.

[2] Estimated Cost to Serve per Subscriber is calculated as the Total Cost of Services for a given year, divided by the 

average number of subscribers for the same year.

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Description Value

Attrition rate: 11.9%

Customer relationship (years): 15.0

Recurring Monthly Revenue (RMR): $50.0

Ongoing revenue share to dealer: 54.6%

Monthly costs to serve: $10.5

WACC: 9.5%

Present value of total RMR, net of costs & rev. share: $658

Upfront multiple to dealer: -

Interactive pass-through %: -

Upfront multiple to dealer net of pass-through: -

Charge-back %: -

Upfront payment to dealer after pass-through & charge-back: $0

Total Net Present Value: $658

Notes & Sources:

See Exhibit 3 for applicable notes and sources.

Exhibit 4

Home Security Systems Industry Dealer Revenue Sharing

No Upfront Payment and Ongoing Revenue Sharing Only

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Description Industry Figures

Recurring Monthly Revenue (RMR):[1] $50.0

Revenue Sharing % (no upfront payment):[2] 45.4%

Alarm Company Revenue Share:[3] $22.7

Avoided Service Costs:[4] $10.5

Net Revenue Sharing:[5] $12.2

Royalty Rate:[6] 24.4%

Notes & Sources:

[1] See Exhibit 3, Exhibit 3.2.

[2] Calculated as 1 minus the ongoing revenue share to the dealer (see Exhibit 4).

[3] Calculated as (RMR * Rev Share %).

[4] Based on Monthly costs to serve. See Exhibit 3, Exhibit 3.3.

[5] Calculated as (Alarm Company Revenue Share - Avoided Service Cost).

[6] Calculated as (Net Revenue Sharing / RMR).

Exhibit 5

Calculation of Royalty Rate

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ADT LLC, et al. v. Vivint Smart Home, Inc., et al.

a b c d e f g

Year ended 

December 31,

New 

Subscribers 1

% Direct-toHome 2 Direct-to-Home

Subscribers 3

Cumulative 

DTH 

Subscribers 4

Annual Revenue 

(RMR @ $50) 5, 6

ADT Market 

Share (net of 

Vivint) 7

ADT Share 8

2020 343,434 39% 133,939 491,705 $295,022,802 18.75% $55,316,775

2019 316,403 57% 180,350 357,765 $214,659,246 18.75% $40,248,609

2018 322,574 55% 177,416 177,416 $106,449,420 18.75% $19,959,266

Total: $616,131,468 18.75% $115,524,650

[6] See Exhibit 3.

[2] See Vivint 2020 10-K at pages 12 and 50–51; APX Group Holdings, Inc 2018 10-K at page 13.

[3] c = b * a

[4] d = d n-1 + c 

[5] e = d * $50 * 12 months

[7] See Barnes Associates Industry Overview, April 2021 at slide 30.

[8] g = e * f

Exhibit 6

Vivint Customer Breakdown Table

Notes & Sources:

[1] See Vivint 2020 10-K at page 53; Vivint 2019 10-K at page 61.

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Description Value

Attrition rate:[1] 11.9%

Customer relationship (years):[2] 15.0

Recurring Monthly Revenue (RMR):[3] $50.0

Ongoing revenue share to dealer:[4] 3.0%

Monthly costs to serve:[5] $12.3

WACC:[6] 9.5%

Present value of total RMR, net of costs & rev. share:[7] $1,954

Upfront multiple to dealer:[8] 35.0

Interactive pass-through %:[9] 10.0%

Upfront multiple to dealer net of pass-through:[10] 31.5

Charge-back %:[11] 11.7%

Upfront payment to dealer after pass-through & charge-back:[12] $1,391

Total Net Present Value:[13] $563

Notes & Sources:

[1] See Exhibit 3.1. Average of the Industry-wide figures is used.

[3] See Exhibit 3.2.

[5] Based on 2018 - 2020 average costs to serve per subscriber for BRINKS and Vivint. See Exhibit 3.3.

[6] Based on average of WACC for selected alarm companies. Data from Barnes 

Associates.

[10] Equal to [8]*(1-[9]).

[12] Equal to [3]*[10]*(1-[11]).

[13] Equal to [7] minus [12].

[9] An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About Alarm Dealer Programs," 

accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarm-dealer-programs/.

[11] Typical charge-back period is 12 months. (http://www.alarmprogramadvisor.com/top-10-things-alarmdealer-programs/). Thus annual attrition rate applied.

Exhibit 3 Alt

Home Security Systems Industry Dealer Revenue Sharing

With Upfront Payment and Ongoing Revenue Sharing (Alternative Costs to 

[2] Based on studies performed by ADT to determine expected life of customer relationship (ADT 2020 10-K, 

p. 66).

[4] Industry publication indicates dealers may earn 10% when attrition is less than 5%, and earn 5% when 

attrition is less than 10%. (An Insider's Guide to Security Dealer Programs, "Top 10 Things to Know About 

Alarm Dealer Programs," accessed Jun. 30, 2021, http://www.alarmprogramadvisor.com/top-10-things-alarmdealer-programs/) Based on the inverse 1 to 1 relationship between attrition and revenue share, the revenue 

shared is 3% when attrition is 12%.

[7] Prevent value of contract recurring revenue, revenue share, and costs. Calculation based on growing 

annuity formula.

[8] Barnes Associates, "Security Alarm Industry Overview & Update," Barnes Buchanan Conference , April 

2021 at slide 66.

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Description Value

Attrition rate: 11.9%

Customer relationship (years): 15.0

Recurring Monthly Revenue (RMR): $50.0

Ongoing revenue share to dealer: 54.6%

Monthly costs to serve: $12.3

WACC: 9.5%

Present value of total RMR, net of costs & rev. share: $563

Upfront multiple to dealer: -

Interactive pass-through %: -

Upfront multiple to dealer net of pass-through: -

Charge-back %: -

Upfront payment to dealer after pass-through & charge-back: $0

Total Net Present Value: $563

Notes & Sources:

See Exhibit 3 for applicable notes and sources.

Exhibit 4 Alt

Home Security Systems Industry Dealer Revenue Sharing

No Upfront Payment and Ongoing Revenue Sharing Only 

(Alternative Costs to Serve)

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Description Industry Figures

Recurring Monthly Revenue (RMR):[1] $50.0

Revenue Sharing % (no upfront payment):[2] 45.4%

Alarm Company Revenue Share:[3] $22.7

Avoided Service Costs:[4] $12.3

Net Revenue Sharing:[5] $10.4

Royalty Rate:[6] 20.9%

Notes & Sources:

[1] See Exhibit 3, Exhibit 3.2.

[2] Calculated as 1 minus the ongoing revenue share to the dealer (see Exhibit 4).

[3] Calculated as (RMR * Rev Share %).

[4] Based on Monthly costs to serve. See Exhibit 3, Exhibit 3.3.

[5] Calculated as (Alarm Company Revenue Share - Avoided Service Cost).

[6] Calculated as (Net Revenue Sharing / RMR).

Exhibit 5 Alt

Calculation of Royalty Rate (Alternative Costs to Serve)

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