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Two-Way Media Ltd. v. Verizon Communications Inc.

United States District Court, D. Delaware

May 18, 2015

TWO-WAY MEDIA LTD., Plaintiff,
v.
VERIZON COMMUNICATIONS INC., VERIZON SERVICES CORP., and VERIZON ONLINE LLC, Defendants.

REPORT AND RECOMMENDATION

MARY PAT THYNGE, Chief Magistrate Judge.

I. INTRODUCTION

On September 19, 2014, Two-Way Media Ltd. ("plaintiff') filed this action against Verizon Communications Inc., Verizon Services Corp., and Verizon Online LLC (collectively, "Verizon" or "defendants"), alleging infringement of U.S. Patents Nos. 6, 434, 622 (the "'622 patent"); 8, 539, 237 (the "'237 patent"); and 7, 266, 686 (the "686 patent"; collectively with the 622 patent and 237 patent, the "patents-in-suit"). Plaintiff sought a permanent injunction of all allegedly infringing activities by defendants, damages, and costs. On October 9, 2014, plaintiff amended its complaint to add the claim of reckless infringement.[1]

Pending before the court is defendants' motion to dismiss plaintiffs amended complaint for failure to state a claim for joint infringement under FED. R. Crv. P. 12(b)(6).[2] This court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1338(a) because this action arises under 35 U.S.C. § 101 et seq. [3] and personal jurisdiction over defendants as residents of Delaware that have availed themselves of this state's benefits and protections.[4] Venue is proper under 28 U.S.C. §§ 1391 (c) and 1400(b).[5] This Report and Recommendation is issued pursuant to 28 U.S.C. § 636(b)(1)(8), FED. R. CIV. P. 72(b)(1), and D. DEL. LR 72.1.[6] For the reasons stated below, it is recommended that defendants' motion be granted.

II. BACKGROUND

A. Parties

Plaintiff is a limited partnership existing under the laws of Colorado with its principal place of business in Colorado and its general partner existing under the laws of Delaware.[7] Defendants are Delaware business entities with their primary places of business in New York or Virginia.[8]

B. Patents-in-Suit

Plaintiff asserts it holds all rights to the patents-in-suit by assignment from Netcast Communications Corp. in 2002.[9] The three asserted patents arose from a series of applications claiming priority to May 9, 1996.[10] The 622 patent was issued on August 13, 2002 and claims an invention called "Multicasting Method and Apparatus." Reexamination certificates for the 622 patent were issued on September 12, 2006 and December 2, 2008. On September 4, 2007, the 686 patent was issued for an invention, also called "Multicasting Method and Apparatus." The 237 patent claims an invention entitled "Methods and Systems for Playing Media."[11]

Plaintiff represents the shared specification of the patents-in-suit describes a system for transmitting, receiving, and monitoring audio and video over the lnternet.[12] The patents purportedly relate to an interactive distributed client-server system that allows live audio and video streams to be sent to multiple users and enables commercial record keeping and marketing functions.[13]

According to plaintiff, its system works as follows. A central facility in its system receives and, if necessary, digitizes incoming audio and video signals and forwards them to various servers. In turn, the servers transmit the signals to users via the Internet or similar communications networks.[14] The transmissions are monitored to ensure the reliability and accuracy of gathered usage statistics. The servers may play a role in ensuring that each user receives the particular stream of his choosing and that he receives the requested content at substantially the same time that the signals are transmitted from the central facility.[15] Servers may also participate in gathering usage statistics, dynamically inserting advertising content into streams, and offering targeted product sales, such as buying music or concert tickets that relate to a song that is being streamed.[16] Depending on demographics and geography, the signals in plaintiff's system pass through one or more intermediary servers before reaching users.[17]

C. Plaintiff's Allegations

Plaintiff avers defendants infringe the patents-in-suit, literally or under the doctrine of equivalents, by live streaming one or more of approximately one hundred and fifty TV channels through their subscription services, dubbed TV Everywhere ("TV Everywhere").[18] These services allow subscribers to stream live TV content to digital platforms like computers, tablets, smartphones, and other devices via the lnternet.[19] Servers used by defendants for streaming allegedly generate detailed recordings and usage statistics about the TV Everywhere services.[20]

Plaintiff contends defendants also contract and have relationships exceeding mere arms-length cooperation with third parties, including Adobe Systems Inc., Conviva, Inc., and comScore, Inc., to "gather usage statistics" related to their TV Everywhere services.[21] Defendants allegedly transmit to these third parties messages generated by software running on the user devices and "direct[ ] or control[ ]" the third parties by requesting particular types of data on the delivery of the streaming content, such as commencement, duration, and termination of the stream.[22] Defendants also direct or control the gathering of such statistics by offering their subscribers apps generating information that is ultimately transmitted to and used by the third parties to gather and process the statistical data.[23] Based on these contentions, plaintiff argues defendants in combination with one or more ...


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