Free Stream Media Corp. v. Alphonso Inc.

Citation: 366 F. Supp. 3d 1093Docket: Case No. 17-cv-02107-RS

Court: District Court, N.D. California; December 27, 2018; Federal District Court

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U.S. Patent No. 9,386,356, owned by Free Stream Media Corp. (Samba), pertains to a system that identifies a person's television viewing and delivers targeted content, such as advertisements, to their mobile device. Samba markets this technology, enabling advertisers to reach consumers based on their viewing patterns. Alphonso, Inc., the defendant, offers similar targeted advertising services based on consumers' television viewing histories. Although both systems aim to perform comparable functions, the legal question is whether Alphonso's system infringes any claims of the '356 patent.

The case was filed in November 2015 and initially involved U.S. Patent No. 9,026,668, which was later dismissed for non-infringement. The '356 patent was introduced in July 2016, and the case was subsequently consolidated. The asserted claims in question are independent claims 1, 10, and 18. A key distinction between the patent claims and the broader patent specifications lies in the explicit requirement of "a television" as the "networked device" in the claims, in contrast to the specification's broader terms.

Claim 10, representative of the asserted claims, describes a relevancy-matching server that connects with a television and a mobile device, including components like a processor and memory. It details processes for matching user data with targeted data based on various factors and specifies that "fingerprint data" is derived from audio or visual content to identify what a consumer is watching. The court's claim construction defines "primary data" as user-related data that can be matched with targeted data. The undisputed facts indicate that Alphonso's system does not meet all elements of the asserted claims, leading to the granting of Alphonso's motion for summary judgment.

The "relevancy factor" serves as a criterion for aligning targeted data with primary data, which includes content recommendations and advertisements. Under claim 10, a "relevancy matching server" utilizes its processor and memory to match user information and television viewing habits with targeted data based on the relevancy factor, ultimately delivering this targeted data to the user's mobile device. While the claims encompass more than just advertising, a notable application is targeting advertisements based on viewers' television interests.

Alphonso, the accused technology provider, does not manufacture televisions or phones but offers a platform for customers to target advertisements to mobile devices. Data collection occurs through three main avenues: 

1. **Vizio**: Until early 2017, Alphonso purchased television viewing data from Vizio, accessing it through cloud downloads rather than direct device interaction.
2. **Sling**: Through a partnership with Sling, Alphonso's software development kit (SDK) samples audio content from Sling's streaming services and relays that data to the Alphonso platform.
3. **Hisense**: A recent partnership with Hisense involves installing the Alphonso SDK in its smart TVs, although the specifics of this integration were not confirmed before discovery closed.

Samba claims that infringement can be presumed based on the SDK's operation, while Alphonso argues that there is no evidence regarding the SDK's functionality in Hisense TVs.

For data sorting, Alphonso leverages data from Vizio and Sling using its Campaign Segment Tool, which allows employees to generate segments based on customer-defined criteria (e.g., targeting NFL fans by identifying viewers from the past week). 

In creating advertising campaigns, Alphonso employs a third-party demand side platform (DSP) from Beeswax. Customers provide an insertion order detailing budget, time frame, geographic targeting, and advertisement content. Alphonso employees manually input this information into the Beeswax platform to process orders.

Alphonso has registered data segments within the Beeswax software, allowing employees to select specific segments for ad targeting via drop-down menus. This selection dictates which devices receive advertisements based on the employee's understanding of the target audience. Advertisements are delivered through Beeswax's bidding system, initiated when a mobile device sends a bid request to a third-party ad server, which then relays it to an advertisement exchange. The request indicates an opportunity for ad display on the device. Beeswax evaluates whether to bid based on campaign rules, verifying if the device ID/IP address matches the specified segments. If compliant, Beeswax submits a bid with a price and URL to the ad server. If selected, the URL directs the mobile device to retrieve and display the ad from a third-party server. Notably, Alphonso does not provide software on the mobile devices nor maintains contracts with device manufacturers or users.

Summary judgment is appropriate when there is no genuine issue of material fact, allowing the moving party to claim judgment as a matter of law. The moving party must inform the court of the basis for its motion and identify relevant pleadings and affidavits demonstrating the absence of material fact issues. If successful, the burden shifts to the non-moving party to show specific facts indicating a genuine issue for trial. The non-moving party cannot simply allege factual disputes; they must present material facts that could affect the case's outcome. Factual disputes that are irrelevant will not block summary judgment. The court must draw reasonable inferences in favor of the non-moving party regarding credibility and evidence weight.

The court evaluates whether the specific facts presented by the nonmoving party, along with undisputed contextual facts, could lead a reasonable jury to favor that party. Summary judgment is inappropriate if material facts are genuinely disputed, meaning a reasonable jury could find for the nonmoving party. However, if the evidence as a whole does not allow a rational trier of fact to find for that party, there is no genuine issue for trial. 

In patent cases, determining infringement involves a two-part analysis: claim construction and comparing the construed claims to the accused product. The claim construction is complete, leaving the comparison between the asserted claims and the Alphonso system. Infringement, whether literal or via the doctrine of equivalents, is a factual question. The patentee bears the burden of proof for infringement, and the accused infringer can secure summary judgment by showing that either the evidence negates infringement or fails to create a material factual dispute regarding any essential element of the patentee's case.

Alphonso's argument against infringement is based on the assertion that its technology does not include a relevancy-matching server connected to a television. Alphonso argues that purchasing data from a third-party smart TV manufacturer does not constitute a server being "communicatively coupled with a television." Samba counters that Alphonso cannot avoid liability by outsourcing any part of the system, pointing to a Data License Agreement that obligates Vizio to supply TV viewing data, effectively making Vizio an agent of Alphonso. Samba suggests there is a factual question regarding Alphonso's control over Vizio's data collection.

However, the court finds that Alphonso did not exercise sufficient control over Vizio’s data collection to attribute Vizio’s actions to Alphonso. While Alphonso specified how often data should be provided, this does not equate to controlling how Vizio’s smart TVs functioned. There is no evidence suggesting that Vizio's data collection was solely due to its contract with Alphonso. As a result, the court grants summary judgment in favor of Alphonso regarding this aspect of Samba’s claims, and also for claims relating to the alleged incorporation of the Alphonso SDK in Hisense smart TVs.

Requiring a separate lawsuit is generally undesirable, yet the current record does not support a finding of patent infringement based on developments that arose after the closure of discovery. Summary judgment is inappropriate for the claim involving Sling, as there is a possibility that a jury could find that a mobile device with the Sling app functions as a television per the patent's definition, and that Alphonso's software development kit (SDK) within the app may lead to infringement. Although Samba's claims about the use of fingerprint data from such a mobile device for targeted advertising may involve some speculation, there remains a triable issue of fact.

The core of Alphonso's motion challenges the characterization of its platform as relying on human employees for matching advertising content to consumer viewing information, arguing it does not involve a "computer-executed system" or a "relevancy-matching server." While Alphonso argues it does not employ a relevancy-matching server, some of its arguments regarding "computer-executed" processes are misplaced. Samba contends that the patent aims to simplify the user experience, minimizing the need for users to configure devices, which Alphonso's platform achieves.

Moreover, the boundary between human and computer-executed processes is not always clear, as human involvement is often necessary even in automated systems. For instance, user input is required for Google searches, despite the automation of the search process. The patent claims necessitate at least one computer-executed process that Alphonso's platform fails to fulfill, as it relies on human judgment for some operations that should be automated. The patent specifically demands a relevancy-matching server comprised of a processor, memory, and instructions executed by the processor to match primary data from the television with targeted data based on relevancy factors. While Alphonso's computer programs perform important functions, such as using the Segment Tool to analyze viewer data, the claims assert that automated processes are essential for compliance with the patent's requirements.

Alphonso's process for delivering advertisements to mobile devices involves human decision-making rather than automated computer processes. An employee selects relevant audience data based on customer-defined characteristics, distinguishing it from a purely algorithmic approach. As a result, Alphonso claims entitlement to summary judgment of non-infringement, asserting that it does not control the mobile devices that request ads or dictate how they operate. While Samba argues that Alphonso profits from the ad delivery system, the court emphasizes that Alphonso does not use the entire system, as it cannot influence when bid requests are generated by mobile devices. Citing Centillion Data Sys., the court notes that Alphonso cannot be liable for direct infringement since the end-users’ devices are crucial for the system's operation and Alphonso does not supply anything to those users. Consequently, Alphonso's motion for summary judgment of non-infringement is granted, with pending motions for sanctions and Daubert being denied as moot. The court also addressed previous motions regarding the abstract nature of targeted advertising, ultimately rejecting claims that the patent addresses specific technological barriers. The court remains unsure if the patent effectively overcomes those barriers as claimed by Samba.

The accused Alphonso system does not clearly demonstrate an innovative method for addressing the alleged barriers. A separate infringement case involving Hisense may be limited by the findings in this order. Samba claims that the Alphonso platform infringes due to the Segment Tool matching primary data with "other information matching or related to primary data," as defined in the claim construction for "targeted data." However, Claim 10 requires that this targeted data must be rendered to the user through a mobile device's sandboxed application, and Samba has not proven that any matched "other information" is shown to users on the device. While other claims do not stipulate that targeted data must be displayed on a mobile device, Samba has failed to establish that the Segment Tool satisfies the relevancy-matching server limitation across any claims. Alphonso contends that Centillion limits its liability concerning the television aspects of the claims, but this argument does not substantively impact the earlier discussions about televisions. Consequently, the individual defendants are entitled to judgment in their favor. Even if Alphonso were not granted judgment, the individuals would likely still qualify for relief, as Samba's allegations regarding alter ego liability or piercing the corporate veil are vague. It is uncertain whether Samba has preserved the right to pursue these claims at this stage, and thus the potential liability of the individuals will not be addressed now.