Case Opinions – Music Choice v. Stingray Digital

Introduction

I will start quoting, MultiChannel article that describes the genesis of this dispute..

Stingray and Music Choice have a long history. In 2015, Music Choice sued Stingray for patent infringement after AT&T U-verse dropped Music Choice in favor of the Canadian company. Music Choice had claimed that Stingray’s service included digital audio music and video-on-demand features that infringed on its patents, features that Stingray enhanced after getting access to confidential information during talks about possibly buying Music Choice in 2015. Stingray counter-sued, asserting “claims of unfair competition, defamation, trade libel, tortious interference with existing and prospective contractual relationships, and unfair competition.” (Source: Multichannel)

It was very interesting that in 2017, Stingray made a $120M offer to Music Choice, that was, rejected, not publicly, simply ignored. The offer was sweet basically no strings attached, and likely this case in dispute completely dismissed.

“Canadian digital and music video company Stingray Digital Group said it has made an unsolicited offer to purchase pay TV stalwart Music Choice for $120 million. (Id) “

As  consequence of this lawsuit, multiple other litigation steps have followed this case: IPR,  Counter Claims, Daubert challenges, and much more. I have been tracking this case I have a portfolio in the same are as “Music Choice” & “Stingray Digital”

Now all my observations have become a reality and in a way, my analysis of this cases even in 2017 is now a reality. In summary, I concluded that:

  • Stingray IPRs was not going to be super successful, as the PTAB judges were not fully convinced with the arguments.
  • I still believe that Music Choice’s slashed patents by PTAB might have some light in appeal.
  • Damages Report, challenged by Stingray, with a multi-million dollar award was going to be accepted by the court
  • Alice defenses were futile by Stingray
  • Trial was going to be conducted and all other defenses denied

Now this case is scheduled for trial Dec 9th, 2019 in Marshall, TX.

Opinions

Several rulings have gone unfavorable to Stingray Digital which includes adoption of Magistrate judge opinions and ordering denying the Daubert challenge made to Dr. Keith Ugone, the damages expert in the case representing Music Choice, Inc.  Clearly, a big reverse to Stingray specially when Dr. Ugone has testified that a “non-infringing alternative” presented by Stingray was not suitable and hence, the damages model was at least $23M from the numbers released in a court ruling.

 For that reason and the other reasons stated within the Order, the Court agrees with the conclusion reached within the Order. The Magistrate Judge’s Recommendation is therefore ADOPTED. 

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On second adverse ruling, Judge Payne has provided to Judge Gilstrap its report and recommendations regarding the Alice challenge that Stingray has made against Music Choice, Inc patents. The adverse ruling indicates that as a matter of law, Alice Step One, fails and there is no need to conduct any further steps,

The Court concludes that each of the remaining asserted claims are not directed to an abstract idea at Alice Step One. Because the Court resolves the Alice inquiry at Step One, the Court need not proceed to Alice Step Two. Thus, the Court recommends that Music Choice’s cross-motion be GRANTED and that Stingray’s motion for judgment on the pleadings be DENIED. 

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As jury selection is due December 9th, 2019, clearly Stingray has a low change of surviving and in my opinion, Stingray has increase its chances to be found guilty of infringement and pay a hefty amount, likely a multi-million dollar judgment and a potential injunction relief favorable to stingray.

What will happen?

Stingray digital has to find a way to now settle this case or, discuss a way to present my patents as a non-infringing alternative to Music Choice, either way, its is not good to be in this position.

Stingray made an offer for $120M to purchase Music Choice, and Music Choice rejected the offer, risked a trial and now their position has been getting more solid day after day.  I would assume that it will have to make an offer around that to settle? That means that Stingray’s revenues in the US, which totals $9M per Quarter or $36M/year are now at risk.

The current damages report shows a $23M loss profits made by Music Choice as of this date, however a full report is only REDACTED and unavailable to the public.

“Revenues in the United States increased 12.2% to $9.4 million (12.9% of total revenues) and in Other Countries, revenues increased by 31.3% to $16.1 million (22.1% of total revenues)” (Source: Globenewswire).

Greenberg and Trauig is defending Stingray and Dechert Law, LLP is Music Choice’s plaintiff. I will keep track on more updates to follow.

 


 

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