- ♠ Technology
- ♠ Damages
- February 5, 2020 Damages Expert, Damages Report, Expert Witness, Intellectual Property, Inventions, Litigation, USPTOMusic Choice vs Stingray Settlement arrives right before trial. This case has been analyzed as a case by our experts from two angles:
Damages Reports with Loss Profits : Non-Infringing Alternatives and Reasonable Royalty
Damages Reports with Loss Profits require a set of guidelines to meet, specially the absence of Non-Infringing Alternatives. Non-Infringing Alternatives are important when determining damages and what is called, the Panduit Test. Damages experts usually have two choices when calculating damages in intellectual property cases:
- • Loss Profits,
- • Reasonable Royalty
There are numerous cases where loss profits are computed, and how in some cases even arriving to a reasonable royalty might be confusing and complicated.
Patent Damages theories including some landmark cases like Apple Inc vs Motorola Inc, Fed. Cir 2014 or other specially citing “Extent of use” approach, where a proportion of a technology affects the value of certain technology.
One of the theories used in many damages reports or when following a hypothetical negotiations, or what is called Georgia-Pacific factor for reasonable royalties.
Indeed, reaching a reasonable royalty is far more complicated than simply computing and writing damages reports with loss profits. However Loss Profits require a test that needs to include (see https://www.fr.com/wp-content/uploads/2016/12/FINAL_Patent_Damages_12_01.pdf) :
For lost profits, “not infringed” means the hypothetical world in which the infringer did not use the technology at all in competition with the patentee. See Grain Processing Corp. v. Am. Maize-Prods. Co., 185 F.3d 1341, 1350 (Fed. cir. 1999) (quot- ing Aro, 377 u.S. at 507).
I will use a sample case from the Federal Circuit to see how Loss Profits were used to compute damages.
In Dkct #280 of Case 2:16-cv-00586-JRG-RSP , the magistrate judge analyzed motions and filed and order stating that:
Stingray, which entered the United States in 2010, is Music Choice’s only significant competitor. Stingray has three products in the United States relevant to Music Choice’s claims: (1) the Music TV App, which consists of VOD music programming, which Music Choice accuses of infringing the ’025 and ’045 VOD Linking Patents; (2) the “OSE2” version of Stingray’s UbiquiCAST system, which provides images corresponding to the music playing, which Music Choice accuses of infringing the ’025 and ’045 VOD Linking Patents; and (3) the “OSE1” version of its UbiquiCAST system, which only provides generic images and which Music Choice does not accuse of infringement in this case. (Dkt. No. 214, at 2).
What this mean is that the defendant, Stingray, attempted to convince the court that they have product that did not infringe on plaintiff’s patents and hence, loss profits analyst made by the expert, Dr. Ugone’s was wrong ( their products were Non-Infringing Alternatives)
Lessson #1 – Panduit Test
A panduit test is cited by the judge as follows:
The four-factor Panduit test requires the patentee to show: (1) demand for the patented product; (2) an absence of acceptable, non-infringing alternatives or substitutes; (3) manufacturing and marketing capability to exploit the demand; and (4) the amount of profit that would have been made. Panduit, 575 F.2d at 1156
This test then requires that basically, there is no an acceptable, non-infringing substitute to the patents in dispute.
Upon analyzing, the pleadings filed by Greenberg and Decher Law, Stingray and Music Choice attorneys, the judge states that:
Stingray questions Dr. Ugone’s application of Panduit factor 2, which is “the absence of acceptable non-infringing alternatives or substitutes.” Panduit, 575 F.2d at 1156. Stingray states that Dr. Ugone’s conclusion that “OSE1 is not an acceptable non-infringing substitute because of the ‘importance of the features and benefits enabled by the Visual Complement Patent’” is flawed
And concludes that, Dr. Ugone’s analysis is hence correct, and the alternatives presented by Stingray are just not appropriate.
The Court concludes that Dr. Ugone’s analysis of lost profits under the Panduit test is sufficiently reliable with respect to Liberty. Stingray has not sufficiently shown that Dr. Ugone’s analysis here is so unreliable that exclusion is warranted. Instead, the arguments presented by Stingray are better suited for a jury.
And obviously, the Daubert challenge made to Dr. Ugone’s report failed, and the court simply denied it.
Lesson #2 : Non-Infringing Alternatives
There are numerous cases where Non-Infringing Alternatives or NIA is determined by simply finding out if:
By Non–infringing alternatives, we mean that the infringer, without infringing the subject patent, could have made the same product and achieved an equal number of sales using that alternative.
Gain Processing is a decision that brought a lot of light when to use a reasonable royalty and when to use loss profits.
Grain Processing has made it more difficult for patent holders to claim lost profits damages, it is less well understood how Grain Processing has affected the incentives of companies to risk litigation by using patented technology (without a license) rather than to avoid infringement by using an economically inferior non-infringing technology.
This indeed brings the questions what would be a difference by example between both:
In the same case, apparently in March 2011, Music Choice charge $0.12 per residential subscriber, however due to competition brough by Stingray, decried i to $0.0931 and its competitor, Stingray offered i at $0.03 per residential subscriber, which seems to be working at a loss. Loss Profits is a simple computation.
What Dr. Ugone identified is hat $15.69 M in loss profits where associated o Liberty and AT&T.
Although, this price erosion and loss profits from 2014-2018 could have been affecting other clients as well, it is unknown, as all the damages reports are confidential and cannot be seen.
A simple computation indicates that, $60M could have been the loss of revenues, as the cost, could have been flat at $0.03 per subscriber.
Then, if a NIA existed and it was not mere speculation (from https://www.stout.com/en/insights/article/presidio-atc-new-insights-regarding-noninfringing-alternatives/) :
When an alleged alternative is not on the market during the accounting period, a trial court may reasonably infer that it was not available as a noninfringing substitute at that time. The accused infringer then has the burden to overcome this inference by showing that the substitute was available during the accounting period. Mere speculation or conclusory assertions will not suffice to overcome the inference. After all, the infringer chose to produce the infringing, rather than noninfringing, product. Thus, the trial court must proceed with caution in assessing proof of the availability of substitutes not actually sold during the period of infringement. Acceptable substitutes that the infringer proves were available during the accounting period can preclude or limit lost profits; substitutes only theoretically possible will not.
Assuming then that, a non-infringing alternative exists, which is this case would have been my patents, or Cloud to Cable, as :
- • Cloud to cable enables a visual component with audio and video,
- • Cloud to cable can be used for VOD or SVOD
- • Cloud to Cable has been tested and besides being a patent is a software device with implementation.
Clearly, Cloud to Cable does and creates all what Music Choices states and claims Stingray is doing.
However, Stingray MUST provide to the court that a NIA exists and a license was possible without infringing on it. This can be achieved with a licensing deal, in my opinion, and all Dr. Ugone’s analysis would be then with problems.
Then assuming only AT&T and LIBERTY, or $15.6M in damages, could translate to $10% royalty or $4.5M or even at 1% or $450k total losses, which would be a significant decrease and impact from this litigation.
Lesson #3 : Greenberg and Traurig $9M hole
It doesn’t matter how large is your attorney’s firm or how much you paid, they may dump you.
I contacted Greenberg and Traurig and presented them with my non-infringement alternatives back in 2018. I spoke with a few gentlemen but then radio silence. I still do not understand how strategically was not to discuss anything with me, after seeing all these rulings by the jugde.
Greenberg and Trauring billed $9M to Stingray for a few years of litigation and dropped them, or were fired, it is not clear to me what happened but, what the new lawyers from Stingray are saying is that on Dkt #339:
After nearly five years of litigating this lawsuit for Stingray and after collecting more than $9,000,000 in legal fees, Greenberg now seeks to withdraw as Stingray’s counsel of record at the same time this Court is understandably eager to get this case tried. Because of the timing of Greenberg’s Motion to Withdraw, Stingray is placed in an untenable position.
Clearly, Stingray is still holding a hot potato and may go to trial, or accept settlement that appears not to be of their liking.
Greenberg’s withdrawal at this moment in time would materially prejudice Stingray’s ability to prepare for and participate at trial. Indeed, while it will not take several years or millions of dollars—as it has thus far—it will take considerable time for replacement counsel to acquaint themselves with the case in a manner sufficient to assist Stingray in mounting a robust defense.
Lessons learned are:
- • Stay on top of all potential solutions, and outcomes,
- • Get lawyers from other firms, to work with the main firm, more expensive but who can keep checks and bounds,
- • It is more inexpensive to simply take a license to a patented technology than infringing, I bet if Stingray Digital would I found some patents that were alternative would have spent less than the in a license.
- •Now, the case is a total mess, and who knows what the outcome will be
- November 24, 2019 Damages Expert, Damages Report, Daubert Challenge, Expert Witness, Intellectual Property, Litigation, Media Projects, Music for Cable TV
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 resulted accurate, and in other words, the analysis of this cases that I made in 2017 is now a reality.
- ♠ 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.
Several rulings have gone unfavorable to Stingray Digital, which includes adoption of the Magistrate judge opinions followed by an order denying the Daubert challenge made to Dr. Keith Ugone. What this means is that Mr. Ugone’s damages report is safe and sound, in other words the damages expert, Dr. Ugon representing Music Choice, will be able to tell the jury his story about this case.
Clearly, this was 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.
Dr. Ugone’s testified that in absence of a non-infringement alternative, loss profits need to be used to compute damages, instead of a reasonable royalty. Assuming $23M in loss profits, that means revenues could have been $75M. If, an expert applies a royalty of 10% that’s $7M and 1%, 700k in reasonable royalties. Potentially saving $23M in loss profits, or even higher at $75M for treble damages, if the judge considers necessary to punish Stingray.
As you know, already, I completely disagree as my patents when in use in Cable TV systems are a non-infringing alternative to Music Choice’s.
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.
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.
As jury selection is due December 9th, 2019, clearly Stingray has a low chance of surviving a trial, 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, maybe even better, Stingay can discuss a way to present a license to my patents and technology. My patents and technologiss are clearly as a non-infringing alternative to Music Choice, and my patents are new, and will last for a longer time as a protection.
Either way, this is not good to be in this position for Stingray.
Stingray could take a license to my portfolio and present it to Music Choice and the court, and avoid all infringement claims.
Besides that, Stingray Digital 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.
Licensing of My Patent Portfolio
There are several ways to find out about my portfolio of patents and software implementation, you can contact me via email to firstname.lastname@example.org or call me. My innovations are covered by US Patents 10,123,074 and 10,524,002 and other continuation patents, including European Patent filings, plus the technology and software platform:
- First, this site contains some of that information and clicking under Patent Portfolio and MVPD Licensing
- Or visit cloudtocable.com for additional information on the technology or the portfolio
- or Eglacomm.net search “CloudtoCable” or Patents
This analysis only works when Panduit testfails for a computation of loss profits and only works for a reasonable royalty damagers model.
I personally submitted a damages report in a the case: Mobility Workx, LLC vs Cellco Partnership aka Verizon Wireless in the E.D. Texas, and Judge Mazzant ordered me to present it to a jury which means a Daubert challenge was made and survived..
The model I created for damages can be used for many technology disputes where “Key Performance Indicators” are measured to map a business performance, and how and what intellectual property maps to the revenues generated by a business and its performance.
My report mapped, KPIs from ETSI Specification “TS 32.451 Version 8.0.0 Release 8” describing the following subcategories:
Judge Mazzant accepted my report due to my experience at Motorola and all my overall resume working with startups, licensing deals, and being part of multiple patent and technology licensing agreements that involved companies like Qualcomm, Google, and many others.
For example, TS 32.451 contain several KPIs for LTE Systems or E-UTRAN and you can map an Intellectual Property piece to one or several subcategories, and then from that category you can then establish the proper proportion of what an intellectual property maps to, which means that clearly a percentage of the revenues that a company generates can be mapped to a certain technology.
Key performance Indicators are part of not only 4G LTE systems but are found in most technological systems. The process is presented in the following slides:
KPI - Damages Reports
In summary, one can say that many KPIs have a mapping to revenues, and that’s how companies can value performance to value.
Once these mappings are determined, which all KPIs may offer the same proportion of value to the generated revenues of a corporation, then one can map the features of a patent portfolio to one or many KPIs and create a weighed average of contribution to the KPIs and hence to the revenues.
In the following charts, I represent that maybe a single patent or IP maps to a KPI which equates to a percentage of the revenues, let’s say it is 20%. Assume for a second that the KPI category contains 20 parameters, that for simplicity will be equally weighted. As such, the technology where damages are being calculated corresponds to 2 parameters let’s say, hence a 10% of the KPI is then affected or benefited by the patents or technologies.
Setting up a royalty rate, of let’s say 3% to 5% seems reasonable and affects only the percentage of the revenues a KPI is affected by the patents. Hence, there is no dispute on how much effect a patent or an IP affects a business model.
KPIs are usually defined by the defendant or an industry-defined, like in LTE, and each are granular enough that a mapping between a patent portfolio and /or an intellectual property can be mapped to.
As such a simply royalty yield of 5% can be used to compute an overall royalty that only affects the revenues generated by let’s say LTE Revenues for example, or any other technology with KPIs.
if you have any questions you can contact me or hire me to calculate your damages report.ts_132451v080000p