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Ceats, Inc. v. TicketNetwork, Inc.

United States District Court, E.D. Texas, Marshall Division

January 17, 2018

CEATS, INC., Plaintiff,
v.
TICKETNETWORK, INC. and TICKET SOFTWARE, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER

          ROY S. PAYNE, UNITED STATES MAGISTRATE JUDGE

         Before the Court is CEATS, Inc.'s Motion for Leave to Serve the Supplemental Expert Report of Robert McSorley [Dkt. # 160]. Defendants TicketNetwork, Inc. and Ticket Software, LLC (together, “TicketNetwork”) only oppose the motion with respect to Sections 9 and 11 of the report, which TicketNetwork contends constitute improper surrebuttal.

         After considering the parties' briefing, the Court will GRANT the motion IN PART . Specifically, the Court will GRANT the motion except as to Section 9 and some portions of Section 11.

         I. BACKGROUND

         TicketNetwork's business comprises four components. First, it markets ticket inventory owned by others directly to end users through internally owned and operated websites, such as TicketNetwork.com and TicketLiquidator.com. Kruse Decl. (Oct. 27, 2017) [Dkt. # 112-28] ¶ 4. Second, it licenses a range of products and services to independently owned, operated, and controlled third-party ticket marketers. Id. ¶ 5. Third, it operates a backend ticket exchange whereby ticket brokers exchange ticket inventory with one another. Id. ¶ 6. Fourth, it operates a call center for its internal and third-party websites for facilitating purchases by end users. Id. ¶ 9.

         In 2010, CEATS sued TicketNetwork for patent infringement. The parties settled mid-trial and later executed a license agreement concerning 16 of CEATS's patents. Settlement & License Agreement for CEATS Patents (Mar. 28, 2012) [Dkt. # 38-5] (hereafter, “the Agreement”).

         This lawsuit concerns TicketNetwork's alleged breach of the Agreement. CEATS contends TicketNetwork has not performed its obligation under Paragraph 5.2 of the Agreement to pay CEATS $0.50 for each “Transaction, ” which is “[t]he purchase of one ticket directly using an online ticketing system freely available via the Internet from a general purpose computer, without the use of any dedicated resident ticket vending software on such computer, providing such system includes the Subject Functionality.” CEATS' Standard Licensing Rates [Dkt. # 38-34]; see also Agreement [Dkt. # 38-5] ¶ 1.13 (defining “Transaction” to have “the meaning set forth in CEATS' Standard Licensing Rates for Licenses Under the Patent Portfolio Held by CEATS, Inc.”). “Subject Functionality” means “[f]unctionality in a system or method that provides (i) an interactive seat map and (ii) additional information or an additional display of information in response to user interaction with the display of seats in such seat map by placing a mouse indicator over the seat map.” CEATS' Standard Licensing Rates [Dkt. # 38-34]; Agreement [Dkt. # 38-5] ¶ 1.10 (defining “Subject Functionality” to have “the meaning set forth in CEATS' Standard Licensing Rates for Licenses Under the Patent Portfolio Held by CEATS, Inc.”). The functionality at issue concerns TicketNetwork's web interface that allows a user to purchase tickets on-line. In the image below, which is exemplary only, the interface (everything inside the red dashed line) includes an available ticket listing panel (blue) on the left side that is populated by a listing of sections with available seats. The right side of the interface (green dashed line) is a venue diagram providing a display of seats. When a user rolls a mouse icon over a section of available seats in the left (blue) panel, the interface highlights the physical location of those seats in the right venue-diagram panel.

         (IMAGE OMITTED)

         The parties' main dispute concerns the meaning of “seat map” in the definition of Subject Functionality and how it applies to this layout. TicketNetwork contends the “seat map” is limited to the right panel-what CEATS calls the “venue diagram”-and the “display of seats” is the collection of seats composing the seat map along with any other elements of the event venue, such as the concert stage. Defs.' Summ. J. Reply [Dkt. # 147] at 5 n.3. CEATS agrees the “display of seats” makes up the venue diagram map and that it is separate from the available ticket list. Pl.'s Resp. to Defs.' Mot. for Summ. J. [Dkt. # 138] at 7 (“On the right-hand side of the interface . . . is a dynamic venue diagram providing a display of seats.”); Pl.'s Sur-Reply [Dkt. # 156] at 1 (“A ‘display of seats' is a subset of the larger phrase ‘seat map' . . . .”). But CEATS contends the “seat map” is the entire interface (in this example, everything within the red dashed line), including the available ticket list within the left panel.

         TicketNetwork summarizes the parties' positions with this graphic:

         (IMAGE OMITTED)

         Defs.' Mot. for Summ. J. [Dkt. # 112] at 24.

         There are also some secondary issues particularly relevant to the present motion. For one, TicketNetwork claims sales made through its call center are not “Transactions” under the Agreement. Id. at 27. TicketNetwork also claims ticket sales made by a user on its mobile platform cannot qualify as Transactions. Id. CEATS claims certain ticket purchases constitute two Transactions. CEATS's 2d Supp. Discl. [Dkt. # 112-6] at 2 (“Because each ticket sold through TicketNetwork's POS and Mercury products involves a purchase of a ticket from inventory and then a corresponding sale, each ticket represents two transactions for purposes of calculating the royalty payment due to CEATS . . . .”). Thus, if TicketNetwork is found to have breached the Agreement, resolution of these secondary issues will impact the amount of damages.

         CEATS and TicketNetwork retained Robert McSorley and Keith Ugone, respectively, as their damages experts. On September 22, CEATS served McSorley's initial report on damages. On October 16, TicketNetwork served ...


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