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Biscotti Inc. v. Microsoft Corp.

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

March 23, 2018

BISCOTTI INC., Plaintiff,
v.
MICROSOFT CORPORATION, Defendant.

          MEMORANDUM OPINION AND ORDER

          RODNEY GILSTRAP, UNITED STATES DISTRICT JUDGE.

         Before the Court is Plaintiff Biscotti, Inc.'s (“Biscotti”) Motion for Judgment as a Matter of Law and New Trial (the “Motion”) (Dkt. No. 318). Having considered the Motion, and for the reasons set forth herein, the Court concludes that the Motion should be and hereby is DENIED.

         I. Background

         A. The Asserted Patent

         Biscotti accuses Microsoft Corporation (“Microsoft”) of infringing claims 12, 13, 23, 27, 28, 35, and 86 (the “Asserted Claims”) of U.S. Patent No. 8, 144, 182 (the “'182 Patent” or the “Asserted Patent”). (Dkt No. 318 at 6.) The '182 Patent is titled “Real Time video Communications System” and it covers systems and methods for video calling. (PTX-1.)

         B. Procedural History

         Biscotti originally filed this case on November 26, 2013, asserting infringement of several claims of the '182 Patent. (Dkt. No. 1.)

         1. Inter Partes Review (“IPR”) Proceedings

         On September 6, 2014, Microsoft filed three petitions for inter partes review (“IPR”) challenging 53 claims of the '182 Patent, including all of the claims which had been asserted by Biscotti in its Complaint. (Dkt. No. 88 at 1; Dkt. No. 98 at 1-2.) At this point, the Parties jointly moved to stay this case pending resolution of the IPRs. (Dkt. No. 88.) The Court agreed and stayed the case. (Dkt. No. 89.)

         On March 19, 2015, the Patent Trial and Appeal Board (“PTAB”) instituted IPR proceedings on claims 6, 7, 12, 17-26, 28, 29, 31, 36, 37, 38, 39, 41, 42, 44, 45, 50, 52, 53, 69- 71, and 74 and declined to institute on claims 1, 4-5, 8, 13-16, 27, 32-35, 40, 46, 72-73 and 82- 86. (Dkt. No. 98 at 1-2.) Microsoft then filed a second round of IPR petitions challenging the claims on which the PTAB had declined to institute in the first round of IPRs. (Id.) The PTAB again denied institution on these claims. (Id. at 2.)

         On March 17, 2016, the PTAB issued Final Written Decisions upholding the patentability of each challenged claim on which IPRs had been instituted. (Id.)

         2. Subsequent District Court Litigation

         On August 22, 2016, the Court lifted the stay, set the case for trial, and referred it to Magistrate Judge Roy S. Payne for pretrial proceedings. (Dkt. No. 101.) The Parties then engaged in extensive motion practice.

         The Court held a jury trial from June 5-9, 2017. After the jury retired to deliberate and outside of their presence, the Court conducted a bench trial as to Microsoft's inequitable conduct defense. (Dkt. No. 294 at 96:1-135:20.)

         Ultimately, the jury found that Microsoft did not infringe any of the Asserted Claims. (Dkt. No. 276 at 2.) The jury also found all of the Asserted Claims to be “anticipated or obvious.” (Id. at 4.) Further, the Court rejected Microsoft's inequitable conduct defense. (Dkt. No. 310.)

         3. Post-Trial Motions

         On October 3, 2017, the Court entered its Final Judgment in accordance with the jury's verdict. (Dkt. No. 311.) Biscotti then timely filed the instant Motion seeking either entry of judgment as a matter of law to obviate the jury's verdict or, alternatively, granting of a new trial. (Dkt. No. 318.)

         II. Legal Standard

         After a jury trial on the merits, a party may file a motion for judgment as a matter of law or in the alternative for a new trial. Fed.R.Civ.P. 50(b).

         A. Judgment as a Matter of Law

         “A motion for judgment as a matter of law [under Rule 50(b)] is a challenge to the legal sufficiency of the evidence supporting the jury's verdict.” Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., 276 F.Supp.3d 629, 643 (E.D. Tex. 2017) (“UroPep”) (Bryson, J., sitting by designation). Entry of judgment as a matter of law is therefore only appropriate when “there is no legally sufficient evidentiary basis for a reasonable jury to find as the jury did.” Guile v. United States, 422 F.3d 221, 225 (5th Cir. 2005); see also Baisden v. I'm Ready Prods., Inc., 693 F.3d 491, 498 (5th Cir. 2012) (“A district court must deny a motion for judgment as a matter of law unless the facts and inferences point so strongly and overwhelmingly in the movant's favor that reasonable jurors could not reach a contrary conclusion.” (emphasis added, internal quotation marks removed)).[1]

         “In evaluating a motion for judgment as a matter of law, a court must ‘draw all reasonable inferences in the light most favorable to the verdict.'” Metaswitch Networks Ltd. v. Genband U.S. LLC, No. 2:14-CV-00744-JRG, 2017 WL 3704760, at *2 (E.D. Tex. Aug. 28, 2017) (quoting E.E.O.C. v. Boh Bros. Const. Co., L.L.C., 731 F.3d 444, 451 (5th Cir. 2013)). Courts must also avoid the temptation of revisiting credibility determinations or reweighing evidence. Id. Such determinations are, appropriately, left to the jury. Montano v. Orange Cty., Texas, 842 F.3d 865, 874 (5th Cir. 2016) (“[I]t is for the jury alone to judge the credibility of witnesses and weigh the evidence.”).

         B. Motion for a New Trial

         A motion for a new trial under Rule 50(b) is essentially an invocation of Rule 59, which provides that a new trial may be granted on all or part of the issues on which there has been a trial by jury for “any reason for which a new trial has heretofore been granted in an action at law in federal court.” Fed.R.Civ.P. 59(a). Notwithstanding the broad sweep of Rule 59, “courts do not grant new trials unless it is reasonably clear that prejudicial error has crept into the record or that substantial justice has not been done, and the burden of showing harmful error rests on the party seeking the new trial.” Metaswitch, No. 2:14-CV-00744-JRG, 2017 WL 3704760, at *2; UroPep, 276 F.Supp.3d at 643. “A new trial may be granted, for example, if the district court finds the verdict is against the weight of the evidence, the damages awarded are excessive, the trial was unfair, or prejudicial error was committed in its course.” Smith v. Transworld Drilling Co., 773 F.2d 610, 612-13 (5th Cir. 1985); see also Laxton v. Gap Inc., 333 F.3d 572, 586 (5th Cir. 2003) (“A new trial is warranted if the evidence is against the great, and not merely the greater, weight of the evidence.”).[2]

         III. Discussion

         A. Infringement

         At trial, Microsoft raised three non-infringement arguments. Biscotti now moves for judgment as a matter of law on the basis that no reasonable jury could have credited these non-infringement theories.

         1. Instructions for controlling

         Claim 6, from which all the Asserted Claims depend, recites a “first video communication device” including “a storage medium . . . having encoded thereon a set of instructions executable by the at least one processor.” (PTX-1 at 32:62-33:25.) These “instructions” further comprise “instructions for controlling the video capture device to capture a captured video stream” and “instructions for controlling the audio capture device to capture a captured audio stream.” (Id.)

         At trial, Microsoft argued that it did not infringe the '182 Patent in part because the “at least one processor” and “storage medium” located on the Xbox One[3] do not contain instructions for controlling the audio and video capture devices located on the Kinect. (See, e.g., Dkt. No. 288, 6/6/17 P.M. Trial Tr. at 17:6-18:25; Dkt. No. 294, 6/9/17 Trial Tr. at 71:1-75:22.) Instead, Microsoft argued that the instructions for controlling the audio and video capture devices on the Kinect were located on the Kinect's own processor. (Id.)

         Biscotti now argues that no reasonable jury could have found for Microsoft on infringement because the Xbox One processor does include instructions for controlling the audio and video capture devices in the Kinect. In particular, Biscotti relies on several statements by Microsoft's witnesses that the Xbox One sends instructions to the Kinect Sensor that cause the Kinect to start and stop recording. (Dkt. No. 318 at 24-25.) Biscotti maintains that Microsoft “never denied the existence of these instructions or explained why they do not [satisfy] the claims.” (Id. at 25.)

         Microsoft responds by pointing to the testimony of Plaintiff's infringement expert, Dr. Wicker, who explained at trial that “the Kinect device . . . actually do[es] the video capture.” (Dkt. No. 287, 6/6/17 A.M. Trial Tr. at 74:6-13.) According to Microsoft, the jury could have reasonably concluded based on this testimony that the instructions on the Xbox One signaling the Kinect's audio and video capture devices to turn on/off are neither “instructions for controlling the video capture device to capture a captured video stream” nor “instructions for controlling the audio capture device to capture a captured audio stream.” (Dkt. No. 322 at 6-7.)

         Whether the instructions on the Xbox One actually control audio and video recording by the Kinect was a factual dispute the jury resolved in favor of Microsoft. To overcome this, Biscotti needs to demonstrate that the way the jury resolved this dispute was unreasonable. It has not. Biscotti's own expert admitted the instructions that “actually” control audio and video capture by the Kinect are found in the Kinect and not, as Biscotti argued, in the Xbox One. (Dkt. No. 287, 6/6/17 A.M. Trial Tr. at 74:6-13.) Based upon that alone, a reasonable jury could have concluded that “the at least one processor” and “storage medium” identified by Biscotti do not include “instructions for controlling the video capture device to capture a captured video stream” or “instructions for controlling the audio capture device to capture a captured audio stream.”

         Biscotti attempts to sidestep the jury's verdict by raising, for the first time, a new claim construction dispute regarding the meaning of “instructions for controlling.” However, “[i]t is too late at the JMOL stage to argue for or adopt a new and more detailed interpretation of the claim language and test the jury verdict by that new and more detailed interpretation.” Wi-Lan, Inc. v. Apple, Inc., 811 F.3d 455, 465 (Fed. Cir. 2016) (internal brackets removed). Given that neither party sought more specific constructions for these limitations, the question now is whether the plain and ordinary meaning, combined with the evidence, supports a finding of non-infringement. Id. (reversing a district court for providing new post-trial constructions in ruling on a JMOL and concluding that “[w]hen tested by the [original] construction the court provided, it was reasonable for the jury to conclude that the ‘first computing means' need not include the complex multiplier”). In this case, it does. For example, the jury could have concluded that merely providing instructions to turn the Kinect's audio/video capture devices on and off is not equivalent to “controlling the video capture device to capture a captured video stream” or “controlling the audio capture device to capture a captured audio stream” as required by Claim 6. (PTX-1 at 32:62-33:25 (emphasis added).)

         Biscotti also argues that even if the processor on the Xbox One does not include the required instructions for controlling the audio/video capture devices on the Kinect, this is irrelevant because the Xbox One and Kinect are part of the same “video communication device.” (Dkt. No. 318 at 24-26.) According to Biscotti, the Kinect processor, the Xbox One processor, and the Kinect's audio/video capture devices taken together still infringe. (Id.)

         In response, Microsoft argues that even if the Xbox One and Kinect are part of the same “video communication device, ” Claim 6 of the '182 Patent still “requires that a set of instructions for various capabilities all be stored on one storage medium and executed by one processor.” (Dkt. No. 322 at 8.)

         Biscotti replies that Claim 6 does not require a single processor or a single storage medium. (Dkt. No. 324 at 9-10.) In particular, Biscotti argues that “[t]he ['182] patent explicitly contemplates embodiments with multiple processors and memories.” (Id. at 10.) Thus, Biscotti accuses Microsoft of seeking an untimely and unsupportable construction of the '182 Patent. (Id.) Of course, Microsoft in turn accuses Biscotti of seeking the same thing. (Dkt. No. 322 at 8.)

         Given that neither party sought a construction of “a storage medium” or “the at least one processor” before trial, the Court will not provide a new construction now. Wi-Lan, 811 F.3d at 465. Instead, the Court considers whether a reasonable jury could have found no infringement based on the evidence presented at trial and the claims themselves. At trial, Biscotti's expert, Dr. Wicker, testified that the “at least one processor” and “storage medium” limitations were satisfied by a particular processor and a particular storage medium in the Xbox One, not a combination of various processors and storage mediums. (Dkt. No. 287, 6/6/17 A.M. Trial Tr. at 54:3-11, 68:3- 9, 69:15-24.) A reasonable jury could have therefore concluded that to find infringement the instructions had to be contained on the processor and the storage medium about which Dr. Wicker testified. This conclusion is consistent with the claims, which refer, as Dr. Wicker did, to a particular storage medium and a particular processor rather than various processors and storage mediums in separate computer systems.[4] This conclusion is also consistent with the evidence, as explained above.

         2. Instructions for encoding the captured video stream

         The Asserted Claims also require the storage medium to include, and the “at least one processor” to be able to execute, “instructions for encoding the captured video stream and the captured audio stream to produce a series of data packets.” (PTX-1 at 33:15-17.)

         At trial, Microsoft argued that the processor on the Xbox One did not satisfy this limitation because it does not encode the video stream actually captured by the Kinect. (Dkt. No. 322 at 9.) According to Dr. Orchard, Microsoft's expert, the original video stream captured by the Kinect is altered by the Kinect before it is encoded by the XboxOne. (Dkt. No. 288, 6/7/17 P.M. Trial Tr. at 119:13-120:4.) At this point, the newly encoded video is not the same as the original captured video. (Id. at 128:21-132:20 (“[Y]ou would not say - you cannot say that you are encoding the captured video stream . . . .”); Dkt. No. 322 at 9 (“[T]he ‘captured video stream' obtained by the Kinect camera is not the video stream (or even the same content) that the Xbox One console receives . . . [a]ny subsequent encoding by the Xbox One itself therefore is not ‘encoding the captured video stream.'”).)

         Biscotti argues that nothing in the language of Claim 6 requires the “captured video stream” to not have been previously processed when it is encoded by the “at least one processor.” (Dkt. No. 318 at 27-28.) Biscotti further argues that Claim 6 cannot include such a requirement because Claim 50, which depends from Claim 6, recites “wherein the instructions for encoding the captured video stream comprise instructions for processing the captured video stream prior to encoding the captured video stream.” (Id.) According to Biscotti, this means that Claim 6 is still infringed even if the raw video captured by the Kinect is encoded or processed before it is subsequently encoded by the Xbox One processor. (Id.)

         Microsoft responds that Biscotti's argument improperly raises a claim construction dispute, for the first time, regarding what “captured video stream” encompasses. (Dkt. No. 322 at 10-11.) As to Claim 50, Microsoft responds that Claim 50 is irrelevant because the processing prior to encoding mentioned in Claim 50 is part of the same set of instructions on the same processor that does the encoding. (Id.) By contrast, according to Microsoft, the prior encoding and subsequent encoding in the Xbox One and Kinect happen on separate processors and as part of separate sets of instructions. (Id.)

         As with several other issues in this case, the dispute here turns, at least in part, on competing constructions for a term that neither party sought to have construed prior to trial. The Court therefore considers whether the plain and ordinary meaning, combined with the evidence, supports a finding of non-infringement. Wi-Lan, 811 F.3d at 465. It does. Claim 6 requires the instructions on the storage medium to relate to “encoding the captured video stream.” (PTX-1 at 33:18-19.) Dr. Wicker acknowledged that because of the encoding that takes place on the Kinect, the video stream that is captured by the Kinect is not the same as the video stream encoded by the Xbox One. (Dkt. No. 288, 6/6/17 P.M. Trial Tr. at 43:1-7 (“Q. But the trade-off in an MJPEG is when you compress it down, it's small, but when you go to open it back up, it's not going to be the same thing because you've lost certain of your pixels; is that fair? A. Yes. When you - by allowing for a little loss, you can compress a lot more. And what you get back is slightly different. That's the price you pay.”).) From this testimony, and the evidence generally, a reasonable jury could have concluded that the Xbox One processor does not include instructions for encoding “the captured video stream” that is captured by the Kinect. Moreover, even if “the captured video stream” refers to a previously encoded or processed stream, a reasonable jury could have concluded that the extent of processing in this case means that the two streams are not the same, as Dr. Wicker admitted, or even sufficiently similar.[5]

         3. Instructions for transmitting

         The Asserted Claims require the storage medium to include, and the “at least one processor” to be able to execute, “instructions for transmitting the series of data packets . . . for reception by a second video communication device.” (PTX-1 at 33:24-26.)

         Prior to trial, but after the claim construction phase of this case, the Parties disputed whether the “instructions for transmitting” limitation meant that the data packets transmitted by the first communication device needed to include some specific reference to a second communication device. (Dkt. No. 228 at 9-11.) Biscotti argued that a specific reference was not necessary and that the claims could be infringed so long as the first communication device sent data that ended up on the second communication device. (Id. at 10.) By contrast, Microsoft argued that the instructions must reference a specific second communication device. (Id. at 9-10.) Ultimately, the Court agreed with Microsoft, at least in part, by construing the “instructions for transmitting” limitation to require “some reference to a second video communication device.” (Id. at 11; see also Dkt. No. 260.)

         At trial, Microsoft argued that, at least with respect to Twitch and Beam, [6] the Xbox One does not include “instructions for transmitting . . . for reception by a second video communication device.” (Dkt. No. 322 at 12.) Instead, the Xbox One transmits packets to external servers, managed by Twitch and Beam, rather than a second video communication device. (Id.) According to Microsoft, it is the servers maintained by Twitch and Beam, not the Xbox One, that include the instructions for transmitting to the receiving second video communication device. (Id.) In particular, Microsoft focused on the fact that the data packets sent from the Xbox One are subsequently modified by Twitch and Beam servers, which add a new IP address (for the receiving second video communication device) along with other modifications to optimize for streaming to different device types, connection types, etc. (Id. at 12-15.)

         In its Motion, Biscotti argues that Microsoft's non-infringement positions are premised on a flawed reading of the relevant “instructions for transmitting” limitation. In particular, Biscotti argues that the '182 Patent specifically describes how transmitting from a first video communication device to a second may involve intermediate servers. (Dkt. No. 324 at 13-14.) According to Biscotti, sending data packets to an intermediate server which then relays the packets to a final destination must be covered by Claim 6 even if some alterations are made to the underlying packets. (Id.) Biscotti maintains that Microsoft's “the packets are different” argument is flawed because it reads in a requirement that the data packets transmitted from the first communication device cannot be altered before they arrive at the second video communication device. (Id. at 13-14.) In addressing the requirement that the “instructions for transmitting” reference the receiving video ...


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