United States District Court, E.D. Texas, Marshall Division
PAYNE UNITED STATES MAGISTRATE JUDGE.
Stingray Digital Group Inc. and Stingray, USA, Inc.
(collectively “Stingray”) filed a Daubert Motion
to Exclude Certain Opinions and Testimony of Music
Choice’s Damages Expert (Dkt. No. 192), which is now
before the Court. In this motion, Stingray moves to exclude
certain opinions and testimony of Dr. Keith R. Ugone.
Stingray seeks to exclude (1) Dr. Ugone’s calculation
of lost profits relating to two former Music Choice customers
that switched their business to Stingray, (2) his analysis of
the price erosion allegedly caused by Stingray’s entry
into the market with respect to ten Music Choice customers,
and (3) his opinions on the commercial success of certain
Music Choice products and services.
(Id). For the reasons set forth herein,
Stingray’s motion is DENIED.
Background of this Action, including Patents-in-Suit
Choice filed this patent infringement action on June 6, 2016.
(Dkt. No. 192, at 5).This action involves audio and video on
demand (“VOD”) music channels transmitted to
consumers by cable and satellite television providers who
serve as multichannel video programming distributors
(“MVPD”). (Id., at 1). MVPDs execute a
contract with a music service provider where the MVPD agrees
to pay the music service provider a monthly rate per
subscriber in exchange for one or more music services,
including, for example, audio or VOD music channels.
(Id., at 2). Typically, each MVPD executes a
contract with only one music service provider at a time for a
period of several years. (Id., at 3).
stay of this action pending inter partes review
(“IPR”), three patents-in-suit remained: U.S.
Patent No. 9,357,245 (the “’245 Patent” or
“Visual Complement Patent”), U.S. Patent No.
7,320,025 (the “’025 Patent”), and U.S.
Patent No. 9,351,045 (the “’045 Patent”).
The ’245 Patent is directed to providing visual images
to complement an audio data stream, e.g., album art relating
to the song being played. (Id., at 5). The
’025 and ’045 Patents (collectively, the
“VOD Linking Patents”) are related patents and
share a common specification. The VOD Linking Patents are
directed to enabling users to exercise control over the
selection and timing of the on-demand content they wish to
Choice, owned by several MVPDs, has been a music service
provider since 1991. It offers audio through its Audio
Service, which consists of audio music channels, and VOD
music programming, through its VOD Service. (Id., at
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).
History of AT&T and Liberty
Choice first secured AT&T’s subscriber business in
March 2011, when it agreed to provide music channels and
videos for a monthly rate of $0.12 per residential
subscriber. (Id.). After the term expired in 2014,
they renewed the deal for one year but at a new rate of
$0.0931 per residential subscriber. (Id., at 3).
When the new term ended in March 2015, AT&T switched to
Stingray and its newly developed Music TV App, which had the
same features and functionality as Music Choice’s
offerings, but at a lower price of $0.03 per residential
subscriber. (Id.). While Stingray provided its Music
TV App to multiple customers, only AT&T was provided a
service accused of infringement. (Dkt. No. 192, at 5). In
February 2018, AT&T, through its subsidiary,
DirecTV, re-signed with Music Choice at a lower
rate than in 2014. (Dkt. No. 214, at 6 n.2).
Cable Vision of Puerto Rico (“Liberty”) was
another Music Choice customer. In March 2014, it switched its
business to Stingray. Initially, it was provided the OSE1
version of the UbiquiCAST system, but starting in at least
April 2016, Stingray began providing Liberty with the OSE2
version of the system. (Id., at 3).
Dr. Ugone’s Reports
Ugone submitted a damages report on September 27, 2017, and a
post-stay supplemental report on April 12, 2019. (Dkt. No.
192, at 5). In the report, Dr. Ugone found that Music Choice
suffered lost profits due to the loss of the AT&T and
Liberty accounts caused by Stingray’s alleged
infringement of the Visual Complement Patent and VOD Linking
Ugone also calculated price erosion with respect to ten
additional customers for whom Music Choice lowered its prices
due to Stingray’s alleged infringement of the VOD
Linking Patents. In the supplemental report, Dr. Ugone
updated the damages calculations, but his methodologies did
not change. (Id., at 6).
Dr. Ugone prepared a report on commercial success of the
’245 Patent in support of Music Choice’s position
that the patents-in-suit are non-obvious. He opined that the
technology in the ’245 Patent has been the subject of
significant commercial success. (Id.).