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Music Choice v. Stingray Digital Group Inc.

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

October 24, 2019

MUSIC CHOICE, Plaintiff,
v.
STINGRAY DIGITAL GROUP INC. and STINGRAY MUSIC, USA, INC., Defendants. STINGRAY MUSIC, USA, INC, Plaintiff,
v.
MUSIC CHOICE, Defendant.

          MEMORANDUM ORDER

          ROY S. PAYNE UNITED STATES MAGISTRATE JUDGE.

         Defendants 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).[1] For the reasons set forth herein, Stingray’s motion is DENIED.

         I. BACKGROUND

         a. Background of this Action, including Patents-in-Suit

         Music Choice filed this patent infringement action on June 6, 2016. (Dkt. No. 192, at 5).[2]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).

         After a 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 view. (Id.).

         b. Parties

         Music 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 3).

         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).

         c. History of AT&T and Liberty

         Music 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,[3] re-signed with Music Choice at a lower rate than in 2014. (Dkt. No. 214, at 6 n.2).

         Liberty 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).

         d. Dr. Ugone’s Reports

         Dr. 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 Patents.

         Dr. 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).

         Finally, 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.).

         II. ...


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