While much of the attention on NPE patent litigation centers on the big technology players like Google and Apple, literally hundreds of other technology companies face these lawsuits, and more and more of that litigation involves cloud computing. One recent example is streaming media company Sling TV who is facing a patent lawsuit filed by Realtime Data LLC over patents allegedly infringed by use of the H.264 video compression standard. This case is interesting as it demonstrates that NPEs are having a tougher time holding cases in the Eastern District of Texas since the Supreme Court’s TC Heartland decision, and that it involves potentially standards essential patents which are widely licensed through patent pools.
Realtime Data, LLC d/b/a IXO (“Realtime) originally sued Sling TV along with Arris Group, Sling Media, Dish Network, Echostar, and Hughes Network Systems in the Eastern District of Texas on February 14, 2017. That lawsuit involved eight asserted patents on video compression. Some of those defendants filed motions to dismiss, and on July 19, 2017, the court severed the case and opened a new case with respect to Realtime’s Amended Complaint for all defendants except Echostar and Hughes Network Systems. In the second case, more motions to dismiss or alternatively transfer were filed, with Sling TV arguing in its motion that it is not a resident of the Eastern District and has no established place of business there. Apparently recognizing that it was not going to successfully hold the case in Texas, Realtime voluntarily dismissed its case against Dish Network, Sling TV and Sling Media on August 31, 2017. That same day, and more than six months after its initial lawsuit, Realtime sued Sling TV and Sling Media in the District of Colorado on only three of the eight patents in the original lawsuit.
With regard to Sling TV, Realtime alleges that the single-stream Sling Orange service and the multi-stream Sling Blue service infringes the three asserted video compression patents. Incidentally, among the several add-on options for Sling TV is “Cloud DVR” (in case anyone wonders whether Sling TV considers itself a cloud company). The Complaint includes several pages of “cut and paste” content from various sources regarding the H.264 standard, seemingly to equate Realtime’s asserted patents as essential to H.264. However, it’s highly questionable whether Realtime’s patents are in fact standards essential. Realtime did not file an ITU-T patent declaration form for H.264, and they are not a licensor of MPEG LA’s H.264 patent pool, so have not had an independent determination made on standards essentiality.
This case seems to have a lot of problems, and it’s hard to imagine that Realtime has an end game anything beyond nuisance value settlement. First and foremost, there are literally thousands of H.264 essential patents offered for license under MPEG LA’s patent pool. That license arguably sets a baseline for the value of any particular H.264 patent, so Realtime should only reasonably expect to receive a fraction of a fraction of the MPEG LA royalty. Second, Realtime will likely face a Section 101 invalidity challenge on its patents in light of the Federal Circuit’s recent decision in RecogniCorp v. Nintendo (which found encoding and decoding image data to be an abstract idea). Look for a Section 101 Motion to Dismiss from Sling TV in the coming weeks. While Sling TV is not facing anything close to a threat to its business with this lawsuit, it’s an unfortunate example of the types of patent assertions that cloud service companies have to deal with every day.