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Quantum Stream Inc. v. Charter Communications, Inc.

United States District Court, S.D. New York

March 1, 2018

QUANTUM STREAM INC., Plaintiff,
v.
CHARTER COMMUNICATIONS, INC. and SPECTRUM MANAGEMENT HOLDING COMPANY, LLC, formerly known as TIME WARNER CABLE, INC., Defendants.

          OPINION & ORDER

          Paul A. Engelmayer United States District Judge

         Plaintiff Quantum Stream Inc. ("Quantum") brings this patent infringement action against defendants Charter Communications, Inc. and Spectrum Management Holding Company, LLC (together, "Charter"). Quantum alleges infringement of three of its patents that relate to the pairing of "secondary" advertising content based upon a user's real-time selection of "primary" content or upon other data, so as to result in a customized presentation of content and dependent advertising to the user.

         Before the Court now is Charter's motion to dismiss this action for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Charter argues that Quantum's three patents are drawn to patent-ineligible subject matter and are thus invalid under § 101 of the Patent Act, 35 U.S.C. § 101. For the following reasons, the Court holds that Quantum's three patents at issue claim as their inventions no more than the abstract idea of custom advertising, including when advertising is directed to a user based upon qualities of the user, such as the user's selection of other content. The Court therefore grants Charter's motion to dismiss.

         I. Background[1]

         A. The Parties

         Quantum is a Delaware corporation with its principal place of business in New York City. Relevant here, it owns, by assignment, the three patents at issue, possessing "the exclusive right to sue and to recover damages for infringement of each of them. Complaint ¶¶ 1, 9-14. Defendant Charter Communications, Inc., is a Delaware corporation with its principal place of business in St. Louis, Missouri. Defendant Spectrum Management Holding Company, LLC is a Delaware corporation based in New York City and Stamford, Connecticut. Id. ¶ 3. Together, the defendants provide "digital entertainment services under the Spectrum, Charter Spectrum, and Time Warner Cable brand names to customers in New York" and elsewhere. Id. ¶ 4.

         B. The Patents

         1. Overview of the Three Patents

         The three patents at issue in this case are U.S. Patent No. 9, 047, 626 (the " '626 Patent"), U.S. Patent No. 9, 117, 228 (the " '228 Patent"), and U.S. Patent No. 9, 349, 136 (the " '136 Patent"). See Complaint, Exs. A-C. Each was issued by the U.S. Patent and Trademark Office to inventor Tayo Akadiri, on the following dates: the '626 Patent on June 2, 2015; the '228 Patent on August 25, 2015; and the '136 Patent on May 24, 2016.

         Each patent has the same specification and each is entitled, "Content Distribution System and Method, " although the claims of each patent are different. In describing how the patents relate to the pairing of secondary advertising content based upon the user's own selection of primary content or upon other data, the patents elaborate in their specification that they "relate[] generally to content distribution systems and, more particularly, to a system for distributing digital content associated with a container based on a relationship between attributes associated with the digital content and attributes associated with a defined region of the container." '136 Patent at 1:28-32.[2] The "container, " in turn, is "any digital transmission, " into which primary content and secondary content may be added, which the specification goes on to describe as something that "may constitute, or be included in, any digital transmission, such as television or radio programming, web pages, and the like." Id. at 1:33-35.

         The specification elaborates that containers contain "vacancies, " particular spaces that are reserved to be filled with secondary advertising content yet to be determined. See Id. at 3:1-2 (defining "vacancies" as follows: "designated regions ('vacancies') which are reserved to be filled by other secondary digital content"). The patents thus state that they "provid[e] a means for creating units of content which can fill the vacancies, and by providing an automated broker that responds to real-time notifications of vacancies that need content, selects appropriate units of content for each vacancy, and transmits in real-time the content unit information to fill each vacancy." Id. at 3:2-7.

         The basis by which secondary content is selected to fill each "vacancy" is accomplished by reference to "attributes" that correspond to both the vacancies themselves and the content units that could be selected to occupy them. Id. at 3:8-16 ("Both the vacancies and the content units that fill them have attributes that may be used to determine how and when a vacancy will be filled by a unit of content, or how and when a unit of content can be used."); see also Id. at 3:30-37 ("A vacancy is a designated region within digital content which is reserved to be filled by other (secondary) digital content. Each vacancy has attributes that can be used to determine how and when that vacancy will be filled by secondary content. At different times, a single vacancy may be filled with a variety of types of different content from any source-thus making the vacancy also a method for assembling on-the-fly, mix-and-match content."). The specification then describes potential conceptual bases for how attributes would be evaluated and used to pair secondary content with a vacancy, such as through "marketplace (trading) mechanisms to determine the matching and selection of content." Id. at 3:12-13.

         The container, vacancies, and secondary content units are described in the patents as not limited to any particular format or information medium, other than analog information forms. Instead, the specification states that "[a] vacancy may be included in any digital medium such as digital video or digital audio, web pages, email, and the like. Correspondingly, the unit of content that fills a vacancy can constitute any digital medium." Id. at 3:13-16. The end result described by the patents is a customized presentation of content to the user, with selection of the secondary content based upon some evaluation of the attributes of that content and the attributes of the vacancies contained within the primary content the user has selected or upon other attributes, such as attributes relating to the user. Id. at 3:17-27 ("At different times, a single vacancy may be filled with a variety of types of different content from any source. Conversely, a single vacancy in content that is distributed to multiple consumers may be filled with different content for each consumer at the same time-thus making the vacancy also a method for seamlessly assembling multi-sourced, mix-and-match content, on-the-fly. Trading and placing content units within vacancies for content enables both primary content owners and secondary content owners to obtain the full commercial and consumer benefit of their content."). The specification notes that this may be accomplished via various implementations "consistent with an embodiment of the present invention, " such as by providing "a method ... for notifying a broker (or service provider) in real-time of a vacancy opening that needs to be filled with content. The notification may be transmitted across a network such as the Internet, and may include vacancy information, such as the attributes of the open vacancy, and other information including data on the consumer of the digital content that contains the vacancy." Id. at 3:62-4:2.

         Quantum alleges infringement of "at least" claim 1 of each of the three patents. See Complaint ¶¶ 34 ('626 Patent, cl. 1), 38 ('228 Patent, cl. 1), and 42 ('136 Patent, cl. 1). These claims disclose as follows:

         As to the '626 Patent:

1. A system for providing secondary content for inclusion in video content, the system comprising:
a consumer device comprising:
at least one network connector for receiving secondary content selected based on targeted criteria and for receiving (a) video content having at least one vacancy, and (b) information relating to the video content, wherein the information relating to the video content includes one or more attributes associated with the at least one vacancy;
at least one storage device for storing the secondary content and information relating to the secondary content, wherein the information relating to the secondary content includes one or more attributes; and at least one processor for inserting the secondary content to fill the at least one vacancy of the video content, wherein the insertion is based on matching the one or more attributes associated with the at least one vacancy with the one or more attributes of the information relating to the secondary content; and
at least one server interface for transferring the video content and the secondary content to the consumer device; wherein the consumer device outputs the secondary content within the at least one vacancy of the video content.
'626 Patent, cl. 1.

         Claim 1 of each of the other two patents, the '228 Patent and the '136 Patent, are quite similar, with the '228 Patent being a narrower invention subsumed by the '136 Patent.[3] The narrowing is accomplished by the use of two servers in the '228 Patent, one for the storage and selection of secondary digital video advertisements and another for the transmission of a primary content digital video program. The '136 Patent differs in that while it could utilize the same configuration of two servers as described in the '228 Patent, it does not require precisely two servers, but instead could use additional servers. Both patents use a "network" and "network connectors" to connect the servers to a "consumer device, " which inserts the secondary advertising into the vacancies contained within the primary content.

         As such, both patents differ from the '626 Patent in that the "consumer device" in the '228 and '136 Patents does not contain a "storage device" for storing secondary advertising content. In the '626 Patent, the "processor" of the consumer device draws from such a device to select secondary advertising content based upon attributes evaluated in a selection function and inserts that secondary content into primary content vacancies. Instead, in the '228 Patent, the secondary advertising content is delivered to the consumer device over a network from a "second server, " in which a "storage device" of secondary advertising content is located. And in the '136 Patent, it is delivered over a network from at least one "second server" that transmits the selected secondary advertising content to the consumer device. In both the '228 and '136 Patents, the selection of the particular secondary advertising content is accomplished in the "second server" (the '228 Patent discloses a "processor" in the second server for this function), while the processor in the consumer device in both the '228 and '136 Patents is used for insertion of the already selected secondary advertising content into the primary content vacancies.

         Claim 1 of the '136 Patent is thus broader and discloses:

         1. A system for targeting digital video advertisements to consumers, the system comprising:

at least one first server comprising a first network connector, wherein the at least one first server is connected to at least one consumer device over a network and is configured to transmit a digital video program, having at least one vacancy, to the at least one consumer device through the first network connector and over the network; at least one consumer device comprising:
at least one second network connector, wherein the at least one consumer device is configured to receive, through the at least one second network connector, the digital video program from the at least one first server and the digital video advertisements from at least one second server, wherein at least one of the digital video advertisements is selected for transmission to the at least one consumer device based on comparing targeted criteria to at least one attribute of the at least one of the digital video advertisements; and
at least one processor configured to insert the selected at least one of the digital video advertisements into the at least one vacancy of the digital video program.

'136 Patent, cl. 1, Finally, claim 1 of the '228 Patent discloses:

         1. A system for targeting digital video advertisements to ...


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