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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`SAN JOSE DIVISION
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`MAX SOUND CORPORATION and
`VEDANTI SYSTEMS LIMITED,
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`Plaintiffs,
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`v.
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`GOOGLE, INC.; YOUTUBE, LLC; and
`ON2 TECHNOLOGIES, INC.,
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`Case No. 5:14-cv-04412-EJD
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`ORDER DENYING MOTION TO
`DISMISS
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`Re: Dkt. No. 28
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`Plaintiff Max Sound Corp. (“Plaintiff”) filed the instant patent infringement action against
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`Defendants Google, Inc. (“Google”), YouTube, LLC (“YouTube”), and On2 Technologies, Inc.
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`(“On2”) (collectively, “Defendants”). Most recently, Plaintiff added patent owner Vedanti
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`Systems Limited (“VSL”) as a defendant. Presently before the Court is Defendants’ Motion to
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`Dismiss Plaintiff’s First Amended Complaint. See Dkt. No. 28 (“Mot.”). After fully reviewing
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`the parties’ papers and holding oral argument, the Court DENIES Defendants’ Motion to Dismiss.
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`I. BACKGROUND
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`VSL, a British company, is the patent owner for United States Patent No. 7,974,339
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`entitled “Optimized Data Transmission System and Method” (the “‘339 Patent”). Dkt. No. 23,
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`First Am. Compl. (“FAC”) at ¶ 1, 5, 14; Exh. 1. The ‘339 Patent was issued by the United States
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`Patent and Trademark Office (the “PTO”) on July 5, 2011. Id. at ¶ 13. Plaintiff allegedly entered
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`into a contract with VSL whereby Plaintiff would have a worldwide license to VSL’s Optimized
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`Data Transmission System and Method technology, including the technology claimed in the ‘339
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`Patent, for all fields of use. Id. at ¶ 15. Moreover, pursuant to the agreement, Plaintiff was also
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`Case No.: 5:14-cv-04412-EJD
`ORDER DENYING MOTION TO DISMISS
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`Northern District of California
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`United States District Court
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`Google Inc.
`GOOG 1019
`IPR of US Pat. No. 7,974,339
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`allegedly provided with the exclusive right to enforce VSL’s patent rights on VSL’s behalf,
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`including an indefeasible right to exclude Defendants from practicing the patent. Id.
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`Plaintiff alleges that in 2001, the available technology for delivering digitized video relied
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`solely on compression, i.e., the encoding of digital information by reducing the number of bits in
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`the representation, by identifying and deleting unnecessary bits. Id. at ¶¶ 25, 28. This type of
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`technology resulted in jittery, low-quality video and sound for large-sized video files. Id. at ¶ 27.
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`To improve on this technology, two inventors conceived of and reduced to practice the
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`technological concepts that ultimately became a video codec,1 and the inventions disclosed in the
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`‘339 Patent. Id. at ¶¶ 25, 29. The VSL codec was created by VSL employees and personnel
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`working under the direction of one of the inventors. Id. at ¶ 29. The VSL codec implemented a
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`proprietary and unique system of optimizing data transmission using methods for key frame
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`partitioning, slicing and analyzing pixel variation of video content to significantly reduce the
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`volume of digital video files, while minimizing any resulting loss of video quality. Id. at ¶ 30.
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`The U.S. patent application that resulted in the issuance of the ‘339 patent was filed on January
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`16, 2002. Id. at ¶ 32.
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`Plaintiff alleges that during the mid-to-late 2000s, video compression and streaming
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`technology had become integral to Google products, including the YouTube.com website, the
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`Chrome web browser, and the Android mobile device operating system. Id. at ¶ 33. In March
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`2010, VSL’s CEO Alpesh Patel communicated with Google’s Nikesh Arora to discuss licensing
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`VSL’s video technology and/or the possible acquisition of VSL and the ‘339 Patent. Id. at ¶ 51.
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`In April 2010, Mr. Patel and Google’s Vice President of New Business Development Megan
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`Smith executed a non-disclosure agreement for the purpose of engaging in negotiations regarding
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`VSL’s technology. Id. at ¶ 52. During the course of the negotiations and pursuant to the non-
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`disclosure agreement, VSL allegedly provided a working VSL codec to Google for testing and
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`analysis, and provided copies of VSL’s patents, patent application (including the patent
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`1 A “codec” is a device or computer program capable of encoding or decoding a digital data
`stream or signal. FAC at ¶ 17.
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`application that led to the ‘339 Patent), and claim charts comparing the inventions claimed in the
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`‘339 Patent to the H.264 video codec used by Google. Id. at ¶ 54. By December 2010,
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`negotiations between the parties had stalled, and the parties terminated discussions. Id. at ¶ 56.
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`On December 16, 2010, Google’s employees allegedly shipped back to VSL materials that VSL
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`had provided pursuant to the non-disclosure agreement. Id. at ¶ 57.
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`Plaintiff alleges that Defendants incorporated the ‘339 Patent technology into products
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`they made, used, sold, offered for sale, and/or imported, including VP8, VP9, WebM, H.264,
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`YouTube, Google Adsense, Google Play, Android, Google TV, Chromebook, Google Drive,
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`Google Chromecast, Google Play-per-view, Google Glasses, Google+, Google’s Simplify, Google
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`Maps and Google Earth. Id. at ¶¶ 1, 62-63. Plaintiff further alleges that Google and On2
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`incorporated various claims of the ‘339 Patent into patent applications without disclosing to the
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`PTO the ‘339 Patent or its underlying application as prior art, or its previous inventors. Id. at ¶ 59.
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`Plaintiff commenced the instant action on October 1, 2014 alleging a single claim of patent
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`infringement against Defendants. See Dkt. No. 1. In December 2014, Defendants filed a motion
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`to dismiss based on Plaintiff’s improper joinder of VSL as an involuntary co-plaintiff. See Dkt.
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`No. 15. In January 2015, Plaintiff filed its First Amended Complaint and named VSL as a
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`defendant. See Dkt. No. 23. Defendants filed the instant Motion to Dismiss pursuant to Federal
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`Rule of Civil Procedure 12(b)(6). See Dkt. No. 28. The matter has been fully briefed, and oral
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`argument was held on April 30, 2015. See Dkt Nos. 37, 49, 73.
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`II. LEGAL STANDARD
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`Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient
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`specificity to “give the defendant fair notice of what the . . . claim is and the grounds upon which
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`it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). A
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`complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim
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`upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). “Dismissal under Rule 12(b)(6) is
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`appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support
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`a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th
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`Case No.: 5:14-cv-04412-EJD
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`Cir. 2008). Moreover, the factual allegations “must be enough to raise a right to relief above the
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`speculative level” such that the claim “is plausible on its face.” Twombly, 550 U.S. at 556-57.
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`When deciding whether to grant a motion to dismiss, the court generally “may not consider
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`any material beyond the pleadings.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d
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`1542, 1555 n.19 (9th Cir. 1990). However, the court may consider material submitted as part of
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`the complaint or relied upon in the complaint, and may also consider material subject to judicial
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`notice. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001).
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`In addition, the court must generally accept as true all “well-pleaded factual allegations.”
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`Ashcroft v. Iqbal, 556 U.S. 662, 664 (2009). The court must also construe the alleged facts in the
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`light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1988).
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`However, “courts are not bound to accept as true a legal conclusion couched as a factual
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`allegation.” Id.
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`III. DISCUSSION
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`During the prosecution of the ‘339 Patent, the PTO omitted the language “optimization
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`instead of data compression” from the issued claims:
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`Claim 1. A system for transmitting data optimization instead of data
`compression transmission comprising:
`. . .
`Claim 7. A method for transmitting data optimization instead data
`compression comprising:
`. . .
`Claim 10. A method for transmitting data optimization instead of
`data compression comprising:
`. . .
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`Mot. at 3. Since this language is missing from the issued claims, Defendants contend that this
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`action should be dismissed because the issued claims are invalid as indefinite under 35 U.S.C. §
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`112 for failure to claim what the inventors regard as their invention. Id. at 1.
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`The second paragraph of 35 U.S.C. § 112 provides:
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`The specification shall conclude with one or more claims
`particularly pointing out and distinctly claiming the subject matter
`which the inventor or a joint inventor regards as the invention.
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`(“§ 112, ¶ 2”). In patent law, this is known as the requirement of definiteness. See Nautilus, Inc.
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`v. Biosig Instruments, Inc., 134 S. Ct. 2120, 2125 (2014). If there is a lack of definiteness, then
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`the patent or any claim is invalid. See id.
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`In the recent decision Nautilus, Inc. v. Biosig Instruments, Inc., the Supreme Court set
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`forth the standard for the definiteness requirement: “A patent is invalid for indefiniteness if its
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`claims, read in light of the specification delineating the patent, and the prosecution history, fail to
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`inform, with reasonable certainty, those skilled in the art about the scope of the invention.” Id. at
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`2124. The Supreme Court also highlighted three aspects of the § 112, ¶ 2 inquiry: (1)
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`“definiteness is to be evaluated from the perspective of someone skilled in the relevant art;” (2) “in
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`assessing definiteness, claims are to be read in light of the patent’s specification and prosecution
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`history;” and (3) “definiteness is measured from the viewpoint of a person skilled in the art at the
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`time the patent was filed.” Id. at 2128. The Supreme Court has further stated that the definiteness
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`requirement entails a delicate balance where on the one hand, the requirement must take into
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`account the inherent limitations of language, and on the other hand, a patent must be precise
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`enough to afford clear notice of what is claimed. Id. at 2128-29.
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`In its motion, Defendants argue that during prosecution of the ‘339 Patent, the applicants
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`consistently stated that they regarded their invention as pertaining to the transmission of data that
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`has been optimized without using compression. Mot. at 7-8. Defendants contend that while the
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`examiner entered an amendment to add the “data optimization instead of compression” language
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`to the independent claims, the PTO ultimately failed to include this language to the issued claims.
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`Id. at 8-9. Consequently, Defendants argue that the issued claims of the ‘339 Patent are broader
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`than the claims entered by the examiner, and are invalid because they do not reflect what the
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`applicants regarded as their invention—that the transmission of data was optimized without using
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`compression. Id. at 9 (emphasis added). They contend that the “instead of compression” language
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`is the fundamental aspect of the ‘339 Patent invention. Id. at 9-10.
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`In opposition, Plaintiff argues that the issued claims are valid because they were
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`determined to be patentable without the “data optimization instead of compression” language, and
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`Defendants have failed to point to anything in the record suggesting that the omitted language was
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`essential. Opp. at 12. Moreover, Plaintiff argues that the body of the issued claims, as well as the
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`specification and prosecution history, depicts a data optimization system or method that does not
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`require data compression, thus the express language “instead of compression” is unnecessary. Id.
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`at 14.
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`In evaluating Defendants’ motion in light of the standard set forth by the Nautilus decision,
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`it appears that Defendants seek a judicial determination as to whether the ‘339 Patent is valid.2
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`This type of judicial determination at this stage of litigation is premature. The parties have not
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`commenced discovery, nor have Defendants requested to convert the instant Rule 12(b)(6) motion
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`to a motion for summary judgment.
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`Defendants argue that to conduct the § 112, ¶ 2 analysis it seeks, the Court should take
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`judicial notice of the ‘339 Patent’s prosecution history as a public record in order to demonstrate
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`how the inventors regarded their invention. Mot. at 6, n.3. At oral argument, Defendants
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`emphasized this point. The prosecution history “consists of the complete record of the
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`proceedings before the PTO and includes the prior art cited during the examination of the patent.”
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`Phillips v. AWH Corp., 415 F.3d 1303, 1317 (Fed. Cir. 2005). “Like the specification, the
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`prosecution history provides evidence of how the PTO and the inventor understood the patent . . .
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`[and it] was created by the patentee in attempting to explain and obtain the patent.” Id. While the
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`Court takes judicial notice of the existence of the prosecution history, it declines to take judicial
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`notice of Defendants’ interpretation of the documents. A Rule 12(b)(6) motion is not the proper
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`vehicle to examine and interpret the prosecution history, and engage in a § 112, ¶ 2 analysis to the
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`extent set forth by the Nautilus decision.3 Indeed, none of the court opinions relied on by
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`Defendants show that this type of analysis was conducted on a Rule 12(b)(6) motion. See Mot. at
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`10; Allen Eng’g Corp. v. Bartell Indus., Inc., 299 F.3d 1336 (reviewing a district court judgment
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`2 Defendants rely on a two-requirement standard set forth in Allen Engineering Corp. v. Bartell
`Industries, 299 F.3d 1336, 1348 (Fed. Cir. 2002), to evaluate a §112, ¶ 2 inquiry. See Mot. at 6.
`However, in light of the more recent Nautilus decision by the Supreme Court, this Court declines
`to use the Allen Engineering standard.
`3 This analysis also applies to Defendants’ arguments concerning other terms that were allegedly
`omitted by the PTO. See Mot. at 7.
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`Case5:14-cv-04412-EJD Document78 Filed05/13/15 Page7 of 7
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`following a bench trial); Competitive Techs. v. Fujitsu, Ltd., 286 F. Supp. 2d 1161 (N.D. Cal.
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`2003) (ruling on motions for summary judgment); Lucent Techs., Inc. v. Gateway, Inc., Case No.
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`02-CV-02060-B(WMc) (S.D. Cal. Aug. 11, 2005) (ruling on a motion for partial summary
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`judgment); Nat’l Recovery Techs., Inc. v. Magnetic Separation Sys., Inc., 166 F.3d 1190 (Fed.
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`Cir. 1999) (reviewing a district court judgment following a summary judgment).
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`In sum, within the scope of a Rule 12(b)(6) motion to dismiss, Plaintiff has sufficiently
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`alleged the existence and validity of the ‘339 Patent. At this stage, this is sufficient to survive the
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`instant motion to dismiss. Accordingly, Defendant’s motion is DENIED.
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`IV. CONCLUSION
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`For the foregoing reasons, Defendants’ Motion to Dismiss is DENIED.
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`IT IS SO ORDERED.
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`Dated: May 13, 2015
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`______________________________________
`EDWARD J. DAVILA
`United States District Judge
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`Case No.: 5:14-cv-04412-EJD
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