United States District Court
`Western District of Texas
`Austin Division
`
`Affinity Labs of Texas, LLC,
`
` Plaintiff,
`
` v.
`
`Netflix, Inc.
`
` Defendant.
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`Case No. 1:15-cv-00849-RP
`
`Jury Trial Demanded
`
`First Amended Complaint for Patent Infringement
`
`Plaintiff Affinity Labs of Texas, LLC (Affinity Labs) files this First Amended
`
`Complaint against Defendant Netflix, Inc. (Netflix) and alleges as follows:
`
`Parties
`
`1.
`
`Plaintiff Affinity Labs is a Texas limited liability company having offices at
`
`31884 RR 12, Dripping Springs, TX 78620.
`
`2.
`
`Defendant Netflix, Inc. is a Delaware corporation with a principal office
`
`located at 100 Winchester Circle, Los Gatos, CA 95032. Netflix is registered to do business
`
`in and actively engages in business within the State of Texas, and maintains an agent for
`
`service of process at National Registered Agents, Inc., 1999 Bryan St., Ste. 900, Dallas, TX
`
`75201-3136.
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`Jurisdiction
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`3.
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`This Court has subject matter jurisdiction over this action pursuant to 28
`
`U.S.C. §§ 1331 and 1338(a) because this action arises under the federal patent statutes, 35
`
`U.S.C. §§ 271 and 281-285.
`
`4.
`
`This Court has general and specific personal jurisdiction over Netflix.
`
`Netflix has committed and continues to commit acts giving rise to this action within Texas
`
`and within this judicial district and Netflix has established minimum contacts within the
`
`forum such that the exercise of jurisdiction over Netflix would not offend traditional notions
`
`of fair play and substantial justice. For example, Netflix has committed and continues to
`
`commit acts of patent infringement in this judicial district, as set forth below. In conducting
`
`its business in Texas and this judicial district, Netflix derives substantial revenue from its
`
`patent infringement.
`
`Venue
`
`5.
`
`Venue in the Western District of Texas is proper pursuant to 28 U.S.C. §§
`
`1391(b) and (c) and 1400(b) because Netflix has committed acts within this judicial district
`
`giving rise to this action, and Netflix has and continues to conduct business in this judicial
`
`district, including one or more acts of using, selling, and offering to sell its Netflix on-
`
`demand Internet streaming media service that constitutes patent infringement in this judicial
`
`district, and providing service and support to Netflix’s customers in this judicial district.
`
`6.
`
`On information and belief, Netflix operates distribution and shipping centers
`
`within the state of Texas and this judicial district, including in Austin, Houston, San
`
`Antonio, and Dallas, TX.
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`7.
`
`Venue in the Western District of Texas is also proper because Affinity Labs
`
`is headquartered in this judicial district in Dripping Springs, Texas.
`
`8.
`
`Venue in the Western District of Texas is also proper because the majority
`
`of Affinity Labs’ documents and relevant evidence is located at Affinity Labs’ headquarters
`
`within this judicial district and numerous witnesses are also located within this judicial
`
`district.
`
`9.
`
`Venue in the Western District of Texas is also proper because Affinity Labs
`
`is organized and governed by the limited liability company laws of Texas and is subject to
`
`taxes in Texas. Affinity Labs maintains a registered agent for service of process in Texas.
`
`10.
`
`Venue in the Western District of Texas is also proper because of judicial
`
`economy. The Honorable Judge Lee Yeakel in this judicial district previously presided over
`
`Affinity Labs of Texas, LLC v. Clear Channel Broadcasting, C.A. No. A-12-CV-205-LY,
`
`involving another Affinity Labs patent, United States Patent No. 7,970,379, which is in the
`
`same patent family sharing the same specification as the Asserted Patent in this matter. In
`
`the previous case, Judge Yeakel conducted a fully-briefed claim construction hearing and
`
`issued a claim construction order on this related technology.
`
`Background
`
`11.
`
`12.
`
`Affinity Labs was founded in 2008 by Russell White and Harlie Frost.
`
`Russell White is a successful entrepreneur and inventor with over 30 issued
`
`patents owned by Affinity Labs, Apple, AT&T, and others. Mr. White grew up in Houston,
`
`Texas, and has an undergraduate degree in mechanical engineering from Texas A&M. Mr.
`
`White also graduated from the University of Temple Law School, which he attended at
`
`night while working full time as an engineer for The Lincoln Electric Company. After
`
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`earning his law degree, Mr. White moved to Austin and co-founded SBC Knowledge
`
`Ventures, an entity within AT&T.
`
`13.
`
`Mr. White is a prolific inventor listed on at least thirty-four separate United
`
`States patents.
`
`14.
`
`On March 28, 2000, Mr. White and Kevin R. Imes filed a detailed patent
`
`application, No. 09/537,812 (the ’812 application) with the United States Patent and
`
`Trademark Office (PTO).
`
`15.
`
`The ’812 application broadly addressed the problem of accessing, managing,
`
`and delivering digital audio and video content. In doing so, the ’812 application disclosed a
`
`number of inventions and defined, for the first time, what is now a ubiquitous digital media
`
`ecosystem. These inventions laid the foundation for a revolution in streaming technology
`
`that is responsible for the current transformation in how individuals consume media.
`
`16.
`
`For instance, according to Netflix’s Fourth Quarter 2015 Letter to
`
`Shareholders regarding its quarterly earnings dated January 19, 2016, Netflix accounted for
`
`37% of North American downstream Internet traffic in 2015 during peak download times,
`
`streaming 42.5 billion hours during the year.
`
`17.
`
`More particularly, the inventions detailed in the ’812 application and
`
`claimed in the ’802 patent underpin the streaming technology known generally as Hypertext
`
`Transfer Protocol adaptive bitrate (HTTP ABR) streaming. HTTP ABR streaming is now
`
`ubiquitously utilized among content providers—including Netflix—to stream video to users’
`
`electronic devices.
`
`18.
`
`HTTP ABR streaming technology dynamically detects local bandwidth and
`
`CPU conditions (for example, how fast data in a buffer is being processed) and seamlessly
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`switches the video quality of media files that a player receives. Users with a fast network
`
`connection can experience higher quality videos than users with slower network
`
`connections, while both users enjoy a seamless, uninterrupted streaming video experience.
`
`19.
`
`Additionally, HTTP ABR streaming technology uses the hypertext transfer
`
`protocol (HTTP). Since the Internet was built on HTTP, it is much easier and cheaper to
`
`serve streaming data over this protocol as opposed to specialized streaming protocols (i.e.,
`
`Real Time Streaming Protocol, Microsoft Media Server, and Real Time Messaging
`
`Protocol, among others) as was typically the case prior to 2008.
`
`20.
`
`In HTTP ABR streaming, the video/audio source is cut into many short
`
`segments (“chunks”) that are formatted for delivery. The video/audio is received by the
`
`user’s device as a series of downloads of these segments or chunks. A playlist file that is sent
`
`to the user’s device at the inception of streaming includes a list of network locations, or
`
`URLs, that tell the user’s device where and in what order the user’s device should request
`
`the segments of the video/audio. The “adaptive” part of the technology is achieved by
`
`formatting the video/audio source into multiple bitrate files, generating segments of various
`
`sizes of the video. The user’s device can then choose between the segments of different sizes
`
`based upon the device’s current network connection or the device’s CPU performance.
`
`21.
`
`Variable network connection speeds can be illustrated where a mobile user
`
`traveling in a car connects to different networks with variable data transmission rates during
`
`the same media stream. For example, a child may request delivery of a movie or television
`
`show while sitting in the back of the family’s car waiting to start a family road trip. The
`
`media delivery begins when the requesting device is still connected to a home Wi-Fi
`
`network connection. In the middle of the stream, however, the car starts up and backs out of
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`the family’s driveway, causing the requesting device to disconnect from the higher-speed
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`Wi-Fi network and reconnect to a wireless 4G network with slower data transmission rates.
`
`Later, the family nears the outskirts of town and the requesting device again disconnects
`
`from the higher-speed 4G network and reconnects to a wireless 3G network with even
`
`slower data transmission rates.
`
`22.
`
`Alternatively, a user who is connected to the same network may encounter
`
`variable network connection speeds and speed slowdowns based on network traffic or other
`
`factors the user does not control. Without the benefit of HTTP ABR streaming in both of
`
`these scenarios, if the user’s data transmission rate dropped below the rate required for
`
`continuous streaming of the digital media, the user would experience complications, such as
`
`interruptions or delays, in streaming the media.
`
`United States Patent No. 9,094,802 (the ’802 patent)
`
`23.
`
`On July 28, 2015, the PTO issued U.S. Patent No. 9,094,802 (the ’802
`
`patent), entitled “System and Method to Communicate Targeted Information.” A copy of
`
`this patent is attached as Exhibit A. The ’802 patent was issued from a continuation
`
`application claiming priority to the ’812 application, which was filed with the PTO on
`
`March 28, 2000. The ’802 patent issued over nearly a thousand pieces of prior art (674
`
`domestic and foreign patents and patent applications; and 308 non-patent references), was
`
`explicitly found to satisfy all sections of the patent laws including §§ 101, 102, 103, and 112,
`
`was explicitly determined to have March 28, 2000 as its priority date, is presumed valid, and
`
`is valid.
`
`24.
`
`The ’802 patent sought to solve several problems specifically arising from
`
`digital media streaming and delivery. In doing so, the inventors conceived of solutions that
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`are now foundational to today’s streaming technologies. For example, the inventors
`
`recognized that users would experience varying network connection speeds, either on the
`
`same network or by switching between networks while on the go, and that the changes in
`
`speeds would prevent smooth and continuous media playback. Furthermore, the inventors
`
`recognized the importance and advantage of delivering media using conventional Internet
`
`website technology and infrastructure, for example, by using webservers and links or URLs
`
`to identify the differently formatted media segments.
`
`25.
`
`The ’802 patent further offered particular technical solutions to protect
`
`streaming digital media from delays or interruptions when users experience slowdowns or
`
`congestion in a delivery network. For example, the ’802 patent disclosed that digital media
`
`“may be formatted and transmitted to achieve a desirable transmission rate.” Ex. A, 5:23-
`
`25. “In one embodiment, the information may be wirelessly communicated at a relatively
`
`slow transmission rate.” Id. at 5:52-53. “In this manner, communication networks having
`
`less or slower transfer rates may be used to wirelessly communicate the selected audio
`
`information to the electronic device.” Id. at 5:62-65. In other circumstances, “high-speed
`
`wireless communications networks may be used to communicate the selected audio
`
`information” Id. at 5:66-6:1. In yet another embodiment, “a hybrid of wireless
`
`communication rates may be deployed depending on the requirements of the selected audio
`
`information and/or the electronic device.” Id. at 6:5-8. Thus, a user experiencing variable
`
`network connection speeds, such as the child sitting in the back of the family car during a
`
`road trip, can still receive a continuous media stream without breaks or interruptions in the
`
`media because the delivery system includes a playlist that facilitates varied data
`
`transmission rates to the requesting device.
`
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`26.
`
`The ’802 patent accomplishes this variable rate solution by breaking up and
`
`formatting the digital media into segments so that the same media can be delivered in
`
`different resolutions or qualities at different transmission rates. See, e.g., id. at 3:26-29 (“For
`
`example, an audio file may be formatted, segmented, compressed, modified, etc. for the
`
`purpose of providing or communicating the audio invention.”); id. at 4:58-63 (“For
`
`example, a wireless device may be operable to receive packets of information having a
`
`specific size and in a specific format. In such an embodiment, communications engine 102
`
`could format the information into a desirable format for wirelessly communicating the
`
`information to electronic device 103.”)
`
`27.
`
`During prosecution of the ’802 patent, the Patent and Trademark Office
`
`considered the Office’s post-Alice guidelines and determined that all the claims of the ’802
`
`patent claim patent eligible subject matter and surpassed the requirements set forth in § 101.
`
`No claim of the ’802 patent relates to a fundamental economic practice.
`
`No claim of the ’802 patent relates to a method of organizing human
`
`28.
`
`29.
`
`activity.
`
`30.
`
`No claim of the ’802 patent could be performed in full by the human mind
`
`or with a pen-and-paper.
`
`31.
`
`No claim of the ’802 patent recites or claims a mathematical relationship or
`
`formula.
`
`32.
`
`No claim of the ’802 patent claims recites a computer merely receiving,
`
`processing, and storing data in a generic manner.
`
`33.
`
`No claim of the ’802 patent recites a longstanding or historical commercial
`
`8
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`practice.
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`34.
`
`As of March 2000, every claim of the ’802 patent recites a combination of
`
`elements that were not well-understood, routine, or conventional to those of ordinary skill
`
`in the art.
`
`35.
`
`Every claim of the ’802 patent recites patent eligible subject matter as
`
`required by § 101.
`
`36.
`
`Numerous other companies have recognized the value and importance of
`
`Affinity Labs’ innovation. For instance, twenty-eight companies have licensed Affinity
`
`Labs’ patent portfolio for the patents in the same family as the Asserted Patent.
`
`37.
`
`Netflix does not have a license to the ’802 patent or any patent in Affinity
`
`Labs’ patent portfolio.
`
`United States Patent No. 9,444,868 (the ’868 patent)
`
`38.
`
`On September 13, 2016, the PTO issued U.S. Patent No. 9,444,868 (the ’868
`
`patent), entitled “System to Communicate Media.” A copy of the ’868 patent is attached as
`
`Exhibit B. Similar to the ’802 patent, the ’868 patent also issued from a continuation
`
`application claiming priority to the ’812 application, which was filed with the PTO on
`
`March 28, 2000. The ’868 patent issued over nearly a thousand pieces of prior art, was
`
`explicitly found to satisfy all sections of the patent laws including §§ 101, 102, 103, and 112,
`
`was explicitly determined to have March 28, 2000 as its priority date, is presumed valid, and
`
`is valid.
`
`39.
`
`Similar to the ’802 patent, the ’868 patent claims particular technical
`
`solutions to protect streaming digital media from delays or interruptions when users
`
`experience slowdowns or congestion in a delivery network.
`
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`40.
`
`These problems are unique to streaming digital media and the ’868 patent
`
`offers systems for breaking up and formatting the digital media into segments so that the
`
`same media can be delivered in different resolutions or qualities at different transmission
`
`rates to end user devices.
`
`41.
`
`During prosecution of the ’868 patent, the applicant discussed §§ 101, 102,
`
`103, and 112 with the examiner in a telephonic interview on May 4, 2016.
`
`42.
`
`During the May 4, 2016 interview, the examiner confirmed that the claims
`
`of the ’868 patent comply with all of these statutory provisions.
`
`43.
`
`During prosecution of the ’868 patent, the Patent and Trademark Office
`
`considered the final written decision of the Patent Trial and Appeals Board regarding U.S.
`
`Patent No. 8,359,007 and § 103.
`
`44.
`
`The PTO issued the claims of the ’868 patent after considering the final
`
`written decision of the Patent Trial and Appeals Board described in ¶ 43.
`
`45.
`
`During prosecution of the ’868 patent, the PTO also considered U.S. Patent
`
`Nos. 6,678,215 to Treyz and 6,711,622 to Fuller. The Treyz and Fuller references served as
`
`the basis for the PTAB’s final written decision identified in ¶ 43.
`
`46.
`
`The PTO issued the claims of the ’868 patent after considering the Treyz
`
`and Fuller references.
`
`47.
`
`The PTO issued the claims of the ’868 patent after also considering over 75
`
`press releases from RealNetworks regarding its streaming technologies, as well as user
`
`manuals from RealNetwork for its streaming technologies, including RealJukebox Plus,
`
`RealPlayer 7 Plus, and RealPlayer Plus G2.
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`48.
`
`During prosecution of the ’868 patent, the PTO considered the Office’s post-
`
`Alice guidelines and determined that all the claims of the ’802 patent claim patent eligible
`
`subject matter and surpassed the requirements set forth in § 101.
`
`No claim of the ’868 patent relates to a fundamental economic practice.
`
`No claim of the ’868 patent relates to a method of organizing human
`
`49.
`
`50.
`
`activity.
`
`51.
`
`No claim of the ’868 patent could be performed in full by the human mind
`
`or with a pen-and-paper.
`
`52.
`
`No claim of the ’868 patent recites or claims a mathematical relationship or
`
`formula.
`
`53.
`
`No claim of the ’868 patent claims recites a computer merely receiving,
`
`processing, and storing data in a generic manner.
`
`54.
`
`No claim of the ’868 patent recites a longstanding or historical commercial
`
`practice.
`
`55.
`
`As of March 2000, every claim of the ’868 patent recites a combination of
`
`elements that were not well-understood, routine, or conventional to those of ordinary skill
`
`in the art.
`
`56.
`
`Every claim of the ’868 patent recites patent eligible subject matter as
`
`required by § 101.
`
`57.
`
`Netflix does not have a license to the ’868 patent or any patent in Affinity
`
`Labs’ patent portfolio.
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`Count I
`
`Infringement of U.S. Patent No. 9,094,802 by Netflix
`
`58.
`
`Affinity Labs restates and realleges each of the allegations set forth above
`
`and incorporates them herein.
`
`59.
`
`60.
`
`Affinity Labs holds all legal title, interest, and rights in the ’802 patent.
`
`Netflix did not and does not have authority to make, use, sell, or offer for
`
`sale any system covered by any claim of the ’802 patent.
`
`61.
`
`Netflix has and continues to manufacture, use, sell, and offer to sell, without
`
`authority, its Netflix on-demand Internet streaming media service.
`
`62.
`
`End users and subscribers use the Netflix on-demand Internet streaming
`
`media service to watch Netflix’s movie and television media library on any Internet-
`
`connected device that offers a Netflix application, such as a computer, gaming console,
`
`DVD or Blu-ray player, HDTV, set-top box, home theater system, phone, or tablet.
`
`63.
`
`For example, Netflix advertises on its homepage that users can “Watch
`
`Anywhere,” including “on your TV” using Smart TVs, Playstation, Xbox, Chromecast,
`
`Apple TV, and Blu-ray players; “on the go” using iPhone, iPad, Android phones and
`
`tablets, and Windows phones and tablets; or using “any computer” on Netflix.com.1
`
`
`1 https://www.netflix.com (last visited Sept. 13, 2016).
`
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`64.
`
`Netflix also advertises that its users can “connect to Netflix using your
`
`favorite devices,” including on Smart TVs, Streaming Media Players, Game Consoles, Set-
`
`top Boxes, Blu-ray Players, Smartphones & Tablets, and PCs & Laptops.2
`
`
`
`
`2 See Netflix Supported Devices, Netflix, Inc., https://devices.netflix.com (last visited Sept. 13,
`2016).
`
`13
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`65.
`
`Netflix uses and controls a media delivery system to stream and deliver
`
`movies and television programs to its subscribers and end users using HTTP ABR
`
`
`
`streaming.
`
`66.
`
`As part of its media delivery system, Netflix maintains media, such as
`
`movies and television programs, available for delivery to end users’ requesting device as a
`
`series of segments.
`
`67.
`
`The segments are configured to allow delivery via network links capable of
`
`delivering information at different rates.
`
`68.
`
`For example, Netflix maintains its streaming media library for “watching
`
`movies or TV shows” at different video qualities or resolutions. The “Low” setting streams
`
`content at approximately 0.3 GB per hour, the “Medium” setting streams standard
`
`definition “SD” content at approximately 0.7 GB per hour, the “High” setting streams high
`
`14
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`definition “HD” content and ultra high definition “Ultra HD” content at approximately 3 to
`
`7 GB per hour, and the “Auto” setting “[a]djusts automatically to deliver the highest
`
`possible quality, based on your current Internet connection speed.”3
`
`
`
`69.
`
`Netflix’s media delivery system includes a media playlist with the different
`
`network locations of the configured segments.
`
`
`3 How can I control how much data Netflix uses?, Netflix, Inc.,
`https://help.netflix.com/en/node/87 (last visited Sept. 13, 2016). Mobile devices have
`additional settings, such as “Off” and “Unlimited” to control the data streamed over mobile
`networks such as a cellular connection. See How do I manage mobile data usage on Netflix?,
`Netflix, Inc., https://help.netflix.com/en/node/43701 (last visited Sept. 13, 2016).
`
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`70.
`
`Netflix’s media delivery system also maintains a delivery resource that
`
`responds to a plurality of file requests to deliver a continuous stream of the requested media
`
`to the end users’ requesting device.
`
`71.
`
`The Netflix on-demand Internet streaming media service allows Netflix’s
`
`end users to stream media at different rates using HTTP ABR streaming for continuous
`
`viewing on the end users’ requesting device, even during fluctuating network conditions.
`
`72.
`
`In violation of 35 U.S.C. § 271(a), Netflix has infringed, and if not enjoined,
`
`will continue to infringe claims of the ’802 patent by manufacturing, using, selling, and/or
`
`offering to sell, without authority, a media delivery system that includes the Netflix on-
`
`demand Internet streaming media service, which is covered by one or more claims of the
`
`’802 patent, literally and/or under the doctrine of equivalents, in this judicial district and
`
`elsewhere in the United States.
`
`73.
`
`For example, Netflix directly infringes at least claims 1, 9, and 14 of the ’802
`
`patent by having and continuing to make, use, sell, and/or offer to sell its media delivery
`
`system that includes the Netflix on-demand Internet streaming media service.
`
`74.
`
`Netflix has known of the ’802 patent since at least August 5, 2015. For
`
`instance, Mr. Frost, President of Affinity Labs, wrote Netflix’s CEO, Reed Hastings, on
`
`August 5, 2015. In that letter, Mr. Frost enclosed a copy of the ’802 patent because of
`
`Netflix’s media delivery system.
`
`75.
`
`Despite Affinity Labs’ written notice of and Netflix’s knowledge of the ’802
`
`patent, Netflix has not stopped its infringement. Instead, Netflix continues to make, use,
`
`sell, and/or offer for sale its media delivery system that includes the Netflix on-demand
`
`Internet streaming media service, which infringes the ’802 patent.
`
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`76.
`
`Netflix’s infringement of the ’802 patent has been and is willful because
`
`Netflix has known of the ’802 patent, knew or was at least reckless with respect to its
`
`infringement of the ’802 patent, and yet continues to offer the Netflix on-demand Internet
`
`streaming media service in at least reckless disregard of Affinity Labs’ patent rights.
`
`77.
`
`Netflix does not have a license or permission to use the claimed subject
`
`matter in the ’802 patent.
`
`78.
`
`Affinity Labs has been injured and has been caused significant financial
`
`damage as a direct and proximate result of Netflix’s infringement of the ’802 patent.
`
`79.
`
`Netflix will continue to infringe the ’802 patent, and thus cause irreparable
`
`injury and damage to Affinity Labs unless enjoined by this Court.
`
`80.
`
`Affinity Labs is entitled to recover from Netflix the damages sustained by
`
`Affinity Labs as a result of Netflix’s wrongful acts in an amount subject to proof at trial.
`
`Count II
`
`Infringement of U.S. Patent No. 9,444,868 by Netflix
`
`81.
`
`Affinity Labs restates and realleges each of the allegations set forth above
`
`and incorporates them herein.
`
`82.
`
`83.
`
`Affinity Labs holds all legal title, interest, and rights in the ’868 patent.
`
`Netflix did not and does not have authority to make, use, sell, or offer for
`
`sale any system covered by any claim of the ’868 patent.
`
`84.
`
`Netflix has and continues to manufacture, use, sell, and offer to sell, without
`
`authority, its Netflix on-demand Internet streaming media service.
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`17
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`Netflix 1004 - Page 17
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`85.
`
`Netflix works with device manufacturers,
`
`such as “global TV
`
`manufacturers,” to preinstall software to operate its media delivery system on end user
`
`devices, such as Smart TVs, before the end user receives the device.4
`
`86.
`
`In violation of 35 U.S.C. § 271(a), Netflix has infringed, and if not enjoined,
`
`will continue to infringe claims of the ’868 patent by manufacturing, using, selling, and/or
`
`offering to sell, without authority, a media delivery system that includes the Netflix on-
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`demand Internet streaming media service, which is covered by one or more claims of the
`
`’868 patent, literally and/or under the doctrine of equivalents, in this judicial district and
`
`elsewhere in the United States.
`
`87.
`
`For example, Netflix directly infringes at least claim 7 of the ’868 patent by
`
`having and continuing to make, use, sell, and/or offer to sell its media delivery system that
`
`includes the Netflix on-demand Internet streaming media service.
`
`88.
`
`89.
`
`Netflix has known of the claims in the ’868 patent since at least May 2016.
`
`On May 19, 2016, counsel for Affinity Labs wrote Netflix, through its
`
`counsel as an agent for Netflix, and directed Netflix to the patent application that led to the
`
`’868 patent, and the claims in that application.
`
`90.
`
`The claims of the ’868 patent have not changed since the last amendment on
`
`May 19, 2016.
`
`91.
`
`Netflix has been aware that the claims of the ’868 patent would issue at least
`
`as early as July 14, 2016.
`
`
`4 Netflix Recommended TVs, Netflix, Inc.,
`https://devices.netflix.com/en/recommendedtv/2016/ (last visited Sept. 13, 2016); see also
`Netflix Supported Devices, Netflix, Inc., https://devices.netflix.com (last visited Sept. 13,
`2016).
`
`18
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`Netflix 1004 - Page 18
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`92.
`
`On July 14, 2016, counsel for Affinity Labs wrote Netflix, through its
`
`counsel as an agent for Netflix, and informed Netflix that the examiner issued a Notice of
`
`Allowance for the claims of the ’868 patent.
`
`93.
`
`On August 24, 2016, Affinity Labs, through its counsel, and Netflix, through
`
`its counsel, participated in a conference call with Special Master Karl Bayer.
`
`94.
`
`During the call on August 24, Affinity Labs and Netflix discussed adding the
`
`’868 patent to this litigation.
`
`95.
`
`Specifically, and in light of Affinity Labs’ intent to assert the ’868 patent
`
`upon issuance, Netflix represented and agreed that the ’868 patent should be included in this
`
`case because of the relationship between the claims of the ’868 patent that were set to issue
`
`and the claims in the ’802 patent.
`
`96.
`
`By no later than the August 24 call, Netflix was aware of and had reviewed
`
`the claims of the ’868 patent.
`
`97.
`
`Since at least August 26, 2016, Netflix knew that the ’868 patent would issue
`
`on September 13, 2016.
`
`98.
`
`On August 26, 2016, counsel for Affinity Labs wrote Netflix, through its
`
`counsel as an agent, and informed Netflix of the issue date for the ’868 patent.
`
`99.
`
`Despite Affinity Labs’ written notice of and Netflix’s knowledge of the ’868
`
`patent and its claims, Netflix has not taken any actions to avoid infringing the ’868 patent.
`
`100.
`
`Instead, Netflix continues to make, use, sell, and/or offer for sale its media
`
`delivery system that includes the Netflix on-demand Internet streaming media service,
`
`which infringes the ’868 patent.
`
`19
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`Netflix 1004 - Page 19
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`101. Netflix’s infringement of the ’868 patent has been and is willful because
`
`Netflix has known of the ’868 patent, knew or was at least reckless with respect to its
`
`infringement of the ’868 patent, and yet continues to offer the Netflix on-demand Internet
`
`streaming media service in at least reckless disregard of Affinity Labs’ patent rights.
`
`102.
`
`In violation of 35 U.S.C. § 271(b), Netflix has indirectly infringed one or
`
`more claims of the ’868 patent by inducing others (e.g., its subscribers and end users) to
`
`directly infringe the ’868 patent at least by using the Netflix on-demand Internet streaming
`
`media service in this judicial district and elsewhere in the United States.
`
`103. Netflix advertises to its end users that streaming content from Netflix
`
`requires certain available network connection speeds depending on the quality of the
`
`streaming content.
`
`104.
`
`For example, Netflix requires a minimum 0.5 Megabits per second
`
`download available from the user’s internet network to stream movies and TV shows, with
`
`3.0 Megabits per second recommended for SD content, 5.0 Megabits per second for HD
`
`content, and 25 Megabits per second for Ultra HD content.5
`
`105. Netflix preinstalls its software capable of using Netflix’s media delivery
`
`system on at least some end user devices before users receive the device.6
`
`106. Additionally, Netflix instructs its users how to use its media delivery system
`
`on end user devices by downloading an application or by using Netflix.com.7
`
`
`5 Internet Connection Speed Recommendations, Netflix, Inc.,
`https://help.netflix.com/en/node/306 (last visited Sept. 13, 2016).
`6 See Netflix Supported Devices, Netflix, Inc., https://devices.netflix.com (last visited Sept. 13,
`2016).
`7 See id.
`
`20
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`Netflix 1004 - Page 20
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`107. Netflix instructs its end users to use its media delivery system to
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`automatically adjust the quality of the media content “to deliver the highest possible quality,
`
`based on your current Internet connection speed.”8
`
`108. Netflix knowingly encouraged and intended—and continues to encourage
`
`and intend—for its subscribers and end users to directly infringe the ’868 patent, including at
`
`least claims 1, 7, and 14, by instructing and advertising that its end users and subscribers
`
`stream Netflix’s media library of movies and television programs to the end users’
`
`requesting device.
`
`109. Netflix intended these actions by its end users and subscribers while the ’868
`
`patent is in force. With full knowledge of the ’868 patent, Netflix continues to intend that its
`
`end users use its media delivery system to directly infringe the claims of the ’868 patent.
`
`110. Netflix knew of the ’868 patent and knew that its instructions and
`
`encouragement, and its continued instruction and encouragement, has and will continue to
`
`result in infringement of the ’868 patent. Netflix, therefore, specifically intended to induce
`
`its subscribers and end users to directly infringe the ’868 patent when they used its media
`
`delivery system, including the Netflix on-demand Internet streaming media service.
`
`111. Alternatively, Netflix knew that there was a high probability that the acts by
`
`its subscribers and end users would infringe the ’868 patent but took deliberate steps to
`
`avoid learning of that infringement.
`
`
`8 How can I control how much data Netflix uses?, Netflix, Inc.,
`https://help.netflix.com/en/node/87 (last visited Sept. 13, 2016); see also How do I manage
`mobile data usage on Netflix?, Netflix, Inc., https://help.netflix.com/en/node/43701 (last
`visited Sept 13, 20