Info-Hold, Inc. v. Muzak LLC

• Decision Date: 24 April 2015
• Docket Number: No. 2014–1167.,2014–1167.
• Citation: 114 U.S.P.Q.2d 1556,783 F.3d 1365
• Parties: INFO–HOLD, INC., Plaintiff–Appellant v. MUZAK LLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

783 F.3d 1365

114 U.S.P.Q.2d 1556

INFO–HOLD, INC., Plaintiff–Appellant

v.MUZAK LLC, Defendant–Appellee.

No. 2014–1167.

United States Court of Appeals, Federal Circuit.

April 24, 2015.

Daniel Joseph Wood, Info–Hold, Inc., Cincinnati, OH, James L. Kwak, Standley Law Group LLP, Dublin, OH, argued for plaintiff-appellant.

Barry Eastburn Bretschneider, Baker & Hostetler LLP, Washington, DC, argued for defendant-appellee. Also represented by Michael Edward Anderson, Bridget Springer Merritt ; John Frank Murphy, Philadelphia, PA; Kevin W. Kirsch, Cincinnati, OH.

Before REYNA, WALLACH, and TARANTO, Circuit Judges.

Opinion

REYNA, Circuit Judge.

This case comes before us on appeal of numerous rulings unfavorable to Info–Hold, Inc. (“Info–Hold”), owner of U.S. Patent No. 5,991,374 (the “'374 patent”), the sole patent in the dispute. Info–Hold asserted the '374 patent against Muzak LLC (“Muzak”) and Applied Media Technologies Corporation (“AMTC”) in separate lawsuits before the same judge in the United States District Court for the Southern District of Ohio. Those suits led to separate appeals, which were argued on the same day before the same panel. We address the issues raised in Info–Hold's appeal in the AMTC suit in a separate opinion.

Following claim construction, the district court granted summary judgment to Muzak that, notwithstanding infringement, Info–Hold was not entitled to reasonable royalty damages, and that Muzak did not induce infringement of the ' 374 patent. For the reasons set forth below, we reverse the grant of summary judgment of no damages for infringement, we vacate the summary judgment of no induced infringement, and we affirm the district court's construction of the sole claim term in dispute.

Background

The '374 patent is directed to systems, apparatuses, and methods for playing music and messages (e.g., advertisements) through telephones and public speaker systems. Playback order of the music and message tracks is set on a remote server. The remote server generates and sends control signals to message playback devices, telling them to access and play back tracks in a specified order. One use of the disclosed technology involves directing the output of the message playback devices to a public address system at retail stores, so customers can hear the music and advertisements while shopping. The output of the message playback device can also be directed to a music-on-hold (“MOH”) system, which plays the tracks over the telephone to callers who are on hold. The inventor of the patent, Joey C. Hazenfield, assigned the patent to Info–Hold in exchange for a 5 percent royalty on sales of products embodying the patent's technology. (“Hazenfield Assignment”).

Prior to the filing of the suit against Muzak, a third-party requester initiated an ex parte reexamination of the '374 patent. To overcome prior art during reexamination, Info–Hold amended several independent claims by adding the limitation “when a caller is placed on hold” to specify the timing of track playback. Info–Hold argued to the examiner that, after the addition of the limitation “when a caller is placed on hold,” the claims were patentable because the prior art “fails to teach, or even suggest, a music-on-hold-compatible telephone system or playing messages or generating signals when callers are placed on hold....” J.A. 473. The examiner allowed the claims on the basis of Info–Hold's argument. J.A. 361. Independent claim 7 is representative of the technology claimed in the '374 patent and recites:

7. A programmable message delivery system for playing messages on message playback devices at one or more remote sites comprising:

a communication link;

a plurality of message playback devices, each of said message playback devices communicating with a respective telephone system and comprising a storage device for storing messages and for playing selected ones of said messages through an output of said message playback device when a caller is placed on hold; and

a computer remotely located from said plurality of message playback devices and operable to generate and transmit control signals via said communication link for controlling at least one of said plurality of message playback devices;

each of said plurality of message playback devices being adapted to receive said control signals via said communication link and being programmable to access at least one of said messages from said storage device and to provide said accessed message to said output in accordance with said control signals when a caller is placed on hold;

wherein said computer comprises a display device and is programmable to generate screens on said display device that include user selectable menu items for selection by an operator to define relationships between said plurality of message playback devices and said messages, the screens guiding an operator to make choices selected from the group consisting of which of said messages are to be played, which of said plurality of message playback devices are to play said selected messages, a time of day when said control signals are to be transmitted to said message playback devices, a date on which said control signals are to be transmitted to said message playback devices, a sequence in which said selected messages are to be played, and how many times to repeat at least one of said selected messages in said sequence, and to generate said control signals to implement said choices via said message playback devices.

'374 patent reexamination certificate, col. 1 ll. 28–67 (emphasis added).

The parties in this case make and sell MOH systems. Info–Hold sells a product called “Info–Link” that purportedly embodies the features of the '374 patent, including remote programming capabilities and the ability to select messages for playback at particular locations. Muzak makes and sells two music and messaging delivery devices, the Encompass LE 2 and the Encompass MV, which Info–Hold alleges infringe the '374 patent.

Litigation History

In 2006, Info–Hold contacted Muzak on at least two occasions regarding the possibility that Muzak's products infringe the '374 patent. On February 21, 2006, Info–Hold's in-house counsel, Daniel Wood, sent a letter to Muzak's General Counsel, Michael Zendan, drawing attention to the '374 patent and asking whether any of Muzak's products might practice the patented technology. Mr. Wood specifically requested to be informed of the results of any “detailed analysis of the '374 patent ” already conducted by Muzak. Mr. Wood also requested that Muzak conduct such an analysis. J.A. 2890. Muzak did not respond to Info–Hold's letter.

Mr. Wood called Mr. Zendan in June 2006. In that conversation, Mr. Wood explained the technology alleged to be covered by the '374 patent. Mr. Wood inquired whether Muzak's products included the ability to control music and/or message playback at one or more other locations from a single, remotely located computer. See, e.g., J.A. 2815, 6:17–21; 2816, 13:14–22. During the course of the conversation, Mr. Zendan expressed surprise upon learning that the ' 374 patent covered the playback of music as opposed to only messages. Mr. Zendan stated, “We're talking about the music, how they control their music.... Well ... yeah, we have a system where there probably is some control of the music.” J.A. 2817, 14:1–7. In light of this fact, Mr. Zendan told Mr. Wood that he would take another look at the '374 patent in relationship to Muzak's products. Id. at 14:17–22. Mr. Zendan asked whether Info–Hold wanted Muzak to “look at our technology from the standpoint of ... music that you would hear in a store ...”

Id. at 15:22–16:5. Mr. Wood replied, “Yes.” Id. at 16:6.

Info–Hold filed suit in May 2011, alleging that Muzak infringed the '374 patent through the manufacture and sale of Muzak's Encompass LE 2 and Encompass MV products. Info–Hold also alleged that Muzak induced and contributed to the infringement of the '374 patent. Muzak answered, seeking a declaratory judgment that the '374 patent was invalid and that it did not indirectly infringe the patent.

During the Markman phase of the litigation, the parties requested construction of several terms, including the term “when a caller is placed on hold.” The parties' dispute focused on whether “when” meant at the moment the caller was placed on hold (Muzak's position) or during the period the caller was on hold (Info–Hold's position). The district court construed this term to mean “at the moment a caller is placed on hold.” Based on the district court's construction, the parties stipulated to non-infringement of the asserted independent claims of the '374 patent containing the phrase “when a caller is placed on hold,” and all claims depending from those independent claims.

On the issue of damages, the parties disagreed about the royalty to which Info–Hold would be entitled if infringement were found. Info–Hold attempted to base its damages case on the report and testimony of its expert, Robert White, who performed tax and audit work for Info–Hold for fifteen years prior to the suit. Mr. White employed the entire market value rule, though his report was silent on whether the patented features drove demand for the accused products. As part of the reasonable royalty analysis, Mr. White considered a license of the '374 patent to Trusonic, Inc. (“Trusonic License”), entered into as part of a litigation settlement, and the Hazenfield Assignment. Mr. White's royalty calculation relied on the 25–percent rule of thumb. Muzak introduced the report of its expert, David Paris. Mr. Paris considered the Trusonic License, the Hazenfield Assignment, a settlement agreement between Muzak and a third party for use of patents comparable to the '374 patent, the license of several Info–Hold patents to a third party related to MOH systems, and the financial data of Info–Hold and Muzak during the relevant period. Based on these sources of information, Mr. Paris determined that a royalty between 1 and 2...