Rowe Intern. Corp. v. Ecast, Inc., No. 06 C 2703.

• Court: United States District Courts. 7th Circuit. United States District Court (Northern District of Illinois)
• Writing for the Court: Matthew F. Kennelly
• Citation: 586 F.Supp.2d 924
• Docket Number: No. 06 C 2703.
• Decision Date: 25 August 2008
• Parties: ROWE INTERNATIONAL CORP. and Arachnid, Inc., Plaintiffs, v. ECAST, INC., Rock-Ola Manufacturing Corp., and View Interactive Entertainment Corp., Defendants.

586 F.Supp.2d 924 ROWE INTERNATIONAL CORP. and Arachnid, Inc., Plaintiffs,
v.
ECAST, INC., Rock-Ola Manufacturing Corp., and View Interactive Entertainment Corp., Defendants. No. 06 C 2703. United States District Court, N.D. Illinois, Eastern Division. August 25, 2008.

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James P. Murphy, David Z. Petty, McAndrews, Held & Malloy, P.C., Chicago, IL, Charles W. Saber, Deanna D. Allen, Dipu A. Doshi, Thomas Dale Anderson, Dickstein Shapiro LLP, Jon D. Grossman, Megan S. Woodworth, Dickstein Shapiro Morin & Oshinsky LLP, Washington, DC, Dawn Rudenko, Dickstein Shapiro LLP, New York, NY, for Plaintiffs.

Alfredo A. Bismonte, Jeremy Michael Duggan, Justin T. Beck, Ronald Craig Finley, Beck Ross Bismonte & Finley LLP, San Jose, CA, David M. Alban, Erica D. Wilson, Gerald P. Dodson, Jonathan M. Kaplan, Susan Vastano Vaughan, Timur S. Engin, William D. Janicki, Morrison & Foerster, LLP Palo Alto, CA, Sherry Lee Rollo, Steven Eric Feldman, Husch Blackwell Sanders Welsh & Katz, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge.

Rowe International Corp. and Arachnid, Inc. have sued Ecast, Inc., Rock-Ola Manufacturing Corp., and View Interactive Entertainment Corp., claiming that they have infringed six patents owned by Arachnid and licensed to Rowe: U.S. Patent Nos. 5,355,302, 5,781,889, 6,397,189, 6,381,575, 5,848,398, and 6,970,834 (the Arachnid patents). Rowe also asserts that defendants have infringed U.S. Patent No. 6,598,230. Ecast has counterclaimed against AMI Entertainment, Inc. for infringement of U.S. Patent No. 5,341,350. The case is before the Court on the parties' respective motions for summary judgment on certain claims, defenses, and counterclaims. For the reasons set forth below, the Court grants plaintiffs' motion in part and denies it in part and denies defendants' motion.

Background

The basic facts surrounding this litigation are set forth in some detail in the Court's prior opinions. See, e.g., Rowe Int'l Corp. v. Ecast, Inc., 241 F.R.D. 296, 298-99 (N.D.Ill.2007). The Court will restate them only briefly here. Each of the

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patents-in-suit involves computer jukeboxes and computer jukebox networks. Prior to the development of computer jukebox systems, conventional jukeboxes contained vinyl records, compact discs, or digital music files. These conventional systems required the jukebox to house all the songs available for selection, thereby requiring the jukebox operator to visit each jukebox to update the music available. The operator also would visit the jukeboxes to collect money, information regarding how often songs were played, and other data. The song selections necessarily were limited by the storage space available at each jukebox.

The computer jukeboxes that are the subject of the patents at issue in this case have a central management station that can distribute digital music to multiple jukeboxes. The central management station also stores advertisements and other information that can be transmitted to the jukeboxes. The computer jukebox system also allows the jukeboxes to store certain songs (for example, those that are frequently played), so that they do not have to be transmitted from the central management station repeatedly. In addition, the central management station can collect data regarding the songs being played, fees collected, etc., thereby eliminating the need for an operator to regularly visit each computer jukebox.

Discussion

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). When determining whether a genuine issue of material fact exists, the Court must view the facts in the light most favorable to the nonmoving party and draw all reasonable inferences in its favor. See Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir.2002). Because the Court is presented with cross-motions for summary judgment in this case, it must consider each party's motion separately and draw all reasonable inferences against the party whose motion is under consideration. See Crespo v. Unum Life Ins. Co. of Am., 294 F.Supp.2d 980, 991 (N.D.Ill.2003) (citing Brownlee v. City of Chicago, 983 F.Supp. 776, 779 (N.D.Ill. 1997)).

I. Plaintiffs' motion for summary judgment

Plaintiffs move for summary judgment on infringement of claims 1 through 6 of the '189 patent, claims 1 through 6, 9 through 11, 15, and 21 through 21 of the '575 patent, defendants' inequitable conduct defenses, and the invalidity of the '350 patent, certain claims of which Ecast asserts in its infringement counterclaim.

A. Possibility of direct infringement of the '189 and '575 patents

The Court begins with a point to which the parties devote relatively little attention. Defendants argue that the Court should deny summary judgment as to infringement of claim 1 of the '189 patent and claims 1, 15, and 22 of the '575 patent because no one defendant directly infringes any of these claims, in the sense of practicing every element of the claim. See Warner-Jenkinson Co., Inc. v. Hilton Davis Chemical Co., 520 U.S. 17, 40, 117 S.Ct. 1040, 137 L.Ed.2d 146 (1997). Defendants contend that Rock-Ola and View make jukebox components and that Ecast contributes a memory "that makes the system work" as well as a network. Def. Opp. Br. at 4. The operators of the individual jukeboxes put all of these things together "to create a working system," id.,

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defendants say, likening them to the surgeons in Cross Medical Products v. Medtronic Sofamor Danek, 424 F.3d 1293 (Fed.Cir.2005). In that case, the Federal Circuit refused to combine the surgeons' actions with those of the defendant medical device maker to find direct infringement of the patentees' apparatus claim. Id. at 1311; see also Muniauction, Inc. v. Thomson Corp., 532 F.3d 1318, 1328-30 (Fed. Cir.2008) (citing BMC Resources, Inc. v. Paymentech, L.P., 498 F.3d 1373, 1380-81 (Fed.Cir.2007)).

Plaintiffs respond that the only issue in the case now is whether the asserted claims are infringed, not whether the alleged infringement is direct, contributory, or induced. The latter determination can come later, plaintiffs say.

There are two interrelated problems with defendants' attempts to resist summary judgment on this basis. First, the record does not support defendants' assertion that no one of them makes, uses, or sells "a complete jukebox system." Def. Opp. Br. at 4. Specifically, the record includes an Ecast technical and promotional document setting out "the architecture of the major components" of the Ecast Jukebox & Network 2.5, which by its own terms is aimed at Ecast's customers (as well as its "partners" and technical employees). Pl. Statement of Facts, Ex. 8 at E009012. The first sentence of this document's overview section describes the Ecast system as a "wide area network consisting of consumer entertainment Jukebox units . . . and a Data Center." Id. at E009016. The record also includes a 2005 proposal in which Ecast lists as the "main components of [its] system" digital jukebox hardware along with its software for jukeboxes, servers, and route management. Id. at E020984. Thus, in Ecast's own view of the system it markets to its customers, the jukeboxes that are supplied by Rock-Ola and View—under manufacturing and distribution contracts with Ecast, see id., Ex. 15 at 21—are part of the same system as the data center Ecast itself operates. Defendants are not entitled to denial of plaintiffs' summary judgment motion on the ground that no one of them directly infringes the asserted patents.

Alternatively, even if it were not clear from the record that Ecast markets and sells a "complete jukebox system" to its customers, Cross Medical Products and Federal Circuit cases that have followed it hurt rather than help defendants. In BMC Resources, an important Federal Circuit decision on this point handed down last year, the court held that a defendant was not liable for direct infringement of the asserted patent, which disclosed a multi-step method for processing debit transactions, because it did not control every step in the process and thus did not practice each and every element of the claimed invention. BMC Resources, 498 F.3d at 1380. In doing so, the Federal Circuit rejected the argument that dicta in On Demand Machine Corp. v. Ingram Indus., Inc., 442 F.3d 1331, 1334-35 (Fed.Cir. 2006), had altered the law regarding direct infringement by more than one actor. The court reaffirmed that

[i]nfringement requires, as it always has, a showing that a defendant has practiced each and every element of the claimed invention. This holding derives from [35 U.S.C. § 271(a) ] itself ... Where a defendant participates in infringement but does not directly infringe the patent, the law provides for remedies under principles of indirect infringement. However, this court has held that inducement of infringement requires a predicate finding of direct infringement.

BMC Resources, 498 F.3d at 1380 (internal citations omitted).

At the same time, however, the Federal Circuit acknowledged that a defendant

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"cannot avoid infringement ... simply by contracting out the steps of a patented process to another entity." Id. at 1381. Liability for direct infringement, the court said, would exist for the "mastermind" that controlled such an arrangement. Id. Thus, the test under BMC Resources is whether one party effectively controls or directs others such that it can be said to practice every element of the asserted claims. See...