DCT

1:13-cv-00408

Princeton Digital Image Corp v. Nordstromcom LLC

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 1:13-cv-00408, D. Del., 01/31/2017
  • Venue Allegations: Venue is alleged to be proper in the District of Delaware because the defendant, Princeton Digital Image Corporation, initiated the underlying patent infringement lawsuits in this district.
  • Core Dispute: The licensee (Adobe) alleges that the patent owner (Princeton) breached their license agreement and engaged in patent misuse by suing Adobe’s customers for infringement based on the customers' use of Adobe's licensed products.
  • Technical Context: The technology concerns methods of statistical data compression for digital signals, a foundational technique for image formats such as JPEG.
  • Key Procedural History: The complaint alleges that in 2011, Adobe secured a fully paid-up license to the patent-in-suit for its products and services, with the license and a covenant not to sue extending to its customers. The patent expired in 2007, and Princeton acquired it in 2009 before launching a litigation campaign of over 50 lawsuits. This action is a "Complaint in Intervention" where Adobe seeks to enforce the license agreement on behalf of its customers who have been sued by Princeton.

Case Timeline

Date Event
1987-12-08 '056 Patent Priority Date
1989-03-14 '056 Patent Issue Date
2007-03-14 '056 Patent Expiration
2009 Princeton acquires '056 Patent rights
2011-06-06 Adobe and Princeton enter into license agreement
2013-09-20 Adobe files motion to intervene in related L.L. Bean case
2014-07-07 L.L. Bean case is dismissed with prejudice
2017-01-31 Adobe files First Amended Complaint in Intervention

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 4,813,056 - "Modified Statistical Coding of Digital Signals"

  • Patent Identification: U.S. Patent No. 4,813,056, "Modified Statistical Coding of Digital Signals," issued March 14, 1989.

The Invention Explained

  • Problem Addressed: The patent addresses the challenge of efficiently compressing digital data, such as a video signal, where some data values occur very frequently while a large number of other values occur very rarely ('056 Patent, col. 2:5-15). Standard encoding schemes could be inefficient, either by assigning unnecessarily long codes to these rare values or by requiring complex overhead to manage multiple coding tables ('056 Patent, col. 2:16-27).
  • The Patented Solution: The invention proposes a "modified statistical coding" system using a single dictionary. For individually rare but collectively probable events (e.g., various long runs of zeros), the system assigns a single, relatively short "key codeword" as a common prefix. This prefix signals a departure from standard Huffman coding and is followed by a unique suffix to identify the specific rare event. This two-part structure allows for shorter average codeword lengths compared to assigning a unique, long Huffman code to every rare event, thereby increasing compression efficiency ('056 Patent, Abstract; col. 3:6-19). Figure 5 illustrates this logic, showing how a 1-bit prefix can direct the system to interpret the following 9 bits as either a "NON-ZERO" value or a "ZERO RUN LENGTH" ('056 Patent, Fig. 5).
  • Technical Importance: This method offered a way to achieve high data compression, which was critical for the transmission and storage of digital images and video in an era of limited bandwidth and processing power ('056 Patent, col. 2:28-35).

Key Claims at a Glance

The complaint does not specify which claims of the '056 Patent were asserted against Adobe's customers. However, the technology described in the patent is central to the dispute. For context, independent claim 1 of the '056 Patent recites a statistical encoding method comprising the key steps of:

  • Generating a first set of codewords for a first set of signal conditions.
  • Generating a second set of codewords for a second set of signal conditions.
  • Each codeword in the second set includes a "common codeword portion" whose length is "statistically based on said combined frequency of occurrence" of the conditions in the second set.
  • Causing the codewords to be generated according to the frequency of occurrence of the signal conditions.

III. The Licensed Instrumentality

Product Identification

  • Adobe Photoshop and Adobe Scene7 products and services (Compl. ¶¶ 10, 18).

Functionality and Market Context

The complaint alleges that Adobe's licensed products are used to create, process, and display JPEG images (Compl. ¶¶ 24-26). The defendants in the underlying lawsuits are retailers such as Office Depot, J.C. Penney, and QVC, who are alleged to be Adobe customers (Compl. ¶27). According to Adobe, these defendants used Adobe's licensed products to create the JPEG image content displayed on their company websites (Compl. ¶28). The core of Adobe's intervention is that these commercial activities by its customers are protected under the 2011 license agreement with Princeton (Compl. ¶¶ 21, 41).

IV. Analysis of Infringement Allegations

The complaint-in-intervention does not contain a formal claim chart alleging infringement. Instead, it describes the basis of Princeton’s infringement allegations against the defendants (Adobe's customers). The complaint alleges that Princeton’s theory is that "each defendant has encoded image data into JPEG files, and that those JPEG files are accessible through each Defendant’s website" (Compl. ¶23).

Adobe's central argument is not that infringement did not occur, but that any such use is licensed under the 2011 Agreement. The agreement allegedly extends a "license and covenant not to sue to Adobe's past, present, and future licensees, customers, and end users for any claims arising in whole or in part from use of Adobe's licensed products and services" (Compl. ¶21). Because the defendants allegedly used Adobe products to create the accused JPEG files, Adobe contends that Princeton is contractually barred from bringing these infringement suits (Compl. ¶¶ 41-42).

No probative visual evidence provided in complaint.

V. Key Claim Terms for Construction

While this is not a direct infringement action, the scope of the patent claims is relevant to understanding the scope of the license and the underlying dispute. Practitioners would likely focus on the following terms from the '056 patent's independent claims.

  • The Term: "a common codeword portion"

    • Context and Importance: This term is the technical heart of the invention. Its definition distinguishes the claimed method from standard Huffman coding. The central question is whether this term requires a prefix that is selected based on a statistical analysis of a group of events, as taught by the specification, or if it could more broadly cover any shared prefix used to identify a class of data.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: The plain meaning of "common codeword portion" could be argued to encompass any set of bits shared among multiple codewords.
      • Evidence for a Narrower Interpretation: The specification repeatedly links the "key codeword" (the preferred embodiment of the "common codeword portion") to the "combined probability of their occurrences" ('056 Patent, col. 3:15-19). The abstract and detailed description frame the invention as a specific statistical departure from Huffman coding, not just a generic prefixing scheme ('056 Patent, Abstract).

  • The Term: "statistically based on said combined frequency of occurrence"

    • Context and Importance: This phrase qualifies how the "common codeword portion" is determined and is crucial for limiting the claim scope to the patent's specific contribution. An infringement analysis would have to determine if an accused system performs an equivalent statistical grouping and assignment, or merely uses a prefix for non-statistical reasons.
    • Intrinsic Evidence for Interpretation:
      • Evidence for a Broader Interpretation: A party might argue that any system that groups less frequent codes and assigns them a shared prefix is implicitly "statistically based," even without an explicit calculation of combined probability.
      • Evidence for a Narrower Interpretation: The specification describes a clear process where the ordinal position of the key codeword, and thus its length, is determined by comparing the combined probability of the rare-event group to the individual probabilities of other, more frequent events ('056 Patent, col. 10:49-56). This suggests a specific, mathematically grounded process is required.

VI. Other Allegations

  • Breach of Contract: Adobe's primary claim is that Princeton breached the 2011 license agreement (Compl. ¶43). The complaint alleges the agreement provides a release and covenant not to sue for Adobe's customers for any infringement claims arising from the use of licensed Adobe products (Compl. ¶¶ 20-21). Adobe alleges that by suing these customers for using JPEGs created with Adobe software, Princeton has violated the agreement, causing Adobe to incur costs in defending its customers (Compl. ¶44).
  • Patent Misuse and Unenforceability: Adobe alleges that Princeton’s actions constitute patent misuse (Compl. ¶48). The theory is that by licensing Adobe and then suing Adobe's customers for the licensed use, Princeton is attempting to "improperly recover double royalties" for the same patented technology (Compl. ¶46). This practice, Adobe argues, violates the doctrine of patent exhaustion, which holds that the first authorized sale of a patented article extinguishes the patentee's right to control that article's use. Adobe requests a judgment that this misuse renders the '056 Patent unenforceable (Compl. ¶¶ 47-48, Prayer for Relief ¶4).

VII. Analyst’s Conclusion: Key Questions for the Case

This case presents a classic dispute over the scope of a patent license and the doctrine of patent exhaustion, rather than a direct technical infringement analysis. The key questions for the court appear to be:

  1. A central issue will be one of contract interpretation: Does the 2011 license agreement between Adobe and Princeton, specifically its covenant-not-to-sue "customers" and "end users," unambiguously bar Princeton's infringement lawsuits against retailers who use Adobe's licensed software to create and display JPEG images on their websites?

  2. A key legal question will be one of patent exhaustion and misuse: Do Princeton's lawsuits against the downstream customers of its licensee (Adobe) constitute an improper attempt to control the use of licensed products post-sale, thereby rising to the level of patent misuse that would render the '056 patent unenforceable?