Marking Object Virtualization Intelligence LLC v. Kudelski SA

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Marking Object Virtualization Intelligence, LLC (Texas)
  • Defendant: Kudelski S.A. D/B/A/ Kudelski Group (Switzerland), NexGuard Labs USA, Inc. (Delaware), NexGuard Labs Netherlands B.V. (Netherlands), and Civolution USA, Inc. (Delaware)
  • Plaintiff’s Counsel: Capshaw Derieux, LLP; Berger & Hipskind LLP
• Case Identification: 2:16-cv-01099, E.D. Tex., 10/05/2016
• Venue Allegations: Plaintiff alleges venue is proper in the Eastern District of Texas because Defendant Kudelski Group is registered to do business in Texas, has transacted business in the district, and has committed alleged acts of infringement there.
• Core Dispute: Plaintiff alleges that Defendant’s digital watermarking products and services, used for digital rights management (DRM), infringe four patents related to the embedding and detection of watermarks in digital media content.
• Technical Context: The technology at issue is digital watermarking, a method of imperceptibly embedding data into media like video or audio to manage copyrights and prevent unauthorized distribution.
• Key Procedural History: The patents-in-suit were originally assigned to Rovi Corporation (formerly Macrovision), a company described as a pioneer in DRM, and later assigned to Plaintiff. The complaint alleges that a subsidiary of Defendant Kudelski Group cited the ’127 patent during the prosecution of its own patent, which issued in 2010, a fact Plaintiff may use to support allegations of pre-suit knowledge and willful infringement.

Case Timeline

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

U.S. Patent No. 6,553,127 - Method and Apparatus for Selective Block Processing

The Invention Explained

• Problem Addressed: The patent describes that conventional watermarking methods, which process every single block of a video stream, are computationally intensive and costly, making them difficult to implement in mass-market consumer electronics like DVD players (ʼ127 Patent, col. 2:9-39).
• The Patented Solution: The invention proposes a more efficient method where a watermark is embedded only in select blocks of a data stream. The selection is based on a "texture criterion," which measures the visual complexity or variation within a block (e.g., luminance variation). The detector then uses the same criterion to only search for watermarks in these "textured" blocks, reducing the computational load for both embedding and detection (ʼ127 Patent, Abstract; col. 3:10-23).
• Technical Importance: This selective processing approach aimed to make robust watermarking more practical and cost-effective for widespread deployment in consumer devices (ʼ127 Patent, col. 2:30-39).

Key Claims at a Glance

• The complaint asserts at least independent claim 10 (Compl. ¶48).
• Essential elements of claim 10 include:
  • A method of detecting a watermark in a data stream.
  • Dividing the data stream into equally sized blocks.
  • Selecting only the blocks that meet a "substantially similar texture criterion" to the one used during embedding.
  • Detecting the watermark only in those selected blocks.
  • The texture criterion measures variation of a characteristic (e.g., luminance) and is unrelated to relationships between different video frames.
• The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 6,360,000 - Method and Apparatus for Watermark Detection for Specific Scales and Arbitrary Shifts

The Invention Explained

• Problem Addressed: The patent states that common video processing, such as scaling (e.g., changing aspect ratio from 16:9 to 4:3) or shifting, can move a watermark from its expected position, rendering it undetectable by standard detection methods (ʼ000 Patent, col. 2:4-24).
• The Patented Solution: The invention provides a method to detect a watermark even after it has been scaled by an unknown factor (from a finite set of possibilities) and shifted. The system reads blocks from the video, uses a "fractional remainder" calculation to sort them into different bins based on their relative offsets, re-scales the data in the bins, and then combines them. This process reinforces the underlying watermark signal while averaging out the video content, allowing the watermark's scale and shift to be identified and detected (ʼ000 Patent, Abstract; col. 3:3-12).
• Technical Importance: The technique makes watermarking more robust against the common transformations that video content undergoes, a critical feature for reliable DRM enforcement across different playback formats (ʼ000 Patent, col. 2:4-10).

Key Claims at a Glance

• The complaint asserts at least independent claim 15 (Compl. ¶76).
• Essential elements of claim 15 include:
  • A method of processing a watermarked data stream scaled by an unknown scale.
  • Dividing the stream into portions, each having an offset corresponding to a "fractional remainder."
  • Using the fractional remainder to compute a number of bins for distribution.
  • Accumulating portions with the same offset into the same bin.
  • Re-scaling the distributed portions to recover original dimensions.
  • Combining the re-scaled portions into a data accumulated block to reveal the unknown scale.
• The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 8,014,524 - Scaling Independent Technique for Watermarking Images with Recorder Shut-off

• Issued: September 6, 2011 (Compl. ¶23).
• Technology Synopsis: The patent addresses the problem of image scaling defeating watermark-based "recorder shut-off" mechanisms (ʼ524 Patent, col. 2:3-14). The proposed solution involves embedding watermarks that cycle through a variety of different scales over predetermined time intervals. This ensures that regardless of how a user scales the video, the detector in a recording device will eventually encounter a watermark at a scale it can detect, thereby triggering the shut-off function (ʼ524 Patent, Abstract).
• Asserted Claims: Claims 1 and 28 are asserted, with claim 1 being independent (Compl. ¶103).
• Accused Features: The accused products are alleged to include methods for preventing illicit copying by embedding a plurality of watermarks at different scales for different time periods (Compl. ¶¶93, 94, 98).

U.S. Patent No. 6,931,536 - Enhanced Copy Protection of Proprietary Material Employing Multiple Watermarks

• Issued: August 16, 2005 (Compl. ¶26).
• Technology Synopsis: The patent addresses the vulnerability of a single watermark system, particularly when detection occurs on a programmable device like a PC where it can be analyzed and removed (ʼ536 Patent, col. 1:14-25). The solution is to use two or more watermarks: a primary watermark detectable by all devices, and a secondary watermark detectable only by non-programmable devices (e.g., consumer electronics). If the primary watermark is defeated, the non-programmable device can fall back on detecting the secondary one to enforce copy protection (ʼ536 Patent, Abstract).
• Asserted Claims: Claims 25 and 35 are asserted, with claim 25 being independent (Compl. ¶127).
• Accused Features: The accused products are alleged to use two or more watermarks for enhanced copy protection, where a second watermark is processed if the first is not detected (Compl. ¶¶115, 121).

III. The Accused Instrumentality

Product Identification

The accused instrumentalities are the "NexGuard File Embedder Version 2.2," the "NexGuard Transcoder Plugin," and "NexGuard OTT VOD and TV Everywhere Services" (Compl. ¶¶31, 112). The complaint also names various third-party products into which the NexGuard technology is allegedly integrated (Compl. ¶31).

Functionality and Market Context

The accused products are enterprise-level software and services for digital watermarking (Compl. ¶¶8-9). They are used to encode (embed) and decode (detect) watermarks in video content for end-users and content providers, serving a central role in digital rights management (DRM) and copy protection workflows (Compl. ¶¶33, 60). The complaint alleges that the Kudelski Group incorporated the patented technology to expand its product base without obtaining a license (Compl. ¶16). No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

U.S. Patent No. 6,553,127 Infringement Allegations

U.S. Patent No. 6,360,000 Infringement Allegations

Identified Points of Contention

• Scope Questions: For the ’127 patent, a primary question will be whether the defendant's method for selecting blocks is properly characterized as a "texture criterion" as defined in the patent. The complaint alleges the products use "substantially similar textual criteria" (Compl. ¶42), which raises the question of whether this is a typographical error or reflects a different, potentially non-infringing technical approach.
• Technical Questions: For the ’000 patent, the infringement analysis will likely focus on the specific algorithm used. A key question for the court will be whether the accused products' method for handling scaled video actually performs the claimed steps of using a "fractional remainder" to compute and distribute blocks into bins, or if it achieves a similar outcome through a different, non-infringing mathematical process.

V. Key Claim Terms for Construction

Term from '127 Patent: "texture criterion"

• Context and Importance: This term is central to the asserted claims of the ’127 patent. The outcome of the infringement analysis depends heavily on whether the functionality in the accused products for selecting blocks falls within the scope of this term. Practitioners may focus on this term because it defines the core selective process alleged to be the invention.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The patent abstract defines it broadly as a measure of "a variation of selected characteristics associated with each element of the data stream." Claim 10 itself requires only that it "measures a variation of a selected characteristic."
  • Evidence for a Narrower Interpretation: The specification provides specific examples of calculating texture, such as subtracting the minimum from the maximum luminance value in a block or summing absolute differences of pixel pairs (ʼ127 Patent, col. 8:1-18). A defendant may argue the term should be limited to these disclosed embodiments.

Term from '000 Patent: "fractional remainder"

• Context and Importance: This term describes the specific mathematical operation claimed for determining how to sort video blocks into bins to correct for scaling and shifting. Whether the accused products literally infringe the ’000 patent may turn on whether their algorithm uses this specific type of calculation.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The term is used functionally in the claims to "compute a number of bins" (Claim 15). A plaintiff could argue that any mathematical process that determines block offsets for binning purposes meets this functional description.
  • Evidence for a Narrower Interpretation: The detailed description provides a concrete example: "the fractional remainders of dividing (n*16) by 64/3" (ʼ000 Patent, col. 6:19-21). A defendant could argue that the term is limited to the result of a specific division operation, not any method of calculating an offset.

VI. Other Allegations

Indirect Infringement

The complaint alleges that the Kudelski Group induces infringement by providing customers with the accused products along with "documentation and training materials, ... user manuals, product support, [and] marketing materials" that allegedly instruct users on how to operate the products in an infringing manner (Compl. ¶¶52, 79, 106, 130).

Willful Infringement

Willfulness is alleged for all four patents. For the ’127 patent, the allegation is based on specific pre-suit knowledge dating to at least November 30, 2010, when a Kudelski Group subsidiary (Civolution B.V.) allegedly cited the ’127 patent during the prosecution of its own patent (Compl. ¶50). For the other patents, the allegations are based on knowledge from the service of the complaint (Compl. ¶¶78, 105, 129). The complaint further supports willfulness by claiming Defendants operate as a "pirate" by not paying for licensed technology that competitors have licensed (Compl. ¶¶53, 80).

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

• A core issue will be one of technical implementation versus claim scope: The complaint makes high-level functional allegations, but the case will depend on detailed evidence of how the accused products actually work. Key questions include: (1) For the ’127 patent, does the accused block-selection mechanism function as the claimed "texture criterion," or does it use a different, non-infringing logic? (2) For the ’000 patent, does the accused scaling-compensation algorithm use the specific "fractional remainder" and binning process of the claims, or an alternative mathematical approach?
• A second central question will be one of pre-suit knowledge and willfulness: The plaintiff has put forth a specific factual basis for pre-suit knowledge of the ’127 patent, tied to a patent prosecution file of a defendant's subsidiary. A key evidentiary battle will likely concern whether that knowledge can be imputed to the defendants in this case and whether it supports a finding of willful infringement, which could expose the defendants to enhanced damages.