DCT

2:25-cv-00695

Headwater Research LLC v. Cellco Partnership

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 2:25-cv-00695, E.D. Tex., 07/07/2025
  • Venue Allegations: Plaintiff alleges venue is proper because Defendant Verizon has a regular and established place of business in the Eastern District of Texas and has committed acts of infringement in the district, supported by allegations that Verizon advertises its wireless network coverage and sells accused mobile devices from retail stores within the district.
  • Core Dispute: Plaintiff alleges that Defendant’s cellular networks, servers, services, and eSIM-enabled devices infringe six patents related to device-assisted and network-based management of data services, policy control, and billing.
  • Technical Context: The technology relates to systems and methods for monitoring and controlling data usage on wireless devices, enabling more flexible and granular service plans beyond simple data consumption limits.
  • Key Procedural History: The complaint alleges a prior business relationship between the parties from 2009-2013, during which Plaintiff disclosed its technology and pending patent applications to Defendant under a non-disclosure agreement. This relationship allegedly included a paid software evaluation trial, the development of a Verizon-specific prototype, and field trials. The complaint also references a 2013 whistleblower lawsuit filed by a former Verizon employee which allegedly detailed the "misappropriation of intellectual property" shared by Plaintiff's predecessor with Defendant.

Case Timeline

Date Event
2009-01-28 Priority Date for ’337, ’630, ’781, ’617, ’661, and ’549 Patents
2009-06-30 Headwater and Verizon allegedly enter into an NDA
2009-07-01 Headwater allegedly provides detailed presentations to Verizon
2009-08-31 Headwater allegedly presents its technology platform and a trial plan to Verizon
2013-01-15 U.S. Patent No. 8,355,337 Issues
2013-09-03 U.S. Patent No. 8,527,630 Issues
2013-09-30 Whistleblower complaint filed against Verizon
2013-11-12 U.S. Patent No. 8,583,781 Issues
2014-01-14 U.S. Patent No. 8,630,617 Issues
2014-07-22 U.S. Patent No. 8,788,661 Issues
2014-12-30 U.S. Patent No. 8,924,549 Issues
2025-07-07 Complaint Filing Date

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

U.S. Patent No. 8,355,337 - "Network based service profile management with user preference, adaptive policy, network neutrality, and user privacy" (issued Jan. 15, 2013)

The Invention Explained

  • Problem Addressed: The patent describes the increasing demand for data on wireless networks and the resulting negative impact on service provider profits as their costs increase with bandwidth consumption (’337 Patent, col. 5:55-6:4). It identifies a need for a communication and management system that allows for more flexible service plans and more efficient management of network resources (Compl. ¶9; ’337 Patent, col. 6:5-8).
  • The Patented Solution: The invention proposes a device-assisted service management architecture where a "service processor" on the end-user device works in conjunction with a "service controller" in the network (’337 Patent, col. 8:54-67). This system allows for granular, real-time monitoring of data usage based on specific classifications (e.g., by application or content type) and the application of service policies to control that usage, enabling sophisticated billing and service plans beyond simple data caps (’337 Patent, Fig. 16; col. 7:1-8).
  • Technical Importance: This approach enabled a shift from treating all data as a monolithic commodity to managing data as a collection of distinct services, which could be individually controlled, prioritized, and billed, creating new business models for wireless carriers (Compl. ¶14, ¶17).

Key Claims at a Glance

  • The complaint asserts at least independent claim 1 (Compl. ¶60).
  • The essential elements of independent claim 1 include:
    • Receiving a first usage measure and a second usage measure of a network service provided to a communications device, where each measure specifies an amount of use for a first and second classification of data, respectively.
    • Identifying the first classification of data corresponding to the first usage measure.
    • Identifying the second classification of data corresponding to the second usage measure.
    • Using the first and second usage measures and their corresponding classifications to facilitate implementation of a service policy.
    • The service policy includes network service settings and assists in accounting to a sponsor entity, presenting a notification to the user, or controlling usage.
  • The complaint does not explicitly reserve the right to assert dependent claims.

U.S. Patent No. 8,527,630 - "Adaptive ambient services" (issued Sep. 3, 2013)

The Invention Explained

  • Problem Addressed: The patent addresses the technical and business challenges of offering "ambient services"—limited, often free or sponsored, network services intended to provide a baseline user experience and encourage upgrades to paid plans (’630 Patent, col. 3:4-10). A static list of allowed websites or services for such a plan quickly becomes outdated as online services are dynamic (’630 Patent, col. 6:1-6).
  • The Patented Solution: The invention discloses a method for dynamically managing these ambient services by inspecting a device’s traffic flow, identifying a requested access (e.g., a website), and determining if it falls within a pre-defined service profile (’630 Patent, Abstract). If the access is within the profile (e.g., a partner website), a record is created to account for that specific usage to a "sponsor entity," separating its cost from the user's general data usage (’630 Patent, Fig. 3; col. 4:31-40).
  • Technical Importance: This technology provides a mechanism to implement sponsored data programs, where a third-party content provider or advertiser could subsidize a user's data consumption for accessing its specific service, creating new revenue streams for network operators (Compl. ¶17).

Key Claims at a Glance

  • The complaint asserts at least independent claim 1 (Compl. ¶72).
  • The essential elements of independent claim 1 include:
    • Inspecting a traffic flow associated with a device.
    • Identifying a requested access within the traffic flow.
    • Determining if the requested access is within a profile associated with a first service, where the profile identifies a network destination, application, or content type.
    • The first service's usage is accounted for separately from a second service's usage.
    • If the access is within the profile, creating or modifying a record to assist in accounting for the first usage to a sponsor entity.
  • The complaint does not explicitly reserve the right to assert dependent claims.

Multi-Patent Capsule: U.S. Patent No. 8,583,781

  • Patent Identification: U.S. Patent No. 8,583,781, "Simplified service network architecture," issued November 12, 2013 (Compl. ¶39).
  • Technology Synopsis: The patent describes a network architecture where device-assisted service policy and control are implemented using a virtual network overlay. This approach is intended to simplify the data path processing required in the core network, reduce backhaul costs, and improve user experience by moving service control closer to the network edge (Compl. ¶1; ’781 Patent, col. 11:13-33).
  • Asserted Claims: At least independent claim 1 (Compl. ¶84).
  • Accused Features: The complaint accuses Verizon's cellular networks, servers, and services of infringement, suggesting the allegation targets the overall architecture Verizon uses to manage data traffic and enforce service policies (Compl. ¶45, ¶84).

Multi-Patent Capsule: U.S. Patent No. 8,630,617

  • Patent Identification: U.S. Patent No. 8,630,617, "Device group partitions and settlement platform," issued January 14, 2014 (Compl. ¶40).
  • Technology Synopsis: This invention relates to a settlement platform that processes device-assisted usage information. It enables the creation of distinct "device group partitions," allowing service policies and billing to be managed differently for various groups of devices (e.g., corporate vs. consumer) and facilitating financial settlement between multiple entities, such as carriers and their partners (’617 Patent, Abstract; col. 3:55-4:2).
  • Asserted Claims: At least independent claim 1 (Compl. ¶96).
  • Accused Features: The infringement allegations appear directed at Verizon's systems for managing different classes of customers or devices (e.g., enterprise, IoT, consumer) and settling costs or revenue with partners, such as through sponsored data or wholesale programs (Compl. ¶45, ¶96).

Multi-Patent Capsule: U.S. Patent No. 8,788,661

  • Patent Identification: U.S. Patent No. 8,788,661, "Device assisted CDR creation, aggregation, mediation and billing," issued July 22, 2014 (Compl. ¶41).
  • Technology Synopsis: The patent describes a method for monitoring traffic on a device, obtaining a first accounting for a sponsored portion of the traffic and a second accounting for a non-sponsored portion. The system then provides an accounting record to the sponsor based on the first accounting, effectively creating a billing mechanism for sponsored data programs that separates sponsored usage from the user's regular data plan (’661 Patent, Abstract).
  • Asserted Claims: At least independent claim 1 (Compl. ¶108).
  • Accused Features: The complaint targets Verizon's networks and billing systems, particularly any functionality that supports sponsored data, zero-rated services, or other plans where different types of data traffic are billed to different entities (Compl. ¶45, ¶108).

Multi-Patent Capsule: U.S. Patent No. 8,924,549

  • Patent Identification: U.S. Patent No. 8,924,549, "Network based ambient services," issued December 30, 2014 (Compl. ¶42).
  • Technology Synopsis: This patent discloses a system where a network operator monitors traffic from a user's device to a specific application or network endpoint. The system obtains an offset for the usage associated with that specific traffic from a sponsor, and then allocates that offset to the user's account, thereby reducing the user's bill for the sponsored portion of the usage (’549 Patent, Abstract).
  • Asserted Claims: At least independent claim 1 (Compl. ¶120).
  • Accused Features: The allegations are aimed at Verizon's services and billing platforms that enable sponsored or "ambient" services, where a third party covers the cost of a user's data access to a particular application or website (Compl. ¶45, ¶120).

III. The Accused Instrumentality

Product Identification

The complaint identifies the Accused Instrumentalities as "Verizon's cellular networks, servers, and services" and "eSIM-enabled devices" that operate on Verizon's network (Compl. ¶45). This includes network components such as eSIM provisioning systems (SM-DP+, SM-SR), authentication servers (AAA/UDM/AUSF), and policy control entities (PCRF/PCF) (Compl. ¶45).

Functionality and Market Context

The accused systems collectively provide wireless data connectivity to a wide range of devices, including phones, tablets, and IoT devices (Compl. ¶45). The complaint alleges these systems perform functions related to managing device and data usage, which is central to a carrier's ability to offer tiered and differentiated service plans (Compl. ¶24). To support its venue allegations, the complaint provides a screenshot of a Verizon coverage map showing 4G LTE and 5G network availability in Marshall, Texas (Compl. p. 14). It also provides a screenshot from Verizon's website showing retail store locations within the district (Compl. p. 15). The complaint asserts Verizon's significant market position, noting approximately 115 million wireless retail connections as of June 2022 (Compl. ¶52).

IV. Analysis of Infringement Allegations

'337 Patent Infringement Allegations

The complaint alleges that Exhibit 7 provides a claim chart detailing infringement of claim 1 of the ’337 Patent, but the exhibit was not attached to the publicly filed complaint (Compl. ¶60). The body of the complaint does not provide a narrative summary of the specific infringement theory.

  • Identified Points of Contention:
    • Technical Questions: A central question will be whether Verizon's network architecture performs the steps of receiving and identifying two distinct "classifications" of data with corresponding "usage measures," as required by the claim. The dispute may focus on what evidence exists that Verizon's systems create and use such discrete, classified data measures, rather than employing a more monolithic system for tracking total data volume.
    • Scope Questions: The analysis may turn on whether routine network management functions, such as distinguishing video streaming from web browsing for QoS purposes, meet the claim limitation of "facilitate implementation of a service policy" that involves accounting to a "sponsor entity."

'630 Patent Infringement Allegations

The complaint alleges that Exhibit 8 provides a claim chart detailing infringement of claim 1 of the ’630 Patent, but this exhibit was not provided with the complaint (Compl. ¶72). The complaint does not contain a narrative description of the infringement theory in the pleading's main body.

  • Identified Points of Contention:
    • Technical Questions: An evidentiary question may arise regarding how Verizon's systems "create or modify a record for assisting in accounting... to a sponsor entity." The focus will be on the specific data records, their structure, and how they are used for billing or settlement with third-party partners versus internal cost allocation.
    • Scope Questions: A likely point of contention will be the scope of "profile associated with a first service." Does this term require a specific set of rules defined for a third-party "ambient service," or could it be interpreted to cover a network operator's internal policies for zero-rating its own content or managing traffic for different application types?

V. Key Claim Terms for Construction

'337 Patent

  • The Term: "service policy" (from claim 1).
  • Context and Importance: This term is the object of the claimed method; the entire process of measuring and classifying data is performed to "facilitate implementation of a service policy." Whether Verizon's standard network operating procedures constitute a "service policy" as claimed will be critical to the infringement analysis. Practitioners may focus on this term because its scope could determine whether the claim covers general traffic management or is limited to the specific device-and-controller architecture described in the patent.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification describes a wide range of policy functions, including "network access control, service network access control, service network admission control services, service billing, transaction billing, simplified service activation and sign up, user service usage and activity notification, service plan selection and other service aspects" (’337 Patent, col. 9:8-13). This language may support a broad definition.
    • Evidence for a Narrower Interpretation: The detailed description repeatedly links the "service policy" to a specific architecture involving a "service processor 115" on the device and a "service controller 122" in the network (’337 Patent, col. 8:54-67; Fig. 16). This may support an argument that the term implies more than just a set of rules and requires this particular architectural implementation.

'630 Patent

  • The Term: "sponsor entity" (from claim 1).
  • Context and Importance: The identity and nature of the "sponsor entity" are central to the claimed method, as the purpose of creating the accounting record is to attribute usage to this entity. The case may turn on whether Defendant Verizon can itself be a "sponsor entity" when it zero-rates its own services, or if the term is limited to third parties.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The claim language itself is broad, defining the sponsor as an "entity responsible for at least subsidizing at least a portion of the first usage." This functional definition does not explicitly exclude the network operator.
    • Evidence for a Narrower Interpretation: The abstract and detailed description frame the invention in the context of "ambient services" that provide users with access to partner websites or applications, with those partners subsidizing the usage (’630 Patent, Abstract; col. 4:15-30). This context suggests the "sponsor entity" is a third-party partner of the network operator, not the operator itself.

VI. Other Allegations

  • Indirect Infringement: The complaint alleges that Defendant induces infringement by "actively encouraging others (including their customers) to use" the accused networks and devices, and by providing "information and instructions on the use of the Accused Instrumentalities" (Compl. ¶64, ¶76, ¶88, ¶100, ¶112, ¶124).
  • Willful Infringement: Willfulness is alleged based on Defendant's purported pre-suit knowledge of the patents and technology (Compl. ¶63, ¶75, ¶87, ¶99, ¶111, ¶123). The complaint alleges this knowledge arises from a 2009-2013 business relationship that included detailed technical presentations, disclosure of the pending patent applications, a multi-million dollar software evaluation license, and joint prototype development (Compl. ¶17, ¶20, ¶25, ¶28). The allegations are further supported by reference to a 2013 whistleblower complaint alleging misappropriation of the technology by Defendant (Compl. ¶31).

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

  • A core issue will be one of technical implementation: what evidence exists that Verizon's large-scale, commercial network architecture performs the specific, multi-step methods recited in the claims, such as creating distinct, classified usage measures or generating special accounting records for sponsored services, as opposed to achieving similar commercial outcomes through fundamentally different technical processes?
  • A central legal question will be one of definitional scope: can terms like "service policy" and "sponsor entity," which are described in the patents in the context of a novel device-and-controller architecture for managing third-party services, be construed broadly enough to read on a network operator's general traffic management practices and its own zero-rated content offerings?
  • Given the extensive history alleged between the parties, a key factual dispute will concern pre-suit knowledge and intent. The case will likely feature significant focus on the 2009-2013 business relationship and the subsequent whistleblower allegations to determine whether any infringement, if found, was willful.