DCT

6:22-cv-01206

AlmondNet Inc v. Microsoft Corp

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 6:22-cv-01206, W.D. Tex., 11/18/2022
  • Venue Allegations: Plaintiff alleges venue is proper because both Microsoft and its subsidiary Xandr are registered to do business in Texas, have regular and established places of business in the Austin area, and have committed acts of infringement within the district.
  • Core Dispute: Plaintiff alleges that Defendant’s digital advertising platform infringes five patents related to targeted advertising systems, data profiling, and profit-based ad selection.
  • Technical Context: The patents relate to the field of digital advertising, specifically methods for targeting advertisements across different platforms by associating user behaviors observed in one medium with ad delivery in another, often without using personally identifiable information.
  • Key Procedural History: The complaint alleges that Microsoft had pre-suit knowledge of four of the five asserted patents due to a prior lawsuit filed by AlmondNet against Microsoft in August 2021. For the fifth patent, the complaint alleges knowledge based on communications in 2019 regarding a parent patent in the same family. These allegations form the basis for the claim of willful infringement.

Case Timeline

Date Event
1999-12-13 Earliest Priority Date (’307, ’249 Patents)
2006-06-16 Earliest Priority Date (’146 Patent)
2007-04-17 Earliest Priority Date (’260, ’878 Patents)
2010-12-28 Issue Date: U.S. Patent No. 7,861,260
2011-07-12 Issue Date: U.S. Patent No. 7,979,307
2014-07-08 Issue Date: U.S. Patent No. 8,775,249
2015-02-17 Issue Date: U.S. Patent No. 8,959,146
2019 Plaintiff and Defendant communicated regarding '260 Patent family
2020-07-14 Issue Date: U.S. Patent No. 10,715,878
2021-08-27 Prior lawsuit filed (AlmondNet Inc v. Microsoft Corp, 6:21-cv-00897)
2022-06-06 Microsoft acquires Defendant Xandr, Inc.
2022-11-18 Complaint Filing Date

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

U.S. Patent No. 7,861,260 - “Targeted Television Advertisements Based on Online Behavior”

The Invention Explained

  • Problem Addressed: The patent addresses the difficulty of targeting television advertisements based on a viewer's online behavior, particularly because different devices are typically used to access each medium and linking them often requires personally identifiable information (PII), which raises privacy concerns (’260 Patent, col. 7:25-33).
  • The Patented Solution: The invention proposes a method to electronically associate the IP address of an online access device (e.g., a modem) with the IP address of a television set-top box (STB). This association allows user profile information gathered from online activity (e.g., web browsing) to be used to select and automatically direct a targeted advertisement to the associated television, preferably without using PII (’260 Patent, Abstract; col. 10:40-56).
  • Technical Importance: This approach provided a technical framework for cross-media advertising that could link online intent with television-based ad delivery, a significant goal in the advertising industry, while potentially mitigating consumer privacy concerns.

Key Claims at a Glance

  • The complaint asserts infringement of at least independent claim 1 (Compl. ¶15).
  • Essential elements of independent claim 1 include:
    • For multiple users, electronically associating an online access IP address and a set-top box IP address based on a common IP address.
    • Using user profile information derived from online activity via a first online access IP address.
    • Automatically causing a first television advertisement to be directed to the set-top box indicated by the associated set-top box IP address.

U.S. Patent No. 7,979,307 - “Method and Stored Program for Accumulating Descriptive Profile Data Along with Source Information for Use in Targeting Third-Party Advertisements”

The Invention Explained

  • Problem Addressed: The patent identifies a need in the art for a commercial method to manage and assign value to specific "attributes of information" (i.e., discrete pieces of user data), as the existing commerce was focused on selling whole records or databases rather than brokering individual data points (’307 Patent, col. 2:1-4).
  • The Patented Solution: The invention describes a "descriptive-profile mercantile method" where a system acts as a brokerage. It receives partial user profiles, searches a databank for complementary data, and facilitates contractual exchanges of these data attributes between parties (’307 Patent, Abstract). The system is designed to track the source of each data attribute, enabling compensation to the original provider when that data is used (’307 Patent, col. 13:5-14).
  • Technical Importance: This system provides a framework for creating a viable economic market for granular user profile data, allowing data providers to be compensated for the use of their information in applications like targeted advertising.

Key Claims at a Glance

  • The complaint asserts infringement of at least one independent claim (Compl. ¶25).
  • Essential elements of independent claim 1 include:
    • Electronically receiving a partial profile of an entity from a server of an unaffiliated third party, where the receipt is achieved by an automatic electronic URL redirection.
    • Automatically adding the received partial profile to a maintained profile believed to be related to the same entity.
    • Automatically generating and storing an electronic record of which third party contributed which profile attributes.
    • Using the maintained profile data to target third-party advertisements.

U.S. Patent No. 8,775,249 - “Method, Computer System, and Stored Program for Accumulating Descriptive Profile Data Along with Source Information for Use in Targeting Third-Party Advertisements”

  • Technology Synopsis: Continuing the technology of the ’307 Patent, this invention details a method for collecting and aggregating user profile data from various third-party sources. The system tracks the origin of each piece of profile data, which facilitates compensation to the data provider when their information is used for targeting advertisements (’249 Patent, Abstract).
  • Asserted Claims: At least independent claim 1 (Compl. ¶35).
  • Accused Features: The complaint alleges that Microsoft’s advertising platform uses these methods for collecting and using profile data (Compl. ¶30).

U.S. Patent No. 8,959,146 - “Media Properties Selection Method and System Based on Expected Profit From Profile-Based Ad Delivery”

  • Technology Synopsis: This patent describes a system that selects where to place an advertisement based on calculated expected profit. The system analyzes a user profile, calculates the potential revenue from delivering a targeted ad minus the cost of the ad space on various media properties, and then arranges for ad delivery only on properties where a positive profit is expected (’146 Patent, Abstract).
  • Asserted Claims: At least one independent claim (Compl. ¶45).
  • Accused Features: The complaint alleges that Microsoft’s advertising platform performs profit-based ad selection (Compl. ¶40).

U.S. Patent No. 10,715,878 - “Targeted Television Advertisements Based on Online Behavior”

  • Technology Synopsis: As a continuation of the ’260 Patent, this invention further refines the method for targeting television ads based on online behavior. It focuses on the cross-device association of a user's online activities with their television viewing environment, using identifiers and IP addresses to link devices on a common local area network (LAN) for ad targeting purposes (’878 Patent, Abstract; col. 23:24-24:2).
  • Asserted Claims: At least one independent claim (Compl. ¶56).
  • Accused Features: The complaint accuses Microsoft's advertising platform of using these cross-device targeting methods (Compl. ¶51).

III. The Accused Instrumentality

Product Identification

  • The Accused Instrumentalities are identified as "Microsoft's advertising platform," which includes the technology and services of its wholly-owned subsidiary, Xandr, Inc. (Compl. ¶4, 10).

Functionality and Market Context

  • The complaint alleges that Microsoft's advertising platform provides "digital advertising solutions" that enable targeted advertising (Compl. ¶4, fn. 1). The complaint does not provide specific technical details on how the platform operates. Instead, it makes general allegations that the platform performs the functions recited in the asserted patents, such as profile-based bidding, behavioral targeting, and multi-platform advertising (Compl. ¶2, 10, 20, 30, 40, 51). Microsoft acquired Xandr to "accelerate the delivery of our digital advertising solutions," suggesting the platform's importance to Microsoft's business strategy (Compl. ¶4, fn. 1).

IV. Analysis of Infringement Allegations

The complaint references claim-chart exhibits for each asserted patent but does not include them in the filing (Compl. ¶15, 25, 35, 45, 56). The narrative infringement theory is summarized below.

The complaint alleges that Microsoft’s advertising platform directly infringes the asserted patents by performing the claimed methods for targeted advertising. For the ’260 and ’878 Patents, the core allegation is that the platform associates users' online activities with ad delivery to other devices, such as for television or streaming, by linking device identifiers or IP addresses (Compl. ¶10, 51). For the ’307 and ’249 Patents, the allegation is that the platform infringes by accumulating user profile data from various sources and tracking that source information for use in targeting ads (Compl. ¶20, 30). For the ’146 Patent, the complaint alleges the platform selects where to place advertisements based on a calculation of expected profit (Compl. ¶40).

No probative visual evidence provided in complaint.

  • Identified Points of Contention:
    • Scope Questions: A central question for the ’260 and ’878 Patents will be whether the term "television set-top box" can be construed to read on the modern devices targeted by Microsoft's advertising platform, which may include smart TVs, streaming media players, or software applications rather than the traditional hardware boxes depicted in the patent. A related question is whether the "association" of IP addresses as claimed occurs within the accused platform's architecture.
    • Technical Questions: The complaint lacks technical specifics about the accused platform. A key point of contention will therefore be evidentiary: what proof can Plaintiff offer that Microsoft's platform actually performs the specific steps of (1) electronically associating different device IP addresses for a single user, (2) tracking the source of third-party profile data for compensation, and (3) making ad placement decisions based on a specific "expected profit" calculation as required by the respective claims?

V. Key Claim Terms for Construction

  • The Term: "television set-top box" (from claim 1 of the ’260 Patent).
  • Context and Importance: The construction of this term may be dispositive for the ’260 and ’878 Patents. The dispute may center on whether this term is limited to the physical cable or satellite boxes prevalent when the patent was filed, or if it is broad enough to encompass modern hardware (e.g., smart TVs, Roku, Apple TV) and software (e.g., streaming apps on a game console) that serve a similar function of delivering content to a television screen.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification defines "Set-top box (STB)" as "a device that connects a television and a signal source," and notes that it is "not even necessary that the STB be located in proximity to the television" or that it "be a box, literally," suggesting it could be implemented as a "circuit board, integrated circuit, set of integrated circuits, or software" (’260 Patent, col. 1:44-64).
    • Evidence for a Narrower Interpretation: The detailed embodiments and figures consistently depict a distinct physical "STB" (36) as a separate component connected to a "TV" (38) and a provider network, which may support an argument that the invention was conceived as a hardware-centric system distinct from an integrated smart TV or a pure software application (’260 Patent, Fig. 1).
  • The Term: "unaffiliated third parties" (from claim 1 of the ’307 Patent).
  • Context and Importance: This term is central to the structure of the data collection method claimed in the ’307 and ’249 Patents. Its construction will determine the types of entities whose data collection activities could fall within the claim scope. Practitioners may focus on this term because the nature of the relationship between Microsoft's advertising platform, its data partners, and website publishers will be critical to determining infringement.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The patent does not provide an explicit definition, which may support applying the term’s plain and ordinary meaning of separate, independently controlled entities. The background describes a diverse ecosystem of data sources, suggesting the invention is meant to apply broadly to any external data provider (’307 Patent, col. 1:12-45).
    • Evidence for a Narrower Interpretation: A defendant may argue that certain data-sharing relationships, such as those between corporate subsidiaries, partners with data-sharing agreements, or entities within a walled-garden ecosystem, do not qualify as "unaffiliated," potentially narrowing the scope of accused activities. The patent's focus on a "brokerage" model could suggest a requirement for a purely arms-length, transactional relationship to be considered "unaffiliated" (’307 Patent, col. 3:3-12).

VI. Other Allegations

  • Indirect Infringement: The complaint alleges induced infringement for all five patents. The basis for this allegation is that Defendant provides "user manuals and online instruction materials on its website" that allegedly "actively encourage and instruct its customers and end users" to use the accused platform in a manner that directly infringes the patents (Compl. ¶13, 23, 33, 43, 54).
  • Willful Infringement: Willfulness is alleged for all five patents. For the ’260, ’307, ’249, and ’146 Patents, the allegation is based on pre-suit knowledge stemming from a prior lawsuit, AlmondNet, Inc. et al. v. Microsoft Corporation, filed on August 27, 2021 (Compl. ¶12, 22, 32, 42). For the ’878 Patent, willfulness is based on alleged pre-suit knowledge from communications during "the 2019 time frame," in which Plaintiff allegedly notified Defendant of the ’260 Patent, which is in the same family as the ’878 Patent (Compl. ¶53).

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

  • A core issue will be one of technological translation: can the claims of the asserted patents, drafted in the context of early-2000s internet and television technology (e.g., "set-top boxes"), be construed to cover the architecture and functionality of Microsoft's modern, integrated digital advertising platform?
  • A second central question will be evidentiary proof: given the complaint's lack of specific factual allegations about the operation of the accused platform, what evidence will Plaintiff produce to demonstrate that Microsoft's systems perform the highly specific methods claimed, such as associating disparate device IP addresses and tracking the source of third-party data for compensation?
  • A third key question will concern willfulness: did the prior 2021 litigation and 2019 communications provide Microsoft with knowledge of infringement that was "so egregious and characteristic of a wanton disregard of patent rights" as to justify enhanced damages, or will Microsoft establish that it had a good-faith belief of non-infringement or invalidity?