Netflix, Inc. v. Blockbuster, Inc.

Filing 83

Netflix, Inc. v. Blockbuster, Inc.

Doc. 83

Case 3:06-cv-02361-WHA

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ALSCHULER GROSSMAN STEIN & KAHAN LLP Marshall B. Grossman (No. 35958) William J. O'Brien (No. 99526) Tony D. Chen (No. 176635) Dominique N. Thomas (No. 231464) The Water Garden 1620 26th Street Fourth Floor, North Tower Santa Monica, CA 90404-4060 Telephone: [phone] Facsimile: 310-907-2000 Email: [e-mail] [e-mail] m [e-mail] m [e-mail] Attorneys for Defendant and Counterclaimant, Blockbuster Inc. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

NETFLIX, INC., a Delaware corporation, Plaintiff, vs. BLOCKBUSTER INC., a Delaware corporation, DOES 1-50, Defendants.

CASE NO. C 06 2361 WHA (JCS) DECLARATION OF WILLIAM J. O'BRIEN IN SUPPORT OF BLOCKBUSTER'S MOTION TO COMPEL FURTHER RESPONSES TO BLOCKBUSTER'S FIRST SET OF REQUESTS FOR PRODUCTION Hearing Date: Time: Courtroom: Judge: Complaint Filed: Dec. 8, 2006 9:30 A.M. A, 15th Floor Hon. Joseph C Spero April 4, 2006

AND RELATED COUNTER ACTION.

I, William J. O'Brien, declare: Introduction 1. I am an attorney duly admitted to practice before this Court and a partner in

the law firm of Alschuler Grossman Stein & Kahan LLP, counsel of record for Defendant and Counterclaimant, Blockbuster Inc., in this case. I am a patent litigator with significant trial and appellant experience. Together with my partner Marshall B. Grossman, I am heading up the representation of Blockbuster in this case.
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2.

I am familiar with the proceedings in this case, including court filings,

discovery, and correspondence. I have personal knowledge of facts stated below except insofar as another source of information is identified. Blockbuster's Service of Requests for Production and Special Notice to Netflix Counsel About Them 3. I caused Blockbuster's First Set of Requests for Production and First Set of

Interrogatories to be delivered to the offices of counsel of record for Plaintiff and CounterDefendant, Netflix, Inc., Keker & Van Nest, LLP, on July 11, 2006. A true and correct copy of the Requests, which are the subject of Blockbuster's present motion, is Exhibit A to this Declaration. In addition, the specific requests at issue in this motion ­ and Netflix's written responses to them ­ are reprinted verbatim in Paragraphs 55 through 59 below. 4. Because Blockbuster's Requests for Production had been served together

with the Interrogatories on July 11, Netflix's written responses to the Request for Production were due on August 10, the same date when Netflix's Interrogatory Answers were originally due. On Page 1 of the Requests for Production, Blockbuster asked that the requested documents be produced on August 14, 2006. 5. On July 11, 2006, the same day that the Requests and Interrogatories were

served, I sent an email to Daralyn Durie of Keker & Van Nest, notifying her of the service and attaching copies of the Requests and Interrogatories. A true and correct copy of that email is Exhibit B to this Declaration. In the email, I also gave Ms. Durie a special "heads-up" that Blockbuster needed discovery responses before the August 17 hearing on Netflix's motion to dismiss: I want to give you a heads-up at the outset that, while we are usually inclined to be liberal with extensions of time, these sets of discovery requests present a special case, because they are largely directed to facts implicated by Net flix's pending motion to dismiss. In that motion, as you know, Netflix attacks the facts alleged in support of certain Blockbuster defenses and counterclaims as insufficient and argues for the inadequacy of Blockbuster's allegations made on information and belief. While we believe that our allegations are both proper and adequate to support our claims and defenses, we need to be in a position to advise the Court at the hearing of what further allegations we can add if we are required to amend our pleading.
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6.

In closing, I stated that, "[i]f there are any problems we will need to

address with regard to the discovery requests, I would appreciate your contacting me as early as possible about them." 7. I never received any response from Netflix's counsel to my July 11 email.

Netflix's Request For An Extension of Time to Answer Interrogatories ­ But Not to Respond to Requests for Production 8. On August 4, 2006, however, I received a telephone call from Leo Lam of

Keker & Van Nest. Mr. Lam requested an extension of Netflix's time to answer the First Set of Interrogatories from August 10 to August 14. During this conversation, I told Mr. Lam about my July 11 email to Ms. Durie and about the time-sensitivity o f receiving the discovery that Blockbuster had requested that day in view of the August 17 hearing. 9. In this context, Mr. Lam and I referred in passing on August 4 to

Blockbuster's First Set of Requests for Production. While Mr. Lam was thus aware of the Requests, he never requested any extension of time with regard to them, and Blockbuster never granted any such extension. Further, contrary to his later assertions, Mr. Lam never said anything to me on August 4 to indicate that he was under a misapprehension as to when the written responses to Blockbuster's First Set of Requests for Production were due or that he did not know that the written responses were due on August 10. Because the Requests for Production had been served together with the Interrogatories on July 11, and because written responses, like interrogatory answers, are due thirty days after service, it appeared obvious to me that the deadline for written responses was the same as the August 10 deadline for answering the Interrogatories. It never entered into my mind that Mr. Lam was under any misapprehension about this seemingly obvious point until August 11, when he asserted for the first time that the written responses were not due until August 14. 10. Despite the ongoing concerns of Blockbuster's counsel about the time-

sensit ivit y of the requested discovery, I granted Netflix the extension requested by Mr. Lam and sent him a confirming email a few minutes later. A true and correct copy of my August 4 confirming email is Exhibit C to this Declaration. As the email reflects, the extension that I
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granted to Mr. Lam applied only to "Netflix's time to answer Blockbuster's first set of interrogatories . . . ." There is no reference to Blockbuster's Requests for Production anywhere in the email. 11. Mr. Lam did not challenge the accuracy of my August 4 email

confirmation of our conversation and of the scope of the extension granted.1 Netflix's Untimely Written Responses to Blockbuster's Requests for Production 12. Blockbuster's counsel did not receive written responses to Blockbuster's

Requests for Production on August 10, 2006, when they were due. No such responses were served or received until August 14, 2006. On August 11, 2006, I called Mr. Lam, and we spoke by telephone twice during that day. In the first of these conversations, Mr. Lam told me ­ for the first time ­ that he believed the written responses to Blockbuster's Requests for Production were not due until August 14. Initially, Mr. Lam asserted that my August 4 email had said that Netflix's written responses were due on August 14. He retracted this assertion when I read him my August 4 email (Exhibit C), which neither said nor implied anything of the sort. Thereafter, despite repeated requests on my part, Mr. Lam was not able ­ then or in later conversations ­ to articulate any specific reason why he had believed that to be the case. He merely said that this was an "inherited impression." Exhibit D to this declaration is a true and correct copy of a letter I sent Mr. Lam on August 14, concerning our telephone conversations of August 11. 13. Exhibit E is a true and correct copy of Netflix's written responses to

Blockbuster's First Set Requests for Production. Blockbuster's counsel first received these responses on August 14, 2006, which, according to the attached proof of service, is also the date when they were served. 14. In its written responses, Netflix has asserted objections to every one of

Blockbuster's 134 Requests As one example, Netflix has objected even to Request No. 133, which merely asked for the items that Netflix had listed in its Initial Disclosures as Rule 26(a)(1)(b) documents. Netflix also objected to producing, and refused to produce, certain patent
1

As recounted below, Mr. Lam did later assert that, in this email, I had represented that the written responses to Blockbuster's First Set of Requests for Production were due August 14. However, once I read him the email, Mr. Lam retracted that assertion.
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filings, prior art that disclosed features claimed in the patents-in-suit, and other documents as described below. Netflix's Efforts to Excuse Its Untimely Responses 15. Exhibit F to this declaration is a true and correct copy of a letter I received

from Mr. Lam on August 14, 2006, in response to my letter to him of that date (Exhibit D). In the third paragraph of his August 14 letter, Mr. Lam asserts, "When I requested and you granted on August 4 and extension of time until August 14 to respond to Blockbuster's interrogatories, I told you that Netflix wanted to provide its interrogatory responses on the same day that Netflix's written responses to Blockbuster's RFPs were due, on Monday, August 14." That statement by Mr. Lam is incorrect. Mr. Lam's recollection about what he told me in this regard is no more accurate than his incorrect recollection that my August 4 email had said that the written responses were due on August 14. Only after I reputed that incorrect assertion did Mr. Lam switch to reliance on a supposed statement that was oral rather than in writing. 16. Similarly, during our initial telephone conversation on August 14, Mr. Lam

denied that Blockbuster's requests for production specified a requested production date, even though that date appears prominently on the first page of the requests. While I do not question the sincerity of Mr. Lam's belief in his stated recollection, it does not correspond to the facts of what occurred. 17. Mr. Lam is particularly off-base in suggesting that I withheld a correction

of his professed mistake in order to "wait and claim `gotcha' . . . ." In reality, I would gladly have corrected Mr. Lam if he had told me that he believed the written responses were due on August 14, but he made no such assertion on August 4, and the thought never entered my mind that he was unaware of the seemingly obvious response date. On August 11, when Mr. Lam asserted for the first time that the written responses were due on August 14, I did immediately correct him. Until then, I had no occasion or opportunity to do so.

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Efforts at Compromise Resolution 18. Counsel have extensively discussed, and attempted to resolve, numerous

issues regarding Netflix's responses to Blockbuster's First Set of Requests for Production.2 We have successfully resolved some issues by agreement, but have been unable to resolve others and need the assistance of the Court in doing so.3 19. As noted above, I contacted Netflix's counsel by email about Blockbuster's

First Set of Requests for Production on July 11, 2006 ­ the same day they were served ­ and I spoke by telephone with Netflix's counsel about the requests on August 11, 2006, 31 days after service. Thereafter, counsel have conferred for multiple hours, in person and by telephone, about issues related to Netflix's responses to the requests for production. These discussions have included telephone conferences between my colleague Dominique Thomas and me and Leo Lam, Eugene Paige, and Ashok Ramani of Keker & Van Nest LLP 20. The communications that I have sent to opposing counsel in an attempt to

resolve issues about Blockbuster's Requests for Production have included an August 25, 2006, letter to Daralyn Durie about the production requests, a true and correct copy of which is Exhibit G to this Declaration, and an August 31 letter to Eugene Paige, a true and correct copy of which is Exhibit H, in addition to my August 14 letter to Mr. Lam (Exhibit D.)4 My 11-page letter of August 31 (Exhibit H) confirmed a telephone conference of approximately one and onehalf hours. 21. Even so, Mr. Paige suggested, in a letter of September 1, 2006, that we had

not yet fully conferred on all issues. (A true and correct copy of Mr. Paige's September 1, 2006, letter is Exhibit J to this declaration.) I therefore had another long telephone conference with Mr. Paige about the Requests for Production on September 5. At the conclusion of that

2

A description of these efforts is also included in counsel's joint letter attached as Exhibit 1 to Blockbuster's Motion to Compel Further Responses to Requests for Production. 3 Addit ionally, Blockbuster reserves all rights to seek additional relief if it becomes necessary to do so based on future developments, such as any failure by Netflix to produce documents as agreed. Netflix has not yet completed the agreed production of documents. 4 Mr. Lam referred me to Mr. Paige in a letter dated August 30, 2006, a true and correct copy of which is Exhibit I to this declaration.
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conversation, he expressed satisfaction that we had addressed the issues raised in his September 1 letter. 22. Addit io nally, on October 13, 2006, I traveled to San Francisco and met

personally with Jeffrey Chanin and Gene Paige of Keker & Van Nest. Prior to that meeting, I sent Messrs. Chanin and Paige a draft of a proposed joint letter regarding Blockbuster's intended motion to compel further responses to its first set of requests for production. A true and correct copy of that draft is Exhibit K to this declaration. During the afternoon and evening of October 13, we discussed Blockbuster's Requests for Production, Blockbuster's intended motion to compel further responses to those Requests, and the draft of the joint letter. My partner Marshall Grossman participated in this conversation by telephone. At the conference, we were unable to reach agreement on any of the issues addressed in Blockbuster's present motion. Background for the Requests for Production The Pleadings 23. The currently operative pleadings in this case are: a. Netflix's First Amended Complaint for Patent Infringement and

Demand for Jury Trial (Document 28, filed July 26, 2006), a true and correct copy of which is Exhibit L to this declaration; b. Blockbuster's Answer to First Amended Complaint; Counterclaims;

Demand for Jury Trial (Document 43, filed September 11, 2006), a true and correct copy of which is Exhibit M to this declaration; and c. Netflix's Reply to Defendant's Counterclaims (document 50, filed

October 2, 2006), a true and correct copy of which is Exhibit N to this declaration. 24. In its First Amended Complaint (Exhibit L), Netflix accuses Blockbuster of

infringing two patents, U.S. Patent No. 7,024,381 (Exhibit A to the First Amended Complaint) and U.S. Patent No. 6,584,450 (Exhibit B to the First Amended Complaint). 25. In its Answer (Exhibit M), Blockbuster asserts multiple affirmative

defenses and conterclaims. Blockbuster's affirmative defenses include:

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a.

That Netflix's patents are invalid for anticipation under 35 U.S.C.

§102 because they claim subject matter already disclosed in the prior art; b. That Netflix's patent claims were obvious in view of prior art and

therefore unpatentable under 35 U.S.C.§103; c. That Netflix's patents are unenforceable because of inequitable

conduct in obtaining the patents, including the failure to disclose material prior art; d. That Netflix has misused its patents and is therefore barred from

asserting them against Blockbuster; e. That Netflix's patent claims are invalid under 35 U.S.C.§112,¶1

because of failure by the Netflix inventors to disclose, in the patent applications and patents, what they regarded as the best way or "best mode" of practicing the claimed inventions. 26. Blockbuster's affirmative defenses of invalidity, unenforceability and

patent misuse are set forth in Paragraphs 60-72 of the Answer. 27. Blockbuster also asserts affirmative defenses of laches (Paragraphs 73

through 77 of the Answer) and estoppel (Paragraphs 78 through 80 of the Answer). 28. Blockbuster's counterclaims include allegations that Netflix has engaged in

monopolization and attempted monopolization in violation of Section 2 of the Sherman Antitrust Act, 15 U.S.C.§2, through fraudulently obtaining its patents-in-suit and baselessly asserting them in sham litigation against Blockbuster. Blockbuster's antitrust counterclaims and related allegations about interstate commerce and the relevant market are set forth in Paragraphs 88 through 119 of the Answer. Facts common to both Blockbuster's affirmative defenses and its counterclaims are set forth in Paragraphs 16 through 59 of the Answer. 29. In Netflix's Reply (Exhibit N) to Blockbuster's Counterclaims (Exhibit M),

Netflix admits, in Paragraph 98, that it "did not cite any prior art" to the Patent Office during the pendency o f the application for the '450 patent, which is the first of Netflix's two patents-in-suit. 30. Netflix admits, in Paragraph 31 of the Reply, "that certain specific

individuals, including the named inventors and the attorneys who prosecuted the patent
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applicat ions, owed a duty of candor to the Patent and Trademark Office pursuant to 37 C.F.R. §1.56(c)." Netflix admits, in Paragraphs 35 and 36 of the Reply, that Netflix's named inventors singed a "declaration and power of attorney [that] includes a paragraph that states: `I acknowledge a duty to disclose information which is known to me to be material to patentability in accordance with Title 37, Code of Federal Regulations 1.56.'" 31. In Paragraph 44 of its Reply "Netflix admits that it was aware of the

existence of certain patents purportedly owned by NCR during the pendency of the applications for the '450 and '381 patents." In Paragraph 52, "Netflix admits that it did not disclose the NCR patents to the Patent Office in conjunction with the '381 patent." Additionally, in Paragraph 44, "Netflix admits that it was aware of the existence of HBO, Showtime, and TiVo while the applications were [for the '450 and '381 patents] were pending." Netflix's Unsuccessful Motion to Dismiss 32. On July 6, 2006, Netflix filed a Motion to Dismiss Blockbuster's antitrust

counterclaims and to strike Blockbuster's defenses of inequitable conduct and patent misuse. After briefing and argument, this Court denied Netflix's motion in its entirety. A true and correct copy of the Court's order (Document 40, filed August 22, 2006) is Exhibit O to this declaration. 33. On Page 8, Lines 21-28 of the Court's order denying Netflix's motion to

dismiss (Exhibit O), the Court states: Netflix disclosed absolutely no prior art in applying for the '450 patent. Shortly after that patent issued, Netflix suddenly bombarded the PTO examiner with over one hundred references in support of the '381 patent (but not the NCR patents). This is so even though the same law firm prosecuted both patent applications, and even though the same named inventors were responsible for both applications. For Netflix's later patent, the PTO examiner would have needed to swim through a morass of references and then go beyond that morass to find the NCR patents. 34. Exhibit P to this declaration is a true and correct copy of the reply that

Netflix filed in support of its motion to dismiss (Document 36, filed August 3, 2006). In Footnote 5 on Pages 5 and 6 of this reply, Netflix cited cases in which materiality of omitted prior art was supported by references to that art in Patent Office proceedings. Netflix argued, "Here,
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Blockbuster does not allege the PTO cited the NCR patents against Netflix." For example, Netflix cited Papst Motoren GMbH & Co. v. Kanematsu-Goshu (U.S.A.) Inc., 629 F. Supp. 864 (S.D.N.Y. 1986), saying, "the court in Papst noted that the claimant specifically alleged that (1) a patent examiner working on a companion patent application had discussed the omitted prior-art patent with prosecution counsel, and (2) prosecution counsel in fact referred to the omitted priorart patent in an amendment while prosecuting the companion application." Netflix's Disclosures About Its Contentions 35. Exhibit Q to this declaration is a true and correct copy of Netflix's

Amended Initial Disclosures under Rule 26 of the Federal Rules of Civil Procedure, dated July 28, 2006. At Page 5, Lines 13 through 20 of these Disclosures, Netflix states that it contends that it has lost profits as a result of Blockbuster's allegedly infringing activity, including lost profits from lost subscribers and from price erosion, but Netflix does not provide any details are amounts of such alleged damages. At Page 5, Lines 21 through 25 of these Disclosures, Netflix further states that it is entitled to a reasonable royalty from Blockbuster's alleged infringement, but Netflix does not specify any rate, calculation, or amount for such a royalty. 36. Exhibit R to this declaration is a true and correct copy of the

[Amended][Corrected] Netflix's Disclosure of Asserted Claims and Preliminary Contentions for U.S. Patent Nos. 7,024,381 and 6,584,450 (Document 31, filed July 28, 2006. On Page 2 at Lines 5 through 7 of this [Amended][Corrected] Disclosure, Netflix states: Wishing to preserve its right to rely on the assertion that its own methods and systems practice the claimed invention pursuant to Patent L.R. 3-1(f), Netflix discloses that it practices each asserted claim in both the '391 [sic] and '450 Patents. 37. Exhibit A to the [Amended] [Corrected] Disclosure is a table submitted by

Netflix purporting to compare the Blockbuster Online service identified as "the accused instrumentality" to multiple asserted claims of Netflix's '381 patent. On Page 13 of Exhibit A to the [Amended][Corrected] Disclosure, Netflix purports to compare Blockbuster Online to Claim 34 of the '381 patent. In doing so, Netflix breaks Claim 34 into portions designated as "34a" through "34e". The portion of the claim designated as 34a reads, "establishing over the
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Internet a rental agreement with a customer that provides for charging the customer a periodic fee." Referring to the other portions of Claim 34, Netflix merely refers to its preceding Contentions 1a through 1e, which appear on Pages 1-3 of Exhibit A to the [Amended][Corrected] Disclosure and purport to compare Blockbuster Online to Claim 1 of the '381 patent. Based on the [Amended][Corrected] Disclosure, the understanding of Blockbuster's counsel is that Netflix contends that Blockbuster infringes Claim 23 of the '381 patent for the same reasons it allegedly infringes Claim 1, with the sole distinction being Claim 34's addition of the requirement for "establishing over the Internet a rental agreement with a customer that provides for charging the customer a periodic fee" (portion 34a). Blockbuster's Invalidity Contentions 38. Blockbuster's filings disclosing its Preliminary Invalidity Contentions

provide further information about issues in this case. Exhibit X to this Declaration is a true and correct copy o f Blockbuster's Invalidity Contentions for U.S. Patent No. 6,584,450 (Document 45, filed September 18, 2006), while Exhibit Y is a true and correct copy of Blockbuster's Preliminary Invalidity Contentions for U.S. Patent No. 7,024,381 (Document 46, filed September 18, 2006).5 39. For example, information about Blockbuster's best-mode defenses with

regard to the '450 patent is provided at Page 6, Line 14 through Page 7, Line 13 of Exhibit X. Information about Blockbuster's best-mode defenses as to the '381 patent is provided at Page 6, Lines 1 through 27 of Exhibit Y. As stated in these documents, Blockbuster's best-mode defenses include that claims of the '450 and '381 patents recite selecting movies or other items for delivery to a customer but do not disclose any mode of selecting items or movies that prioritizes between requests of different customers. For instance, the patents do not disclose any mode of selecting movies or other items that takes into account how often a customer returns

5

Blockbuster's detailed charts concerning prior art supporting its invalidity contentions are not included in these exhibits because of their bulk. Inclusion of these charts would have resulted in submission of approximately 824 pages with respect to the '450 patent and approximately 628 pages with respect to the '381 parent.
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them and receives new ones, nor any step method, device, or feature for anything known or described as "throttling." 40. As further reflected in Exhibits X and Y, Blockbuster contends that claims

of the '450 and '381 patents recite delivery of moves or other items to customers and delivery by mail but do not disclose any particular type, design, or features for the envelope or package used for such delivery or for return of movies or other items by a customer. "Throttling" and the Related Class Action Against Netflix 41. During our investigation for this case, Blockbuster's counsel have become

aware of a recently settled class action lawsuit against Netflix, Frank Chavez v. Netflix, Inc., Case No. CGC-04-434884 in the Superior Court for the State of California for the City and County of San Francisco. Exhibit S to this Declaration is a true and correct copy of the Complaint in that case, obtained from the San Francisco Superior Court's case file. In Paragraph 32 on Pages 8 and 9 of this Complaint, the class-action plaintiff alleges that Netflix "intentionally designed their business processes and operating software so as to increase the delivery times to many customers . . . and to significantly decrease and/or limit the number of DVDs that can be rented in a month." The class-action plaintiff goes on to provide some particulars of the alleged Netflix conduct at issue. For example, in Sub-Paragraph 32a, he alleges that Netflix "prioritize[d] shipping DVDs . . . to account holders who have rented the fewest DVDs in prior months. Customers who rent the fewest DVDs per month are the most profitable. . . ." 42. In Paragraph 35 on Page 11 of the Class Action Complaint, it is alleged

that Netflix's conduct "unfairly disadvantages" competitors ­ such as Blockbuster ­ "who more accurately disclose their delivery times." 43. This class action lawsuit and Netflix's "throttling" practices received

considerable attention in the media and on the Internet. Exhibit T is a true and correct copy of a typical article on the case from DVD Rental News, dated February 10, 2006. 44. Exhibit U is a copy of the Order Approving Settlement of the Chavez class

action, dated April 28, 2006, and signed by the Hon. Thomas J. Mellon, Jr., of the San Francisco Superior Court. Blockbuster's counsel obtained this document from the Superior Court case file.
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45.

Netflix's patents-in-suit (Exhibits A and B to Netflix's First Amended

Complaint, which is Exhibit L to this declaration) do not provide any disclosure concerning "throttling" or other procedures for prioritizing between requests of different customers as described in the Chavez Class Action Complaint. Other Information Received About Netflix 46. Exhibit V to this declaration is a true and correct copy of an article found

by Blockbuster's counsel on the Internet at the website "MarketingProfs.com," dated April 11, 2006 and entitled "Five Lessons From the Netflix Startup Story." The article is co-authored by Jim Cook, who is described on Page 5 of the article as "a Netflix cofounder." On Pages 1 through 3 of the article, Mr. Cook describes issues addressed by Netflix with regard to U.S. Postal Service operations and packaging. Among other things, Mr. Cook states, on Page 2: In short, we figured out a way to make it all work. . . . We knew that if we didn't find a way to work within the US Post Office's systems, we wouldn't succeed. . . . To understand how the Post Office backend worked, I spent hundred of hours at a few of the largest regional Postal Centers, observing and asking tons of questions. I noticed letters being sorted by several high spinning circular drums. . . . [I]t was obvious that a thin plastic DVD would not survive the journey. . . . I found out that if an envelope had certain dimensions and other characteristics, it would be sorted by [an] alternative system instead of the large, crushing metal drums. . . . Our resulting "Netflix envelope" was one of the biggest "customer wows." Its design was critical not only for the customer experience but also for our operations and business mode. We had to design the envelope so that it met several criteria . . . . 47. Mr. Cook's article (Exhibit V) also includes a section on Page 4 entitled

"Copy the best." Mr. Cook states, "When designing the Netflix Web site we turned to the best: Amazon." He proceeds to list six "ideas that we adapted [from Amazon] for the Netflix Web site . . . ." 48. Exhibit W to this decoration is a true and correct copy of an email dated

February 7, 2006 received Blockbuster through the email address
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"[e-mail]." The email is if from a postal employee named William Grubb, who advised Netflix of special processing procedures in use on behalf of Netflix (but not Blockbuster) at the Post Office where he works.6 49. Netflix's patents-in-suit (Exhibits A and B to Netflix's First Amended

Complaint, which is Exhibit L to this declaration) do not provide any disclosure concerning Postal Service machinery or systems, special postal processing procedures, or envelope design. In fact, the patents do not mention envelopes at all. Blockbuster's Attemtps to Gather Evidence About Claimed Features in the Prior Art 50. Blockbuster has conducted an extensive search for prior art disclosing

features claimed in the patents-in-suit. Blockbuster wishes to use such prior art to support its invalidity defenses of ant icipat ion and obviousness. In addition, to the extent that Blockbuster can establish knowledge by Netflix of material undisclosed prior art, it intends to use such information to support its inequitable conduct defenses and antitrust counterclaims. 51. Netflix's '450 patent bears an application filing date of April 28, 2000.

The '381 patent claims priority of that application as well. Blockbuster's prior art search is therefore focused on prior art existing as of April 28, 1999 ­ one year before Netflix's claimed priority date. For example, under 35 U.S.C.§102(b), a person is not entitled to a patent if "the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States . . . ." 52. Many o f the Requests for Production now in dispute with Netflix constitute

attempts by Blockbuster to identify relevant prior art and, especially, prior art known to Netflix but not disclosed by it to the Patent and Trademark Office in obtaining the patents-in-suit. Such Requests include Nos. 32, 34-36, 55-57, 67-71, 73-74, 78-81, 86, 88-90, 93-100, 105, 113-17, and 119.

6

Material reflect ing subsequent forwarding of Mr. Grubb's email has been omitted from Exhibit W.
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53.

Of these Requests, Nos. 32, 34, 35, and 36 request documents related to

particular prior art businesses or categories of prior art businesses, such as HBO, Showtime, or other subscription cable or satellite television services or pay television services in existence before April 28, 1999 (Request No. 32), Webvan, Homegrocer.com, or other Internet grocery service in existence before April 28, 1999 (Request No. 34), Amazon.com (Request No. 35), and eBay (Request No. 36). 54. The remainder of the prior-art related Requests seek information pre-dating

April 28, 1999, concerning prior art that included various features that Netflix has included in claims in the patents-in-suit. The following table provides illustrative comparisons between features in these Requests for Production and features recited in Claims of the '381 and '450 patents: Features of Prior Art Requested in Requests for Production (Exhibit A) "co mputer-implemented rental of movies to a customer" (Request No. 55) "co mputer-implemented rental of movies to customers" (Request No. 56) Similar Features Claimed in Patents-in-Suit (Exhibits A & B to Exhibit L) "A computer-implemented method for renting movies to customers . . ." ('381 patent, Claims 1, 14, 24, 34) "A method for renting items to customers, the method comprising the computer-implemented steps [described below]." ('450 patent, Claims 1, 16, 31) "A computer-readable medium for renting items to customers, the computer-readable medium carrying one or more sequences of one or more instructions which, when executed by one or more processors, cause the one or more processors to perform the computerimplemented steps [described below]." ('450 patent, Claims 36, 81) "providing electronic digital information that causes one or more attributes of movies to be displayed . . ." ('381 patent, Claims 1, 14, 24, 34, 44) "a rental agreement with a customer that provides for charging the customer a periodic fee . . ." ('381 patent, Claim 34) "establishing over the Internet a rental agreement . . ." ('381 patent, Claim 34) "if the customer is current on the periodic fee, selecting another movie based upon the order of the list and causing the selected movie to be delivered to the customer . . ." ('381 patent, Claim 34) 15
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"providing electronic digital information that caused one or more attributes of movies to be displayed" (Request No. 57) "a rental agreement that provided for a periodic fee" (Request No. 67) "establishing a rental agreement over the Internet" (Request No. 68) "shipping a movie only if a fee was current" (Request No. 69)

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Features of Prior Art Requested in Requests for Production (Exhibit A) "co mputer system for renting movies" (Request No. 70)

Similar Features Claimed in Patents-in-Suit (Exhibits A & B to Exhibit L) "A computer system for renting movies to customers . . ." ('381 patent, Claim 44) "An apparatus for renting items to customers comprising . . . one or more processors . . ." ('450 patent, Claim 51) "rent ing movies using a computer coupled "A computer system for renting movies to to a digital telecommunications network" customers, comprising: . . . a computer that is (Request No. 71) coupled to a digital teleco mmunicat ions network . . ." ('381 patent, Claim 44) "rent ing movies using a computer with "A computer system for renting movies to electronic digital memory" (Request No. 73) customers, comprising: . . . a computer [and] an electronic digital memory in the computer . . ." ('381 patent, Claim 44) "An apparatus for renting items to customers comprising . . . a memory communicatively coupled to the one or more processors . . ." ('450 patent, Claim 51) "rent ing movies using a computer with "A computer system for renting movies to programs stored in memory causing the customers, comprising: . . . a computer . . .; an computer to perform steps" (Request No. electronic digital memory in the computer [and] 74) one or more sequences of computer program instructions stored in the electronic digital memory which, when executed, cause the computer to perform the steps [described below]." ('381 patent, Claim 44) "An apparatus for renting items to customers comprising . . . a memory communicatively coupled to the one or more processors, the memory including one or more sequences of one or more instructions which, when executed by the one or more processors, cause the one or more processors to perform the steps [described below]." ('450 patent, Claim 51) "co mputer-implemented method in which "A computer-implemented method as recited in two or more movies for renting to a claim 1 [or 14 or 24 or 34], wherein the two or customer are selected by a customer" more movies for renting to the customer are (Request No. 78) selected by the customer." ('381 patent, Claims 5, 18, 28, 38) "determining the order of two or more "A computer-implemented method as recited in movies based upon one or more preferences claim 1 [or 14 or 24], further comprising of a customer" (Request No. 79) determining the order of the two or more movies based upon one or more preferences of the customer." ('381 patent, Claims 6, 19, 29) "delivery of a selected movie by mail" "A computer-implemented method as recited in (Request No. 80) claim 1 [or 14 or 24 or 34 or 44], wherein the delivery o f the selected movie comprises delivery by mail." ('381 patent, Claims 7, 20, 30, 40, 48) "A method as recited in claim 31, wherein movies are provided to the customer by mail." ('450 patent, Claim 34) "A computer-readable medium as recited in
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Features of Prior Art Requested in Requests for Production (Exhibit A) "delivery of a selected movie by mail on one or more optical media" (Request No. 81) "rental of any o f motion pictures, television series, documentaries, cartoons, music videos, video recordings of concert performances, instructional programs, or educational programs" (Request No. 86) "providing a customer up to a specified number of items indicated by one or more selection criteria" (Request No. 88)

"in response to receiving one or more items provided to a customer, providing the customer one or more other items indicated by one or more item selection criteria" (Request No. 89) "rental of items to a customer in which the total current number of items provided to the customer did not exceed a specified number" (Request No. 90)

"co mputer-readable medium for renting items to customers" (Request No. 93) "co mputer-readable medium for renting items to customers that carried one or more sequences of instructions (Request No. 94) "instructions that, when executed by one or more processors, caused one or more of them to perform steps for renting items to customers" (Request No. 95)

Similar Features Claimed in Patents-in-Suit (Exhibits A & B to Exhibit L) claim 96, wherein movies are provided to the customer by mail." ('450 patent, Claim 99) "A computer-implemented method as recited in claim 1 [or 14 or 24 or 34 or 44], wherein the delivery o f the selected movie comprises delivery by mail on one or more optical media." ('381 patent, Claims 8, 21, 31, 41, 49) "A method as recited in claim 1, wherein the movies comprise any of motion pictures, television series, documentaries, cartoons, music videos, video recordings of concert performances, instructional programs, and educational programs." ('381 patent, Claim 13) "providing to the customer up to a specified number of the one or more items indicated by the one or more item selection criteria . . ." ('450 patent, Claims 1, 16, 31, 51, 81, 96) "providing to the customer one or more other items indicated by the one or more item selection criteria, wherein a total current number of items provided to the customer does not exceed the specified number . . ." ('450 patent, Claim 36) "in response to receiving any of the items provided to the customer, providing to the customer one or more other items indicated by the one or more item selection criteria . . ." ('450 patent, Claims 1, 16 ) "A computer-implemented method as recited in claim 1 [or 14 or 24 or 34], wherein a number of movies delivered to the customer and not yet returned does not exceed the specified number." ('381 patent, Claims 10, 23, 33, 43) "A computer system as recited in claim 44, wherein a number of movies delivered to the customer and not yet returned does not exceed the specified number." ('381 patent, Claim 51) "A computer-readable medium for renting items to customers . . ." ('450 patent, Claims 36, 81) "A computer-readable medium for renting items to customers, the computer-readable medium carrying one or more sequences of one or more instructions . . ." ('450 patent, Claims 36, 81) "instructions which, when executed by one or more processors, cause the one or more processors to perform the computerimplemented steps [described below]." ('450 patent, Claims 36, 81) "A computer system for renting movies to customers, comprising: . . one or more sequences of computer program instructions stored in the electronic digital memory which, when executed, cause the computer to perform the 17
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Features of Prior Art Requested in Requests for Production (Exhibit A) "apparatus for renting items to customers, the apparatus including one or more processors" (Request No. 96) "apparatus for renting items to customers, the apparatus including a memory communicatively coupled to the one or more processors, the memory including one or more sequences of one or more instructions which, when executed by the one or more processors, caused the one or more processors to perform steps" (Request No. 97) "apparatus for renting items to customers comprising an item rental mechanism configured to perform steps" (Request No. 98) "rental of items to customers in which a total number of items provided to the customer within a specified period of time did not exceed a specified limit" (Request No. 99)

"rental of items to customers in which a total number of items provided to the customer within a specified period of time did not exceed a specified number" (Request No. 100)

Similar Features Claimed in Patents-in-Suit (Exhibits A & B to Exhibit L) steps [described below]." ('381 patent, Claim 44) "An apparatus for renting items to customers comprising . . . one or more processors . . ." ('450 patent, Claim 51) "An apparatus for renting items to customers comprising . . . one or more processors; and a memory co mmunicat ively coupled to the one or more processors, the memory including one or more sequences of one or more instructions which, when executed by the one or more processors, cause the one or more processors to perform the steps [described below]." ('450 patent, Claim 51) "An apparatus for renting items to customers comprising an item rental mechanism configured to [perform steps described below]." ('450 patent, Claim 66) "A method as recited in claim 1 [`A method for renting items to customers . . .'], wherein a total number of items provided to the customer within a specified period of time does not exceed a specified limit." ('450 patent, Claim 2) "A method for renting items to customers, . . . wherein a total number of items provided to the customer within a specified period of time does not exceed a specified limit." ('450 patent, Claim 16) "A computer-readable medium as recited in claim 36 [`A computer-readable medium for renting items to customers . . .'], wherein the total number of items provided to the customer within a specified period of time does not exceed a specified limit." ('450 patent, Claim 37) "An apparatus as recited in claim 66, wherein the total number of items provided to the customer within a specified period of time does not exceed a specified limit." ('450 patent, Claim 67) "rent ing items . . . providing to the customer up to a specified number of the one or more items indicated by the one or more item selection criteria . . ." ('450 patent, Claims 1, 16, 51, 81) "rent ing items . . . providing to the customer one or more other items indicated by the one or more item select ion criteria, wherein a total current number of items provided to the customer does not exceed the specified number . . ." ('450 patent, Claim 36) "rent ing movies . . . providing to the customer up to a specified number of the one or more items indicated by the one or more item selection 18
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Features of Prior Art Requested in Requests for Production (Exhibit A) "item selection criteria specifying one or more preferred item attributes" (Request No. 105)

"in response to receiving a customer notification, providing the customer a second set of one or more items indicated by item selection criteria" (Request No. 113)

"in response to expiration of a specified amount of time, providing a customer a second set of one or more items indicated by item selection criteria" (Request No. 114)

"in response to a specified date being reached, providing a customer a second set of one or more items indicated by item selection criteria" (Request No. 115)

Similar Features Claimed in Patents-in-Suit (Exhibits A & B to Exhibit L) criteria . . ." ('450 patent, Claims 31, 96) "A method as recited in claim 1 [or 16], wherein . . . the one or more item select ion criteria specifies one or more preferred item attributes . . ." ('450 patent, Claims 6, 21) "A computer-readable medium as recited in claim 36 [or 81], wherein the one or more item selection criteria specifies one or more preferred item attributes . . ." ('450 patent, Claims 41, 86) "An apparatus as recited in claim 51 [or 66], wherein the one or more item selection criteria specifies one or more preferred item attributes . . ." ('450 patent, Claims 56, 71) "A method as recited in claim 1 [or 16], further comprising in response to receiving a customer notification, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 8, 23) "A computer-readable medium as recited in claim 36, further comprising in response to receiving a customer notification, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claim 43) "A method as recited in claim 1 [or 16], further comprising in response to expiration of a specified amount of time, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 9, 24) "A computer-readable medium as recited in claim 36 [or 81], further comprising in response to expiration of a specified amount of time, providing to the customer a second set of one or more other items indicated by the one or more item select ion criteria." ('450 patent, Claims 44, 89) "An apparatus as recited in claim 51 [or 66], further comprising in response to expiration of a specified amount of time, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 59, 74) "A method as recited in claim 1 [or 16],further comprising in response to a specified date being reached, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 10, 25) "A computer-readable medium as recited in claim 36 [or 81], further comprising in response 19
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Features of Prior Art Requested in Requests for Production (Exhibit A)

"in response to a specified fee being received, providing a customer a second set of one or more items indicated by item selection criteria" (Request No. 116)

"providing rental items to a customer by mail" (Request No. 117)

"rent ing movies" (Request No. 119)

Similar Features Claimed in Patents-in-Suit (Exhibits A & B to Exhibit L) to a specified date being reached, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 45, 90) "An apparatus as recited in claim 51 [or 66], further comprising in response to a specified date being reached, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 60, 75) "A method as recited in claim 1 [or 16], further comprising in response to a specified fee being received, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 11, 26) "A co mputer-readable medium as recited in claim 36 [or 81], further comprising in response to a specified fee being received, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 46, 91) "An apparatus as recited in claim 51 [or 66], further comprising in response to a specified fee being received, providing to the customer a second set of one or more other items indicated by the one or more item selection criteria." ('450 patent, Claims 61, 76) "A method as recited in claim 1 [or 16], wherein items are provided to the customer by mail." ('450 patent, Claims 12, 27) "A computer-readable medium as recited in claim 36 [or 81], wherein items are provided to the customer by mail." ('450 patent, Claims 47, 92) "An apparatus as recited in claim 51 [or 66], wherein items are provided to the customer by mail." ('450 patent, Claims 66, 77) "A method for renting movies to customers . . ." ('450 patent, Claim 31) "A computer-readable medium for renting movies to customers . . ." ('450 patent, Claim 96) "A . . . method for renting movies to customers . . ." ('381 patent, Claims 1, 14, 24, 34)

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The Disputed Requests for Production and Netflix's Responses 55. The Requests for Production and Responses that are particularly in dispute

in Blockbuster's present motion are set forth verbatim below. For the Court's convenience, they are grouped into four categories. Documents Related to Netflix Patents and Applications or to Patent Rights Related to Blockbuster Online or to Netflix (Requests Nos. 3-5, 10-16, 46-49, and 52-54) 56. The text of each of these Requests and of each of Netflix's Written

Responses to them is as follows: REQUEST FOR PRODUCTION NO. 3: All MATERIALS submitted to or received from the United States Patent and Trademark Office or any other patent office or agency in connection with any SUBJECT PATENT OR APPLICATION. RESPONSE TO REQUEST FOR PRODUCTION NO. 3: Netflix objects to Blockbuster's demand that it produce documents relating to its patents and/or applications other than the patents-in-suit, because such patents/applications have no relevance to any issue in this case. Netflix further objects to producing documents relating to its patent applications that have not either been issued or been published on the grounds that the pendency o f these patents, and the nature of the areas that they cover, is competitively sensitive information regarding Netflix's future business plans, and should not be produced to a company that is seeking directly to compete with Netflix in the market, such as Blockbuster. Netflix further objects to Blockbuster's Request that it produce documents relating to prosecution of patents before patent offices or agencies other than the United States Patent and Trademark Office. The prosecution of patents that are not only not asserted in this case, but cannot be asserted here because they are being prosecuted and will be issued in a foreign country, is in no way relevant to any of the issues presented in this case. Netflix objects to this Request as overly broad and unduly burdensome, seeking material that is irrelevant to the subject matter of this action and is not reasonably calculated to lead to the discovery of admissible evidence. Netflix also objects to this Request to the extent
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that it calls for information protected by the attorney-client privilege or the work product doctrine. Further, Netflix objects to the extent that this Request duplicates prior Requests. Subject to and without waiving the foregoing objections, Netflix will produce all nonprivileged, responsive documents so described and related to the `381 and `450 patents that are locatable after a diligent search of all locations at which such materials might plausibly exist. REQUEST FOR PRODUCTION NO. 4: All files of NETFLIX, including any NETFLIX patent attorney or patent agent, for any SUBJECT PATENT or APPLICATION. RESPONSE TO REQUEST FOR PRODUCTION NO. 4: Netflix objects to Blockbuster's demand that it produce documents relating to its patents and/or applications other than the patents-in-suit, because such patents/applications have no relevance to any issue in this case. Netflix further objects to producing documents relating to its patent applications that have not either been issued or been published on the grounds that the pendency o f these patents, and the nature of the areas that they cover, is competitively sensitive information regarding Netflix's future business plans, and should not be produced to a company that is seeking directly to compete with Netflix in the market, such as Blockbuster. Netflix also objects to this Request to the extent that it calls for information protected by the attorney-client privilege or the work product doctrine. Further, Netflix objects to the extent that this Request duplicates prior Requests. Subject to and without waiving the foregoing objections, Netflix will produce all nonprivileged, responsive documents so described and related to the `381 and `450 patents that are locatable after a diligent search of all locations at which such materials might plausibly exist. REQUEST FOR PRODUCTION NO. 5: All MATERIALS constituting, recording, referring to, or evidencing any assertion of, or attempt to license, any SUBJECT APPLICATION OR PATENT. RESPONSE TO REQUEST FOR PRODUCTION NO. 5: Netflix objects to Blockbuster's demand that it produce documents relating to its patents and/or applications other than the patents-in-suit, because such patents/applications have
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no relevance to any issue in this case. Netflix further objects to producing documents relating to its patent applications that have not either been issued or been published on the grounds that the pendency o f these patents, and the nature of the areas that they cover, is competitively sensitive information regarding Netflix's future business plans, and should not be produced to a company that is seeking directly to compete with Netflix in the market, such as Blockbuster. Netflix objects to this Request as overly broad and unduly burdensome, seeking material that is irrelevant to the subject matter of this action and is not reasonably calculated to lead to the discovery of admissible evidence. Netflix also objects to this Request to the extent that it calls for information protected by the attorney-client privilege or the work product doctrine. Further, Netflix objects to the extent that this Request duplicates prior Requests. Subject to and without waiving the foregoing objections, Netflix will produce all nonprivileged, responsive documents so described and related to the `381 and `450 patents that are locatable after a diligent search of all locations at which such materials might plausibly exist. REQUEST FOR PRODUCTION NO. 10: All MATERIALS asserting, referring to or evidencing the scope of any SUBJECT APPLICATION OR PATENT or any aspect of the construction of any claim of any such application or patent. RESPONSE TO REQUEST FOR PRODUCTION NO. 10: Netflix objects to Blockbuster's demand that it produce documents relating to its patents and/or applications other than the patents-in-suit, because such patents/applications have no relevance to any issue in this case. Netflix further objects to producing documents relating to its patent applications that have not either been issued or been published on the grounds that the pendency o f these patents, and the nature of the areas that they cover, is competitively sensitive information regarding Netflix's future business plans, and should not be produced to a company that is seeking directly to compete with Netflix in the market, such as Blockbuster. Netflix also objects to this Request to the extent that it calls for information protected by the attorney-client privilege or the work product doctrine. Netflix further objects to this Request as vague and ambiguous with regard to "scope", and understands the term to refer to
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construction of claims. To the extent that Blockbuster demands Net flix produce materials that would evidence Netflix's construction of a claim, Netflix objects to the Request as premature in that it seeks to impose upon Netflix a duty to come forward with a claim construction well prior to the date provided for in the Court's Case Management Order and the Local Rules of this Court, and objects to the Request as well as calling for a legal conclusion. Netflix objects to the extent that this Request duplicates prior Requests. Subject to and without waiving the foregoing objections, Netflix will produce all nonprivileged, responsive documents so described and related to the `381 and `450 patents that are locatable after a diligent search of all locations at which such materials might plausibly exist. REQUEST FOR PRODUCTION NO. 11: All MATERIALS asserting, referring to or evidencing the patentability or unpatentability of any SUBJECT APPLICATION OR PATENT or of any claim of any such application or patent. RESPONSE TO REQUEST FOR PRODUCTION NO. 11: Netflix objects to Blockbuster's demand that it produce documents relating to its patents and/or applications other than the patents-in-suit, because such patents/applications have no relevance to any issue in this case. Netflix further objects to producing documents relating to its patent applications that have not either been issued or been published on the grounds that the pendency o f these patents, and the nature of the areas that they cover, is competitively sensitive information regarding Netflix's future business plans, and should not be produced to a company that is seeking directly to compete with Netflix in the market, such as Blockbuster. Netflix objects to this Request to the extent that it calls for information protected by the attorney-client privilege or the work product doctrine. Further, Netflix objects to the extent that this Request duplicates prior Requests. Netflix further objects as the demand for materials "evidencing patentability or unpatentability" is vague, ambiguous, and calls for a legal conclusion. Subject to and without waiving the foregoing objections, Netflix will produce all nonprivileged, responsive documents so described and related to the `381 and `450 patents that
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DECLARATION OF WILLIAM J. O'BRIEN RE MOTION TO COMPEL FURTHER RESPONSES C 06 2361 WHA (JCS)

Case 3:06-cv-02361-WHA

Document 83

Filed 11/04/2006

Page 25 of 60

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ALSCHULER GROSSMAN STEIN & KAHAN LLP

are locatable after a diligent search of all locations at which such materials might plausibly exist. REQUEST FOR PRODUCTION NO. 12: All MATERIALS asserting, referring to or evidencing the patentability or unpatentability of any method perfor