Lodsys, LLC v. Combay, Inc. et al

Filing 4

MOTION to Intervene by Apple, Inc.. (Attachments: # 1 Text of Proposed Order, # 2 Exhibit A - Answer and Counterclaims, # 3 Affidavit of Sanders, # 4 Exhibit B to Sanders Declaration, # 5 Exhibit C to Sanders Declaration, # 6 Exhibit D to Sanders Declaration, # 7 Exhibit E to Sanders Declaration, # 8 Exhibit F to Sanders Declaration)(Findlay, Eric)

Exhibit F

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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
TIVO INC.,

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Plaintiff,
v.
AT&T INC,
Defendant.

CIVIL ACTION NO. 2:09-CV-259

ORDER
Before the Court is Microsoft’s Motion to Intervene. Dkt. No. 22. Also before the Court
are Plaintiff TiVo’s Response, AT&T Inc’s Notice of Joinder in Microsoft’s Motion, and
Microsoft’s Reply. Dkt. Nos. 28, 29, and 30, respectively. Having considered the briefing and
all relevant papers and pleadings, the Court finds that Microsoft’s motion should be granted.
I. BACKGROUND
On August 26, 2009, Plaintiff TiVo Inc. (“TiVo”) initiated this patent infringement
lawsuit against Defendant AT&T Inc (“AT&T”) alleging that AT&T infringes certain claims of
U.S. Patent No. 6,233,389 (“the ’389 patent”), U.S. Patent No. 7,493,015 (“the ’015 patent”), and
U.S. Patent No. 7,529,465 (“the ’465 patent”) (collectively, “the patents-in-suit”). Dkt. No. 1.
The Abstract of the ’389 patent recites:
A multimedia time warping system. The invention allows the user
to store selected television broadcast programs while the user is
simultaneously watching or reviewing another program. A
preferred embodiment of the invention accepts television (TV)
input streams in a multitude of forms, for example, National
Television Standards Committee (NTSC) or PAL broadcast, and
digital forms such as Digital Satellite System (DSS), Digital
Broadcast Services (DBS), or Advanced Television Standards
Committee (ATSC). The TV streams are converted to an Moving
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Pictures Experts Group (MPEG) formatted stream for internal
transfer and manipulation and are parsed and separated it into
video and audio components. The components are stored in
temporary buffers. Events are recorded that indicate the type of
component that has been found, where it is located, and when it
occurred. The program logic is notified that an event has occurred
and the data is extracted from the buffers. The parser and event
buffer decouple the CPU from having to parse the MPEG stream
and from the real time nature of the data streams which allows for
slower CPU and bus speeds and translate to lower system costs.
The video and audio components are stored on a storage device
and when the program is requested for display, the video and audio
components are extracted from the storage device and reassembled
into an MPEG stream which is sent to a decoder. The decoder
converts the MPEG stream into TV output signals and delivers the
TV output signals to a TV receiver. User control commands are
accepted and sent through the system. These commands affect the
flow of said MPEG stream and allow the user to view stored
programs with at least the following functions: reverse, fast
forward, play, pause, index, fast/slow reverse play, and fast/slow
play.

This case had been pending before the Honorable T. John Ward, who entered an order of
recusal on February 10, 2010. Dkt. No. 32. Microsoft now seeks to intervene as a defendant as a
matter of right under FED . R. CIV . P. 24(a)(2) or, alternatively, by permission under FED . R. CIV .
P. 24(b)(2). Dkt. No. 22 at 5. Microsoft’s proposed complaint-in-intervention seeks declaratory
judgments of noninfringement and invalidity of the three patents-in-suit. Dkt. No. 23 at ¶¶ 1241. Defendant AT&T does not oppose Microsoft’s intervention. Dkt. No. 29. Plaintiff TiVo
does not oppose Microsoft’s intervention subject to certain conditions. Dkt. No. 28.
II. LEGAL PRINCIPLES
Federal Rule of Civil Procedure 24 (“Rule 24”) allows for intervention in certain
circumstances either as a matter of right or by permission. Rule 24 is aimed at preventing

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multiple lawsuits when common questions of law or fact are involved. It does not permit,
however, the creation of a whole new lawsuit by an intervenor. Deus v. Allstate Ins. Co., 15 F.3d
506, 525 (5th Cir. 1994). In part, Rule 24 states:
(a) Intervention of Right. Upon timely application anyone shall be
permitted to intervene in an action: (1) when a statute of the United
States confers an unconditional right to intervene; or (2) when the
applicant claims an interest relating to the property or transaction
which is the subject of the action and the applicant is so situated
that the disposition of the action may as a practical matter impair or
impede the applicant’s ability to protect that interest, unless the
applicant’s interest is adequately represented by existing parties.
(b) Permissive Intervention. Upon timely application anyone may
be permitted to intervene in an action: (1) when a statute of the
United States confers a conditional right to intervene; or (2) when
an applicant’s claim or defense and the main action have a question
of law or fact in common. . . . In exercising its discretion the court
shall consider whether the intervention will unduly delay or
prejudice the adjudication of the rights of the original parties.
Rule 24(a) allows a party to intervene as a matter of right if four requirements are met;
the failure to meet any of the requirements precludes intervention as a matter of right. Sierra
Club v. Espy, 18 F.3d 1202, 1204-05 (5th Cir. 1994). The four requirements are: (1) the
application must be timely; (2) the applicant must have an interest relating to the property or
transaction that is the subject of the action; (3) the applicant must be so situated that the
disposition of the action may, as a practical matter, impair or impede its ability to protect its
interest; and (4) the applicant’s interest must be inadequately represented by the existing parties
to the suit. Id.
The determination of allowing permissive intervention under Rule 24(b) is wholly
discretionary even where there is a common question of law or fact. New Orleans Pub. Serv.,

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Inc. v. United Gas Pipe Line Co., 732 F.2d 452, 470-71 (5th Cir. 1984).
III. PARTIES’ POSITIONS
Microsoft argues that TiVo’s infringement claims target the use and distribution of
Microsoft software and technology by AT&T. Dkt. No. 22 at 5. Specifically, Microsoft submits
that TiVo’s allegations that AT&T’s U-verse products and services infringe the patents-in-suit
implicate Microsoft’s Mediaroom software, which runs on the set-top boxes used in the U-verse
service. Id. According to Microsoft, the money damages and injunctive relief sought by TiVo
“would directly and significantly injure Microsoft’s interests.” Id. at 5-6. Microsoft adds that
AT&T’s request that Microsoft indemnify AT&T “create[s] potential exposure for Microsoft to
the damages [TiVo] seeks to recover from AT&T [] in this action.” Id. at 6.
In arguing that it meets the first of the four intervention-as-of-right requirements,
Microsoft points out that this lawsuit was commenced at the end of August 2009 with AT&T’s
answer not being filed until October 2009; thus, Microsoft argues, its motion “was reasonably
filed near the initial period of the action.” Id. at 9. With respect to the second requirement,
Microsoft contends that it has a significant interest in the property and transaction at issue in this
lawsuit. Id. at 11. As discussed, Microsoft claims that TiVo’s infringement allegations implicate
its Mediaroom software. Thus, “[a]s the developer of the Mediaroom software,” Microsoft
submits, “[it] has an interest in defending its own technology and in clarifying the intellectual
property rights that apply to such technology.” Id. Regarding the third requirement, Microsoft
argues that “[a]n adverse judgment of infringement based in any way on the functionality of
Mediaroom would adversely affect Microsoft in view of the demand for indemnification against

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any judgment.” Id. at 13. Finally, AT&T does not represent Microsoft, and Microsoft has a
broader interest than AT&T in protecting the Mediaroom software, Microsoft argues. Id. at 14.
In the alternative, Microsoft argues it should be allowed to intervene permissibly because
“numerous common questions of law and fact exist.” Id. at 15. Microsoft describes these
common issues as (1) the design and functionality of Mediaroom software in the U-verse boxes;
(2) construction of disputed terms in the patents-in-suit; (3) invalidity of the asserted claims; and
(4) non-infringement in connection with the Mediaroom software. Id.
In response, TiVo states that it “does not oppose Microsoft’s intervention subject to
reasonable conditions relating to Microsoft’s representation that is intervention will not prejudice
the rights of any existing party.” Dkt. No. 28 at 4. Specifically, TiVo requests that Microsoft
and AT&T be treated as one entity for purposes of seeking discovery from TiVo, and that
Microsoft’s intervention not be used as a basis for seeking a transfer of venue. Id.
TiVo’s stated lack of opposition notwithstanding, TiVo maintains that Microsoft has
failed to show intervention as of right. TiVo contends that Microsoft has not met its burden of
showing that it has sufficient interest, and assuming an interest, that AT&T cannot adequately
represent its interest. Id. at 5. Specifically, TiVo argues that “Microsoft has failed to put forth
any evidence regarding how its software relates to the claims of the asserted patents” and “there
is nothing in the record that indicates what Microsoft’s software does, what its functions and
features are, or what its role in the U-verse box is other than it ‘runs’ inside the box.” Id.
Additionally, TiVo argues that Microsoft fails to rebut the presumption that AT&T will
adequately represent its interests. Id. at 6.

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Because Microsoft has failed to demonstrate intervention as of right, TiVo argues, the
Court may impose ‘virtually any condition’ on Microsoft’s intervention. Id. (citing Beauregard,
Inc. v. Sword Servs., LLC, 107 F.3d 351, 352 (5th Cir. 1997)). The two conditions TiVo
proposes are: (1) that Microsoft and AT&T be treated as a single side for purposes of discovery
and (2) that the Court should not allow Microsoft’s intervention to be used as a basis for a
motion to transfer venue. Id. at 7.
In reply, Microsoft argues that “the record before the court establishes that the U-verse
set-top boxes through which DVR service is made available run on Mediaroom software[,]” and
that “Microsoft developed and licensed Mediaroom software to the subsidiaries of AT&T
responsible for U-verse.” Dkt. No. 30 at 3. Microsoft submits that such interests are adequate to
support intervention as of right. Id. With respect to the ability of AT&T to adequately protect
the intervenor’s interests, Microsoft echoes its arguments that it has “unique and broader
commercial interests in Mediaroom software compared to the interests of AT&T, which is
limited to the U-verse service.” Id. at 4.
In its notice of joinder, AT&T adds that it “fully anticipates that virtually all of the debate
in this case will focus on whether U-verse’s DVR functionality provided by Microsoft’s
Mediaroom software infringes TiVo’s patents.” Dkt. No. 29 at 2.
IV. DISCUSSION
TiVo, through its own admission, does not oppose Microsoft’s intervention; however,
TiVo would ask the Court to impose certain conditions to Microsoft’s intervention. See Dkt. No.
28-4 (Proposed Order submitted by TiVo granting Microsoft’s Motion to Intervene); see also,

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Dkt. No. 28 at 4.
As an initial matter, the Court finds that Microsoft’s claims and defenses share common
questions of law and fact with the action by TiVo against AT&T. Specifically, TiVo alleges that
certain claims of the patents-in-suit are infringed by AT&T’s U-verse system, which employs
Microsoft’s Mediaroom software. See Dkt. No. 29-2 at 2 (Decl. of Eddy Barker) (“Microsoft’s
Mediaroom software provides the digital video recorder (“DVR”) functionality in every U-Verse
set-top box that includes DVR functionality.”). TiVo does not dispute this, nor does TiVo
contend that its infringement claims do not implicate the Mediaroom software. Moreover,
Microsoft’s proposed complaint-in-intervention seeks declaratory judgments of noninfringement
and invalidity of the three patents-in-suit, which raises the same factual and legal questions as to
the patents-in-suit as already before the Court. See Dkt. No. 19 at ¶¶35-41 (AT&T’s answer
asserting defenses of invalidity and noninfringement, among others).
Furthermore, there is no evidence that Microsoft’s intervention will “unduly delay or
prejudice the adjudication” of TiVo’s claims. FED . R. CIV . P. 24(b). TiVo filed this lawsuit on
August 26, 2009, AT&T answered on October 21, 2009, and Microsoft moved to intervene
January 15, 2010. The Court does not find sufficient “untimeliness” to warrant denying
Microsoft’s motion. See John Doe No. 1 v. Glickman, 256 F.3d 371, 375-376 (5th Cir. 2001).
Moreover, the Court has not held a scheduling conference nor issued a scheduling order in this
case. See Dkt. No. 39.
Having found common questions of law and fact and no undue delay or prejudice, the
remaining question before the Court is whether Microsoft’s intervention should be subject to

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certain conditions. TiVo cites Beauregard, Inc. v. Sword Servs., LLC, 107 F.3d 351, 352 (5th
Cir. 1997) for the proposition that a Court may impose “virtually any condition” on intervention.
While the Beauregard panel did conclude that “reasonable conditions may be imposed even upon
one who intervenes as of right[,]” TiVo provides no support for its proposal that Microsoft and
AT&T should be treated as one entity for discovery purposes. TiVo, instead, seeks to avoid
doubling the discovery and increasing the cost of litigation. Dkt. No. 28 at 7. This argument
lacks merit. As previously noted, a scheduling order has yet to be issued. Further, as of the date
of Microsoft’s reply, the parties have not engaged in the meet and confer process or, to the
Court’s knowledge, held a Rule 26(f) conference. Thus, TiVo’s discovery-related condition is, at
best, premature.
TiVo also seeks to preclude Microsoft from moving to transfer venue as a condition of
intervention. This argument similarly lacks merit. TiVo has not provided – and the Court has
not found – support for the proposition that a party’s right to request a transfer of venue should
be waived as a cost of intervention. TiVo’s only cited case, Trans World Airlines, Inc. v. Civil
Aeronautics Board, 339 F.2d 56 (2d Cir. 1964), does not unequivocally stand for the proposition
that an intervenor may not object to venue. Finally, TiVo’s proposed condition amounts to an
unsupported prohibition on the original defendant AT&T as well. Thus, on one hand, TiVo
argues that Microsoft’s intervention should not work to prejudice the rights of an existing party,
and on the other, proposes a condition that could, in fact, prejudice AT&T, an existing party.
In sum, based on the common questions of law and fact and finding that no undue delay
or prejudice will result, the Court allows permissive intervention by Microsoft as a defendant

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pursuant to Rule 24(b)(2). The Court need not decide whether intervention must be permitted as
a matter of right pursuant to Rule 24(a)(2).

.

V. CONCLUSION
For the foregoing, Microsoft’s Motion to Intervene, Dkt. No. 22, is hereby GRANTED.
IT IS SO ORDERED.

SIGNED this 31st day of March, 2010.

____________________________________
DAVID FOLSOM
UNITED STATES DISTRICT JUDGE

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