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Dolby Laboratories, Inc. v. Intertrust Technologies Corp.

United States District Court, N.D. California

November 6, 2019

DOLBY LABORATORIES, INC., Plaintiff,
v.
INTERTRUST TECHNOLOGIES CORPORATION, Defendant.

          REDACTED/PUBLIC VERSION ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS DOCKET NOS. 40-4, 41

          Edward M. Chen United States District Judge

         Plaintiff Dolby Laboratories, Inc. has filed suit against Defendant Intertrust Technologies Corporation, seeking a declaration that Dolby does not infringe eleven patents held by Intertrust. Currently pending before the Court is Intertrust's motion to dismiss. In the motion, Intertrust makes two arguments: (1) subject matter jurisdiction is lacking because there is no case or controversy between the parties once information protected by a Nondisclosure Agreement (“NDA”) is “excised” from the operative complaint and (2) even if there were subject matter jurisdiction, Dolby has failed to state a claim for relief - once again, when information protected by the NDA is excised.

         Having considered the parties' briefs and accompanying submissions, as well the oral argument of counsel, the Court hereby GRANTS in part and DENIES in part the motion to dismiss. The Court has subject matter jurisdiction over the instant case; however, Dolby has failed to adequately state a claim for relief.

         I. FACTUAL & PROCEDURAL BACKGROUND

         The operative pleading in the case is the first amended complaint (“FAC”). The following facts come from the allegations in the FAC or where, as noted, other evidence in the record.

         Dolby is a company involved “in the design, development, and distribution of audio and video solutions.” FAC ¶ 3. Part of its business is related to digital cinema technology. “Digital cinema refers generally to the use of digital technology to master, transport, store or present motion pictures as opposed to the historical use of reels of motion picture film.” FAC ¶ 21. Among Dolby's product offerings are digital cinema servers, also known as media block servers. Such servers are “used in the storage or playback of digital cinema content.” FAC ¶ 23. Dolby's servers are branded either Dolby or Doremi (named after a company acquired in 2014). See FAC ¶¶ 24-25.

         In March 2002, several major motion picture studios created a joint venture known as Digital Cinema Initiatives, LLC (“DCI”). See FAC ¶ 22. The primary purpose of DCI was “to establish and document voluntary specifications for an open architecture for digital cinema that ensures a uniform and high level of technical performance, reliability and quality control.” FAC ¶ 22. “Among the specifications promulgated by DCI [is] the Digital Cinema System Specification (“DCSS”), which defines technical specifications and requirements for technology used in the mastering, distribution, and theatrical presentation of digital cinema content (e.g., a motion picture or trailer).” FAC ¶ 23.

[T]he digital cinema theater system framework specified by DCI in the DCSS[] includ[es] security elements, such as the “Security Manager (SM).” According to the DCI specifications, the Security Manager is contained within the media block, or Image Media Block (IMB), component of the theater system. [As noted above, ] Dolby offers Doremi and Dolby branded DCI-compliant media server products containing such media blocks.

FAC ¶ 27 (emphasis added).

         A. April 2018 Letters to Dolby's Customers

         In April 2018, Intertrust sent letters to companies who are customers of Dolby's media server products; the customers included AMC, Cinemark, and Regal. See FAC ¶ 26. (The letters were technically sent by Intertrust's attorney, Harold Barza of the Quinn Emmanuel law firm. Mr. Barza is the litigation counsel of record for Intertrust in this case.)

         In the letters, Intertrust explicitly stated its belief that the companies were infringing on Intertrust's patents. See FAC ¶ 26. Intertrust explained: “Your theaters render motion pictures using equipment certified by the [DCI] to be compliant with the [DCSS]. . . . [¶] By rendering motion pictures using unlicensed DCI certified equipment, [you have] infringed and continue[] to infringe one or more claims of at least the following [eleven] Intertrust patents.” Docket No. 42-1 (Spencer Decl., Exs. A-C) (letters to AMC, Cinemark, and Regal). The eleven patents are the patents at issue in this case.[1]

         In the letters, Intertrust gave one example of infringement - i.e., infringement of claim 17 of the ‘106 patent. Claim 17 provides as follows:

A method for managing the use of electronic content at a computing device, the method including:
receiving a piece of electronic content;
receiving, separately from the piece of electronic content, data specifying one or more conditions associated with rendering the piece of electronic content, the one or more conditions including a condition that the piece of electronic content be rendered by a rendering application associated with a first digital certificate;
executing a rendering application on the computing device, the rendering application being associated with at least the first digital certificate, the first digital certificate having been generated by a first entity based at least in part on a determination that the rendering application will handle electronic content with at least a predefined level of security;
requesting, through a rights management engine executing on the computing device, permission for the rendering application to render the piece of electronic content;
determining, using the rights management engine, whether the one or more conditions specified by the data have been satisfied;
decrypting the piece of electronic content; and
rendering the decrypted piece of electronic content using the rendering application.

‘106 patent, claim 17.

         In its letters to the companies, Intertrust gave the following explanation as to how they infringed on claim 17.

[Claim 17] claims a “method for managing the use of electronic content at a computing device.” The method is practiced by your use of DCI certified projection equipment to render DCI compliant motion picture content in your theaters. Your use of a DCI compliant projection system comprises use of a “computing device” as that term is used in Intertrust's patent. The projection equipment receives a “piece of electronic content” when you use it to render a DCI compliant motion picture, insofar as it receives the DCP [Digital Cinema Package] from the content supplier. The projection equipment also separately receives the KDM [Key Delivery Message], which includes “data specifying one or more conditions associated with rendering the piece of electronic content, ” including, for example, a Trusted Device List (TDL), which restricts rendering of the content to DCI certified projectors, i.e., “a condition that the piece of electronic content be rendered by a rendering application associated with a first digital certificate.” The projection equipment executes “a rendering application” and is certified as DCI compliant by the projection equipment manufacturer after it is tested and confirmed to satisfy the requirements of the [DCSS], i.e., “will handle electronic content with at least a predefined level of security.” Your theater's screen management system will request, through the projection equipment's “rights management engine” “permission for the rendering application to render the piece of electronic content.” In response to this request, the “rights management engine, ” i.e., the projection equipment's Security Manager, will determine “whether the one or more conditions specified by the data have been satisfied, ” e.g., whether the projection equipment is identified on the TDL. If the specified conditions are satisfied, the electronic content will be decrypted and rendered for exhibition.

Docket No. 42-1 (Spencer Decl., Exs. A-C) (letters). As noted above, the Security Manager referenced above “is contained within the media block, or Image Media Block (IMB), component of the theater system, ” FAC ¶ 27, and Dolby sells media block products.

         Intertrust concluded its letters by stating:

[T]his example is but one of many Intertrust inventions being used in your theaters. The use of Intertrust's patented technology requires a license from Intertrust.
We are prepared to discuss with you a license to the relevant patents on commercially reasonable terms. If you wish to resolve this matter amicably through a licensing negotiation, please contact me at your earliest convenience to begin a discussion.

Docket No. 42-1 (Spencer Decl., Exs. A-C) (letters).

         After Intertrust sent the letters to the companies, the companies, in turn, “sent letters to Dolby stating that Intertrust's infringement allegations implicated Doremi and Dolby branded DCI-compliant products, and requesting indemnification with respect to Intertrust's assertions.” FAC ¶ 28.

         B. October 2018 Email to Dolby

         Apparently, Intertrust learned of the customers' indemnification requests. On October 10, 2018, Intertrust sent an email to Dolby, noting that,

[r]ecently, Intertrust asserted patents against theater owners using equipment compatible with the [DCI]. . .
We understand that exhibitors have contacted equipment makers and are asking about indemnification and other matters, so we thought we should reach out to Dolby.
If Dolby's IP team would like to discuss the patent assertions with Intertrust, we are willing to have ...

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