Case 2:06-cv-00310 Document 1 Filed in TXSD on 07/18/06 Page 1 of 13 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS CORPUS CHRISTI DIVISION TWO-WAY MEDIA LLC, § § Plaintiff, § CIVIL ACTION § NO. ____________ v. § § AOL LLC, (formerly known as § America Online, Inc.) § JURY TRIAL DEMANDED § Defendant. § COMPLAINT Plaintiff Two-Way Media LLC (“TWM”) brings this action against AOL LLC (“AOL”) for patent infringement arising out of the Patent Laws of the United States, Title 35, United States Code. I. PARTIES 1. All facts herein are alleged on information and belief except those facts concerning TWM’s own activities. 2. TWM is a Nevada corporation with its principal place of business at 2153 Grove Circle West, Boulder, CO 80302. TWM is the owner of various patents relating to methods and systems for providing audio and visual information over a communication network. 3. AOL is a Delaware corporation with its principal place of business at 22000 AOL Way, Sterling, Virginia 20166. AOL may be served with this complaint through its registered agent, Corporation Service Company (dba CSC – Lawyers Incorporating Service Company), located at 701 Brazos Street, Suite 1050, Austin, Texas 78701. II. JURISDICTION AND VENUE 4. This is an action for patent infringement under the Patent Act, 35 U.S.C. § 271. Case 2:06-cv-00310 Document 1 Filed in TXSD on 07/18/06 Page 2 of 13 AOL provides infringing services in the Southern District of Texas. This Court has personal jurisdiction over AOL, in part, because AOL has members/customers that reside in the Southern District of Texas and AOL provides infringing online services to its members/customers in this district. This Court has subject matter jurisdiction by virtue of Section 1338(a) of Title 28, United States Code. Venue in this Court is proper by virtue of Sections 1391(b) and (c) and 1400(b) of Title 28, United States Code. III. BACKGROUND A. TWM and the TWM Patents 5. TWM’s predecessor in interest, Netcast Communications Corp. (“Netcast”), is one of the early pioneers of technology that allows Internet users to listen to music and other audio programming over the Internet without having to wait for the entire music or program to download. This technology is sometimes referred to as “live streaming.” Live streaming allows users to receive and listen to a radio station over the Internet at approximately the same time as the signals for that radio station are transmitted. TWM’s technology performs useful functions in connection with live streaming. For example, TWM’s technology permits collection of information about usage, insertion of advertising content into live streaming signals, user interaction with live streaming signals (e.g., chatting with other users listening to the same signal), and the combination of various e-commerce opportunities with live streaming (e.g., buying music CDs that relate to a song that the user is listening to). 6. TWM has filed several patent applications that cover audio and visual streaming technology. On July 7, 1998, the United States Patent and Trademark Office issued the first of these patent applications. Specifically, United States Patent No. 5,778,187 C1 (the “‘187 Patent”) was duly and legally issued to Netcast as the legal assignee of the inventors, Antonio M. 2 Case 2:06-cv-00310 Document 1 Filed in TXSD on 07/18/06 Page 3 of 13 Monteiro and James F. Butterworth. Thereafter, the United States Patent and Trademark Office issued other patents on TWM’s technology, including U.S. Patent No. 5,983,005 C1 (the “‘005 Patent”), which issued on November 9, 1999, U.S. Patent No. 6,434,622 B1 (the “‘622 Patent”), which issued on August 13, 2002, and U.S. Patent No. 7,080,153 (the “‘153 Patent”), which issued on July 18, 2006 and published December 16, 2004. The ‘005 Patent, the ‘622 Patent, and the ‘153 Patent are all continuations of the ‘187 Patent. The ‘187 Patent, the ‘005 Patent, the ‘622 Patent, and the ‘153 Patent collectively constitute the “TWM Patents.” In 2002, Netcast sold the TWM Patents to Netcast Innovations Ltd., which later in 2002 changed its name to Two- Way Media LLC. TWM has previously filed suit against AOL for infringement of the ‘187, ‘005 and ‘622 Patents. The previously filed case (now pending) is assigned to Chief Judge Hayden Head and is styled Two Way Media LLC v. America Online, Inc., Sothern District of Texas, Corpus Christi Division, C.A. No. C-04-089. This suit concerns AOL’s infringement of TWM’s most recently issued patent, the ‘153 Patent. 7. Before a user can listen to a radio station over the Internet, the analog transmission signals of a traditional radio station first must be converted to a stream of digital information. This conversion is necessary because conventional computers only process data or signals that are digital, i.e., data that have been converted to a format consisting of zeros and ones. The incoming radio signals are received by a central facility, which typically converts the analog signals to a stream of digital information that computers can understand. This central facility then feeds the digitized audio streams to various computers or servers, which transmit the audio streams to users across the Internet and monitor the reception of the audio streams by the users. The servers may play a role in ensuring that each user receives the particular station of the user’s choosing and that the user receives a stream at substantially the same time as the signal is 3 Case 2:06-cv-00310 Document 1 Filed in TXSD on 07/18/06 Page 4 of 13 transmitted from the original source (e.g., the actual physical radio station, such as WCBS 101.1 Jack FM located in New York City or “XM The Blend” on XM Satellite Radio). 8. In order to listen to a particular radio station over the Internet, a user must first select the desired station from a list of available stations on the user’s personal computer (“PC”). Figure 18 of the ‘153 Patent (reproduced below) illustrates this process. Figure 18 is one example of what a user’s PC screen might look like. The screen in Fig. 18 is divided into three main sections: a channel guide (upper left frame), a program guide (upper right frame) and a multimedia frame (lower half of the screen). The channel guide lists all available stations or genres of music that are available to the user. The user may select a desired station or genre simply by clicking on it. In Fig. 18, for example, the user has selected “Alternative Rock.” The program guide section provides information about the selected station. In Fig. 18, for example, this section informs the user what artists are coming up in the selected Alternative Rock genre. The multimedia frame section provides various other features, such as a web browser, e- commerce and chat. In Fig. 18, for example, the user can order a music CD of the song being played by clicking on the “Order CD” tab or button. 4 Case 2:06-cv-00310 Document 1 Filed in TXSD on 07/18/06 Page 5 of 13 9. While the user is viewing or listening to the selected station, one or more of the servers may monitor the user’s reception of the selected station and capture certain usage information. The information captured may include, for example, the identity of the specific radio program or channel that the user is listening to, how long the user listens to that channel, and the times at which the user listened to the channel. Additionally, server computers may insert advertising into the signals that are sent to users. The content of the advertising may be varied based on the identity of the user such that the advertising may be targeted to different demographics. 5 Case 2:06-cv-00310 Document 1 Filed in TXSD on 07/18/06 Page 6 of 13 B. AOL and AOL’s Infringing Services 10. After TWM invented its technology, streaming of audio and/or visual information over the Internet became one of the most popular Internet activities. Arbitron Inc. and comScore Media Metrix,, two highly respected third-party Internet broadcasting reporters, have teamed to publish regular statistics regarding the top Internet radio broadcasters. The current comScore Arbitron Online Radio Ratings report on the top six Internet radio broadcasters shows that in April 2006, more than seven and a half (7.5) million unique users tuned in to Internet radio broadcasts from these six Internet radio broadcasters. The same report shows that AOL’s Internet radio broadcasting service, AOL Radio, was the number two Internet radio broadcasting service for that month. AOL’s Internet radio services also were the number one or number two such services in the years prior to 2006, and continue to attract millions of users every month. 11. In addition to providing Internet radio broadcasts, AOL is engaged in the business of providing other Internet and online services to its members/customers. To be an AOL member, a user must register and optionally agree to pay a subscription fee for the membership. AOL has tens of millions of members worldwide who currently pay for their membership. As noted above, many AOL members use the AOL Radio service. In 2005, AOL’s subscription fee revenues were approximately $5 billion in the United States and more than $6.7 billion worldwide. In addition, the content that AOL delivers both to its members and to users of its web portal, AOL.com, generates revenues from both advertising fees and sales flowing from e- commerce activities.