Sonos Defeats Denon HEOS Again: Understanding the Patent Lawsuits

It was a bad week for Denon Electronics, LLC and its HEOS line of wireless multiroom audio systems. The D&M Holdings unit, now owned by Sound United, was sued by Sonos in 2014 on four patent infringement claims. In December 2017, the jury ruled against Denon on three of those claims, ordering the company to pay Sonos $2 million for past breaches dating back to the HEOS product launch in 2014 through December 2016.

Last week, Sonos filed a claim to extend damages through December 2017, alleging Denon continues to infringe on the patents in question. (Relevant Sonos and D&M patents are summarized below.)

Furthermore, Sonos is asking to “enhance” damages by at least 2x because Denon’s infringement was deemed “willful” by the jury last year, and because Denon has engaged in other “inappropriate behavior” throughout the proceedings.

Sonos also requests a permanent injunction against Denon’s infringing products, or else ongoing royalties of at least twice what the jury effectively awarded last year.

In another blow, a judge invalidated a key D&M patent (‘899, involving the storage of user preferences for audio/video playback) on summary judgment — a highly unusual move. That 2006 patent, and several others owned by D&M, had been filed by Digital Networks North America, parent company of the one-time TiVo rival ReplayTV.

‘899 was the third D&M patent to be invalidated by the Court, out of nine patents asserted in “retaliatory” infringement counterclaims against Sonos. Four other patent-infringement claims were withdrawn voluntarily by D&M after the Court issued its claim construction, i.e., how the patents should be interpreted for legal purposes.

Two others are still in play, but Sonos believes it will prevail in summary judgment on one of the patent-infringement claims. (Patents and dispositions detailed below.)

In its latest filing, Sonos reiterated “evidence” the jury heard regarding the willfulness of Denon’s infringing behavior, particularly in regards to Sonos’s ‘258 patent (method of synchronizing audio zones) and ‘949 patent (grouping multiple players into a single zone and controlling the volume of all players at once).

  • “[P]rior to developing HEOS, D&M spent ‘a considerable amount of time, money, and energy’ studying Sonos’s technology, which included numerous detailed “teardowns” of Sonos’s products embodying the patented technology ….”

  • “D&M developed a product plan for ‘reproducing the Sonos functionality’ and … acknowledged Sonos was the ‘benchmark’ for HEOS.”

  • “[P]art of D&M’s plan to make Sonos-copy products included reproducing Sonos’s dynamic-grouping, synchronization, and group-volume control technology, which D&M internally lauded time and again.”

  • “D&M extensively monitored Sonos’s patent activities as part of the development process for the HEOS product line.”

  • “D&M became desperate and would stop at nothing, including disregarding Sonos’s patent rights, to accomplish its goal of creating a ‘Sonos Killer’ to take Sonos’s market share.”

  • “[K]ey personnel responsible for HEOS either ignored Sonos’s patents or evaluated Sonos’s patents but then took no action to avoid infringing them.”

  • “[T]he infringing HEOS features are software-based and … D&M allegedly could have easily and readily implemented alternative synchronization and volume control features that would apparently avoid infringing Sonos’s patents.”

  • “D&M continued to sell HEOS products that infringe the ‘258 and ‘949 Patents, and continued releasing new marketing materials and promoting the HEOS features that infringe those patents.”

  • “D&M’s HEOS Apps included a nearly identical group volume control interface as can be found in Sonos’s patented App. … [T]he HEOS device’s synchronization mechanism is identical to the mechanism claimed and described in Sonos’s 258 Patent.”

  • “[T]he HEOS product line used a similar naming convention as Sonos’s product line (e.g., “HEOS 1,” HEOS 3,” HEOS 5,” versus Sonos’s “PLAY:1,” “PLAY:3,” “PLAY:5”).”

D&M’s ‘Inappropriate Behavior’

In addition to its willful infringement, Sonos claims, D&M should be penalized for “inappropriate actions [that] caused Sonos to waste time and significant resources” over the course of the proceedings:

Such misconduct establishes a disregard for Sonos and the valuable time of the Court and jury, and disrespect for the judicial process. D&M’s pursuit of these frivolous defenses was nothing more than a desperate and bad faith effort to force Sonos to unnecessarily incur additional expenses and delay Sonos from pursuing this case to final judgment. This type of vexatious strategy during the litigation is an important consideration when deciding whether to enhance damages ….

The 1992 Read v. Portec case gave us the “Read Factors” for determining the egregiousness of an infringer’s behavior. Sonos systematically runs through these factors in its recent filing, starting with the deliberateness of D&M’s infringement in the first place, discussed above.

Other factors include how “close” the case was, the duration of the infringer’s misconduct, and remedial action taken by the infringer.

Sonos says the case against D&M was “not close at all.”

As the plaintiff explains, “[T]he jury found in favor of Sonos in all respects and deliberated for less than 2 hours – while eating lunch and with a delay …. Indeed, the jury’s quick verdict confirms that D&M’s non-infringement and invalidity positions were tenuous at best.”

Moreover, Sonos argues that D&M filed multiple disingenuous claims during the three-year process, and lost almost all of them. For example, D&M tried unsuccessfully to disqualify a Sonos lawyer. The company also tried to use the plaintiff’s “inequitable conduct” as a defense, claiming unethical conduct by Sonos’s in-house lawyer. Plus, D&M forced multiple “claim construction” proceedings to try to secure a favorable interpretation of its own patents. During trial, the court censured D&M for presenting “numerous improper claim constructions to the jury ….”

Sonos alleges other Read factors that “weigh in favor of enhancement.” Most importantly, the company claims D&M continued to infringe on Sonos patents after the original lawsuit was filed in 2014, even launching in 2017 two new products (HEOS Bar and HEOS Subwoofer) that are “not colorably different” from Denon’s infringing HEOS speakers.

D&M filed a motion in 2016 challenging the patentability of the three Sonos inventions involved in the case, but Sonos prevailed on all claims.

Damages

Sonos calculated the jury award amounted to $36.55 per HEOS unit sold through December 2016 (54,325 units). The per-unit figure includes only the infringements on two patents (‘258 and ‘949) that would be subject to ongoing damages. Sonos would be asking for something like two times that amount as a “’starting point’ for the Court’s ongoing royalty rate analysis.”

In fact, Sonos believes it should be eligible for treble damages because the defendant filed allegedly meritless claims again and again, and “D&M lost nearly every major decision leading up to the trial.”

A preceding 2017 case (Stryker Corp. v. Zimmer, Inc.) awarded treble damages and fees when it was not a close case where “[e]very major decision – from claim construction to post-verdict motions – went against [defendant].”

Sonos draws deep parallels to that case.

Source CEPro

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