SIGHTSOUND TECHNOLOGIES, LLC
`EXHIBIT 2110
`CBM2013-00020 (APPLE INC. v. SIGHTSOUND TECHS., LLC)
`PAGE 000001
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`EXHIBIT 2110
`CBM2013-00020 (APPLE INC. v. SIGHTSOUND TECHS., LLC)
`PAGE 000001
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`Mail Stop PATENT BOARD
`Patent Trial and Appeal Board
`U.S..Patent & Trademark Office
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`P.O. Box 1450
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`Alexandria, VA 22313-1450
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`I, Scott Sander, hereby declare as follows:
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`1.
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`I am a member of the managing board of SightSound Technologies,
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`LLC (“SightSound”).
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`I provide this Declaration in support of SightSound’s
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`Responses to Apple Inc.’s Petitions for Covered Business Method Patent Review of
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`United States Patent Nos. 5,919,573 (“the ‘S73 Patent”) and 5,966,440 (“the ‘440
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`Patent”) (collectively “the Patents”).
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`I am over the age of eighteen, have personal
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`knowledge of the facts set forth below unless otherwise stated, and if called to
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`testify as a witness in this matter, I could and would testify competently thereto.
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`2.
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`In 1995, together with Arthur Hair (the inventor of the Patents) I
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`founded Parsec Sight/Sound, Inc. and Digital Sight/Sound,
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`Inc., SightSound’s
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`predecessors in interest, to commercialize Mr. Hair’s invention. Mr. Hair assigned
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`all of his ownership rights in the ‘S73 Patent, and every subsequent patent to issue
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`from that same disclosure, to SightSound. Shortly after obtaining the ‘S73 Patent,
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`Mr. Hair wrote to John Sculley, the then-Chairman of the Board and CEO of Apple,
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`informing him of the ‘S73 Patent, which Mr. Hair stated would “revolutionize the
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`video rental industry and prerecorded music industry, among others, and will serve
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`as a catalyst to propel the multimedia industry into the 21‘'‘ century.” Attached as
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`-1-
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`PAGE 000002
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`exhibit 2111 is a true and correct copy of Mr. Hair’s April 5, 1993 letter to Mr.
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`Sculley. Page numbers and an exhibit label have been added to this document but
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`no other alterations have been made.
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`3.
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`In the late 1990s and early 2000s, SightSound developed an online
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`commercial system for the sale of digital music and video files which was found at
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`SightSound.com.
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`4.
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`In 1995, SightSound became the first company to offer digital
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`downloads of music through electronic sale over the Internet, when it offered the
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`album (as well as individual songs) from the band The Gathering Field’s debut
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`album “The Gathering Field.” Attached as exhibit 21 12 is a true and correct copy
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`of a screen shot from the SightSound.com website in 1995 offering the Gathering
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`Field album for sale for $6.00, as well as offering individual songs from the album
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`for sale for $1.00. Page numbers and an exhibit label have been added to this
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`document but no other alterations have been made. SightSound.com offered free 30
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`second previews of the music being offered for sale. Id. (“Free Sample: 5.4 MB:
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`30 second clip”). SightSound.com also showed the cover art for music being
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`offered for sale and provided reviews and press coverage regarding the album as
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`shown in exhibit 2112.
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`5.
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`Shortly after SightSound began offering The Gathering Field’s album
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`for sale, SightSound temporarily ceased selling music on its website due to
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`PAGE 000003
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`guidance I received from noted venture capitalist, L. John Doerr, who warned that
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`selling the music of independent artists directly to consumers in this new way
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`would be perceived by the major record labels as a threat to their current business
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`model.
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`I believe the music labels were not ready to adopt such a radical change in
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`the mid to late 1990s, as the new model would have required them to migrate away
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`from production of physical media (such as CD5) and transition to digital formats,
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`as well as sell individual songs instead of entire albums which I understood they
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`believed would be less profitable.
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`I also understood that the music labels were
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`reluctant to embrace the new model as they were concerned about unauthorized
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`copying of their content. For these reasons, I understood that content holders were
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`reluctant to license their content to SightSound for sale over the Internet.
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`6.
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`SightSound.com initially offered individual songs for sale for $1.00.
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`By
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`1998, however, Sightsound began offering songs
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`for $0.99.
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`The
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`SightSound.com website presented a menu of music to select for purchase by
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`showing the cover art of particular albums in a table format. Attached as exhibit
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`2113 hereto is a true and correct copy of a screen shot from SightSound.com from
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`1998-1999 reflecting music for sale at SightSound.com. Page numbers and an
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`exhibit label have been added to this document but no other alterations have been
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`made.
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`In l999, SightSound offered the first sale of a movie over the Internet
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`(Darren Aronofsl<y’s movie “Pi”).
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`PAGE 000004
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`7.
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`SightSound.com received press and media coverage praising the
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`innovative new method for selling digital content. Accurate information about the
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`history of SightSound, the website and press coverage regarding the company and
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`website can still be found at http://www.sightsound.co1m'.
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`Some specific press
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`articles and television coverage about Mr. Hair’s invention and SightSound.com are
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`under the drop down menu “In the News.” As just a few examples of the press
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`coverage SightSound received, attached as exhibit 2114 is a true and correct copy
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`of a November 1998 article from the Pittsburgh Business Times entitled “Intemet
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`Firm Pioneers Downloadable Music Sales.’
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`Page numbers and an exhibit label
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`9
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`have been added to this document, and text has been organized to fit on an 8 1/2” x
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`11” page, but no other alterations have been made. Further, the September 6, 1999
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`issue of Time magazine featured SightSound.com in an article entitled “Movies Hit
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`the Net.” Attached as exhibit 2115 is a true and correct copy of the September 1999
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`article. Page numbers and an exhibit label have been added to this document but no
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`other alterations have been made. Further, in January 2000, Yahoo Internet Life
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`magazine featured SightSound.com as the lead story in its article on the 100 best
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`sites for 2000. Attached as exhibit 2116 is a true and correct copy of the January
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`2000 Yahoo Internet Life magazine article. Page numbers and an exhibit label have
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`been added to this document but no other alterations have been made.
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`PAGE 000005
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`8.
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`On January 15, 1999, I wrote to Steve Jobs, the then-Chairman and
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`CEO of Apple, informing him of the business of SightSound.com and the potential
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`for Apple to participate with SightSound in the business of selling digital content
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`over the Internet.
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`I informed Mr. Jobs that “we believe that the download sale of
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`movies and music will become the consumers’ method of choice,” and further, that
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`the Mac OS (operating system) required specific functionality to support the
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`download sales of music and movies.
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`I also suggested that there could be an
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`opportunity for Apple to participate in the “manufacture of an open platform audio
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`player.” I further attached a graphical schematic detailing how the SightSound.com
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`servers stored content, permitted the downloaded content to be received by the
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`consumer, and could be used on a handheld device that SightSound suggested that
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`Apple develop. Attached as exhibit 21 17 is a true and correct copy of my January
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`15, 1999 letter to Mr. Jobs with the attached schematic. Page numbers and an
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`exhibit label have been added to this document but no other alterations have been
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`made.
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`9.
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`On or around February 3, 1999, SightSound was contacted by Apple
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`with a proposal to discuss the potential business described in my January 15, 1999
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`letter. The letter from Apple requested that a meeting take place on a non-
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`confidential and non-obligation basis and asked SightSound to confirm that
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`understanding. With full confidence in the protection afforded SightSound by
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`PAGE 000006
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`virtue of our patents,
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`I accepted Mr. Cefalo’s ‘‘non-confidential and without
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`obligation” standard for the proposed meeting. Attached as exhibit 2118 is a true
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`and correct copy of the February 3, 1999 letter from Mr. Albert P. Cefalo on behalf
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`of Apple to me. Page numbers and an exhibit label have been added to this
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`document but no other alterations have been made.
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`10.
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`On or around February 26, 1999, Mr. Hair and I met with Mark
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`Gavini and Tom Weyer from Apple in Los Angeles.
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`I understood that Mr. Weyer
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`was an Apple engineer and that Mr. Gavini was Partnership Manager of Worldwide
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`Developer Relations. During that meeting, Mr. Hair and I explained our patents,
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`expressed our belief in the superiority of our download purchase model versus
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`streaming subscription services, and made several requests of Apple, notably that
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`they manufacture a hand held portable player, and re—architect their operating
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`system. We discussed in more detail the written schematic previously provided to
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`Steve Jobs. We requested enhancements to Apple’s operating system to bolster
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`digital rights management (DRM) capabilities—specif1cally encryption—to permit
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`the sale of digital audio and video for download on Mac computers. After a lengthy
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`discussion,
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`I recall Messrs. Gavini and Weyer concluding that it would take an
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`entire re-write of the Mac operating system to adequately support the level of
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`encryption that would be needed to satisfy the media and entertainment industry.
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`PAGE 000007
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`Messrs. Gavini and Weyer indicated that SightSound should not expect such a re-
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`write of the Mac operating system anytime soon.
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`11.
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`In May 2001, Sightsound was the first company to electronically sell
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`a movie into a handheld pocket personal computer; the movie “Quantum Project”
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`was sold into the iPAQ, which was sold by Compaq Computer Corporation.
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`Attached as exhibit 2119 is a true and correct copy of a screen shot from
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`SightSound.co1n
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`from 2001
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`reflecting the Quantum Project
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`for
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`sale
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`SightSound.com. Page numbers and an exhibit label have been added to this
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`document but no other alterations have been made.
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`12.
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`SightSound continued to promote SightSound.com and the patented
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`invention in the early 2000s. However, we were unable to successfully convince
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`the major record labels that music and video distribution via a digital online
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`download format was the future of the music industry and obtain licenses to sell
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`their content.
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`I believe that the record labels were resistant for the reasons
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`mentioned above, and were slow to understand the market potential for online
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`digital music and video sales. Without sufficient licenses for content to sell through
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`SightSound.com,
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`it was difficult
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`to generate significant revenue from digital
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`download sales.
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`13.
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`In 2002, paradoxically, our Patents, the very things that enabled us to
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`raise the capital to launch the download industry, now were draining us of cash,
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`PAGE 000008
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`given the heavy cost of defending against infringers. Further, content holders were
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`largely unwilling to give us
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`licenses
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`to their
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`content
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`to sell
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`through
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`SightSound.com.
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`I understood that content holders, particularly record labels, were
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`unwilling for the reasons outlined above, but also because SightSound.c0m sold
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`only to users of Microsoft’s’ operating system, which the record labels feared as a
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`monopoly with its 96% market share, was of further concern to the record labels. In
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`contrast, Apple's 4% share made it a far less threatening partner to the record
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`labels, or so they thought, so they were willing to grant Apple licenses to their
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`content. Time magazine confirmed my understanding on this point, stating that the
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`record labels gave Apple a “sweet deal” because “Apple with its miniscule share of
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`the computer market was never going to be a real distribution threat.” Attached as
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`exhibit 2120 is a true and correct copy of the November 17, 2003 Time magazine
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`article “Invention of the Year.” Page numbers and an exhibit label have been added
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`to this document but no other alterations have been made.
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`14.
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`In 2002, SightSound ceased its own commercial operations, as
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`SightSound.com was unable to generate sufficient revenue to fimd SightSound’s
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`expenses, including the costs associated with defending the Patents.
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`PAGE 000009
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`I declare under penalty of perjury that the foregoing is true and correct.
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`Sworn this fl1" day of December, 2013 at Pittsburgh, Pennsylvania.
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`Scott Sander
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`PAGE 000010
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