CG Technology Development, LLC et al v. Big Fish Games, Inc.

Filing 59

ORDER granting in part and denying in part ECF No. 39 Motion to Dismiss; denying ECF No. 43 Motion to Stay. Signed by Judge Robert C. Jones on 1/4/2017. (Copies have been distributed pursuant to the NEF - KR)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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CG TECHNOLOGY DEVELOPMENT, LLC
et al.,

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2:16-cv-00857-RCJ-VCF

Plaintiffs,

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vs.

ORDER

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BIG FISH GAMES, INC.,

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Defendant.

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This case arises out of the alleged infringement of seven patents relating to online

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gambling. Pending before the Court are Defendant Big Fish Games, Inc.’s Motion to Dismiss

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(ECF No. 39) and Motion to Stay (ECF No. 43). For the reasons given herein, the Motion to

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Dismiss is granted in part and denied in part, and the Motion to Stay is denied.

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I.

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FACTS AND PROCEDURAL HISTORY
Plaintiff CG Technology Development, LLC (“CG Tech”) is a wholly owned subsidiary

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of non-party CG Technology, L.P. (“CG”), which provides technology solutions for lottery,

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gaming, racing, and sports wagering. (Am. Compl. ¶ 2, ECF No. 19.) “[CG] specializes in

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providing secure, scalable, mobile technology and risk management solutions to integrated

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resorts, gaming partners, race and sports books, and lottery industries.” (Id.) CG and CG Tech

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produce mobile phone applications for real-money and social casino gaming, as well as account-

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based wagering systems. (Id.).

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CG Tech is the assignee of U.S. Patent No. RE39,818. Plaintiff Interactive Games

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Limited (“IG Ltd”) is the assignee of U.S. Patent Nos. 6,899,628; 6,979,267; 8,342,924;

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7,029,394; and 9,111,417. Plaintiff Interactive Games LLC (“IG LLC”) is the assignee of U.S.

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Patent No. 7,534,169. Plaintiffs have sued Defendant Big Fish Games (“Defendant”) in this

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Court for direct and willful infringement via operation of its various online casino games. On

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August 29, 2016, the Court granted Defendant’s motion to dismiss Plaintiffs’ original Complaint

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(ECF No.1), finding that (1) the ‘628, ‘267, ‘924, ‘394, ‘417, and ‘169 Patents are patent-

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ineligible under 35 U.S.C. § 101 and Alice Corp. Pty. v. CLS Bank lnt’l, 134 S. Ct. 2347 (2014);

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(2) the ‘818 Patent is patent-eligible, but Plaintiffs had failed to state a plausible claim of relief;

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and (3) Plaintiffs had failed to state a plausible claim with respect to willful infringement. (See

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Order, ECF No. 36.)
Plaintiffs have now amended their Complaint, (ECF No. 37), and Defendant moves again

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for dismissal, (ECF No. 39). Plaintiffs have not pled willful infringement in their Amended

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Complaint, but have re-alleged infringement of all seven patents, even those the Court previously

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held invalid. Plaintiffs assert that the invalid patents have been included in the amended pleading

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“for preservation of options on appeal only.” (See, e.g., Am. Compl. 13 n. 2, ECF No. 37.)

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II.

MOTION TO DISMISS

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a. Legal Standards

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Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

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claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

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what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47

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(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

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that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule

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12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720

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F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for

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failure to state a claim, dismissal is appropriate only when the complaint does not give the

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defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

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sufficient to state a claim, the court will take all material allegations as true and construe them in

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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

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Cir. 1986). The court, however, is not required to accept as true allegations that are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

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A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a

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plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just

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“possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556)

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(“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to

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draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is,

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under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a

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cognizable cause of action (Conley review), but also must allege the facts of his case so that the

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court can determine whether the plaintiff has any basis for relief under the cause of action he has

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specified or implied, assuming the facts are as he alleges (Twombly-Iqbal review).

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“Generally, a district court may not consider any material beyond the pleadings in ruling

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on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the

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complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner

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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents

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whose contents are alleged in a complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

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motion to dismiss” without converting the motion to dismiss into a motion for summary

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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule

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of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay

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Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court

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considers materials outside of the pleadings, the motion to dismiss is converted into a motion for

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summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.

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2001).

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b. Analysis
i. Direct Infringement of the ‘818 Patent
The ‘818 Patent claims “[a] video game system . . . which includes a wireless game

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controller which stores information about the user of the controller.” (‘818 Patent Abstract, ECF

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No. 37-2 at 3.) The ‘818 Patent has thirteen independent claims and twenty dependent claims.

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(See id. at 5:40–8:64, ECF No. 37-2 at 9–10.) Plaintiffs allege infringement of “at least claims 1,

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16, 20, 21, 24, 31, and 32.” (Am. Compl. ¶ 21, ECF No. 37.) The Amended Complaint focuses

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solely on the alleged infringement of Claim 20 “by way of example,” although the Court finds

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that all of the asserted claims broadly contain certain essential elements: (1) a game controller or

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hand-held device, (2) which wirelessly transmits information (3) to a processor executing a

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game, (4) which authorizes game play based at least in part on the age of the player. (See ‘818

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Patent 5:40–59, 6:61–7:10, 7:25–40, 7:46–54, 8:34–49, ECF No. 37-2 at 9–10.)

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Here, after amendment, Plaintiffs’ claim of direct infringement of the ‘818 Patent is

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sufficient to survive the Motion to Dismiss. The allegations, including screenshots of

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Defendant’s online casino games, descriptions of how Defendant’s products allegedly work, and

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assertions of testing, use, and demonstration of the ‘818 Patent, are enough to make Plaintiffs’

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legal theory clear and definite: By using smartphones, tablets, or personal computers to test its

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products and demonstrate them at promotional events, Defendants infringed the ‘818 Patent.

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Under this theory, these various electronic devices would constitute the “controllers” described

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in the Patent, and would wirelessly transmit information to a remote processor executing

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Defendant’s casino games. Plaintiffs have specifically and plausibly pled Defendant’s use of the

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‘818 Patent in testing, promoting, and demonstrating its products, and the screenshots are enough

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to show that game play is indeed authorized “based at least in part on the age of the player,” and

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that “a plurality of input controls . . . allow the player to interact with the processor.” (See Am.

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Compl. ¶ 32–33, ECF No. 37.) Furthermore, Defendant’s development and distribution of

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integrated software (i.e., apps) for various mobile devices gives rise to a plausible claim that

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Defendant adopted the “controllers” used by its customers to play Defendant’s games. Therefore,

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Plaintiffs’ allegations are sufficiently pled to state a claim of direct infringement of at least Claim

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Patent.

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ii. Induced and Contributory Infringement of the ‘818 Patent
“In contrast to direct infringement, liability for inducing infringement attaches only if the

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defendant knew of the patent and that the induced acts constitute patent infringement.” Commil

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USA, LLC v. Cisco Sys., Inc., 135 S. Ct. 1920, 1926 (2015) (citation omitted). “Like induced

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infringement, contributory infringement requires knowledge of the patent in suit and knowledge

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of patent infringement.” Id. Accordingly, proving either induced or contributory infringement

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“requires proof the defendant knew the acts were infringing.” Id. at 1928. In other words, if a

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defendant makes the conclusion that its acts are non-infringing, and that conclusion is based on a

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reasonable reading of the patent, the defendant will not be liable for induced or contributory

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infringement for acts based on such reasonable reading, even if it is later established that the

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defendant’s acts did in fact cause the patent to be infringed. See id.

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Here, the only allegation Plaintiffs make with respect to Defendant’s knowledge of the

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‘818 Patent is that “Defendant had knowledge of the RE’818 patent at least since the service of

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the original Complaint on or about April 14, 2016.” (Am. Compl. ¶ 27, ECF No. 37.) Therefore,

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Plaintiffs have failed to state a claim of pre-litigation induced or contributory infringement. Any

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surviving claim of induced or contributory infringement of the ‘818 Patent must be limited in

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scope to “post-filing conduct” only. See Silver State Intellectual Techs., Inc. v. FourSquare Labs,

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Inc., No. 2:12-CV-01308-GMN, 2013 WL 5437363, at *3 (D. Nev. Sept. 26, 2013).

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With that said, the Court finds that Plaintiffs have sufficiently pled their claims of
induced and contributory infringement of the ‘818 Patent.
1. Induced Infringement

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To survive a motion to dismiss, a plaintiff asserting induced infringement must plead (1)

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that the defendant had “knowledge of the existence of the patent that is infringed,” Global–Tech

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Appliances, Inc. v. SEB S.A., 131 S.Ct. 2060, 2068 (2011), and (2) “facts that plausibly establish

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that the accused infringer ‘specifically intended their customers to infringe the [asserted] patent

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and knew that the customers’ acts constituted infringement,’” Silver State, 2013 WL 5437363, at

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*4 (quoting In re Bill of Lading Transmission and Processing Sys. Patent Litigation, 681 F.3d

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1323, 1336 (Fed. Cir. 2012)). First, no one can dispute that Defendant had knowledge of the ‘818

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Patent by May 17, 2016, when Defendant first appeared in the case, (ECF No. 17), and likely as

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early as April 14, 2016, when the original Complaint was filed and served.

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With respect to the element of Defendant’s intent, Plaintiffs have alleged that Defendant

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directs, promotes, encourages, and causes its customers to use its products “in a manner that it

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knows infringes the ‘818 Patent.” (Am. Compl. ¶ 25, ECF No. 37.) In so doing, Defendant

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“provides detailed instructions to its customers through training videos, demonstrations,

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brochures, installation and/or user guides explaining how to use the social casino platform, and

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(2) touting and advertising these features to its customers.” (Id. (citations omitted).) In Bill of

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Lading, the Federal Circuit reversed an order of dismissal because it was “more than reasonable

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to infer that [defendant] intended to induce its customers to use its products to practice the

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patented method and did so with knowledge of the patent.” 681 F.3d at 1341. Such is the case

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here as well. Defendant was made aware of the ‘818 Patent by this lawsuit and has continued to

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market its social casino games to its customers. Defendant makes much of the fact that it doesn’t

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produce or sell any physical, tangible components. However, Defendant specifically induces its

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customers to couple its social casino games with tangible components (i.e., mobile phones and/or

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computers) in a way that implicates all of the elements of certain of the ‘818 Patent’s claims.

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Therefore, Plaintiff’s allegations are sufficient to raise the plausible inference of induced

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infringement. See id. at 1339–40 (stating that a plaintiff is not required to “prove its case at the

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pleading stage,” and that all reasonable inferences must be drawn in the plaintiff’s favor).

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2. Contributory Infringement
Similarly, a plaintiff asserting contributory infringement must plead (1) again, knowledge

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of the existence of the patent, and (2) “facts from which the Court can infer that the accused

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device has no substantial non-infringing uses.” Silver State, 2013 WL 5437363, at *4. Here,

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Plaintiff has not only adequately pled knowledge based on the filing of this case, but has also

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plausibly pled that the online casino game products Defendant marketed and sold to its

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customers have no substantial non-infringing uses. Plaintiffs’ theory of the case is that

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smartphones, tablets, and personal computers, with which Defendant’s games are meant to be

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played, constitute the “controllers” described in the ‘818 Patent, which wirelessly transmit

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information to a remote processor executing Defendant’s casino games, and that Defendant’s

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games authorize play based on the age of the player. In order to play Defendant’s games,

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Defendant’s customers are required to use one of these “controllers”; there is no way to use

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Defendant’s allegedly infringing products without such a device. Therefore, if Defendant’s use

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and testing of its online casino games actually infringes the ‘818 Patent—that is to say, if

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Plaintiffs’ theory of the case is successful—then any customer use of Defendant’s games would

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necessarily infringe as well.
Therefore, the motion to dismiss the claims of induced and contributory infringement is

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granted with respect to Defendant’s pre-filing conduct, but denied with respect to Defendant’s

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post-filing conduct.
iii. The Remaining Patents

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The Court has held the remaining patents asserted in the Amended Complaint are invalid.

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(See Order, ECF No. 36.) Plaintiffs have re-alleged infringement of these six patents—and of the

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same patent claims previously asserted in the original Complaint—without supplementing or

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otherwise amending any pertinent factual allegations. Furthermore, Plaintiffs make clear in their

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amended complaint and Response to the instant motion that their reassertion of these patents was

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solely for the purpose of preserving appellate rights. (See, e.g., Am. Compl. 13 n. 2, ECF No. 37;

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Resp. 15–16, ECF No. 45.) Accordingly, the claims of infringement of the ‘628, ‘267, ‘924,

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‘394, ‘417, and ‘169 Patents are dismissed with prejudice, for the reasons given in the Court’s

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prior order granting dismissal of the same claims. (See Order, ECF No. 36.)

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III.

MOTION TO STAY

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With only the ‘818 Patent still at issue in the case, Defendant requests that the Court stay

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further proceedings pending resolution of the ‘818 Patent’s ownership in the U.S. District Court

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for the Southern District of New York. See Slifer v. CG Technology, L.P., No. 14-cv-9661

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(S.D.N.Y. Aug. 30, 2016) (the “New York case”). The Court will deny the Motion to Stay.

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Although only the ‘818 Patent remains at issue in the instant action, the reasoning in the Court’s

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prior order denying a stay of proceedings in CG Technology Development, LLC v. FanDuel, Inc.,

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No. 2:16-cv-00801-RCJ-VCF (D. Nev. Oct. 18, 2016), is relevant. In FanDuel, the Court ruled

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that the balance of the stay factors weighed in favor of denial due to the potential of prejudice to

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CG Tech. The instant action is on a consolidated discovery track with FanDuel and six other

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related cases. Staying proceedings here without staying other consolidated actions would create

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numerous party and judicial inefficiencies. While only the ‘818 Patent remains at issue here,

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various other patents have survived dismissal among the related cases. Therefore, the analysis in

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the Court’s FanDuel order applies here, and the Court declines to stay the case. In addition, the

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Court notes that, with trial planned for early January 2017 in the New York Case, any harm

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Defendant may suffer as a result of the denial of stay is likely to be minimal.
CONCLUSION

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IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 39) is GRANTED IN
PART AND DENIED IN PART.

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IT IS FURTHER ORDERED that the Motion to Stay (ECF No. 43) is DENIED.

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IT IS SO ORDERED.

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_____________________________________
ROBERT C. JONES
United States District Judge
Dated: January 4, 2017.

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