Universal Entertainment Corporation v. Aruze Gaming America, Inc. et al
Filing
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ORDER. IT IS ORDERED that 119 Defendants Aruze Gaming America, Inc. and Kazuo Okada's Motion for Temporary Restraining Order and 120 Motion for Preliminary Injunction are DENIED. IT IS FURTHER ORDERED that 118 Defendants Aruze Gaming America, Inc. and Kazuo Okada's Motion for Leave to File Under Seal Application for Temporary Restraining Order and Motion for Preliminary Injunction in accordance with Rule 5.2(d) of the Federal Rules of Civil Procedure is GRANTED, nunc pro tunc. Signed by Judge Richard F. Boulware, II on 3/16/2020. (Copies have been distributed pursuant to the NEF - MR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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Universal Entertainment Corporation,
Case No. 2:18-cv-00585-RFB-NJK
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Plaintiff,
ORDER
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v.
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Aruze Gaming America, Inc. et al.,
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Defendants.
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I.
INTRODUCTION
Before the Court are Defendants Aruze Gaming America, Inc. (“AGA”) and Kazuo
Okada’s Motions for Temporary Restraining Order (ECF No. 119) and Preliminary Injunction
(ECF No. 120). The motions are denied.
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II.
PROCEDURAL BACKGROUND
Plaintiff Universal Entertainment Corporation (“UEC”) sued AGA and Okada on March
20, 2018. ECF No. 1. AGA and Okada moved to dismiss the complaint on May 29, 2018. ECF
No. 13. The Court granted leave to file an amended complaint on July 16, 2018. ECF No. 25.
UEC filed the First Amended Complaint on July 19, 2018. ECF No. 29. AGA and Okada moved
to dismiss the First Amended Complaint. ECF No. 33. UEC then filed the Second Amended
Complaint on August 23, 2018. ECF No. 43. The Second Amended Complaint is the operative
complaint in this action.
AGA and Okada moved to dismiss the complaint on September 6, 2018. ECF No. 44.
UEC opposed, and AGA and Okada replied. ECF Nos. 49, 53. This motion remains pending
before the Court after a hearing held on May 29, 2019. ECF No. 89.
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On September 20, 2018, AGA and Okada also answered the complaint, asserting eighteen
counterclaims. ECF No. 50. They amended the answer on October 11, 2018. ECF No. 58. In the
Amended Answer, AGA and Okada assert counterclaims against UEC, Aruze USA, Inc., and Jun
Fujimoto.
UEC moved to dismiss the counterclaims. ECF No. 59. AGA and Okada opposed, and
UEC replied. ECF Nos. 64, 68. Fujimoto also moved to dismiss the counterclaims. ECF No. 60.
AGA and Okada opposed, and Fujimoto replied. ECF Nos. 63, 67. These motions remain pending
before the Court after the hearing on May 29, 2019. ECF No. 89.
The parties engaged in a settlement conference on March 5, 2019, but no settlement was
reached. ECF No. 78. On May 24, 2019, Defendant and Counter Claimant AGA filed a Motion
for Summary Judgment. ECF No. 86. UEC responded on June 28, 2019, AGA replied on July 19,
2019. ECF Nos. 97, 99. This motion remains pending before the Court.
On October 29, 2019, UEC filed a Notice of Related Case referencing a case filed in this
district involving the same parties and asserting patent infringement claims involving similar
products at issue in this matter. ECF No. 117. That case is not currently before this Court.
On November 15, 2019, AGA and Okada filed the instant motions. ECF Nos. 119, 120.
UEC responded on November 22, 2019 and AGA and Okada replied on November 27, 2019. ECF
Nos. 126, 127.
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III.
FACTUAL BACKGROUND
The facts at issue in the underlying dispute are substantial. For purposes of deciding the
instant motions, the Court limits its factual discussion to those facts upon which the instant motions
are based.
The primary dispute at the center of this action is an allegation by UEC against AGA of
four counts of patent infringement of its slot machines, as asserted in UEC’s complaint. ECF No.
43 at 3-38. In the operative complaint, UEC alleges, inter alia, infringement of four patents by
AGA’s G-ENEX slot machine cabinets, as well as certain AGA gaming machines. Id. In response,
Defendants have asserted a number of counterclaims against UEC, including breach of patent
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license agreement (Count Ten), Sham Patent Litigation (Count Twelve), Declaratory Judgment as
to Patent Rights (Count 15), and Breach of Contract (Count 17). ECF No. 58 at 64-79. The
assertion underlying these counterclaims is that AGA has an implied and oral license with a right
to sublicense to UEC patents “existing, conceived, or claiming priority to applications existing on
March 31, 2009, when UEC completed its sale of AGA to Okada.” ECF No. 120 at 11.
Defendants assert in the instant motion that UEC has filed and initiated additional patent
suits in foreign jurisdictions against Defendants and their affiliates. ECF No. 120 at 5. Specifically,
Defendants assert that UEC previously initiated criminal proceedings against Okada and AGA in
the Philippines in November 2017 alleging fraud, id. at 10, and in April 2018 “encourage[ed]” the
Hong Kong Independent Commission Against Corruption to criminally prosecute Okada by
providing documents and submitting a statement alleging corruption, id. at 12. The current motions
specifically concern UEC’s filing of a criminal complaint in Macau for patent infringement against
Aruze Gaming Macau Limited (“AGML”), id. at 2, 12, a subsidiary of Aruze Gaming HK, which
is an affiliate of AGA, id. at 7 n.4. This criminal complaint was filed on or about July 10, 2018.
ECF No. 126 at 2.
Defendants explain through an affidavit filed by counsel for AGML that in Macau, a
private entity may file either a civil or criminal complaint for patent infringement and “may request
to be appointed as an assistant to the criminal proceedings and, in that capacity . . . may provide
its collaboration in the investigation, as well as request that investigative measures and further
means of evidence be produced and/or collected.” Ex. A at 2, ECF No. 121. The Public Prosecutor,
“directly or with the assistance of the police authority . . . must investigate the complaint.” Id. It is
ultimately the Public Prosecutor’s decision whether to bring an indictment after investigation, but
if “sufficient evidence exists” to suggest that a crime may have been committed, the Prosecutor
“must” pursue charges. Id. at 3. Until an indictment is issued or a trial hearing is scheduled, the
investigation and pre-trial proceedings are required to remain secret. Id. at 4.
Defendants state that on June 5, 2019, Macau Customs officials 1 removed AGML’s
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According to counsel for AGML, Macau Customs is “entrusted with police authority and
has the competence to investigate criminal offenses related to intellectual property matters . . . .”
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gaming machine inventory of approximately eight gaming machines of the G-ENEX and CUBEX G-series cabinets at issue in this case. ECF No. 120 at 13-14. Defendants assert “upon
information and belief” that this seizure was the consequence of the criminal complaint asserting
patent infringement by AGML filed by UEC with the Macau Customs authorities. Id. at 14. UEC
has cooperated with the Macanese authorities in this criminal investigation. ECF No. 126 at 2.
These actions by UEC are consistent with a press release it issued on May 14, 2018, in
which it stated it would file criminal complaints and civil lawsuits against AGA and Okada “on
the grounds that its patent rights and other rights were violated” in the United States, Macau, the
Philippines, and Hong Kong. ECF No. 120 at 12 (citing Ex. CC at 175-76, ECF No. 123).
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IV.
LEGAL STANDARD
A. Anti-Suit Injunction
“‘A federal district court with jurisdiction over the parties has the power to enjoin them
from proceeding with an action in the courts of a foreign country, although the power should be
used sparingly.’” Microsoft Corp. v. Motorola, Inc., 696 F.3d 872, 881 (9th Cir. 2012) (quoting E.
& J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 989 (9th Cir. 2006)). “Courts derive the
ability to enter an anti-suit injunction from their equitable powers. Such injunctions allow the court
to restrain a party subject to its jurisdiction from proceeding in a foreign court in circumstances
that are unjust.” Gallo, 446 F.3d at 989. “The suitability of an anti-suit injunction involves different
considerations from the suitability of other preliminary injunctions.” Id. at 990. “To the extent the
traditional preliminary injunction test is appropriate, . . . [courts] only need address whether [the
injunction seeker] showed a significant likelihood of success on the merits. The merits in this case,
however, are . . . about . . . whether [the injunction seeker] has demonstrated that the factors specific
to an anti-suit injunction weigh in favor of granting that injunction here.” Id. at 990-91 (adopting
Fifth Circuit approach establishing that a modified analysis for anti-suit injunctions applies rather
than the usual test for preliminary injunctions) (internal quotations and citation omitted).
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Ex. A at 2, ECF No. 121.
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Whether a court should issue an anti-suit injunction is determined by the consideration of
three factors. Microsoft Corp., 696 F.3d at 881. First, a court must determine “whether or not the
parties and the issues are the same in both the domestic and foreign actions, and whether or not
the first action is dispositive of the action to be enjoined.” Id. (internal quotations and citation
omitted).
Second, the court must determine “whether at least one of the so-called
‘Unterweser factors’ applies.” Id. (citation omitted). Finally, a court must “assess whether the
injunction's impact on comity is tolerable.” Id.
The Unterweser factors “are a disjunctive list of considerations that may justify a foreign
anti-suit injunction . . . .” Id. at 881-82. They are: “[whether the] foreign litigation . . . would (1)
frustrate a policy of the forum issuing the injunction; (2) be vexatious or oppressive; (3) threaten
the issuing court's in rem or quasi in rem jurisdiction; or (4) where the proceedings prejudice other
equitable considerations.” Id. at 882 (quoting Gallo, 446 F. 3d at 990).
V.
DISCUSSION
Defendants request that the Court enjoin UEC and affiliates within its control from further
voluntary cooperation with Macanese authorities in the criminal investigation and prosecution of
AGML, and of other AGA and Okada affiliates, over the alleged infringement of UEC patents
within the scope of AGA’s alleged license. ECF No. 120 at 2. With regard to the Macanese
investigation, Defendants also request that the Court enjoin UEC from asserting that AGA has no
rights to UEC patents without also disclosing Defendants’ pending counterclaims alleging AGA
has a license and sublicense to UEC’s patents in the underlying suit before this Court. Id. at 2-3.
Defendants also move the Court to enjoin UEC from initiating or encouraging additional foreign
government authorities to criminally prosecute Okada, AGA, or any of their affiliates on issues
relating to the right to use patents within the scope of AGA’s alleged license, pending resolution
of the underlying counterclaims. Id. at 3.
Employing the three-part test elucidated by the Ninth Circuit in Microsoft Corp., the Court
first considers whether or not the parties and the issues are the same in both the domestic and
foreign actions, and whether or not the first action is dispositive of the action to be enjoined.
Defendants argue that both the parties and issues are functionally the same in both this and
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the Macau action. With regard to the parties, Defendants assert that “functionally UEC is a party”
to the Macau action because the Public Prosecutor in investigating the criminal complaint filed by
UEC and potentially filing charges and trying the case, with the potential assistance of UEC, will
“indirectly represent UEC’s interests in pursuing the[] criminal charges, as any relief obtained
would benefit UEC.” ECF No. 120 at 15-16. UEC counters that the Public Prosecutor is not the
functional equivalent of UEC and that Defendants have proffered no evidence that AGML and
AGA “share the type of affiliation . . . that courts have recognized would satisfy [the] identity
requirement.” ECF No. 126 at 7-8. Specifically, UEC argues that the Macau action is not a civil
action in which UEC sought “to protect its own civil patent rights,” id. at 6-7, and the private entity
who files the criminal complaint “is not a party to the criminal investigation and has no control or
authority of the investigation nor decision to indict” though it may be asked to or may request to
assist, id. at 7. Regarding the relationship between AGML and AGA, UEC asserts that Defendants
have not shown that any adverse consequences of the Macau action on AGML would extend to
AGA. Id. at 8.
In reply, Defendants note that the declaration and organizational chart attached to their
motion “outlining the close affiliation between Defendants and AGML” provides evidence in
support of common ownership and shared business practices and assets, and therefore evidence
that Defendants and AGML are functionally the same. ECF No. 127 at 5 (citing Exs. N, FF, ECF
No. 120). With regard to UEC, Defendants assert in reply that UEC’s admission that it initiated
the criminal complaint and the fact that Macau procedure permits the private entity to voluntarily
assist in the criminal investigation, leads Defendants to “believe that UEC has continued to
voluntarily and gratuitously insert itself further into the Macau proceedings by requesting to be
made an assistant to the Macanese Authorities.” Id. at 6. This conduct is consistent with “a role
that is functionally similar to an active litigant,” thereby warranting an injunction. Id. at 6.
The Court finds that Defendants have not satisfied this initial hurdle of the first factor in
the Microsoft Corp. test because they have failed to show that the parties are the same, in either
the Macau action or any future foreign criminal proceedings. Microsoft Corp. itself considered
facts very similar to those at issue here, with one crucial exception. In that case, the Ninth Circuit
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considered an interlocutory appeal of the district court’s foreign anti-suit injunction. Microsoft
filed a breach of contract suit against Motorola, arguing that Motorola had breached its contractual
obligation to license standard-essential patents to the International Telecommunications Union and
Institute of Electrical and Electronics Engineers with terms that are “reasonable and
nondiscriminatory.” 696 F.3d at 876-78. Microsoft was a third-party beneficiary to the contract.
Id. Months after the civil litigation began, Motorola sued Microsoft in a German court, alleging
patent infringement. Id. at 879. That German court found that Microsoft did not have a license to
use Motorola’s patents and that Microsoft did not have third-party contractual rights based on
German law. Id. The court enjoined Microsoft from using the patents in Germany. Id. Because the
German injunction was not self-enforcing, Microsoft sought an order in the U.S. civil action to
enjoin Motorola from enforcing German injunctive relief. Id. The district court granted the
injunction, and the Ninth Circuit agreed with the lower court’s reasoning that the U.S. contract
dispute would be dispositive of the German patent action because the patents at issue in that action
were included in the proposed worldwide license to Motorola’s standard-essential patents at issue
in the contract dispute. Id. at 880, 883.
Importantly, in Microsoft Corp., all agreed on the threshold issue that the parties were the
same in both the German and U.S. actions. Id. at 883. Here, the fact that the Macau action is a
criminal, rather than civil proceeding, and therefore invokes the power of the Macanese
government itself, makes plain the vital distinction between these two cases, and the necessity for
a divergent result. The Macanese Public Prosecutor is not the functional equivalent of UEC, though
the procedures of that country permit UEC to voluntarily assist in the investigation. The Public
Prosecutor, not UEC, will ultimately make the decision as to whether there is evidence sufficient
to suggest a crime has been committed, and therefore that an indictment is warranted. Defendants
ask this Court to enjoin UEC from that continued voluntary cooperation, if indeed it is engaged in
that conduct, and not to enjoin the criminal proceeding itself. The Court appreciates the distinction
but is unwilling to exercise its equitable powers to enjoin UEC from participation in a Macanese
criminal proceeding that is governed by Macanese procedural rules and led by Macanese
authorities, to determine whether there has been a violation of Macanese criminal law.
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Moreover, even assuming, arguendo, that Defendants were able to satisfy the first and
second Microsoft Corp. factors, they would not satisfy the third. The Court finds in the instant case
that the impact of such an injunction on international comity would not be “tolerable.” Defendants
request that the Court enjoin UEC from “initiating or encouraging additional foreign government
authorities to criminally prosecute Mr. Okada, AGA or any of their affiliates” on issues concerning
the patents at issue in this action. ECF No. 120 at 3. However, the criminal patent infringement
complaint process of Macau clearly allows for initiation of a criminal investigation by a nongovernmental entity. Yet, this non-governmental entity does not ultimately direct the investigation
or decide whether criminal charges may be brought. This is to say that it is not essentially a civil
proceeding whose prosecution or litigation is directed by third parties. As the determination of
how a country’s criminal laws should be investigated and enforced represents one of the most
important characteristics of sovereign authority, this Court will not intervene in an essentially
criminal proceeding of another country. While Defendants move the Court to enjoin the initiation
or encouragement itself, and not the resulting criminal prosecutions, the Court finds that enjoining
such conduct would have an intolerable impact on the criminal proceeding and thus international
comity. Foreign governments have the right to enforce their criminal laws and to investigate
credible allegations of violations. Whether they choose to do so, once allegations have been made,
is in accordance with the application of their laws to the facts at hand. UEC may make allegations
against Defendants, but that in itself does not necessarily result in criminal investigation and
prosecution. Defendants essentially ask this Court to enjoin UEC from alerting foreign
governments to potential violations of their criminal laws. Whether those allegations are credible
enough to warrant investigation is a decision to be made by the foreign government. The Court
declines to intrude upon this sovereign discretion.
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As the Court finds that Defendants have not established that the parties are the same in
both this action and the Macau action, and will not be the same in any future foreign criminal
actions, Defendants have failed to meet the initial hurdle of the first factor of the Microsoft Corp.
test, and the Court does not consider the parties’ remaining arguments.
//
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VI.
CONCLUSION
IT IS THEREFORE ORDERED that Defendants Aruze Gaming America, Inc. and
Kazuo Okada’s Motion for Temporary Restraining Order (ECF No. 119) and Motion for
Preliminary Injunction (ECF No. 120) are DENIED.
Good cause appearing, IT IS FURTHER ORDERED that Defendants Aruze Gaming
America, Inc. and Kazuo Okada’s Motion for Leave to File Under Seal Application for Temporary
Restraining Order and Motion for Preliminary Injunction (ECF No. 118) in accordance with Rule
5.2(d) of the Federal Rules of Civil Procedure is GRANTED, nunc pro tunc.
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DATED: March 16, 2020.
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__________________________________
RICHARD F. BOULWARE, II
UNITED STATES DISTRICT JUDGE
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