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CG Technology Development, LLC v. Fanduel, Inc.

United States District Court, D. Nevada

January 4, 2017

CG TECHNOLOGY DEVELOPMENT, LLC et al., Plaintiffs,
v.
FANDUEL, INC., Defendant.

          ORDER

          ROBERT C. JONES United States District Judge.

         These consolidates cases arise out of the alleged infringement of several patents relating to automated gambling. Defendant in the Lead Case, No. 2:16-cv-801, has filed a partial motion to dismiss the Second Amended Complaint (“SAC”).

         I. FACTS AND PROCEDURAL HISTORY

         Plaintiffs CG Technology Development, Inc. (“CG Tech”), Interactive Games Limited (“IG Ltd.”), and Interactive Games LLC (“IG LLC”) accuse Defendant FanDuel, Inc. of infringing the following claims of the listed patents (“the Patents”) through the use of its online fantasy sports contests (“the Accused Games”): (1) Claim 20 of U.S. Patent No. RE39, 818; (2) Claim 31 of U.S. Patent No. 6, 899, 628; (3) Claim 1 of U.S. Patent No. 9, 111, 417; (4) Claim 16 of U.S. Patent No. 8, 641, 511; (5) Claim 11 of U.S. Patent No. 8, 342, 924; (6) Claim 1 of U.S. Patent No. 7, 029, 394; (7) Claim 39 of U.S. Patent No. 6, 884, 166; (8) Claim 1 of U.S. Patent No. 7, 534, 169; (9) Claim 19 of U.S. Patent No. 8, 771, 058; (10) Claim 17 of U.S. Patent No. 8, 814, 664; (11) Claim 9 of U.S. Patent No. 9, 355, 518; and (12) Claim 1 of U.S. Patent No. 9, 306, 952. CG Tech owns the ‘818 Patent for a wireless controller (Cause of Action 1); IG Ltd. owns the ‘628, ‘417, ‘924, ‘394, and ‘166 Patents for enhanced services for gaming applications (Causes of Action 2, 3, 5, 6, and 7), and IG LLC owns the ‘511, ‘169, ‘058, ‘664, ‘518, and ‘952 Patents for location-based game configurations (Causes of Action 4, 8, 9, 10, 11, and 12).

         Defendant previously asked the Court to: (1) dismiss for failure to state a claim; (2) stay the case with respect to the ‘818 Patent pending the resolution of its ownership in the U.S. District Court for the Southern District of New York; and (3) sever the case into three cases according to ownership of the Patents and category of technology. The Court denied the motions to stay and to sever and granted the motion to dismiss, with leave to amend. Specifically, the Court ruled that the ‘628, ‘417, ‘924, ‘394, and ‘169 Patents were directed to unpatentable subject matter under 35 U.S.C. § 101 and Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347 (2014), and that Plaintiffs had failed to state a claim of infringement as to the ‘818, ‘511, ‘166, ‘058, ‘664, ‘518, and ‘952 Patents.

         Plaintiffs have filed the SAC, alleging infringement of the ‘818, ‘511, '166, ‘058, ‘518, and ‘952 Patents in the first six causes of action, respectively, and willful infringement of each of them in the seventh cause of action. Defendant has asked the Court to: (1) dismiss the claims of infringement of the ‘818, ‘511, and ‘166 Patents for failure to state a claim and without leave to amend; (2) dismiss the claims of infringement of the ‘511, and ‘166 Patents under § 101 and Alice Corp.; and (3) dismiss the claims of willful infringement of the ‘058, ‘518, and ‘952 Patents for failure to state a claim and without leave to amend. Because Defendant answered the SAC before filing the present motion to dismiss it, the present motion must be treated under Rule 12(c) rather than Rule 12(b).

         II. LEGAL STANDARDS

         Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule 12(b)(6) tests the complaint's sufficiency. See N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). The court, however, is not required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

         A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a plaintiff must plead facts pertaining to his own case making a violation “plausible, ” not just “possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677-79 (2009) (citing Twombly, 550 U.S. at 556) (“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is, under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a cognizable cause of action (Conley review), but also must allege the facts of his case so that the court can determine whether the plaintiff has any basis for relief under the cause of action he has specified or implied, assuming the facts are as he alleges (Twombly-Iqbal review). Put differently, Conley only required a plaintiff to identify a major premise (a cause of action), but Twombly and Iqbal require a plaintiff also to allege minor premises (facts of the plaintiff's case) such that the syllogism showing liability is logically complete and that liability necessarily, not only possibly, follows (assuming the allegations are true).

         “Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss” without converting the motion to dismiss into a motion for summary judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court considers materials outside of the pleadings, the motion to dismiss is converted into a motion for summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir. 2001).

         “After the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). The standards governing a Rule 12(c) motion are the same as those governing a Rule 12(b)(6) motion. See Dworkin v. Hustler Magazine, Inc., 867 F.2d 1188, 1192 (9th Cir. 1989) (“The principal difference . . . is the time of filing. . . . [T]he motions are functionally identical . . . .”).

         III. ANALYSIS

         A. Infringement of the ‘818, ‘511, and ‘166 Patents

         A defendant is liable for direct patent infringement if he “without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor . . . .” 35 U.S.C. § 271(a). “Under the ‘all elements' rule, to find infringement, the accused device must contain ‘each limitation of the claim, either literally or by an equivalent.'” TIP Sys., LLC v. Phillips & Brooks/Gladwin, Inc., 529 F.3d 1364, 1379 (Fed. Cir. 2008) (quoting Freedman Seating Co. v. Am. Seating Co., 420 F.3d 1350, 1358 (Fed. Cir. 2005) (citing Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 29 (1997))).

         The requirement of providing infringement contentions element-by-element under the Local Rules does not permit a more flexible application of Civil Rule 8(a) at the dismissal stage. Iqbal and Twombly have always applied to claims of indirect infringement. See Superior Indus., LLC v. Thor Global Enters. Ltd., 700 F.3d 1287, 1295 (Fed. Cir. 2012) (citing In re Bill of Lading Transmission & Processing Sys. Patent Litig. (R Carriers, Inc. v. DriverTech LLC), 681 F.3d 1323, 1336 (Fed. Cir. 2012)) (noting that only claims of direct infringement, not claims of indirect infringement, could be pled using Form 18). Although Form 18 formerly applied to claims of direct infringement, obviating the Twombly/Iqbal pleading standard for such claims if the form was used, both Form 18 and Civil Rule 84 (authorizing the form) were deleted from the Civil Rules in 2015, extinguishing the exception to the Twombly/Iqbal pleading standard for direct infringement claims.

         Local Rule 16.1-6, providing for the initial disclosure of infringement contentions before discovery, was adopted no later than 2011, i.e., at a time when Form 18 permitted a direct infringement plaintiff to obtain full discovery with a bare-bones pleading that would not survive Iqbal and Twombly. As in other districts with similar local rules, “[b]y requiring the party claiming invalidity to flesh out and support its invalidity contentions early on, the Patent Local Rules fulfill[ed] the function of Twombly and Iqbal.” Wistron Corp. v. Phillip M. Adams & Assocs., LLC, 2011 WL 1654466, at *11 (N.D. Cal. Apr. 28, 2011) (Chen, Mag. J.). But the fact that certain aspects of Local Rule 16.1-6 may have been rendered redundant via Civil Rule 84's deletion and the resulting application of Iqbal and Twombly to direct infringement claims does not mean that the Local Rules may be interpreted so as to abrogate the operation of the Civil Rules. See Fed. R. Civ. P. 83(a)(1). The Supreme Court's interpretation of Civil Rule 8(a) requires plausible allegations as to all elements of a cause of action, and the elements of a cause of action for direct infringement include each limitation of the patent claim at issue. In any case, the current (2016) version of Local Patent Rule 1-6 (the infringement contentions rule) requires much more detailed allegations than Iqbal and Twombly do, so it is not redundant to hold infringement plaintiffs to the lesser strictures of Civil Rule 8(a) at the pleading stage.

         1.The ...


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