United States District Court, D. Nevada
January 4, 2017
CG TECHNOLOGY DEVELOPMENT, LLC et al., Plaintiffs,
DOUBLE DOWN INTERACTIVE, LLC, Defendant.
C. JONES United States District Judge.
case arises out of the alleged infringement of seven patents
relating to online gambling. Pending before the Court are
Defendant Double Down Interactive, LLC's Motion to
Dismiss (ECF No. 63) and Motion to Stay (ECF No. 66). For the
reasons given herein, the Motion to Dismiss is granted in
part and denied in part, and the Motion to Stay is denied.
FACTS AND PROCEDURAL HISTORY
CG Technology Development, LLC (“CG Tech”) is a
wholly owned subsidiary of non-party CG Technology, L.P.
(“CG”), which provides technology solutions for
lottery, gaming, racing, and sports wagering. (Am. Compl.
¶ 2, ECF No. 58.) “[CG] specializes in providing
secure, scalable, mobile technology and risk management
solutions to integrated resorts, gaming partners, race and
sports books, and lottery industries.” (Id.)
CG and CG Tech produce mobile phone applications for
real-money and social casino gaming, as well as account-based
wagering systems. (Id.).
is the assignee of U.S. Patent No. RE39, 818. Plaintiff
Interactive Games Limited (“IG Ltd”) is the
assignee of U.S. Patent Nos. 6, 899, 628; 6, 979, 267; 8,
342, 924; 7, 029, 394; and 9, 111, 417. Plaintiff Interactive
Games LLC (“IG LLC”) is the assignee of U.S.
Patent No. 7, 534, 169. Plaintiffs have sued Defendant Double
Down Interactive (“Defendant”) in this Court for
patent infringement via operation of its various online
casino games. Defendant has asked the Court to dismiss all
claims of infringement, arguing that each and every asserted
patent is patent-ineligible under 35 U.S.C. § 101 and
Alice Corp. Pty. v. CLS Bank lnt'l, 134 S.Ct.
2347 (2014). Defendant also argues that Plaintiffs have
failed to state a plausible claim of relief with respect to
the infringement of the ‘818 Patent, including the
claims of induced and contributory infringement.
related cases, this Court has already analyzed each of the
patents asserted here under Section 101 and the
Alice standard. Accordingly, the Court will
incorporate its analysis from those cases into this order.
For the reasons given in CG Tech. Dev., LLC v. Big Fish
Games, Inc., No. 2:16-cv-857 (D. Nev. Aug 29, 2016)
(order granting motion to dismiss), the Court finds the
‘628, ‘169, ‘267, ‘924, ‘394,
and ‘417 Patents are invalid under Alice;
however, the ‘818 Patent is patent-eligible.
Accordingly, as a preliminary matter, the Court will grant
Defendant's motion to dismiss the claims of infringement
with respect to the ‘628, ‘169, ‘267,
‘924, ‘394, and ‘417 Patents. The Court
finds the ‘818 patent is patent-eligible, and will
address Defendant's motion to dismiss for failure to
state a claim below. The Court will also address the claims
of induced and contributory infringement of the ‘818
MOTION TO DISMISS
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).
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
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.
Direct Infringement of the ‘818 Patent
‘818 Patent claims “[a] video game system . . .
which includes a wireless game controller which stores
information about the user of the controller.”
(‘818 Patent Abstract, ECF No. 58-2 at 3.) The
‘818 Patent has thirteen independent claims and twenty
dependent claims. (See Id. at 5:40-8:64, ECF No.
58-2 at 9-10.) Plaintiffs allege infringement of “at
least claims 1, 16, 20, 21, 24, 31, and 32.” (Am.
Compl. ¶ 21, ECF No. 58.) The Amended Complaint focuses
solely on the alleged infringement of Claim 20 “by way
of example, ” although the Court finds that all of the
asserted claims broadly contain certain essential elements:
(1) a game controller or hand-held device, (2) which
wirelessly transmits information (3) to a processor executing
a game, (4) which authorizes game play based at least in part
on the age of the player. (See ‘818 Patent
5:40-59, 6:61-7:10, 7:25-40, 7:46-54, 8:34-49, ECF No. 58-2
Plaintiffs' claim of direct infringement of the
‘818 Patent is sufficient to survive the Motion to
Dismiss. The allegations, including screenshots of
Defendant's online casino games, descriptions of how
Defendant's products allegedly work, and assertions of
testing, use, and demonstration of the ‘818 Patent, are
enough to make Plaintiffs' legal theory clear and
definite: By using smartphones, tablets, or personal
computers to test its products and demonstrate them at
promotional events, Defendant infringed the ‘818
Patent. Under this theory, these various electronic devices
would constitute the “controllers” described in
the Patent, and would wirelessly transmit information to a
remote processor executing Defendant's casino games.
Plaintiffs have specifically and plausibly pled
Defendant's use of the ‘818 Patent in testing,
promoting, and demonstrating its products, and the
screenshots are enough to show that game play is indeed
authorized “based at least in part on the age of the
player, ” and that “a plurality of input controls
. . . allow the player to interact with the processor.”
(See Am. Compl. ¶ 32-33, ECF No. 58.)
Furthermore, Defendant's development and distribution of
integrated software (i.e., apps) for various mobile devices
gives rise to a plausible claim that Defendant adopted the
“controllers” used by its customers to play
Defendant's games. Therefore, Plaintiffs' allegations
are sufficiently pled to state a claim of direct infringement
of at least Claim 20, and the Court denies the motion to
dismiss Plaintiffs' claim of direct infringement of the
Induced and Contributory Infringement of the ‘818
contrast to direct infringement, liability for inducing
infringement attaches only if the defendant knew of the
patent and that the induced acts constitute patent
infringement.” Commil USA, LLC v. Cisco Sys.,
Inc., 135 S.Ct. 1920, 1926 (2015) (citation omitted).
“Like induced infringement, contributory infringement
requires knowledge of the patent in suit and knowledge of
patent infringement.” Id. Accordingly, proving
either induced or contributory infringement “requires
proof the defendant knew the acts were infringing.”
Id. at 1928. In other words, if a defendant makes
the conclusion that its acts are non-infringing, and that
conclusion is based on a reasonable reading of the patent,
the defendant will not be liable for induced or contributory
infringement for acts based on such reasonable reading, even
if it is later established that the defendant's acts did
in fact cause the patent to be infringed. See id.
the only allegation Plaintiffs make with respect to
Defendant's knowledge of the ‘818 Patent is that
“Defendant had knowledge of the RE'818 patent at
least since the service of the original Complaint on or about
April 14, 2016.” (Am. Compl. ¶ 27, ECF No. 58.)
Therefore, Plaintiffs have failed to state a claim of
pre-litigation induced or contributory infringement. Any
surviving claim of induced or contributory infringement of
the ‘818 Patent must be limited in scope to
“post-filing conduct” only. See Silver State
Intellectual Techs., Inc. v. FourSquare Labs, Inc., No.
2:12-CV-01308-GMN, 2013 WL 5437363, at *3 (D. Nev. Sept. 26,
that said, the Court finds that Plaintiffs have sufficiently
pled their claims of induced and contributory infringement of
the ‘818 Patent.
survive a motion to dismiss, a plaintiff asserting induced
infringement must plead (1) that the defendant had
“knowledge of the existence of the patent that is
infringed, ” Global-Tech Appliances, Inc. v. SEB
S.A., 131 S.Ct. 2060, 2068 (2011), and (2) “facts
that plausibly establish that the accused infringer
‘specifically intended their customers to infringe the
[asserted] patent and knew that the customers' acts
constituted infringement, '” Silver State,
2013 WL 5437363, at *4 (quoting In re Bill of Lading
Transmission and Processing Sys. Patent Litigation, 681
F.3d 1323, 1336 (Fed. Cir. 2012)). First, no one can dispute
that Defendant had knowledge of the ‘818 Patent by May
9, 2016, when Defendant first appeared in this case, (ECF No.
17), and likely as early as April 14, 2016, when the original
Complaint was filed and served.
respect to the element of Defendant's intent, Plaintiffs
have alleged that Defendant directs, promotes, encourages,
and causes its customers to use its products “in a
manner that it knows infringes the ‘818 Patent.”
(Am. Compl. ¶ 25, ECF No. 58.) In so doing, Defendant
“provides detailed instructions to its customers
through training videos, demonstrations, brochures,
installation and/or user guides explaining how to use the
social casino platform, and (2) touting and advertising these
features to its customers.” (Id. (citations
omitted).) In Bill of Lading, the Federal Circuit
reversed an order of dismissal because it was “more
than reasonable to infer that [defendant] intended to induce
its customers to use its products to practice the patented
method and did so with knowledge of the patent.” 681
F.3d at 1341. Such is the case here as well. Defendant was
made aware of the ‘818 Patent by this lawsuit and has
continued to market its social casino games to its customers.
Defendant makes much of the fact that it doesn't produce
or sell any physical, tangible components. However, Defendant
specifically induces its customers to couple its social
casino games with tangible components (i.e., mobile phones
and/or computers) in a way that implicates all of the
elements of certain of the ‘818 Patent's claims.
Therefore, Plaintiff's allegations are sufficient to
raise the plausible inference of induced infringement.
See Id. at 1339-40 (stating that a plaintiff is not
required to “prove its case at the pleading stage,
” and that all reasonable inferences must be drawn in
the plaintiff's favor).
a plaintiff asserting contributory infringement must plead
(1) again, knowledge of the existence of the patent, and (2)
“facts from which the Court can infer that the accused
device has no substantial non-infringing uses.”
Silver State, 2013 WL 5437363, at *4. Here,
Plaintiff has not only adequately pled knowledge based on the
filing of this case, but has also plausibly pled that the
online casino game products Defendant marketed and sold to
its customers have no substantial non-infringing uses.
Plaintiffs' theory of the case is that smartphones,
tablets, and personal computers, with which Defendant's
games are meant to be played, constitute the
“controllers” described in the ‘818 Patent,
which wirelessly transmit information to a remote processor
executing Defendant's casino games, and that
Defendant's games authorize play based on the age of the
player. In order to play Defendant's games,
Defendant's customers are required to use one of these
“controllers”; there is no way to use
Defendant's allegedly infringing products without such a
device. Therefore, if Defendant's use and testing of its
online casino games actually infringes the ‘818
Patent-that is to say, if Plaintiffs' theory of the case
is successful-then any customer use of Defendant's games
would necessarily infringe as well.
the motion to dismiss the claims of induced and contributory
infringement is granted with respect to Defendant's
pre-filing conduct, but denied with respect to
Defendant's post-filing conduct.
MOTION TO STAY
only the ‘818 Patent still at issue in the case,
Defendant requests that the Court stay further proceedings
pending resolution of the ‘818 Patent's ownership
in the U.S. District Court for the Southern District of New
York. See Slifer v. CG Technology, L.P., No.
14-cv-9661 (S.D.N.Y. Aug. 30, 2016) (the “New York
case”). The Court will deny the Motion to Stay.
Although only the ‘818 Patent remains at issue in the
instant action, the reasoning in the Court's prior order
denying a stay of proceedings in CG Technology
Development, LLC v. FanDuel, Inc., No.
2:16-cv-00801-RCJ-VCF (D. Nev. Oct. 18, 2016), is relevant.
In FanDuel, the Court ruled that the balance of the
stay factors weighed in favor of denial due to the potential
of prejudice to CG Tech. The instant action is on a
consolidated discovery track with FanDuel and six
other related cases. Staying proceedings here without staying
other consolidated actions would create numerous party and
judicial inefficiencies. While only the ‘818 Patent
remains at issue here, various other patents have survived
dismissal among the related cases. Therefore, the analysis in
the Court's FanDuel order applies here, and the
Court declines to stay the case. In addition, the Court notes
that, with trial planned for early January 2017 in the New
York Case, any harm Defendant may suffer as a result of the
denial of stay is likely to be minimal.
HEREBY ORDERED that the Motion to Dismiss (ECF No. 63) is
GRANTED IN PART AND DENIED IN PART.
FURTHER ORDERED that the Motion to Stay (ECF No. 66) is