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CG Technology Development, LLC v. Bwin.Party USA, Inc.

United States District Court, D. Nevada

January 4, 2017

CG TECHNOLOGY DEVELOPMENT, LLC et al., Plaintiffs,
v.
BWIN.PARTY USA, INC. et al., Defendants.

          ORDER

          ROBERT C. JONES United States District Judge.

         This case arises out of the alleged infringement of eleven patents relating to online gambling. Pending before the Court are a motion to reconsider and a motion to dismiss.

         I.FACTS AND PROCEDURAL HISTORY

         Plaintiff 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. (First Am. Compl. ¶ 2, ECF No. 23). “[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.).

         CG Tech 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 Nos. 7, 534, 169; 8, 771, 058; 8, 814, 664; 9, 355, 518; and 9, 306, 952. Plaintiffs have sued Defendants Bwin.Party Digital Entertainment, PLC (“Bwin”), Bwin.Party (USA), Inc. (“Bwin USA”), and Bwin.Party Entertainment (NJ), LLC (“Bwin NJ”) in this Court for direct and willful infringement via operation of its various online casino games. Bwin USA and Bwin N.J. asked the Court to dismiss the infringement claims as to the ‘058, ‘664, ‘518, and ‘952 Patents based on unpatentability under 35 U.S.C. § 101.[1] The Court denied the motion. Defendants have asked the Court to reconsider and have separately asked the Court to dismiss the claims of infringement of the ‘818, ‘058, ‘664, ‘518, and ‘952 Patents for failure to state a claim.

         II. DISCUSSION

         A. Motion to Dismiss

         Plaintiffs argue that Rule 12(g) prevents the present motion due to Defendants' failure to raise the challenges brought now in their previous motion under Rule 12(b). Plaintiffs are correct. A party waives challenges omitted from a first motion under Rule 12, “[e]xcept as provided in Rule 12(h)(2) or (3).” See Fed R. Civ. P. 12(g)(2). Rule 12(h)(2)[2] provides that the defense of failure to state a claim, inter alia, may be raised in a pleading, at trial, or in a motion a cfor judgment on the pleadings under Rule 12(c). See Fed. R. Civ. P. 12(h)(2). Defendants have not made a motion under Rule 12(c), nor can the Court so treat the present motion, because Defendants have not yet answered, and such a motion may only be made after the pleadings are closed. See Fed. R. Civ. P. 12(c). Defendants argue that judicial efficiency counsels the early dismissal of the claims, but the Court may not countermand the Civil Rules in the name of judicial efficiency. Rather, the Court agrees with the reported opinion of a sister district court that a successive motion to dismiss is not permitted, even where a complaint is amended after the previous motion is filed (which is not even the case here), so long as the basis for the latter motion was available by virtue of the operative version of the complaint at the time of the previous motion. See Northstar Fin. Advisors Inc. v. Schwab Invs., 135 F.Supp.3d 1059, 1070- 71 (N.D. Cal. 2015) (Koh, J.). The Court denies the motion to dismiss.

         B. Motion to Reconsider

         Defendants argue that the Court should have ruled the ‘058, ‘664, ‘518, and ‘952 Patents to be patent-ineligible under § 101. They argue that the Court applied the concept of abstractness too narrowly at the first Alice Corp. step. They also argue that the Court's ruling is inconsistent with its ruling in Case No. 2:16-cv-857, finding the ‘924, ‘267, ‘628, ‘394, ‘417, and ‘169 Patents to be invalid under § 101.

         Commentators have noted the lack of clarity in the test for abstractness challenges under § 101. See, e.g., Shane D. Anderson, Software, Abstractness, and Soft Physicality Requirements, 29 Harvard J. L. & Tech. 567, 572-74 (2016). The Alice Corp. Court ruled that the implementation of an abstract idea (such as an algorithm) onto a general purpose computer did not provide a necessary “inventive concept” to make the use of the idea patentable, but the Court did not define “abstract idea” apart from giving examples from prior case law. Brady P. Gleason, Don't Give Up Section 101, Don't Ever Give Up, 65 Cath. U. L. Rev. 773, 790 (2016).

         Plaintiffs argue that the Alice Corp. Court “found that a ‘physical' implementation of an abstract idea by a computer was ‘beside the point.'” (Mot. Recon. 3 (citing Alice Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347, 2358-59 (2014))). What the Alice Corp. Court found to be “beside the point, ” however, was not the physical implementation of abstract ideas generally, but rather the simple fact that a generic computer is itself a physical object. See Id. That fact did nothing to change the fact that the physical computer was being used purely in its capacity as a generalized computing device to perform abstract calculations. See Id. at 2359. In the present case, the geolocation step of the relevant claims adds a physical component that is lacking in Alice Corp.-type claims. The geolocation step is a concrete task requiring physical activity beyond that necessarily attendant to the computing (thinking) capabilities of a generic computer. Plaintiffs also read a rule into the Court of Appeals' dictum in Affinity Labs. of Tex., LLC v. DIRECTV, LLC, 838 F.3d 1253 (Fed. Cir. 2016) that the Court does not perceive, and which would conflict with decades-old case law preserving the distinction between the tests for patentability and anticipation. See infra. In Affinity Labs., the Court of Appeals invalidated a patent that “claim[ed] the general concept of out-of-region delivery of broadcast content through the use of conventional devices, without offering any technological means of effecting that concept.” Id. at 1262. Also, “the claims [we]re directed not to an improvement in cellular telephones but simply to the use of cellular telephones as tools in the aid of a process focused on an abstract idea. That is not enough to constitute patentable subject matter.” Id. The Court of Appeals' comments concerning “longstanding business practice” were made in recounting the holding of the lower court and a similar holding of the Court of Appeals in a previous case concerning the patentability of business practices.

         The Court of Appeals has addressed abstractness since Alice Corp. In In re Smith, the Court of Appeals affirmed the rejection of a patent claim directed to a casino game under Alice Corp. See 815 F.3d 816, 819 (Fed. Cir. 2016). The applicant had attempted to patent a method for dealing a card game while accepting and paying bets, as in a casino. See Id. at 817-18.[3]Applying the two-step test under Alice Corp., the Court of Appeals first found that “rules for conducting a wagering game” constituted an abstract idea. See Id. at 818-19. In affirming the examiner's rejection of the claim, the Patent Trial and Appeals Board had correctly noted that, “[a] wagering game is, effectively, a method of exchanging and resolving financial obligations based on probabilities created during the distribution of the cards.” Id. (alteration in original). Methods of conducting wagering games were just as abstract as methods of exchanging financial obligations and hedging risk. Id. at 819 (citing Alice Corp., 134 S.Ct. 2347; Bilski v. Kappos, 561 U.S. 593 (2010)). The Court of Appeals noted that its “own cases have denied patentability of similar concepts as being directed towards ineligible subject matter.” Id. (citing OIP Techs., Inc. v. Amazon.com, Inc., 788 F.3d 1359, 1362 (Fed. Cir. 2015) (finding offer-based price optimization abstract), cert. denied, 136 S.Ct. 701 (2015); Planet Bingo, LLC v. VKGS LLC, 576 Fed.Appx. 1005, 1007-08 (Fed. Cir. 2014) (determining that methods of managing a game of bingo were abstract ideas)). The Court of Appeals then found that the claim contained no inventive concept sufficient to transform the abstract idea into a patent eligible application. See Id. The Court of Appeals rejected the argument that the requirement of shuffling and dealing physical playing cards was sufficient, because, like the recitation of computer implementation in Alice Corp., shuffling and dealing a standard deck of cards was a “purely conventional step[].” See id.

         The Court has not changed its opinion that the best test for abstractness under the first Alice Corp. step is whether the invention can be practiced entirely ...


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