Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_06-cv-03717/USCOURTS-cand-5_06-cv-03717-63/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 28:1331 Fed. Question

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United States District Court

For the Northern District of California

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ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

CCL

United States District Court

For the Northern District of California

E-FILED on 6/15/10

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

ARISTOCRAT TECHNOLOGIES,

AUSTRALIA PTY LIMITED and

ARISTOCRAT TECHNOLOGIES, INC.,

Plaintiffs,

v.

INTERNATIONAL GAME TECHNOLOGY

and IGT,

Defendants.

No. C-06-03717 RMW

ORDER GRANTING PLAINTIFFS' MOTION

FOR ENTRY OF FINAL JUDGMENT

[Re Docket Nos. 266, 601, 736, 777, 809, 851]

Plaintiffs Aristocrat Technologies, et al. (collectively "Aristocrat") move for entry of final

judgment of non-infringement. For the reasons set forth below, the court grants the motion.

I. BACKGROUND

Aristocrat filed suit against defendants International Game Technology and IGT (collectively

"IGT"), alleging infringement of United States Patent Nos. 7,056,215 ("'215 Patent") and 7,108,603

("'603 Patent"). IGT has asserted various defenses and counterclaims, including counterclaims for

declaratory judgment of non-infringement, patent invalidity, and patent unenforceability due to

inequitable conduct. On May 13, 2010, the court granted summary judgment of non-infringement

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United States District Court

For the Northern District of California

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1

 In the Federal Circuit cases cited by IGT, the district court failed to take any of these four avenues

and was reversed as a result. See Fin Control Sys. Pty, Ltd. v. OAM, Inc., 265 F.3d 1311, 1321 (Fed.

Cir. 2001) (district court sua sponte granted summary judgment of invalidity and unenforceability);

Fort James Corp. v. Solo Cup Co., 412 F.3d 1340, 1349 (Fed. Cir. 2005) (district court held that it

lacked jurisdiction to hear the defendant's counterclaim for unenforceability). 

ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

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for both patents-in-suit. Aristocrat now moves for entry of final judgment of non-infringement

pursuant to Federal Rule of Civil Procedure 54(b). 

II. ANALYSIS

The Federal Circuit has identified the following four avenues that a district court may take

regarding counterclaims of invalidity and patent unenforceability after granting summary judgment

of non-infringement: (1) proceed to trial on the counterclaims, (2) dismiss the counterclaims without

prejudice, (3) direct entry of final judgment on the issue of non-infringement under Rule 54(b), or

(4) certify the summary judgment order for interlocutory appeal.1

 See Nystrom v. Trex Co., Inc., 339

F.3d 1347, 1350-51 (Fed. Cir. 2003). Thus, contrary to IGT's assertion, the court is not obligated to

proceed on its counterclaims of invalidity and unenforceability. While the Supreme Court's decision

in Cardinal Chemical Co. v. Morton Int'l, Inc., 508 U.S. 83 (1993), prohibits the Federal Circuit

from vacating a judgment of invalidity upon finding non-infringement, it "does not preclude the

discretionary action of a district court, in an appropriate case, in dismissing an invalidity

counterclaim without prejudice when it concludes a patent is not infringed." Nystrom, 339 F.3d at

1351; see also Phonometrics, Inc. v. Northern Telecom Inc., 133 F.3d 1459, 1468 (Fed. Cir. 1998).

The court therefore considers whether entry of judgment pursuant to Rule 54(b) is

appropriate in this case. Rule 54(b) permits the court to "direct entry of a final judgment as to one or

more, but fewer than all, claims or parties only if the court expressly determines that there is no just

reason for delay." Fed. R. Civ. Proc. 54(b). Judgment under Rule 54(b) is proper when: (1) there

are multiple claims, (2) at least one of the claims has been adjudicated finally, and (3) the court finds

no just reason for delay. See Continental Airlines, Inc. v. Goodyear Tire & Rubber Co., 819 F.2d

1519, 1524 (9th Cir. 1987). It is undisputed that the first two prongs of this test have been met. The

only question that remains is whether there is just reason for delay. In determining whether there is

no just reason for delay, the court should consider factors such as "whether the claims under review

were separable from the others remaining to be adjudicated and whether the nature of the claims

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ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

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already determined was such that no appellate court would have to decide the same issues more than

once even if there were subsequent appeals." W.L. Gore & Assocs., Inc. v. Int'l Med. Prosthetics

Research Assocs., Inc., 975 F.2d 858, 862 (Fed. Cir. 1992) (quoting Curtiss-Wright Corp. v. General

Elec. Co., 446 U.S. 1, 8 (1980)). The court also considers whether the interest of judicial economy

would be better served by granting judgment and permitting an immediate appeal on the issue of

non-infringement or by proceeding with the remaining counterclaims such that all disputes could be

addressed in a single appeal. 

Aristocrat has indicated that it intends to appeal the court's grant of summary judgment of

non-infringement. If the court's finding of non-infringement is affirmed, there would be no need to

resolve the dispute over the validity of the patents-in-suit. This weighs in favor of permitting an

immediate appeal on the issue of non-infringement and staying further proceedings on IGT's

invalidity counterclaim pending the appeal. As for IGT's counterclaim of patent unenforceability, it

appears that the issue of inequitable conduct raised by this counterclaim must be resolved regardless

of the outcome of the appeal on the issue of non-infringement. If the court's finding of noninfringement is reversed, on remand, IGT's counterclaim for patent unenforceability would proceed

to trial. If the court's finding of non-infringement is affirmed, IGT has indicated that it intends to

move for attorneys' fees. In exceptional cases, the court may award reasonable attorneys' fees to the

prevailing party. 35 U.S.C. § 285. Because inequitable conduct may provide a basis for finding an

exceptional case, the court must make an inequitable conduct determination prior to ruling on the

exceptional case issue. Enzo Biochem, Inc. v. Calgene, Inc., 188 F.3d 1362, 1380 (Fed. Cir. 1999). 

Therefore, the court must resolve IGT's claim of inequitable conduct, either in the context of a

counterclaim for patent unenforceability or in the context of a motion for attorneys' fees. 

The court finds that the claim for infringement, which has been finally adjudicated, is

separable from the remaining counterclaims of patent invalidity and unenforceability. The court's

finding of non-infringement was based on limited claim construction and the Federal Circuit's

holding in Muniauction v. Thomson, 532 F.3d 1318 (Fed. Cir. 2008). Though claim construction is

relevant to both patent invalidity and unenforceability, it does not appear that there is much, if any,

overlap between the terms that would need to be construed for the remaining counterclaims and the

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ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

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limited claim construction that was dispositive on the issue of non-infringement. Moreover, as

discussed below, duplicative effort can be avoided by staying further proceedings on invalidity and

unenforceability to the extent these counterclaims are dependent on claim construction. The nature

of the non-infringement claim is such that no appellate court would have to decide the same issues

more than once even if there were subsequent appeals. In light of these considerations, the court

finds no just reason for delay in entering final judgment on its finding of non-infringement.

Having determined that entry of judgment on non-infringement is appropriate, the court then

turns to the issue of whether to stay the remaining counterclaims. The fact that affirmance of the

court's non-infringement finding would obviate the need to resolve the dispute over validity weighs

in favor of staying further proceedings on IGT's invalidity counterclaim pending the results of the

appeal on non-infringement. However, IGT has expended substantial effort and expense in

obtaining the right to depose Mr. Larkin, an Australian citizen, on issues relating to invalidity and

has expressed concern regarding the potential for loss of memory or witness unavailability if it is not

permitted to take Mr. Larkin's deposition at this time. Taking these factors into consideration, the

court stays further action on IGT's invalidity counterclaim, with the exception that IGT may take Mr.

Larkin's deposition.

As for IGT's patent unenforceability counterclaim, the fact that the issue of inequitable

conduct must be resolved regardless of the outcome of the appeal on non-infringement weighs in

favor of proceeding on IGT's inequitable conduct claims rather than staying these claims. Since

inequitable conduct is an issue to be determined by the court rather than by a jury, there is also no

concern that multiple juries would need to be empaneled, even if a jury trial is later required on the

issues of validity and infringement. In addition, allowing IGT to take discovery relating to

inequitable conduct now would prevent problems which may occur from loss of memory or

witnesses becoming unavailable. 

Aristocrat has raised the concern that proceeding on IGT's unenforceability counterclaim

would result in wasted time, money, and effort if the Federal Circuit later overturns some of the

court's claim construction. IGT's claim of inequitable conduct is based on two categories of

allegations: (1) alleged misrepresentations and omissions to the Patent and Trademark Office

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ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

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("PTO") as to the unintentional nature of the delay in filing a revival petition for the application that

resulted in the '215 Patent and (2) the alleged failure to disclose various types of prior art to the

PTO. Claim construction has no bearing on the former subset of allegations but is relevant to the

latter subset of allegations because it may affect the materiality of the prior art that Aristocrat

allegedly failed to disclose. While it does not appear likely that the limited claim construction

relevant to the court's grant of summary judgment of non-infringement would affect IGT's prior artbased unenforceability counterclaim, it is possible that a changed claim construction could have

some effect. Moreover, IGT has represented that there is substantial overlap between its prior artbased unenforceability counterclaim and its invalidity counterclaim. The court therefore stays

further action with respect to IGT's prior art-based unenforceability counterclaim while proceeding

with IGT's revival-based unenforceability counterclaim.

The status of pending motions are set forth below:

Docket No. Motion Status

266 IGT's Motion for Summary Judgment of

Enforceability Due to Prosecution Laches

Withdrawn

601 Aristocrat's Motion to Amend Its

Disclosure of Asserted Claims and

Preliminary Infringement Contentions

Moot

646 IGT's Motion for Leave to File a Motion

for Reconsideration of IGT's Motion for

Summary Judgment of Invalidity

(Indefiniteness)

Stayed (validity)

649 IGT's Motion for Supplemental Claim

Construction

Stayed (validity)

695 IGT's Motion for Additional Depositions

and to Take Depositions After the

Discovery Deadline

Under submission

702 IGT's Motion to File First Supplemental

Answer and Counterclaims

Under submission

736 IGT's Objections to Magistrate Judge's

Discovery Order Denying Motion to

Compel Further 30(b)(6) Testimony and

Requiring IGT to Produce Gaming

Systems for Inspection

Moot except for

dispute over scope of

privilege waiver

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ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

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Docket No. Motion Status

777 IGT's Motion to Stay Pending Arbitration

and Designate Documents for Arbitration

Withdrawn except for

request to designate

documents for

arbitration

809 IGT's Motion to File Surreply and

Supplemental Declaration Regarding

Aristocrat's Motion to Amend

Moot

As set forth in the chart, IGT is permitted to withdraw its motion for summary judgment of

unenforceability due to prosecution laches without prejudice. Because prosecution laches has been

raised as an affirmative defense, further action on this issue is stayed pending the appeal on noninfringement. 

With respect to IGT's objections to the magistrate judge's discovery order, the court will rule

on the scope of the privilege waiver based on the papers submitted unless the parties request

supplemental briefing on this issue within 10 days. 

IGT's motion to designate documents for arbitration is denied without prejudice. The

question of what documents should be produced to IGT by Aristocrat for the purposes of arbitration

and what the level of disclosure should be for these documents appears to be appropriate for the

arbitrator to decide.

III. ORDER

For the foregoing reasons, the court:

1. Grants Aristocrat's motion for entry of final judgment of non-infringement;

2. Stays further action on IGT's invalidity counterclaim, with the exception that IGT is

permitted to depose Mr. Larkin; 

3. Stays further action on IGT's prior-art based unenforceability counterclaim; 

4. Proceeds with IGT's revival-based unenforceability counterclaim;

5. Permits IGT to withdraw its motion for summary judgment of unenforceability due to

prosecution laches without prejudice; and

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ORDER GRANTING PLAINTIFFS' MOTION FOR ENTRY OF FINAL JUDGMENT —No. C-06-03717 RMW

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6. Denies IGT's motion to designate documents for arbitration without prejudice. 

 

DATED: 6/15/10

RONALD M. WHYTE

United States District Judge

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