High 5 Games, LLC v. Marks
| Decision Date | 09 August 2019 |
| Docket Number | Civil Action No. 13-7161 |
| Parties | HIGH 5 GAMES, LLC, Plaintiff, v. DANIEL MARKS, et al., Defendants. |
| Court | U.S. District Court — District of New Jersey |
Not for Publication
This highly contentious litigation involves competitors who develop features for casino games. Neither side has been entirely consistent in their positions with the exception that each side consistently opposes the other. Presently before the Court are two partial motions to dismiss the Third Amended Complaint filed by (1) Daniel Marks, Joseph Masci, Brian Kavanagh, Marks Studios, LLC ("Marks Studios"), and Aristocrat Technologies, Inc. (individually "ATI" and collectively the "SAC Defendants"), D.E. 344; and (2) Aristocrat Technologies Australia PTY Limited ("ATA"), Aristocrat Leisure Limited ("ALL"), Product Madness, Inc. ("PM"), and Grant Boiling (collectively the "New Defendants"), D.E. 345. Plaintiff High 5 Games, LLC ("H5G" or "Plaintiff") opposed both motions, D.E. 370, 371, to which Defendants replied D.E. 378, 379.1The Court heard oral argument on the motions on June 27, 2019, D.E. 456, after which the parties filed supplemental briefs and opposition, D.E. 459, 460, 462, 463. For the reasons that follow and as discussed on the record at oral argument, Defendants' motions are GRANTED in part and DENIED in part.
Plaintiff's business involves the gaming market, including slot machines. "Super Symbols" and "Super Stacks," two of H5G's gaming methodologies and inventions for slots, are at issue in this litigation. The Super Stacks method provides "a unique method of taking simple stacks and generating an experience-changing function for a player through substituting fixed symbols on the reel with the desired stacked symbol." TAC ¶ 25. Plaintiff alleges that it created the Super Stacks method in approximately the summer of 2009. The Super Stacks method was included in Plaintiff's March 28, 2012 patent application and the resulting US Patent No. 9,022,852 ("'852") patent,3 which was issued to Plaintiff on May 5, 2015. Id. ¶¶ 23-28. Plaintiffalleges that prior to the '852 patent's issuance date, it did not disclose its proprietary methodology as to Super Stacks and considered it a trade secret. Id. ¶ 28.
The Super Symbols invention "pertains to the concept of oversize symbols occupying multiple positions across multiple rows and/or columns." Id. ¶ 30. Plaintiff alleges that it conceived of this idea in "the latter part of 2009" and filed a provisional patent application that included the Super Symbols invention on August 16, 2011. Approximately one year later, Plaintiff filed its patent application, and U.S. Patent No. 8,734,223 ('223) patent was issued to Plaintiff on May 27, 2014. Id. ¶¶ 30-31. Plaintiff also considered the Super Symbols invention to be a trade secret prior to the issuance of the '223 patent and kept its invention a secret before then. Id. ¶ 32.
Plaintiff alleges that three of its former employees, Defendants Daniel Marks, Joseph Masci, and Brian Kavanaugh, as well as Mark's company, Defendant Marks Studios (d/b/a Gimmie Games), misappropriated confidential information. Marks Studios used this information to help a competitor, Defendant ATI, develop two new game features, "Mega Symbols" and "Mega Stacks." Id. ¶ 54.
Marks began working as HSG's legal counsel in September 1998, and during his employment, devised and developed casino game software. Id. ¶ 37. Plaintiff alleges that in 1998, Marks executed an Employee Proprietary Information Agreement in favor of H5G (the "Proprietary Information Agreement"), which assigned Marks' intellectual property rights to H5G. Id. ¶ 65. Marks resigned from H5G, effective February 4, 2010. On that date, Marks and H5G entered into a Separation, Severance and Transition Services Agreement (the "Marks Agreement"). Pursuant to the Marks Agreement, Marks agreed to return (and not use) all confidential information, and to honor a "Restricted Period." Id. ¶ 38. The Restricted Period included non-solicitation and non-compete provisions. Id. Plaintiff alleges that the Super Stacksand Super Symbols inventions constitute confidential information under the Marks Agreement. Id. In October 2011, Marks and H5G executed the "Marks Amendment" to the Marks Agreement, which extended the non-solicitation period. Id. ¶ 40.
Plaintiff alleges that after Marks left, he created and became the managing partner of Marks Studios, and began to compete against H5G. Id. ¶¶ 48-49. In December 2012, Marks hired Kavanagh, and in July 2013, Masci joined Marks Studios. Kavanagh and Masci had previously worked at H5G. Id. ¶¶ 41, 43, 51. Each had post-employment agreements with Plaintiff. Id. ¶¶ 41, 43. Boiling also worked with Plaintiff, leaving in 2010 and agreeing to a post-employment contract; he currently works for ATI. Id. ¶¶ 45. In addition, Marks allegedly entered into an agreement with ATI as early as October 2012. Id. ¶ 50. In the spring of 2012, ATI had executed a non-disclosure agreement with H5G, through which "H5G shared confidential information with [ATI] for the sole purpose of entering a business relationship." Id. ¶ 50.
As noted, the gist of Plaintiff's case centers on its allegations that Defendants misappropriated information that Plaintiff used to fashion the Super Stacks and Super Symbols to create the Max Stacks and Mega Symbols features. Id. ¶¶ 55-56. Plaintiff created many games with the Super Symbols feature and then sold some of the games to Bally Technologies. Id. ¶ 35. Plaintiff and Bally planned to publicly introduce the games in September 2013 at an industry trade show, G2E, in Las Vegas. Id. ¶ 36. Plaintiff alleges, upon information and belief, that Marks Studios' games (with the Max Stacks and Mega Symbols features) were also first publicly introduced at an ATI booth during G2E (although Plaintiff does not allege in what year). Id. ¶ 53. Plaintiff identifies specific games from Marks Studios' that have incorporated the Max Stacks and Mega Symbols features. Id. ¶¶ 57, 60.
Plaintiff also alleges that as early as June 2013, one or more of the Defendants wrongfully filed multiple patent applications in violation of the Proprietary Information Agreement. Id. ¶ 74. At least one of the applications has resulted in an issued patent. Id.
Plaintiff filed its initial Complaint on November 26, 2013, alleging trademark infringement, unfair competition, and breach of contract claims against Marks, Masci, Kavanaugh, and Gimmie Games. D.E. 1. On July 31, 2014, H5G filed its First Amended Complaint ("FAC"), which added ATI as a Defendant and asserted a patent infringement claim against ATI as to the '223 patent. D.E. 32. Defendants moved to dismiss the FAC pursuant to Rule 12(b)(6), which was granted in part and denied in part. D.E. 67. Plaintiff was granted leave to file a Second Amended Complaint, which it filed on January 30, 2017. The SAC added new trade secret and unfair competition claims, in addition to patent infringement claims related to a second patent, the '852 patent. D.E. 186. On February 27, 2017, Defendants sought to dismiss certain counts from the SAC for failure to state a claim. D.E. 195.
While Defendants' motion to dismiss the SAC was pending, H5G filed a motion for a temporary restraining order and a preliminary injunction (the "TRO") on August 9, 2017, alleging that Marks was improperly filing new patent applications and was prosecuting pending patent applications for which H5G was the rightful owner. D.E. 209. The SAC Defendants opposed H5G's motion (D.E. 220-25), to which H5G replied (D.E. 227-28). This Court heard oral argument on H5G's TRO on September 7, 2017, and entered an Order denying the motion the same day. D.E. 229, 230. During oral argument on the TRO, H5G informed the Court that it was contemplating filing a motion to amend the SAC to address certain issue raised in the TRO. As aresult, the Court administratively terminated Defendants' pending motion to dismiss the SAC so that Plaintiff could first seek leave to amend. TRO Argument at T68:1-69:24 (Sept. 7, 2017).
Plaintiff filed its motion for leave to file a Third Amended Complaint ("TAC") on November 10, 2017 (D.E. 242), which the SAC Defendants opposed (D.E. 245). Among other things, the SAC Defendants noted briefly that the proposed TAC failed to allege that New Jersey was a proper forum for the patent infringement claims in light of the Supreme Court's recent decision in TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S. Ct. 1514, 1517 (2017). D.E. 245 at 3, 38. Plaintiff conceded in its reply brief that despite the age of the case, the parties still had much to accomplish in the litigation. D.E. 249 at 3 (). In granting Plaintiff leave to file, Judge Falk determined that "[t]hough the case has been pending for a number of years, it is effectively at square one."4 D.E. 316 at 7.
H5G filed its TAC on May 9, 2018. D.E. 318. The TAC includes new claims that were allegedly learned from discovery produced in 2017 and asserts claims against four new Defendants who are related to ATI. D.E. 242. The New Defendants are (1) PM, a subsidiary of ATI that owns or operates Internet-based "social casinos" that allegedly use infringing games; (2) Boiling, a former H5G employee and current employee of ATI; (3) ATA, an Australian entity and "affiliate company" of ATI that is the listed assignee of intellectual property at issue; and (4) ALL, anAustralian entity that is listed as the parent company of ATI and ATA. TAC ¶¶ 10, 12-14. As for the new claims, H5G asserts indirect infringement claims (1) as to PM relating to the '223 patent and (2) against all the entity Defendants relating to the '852 patent. H5G also asserts the following claims that are solely related...
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