MGT Gaming, Inc. v. WMS Gaming, Inc.

• Decision Date: 23 October 2013
• Docket Number: Civil Action No. 3:12–CV–741–CWR–FKB.
• Citation: 978 F.Supp.2d 647
• Parties: MGT GAMING, INC., Plaintiff v. WMS GAMING, INC., Caesars Entertainment Corporation, MGM Resorts International, Inc., Aruze Gaming America, Inc., and Penn National Gaming, Inc., Defendants.
• Court: U.S. District Court — Southern District of Mississippi

978 F.Supp.2d 647

MGT GAMING, INC., Plaintiff

v.WMS GAMING, INC., Caesars Entertainment Corporation, MGM Resorts International, Inc., Aruze Gaming America, Inc., and Penn National Gaming, Inc., Defendants.

Civil Action No. 3:12–CV–741–CWR–FKB.

United States District Court,

S.D. Mississippi,

Jackson Division.

Oct. 23, 2013.

David W. Clark, Erin D. Saltaformaggio, Bradley Arant Boult Cummings LLP, Jackson, MS, Chris Comuntzis, Joseph S. Presta, Michael E. Crawford, Robert A. Rowan, Nixon & Vanderhye, PC, Arlington, VA, for Plaintiff.

Andrea La'Verne Edney, W. Scott Welch, III, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Andrew S. Harris, W. Whitaker Rayner, Jones Walker, LLP, Jackson, MS, Michael J. Harris, Timothy C. Meece, V. Bryan Medlock, Jr., Banner & Witcoff, Ltd., Chicago, IL, Michael D. Rounds, Watson Rounds, Reno, NV, for Defendants.

MEMORANDUM OPINION AND ORDER

CARLTON W. REEVES, District Judge.

Before the Court is a patent infringement action filed by MGT Gaming, Inc. (“MGT”) against the following defendants: WMS Gaming, Inc. (“WMS”) and its affiliated casino operators, Caesars Entertainment Corporation (“Caesars”) and MGM Resorts International, Inc. (“MGM”) (collectively the “WMS Defendants”); along with Aruze Gaming America, Inc. (“Aruze”) and its affiliated casino operator Penn National Gaming, Inc. (“Penn”) (collectively, the “Aruze Defendants”). The WMS Defendants have filed the following motions: 1) Motion to Dismiss; 2) Motion to Sever the Plaintiff's Claims Against All Defendants; 3) Motion to Stay Proceedings Against the Casino Defendants; and 4) Motion to Change Venue. [Docket No. 22] The Aruze Defendants have filed a Motion to Dismiss [Docket No. 28] and a Motion to Change Venue [Docket No. 36]. The motions have been fully briefed and are ripe for review. For the reasons stated below, 1) the Motion to Dismiss is GRANTED IN PART with respect to the contributory and induced infringement claims and DENIED with respect to the direct infringement claim; 2) the Motion to Sever the Plaintiff's Claims Against All Defendants is GRANTED IN PART as to WMS, Caesars and MGM and DENIED as to Aruze and Penn; 3) the Motion to Stay Proceedings against MGM, Caesars and Penn is GRANTED; and 4) that the Motions to Change Venue are DENIED.

I. FACTUAL AND PROCEDURAL BACKGROUND

On December 17, 2012, MGT filed its First Amended Complaint against the WMS Defendants and the Aruze Defendants alleging that they infringed United States Patent 7,892,088 (“the '088 patent”). The '088 patent is “directed to a gaming system in which a second game played on an interactive sign is triggered once a specific event occurs in a first game, e.g., a slot machine.” Docket No. 19 (“MGT Complaint”), at ¶ 7. Plaintiff alleges that the “defendants either manufacture and sell gaming systems in violation of plaintiff's patent rights or operate casinos that offer such gaming systems.” Id. More specifically, MGT asserts that the named defendants “have infringed and continue to infringe at least claims 1–3 and 6 of the '088 patent, either literally or under the doctrine of equivalents.” Id. at ¶ 17.

The case involves MGT, the owner of the patent at issue; two manufacturers of casino gaming machines, WMS and Aruze; and three casino operators, Caesars, MGM, and Penn. MGT is a Delaware corporation with its principal place of business in New York. WMS states that it is a Delaware corporation with its corporate headquarters in Waukegan, Illinois. WMS designs and develops games at its technology campus in Chicago, Illinois. Aruze is a Nevada corporation with its principal place of business in Las Vegas, Nevada. MGT alleges that WMS and Aruze infringe the '088 patent by making or selling certain gaming machines which utilize the invention covered under that patent.

Caesars, MGM and Penn (or their subsidiaries) (collectively, the “Casino Defendants”) operate casino properties throughout the United States, including in Mississippi. Caesars and MGM are both Delaware corporations with their principal headquarters in Las Vegas, Nevada. Penn is a Pennsylvania corporation with its principal place of business in Wyomissing, Pennsylvania. WMS has a business relationship with Caesars and MGM, and Aruze has a business relationship with Penn. MGT alleges that these Casino Defendants infringe the ' 088 patent by using the accused gaming machines provided by WMS and Aruze.

While no Defendant is chartered or headquartered in Mississippi, Plaintiff alleges that all of the Defendants have registered agents for service of process and are registered to do business in Mississippi. It is undisputed that they have also filed corporate annual reports with the Mississippi Secretary of State as recently as April 2012. WMS has a registered agent for service of process in Jackson, Mississippi, and a sales and distribution office in Gulfport, Mississippi. Aruze has a registered agent for service of process in Flowood, Mississippi. According to MGT, WMS's and Aruze's games are played in casinos throughout Mississippi, and both Defendants exhibited their games at the Southern Gaming Summit in Biloxi, Mississippi, in May 2012.¹ As for the Casino Defendants, Caesars and MGM have a registered agent for service of process in Jackson. They also own various casinos in Biloxi and Tunica, Mississippi, where MGT alleges that multiple infringing games are played. MGT also states that Penn has a registered agent in Flowood, Mississippi and owns at least two casinos in Biloxi where MGT alleges that at least one infringing game is played.

The Court will address each motion separately. Because there are common issues between WMS and Aruze, the Court addresses the common issues in relation to WMS's motion and separately addresses issues unique to each defendant.

II. MOTION TO DISMISS

A. Legal Standard

“The question whether a Rule 12(b)(6) motion was properly granted is a purely procedural question not pertaining to patent law, to which this court applies the rule of the regional circuit.” CoreBrace LLC v. Star Seismic LLC, 566 F.3d 1069, 1072 (Fed.Cir.2009) (quoting Gen. Mills, Inc. v. Kraft Foods Global, Inc., 487 F.3d 1368, 1373 (Fed.Cir.2007)) (alterations omitted).

When considering a motion to dismiss, courts look only to the allegations in the complaint to determine whether they are sufficient to survive dismissal. See Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007). The Supreme Court has held that a complaint does not need detailed factual allegations to survive a Rule 12(b)(6) motion to dismiss, but the pleader's obligation to state the grounds of entitlement to relief requires “more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Supreme Court has additionally pronounced two guiding principles in determining whether a complaint can survive a motion to dismiss: 1) “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice”; and 2) a complaint must state a plausible claim in order to survive a motion to dismiss. Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

In patent infringement cases, a plaintiff may bring three types of claims: direct infringement under 35 U.S.C. § 271(a), induced infringement under Section 271(b), and contributory infringement under Section 271(c). Induced and contributory infringement are considered forms of indirect infringement. In a complaint for direct infringement, Form 18 of the Federal Rules of Civil Procedure provides the pleading standard. In re Bill of Lading Transmission & Processing Sys. Patent Litig. (R+L Carriers, Inc. v. DriverTech LLC), 681 F.3d 1323, 1334 (Fed.Cir.2012). Where a complaint also alleges induced and contributory infringement, the pleading requirements set forth in Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007), and Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009), apply to such claims. Id.Form 18 does not determine the sufficiency of pleading for claims of indirect infringement. R+L Carriers, 681 F.3d at 1336.

B. Analysis1. Direct Infringement

35 U.S.C. § 271(a) provides liability for direct infringement. In relevant part, it states: “[W]hoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States ... any patented invention during the term of the patent therefor, infringes the patent.” Defendants move to dismiss MGT's First Amended Complaint for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). WMS argues that the Plaintiff's complaint fails to “allege sufficient facts showing which products are at issue for each Defendant.” Docket No. 23, WMS Motion, at 25. As a result, the direct infringement allegation fails to satisfy the pleading standard of Twombly and Iqbal. Thus, the Defendants state that they did not have sufficient notice of their alleged infringements.

Form 18 provides the pleading standard for claims of direct infringement, not Twombly and Iqbal.R+L Carriers, 681 F.3d at 1336. To survive a motion to dismiss on a claim of direct infringement, Form 18 requires “(1) an allegation of jurisdiction; (2) a statement that the plaintiff owns the patent; (3) a statement that defendant has been infringing the patent ‘by making, selling, and using [the device] embodying the patent’; (4) a statement that the plaintiff has given the defendant notice of its infringement; and (5) a demand for an injunction and damages.” Id. (quoting McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1357 (Fed.Cir.2007)). The Supreme Court's decisions in Twombly and Iqbal have not affected the adequacy of complying with Form 18. To hold otherwise would render Rule 84 and Form 18 invalid, which cannot be done by judicial action. See Twombly, 550 U.S. at 569 n. 14, 127 S.Ct. 1955 (acknowledging that altering the Federal Rules of Civil Procedure cannot be accomplished by...