Scientific Games Loses Bid to End Walker Process Fraud/Sham Litigation Antitrust Action on Summary Judgment for the Second Time in Ruling that Provides Caveats on IDS Submissions to the USPTO

April 19, 2024

Nixon & Vanderhye shareholders Joe Presta and Bob Rowan, together with local counsel Jeff Cross (a Smith, Gambrell & Russell, LLP partner), and their litigation team, secured a victory for the Plaintiffs in TCS John Huxley America, Inc., et al. v. Scientific Games Corp., et al., No. 19 C 1846 (N.D. Ill.), with a 30-page ruling issued March 28, 2024, by Judge John Robert Blakey that largely denied Scientific Games’ (“Defendants’”) latest motion for summary judgment. 2024 WL 1328710.  Defendants’ first motion for summary judgment filed on different grounds early in the case was unsuccessful. TCS John Huxley, 2021 WL 4264403 (N.D. Ill. Sept. 20, 2021).  The March 28 decision clears the path for Plaintiffs to proceed to trial on their claims that Defendants violated § 2 of the Sherman Act (15 U.S.C. § 2) through Walker Process fraud committed to procure certain U.S. patents directed to automatic card shuffler technologies and by asserting those patents in sham litigation.
Defendants sought summary judgment on the relevant market for assessing monopolization, Plaintiffs’ damages theories, and two patent-related issues. TCS John Huxley, 2024 WL 1328710, at *5.  In deciding some of these issues, Judge Blakey references a summary judgment ruling in Shuffle Tech Int’l LLC, et al. v. Scientific Games Corp., et al, No. 15 C 3702 (N.D. Ill.), a 2015 antitrust action that involved similar allegations for violation of § 2 of the Sherman Act.  Messrs. Presta, Rowan, and Cross obtained a $315 million judgment for the plaintiffs in that case after trial.
Judge Blakey first addressed the relevant market and damages-related issues. TCS John Huxley, 2024 WL 1328710, at *6-9.  In denying Defendants’ challenges, Judge Blakey rejected assertions that Plaintiffs failed to properly identify the relevant market and failed to support their damages claim with substantive evidence. Id.  He further declined to exclude opinions by Plaintiffs’ damages expert that Defendants characterized as unreliable. Id.  Judge Blakey particularly rejected Defendants’ argument that Plaintiffs failed to provide an economic analysis of the relevant market and stated, “[W]here, as here, Plaintiffs have provided evidence to suggest that Defendants have literally cornered the relevant market on casino-grade automatic card shufflers in the United States, the economic analysis is simple: virtually all sales of casino grade shufflers in the United States trace back to Defendants.” Id. at 8.  Further, in response to Defendants’ urging that the damages opinions of Plaintiffs’ expert be excluded as “fundamentally unreliable,” Judge Blakey observed that Defendants made, and lost, this same argument in Shuffle Tech and stated, “Having played the same card regarding the same expert, Defendants get the same result.  As before, the offered expert meets the minimal require[ments] for admissibility under Rule 702.” Id. at *8-9.

Turning to the patent-related issues, Judge Blakey referenced the summary judgment ruling in Shuffle Tech and concluded that Plaintiffs did not proffer sufficient evidence from which a reasonable juror could infer Defendants had specific intent to deceive the USPTO by failing to disclose prior art prototypes at issue (e.g., the Roblejo Shuffler) in two older patents at issue—the ’096 and ’751 patents. TCS John Huxley, 2024 WL 1328710, at *9-11.  While Judge Blakey granted Defendants’ motion on this narrow issue, he limited his ruling to the original prosecution of the ’096 and ’751 patents. Id.  Importantly, this ruling does not extend to Plaintiffs’ claims concerning Roblejo in connection with subsequent proceedings involving the ’096 and ’751 patents, including subsequent reexaminations. TCS John Huxley, 2024 WL 1328710, at *11.  Judge Blakey stated, for instance, “This conclusion of course says nothing about Defendants’ intent or knowledge in 2009 or 2012 when they initiated the lawsuits underlying Plaintiffs’ sham litigation claim.  Nor does it preclude any liability predicated upon a failure to submit an IDS in connection with the ’096 and ’751 patents.  Indeed, exactly how [Defendants] cited the Roblejo prior art references remains relevant.” Id. at *11 n.5.
Defendants’ other patent-based arguments for summary judgment were unsuccessful.  Specifically, Judge Blakey denied Defendants’ assertion that later-issued child patents at issue cannot be held unenforceable under Plaintiffs’ theory of infectious unenforceability because all prior art at issue was submitted to the USPTO in the underlying applications and was considered by the examiners. TCS John Huxley, 2024 WL 1328710, at *12.  However, at issue was the way in which the prior art was submitted to the USPTO, including the submission of disks containing the prior art (the “Shuffler Art Disks”). Id.  Judge Blakey, segueing from his above comment that “exactly how [Defendants] cited the Roblejo prior art references remains relevant,” concluded that Plaintiffs “offered evidence to show that the way Defendants ‘submitted’ the Shuffler Art Disks, itself, suggests an intent to deceive.” Id.  Judge Blakey referenced, for example, opinions from Plaintiffs’ expert evidencing that “because of [] how Defendants submitted the materials here, the [examiner’s] initials demonstrate only a cursory review of the Disks, not a review of any specific reference.” Id.  Judge Blakey also found that the record “includes evidence to show that Defendants crafted [a] ‘Special Notice’ accompanying the Disks in a way that suggested nothing on the disks would impact the examiners’ patentability analysis.” Id.
A trial is expected to be scheduled for the second quarter of 2025.