NEXRF Corp. v. Playtika Ltd.

[2] 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 * * * 6 NEXRF CORP., Case No. 3:20-cv-00603-MMD-CLB 7 Plaintiff, ORDER v. [8] PLAYTIKA LTD., et al., [9] Defendants. [10] 11 I. SUMMARY 12 Plaintiff NEXREF Corp. sued Defendants Playtika Ltd., Playtika Holding Corp. 13 (collectively, “Playtika”) and Caesars Interactive Entertainment (“Caesars”) for allegedly 14 infringing five patents1 by offering online slot machine games. (ECF No. 1.) Before the 15 Court are Caesars and Playtika’s motions to dismiss (ECF Nos. 26, 28),2 and Playtika’s 16 motion for sanctions under Federal Rule of Civil Procedure 11 (ECF No. 53).3, 4 As further 17 explained below, because the Court agrees with Defendants in pertinent part that all five 18 of Plaintiff’s asserted patents are invalid under Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 19 U.S. 208 (2014), and its progeny, the Court will grant both motions to dismiss. The Court 20 will also deny Playtika’s motion for sanctions primarily because it is based on arguments 21 that the Court does not rule on in this order. 22 /// [24] 1The five patents are U.S. Patent Nos. 8,747,229 (the ’229 patent), 8,506,406 (the 25 ’406 patent), 9,646,454 (the ’454 patent), 8,506,407 (the ’407 patent), and 9,373,116 (the ’116 patent) (collectively, the “asserted patents”). (ECF No. 1 at 1.) [26] 2Plaintiff filed a combined response (ECF No. 47), and Defendants filed replies 27 (ECF Nos. 51, 52). 28 3Plaintiff filed a response (ECF No. 56), and Playtika filed a reply (ECF No. 57). 2 The following allegations are adapted from the Complaint. (ECF No. 1.) Plaintiff 3 alleges that the asserted patents “disclose various systems and methods for 4 embodiments of a fully remote, multiplayer capable, secure, and engaging casino-style 5 gaming system.” (Id. at 2.) Said otherwise, the asserted patents generally claim slot 6 machine games playable on a computer or handheld device run on a remote server. 7 Plaintiff more specifically alleges that all asserted patents cover certain unconventional 8 elements: 9 1. A centralized game server that sends game outcomes and corresponding 10 images to a remote device; 11 2. A verification server coupled to the centralized game server that controls 12 access to gaming activities; 13 3. A relatively fast image and/or video delivery component. 14 (Id. at 2.) 15 Plaintiff further alleges that particular asserted patents contain additional 16 unconventional elements. (Id. at 2-3.) The ’229 patent covers a paytable module 17 associated with the centralized game server. (Id.) The ’407 patent covers a transactional 18 system that credits funds from winning game outcomes to a user’s financial account. (Id. 19 at 3.) And the ’116 patent covers location tracking of a user, along with providing that user 20 with rewards. (Id.) 21 Caesars owned Playtika for some time but does not anymore. (Id. at 4-5.) Both 22 Defendants offer various mobile slot machine games, some that allow users to wager real 23 money, and some that do not. (Id. at 5-7.) Plaintiff accuses these games of infringement.5 24 (Id. at 5-23.) 25 /// [26] 5Plaintiff’s Complaint is unclear as to who makes what game, and precisely which 27 games Plaintiff is accusing of infringing which patents. Indeed, Defendants argue Plaintiff’s Complaint is fatally unclear. (ECF Nos. 26 at 24-25, 28 at 10-16.) However, the 28 Court does not wade into these issues because it finds the asserted patents invalid under Alice and its progeny. 2 In each count, Plaintiff alleges that Defendants infringe “the asserted claims of” each of 3 the asserted patents, and otherwise states that Defendants infringe “one or more claims 4 of” each patent, “including but not limited to claim 1[.]” (See, e.g., id. at 7.) But Plaintiff 5 characterizes claim 1 of each asserted patent as exemplary, and only ever specifically 6 includes the limitations of claim 1 of each asserted patent in its Complaint. (Id. at 7-8, 10, 7 14, 17, 20.) 8 Following the order that Plaintiff uses in the Complaint, and to provide necessary 9 context for the Court’s discussion infra, claim 1 of each of the asserted patents follows 10 below. 11 A. The ’229 patent 12 A gaming server system configured to communicate with at least one network access device communicatively coupled to a network, the gaming 13 server system comprising: a verification system configured to access a registration database 14 having a plurality of registration data associated with each registered user; 15 a memory module configured to store a plurality of images corresponding to at least one game outcome that are communicated 16 to the at least one network access device; a centralized gaming server communicatively coupled to each of the 17 at least one network access device, the centralized gaming server configured to generate at least one random game outcome by 18 random generation at the centralized gaming server; a paytable module associated with the centralized gaming server, 19 the paytable module configured to determine one or more prizes associated with a game outcome; and 20 the centralized gaming server configured to access the memory module and communicate the plurality of images corresponding to 21 the at least one random game outcome to the at least one network access device. 22 (Id. at 7-8.) 23 B. The ’406 Patent 24 A system to run a gaming application on a network access device, comprising: 25 the network access device; and a remote gaming system including a verification system; 26 the network access device configured to transmit user identification information and security information to the verification system; 27 the network access device configured to receive an acknowledgement from the verification system indicating that the 28 user identification information and security information are valid; a user of the network access device and transmit the game input to 2 the remote gaming system; the remote gaming system configured to receive the game input and 3 generate a random game output, the remote gaming system further configured to associate an image ID with the random game output 4 and select one or more images associated with the image ID for encoding and broadcasting to the network access device; 5 the network access device configured to receive a plurality of broadcast images generated by the remote gaming system. 6 (Id. at 10.) 7 C. The ’454 Patent 8 A networked gaming system comprising: a user identification received by at least one network access device 9 that is compared with registration data in a registration database, wherein a player is provided access to a game when the user 10 identification matches the registered player data; a transactional component that charges the registered player at least 11 one credit for a game outcome; a centralized networked gaming module that performs game 12 operations and generates at least one random game output by random generation at the networked gaming module; 13 the networked gaming module associates the at least one random game output with an image ID; and 14 the networked gaming module communicates one or more images corresponding to the image ID to the network access device. 15 (Id. at 14.) 16 D. The ’407 Patent 17 A gaming system network, comprising: a verification system configured to verify that a user attempting to 18 access the gaming system network is a registered player, the user operating a network access device communicating with the gaming 19 system network; a gaming system configured to generate at least one random game 20 output, the gaming system configured to associate an image ID with the at least one random game output; 21 a video server configured to store a plurality of images corresponding to at least one game, the video server configured to retrieve one or 22 more images associated with the image ID, wherein the one or more images are representative of a game output, the video server 23 configured to communicate the one or more images to the network access device; and 24 a transactional system configured to credit monetary funds to a financial account of the user based on the at least one random game 25 output. 26 (Id. at 17.) 27 E. The ’116 Patent 28 An interactive gaming system for a casino property, the interactive gaming system comprising: wireless device is used to determine a location of the registered user 2 and the wireless device communicates with a network using at least one wireless networking protocol; 3 a verification system that accesses a registration database having registration data associated with each registered user; 4 a centralized gaming server communicatively coupled to the wireless device, the centralized gaming server generates at least one random 5 game outcome; a memory module that stores a plurality of images corresponding to 6 the at least one game outcome that are communicated to the wireless device; 7 the centralized gaming server accesses the memory module and communicates the plurality of images corresponding to the random 8 game outcome to the wireless device; and a casino player tracking system that includes, 9 a registered user profile that further includes a plurality of user preferences, 10 a record of a plurality of accumulated points associated with a betting activity of the registered user, wherein the betting 11 activity is associated with the random outcomes generated by the centralized gaming server, 12 at least one complimentary good or service corresponding to the accumulated points associated with the registered user; 13 and a plurality of messages generated by the casino player 14 tracking system for the wireless device regarding the complementary goods or services. 15 (Id. at 20.) 16 III. MOTIONS TO DISMISS 17 The Court begins by reciting the legal standards governing its review of these 18 motions. It then analyzes Claim 1 of the ’229 patent under the Alice framework as 19 representative of the asserted claims of the ’454 and ’406 patents as well.6 The Court 20 then analyzes Claim 1 of the ’407 patent under the Alice framework, followed by Claim 1 21 the ’116 patent.7 Finally, the Court explains that it will not grant Plaintiff leave to amend, 22 as amendment would be futile. Again, and as noted, because the Court finds Defendants’ [24] 25 6Plaintiff stated that it did “not oppose treating the ’229 Patent as representative of the ’454 and ’406 Patents for the purposes of this § 101 analysis.” (ECF No. 47 at 16 26 n.10.) Plaintiff also identifies claim 1 of the ’229 patent as exemplary, so the Court’s analysis of claim 1 applies to all other claims of the ’229 patent as well. (ECF No. 1 at 7.) [27] 7As noted, Plaintiff itself holds these two claims out as exemplary of the asserted 28 claims of these two patents, so the Court’s findings as to these two claims apply to both patents more broadly. (ECF No. 1 at 17, 20.) 2 raised in their motions to dismiss. 3 A. Legal Standards 4 1. Motions to Dismiss 5 A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which 6 relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pleaded complaint must provide 7 “a short and plain statement of the claim showing that the pleader is entitled to relief.” 8 Fed. R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While 9 Rule 8 does not require detailed factual allegations, it demands more than “labels and 10 conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v. 11 Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555 ). “Factual allegations 12 must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555 . Thus, to 13 survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a 14 claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 15 U.S. at 570). 16 In Iqbal, the Supreme Court clarified the two-step approach district courts must 17 apply when considering motions to dismiss. First, a district court must accept as true all 18 well-pleaded factual allegations in the complaint; however, legal conclusions are not 19 entitled to the assumption of truth. See id. at 678. Mere recitals of the elements of a cause 20 of action, supported only by conclusory statements, do not suffice. See id. Second, a 21 district court must consider whether the factual allegations in the complaint allege a 22 plausible claim for relief. See id. at 679. A claim is facially plausible when the plaintiff’s 23 complaint alleges facts that allow a court to draw a reasonable inference that the 24 defendant is liable for the alleged misconduct. See id. at 678. Where the complaint does 25 not permit the Court to infer more than the mere possibility of misconduct, the complaint 26 has “alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 27 (alteration in original) (internal quotation marks and citation omitted). That is insufficient. [28] 2 the complaint must be dismissed. See Twombly, 550 U.S. at 570 . 3 2. Alice 4 Under Section 101 of the Patent Act, an inventor may obtain a patent on “any new 5 and useful process, machine, manufacture, or composition of matter, or any new and 6 useful improvement thereof.” 35 U.S.C. § 101 . Courts, however, “have long held that this 7 provision contains an important implicit exception: Laws of nature, natural phenomena, 8 and abstract ideas are not patentable.” Alice, 573 U.S. at 216 (quoting Ass’n for Molecular 9 Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013)). The concern behind these 10 excepted categories is “one of pre-emption”—if an inventor could obtain patent protection 11 over these “building blocks of human ingenuity,” then the patent scheme would work to 12 undermine, not promote, future innovation. Id. But courts are careful to balance concerns 13 over preemption with the fact that “all inventions at some level embody, use, reflect, rest 14 upon, or apply laws of nature, natural phenomena, or abstract ideas.” Mayo Collaborative 15 Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 71 (2012). Thus, where an invention 16 moves beyond an abstract idea by applying it “to a new and useful end,” the invention will 17 meet the Section 101 standard. Alice, 573 U.S. at 217 (quoting Gottschalk v. Benson, [18] 409 U.S. 63, 67 (1972)). 19 Considering these competing concerns, the Supreme Court has developed a two20 part test to assess whether a patent covers an abstract idea. First, courts must determine 21 whether a patent’s claims are directed to a “patent-ineligible concept[,]” such as an 22 abstract idea. Id. Abstract ideas may be “preexisting, fundamental truth[s]” such as 23 mathematical equations, and also encompass “method[s] of organizing human activity” 24 or “longstanding commercial practice[s]” like intermediated settlement or risk hedging. Id. 25 at 220. 26 Second, if a court “determine[s] that the patent is drawn to an abstract idea or 27 otherwise ineligible subject matter,” then that court examines “whether the remaining 28 elements, either in isolation or combination with the non-patent-ineligible elements, are 2 Intellectual Ventures I LLC v. Capital One Bank (USA) (“Capital One”), 792 F.3d 1363 , 3 1366-67 (Fed. Cir. 2015) (quoting Alice, 573 U.S. at 223). 4 Whether a patent is eligible under § 101 is a question of law that may be 5 determined at the dismissal stage. See Accenture Glob. Servs., GmbH v. Guidewire 6 Software, Inc., 728 F.3d 1336, 1340-41 (Fed. Cir. 2013) (reviewing a § 101 determination 7 de novo but noting that the legal issue on review “may contain underlying factual issues”); 8 see also Internet Patents Corp. v. Active Network, Inc., 790 F.3d 1343, 1348-49 (Fed. Cir. 9 2015) (affirming a district court’s granting of a motion to dismiss on § 101 grounds). 10 B. Discussion 11 To start, Plaintiff argues that Defendants’ motions to dismiss are premature and 12 therefore noncompliant with LPR 1-4(c)8 because there are threshold factual issues the 13 Court must resolve before determining invalidity and “there will be significant claim 14 construction disputes” in this case. (ECF No. 47 at 15.) However, and as Defendants 15 argue (ECF Nos. 51 at 13-14, 52 at 8), Plaintiff does not specify what those factual issues 16 and claim construction disputes are (see generally ECF No. 47). Moreover, having 17 reviewed the asserted patents, the parties’ briefing, and the applicable law, the Court 18 cannot say what those factual issues and claim construction disputes—rendering an Alice 19 analysis of the asserted patents premature—would be. The Court will address the merits 20 of the parties’ Alice arguments now. See Simio, LLC v. FlexSim Software Prod., Inc., 983 21 F.3d 1353, 1365 (Fed. Cir. 2020) (concluding that neither conclusory statements nor 22 unexplained, potential claim construction disputes prevent a district court from addressing 23 patent eligibility at the pleadings stage). 24 /// [25] 8LPR 1-4(c) provides, “A party moving to dismiss one or more claims as patent26 ineligible under § 101 must demonstrate in its motion, if appropriate, that there is no factual issue, claim construction or otherwise, that the court need determine before 27 deciding dismissal under 35 U.S.C. § 101 . The filing of a § 101 motion before a Claim Construction Order must not delay any date in the Discovery Plan and Scheduling Order, 28 unless otherwise ordered by the court.” 2 The Court addresses below both steps of the Alice analysis as to Claim 1 of the 3 ’229 patent because it is drawn to patent-ineligible subject matter. 4 a. Alice Step One 5 Claim 1 of the ’229 patent is directed to the abstract idea of remotely playing a slot 6 machine on a server. (ECF No. 1-1 at 19.) As Playtika argues, Claim 1 of the ’229 patent 7 is analogous to the claims found abstract in Planet Bingo, LLC v. VKGS LLC, 576 F. App’x 8 1005, 1007-08 (Fed. Cir. 2014) and In re Smith, 815 F.3d 816, 818-19 (Fed. Cir. 2016). 9 (ECF No. 28 at 20.) And Plaintiff’s decision not to address Planet Bingo in response to 10 Playtika’s motion to dismiss indeed suggests that Plaintiff has no convincing response. 11 (ECF No. 47.) In Planet Bingo, the Federal Circuit Court of Appeals affirmed the district 12 court’s finding that patent claims directed to “managing a bingo game while allowing a 13 player to repeatedly play the same sets of numbers in multiple sessions” were directed to 14 an abstract idea. 576 F. App’x at 1007-08. There, the Federal Circuit described as 15 exemplary a claim that recited “the steps of selecting, storing, and retrieving two sets of 16 numbers, assigning a player identifier and a control number, and then comparing a 17 winning set of bingo numbers with a selected set of bingo numbers.” Id. But this claim 18 was directed to an abstract idea because “not only can these steps be ‘carried out in 19 existing computers long in use,’ but they also can be ‘done mentally.’” Id. at 1008. 20 The system described in Claim 1 of the ’229 patent is similar because it describes 21 a slot machine that runs on a server. (ECF No. 1-1 at 19.) The components of this claim 22 are all processes that could be carried out in existing computers, as evidenced by the fact 23 that the ’229 patent’s specification does not describe any of the computerized 24 components of the purported invention as novel or representing improvements on the 25 prior art. (See generally id.; see also ECF No. 47 at 18-19 (effectively conceding that all 26 component parts of the claim were routine).) And like the “rules for conducting a wagering [27] 28 9As noted supra, the Court’s analysis in this section applies with equal force to the ’454 and ’406 patents. 2 level at which it is described in this claim is a “fundamental economic practice” like those 3 previously found abstract in binding caselaw. Id. (citations omitted). And even while the 4 system described in Claim 1 of the ’229 patent runs on a server, that does not make it 5 any less abstract. See Capital One, 792 F.3d at 1367 (“And while the claims recite 6 budgeting using a ‘communication medium’ (broadly including the Internet and telephone 7 networks), that limitation does not render the claims any less abstract.”). This is contrary 8 to Plaintiff’s primary argument where Plaintiff characterizes the centralized game server 9 as one of the key inventive elements of all asserted patents. (ECF No. 47 at 17-19.) 10 Plaintiff’s reliance on In re Smith is also misplaced. (ECF No. 47 at 21.) Plaintiff 11 specifically relies on In re Smith to argue that not all patents directed to the gaming arts 12 are categorically invalid. (Id.) While that is a fair characterization of one of the Federal 13 Circuit’s statements in In re Smith, it does not render Claim 1 of the ’229 patent non14 abstract. To the contrary, Claim 1 of the ’229 patent has more in common with the patent 15 claims held invalid in In re Smith than it does with the hypothetical gaming patent 16 described in In re Smith that may be patent eligible. See 815 F.3d at 818-19 (affirming 17 the Board’s finding that a “wagering game is, effectively, a method of exchanging and 18 resolving financial obligations based on probabilities created during the distribution of the 19 cards.”). Like the claims at issue in In re Smith, which covered the rules of a card game, 20 Claim 1 of the ’229 patent covers a slot machine that can be played remotely. And that 21 slot machine is effectively a method of exchanging and resolving financial obligations 22 based on probabilities created by a generic random number generator. (ECF No. 1-1 at 23 19.) See also In re Smith, 815 F.3d at 818-19 . 24 Further, Plaintiff’s argument that “the patents-in-suit are directed to technical 25 improvements in online gaming systems” is unpersuasive because Claim 1 of the ’229 26 patent does not explain how any of the purported technical improvements work.10 (ECF [27] 10To the extent that Plaintiff is arguing Claim 1 of the ’229 patent is directed to 28 improvements in computer functionality, the Court rejects that argument because nothing 2 with registered users, but how does it make that association? (ECF No. 1-1 at 19.) Claim 3 1 also includes a centralized gaming server that randomly generates a game outcome, 4 but how does the centralized gaming server do that? (Id.) As another example, Claim 1 5 includes a paytable module that determines the prizes associated with an outcome, but 6 also does not explain how the paytable module does that.11 (Id.) See, e.g., Bot M8 LLC 7 v. Sony Corp. of Am., 465 F. Supp. 3d 1013 , 1021 (N.D. Cal. 2020) (currently on appeal) 8 (“That’s a result, not a means to achieve it. So, up front it’s abstract.”). In general, 9 Plaintiff’s argument that Claim 1 of the ’229 patent is directed to technical improvements 10 in online gaming systems would be more persuasive if the claim itself explained how to 11 accomplish any of the purported technical improvements it covers. See Elec. Power Grp., 12 LLC v. Alstom S.A., 830 F.3d 1350, 1356 (Fed. Cir. 2016) (“Indeed, the essentially result13 focused, functional character of claim language has been a frequent feature of claims 14 held ineligible under § 101, especially in the area of using generic computer and network 15 technology to carry out economic transactions.”). 16 Even more generally, Plaintiff’s arguments sound in novelty or nonobviousness 17 instead of effectively countering Playtika’s argument that Claim 1 of the ’229 patent is 18 directed to an abstract idea. “But, a claim for a new abstract idea is still an abstract idea.” 19 Synopsys, Inc. v. Mentor Graphics Corp., 839 F.3d 1138, 1151 (Fed. Cir. 2016) 20 (emphasis in original). And Plaintiff’s argument that Defendants’ noninfringement 21 arguments contradict their arguments that the asserted patents are unpatentably abstract 22 does not follow either. As Defendants reply, there is nothing contradictory about them [23] in the claims or specification of the patent claims or discusses any sort of improvements 24 in the computer components that make up the system. (ECF No. 1-1.) See RecogniCorp, LLC v. Nintendo Co., 855 F.3d 1322, 1327 (Fed. Cir. 2017) (“Unlike Enfish, claim 1 does 25 not claim a software method that improves the functioning of a computer. It claims a ‘process that qualifies as an ‘abstract idea’ for which computers are invoked merely as a 26 tool.”’) (citations omitted). 27 11The specification does provide an illustrative example of the rules governing the paytable’s programming, but the paytable as described in Claim 1 of the ’229 patent is 28 written more broadly and left undefined because the example rules provided in the specification are merely illustrative. (Compare ECF No. 1-1 at 18-19 with id. at 19.) 2 51 at 11, 52 at 6.) 3 In sum, Claim 1 of the ’229 patent is directed to the abstract idea of remotely 4 playing a slot machine on a server, and none of Plaintiff’s arguments to the contrary are 5 persuasive. 6 b. Alice Step Two 7 Moreover, Claim 1 of the ’229 patent lacks an inventive concept sufficient to 8 transform the abstract idea described therein into a patent-eligible application. The ’229 9 patent instead generally consists of a combination of generic computer elements 10 performing conventional functions. For example, the ’229 patent describes networked 11 interactive gaming over the internet as well known in the art, including secure methods 12 for doing so. (ECF No. 1-1 at 12.) The specification also describes random number 13 generators and paytables as known in the art. (Id.) The same goes for displays and 14 encryption systems. (Id. at 12, 16.) But “[i]nstructing one to ‘apply’ an abstract idea and 15 reciting no more than generic computer elements performing generic computer tasks 16 does not make an abstract idea patent-eligible.” Capital One, 792 F.3d at 1368 ; see also 17 Brit. Telecommunications PLC v. IAC/InterActiveCorp, 813 F. App’x 584 , 587 (Fed. Cir. 18 2020) (reciting generic computer hardware performing conventional steps does not 19 constitute an inventive concept). 20 Moreover, the features described in Claim 1 of the ’229 patent are described and 21 claimed generically. (ECF No. 1-1 at 19 (describing the verification system, memory 22 module, centralized gaming server, and paytable module based on what they can do 23 instead of how they do it).) Claim 1 of the ’229 patent thus lacks an inventive concept 24 sufficient to transform the abstract idea of remotely playing a slot machine on a server 25 into a patent-eligible application. See Affinity Labs of Texas, LLC v. Amazon.com Inc., [26] 838 F.3d 1266, 1271 (Fed. Cir. 2016) (“The features set forth in the claims are described 27 and claimed generically rather than with the specificity necessary to show how those 28 components provide a concrete solution to the problem addressed by the patent.”). 2 “[w]hat was ‘well-understood, routine, and conventional’ at the priority date of the patents 3 is a question of fact” not suitable for resolution at this stage of the litigation. (ECF No. 47 4 at 23.) But that is not the case, where, as here, the specification of the asserted patent 5 describes its own components as conventional. See Aatrix Software, Inc. v. Green 6 Shades Software, Inc., 890 F.3d 1354, 1356 (Fed. Cir. 2018) (“In a situation where the 7 specification admits the additional claim elements are well-understood, routine, and 8 conventional, it will be difficult, if not impossible, for a patentee to show a genuine 9 dispute.”) (citation omitted). Plaintiff next points to certain allegations in its Complaint 10 “regarding the technical improvements claimed by the patents-in-suit[.]” (ECF No. 47 at 11 23 (citing ECF No. 1 at 2-3).) But the Court instead agrees with Playtika that these alleged 12 advantages “are at most all incidental advantages of using a generic server for its 13 intended purpose and cannot therefore be considered inventive.” (ECF No. 51 at 12.) See 14 also BSG Tech LLC v. Buyseasons, Inc., 899 F.3d 1281, 1290-91 (Fed. Cir. 2018) (“If a 15 claim’s only ‘inventive concept’ is the application of an abstract idea using conventional 16 and well-understood techniques, the claim has not been transformed into a patent-eligible 17 application of an abstract idea.”). 18 Plaintiff finally argues that the patents in suit are at least as inventive as those 19 upheld in Bascom Glob. Internet Servs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341 , 1349 20 (Fed. Cir. 2016). (ECF No. 47 at 23-24.) In Bascom, the Federal Circuit found the claim 21 at issue patent-eligible at Alice step two because it claimed and described the inventive 22 concept of “the installation of a filtering tool at a specific location, remote from the end23 users, with customizable filtering features specific to each end user.” 827 F.3d at 1350 . 24 But Plaintiff does not persuasively explain how this finding applies to Claim 1 of the ’229 25 patent, merely arguing that “the arrangement of all the components including the 26 centralization of the game outcome and transmission of images related to that game 27 outcome is unconventional.” (ECF No. 47 at 24.) And again, the centralization of game 28 outcome and image transmission that Plaintiff describes as the inventive concept of this 2 See also BSG Tech, 899 F.3d 1281 at 1290-91 . The Court accordingly concludes that 3 Claim 1 of the ’229 patent lacks an inventive concept that could render it patent-eligible. 4 In sum, based on its analysis of representative Claim 1 of the ’229 patent, the Court 5 concludes that the ’229, ’454, and ’406 patents are all invalid under Alice and its progeny. 6 2. ’407 Patent 7 The same goes for the ’407 patent. Plaintiff argues this patent differs from the ’229 8 patent in that it “includes an additional feature in a centralized transaction system that 9 credits funds to a financial account of the user based on the game outcome.” (ECF No. 10 47 at 20 (citing ECF No. 1-4 at 19).) Plaintiff further explains that storing a user’s financial 11 account information on a centralized server offered improved security over prior art 12 systems that stored account information either on a slot machine or otherwise locally. (Id.) 13 Caesars counters that this improvement is merely a benefit of practicing the abstract idea 14 recited in the patent, not a technological improvement to technology—or said otherwise, 15 that nothing in the patent allows a computer to do something it could not do before. (ECF 16 No. 52 at 3-4.) The Court agrees with Caesars. 17 a. Alice Step One 18 To start, the Court incorporates by reference its discussion supra regarding the 19 ’229 patent because much of it applies to the ’407 patent as well. As articulated by 20 Plaintiff, the difference is that the ’407 patent includes “a transactional system configured 21 to credit monetary funds to a financial account of the user based on the at least one 22 random game output.” (ECF No. 1-4 at 19; see also ECF No. 47 at 20.) But the Court 23 agrees with Caesars that this is “merely claiming an abstract idea as a result without 24 claiming a specific mechanism to achieve that result[.]” (ECF No. 52 at 4.) Indeed, even 25 in the specification of the ’407 patent, the transactional system is described based on 26 what it can do, and not how it performs any of the functions it purportedly includes. (ECF 27 No. 1-4 at 14 (“Preferably, the transactional system is capable of receiving a plurality of 28 funds from a financial account and converting them to credits that are used in the 2 functions including tracking each transaction performed by both the verification system 3 and the broadband gaming system and conducting electronic fund transfers.”), 17 (“The 4 transactional system 38 performs a plurality of functions including tracking each 5 transaction performed by both the verification system and the broadband gaming 6 system.”).) This is the sort of result-focused, functional claim language frequently held 7 patent-ineligible under Alice and its progeny. See Elec. Power Grp., 830 F.3d at 1356 . 8 Indeed, the transactional system described in Claim 1 of the ’407 patent is an example of 9 “using generic computer and network technology to carry out economic transactions.” Id. 10 It is drawn to patent-ineligible concept under Alice step one. 11 b. Alice Step Two 12 And Claim 1 of the ’407 patent lacks an inventive concept that could save the ’407 13 patent at Alice step two. Claim 1 of the ’407 patent as to the transactional system that 14 Plaintiff points to “merely describe[s] the functions of the abstract idea itself, without 15 particularity. This is simply not enough under step two.” Intell. Ventures I LLC v. Cap. One 16 Fin. Corp., 850 F.3d 1332, 1341 (Fed. Cir. 2017). (See also ECF No. 1-4 at 14, 15, 17, 17 19 (“a transactional system configured to credit monetary funds to a financial account of 18 the user based on the at least one random game output.”).) The transactional system 19 “neither improve[s] the functions of the computer itself, nor provide[s] specific 20 programming, tailored software, or meaningful guidance for implementing the abstract 21 concept.” Intell. Ventures, 850 F.3d at 1342 . The ’407 patent is accordingly invalid under 22 Alice and its progeny. 23 3. ’116 patent 24 a. Alice Step One 25 Claim 1 of the ’116 patent is likewise directed to an abstract idea: incentivizing 26 gambling tailored to a user’s location. Caesars argues that the ’116 patent is drawn to the 27 abstract idea of incentivized computer gambling. (ECF No. 26 at 6.) Plaintiff counters that 28 the ’116 patent is not directed to an abstract idea because of its “features of tracking the 2 based upon that tracked information[,]” which are an improvement upon prior art tracking 3 systems. (ECF No. 47 at 20-21.) The Court generally agrees with Caesars, though it finds 4 the ’116 patent is drawn to the abstract idea of incentivized gambling tailored to a user’s 5 specific location, not merely incentivized gambling. 6 As discussed as to the ’229 patent, the Federal Circuit has previously held that a 7 gambling game managed on a computer was abstract because it “‘consists solely of 8 mental steps which can be carried out by a human using pen and paper.’” Planet Bingo, 9 576 Fed. App’x at 1007 (citing Planet Bingo, LLC v. VKGS LLC, 961 F. Supp. 2d 840 , 10 851 (W.D. Mich. 2013)). Similarly, here, the ’116 patent is directed to a computerized 11 version of a common casino slot machine game like those played in person. But the ’116 12 patent is also drawn to the abstract idea of tailoring information based on location. 13 However, the Federal Circuit has also held that location “targeted marketing is a form of 14 ‘tailoring information based on [provided] data,’” and is an abstract idea. Bridge and Post, 15 Inc. v. Verizon Communications, Inc., 778 Fed. App’x 882, 887 (Fed. Cir. 2019) (citing 16 Capital One, 792 F.3d at 1369 ); see also Brit. Telecommunications PLC, 813 F. App’x at 17 587 (“We have previously held that tailoring the provision of information to a user’s 18 characteristics, such as location, is an abstract idea.”) (citing Capital One, 792 F.3d at 19 1369). Thus, and despite Plaintiff’s contentions to the contrary, Claim 1 of the ’116 patent 20 is drawn to the abstract idea of incentivizing gambling tailored to a user’s location rather 21 than improving the technical functionality of any prior art tracking system. The Court 22 accordingly proceeds to Alice step two. 23 b. Alice Step Two 24 But Claim 1 of the ’116 patent does not set forth an inventive concept that could 25 render it patent-eligible at Alice step two. Plaintiff argues that the asserted patents, 26 including the ’116 patent, “are directed to technical improvements in online gaming 27 systems” by “centralizing critical game activities, such as authentication, game outcome 28 generation, and game resolution.” (ECF No. 47 at 17-18.) Caesars counters that the ’116 2 any special way of gaming or incentivizing gaming,” nor does it “require any specific, 3 improved hardware or software configuration.” (ECF No. 52 at 6.) The Court agrees with 4 Caesars. 5 Claim 1 of the ’116 patent recites only generic computer hardware performing 6 routine functions—a wireless device, a verification system, a centralized gaming server, 7 and a memory module—to allow a user to play an online slot machine game. (ECF No. 8 1-5 at 10.) And the Federal Circuit has concluded that patent claims that do not “require[] 9 anything other than off-the-shelf, conventional computer, network, and display technology 10 for gathering, sending, and presenting the desired information” are unpatentable. Elec. 11 Power Grp., 830 F.3d at 1355 . Claim 1 of the ’116 patent therefore lacks an inventive step 12 that could render it patent eligible. Moreover, Claim 1 of the ’116 patent does not explain 13 how it improves any computer hardware or software. (ECF No. 1-5 at 10.) Further, the 14 claim is written in a style that the Federal Circuit would deem “result-focused” and 15 therefore unlikely to survive Alice scrutiny. Elec. Power Grp., 830 F.3d at 1356 . The law 16 demands more than Claim 1 of the ’116 patent offers: a result-oriented solution that 17 provides “insufficient detail for how a computer accomplishes it.” Capital One, 850 F.3d 18 at 1342 . The ’116 patent therefore does not survive scrutiny at Alice step two, and its 19 accordingly invalid under Alice and its progeny. 20 C. Leave to Amend 21 Plaintiff requests leave to amend if the Court dismisses any of Plaintiff’s claims. 22 (ECF No. 47 at 23.)12 The Court has discretion to grant leave to amend and should freely 23 do so “when justice so requires.” Fed. R. Civ. P. 15(a); see also Allen v. City of Beverly 24 Hills, 911 F.2d 367, 373 (9th Cir. 1990). Nonetheless, the Court may deny leave to amend 25 if it will cause: (1) undue delay; (2) undue prejudice to the opposing party; (3) the request 26 is made in bad faith; (4) the party has repeatedly failed to cure deficiencies; or (5) the 27 amendment would be futile. See Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522 , [28] 12This is the request for amendment specific to the Alice arguments. 2 be considered by the Court in determining whether to grant leave to amend or to dismiss 3 the complaint with or without prejudice. See Orion Tire Corp. v. Goodyear Tire & Rubber 4 Co., 268 F.3d 1133, 1137-38 (9th Cir. 2001). 5 The Court declines to grant Plaintiff leave to amend here because amendment 6 would be futile. See Simio, 983 F.3d at 1364 (affirming the district “court’s futility-based 7 denial” of leave to amend to the plaintiff). As to the parties’ Alice arguments, Plaintiff only 8 requests leave to amend to add allegations regarding the inventive steps present in the 9 asserted patents. (ECF No. 47 at 23.) But Plaintiff does not explain what allegations it 10 could add that would be both consistent with those in its Complaint and sufficient to show 11 that the asserted patents contain the inventive steps required to resuscitate the patents 12 at Alice step two. (Id. at 23-24.) And the Court cannot foresee any allegations Plaintiff 13 could add that would solve one of the key issues with the purportedly inventive steps of 14 the asserted patent claims—that they “merely describe the functions of the abstract idea 15 itself, without particularity.” Intell. Ventures, 850 F.3d at 1341. The Court will accordingly 16 dismiss Plaintiff’s Complaint with prejudice, as amendment would be futile. 17 IV. MOTION FOR SANCTIONS 18 The Court first describes this case’s procedural history to this point, then recites 19 the legal standard governing its review of Playtika’s motion for sanctions, and then 20 explains its ruling on Playtika’s motion. 21 A. Procedural History 22 The procedural history of this case is not extensive. Plaintiff filed its Complaint in 23 October 2020. (ECF No. 1.) Defendants filed their motions to dismiss in February 2021. 24 (ECF Nos. 26, 28.) The parties have not engaged in any discovery, in pertinent part 25 because Magistrate Judge Carla L. Baldwin granted Playtika’s motion to stay discovery 26 pending resolution of Defendants’ motions to dismiss in April 2021. (ECF No. 50.) Playtika 27 filed its motion for sanctions in May 2021, seeking its fees and costs incurred in defending 28 against this case, arguing that Plaintiff failed to conduct an adequate pre-suit investigation 2 not infringe the asserted patents through cursory review of publicly-available materials, 3 and because one of Plaintiff’s arguments presented in opposition to Playtika’s motion to 4 dismiss is baseless. (ECF No. 53.) 5 B. Legal Standard 6 “The central purpose of Rule 11 is to deter baseless filings.” Newton v. Thomason, [7] 22 F.3d 1455, 1463 (9th Cir. 1994) (citation omitted). The rule justifies sanctions “when a 8 filing is frivolous, legally unreasonable, or without factual foundation, or is brought for an 9 improper purpose.” Estate of Blue v. County of L.A., 120 F.3d 982, 985 (9th Cir. 1997) 10 (citation omitted). Rule 11, however, “is not intended to permit sanctions just because the 11 court later decides that the lawyer is wrong.” Rachel v. Banana Republic, Inc., 831 F.2d 12 1503, 1508 (9th Cir. 1987) (internal quotation marks and citation omitted). Applying 13 Second Circuit law, the Federal Circuit has suggested that Rule 11 sanctions for filing a 14 baseless complaint are only appropriate when the plaintiff’s position on patent eligibility 15 is not even colorable. See Gust, Inc., v. Alphacap Ventures, LLC, 905 F.3d 1321 , 132816 29 (Fed. Cir. 2018). “In view of the evolving nature of § 101 jurisprudence during [the 17 roughly 2015-2017 time period], it is particularly important to allow attorneys the latitude 18 necessary to challenge and thus solidify the legal rules without the chill of direct economic 19 sanctions.” Id. at 1329; see also id. at 1325-26 (providing timeline of relevant events). 20 C. Discussion 21 Playtika essentially asks the Court to sanction Plaintiff for filing this case based on 22 the strength of two noninfringement arguments raised by Playtika. (ECF No. 35.)13 But 23 the Court has not ruled on the merits of Playtika’s noninfringement arguments, instead [24] 13Plaintiff argues the Court should not even address Playtika’s motion for sanctions 25 on the merits because it violates the stay that Playtika itself obtained. (ECF No. 56 at 5.) Playtika counters that the Court can—and should—address the motion for sanctions now 26 because the “stay Playtika requested and that was granted in this case is limited to ‘discovery’ and ‘deadlines’ imposed by Federal and Local Rules.” (ECF No. 53 at 4.) The 27 Court agrees with Playtika. Playtika only sought a stay of “discovery and all deadlines under Fed. R. Civ. P. 26(f), the Local Rules and the Local Patent Rules” (ECF No. 29 at 28 1), and Judge Baldwin both granted that motion and only referred to pending discovery in her order granting the motion (ECF No. 50 at 2). 2 progeny. Playtika’s motion does not address its Alice arguments at all. 3 That means Playtika’s motion is little help in determining whether Plaintiff’s position 4 on patent eligibility is not even colorable. See Gust, 905 F.3d at 1328-29 . And the Court 5 finds it improper to make that determination sua sponte. Beyond the fact that Playtika 6 does not address the factors the Court should consider given that the Court only 7 addressed the parties’ Alice arguments, two principles specifically cause the Court to 8 pause. First, the Ninth Circuit warns that Rule 11 is not intended to permit sanctions just 9 because the Court determined Plaintiff’s lawyers were wrong—in this case, that the 10 asserted patents are patent eligible. See Rachel, 831 F.2d at 1508. Second, the Court 11 reads Gust, 905 F.3d at 1328-29 , to contain a note of caution from the Federal Circuit 12 regarding awarding Rule 11 sanctions where, as here, the Court makes an Alice ruling 13 early on in a case. The Court will therefore deny Playtika’s motion for sanctions. 14 V. CONCLUSION 15 The Court notes that the parties made several arguments and cited to several 16 cases not discussed above. The Court has reviewed these arguments and cases and 17 determines that they do not warrant discussion as they do not affect the outcome of the 18 motions before the Court. 19 It is therefore ordered that Defendant Caesars Interactive Entertainment’s motion 20 to dismiss (ECF No. 26) is granted. 21 It is further ordered that Defendants Playtika Holding Corp. and Playtika Ltd.’s 22 motion to dismiss (ECF No. 28) is granted. 23 It is further ordered that Defendants Playtika Holding Corp. and Playtika Ltd.’s 24 motion for Rule 11 sanctions (ECF No. 53) is denied. 25 It is further ordered that Plaintiff’s Complaint (ECF No. 1) is dismissed, in its 26 entirety, with prejudice, as amendment would be futile. 27 It is further ordered that U.S. Patent Nos. 8,747,229, 8,506,406, 9,646,454, 28 8,506,407, and 9,373,116 are invalid as further explained herein. 2 favor—and close this case. 3 DATED THIS 7th Day of July 2021. [5] 6 MIRANDA M. DU CHIEF UNITED STATES DISTRICT JUDGE