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GC2 Incorporated v. International Game Technology PLC

United States District Court, N.D. Illinois, Eastern Division

June 5, 2017

GC2 INCORPORATED, Plaintiff,
v.
INTERNATIONAL GAME TECHNOLOGY PLC, INTERNATIONAL GAME TECHNOLOGY IGT, DOUBLEDOWN INTERACTIVE LLC, MASQUE PUBLISHING, WD ENCORE SOFTWARE, DOE DEFENDANTS 1-100, DOE DEFENDANTS 101- 2, 000, 000, IGT, WD ENCORE SOFTWARE, LLC, MASQUE PUBLISHING, INC., and INTERNATIONAL GAME TECHNOLOGY, Defendants.

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY United States District Judge

         GC2 Incorporated (GC2) has filed suit against 1) International Game Technology PLC along with International Game Technology, IGT NV, and DoubleDown Interactive LLC (DoubleDown) (collectively, IGT), 2) Masque Publishing and Masque Publishing Inc. (collectively, Masque), 3) WD Encore Software and WD Encore Software, LLC (collectively, WD Encore), and 4) the consumers of IGT, Masque, and WD Encore, alleging that they have infringed GC2's copyright. IGT, Masque, and WD Encore have moved under Federal Rule of Procedure 12(b)(6) to dismiss all claims against them.

         Background

          The Court takes the following factual allegations from GC2's amended complaint and exhibits.

         GC2 develops videos and images for games that are primarily displayed on physical wagering machines, such as slot machines. Am. Compl. ¶¶ 22-23. GC2 has created artwork and videos for a series of wagering games, including games called Coyote Moon, Lucky Lion Fish, and Pharaoh's Fortune. Id. ¶ 24.

         GC2 licensed its artwork to IGT NV-a wholly owned subsidiary of IGT PLC- from 2003 to 2007. Id. ¶ 81. GC2 and IGT's relationship was described in their original agreement and seven amendments to the agreement. GC2 agreed to "provide IGT with video graphics and artwork necessary for implementing the GC2 Projects on the IGT Platform." Compl., Ex. 18 (Agreement) § 3.14. IGT's Platform is defined as "IGT electronic gaming machines and conversion kits . . . ." Id. § 1.1. GC2 also agreed to "assist IGT engineers in the implementation of such video graphics and artwork onto the IGT Platform." Id. § 3.14. GC2 granted to IGT "the sole and exclusive worldwide right and license to make, manufacture, use, market, and sell gaming equipment (utilizing the IGT Platform) incorporating the GC2 Projects for use in legalized gaming jurisdictions." Id. § 3.2. The license applied to stand-alone games on "video gaming devices operated on licensed gaming premises." Id. The license did not apply to certain wagering devices, such as "devices used for mobile gaming" and "internet gaming." Compl., Ex. 20 (Amend. 7) § 1. The license also did not apply to "nonwagering devices, machines and systems such as: (a) pinball, (b) arcade machines, and (c) gaming consoles, including but not limited to general purpose computers, for non-wagered gaming." Id. In exchange for GC2's exclusive license, IGT agreed to pay GC2 royalty fees. Agreement § 3.6(a). The Agreement defines the royalty fee as "the particular fee [] paid to GC2 for each gaming unit sold by IGT that utilizes the IGT Platform and incorporates a GC2 Project." Id. § 1.15.

         GC2 and IGT also agreed on terms of ownership regarding intellectual property. Specifically, the parties agreed to the following terms:

Except as otherwise provided in this Agreement, each Party shall retain all rights to ownership, title or interests to any proprietary information, any inventions and any Intellectual Properties independently developed by them prior to the Commencement Date of this Agreement and during the Term of this Agreement. All independently developed Intellectual Properties shall remain the property of the Party that developed it.

Id. § 4.1. The "Intellectual Properties" are defined as "patents, copyrights, trade secrets, trademarks, trade names . . . or improvements including any and all devices and computer software, whether or not patentable." Id. § 1.13.

         The parties agreed to some exceptions to the general rule of intellectual property ownership set out in section 4.1 of the Agreement. Specifically, they agreed that "ownership of the copyrights in and to the software for the GC2 Projects developed by or on behalf of IGT shall remain the sole and exclusive property of IGT." Id. § 4.2. GC2 also granted to IGT "any and all rights it may have" in GC2 Bonus Concepts sold to IGT, so that IGT could obtain a patent on such works. Id. § 4.3. In the event IGT was awarded a patent, the "[o]wnership of any and all patents related to GC2 Bonus Games [would] remain the sole and exclusive property of IGT." Id.

         Sometime after IGT ended its relationship with GC2, IGT entered the online gaming industry and sold games through its subsidiaries online. For example, IGT owns the company DoubleDown. Am. Compl. ¶ 104. IGT, through DoubleDown, offers the product DoubleDown Casino to consumers on its website and on third-party websites, such as Facebook. Id. DoubleDown Casino "operates as a single casino application with multiple games where all games are available to the player within a single application." Id. IGT's games incorporating GC2's artwork are among the games available on DoubleDown Casino. Id. ¶ 114. DoubleDown does not hold a license from GC2 to display GC2's artwork.

         IGT also licenses games containing GC2's artwork to third-party publishers, including Masque and WD Encore. Masque runs a website, www.masque.com, where it sells licenses to IGT games. Id. ¶ 60-61. Masque's customers may download IGT games directly from the website or purchase them in CD/DVD format. Several of the IGT games made available on Masque's website contain GC2's copyrighted images and videos, such as Lucky Lion Fish and Pharaoh's Fortune. Id. ¶ 148. Masque also sells these games on third-party websites, such as Amazon.com. Id. ¶ 150. Masque has a licensing agreement with IGT to sell these games but no agreement with GC2. Pl.'s Resp. to Masque Mot. to Dismiss at 1 n.1.

         IGT also maintains a license agreement with WD Encore. WD Encore is a provider of pre-packaged software services. Am. Compl. ¶ 65. On its website, WD Encore sells licenses to IGT's games to its end users. WD Encore's customers may purchase a license for IGT games in either digital or CD/DVD format. Id. ¶¶ 66, 68. Many of these games include GC2's artwork. WD Encore also sells these games on third-party websites, such as Amazon.com. Id. ¶ 69.

         Masque and WD Encore require their end users to agree to a license agreement before they can the IGT game they purchased, regardless of where or in what format they purchased the game. Masque's license agreement states:

The Software is licensed, not sold. By installing, copying, downloading, accessing or otherwise using the Software, You agree to be bound by the terms of this SOFTWARE LICENSE. If You do not agree to the terms of this SOFTWARE LICENSE, do not install, access or use the Software.

Pl.'s Resp. to Masque's Mot. to Dismiss, Ex. A (Masque License). WD Encore's license agreement states:

ENCORE IS WILLING TO GRANT YOU THE LICENSE TO USE THE SOFTWARE ACCORDING ONLY ON THE CONDITION THAT YOU ACCEPT ALL TERMS IN THIS AGREEMENT. . . . IF YOU DO NOT AGREE TO ANY OF THE TERMS BELOW, YOU SHOULD CLICK ON THE "NO" OR "DO NOT ACCEPT" BUTTON BELOW OR OTHERWISE DISCONTINUE THE INSTALLATION PROCESS.

Pl.'s Resp. to WD Encore's Mot. to Dismiss, Ex. A (Encore License). Once an end user agrees to the license agreement, the user is permitted to make a copy of the game on her personal computer. Under both agreements, if an end user violates the licensing agreement by, for example, making an unauthorized copy of the game, Masque and WD Encore have the authority to terminate the license and pursue legal action against the end user. Specifically, Masque's licensing agreement states:

Masque Publishing, Inc. [] grants to you a nontransferable, right to use the copy of the software program being installed[.] You may not copy the Software or any accompanying materials [], except that you may make one copy for backup purposes. You may not place the Software on a computer that would allow multiple users to access it. You may not reverse engineer, disassemble, decompile, modify, adapt, translate, or create derivative works of the Software or Documentation. MASQUE retains all rights, title, and ownership in the Software. MASQUE may terminate this license immediately if you fail to comply with its terms.

         Masque License § 1. WD Encore's license states:

Except as expressly permitted by applicable law, You may not decompile, modify, reverse engineer, disassemble or otherwise reproduce the Software. . . . You may not evade the digital rights management technology, copyright protection, access restrictions or other authorization mechanisms for the Software.
. . . .
This Agreement will terminate automatically without notice from Encore if You fail to comply with any provision of this Agreement. Upon notice of termination, You agree to promptly destroy all of Your copies of the Software. There shall be no refund if this Agreement is terminated by Encore for Your failure to comply with the terms of this Agreement. All provisions of this Agreement as to warranties, limitation of liability, remedies and damages will survive termination. The parties agree to waive any provisions, procedures and the operation of any legislation to the extent that a court order or approval is required to terminate this Agreement.

Encore License §§ 6, 8.

         GC2 filed its complaint in this case on September 9, 2016 and amended it on October 28, 2016. GC2 alleges that IGT, along with Masque, WD Encore, and their end users, infringed its copyrights by selling games containing its artwork without a license. GC2 alleges that IGT is liable for direct copyright infringement (count 1 and 2), vicarious copyright infringement (counts 7 and 8), contributory copyright infringement (count 11), providing false copyright management information (count 12), and consumer fraud under Illinois law (count 13). GC2 asserts that Masque is liable for direct copyright infringement (count 3) and vicarious copyright infringement (count 9). GC2 also alleges that WD Encore is liable for direct copyright infringement (count 4) and vicarious copyright infringement (count 10). GC2 also alleges that IGT, Masque, and WD Encore's consumers-sued as "John Doe" defendants-directly infringed GC2's copyrights (counts 5 and 6).

         IGT, Masque, and WD Encore have all moved to dismiss GC2's claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6). IGT PLC has also moved to dismiss GC2's claims pursuant to Federal Rule of Civil Procedure 12(b)(2). The latter ...


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