United States District Court, N.D. Illinois, Eastern Division
SHUFFLE TECH INTERNATIONAL LLC, ACES UP GAMING, INC., and POYDRAS-TALRICK HOLDINGS LLC, Plaintiffs,
SCIENTIFIC GAMES CORPORATION, BALLY TECHNOLOGIES, INC., and BALLY GAMING, INC., Defendants.
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE
Tech International LLC, Aces Up Gaming, Inc. and
Poydras-Talrick Holdings LLC have filed suit against
Scientific Games Corporation, Bally Technologies, Inc., and
Bally Gaming, Inc., alleging that their patents are invalid
and that they nevertheless knowingly attempted to enforce
them in violation of federal antitrust statutes, the Lanham
Act, and Illinois law. In a previous ruling, the Court
granted defendants' motion to dismiss all but one count
of plaintiffs' complaint, a claim in which plaintiffs
asserted that defendants have used enforcement of their
patents to suppress competition in the market for automated
playing card shufflers in violation of section 2 of the
Sherman Act and section 4 of the Clayton Act. Defendants have
moved for summary judgment on this remaining claim. For the
reasons stated below, the Court denies defendants'
The parties and the relevant patents
Tech International LLC is an Illinois limited liability
company that develops and manufactures automatic playing card
shuffling machines for use by private consumers and casinos.
In April 2012, Shuffle Tech demonstrated its card shuffler
patents and technology to DigiDeal Corporation, a gaming
equipment manufacturer. The parties then entered into a
licensing agreement along with Poydras, a "special
purpose vehicle" created by investors to fund the
development and production of Shuffle Tech's product, the
DigiShuffle. Pls.' Resp. to Defs.' Statement of
Undisputed Material Facts (SUMF) ¶ 16(b). In the
agreement, Shuffle Tech granted Poydras a license to its
patents on the product, and Poydras subsequently granted a
sub-license to DigiDeal. The agreement required DigiDeal to
engineer, produce, market, and sell the shuffler in exchange
for royalty payments to Poydras and Shuffle Tech. Shuffle
Tech agreed to defend DigiDeal against any patent
infringement claims involving the licensed technology and to
indemnify DigiDeal for any resulting attorneys' fees.
Defs.' SUMF, Ex. 2 at 10. In September 2013, DigiDeal
retained Aces Up to conduct the marketing and sales of the
DigiShuffle in exchange for commissions.
1983, John Breeding started SHFL Entertainment, Inc., a
company whose purpose was to manufacture automatic playing
card shufflers for use in casinos. By 2012, SHFL had released
multiple different models of automatic card shufflers and
obtained approximately 253 patents related to shuffler
technology. In 2013, Bally Technologies acquired SHFL, and in
2015 Scientific Games acquired Bally Technologies. Scientific
Games is therefore the present owner of SHFL and its patents.
Bally Gaming is a subsidiary of Bally Technologies and
therefore now operates under Scientific Games. It is
responsible for manufacturing equipment and games for casinos
in the United States. In keeping with the parties'
briefs, the Court will refer to defendants in this case
collectively as SHFL.
parties' dispute arises out of two of SHFL's patents:
the '982 patent and the '935 patent. In April 2002,
SHFL filed the application for the '982 patent based on a
new model of an automatic shuffler known as the Deckmate 1.
According to SHFL, the Deckmate 1 is an advance over other
automatic shufflers based on the technology it uses to
receive cards and return them to the dealer. The Deckmate 1
is installed under the gaming table, with its upper surface
flush with the surface of the table. It also uses an elevator
to move the cards from beneath the table where they are
randomized to the top of the table for use. The elevator has
a cover that moves automatically to return the cards to the
dealer. See Pls.' Resp. to Defs.'
SUMF, Ex. 7-1. Mark Litman, SHFL's outside patent
prosecution counsel, prepared and prosecuted the '982
patent. Jennifer Farrar, SHFL's in-house intellectual
property counsel, likely would have reviewed the patent
application before filing it with the United States Patent
and Trademark Office (PTO). The application lists Atilla
Grauzer, an engineer at SHFL, as the first inventor. During
prosecution, SHFL disclosed many other patents as prior art.
The PTO issued the '982 patent in November 2003. In
October 2003, SHFL filed an application for what eventually
became the '935 patent, also based on the Deckmate 1, a
divisional of the application that became the '982
patent. The '935 patent issued in April 2009.
Competition in the automatic shuffler market
primarily contend that SHFL failed to disclose relevant
pieces of prior art during the prosecutions and
reexaminations of the '982 and '935 patents. The
Court therefore provides an overview of these prior art
references and SHFL's interaction with them.
September 1990, a New Jersey newspaper named The Courier-Post
published an article about Adolph Nicoletti and an automatic
shuffler he had invented. Pls.' Resp. to Defs.' SUMF,
Ex. 17. The article described the shuffler as "installed
under a blackjack table" and included an image of the
installed machine. Id. It also stated that Nicoletti
had conducted a test run of his machine by installing it in a
casino in Atlantic City. The test run ended after one week
due to malfunctions. Breeding testified that he knew of a
shuffler in Atlantic City that was "so big it was built
under the table and cards would go down inside, " but he
never saw it and does not know who manufactured it. Pls.'
Resp. to Defs.' SUMF, Ex. 856 (Breeding Dep.) at 97:9-10.
Breeding stated that the patent holder for the machine called
him with an offer to sell the technology but that he turned
it down. Id. at 97:13-15.
July 1992, Lawrence Luciano developed a prototype of an
automatic shuffler for his company, Luciano Packaging, Inc.,
as a result of a development agreement with International
Game Technology, Inc. (IGT). In November 1993, IGT cancelled
the development agreement. Luciano then began marketing his
prototype shuffler (the Luciano prototype) to casinos and
other potential customers. He made a promotional video that
showed the prototype in operation, which he provided to
anyone in the industry who expressed interest. Pls.'
Resp. to Defs.' SUMF, Ex. 1027 (Luciano Dep.) at 92:7-9.
October 1997, SHFL participated in the World Gaming Expo in
Nevada. Various SHFL executives and employees attended the
expo, including Grauzer and Farrar, who was sent there to
monitor competitive activity. At the expo, another company
named Casino Concepts displayed a prototype of an automatic
shuffler invented by Dr. Conrad Roblejo called the
Sure-Shuffler (hereafter, the Roblejo prototype). During the
expo, Halvard Solberg, who was hired by Casino Concepts to
provide technical support at the expo, gave a very detailed
demonstration of the Roblejo prototype to individuals he
later learned were representatives of SHFL. The demonstration
required Solberg to open the top cover and eventually remove
side panels in order to answer specific technical questions.
An executive at Casino Concepts later wrote a memo to Dr.
Roblejo, in which he stated that "during the entire show
people from [SHFL] looked at our equipment." Pls.'
Resp. to Defs.' SUMF, Ex. 90 at 2. He stated that Casino
Concepts representatives spoke with SHFL's original
designer, vice president of finance, and other unidentified
says that she visited a Casino Concepts booth at an expo in
the early years of her career at SHFL but does not recall if
it was in 1997. She observed a machine on the table but did
not know what it was or how it operated, as there was no one
manning the booth at the time. SHFL's file on the expo
contains a copy of a brochure of the Roblejo prototype
displayed at the 1997 expo. Grauzer testified that he has
never seen the Roblejo prototype at all, much less the
interior of the machine. Defs.' SUMF, Ex. 9 (Grauzer
Dep.) at 141:3-12. Grauzer's files contain a report on
the 1997 expo, which discusses the Roblejo prototype and
includes a marketing brochure. See Pls.' Resp.
to Defs.' SUMF, Ex. 9. Grauzer maintains that he did not
write this report and could not possibly have done so because
it contains non-technical information as well as bullet
points, which he does not know how to create. Grauzer Dep. at
109:4-25; Pls.' Resp. to Defs.' SUMF, Ex. 1012 at
115:6-16. Donald Barnett, a former SHFL employee, testified
during his deposition that Grauzer would have been the person
SHFL relied upon to analyze competition at trade shows.
Pls.' Resp. to Defs.' SUMF, Ex. 1022 (Barnett Dep.)
at 18:7-16. Barnett stated that Grauzer is the only
individual who would have written a report analyzing
competition seen at a trade show. Id. at
187:9-188:3. Another former SHFL employee, Robert
Pietrosanto, agrees that Grauzer would have been the only
individual working for SHFL at the time who was qualified to
analyze a competitive product. Pls.' Resp. to Defs.'
SUMF, Ex. 1021 (Pietrosanto Dep.) at 33:16-34:3.
Block '044 patent, issued by the PTO in March 2002,
discloses an automatic card shuffling and dealing system that
includes a shuffling device under the gaming table and an
elevator that delivers the shuffled cards to the table
surface. SHFL disclosed this patent in the specifications of
four patent applications it submitted in July 2003 as well as
during the course of the prosecution of the '935 patent
The company did not disclose the Block '044 patent in the
application for the '982 patent.
2002, Casino Austria Research and Development in Vienna
(CARD) began importing into the United States an automatic
shuffler known as the "one2six." In May 2003, CARD
filed suit in federal court in Nevada against SHFL requesting
a declaratory judgment that its shuffler did not infringe two
of SHFL's patents, neither of which is at issue in this
case. SHFL filed a counterclaim alleging infringement of
those patents as well as one other. During the litigation,
CARD argued that SHFL's patents were invalid because they
were anticipated by the Nicoletti shuffler, the Luciano
prototype, and the Roblejo prototype. Grauzer submitted a
declaration in that case on behalf of SHFL in which he
disputed this contention as to each reference. Both Grauzer
and Litman attended the deposition of CARD's technical
expert, Joel Greenberg, who opined that the Luciano and
Roblejo prototypes anticipated SHFL's patents. Toward the
end of the litigation, either SHFL or its counsel at the time
created what the parties here refer to as the shuffler art
discs, which contained documents from the CARD litigation and
technical information on the pieces of allegedly invalidating
2004, SHFL and CARD voluntarily dismissed the Nevada case
following a settlement agreement in which SHFL acquired CARD.
Litman and Farrar then filed copies of the shuffler art discs
in multiple pending patent applications before the PTO. SHFL
did not file a copy of the disc as part of the then-pending
'935 application. It did represent in amendments filed
with a different patent application related to shuffler
technology that both in-house and outside prosecution counsel
for SHFL were "in the time-consuming process of
reviewing documents . . . that are the result of litigation
between [SHFL] and third parties." Pls.' Resp. to
Defs.' SUMF, Ex. 248 at 12.
The DigiDeal suit and the present litigation
October 2012, DigiDeal displayed the DigiShuffle prototype at
a gaming show in Nevada, which SHFL employees attended. These
employees saw the prototype and SHFL then filed suit against
DigiDeal in the District of Nevada, alleging that the
DigiShuffle infringed the '982 and '935 patents. The
case was assigned to Judge Gloria Navarro. Shuffle Tech and
Poydras both received notice of the suit and obtained counsel
in anticipation of litigation.
2013, Shuffle Tech and DigiDeal amended their licensing
agreement. The amendment expressly discussed SHFL's
lawsuit and stated that Shuffle Tech agreed to pay litigation
costs, even though the suit did not fall within the scope of
the litigation Shuffle Tech was required to pay for as
defined in the original agreement. Defs.' SUMF, Ex. 3 at
F.1. The amendment also stated that Shuffle Tech "shall
be entitled to any reimbursement for fees and expenses and/or
other damages resulting from [SHFL's infringement suit]
payable by SHFL to any" of the parties to the licensing
agreement. Id. at 11.1. An investor at Poydras found
an attorney, Marie Kerr, to represent DigiDeal. For some
period of time, DigiDeal, Poydras, and Shuffle Tech held
joint strategy sessions to determine the course of
litigation, and Shuffle Tech primarily defended DigiDeal in
October 2013, however, Mike Kuhn, the president of DigiDeal,
instructed attorney Kerr to keep confidential to DigiDeal all
information regarding the suit. Pls.' Resp. to Defs.'
SUMF, Ex. 872. In September 2014, DigiDeal removed Kerr as
counsel and replaced her with James Boyle and Nathan
Henderson. In August 2014, DigiDeal filed suit against
Shuffle Tech and Poydras in the Eastern District of
Washington, alleging breach of contract, primarily on the
ground that Shuffle Tech had failed to uphold its obligation
to defend DigiDeal against SHFL.
in January 2014, DigiDeal initiated re-examination
proceedings before the PTO on claims 1-3 and 42-46 of the
'982 patent, and claims 1, 2, 9-11, and 14 of the
'935 patent. Alan Fanucci acted as lead counsel for SHFL
in the reexamination proceedings and received assistance from
Howard Shin and Kimball Anderson. In August 2014, the PTO
rejected claims 1-3 and 42-46 of the '982 patent based on
the Block '044 patent and the Roblejo '122 patent.
SHFL then amended its claims to state that the shuffler must
be mounted flush with a recessed support surface beneath the
table cover and a cover set flush into the shuffler's top
surface over the elevator, features not taught by the Block
patent. The PTO agreed that the Block patent taught away from
SHFL's invention as described in the amended claims,
because the Block device prevents anyone from physically
touching the cards and does not teach a shuffler that has a
top surface mounted flush with the gaming table surface.
Defs.' SUMF, Ex. 61E at 4. On May 2015, the PTO confirmed
that the claims in the '982 patent were patentable, and
it issued a reexamination certificate in July 2015.
the '935 reexamination, the PTO also rejected some of the
claims in the '935 patent after determining that they
were obvious based on the Block '044 patent and
combinations of the Roblejo '122 patent with other
patents. The PTO indicated that the material in the '935
patent was obvious in light of the disclosure in the Roblejo
'122 patent of an automatic shuffler and another
reference that described a mah-jongg block shuffler mounted
to a gaming table and recessed beneath its surface.
Defs.' SUMF, Ex. 62C at 14. The PTO also indicated that
the Block patent teaches an automatic shuffler mounted to a
gaming table and therefore that it "teaches the
limitations deemed to be missing from the prior art during
the original prosecution of the '935 patent."
Pls.' Resp. to Defs.' SUMF, Ex. 6-1 at 1139. SHFL
then cancelled all of the reexamined claims from the '935
patent "in order to expedite the issuance of a
reexamination certificate." Defs.' SUMF, Ex. 62E at
April 2015, plaintiffs filed the present suit against SHFL,
alleging misconduct in its enforcement of the '982 and
'935 patents. In count 1, plaintiffs request a
declaratory judgment that SHFL fraudulently withheld
information from the PTO in order to acquire the '982 and
'935 patents and attempted to enforce these patents so as
to restrict trade in the market for automated shufflers.
Plaintiffs allege in count 2 that SHFL initiated sham
litigation in order to sustain market power in violation of
section 2 of the Sherman Act and section 16 of the Clayton
Act. In count 3, they allege that SHFL has acquired many
card-shuffler companies and technologies in order to
consolidate market power in violation of section 7 of the
Clayton Act. Plaintiffs allege in count 4 that SHFL knowingly
misrepresented the validity of their patents in violation of
the Lanham Act. In count 5, they allege that the conduct
outlined above constitutes unfair competition in violation of
Illinois statute. Plaintiffs allege in count 6 that the same
conduct constitutes deceptive trade practices under Illinois
2015, SHFL filed a notice of concurrent proceedings with the
PTO in which it attached a copy of the complaint in this
case. The notification indicated that SHFL had determined it
had no obligation to submit the references mentioned in
plaintiffs' complaint because it had already determined
that they were either cumulative, already made of record, or
not a patent or publication. In July and August 2015, the PTO
issued reexamination certificates for the '982 and
October 2015, this Court granted SHFL's motion to dismiss
counts 1, 3, 4, 5, and 6 but denied the motion as to count 2.
Plaintiffs then filed an amended complaint for count 2, in
which they alleged that SHFL violated the Sherman Act and the
Clayton Act by procuring its patents using fraud on the PTO
and then ...