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GC2 Inc. v. International Game Technology, IGT

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

July 15, 2019

GC2 INC., Plaintiff,
v.
INTERNATIONAL GAME TECHNOLOGY, IGT, DOUBLEDOWN INTERACTIVE LLC, and MASQUE PUBLISHING, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          MATTHEW F. KENNELLY, UNITED STATES DISTRICT JUDGE

         GC2 Inc. sued International Game Technology, IGT, [1] Doubledown Interactive LLC, and Masque Publishing, Inc. alleging copyright infringement and violations of the Digital Millennium Copyright Act (DMCA). GC2's claims went to trial in January 2019. The jury found unanimously in GC2's favor. Specifically, the jury found that each of the defendants had both directly and vicariously violated GC2's copyrights, that IGT Holding, IGT NV, and Doubledown had also contributorily infringed, and that IGT Holding, IGT NV, and Doubledown had committed 696 separate violations of the DMCA.

         The defendants have filed several post-trial motions. They ask for partial judgment as a matter of law on the DMCA claims on the basis that evidence did not support the jury's verdict; for a new trial, remittitur, and/or to alter the verdict; and for attorney's fees under the Copyright Act. GC2, the plaintiff, has moved for a permanent injunction, supplemental damages, prejudgment interest, attorney's fees, and costs. For the reasons below, the Court (1) denies the defendants' motion for partial judgment as a matter of law; (2) denies the defendants' motion for a new trial, remittitur, and/or to alter the judgment; (3) grants GC2's motion for a permanent injunction; (4) denies GC2's motion for supplemental damages; (5) grants GC2's motion for prejudgment interest in part; (6) denies GC2's motion for attorney's fees; and (7) denies the defendants' motion for attorney's fees. The Court will rule separately on GC2's bill of costs.

         Background

         There are four defendants in this case: IGT Holding, IGT NV, Doubledown, and Masque. IGT Holding owns IGT NV, a Nevada corporation. IGT NV produces and sells land-based games played in physical casinos. Until June 2018, IGT Holding also owned Doubledown.[2] Doubledown develops and distributes digital slot machine games. Masque sells digital casino games and licensed art from IGT Holding.

         A. Infringing games and artwork

         GC2 developed artwork, images, and thematic elements for games that are primarily displayed on physical wagering machines such as slot machines. The company has created artwork and videos for a series of wagering games, including those at issue in this suit: Coyote Moon, Pharaoh's Fortune, Lucky Lion Fish, Festival Fantastico, Kingpin Bowling, and Wild Goose Chase. GC2 licensed some of its artwork to IGT NV beginning in 2003 for use in the development of these physical slot machine games. Although these games were successfully developed and deployed to casinos, several disputes arose between the companies, leading to a 2007 contract-styled as the seventh amendment to the parties' original agreement-intended to wind up their relationship. In this agreement, IGT NV retained a perpetual license to the GC2 artwork used for the physical land-based machines the companies jointly developed. But the agreement did not give up all the rights to the art used in the disputed games; it expressly reserved GC2's rights to its artwork for use in, among other things, development of internet gaming programs.

         IGT Holding eventually entered the online gaming industry, developing and selling digital games through its then-subsidiary Doubledown. Specifically, Doubledown operated Doubledown Casino, which offered online games to consumers on its website and through third-party websites like Facebook. Among these, GC2 alleged in this suit, were online digital versions of the six disputed games. IGT Holding also licensed digital games containing GC2's artwork to Masque, a third-party publisher. Masque's customers were able to purchase the disputed games for digital download or in CD/DVD format.

         GC2 alleged that the defendants collectively infringed its copyrights by developing and distributing the disputed games. It also alleged that IGT Holding, IGT NV, and Doubledown violated the DMCA, which, among other things, makes it unlawful to manipulate copyright management information-i.e., the material typically displayed on or near copyrighted materials identifying their authors or owners. Specifically, GC2 alleges that the defendants removed or altered GC2's copyright management information from the artwork in question during the process of developing the disputed games and then distributed the artwork knowing that the information had been so removed or altered.

         B. Procedural history

         GC2 filed suit in September 2016. In addition to the claims that went to trial, the original complaint included claims under the Illinois Consumer Fraud and Deceptive Business Practices Act. The complaint originally named all of the current defendants as well as International Game Technology PLC, a European affiliate of IGT Holding; WD Encore Software, LLC, another distributor with a similar relationship to IGT as Masque; and several unidentified "Doe" defendants consisting of end-users of the products in question. The defendants first moved to dismiss for failure to state a claim in December 2016. The Court denied that motion, though it narrowed somewhat the scope of the DMCA count. See GC2 Inc. v. Int'l Game Tech. PLC (GC2 I), 255 F.Supp.3d 812, 822-23 (N.D. Ill. 2017).

         One of the original defendants, IGT PLC, also moved to dismiss for lack of personal jurisdiction. The Court granted that motion, concluding that the company- organized under the laws of England and Wales-lacked sufficient contacts with the forum to permit personal jurisdiction. See GC2 Inc. v. Int'l Game Tech. PLC (GC2 II), No. 16 C 8794, 2017 WL 2985741, at *10 (N.D. Ill. July 13, 2017). The Court also subsequently stayed GC2's claims against another defendant, WD Encore, when it filed for bankruptcy. See Order of Sept. 29, 2017, dkt. no. 168. Finally, the Court dismissed the counts against the Doe defendants without objection by GC2. See Order of Aug. 14, 2018, dkt. no. 279.

         The remaining defendants moved for partial summary judgment after the close of discovery. On the copyright infringement claims, the defendants sought summary judgment that two games besides the six that eventually went to trial-Kitty Glitter and Maid of Money-did not infringe GC2's copyrights. They also sought summary judgment on GC2's claims based on the DMCA and Illinois consumer fraud statutes in their entirety. The Court granted the defendants' motion with respect to Kitty Glitter and Maid of Money and with respect to the Illinois statutory claim but denied the motion on the DMCA claim. See GC2 v. Int'l Game Tech. (GC2 III), No. 16 C 8794, 2018 WL 5921315, at *8 (N.D. Ill. Nov. 12, 2018).

         C. Jury verdict

         GC2's claims for direct, vicarious, and contributory copyright infringement and violations of the DMCA against IGT Holding, IGT NV, Doubledown, and Masque went to trial in January 2019. As previously noted, the jury unanimously found for GC2. Specifically, it found each of the defendants had both directly and vicariously violated GC2's copyrights in relation to all six of the disputed games; that IGT Holding, IGT NV, and Doubledown had also contributorily infringed with respect to all six games; and that IGT Holding, IGT NV, and Doubledown had committed 696 separate violations of the DMCA in relation to the Coyote Moon and Pharaoh's Fortune games.

         The DMCA violations require a bit more explanation. Among other things, the DMCA makes it unlawful to (1) knowingly provide false copyright management information in connection with copies, displays, or the public performance of copyrighted material; (2) intentionally remove or alter copyright management information without the copyright holder's authority; (3) distribute copyright management information knowing that it has been removed or altered without the copyright holder's authority; or (4) distribute or publicly perform copyrighted material knowing the corresponding copyright management information has been removed or altered without the copyright holder's authority. See 17 U.S.C. § 1202(a)-(b). GC2 advanced a theory of liability at trial whereby the defendants involved in distributing the online versions of the disputed games would be liable for each instance the games were updated-and, as a result, reuploaded-to a server accessible to players. GC2 contended that the evidence showed that there were 414 such updates for Coyote Moon and 282 for Pharaoh's Fortune-or 696 in total. The jury accepted that contention and found 696 separate instances of each of the four types of DMCA violations outlined above. The Court accepted the jury's verdict but determined that these four types of violations overlapped and therefore merged them into a cumulative total of 696 DMCA violations. See Order of Feb. 20, 2019, dkt. no. 416.

         Finally, the jury also awarded damages. In addition to actual damages, the jury concluded that 75% of the profits earned on the infringing games were attributable to GC2's copyrighted materials. On the infringement counts, the jury awarded GC2 damages of $4, 122, 464.81 against IGT NV ($536, 677 in actual damages and $3, 585, 787.81 in disgorged profits); $12, 017, 709.46 against Doubledown ($1, 566, 272 in actual damages and $10, 451, 437.46 of disgorged profits); and $134, 878.74 against Masque ($53, 790 in actual damages and $81, 088.74 in disgorged profits)-a total award of $16, 275, 053.01 on the copyright infringement counts. See Judgment, dkt. no. 421. GC2 opted for statutory damages for the 696 DMCA violations that the jury found IGT Holding, IGT NV, and Doubledown had committed. See 17 U.S.C. § 1203(c)(3). The Court concluded that a valuation on the low end of the statutory scale was appropriate and awarded $2, 500 per violation, for a total of $1, 740, 000 in DMCA damages. See Order of Feb. 20, 2019, dkt. no. 416.

         Discussion

         The defendants have moved for partial judgment as a matter of law on GC2's DMCA claims; for a new trial, remittitur, and/or to alter the verdict; and for attorney's fees under the Copyright Act. GC2, the plaintiff, has moved for a permanent injunction, supplemental damages, prejudgment interest, attorney's fees, and costs. The Court addresses each in turn.[3]

         A. Defendants' motion for judgment as a matter of law

         Under Federal Rule of Civil Procedure 50, a party who does not bear the burden of proof may move for judgment as a matter of law on an issue at the close of the opposing party's case. See Fed. R. Civ. P. 50(a). If the Court determines that the party who bears the burden of proof on a particular issue has not presented a "legally sufficient evidentiary basis to" support a jury verdict in its favor, the Court may resolve the issue against that party. Id. The moving party can renew their motion at the end of trial. See Fed. R. Civ. P. 50(b). The question for the Court in reviewing a motion for judgment as a matter of law after the jury has returned a verdict "is simply whether the evidence as a whole, when combined with all reasonable inferences permissibly drawn from that evidence, is sufficient to allow a reasonable jury to find in favor of the plaintiff." Hall v. Forest River, Inc., 536 F.3d 615, 619 (7th Cir. 2008). Evidence is to be "construe[d] . . . strictly in favor of the party who prevailed before the jury." Thorne v. Member Select Ins. Co., 882 F.3d 642, 644 (7th Cir. 2018) (internal quotation marks omitted). "[T]he question is not whether the jury believed the right people, but only whether it was presented with a legally sufficient amount of evidence from which it could reasonably derive its verdict. Overturning a jury verdict is a hard row to hoe." Zelinski v. Columbia 300, Inc., 335 F.3d 633, 638 (7th Cir. 2003) (internal quotation marks omitted) (citations omitted).

         The defendants moved for judgment as a matter of law under Rule 50(a) orally at the close of GC2's case at trial and again in writing before the case was submitted to the jury. The Court took those motions under advisement. The defendants then renewed their motion after the jury returned its verdict. The defendants argue they are entitled to relief on two grounds.[4] First, they contend that insufficient evidence of intent or knowledge was presented at trial to satisfy what they call the DMCA's "double scienter" requirement. Second, the defendants argue that the evidence presented could not, as a matter of law, support liability under the DMCA's provisions for manipulation of copyright management information.

         At the outset, GC2 contends that this motion is procedurally barred because the defendants' renewed motion under Rule 50(b) impermissibly exceeds the scope of their original Rule 50(a) motion. GC2 points to Zelinski, where the Seventh Circuit held that a party seeking to renew a motion for judgment as a matter of law must have first moved for a directed verdict on the issue under Rule 50(a). Zelinski, 335 F.3d at 638, see also Nelson Bros. Prof'l Real Estate, LLC v. Freeborn & Peters, LLP, 773 F.3d 853, 856 (7th Cir. 2014) (holding that a party "waived [an] argument in the district court by not making it until after the jury's verdict, which was too late" under Rule 50).

         The defendants counter that their original motions were sufficiently broad and that GC2's reading of the verbal and written Rule 50(a) motions is unreasonably crabbed. They point to another Seventh Circuit case, Andy Mohr Truck Center, Inc. v. Volvo Trucks North America, 869 F.3d 598, 602 (7th Cir. 2017), which they say adopted a more forgiving standard than that proposed by GC2. In Andy Mohr, the Seventh Circuit drew a distinction between "grounds" for relief-which must be articulated in a Rule 50(a) motion to be renewed in a Rule 50(b) motion-and "arguments in support" of those grounds-which may be honed and modestly changed between motions. See Id. at 604-05 ("The district court, however, understood Volvo as merely advancing a new argument in support of a ground that appeared in its original 50(a) motion: that the evidence was insufficient.").

         The Court concludes that, in light of Andy Mohr, the defendants' Rule 50(b) motion is not procedurally barred. Although the defendants' arguments have no doubt changed to some extent since their motion at the close of GC2's case and since the jury returned a unanimous verdict against them, they nevertheless still "add up to the same thing: [the evidence] was a legally insufficient basis upon which to" find that GC2 met its burden of proving the defendants' intent or violations of the DMCA's substantive provisions governing copyright management information. See Id. at 605.

         1. DMCA's intent and knowledge requirements

         The defendants first seek judgment as a matter of law that there was insufficient evidence from which a jury could find they had the dual scienter required by the DMCA. Section 1202 of the DMCA prohibits "knowingly" providing or distributing false copyright management information "with the intent to induce, enable, facilitate, or conceal infringement." 17 U.S.C. § 1202(a)(1)-(2). Section 1202 also prohibits removing or altering copyright management information. Specifically, section 1202(b) states:

         No person shall, without the authority of the copyright owner or the law -

(1) intentionally remove or alter any copyright management information,
(2) distribute or import for distribution copyright management information knowing that the copyright management information has been removed or altered . . ., or
(3) distribute, import for distribution, or publicly perform works . . . knowing that copyright management information has been removed or altered . . .
knowing, or . . . having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement of any right under this title.

Id. § 1202(b)(1)-(3). The Seventh Circuit has not had occasion to interpret these statutory sections but other circuits have concluded they bear a "double scienter requirement." Krechmer v. Tantaros, 747 Fed.Appx. 6, 9 (2d Cir. 2018) (interpreting section 1202(a)); see also Stevens v. Corelogic, Inc., 899 F.3d 666, 674 (9th Cir. 2018) (interpreting section 1202(b)). That is, to satisfy the statute, GC2 had to show that the defendants "knowingly"-or, in the case of removal or alteration of copyright management information, "intentionally"-undertook the violative actions either with "intent to" or "knowledge, or . . . having reasonable grounds to know" that its actions "will induce, enable, facilitate, or conceal" infringement. 17 U.S.C. § 1202(a)-(b).

         As noted previously, the jury accepted GC2's upload theory of liability and found IGT Holding, IGT NV, and Doubledown liable for 696 violations of each of these four prohibitions-414 related to the online version of Coyote Moon and 282 related to Pharaoh's Fortune. Although the Court found it necessary because of potential overlap to collapse these into a single set of 696 violations, that does not change the fact that the jury reached a unanimous verdict with respect to each of the four forms of violation. In order for the defendants to prevail on this motion, therefore, they must demonstrate that the evidence presented at trial was insufficient to support any of the four types of violations found by the jury.

         The defendants contend that the evidence did not support a finding that they possessed either required layer of intent or knowledge for each of the 696 violations. First, they emphasize that GC2's theory of liability required the jury to infer that the defendants acted with intent or knowledge each time they "launched a new game or updated a different game" besides Coyote Moon and Pharaoh's Fortune. The defendants seem to argue that they could not have possessed such intent or knowledge where they simply modified an unrelated game because such a modification "would not cause any graphical changes to Coyote Moon or Pharaoh's Fortune." Defs.' Br. in Supp. of Rule 50 Mot., dkt. no. 421, at 5.

         The defendants next attack GC2's use of evidence that IGT NV negotiated in bad faith regarding the disputes underlying this lawsuit. They specifically dispute the relevance of evidence about alleged misrepresentations made by an IGT NV executive during 2016 discussions with GC2 about paying royalties for the infringing works. But rather than contesting GC2's interpretation of this evidence-that IGT NV employees apparently falsified accounting statements and misrepresented standard royalty rates- the defendants contend, without citation, that the misrepresentations are irrelevant because they occurred during "business negotiations" before litigation started. See Id. at 7. They also contend that the evidence is irrelevant because the negotiations took place long after the DMCA violations began. In other words, the defendants say that the evidence arose too early but also too late to be relevant. The defendants further argue that the jury should not have been allowed to consider the defendants' delay in taking Coyote Moon and Pharaoh's Fortune down from their gaming platform after they became aware of GC2's infringement contentions and that the defendants' correct attribution of other artwork licensors' copyright ownership on other games on its platform was irrelevant because it was "just as consistent with a mistake[ ]." Id.[5]

         The Court is unpersuaded by the defendants' effort to paint the trial as bereft of evidence of their knowledge or intent. First, the defendants point to no authority for the proposition that a plaintiff must make the requisite showing with direct, rather than circumstantial, evidence. And, indeed, there is significant persuasive authority to the contrary from the related context of contributory infringement under the Copyright Act. Cf. Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., 545 U.S. 913, 934-35 (2005) (discussing narrow limitations on vicarious copyright liability based on imputed intent, but noting that nothing "requires courts to ignore evidence of intent," including evidence of "constructive knowledge" (citation omitted) (internal quotation marks omitted)); Microsoft Corp. v. Rechanik, 249 Fed.Appx. 476, 479 (7th Cir. 2007) (finding that "ostrichlike" business practices were sufficient to support a finding of intent for purposes of contributory infringement). Nor need the plaintiff even demonstrate that a DMCA defendant did actually induce, enable, facilitate or conceal infringement for liability to attach. See Stevens, 899 F.3d at 674. Rather, because the second scienter requirement is forward looking, GC2 needed only to "make an affirmative showing, such as by demonstrating a past 'pattern of conduct' or 'modus operandi,' that the defendant was aware or had reasonable grounds to be aware of the probable future impact of its action." Id.

         The Court concludes, construing the evidence and drawing reasonable inferences in favor of the verdict, see Thorne, 882 F.3d at 644, that GC2 met its burden to demonstrate both layers of intent or knowledge at trial. Contrary to the defendants' protests, the jury had the benefit of significant evidence supporting the necessary inferences. The jury could, for instance, infer that the defendants acted with the first requisite layer of intent or knowledge from, among other evidence, testimony related to the seventh amendment to the parties' license agreement (which expressly reserved rights to development and distribution of online games); testimony that the defendants were contractually obliged to (but did not) provide copyright management information in relation to the art licensed from GC2 despite their faithful application of such information to artwork provided by other licensors; and other evidence about the sophisticated nature of the defendants' business, which involved regular negotiation of intellectual property rights. It would also be reasonable to infer that the defendants-companies engaged in producing and distributing online games-knew that each time they updated or launched a game in the Doubledown Casino they reuploaded the entire game library, thereby causing the unlawfully removed or manipulated copyright management information to again be distributed to the public. Likewise, the jury could infer that IGT Holding, IGT NV, and Doubledown knew or should have known that their unlicensed distribution of artwork missing copyright management information to their customers could lead their customers to infringe GC2's copyrights.

         Put another way, "the evidence as a whole, when combined with all reasonable inferences permissible drawn from that evidence, is sufficient to allow a reasonable jury to find in favor of the plaintiff." Hall, 536 F.3d at 619. The DMCA's dual knowledge and intent requirements provide no basis to disturb the jury's verdict.

         2. DMCA removal claims[6]

         Next, the defendants ask the Court to grant IGT Holding and IGT NV judgment as a matter of law on the substantive DMCA removal claim because, according to the defendants, the conduct proven at trial is not actionable under the statute. As noted previously, section 1202(b) of the DMCA prohibits "intentionally remov[ing] or alter[ing] any copyright management information . . . knowing, or . . . having reasonable grounds to know, that it will induce, enable, facilitate, or conceal an infringement . . . ." 17 U.S.C. § 1202(b)(1). First, the defendants contend that this provision does not apply to the sorts of works at issue here. Second, the defendants contend that they cannot be liable because GC2 provided its copyrighted materials to them separate from its copyright management information and that the defendants therefore did not "remove" that information within the meaning of the statute.

         a. Application to collaborative derivative works

         The defendants contend, in effect, that the statute simply cannot apply to collaborative or derivative works. They cherry pick language from district court opinions that held, for instance, that "[s]ection 1202(b)(1) applies only to the removal of copyright management information on (or from) a plaintiff's product or original work." Monotype Imaging, Inc. v. Bitstream Inc. (Monotype II), 376 F.Supp.2d 877, 893 (N.D. Ill. 2005) (emphasis added). The defendants go on to note that, in this case, GC2 willingly sent them the disputed artwork to be incorporated into the land-based Coyote Moon and Pharaoh's Fortune game systems that the companies were jointly developing. Because the artwork used in the online versions of the game was the result of a ...


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