IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

IGT, )
)
Plaintiff, )
)
v. ) Civ. No. 06-282-SLR
)
BALLY GAMING INTERNATIONAL )
INC., et aI., )
)
Defendants. )

MEMORANDUM ORDER

At Wilmington this 28th day of April, 2010, having reviewed plaintiff's renewed

motion to dismiss defendants' counterclaims X, XI and XIIi or, in the alternative, to

enter a scheduling order to adjudicate patent damages;

IT IS ORDERED that said motion (D.I. 355) is granted, for the reasons that

follow:

1. Background. IGT ("plaintiff') filed this patent infringement action against

Bally Gaming International Inc., Bally Technologies, Inc. and Bally Gaming, Inc. d/b/a

Bally Technologies (collectively, "defendants") on April 28, 2006. In its complaint,

plaintiff alleged infringement of U.S. Patent Nos. RE 38,812 ("the '812 patent"), RE

37,885 (lithe '885 patent"), 6,832,958 (lithe '2958 patent"), 6,319,125 ("the '125 patent"),

6,224,958 ("the '4958 patent"), 6,431,983 (lithe '983 patent"), 6,607,441 ("the '441

iDefendant renumbered these claims as new counterclaims IV, V and VI; to

Plaintiff alleged that defendants' "Bally Power Bonusing®" slot machine technology

infringes one or more claims of the asserted patents.

2. On June 30, 2006, defendants filed their answer, and asserted counterclaims

for a declaratory judgment of noninfringement, invalidity and unenforceability of each

asserted patent ("counts I - IX"); attempted monopolization in violation of Section 2 of

the Sherman Antitrust Act, 15 U.S.C. § 2 ("count X"); false representation in violation of

the Lanham Act, 15 U.S.C. § 1125 ("count XI"); and "intentional interference with

business relationships" ("count XII"). (D.1. 40) Plaintiff moved to dismiss defendants'

antitrust and state law counterclaims ("counts X-XII"). (D.1. 53) Plaintiff also moved for

a preliminary injunction. (D.1. 75) The case was assigned to this judicial officer on April

2,2007.

3. During its June 2007 teleconference with the parties, the court stated that it

bifurcates antitrust counterclaims insofar as they generally do not survive unless there

is a finding of no infringement. 3 (D.1. 117 at 11-12) Following the teleconference,

plaintiff withdrew its pending motions. Discovery proceeded in the case on all but the

antitrust counterclaims and has now since closed. (D.1. 160, 175)

4. On February 25, 2008, by agreement of the parties, all claims, defenses, and

counterclaims related to the '125, '434, '4958, '046, and '2958 patents were dismissed.

(D.1. 152) The parties entered into an agreement on May 14, 2008 removing the '441

2Plaintiff originally filed the complaint in the name of "International Game

3No order was docketed in this regard.

of the '812, '885, and '983 patents; defendants' counterclaims of invalidity and

unenforceability of these patents; and defendants' antitrust counterclaims X-XII.

5. On April 28, 2009, the court construed the disputed claim terms and issued a

memorandum opinion addressing seven motions for summary judgment filed by the

parties. (0.1. 281; 0.1. 283) The court found the '812 and '885 patents valid.

Defendants' motion for summary judgment of invalidity of the '983 patent was denied;

there was no cross-motion. (Id.) Regarding infringement, the court determined that

defendant's Power Rewards product4 infringes claims 10, 33 and 46 of the '885 patent

and claims 21 and 44 of the '812 patent; and ACSC Power Winners infringes claims 10

and 46 of the '885 patent. (Id.)

6. The case was set for a jury trial commencing June 1,2009. At that time, the

parties focused on two remaining issues: plaintiff's allegation of willful infringement;

and defendants' counterclaim for invalidity of the '983 patent. The court and the parties

discussed the propriety of proceeding to trial on these issues and an agreement was

reached whereby defendants subsequently dismissed their invalidity counterclaim

without prejudice. The parties also agreed that willfulness could be tried with plaintiffs

claim for damages after appeal. 5 Trial was cancelled and, on June 15, 2009, plaintiff

4The court provided a detailed description of the patents and technology at issue
in its prior opinion, and need not repeat it here. See IGT v. Bally Gaming Intern., Inc.,
610 F. Supp. 487 (D.Del. 2009).

51t is the court's practice to stay damages pending appeal. The parties have filed
letter briefs on whether the court should preclude plaintiff from asserting willful
infringement. (0.1. 289; 0.1. 293) The court need not resolve that issue now.

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filed its motion for permanent injunction, which was denied by the court on December

22, 2009. (0.1. 352)

7. Plaintiffs motion to dismiss defendants' counterclaims X-XII was filed on

February 23,2010. (0.1. 355) It is plaintiffs position that the unresolved claims pose

an impediment to moving the case to appellate review pursuant to 28 U.S.C. §

1292(c)(2). Plaintiff argues in the alternative that the lack of a damages determination

precludes an appeal under Federal Rule of Civil Procedure 54(b). Defendants oppose

the current motion insofar as plaintiff seeks to dismiss its counterclaims with prejudice.

8. Claims at issue. Defendants claim that plaintiff has violated Section 2 of the

Sherman Antitrust Act, 15 U.S.C. § 2, by: (1) "misusing the patent process ... in order

to intimidate and drive out competitors;" (2) filing infringement actions based on

"fraudulently obtained" patents; (3) "issuing [ ] vague and misleading press release[s]

as well as other false statements to [defendants'] customers" regarding its patent

litigation; and (4) "interfering with [defendants'] ability to properly test [their] products"

(on plaintiffs gaming machines). (0.1. 173 at,-r,-r 30-34; 62) Plaintiffs press releases

and statements are also the premise of defendants' "false representation" claim under

the Lanham Act, 15 U.S.C. § 1125, as well as their claim for intentional interference

with business relationships. (Id. at ,-r,-r 67-69, 73-74)

9. Discussion. A party who petitions the government for redress generally is

immune from antitrust liability. Eastern R.R. Presidents Conference v. Noerr Motor

Freight, 365 U.S. 127 (1961); United Mine Workers of Am. v. Pennington, 381 U.S. 657

(1965). Commonly referred to as the Noerr-Pennington doctrine, this immunity extends

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to persons who petition all types of government entities, including courts. California

Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510 (1972). Although originally

developed in the antitrust context, courts have applied this doctrine universally to

business torts. See Cheminor Drugs, Ltd. v. Ethyl Corp., 168 F.3d 119, 128-29 (3d Cir.

1999).

10. Noerr-Pennington irnmunity, however, is subject to an exception for "sham"

litigation. In this regard, the Supreme Court has outlined a two-part test to determine

whether the "sham litigation" exception applies. See Prof! Real Estate Investors, Inc. v.

Columbia Pictures Indus., Inc., 508 U.S. 49 (1993). As an objective first part, "the

lawsuit must be objectively baseless in the sense that no reasonable litigant could

realistically expect success on the merits." Id. at 60. If an objective litigant could

conclude that the suit is reasonably calculated to elicit a favorable outcome, then the

suit does not qualify as sham litigation and is immunized under the Noerr-Pennington

doctrine. Id. The subjective second part of the definition arises only if the challenged

litigation is objectively meritless. In such a case, the court must decide whether the

"baseless lawsuit conceals 'an attempt to interfere directly with the business

relationships of a competitor.' " Id. at 60-61. To invoke the "sham" exception, a

defendant must prove, by clear and convincing evidence, that a plaintiffs activities were

not really efforts to vindicate its rights in court. See C.R. Bard, Inc. v. M3 Systems, Inc.,

157 F.3d 1340, 1368-69 (Fed. Cir. 1998) ("sham litigation requires more than a failed

legal theory") (quoting Handgards, Inc. v. Ethicon, Inc., 743 F.2d 1282. 1288 (9th Cir.

1984».

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 11. The redress plaintiff seeks through the current motion is, essentially, a

judgment that defendants cannot prevail in showing that the current litigation was a

"sham" insofar as plaintiff prevailed on summary judgment. (D.I. 356 at 14)

Presumably due to the court's indication at the June 2007 teleconference that the

antitrust counterclaims were stayed, plaintiff did not move for summary judgment.

Plaintiff now brings a renewed motion to dismiss. Plaintiff, however, does not merely

seek a review of defendants' 2008 amended pleadings on their face. (D.1. 173) It

seeks application of the 2009 judgment to those pleadings in order to defeat

defendants' claims on their merits.

12. The court notes at this juncture that defendants did not respond to plaintiffs

challenge to the merits of their counterclaims. Rather, defendants argued that the stay

should be maintained for purposes of judicial economy, and reserved their right to

address their claims substantively should the Federal Circuit find in their favor on

appeal. In doing so, defendants have cast a shroud of doubt over the court's ability to

grant judgment sua sponte that defendants cannot prove their counterclaims as a

matter of law. See, e.g., Chambers Dev. Co. v. Passaic County Util. Auth., 62 F.3d

582, 584 n.5 (3d Cir. 1995) ("[A] judgment cannot be entered without first placing the

adversarial party on notice that the court is considering a sua sponte summary

judgment motion. The court must also provide the party with an opportunity to present

relevant evidence in opposition to that motion.").

13. Notwithstanding the foregoing, an affirmance of the court's summary

judgment opinion on appeal would nullify any argument that plaintiff's infringement

claims were "objectively baseless." See Proff Real Estate Investors v. Columbia

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Pictures Indus., 508 U.S. 49, 61 n.5 (1993) ("A winning lawsuit is by definition a

reasonable effort at petitioning for redress and therefore not a sham.") Defendants

admit that their counterclaims do not survive if defendants do not succeed on appeal. 6

(D.1. 360 at 10 ("Once the Federal Circuit has ruled, the parties and this court will have

a clear pathway to proceed with resolution of either [plaintiff's] damages claim or

[defendants'] antitrust counterclaims.") (emphasis added»

14. For the foregoing reasons, the court grants plaintiffs motion, dismisses the

remaining counterclaims without prejudice and enters final judgment in favor of

plaintiff pursuant to Federal Rule of Civil Procedure 54(b). Should the court's opinion

be reversed and the case be remanded, the court will consider defendants' request for

further discovery and take up the merits of defendants' claims in due course.

United State

61t is not clear whether the Noerr-Pennington doctrine applies to Lanham Act
claims. See Santana Prods., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d 123,
130-31 (3d Cir. 2005) (declining to consider the district court's finding in the affirmative
on this question on appeal). The parties have not addressed the issue, and the court
need not consider it at this juncture.