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International Gamco, Inc. v. Multimedia Games

December 4, 2006

INTERNATIONAL GAMCO, INC., PLAINTIFF,
v.
MULTIMEDIA GAMES, INC., DEFENDANT.
MULTIMEDIA GAMES, INC., COUNTERCLAIMANT,
v.
INTERNATIONAL GAMCO, INC.; OASIS TECHNOLOGIES, INC.; SCOTT HENNEMAN; JOHN ADAMS, COUNTERDEFENDANTS.



The opinion of the court was delivered by: Hon. Rudi M. Brewster United States Senior District Judge

ORDER DENYING DEFENDANT'S MOTION TO DISMISS PLAINTIFF'S SUPPLEMENTAL AND SECOND AMENDED COMPLAINT FOR LACK OF SUBJECT MATTER JURISDICTION

Defendant Multimedia Games, Inc. ("Multimedia") brought the instant motion to dismiss the Supplemental and Second Amended Complaint of Plaintiff International Gamco, Inc. ("Gamco"). This matter was heard on November 27, 2006 at 9:00 a.m. For the reasons discussed more fully below the Court hereby DENIES the motion.

I. FACTUAL BACKGROUND

The instant litigation concerns claims of patent infringement of U.S. Patent No. 5,324,035 ("the '035 patent"). The '035 patent was initially issued in June 1994 and assigned to Oasis Technologies Inc. ("Oasis"), then known as Infinational Technologies.

On March 15, 2001, as the result of a settlement agreement between Oasis and Sierra Design Group ("Sierra") in case no. CV N 99-00295 ECR (RAM) in the U.S. District Court of Nevada ("Settlement Agreement"), Oasis granted to Sierra a non-exclusive license to practice the '035 patent. (Dec. Michelle A. Herrerra Supp. Def.'s M. Dismiss Ex. J.) The terms of the settlement gave Sierra a non-exclusive, perpetual, nonterminable worldwide license. The Settlement Agreement explicitly stated that Sierra "shall not have the right to grant sub-licenses" to the '035 patent (Id. § 2a.) It further provided that the rights were assignable and that any successors or assigns of the parties would be bound by its terms. (Id. § 16.)

On December 3, 2001, Oasis assigned its entire right, title and interest in the '035 patent to Gamco. (Dec. Scott Henneman filed Aug 19, 2005 ¶ 9, Ex. J [hereinafter "Dec. Henneman Aug. 2005"].) At this moment in time Gamco became the licensor under the non-exclusive license with Sierra.

In February 2003, Gamco executed an Asset Purchase Agreement under which it assigned the '035 patent to International Game Technology ("IGT"). The Asset Purchase Agreement provided that Gamco retained certain rights under the '035 patent, including some purportedly exclusive rights in New York state.*fn1 (Dec. Henneman Aug. 2005 Ex. K.) The Asset Purchase Agreement explicitly refered to the Settlement Agreement and the non-exclusive license grant to Sierra in Section 1.3: "'Existing License' means the non-exclusive license granted between Seller [Gamco]*fn2 to the Transferred Patents under that certain Settlement Agreement by and between Seller [Gamco] and Sierra Design Group dated March 15, 2001, which license and any proceeds therefrom shall be retained by Seller [Gamco]." (Id.)

In May 2004, Gamco initiated this patent infringement action against Multimedia alleging that Multimedia's activities in New York state infringed the claims of the '035 patent. After dismissal of Gamco's initial complaint for lack of standing, Gamco and Oasis executed a modification of the 2001 Asset Purchase Agreement on November 10, 2005 ("Modification Agreement") (Dec. Callie A. Bjurstrom Supp. Def.'s M. Dismiss ¶ 7, Ex. D [hereinafter "Dec. Bjurstrom]".); Gamco then filed its Supplemental and Second Amended Complaint. The Modification Agreement modified and replaced particular sections of the Asset Purchase Agreement but otherwise left the provisions of the Asset Purchase Agreement in place. (Dec. Bjurstrom Ex. D.) In particular section 5.3(b) was replaced by section 8 of the Modification Agreement; this new section granted to Gamco exclusive rights in the territory of the New York State Lottery with rights to sublicense and granted to Gamco the exclusive right to sue for past, present and future acts of infringement in that territory. (Id.) The only restriction placed on these exclusive rights was IGT's right to approve sub-licensees. (Id.)

In April 2006, Multimedia brought a motion to dismiss under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction arguing that Gamco still did not have sufficient rights to confer standing. After hearing this motion and considering a motion for reconsideration, the Court determined that Gamco had sufficient rights within the specific "enterprise" of the New York State Lottery to provide it with standing to sue. (Order Aug. 31, 2006.) The Court also certified this issue for interlocutory appeal and the issue is presently pending before the U.S. Court of Appeals for the Federal Circuit.*fn3 (Id.)

Multimedia filed the instant motion in October 2006. Multimedia argues that Gamco cannot be an exclusive licensee in the "enterprise" of the New York State Lottery because a third party, Sierra, holds a non-exclusive license. The matter was fully briefed and heard by the Court on November 27, 2006, at 9:00 a.m.

II. DISCUSSION

A. LEGAL STANDARD

Under Rule 12(b)(1), a defendant may seek to dismiss a complaint for "lack of jurisdiction over the subject matter." Fed. R. Civ. P. 12(b)(1). Plaintiff, as the party seeking to invoke jurisdiction, has the burden of establishing that jurisdiction exists. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 379 (1994).

Where a jurisdictional challenge is separate from the merits of the case, the court "is free to hear evidence regarding jurisdiction and to rule on that issue prior to trial, resolving factual disputes where necessary." Augustine v. United States, 704 F.2d 1074, 1077 (9th Cir. 1983); Thornhill Publishing Co. v. General Telephone & Electronic Corp., 594 F.2d 730, 733 (9th Cir. 1979). "No presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed facts will not ...


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