“These kind of cases can be nasty,” said independent attorney David A. Boag. “It’s not just, ‘Somebody bumped into my IP.’”
Boag was commenting on the ongoing litigation between plaintiff Aristocrat Leisure and defendant Light & Wonder as part of a webinar hosted by Jefferies Equity Research on June 30. The patent-and-trademark lawyer took questions from Jefferies analysts David Katz and Kai Erman.
“This was a fun one to read up on,” said Boag of the legal documents in the case. It was, he explained, nominally a trade-secrets case with a copyright component. “There’s definitely overlap, similar potential liability.”
No patents were at issue, he continued. Trade secrets are “the complete opposite; they have to be in the dark in order to thrive. [But] trademark cases can be hugely damaging to a company. Just possessing something isn’t necessarily misappropriation,” however, unless that secret was acquired improperly.
“Hiring a game designer away from Company A to Company B,” as Light & Wonder did with Aristocrat veteran Emma Charles, “that’s asking for trouble.”
In such cases, “You have to show that the harm is irreparable,” which Aristocrat did, hence the removal of Light & Wonder’s Dragon Train from the North American market. “It was a really dramatic opening to the case,” as was the disclosure of Aristocrat files and “other indicia” that Charles had on her computer.
“This is the opportunity for one competitor to beat the crap out of another,” Boag said. He pointed out that Light & Wonder had made few counterclaims, that Aristocrat had already gotten most of what it ostensibly wanted, and that Aristocrat was making a large issue over relatively little money. “If you’ve got a competitor in your crosshairs like that …” Boag let the thought linger.
Not only had Aristocrat gotten Dragon Train kicked off the United States market, “they’ve got the court on speed dial,” if Light & Wonder were to make another misstep. However, by continuing to trial, Aristocrat risked a finding that “their trade secrets are all bark, no bite.”
Light & Wonder was perceived as winning the most recent round of court proceedings, which concerned discovery motions. The Nevada district court held that Aristocrat must confide exactly what trade secrets are at issue.
Light & Wonder stock jumped nine percent after the ruling. Before that, it “was really getting hammered,” Boag related.
The court also ruled that the plaintiff wasn’t entitled “a very broad chunk,” as Boag described it, of Light & Wonder game math, but would have to content itself with keyword searches. “The court’s doing its job of trying to focus the case,” the attorney explained.
From here, the case is slated to proceed to the discovery process, followed by expert depositions, with a trial expected to begin in roughly a year’s time. “This has a ways to go if it doesn’t settle,” which Boag thought statistically unlikely. The keyword search, in the meantime, would focus on file names, functions, and employee names, along with other indicia.
Regarding Aristocrat’s endgame, Boag felt, “They want to preserve the status quo is, which is their competitor has been besmirched and sullied. There’s not much more that they want from this.”
Light & Wonder had commissioned an independent report, which Boag hadn’t seen as it’s still under seal. However, the outside investigator is known to have missed certain important matters, devaluing his work product. “The court’s going to be a little bit skeptical” of it, Boag said, “I don’t think he shows up again.”
Other expert reports are anticipated to be filed in December. Summary-judgment motions, further narrowing the case, are due on February 17, followed on March 13 by the judge’s pretrial order, which sets the remaining schedule for the case.
Boag said it’s not “an existential case” for either side, as neither Aristocrat nor Light & Wonder is expected to go out of business, regardless of who prevails. The outcome, he opined, will almost certainly be some form of lump-sum payment from Light & Wonder to Aristocrat, with neither party wanting anything different.
Future monitoring of Light & Wonder could also be on the table. “They don’t want that kind of invasive investigation going on from a direct competitor,” Boag said.
Although Emma Charles is long gone from Light & Wonder, she still has colleagues there, oes whom Boag expects to be the subject of additional scrutiny. Aristocrat will want “to hobble their direct competitor as much as they can” and obtain commercial intelligence on it.
Is the litigation overkill at this point? “How much does one of these games pull in in a year?” Boag queried in response. “It’s expensive, but that’s the price of peace here.”
As for how much is at issue, Boag also replied with a question. “What’s a lot of money to you? This is not a $500 million case.” The trade secrets, he said, are crucial, leading to a determination of lost profits, unjust enrichment of Light & Wonder, plus a penalty multiplier for bad conduct by the latter. “That’s the universe of damages in this case.”
Asked whether any top-level management changes were on the horizon, Boag was ambiguous. “There was a decision made [by Light & Wonder] to hire someone who was [an employee] at a direct competitor. It’s almost a leak investigation,” he said, one that would be easier if someone could be scapegoated.
In any event, settlement is overwhelmingly the most appealing option, the New York-based lawyer opined. Putting the matter in the hands of a jury of lay people constitutes “a real risk.”
Boag declined to speculate on the fate of parallel Aristocrat/Light & Wonder litigation in Australia, being unfamiliar with the courts Down Under.
