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CIAS, Inc. v. Alliance Gaming Corporation

March 29, 2006

CIAS, INC., PLAINTIFF,
v.
ALLIANCE GAMING CORPORATION AND BALLY GAMING, INC., DEFENDANTS.



The opinion of the court was delivered by: Lewis A. Kaplan, District Judge.

MEMORANDUM OPINION

This patent infringement case involves a patent on a system for detecting counterfeit items that is used in tickets used for playing cashless slot machines in casinos, among other things. The matter is before the Court on defendant's motion for summary judgment dismissing the complaint on the ground that its accused systems do not infringe plaintiff's patent.

I. Facts

A. The Parties

Plaintiff CIAS, Inc. ("CIAS") owns U.S. Patent No. 5,283,422 (the "'422 patent"), which teaches a system of counterfeit detection.*fn1

Defendants are Alliance Gaming Corporation and its subsidiary, Bally Gaming, Inc. (collectively, "Alliance").*fn2 It is a "leading manufacturer of systems and machines used in the gaming industry."*fn3 Among other things, it manufactures and sells two systems that manage all aspects of a casino's slot machines, including accounting and management functions.*fn4

B. The '422 Patent

After overcoming several rejections based on the cited prior art,*fn5 the '422 patent issued on February 1, 1994.*fn6 In connection with infringement litigation unrelated to this case, CIAS requested re-examination on March 30, 1999.*fn7 A re-examination certificate was issued on October 17, 2000, confirming patentability after amendment of Claim 1 by combining it with the original Claim 8.*fn8

The parties dispute vigorously the scope and meaning of the '422 patent's claims, as addressed below. It is undisputed, however, that the '422 patent describes a counterfeit detection system.*fn9 The system detects counterfeits by assigning identifying information to a finite number of objects and storing that information.*fn10 When an object later is presented for authentication, the system compares the object's identifying information to the stored data.*fn11 If the identifying information either does not appear in the stored data or previously has been presented for authentication, the system determines that the object is counterfeit.*fn12

Claim 1 of the '422 patent reads in full: "A counterfeit detection system for identifying a counterfeit object from a set of similar authentic objects, each object in said set having unique authorized information associated therewith comprised of machine-readable code elements coded according to a detectable series, the system comprising: means at a first facility for storing said authorized information; means at a plurality of facilities other than said first facility for machine-reading code elements from a similar object and providing information related to the machine-read code elements; means coupled to receive said information related to said code elements machine-read from aid object for at least temporarily storing that information; and means at said first facility for detecting counterfeits coupled to said storing means and to said means for temporarily storing, said detecting means including a computer programmed to detect a counterfeit from information in said storing means at said first facility and from information received by said means for temporarily storing when information related to code elements machine read from a similar object is different from said authorized information."*fn13

Claims 2 through 10 are dependent on Claim 1 and describe various permutations of the system.*fn14

Claims 11 and 12 describe systems similar to that set out in Claim 1, but with different means of collecting and comparing the unique authorized information.*fn15 Claims 13 and 14 describe similar systems, but the information associated with each object is "unique randomly selected authorized information [] comprised of machine-readable code elements."*fn16 Finally, Claims 15 and 16 describe a method for designating objects as authorized objects by "randomly selecting m sets of unique authorized information from n sets of unique information, said n sets of unique information being a non-random series and m being substantially less than n, such that no given set of said m sets of unique authorized information is deducible from all or part of the remaining of said m sets of authorized information, n and m being integers and n being greater than one; storing said m sets of authorized information; and applying said m sets of authorized information to respective authorized objects in a machine readable form."*fn17

C. Alliance's Systems

Alliance offers two products, called the Slot Data System ("SDS") and the Slot Management System ("SMS"),*fn18 that manage "all aspects of a casino's slot machines, including accounting and management functions."*fn19 They allow players to use "cashless" slot machines by inserting and retrieving electronically-generated tickets redeemable for cash.*fn20

These paper tickets, called eTickets,*fn21 are the size of a dollar bill and imprinted with an 18-digit identification number, which appears both numerically and in a standard bar code format.*fn22 Slot machines read eTickets with "bill validators," equipment that includes standard bar code readers.*fn23

While the SDS and SMS systems each produce an 18-digit identification number for every eTicket, they do so in different manners. The SDS system produces a number comprised of five subparts:*fn24

Ticket Type 1 digit identifying whether the eTicket was printed at a slot machine or casino cashier station.

Property Identifier 3 digits, identifying the casino.

Machine Number 5 digits, identifying the machine or cashier station that printed the eTicket.

Ticket Number 5 digit serial number for the individual eTicket, ranging from 00001 to 99999. Unique Ticket 4 digits, generated by a secret algorithm Identifier using the preceding numbers.

In contrast, an 18-digit identification number produced by the SMS system*fn25 is comprised of five digits that identify the machine issuing the eTicket and thirteen digits that are generated by a secret algorithm, that operates on a machine identification number, casino identification number, the date, and the time as its input data.*fn26

CIAS contends that the SDS system infringes Claims 1 (as amended), 3, 5-7, and 9-12 and that the SMS system infringes Claims 13 and 14.

II. The Standard

Summary judgment is appropriate if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.*fn27 The moving party has the burden of demonstrating the absence of a genuine issue of material fact,*fn28 and the Court must view the facts in the light most favorable to the nonmoving party.*fn29

Where the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence on an essential element of the non-movant's claim.*fn30 In that event, the nonmoving party must come forward with admissible evidence*fn31 sufficient to raise a genuine issue of fact for trial or suffer an adverse judgment.*fn32

When a party moves for summary judgment of non-infringement, the court first determines the meaning and scope of the claims as a matter of law and then compares the construed claims to the allegedly infringing product.*fn33 A court may, but need not, conduct a Markman hearing to determine the scope of the claims.*fn34

III. Claim Construction

A. Applicable Law

"It is a 'bedrock principle' of patent law that 'the claims of a patent define the invention to which the patentee is entitled the right to exclude.'"*fn35 Claim terms in a patent normally have their ordinary and customary meanings as understood by those skilled in the relevant art at the time of invention.*fn36 The understanding of a claim term by one of ordinary ...


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