Federal Court of Australia Light & Wonder, Inc v Aristocrat Technologies Australia Pty Limited [2024] FCA 870 Appeal from: Aristocrat Technologies Australia Pty Ltd v Light & Wonder, Inc. [2024] FCA 439 File number: NSD 623 of 2024 Judgment of: JACKMAN J Date of judgment: 7 August 2024 Catchwords: PRACTICE AND PROCEDURE – preliminary discovery – application for leave to appeal – where prospective proceedings concern misuse of confidential information and copyright infringement – where related proceedings commenced by prospective applicant in the United States – application dismissed Legislation: Federal Court Rules 2011 (Cth) r 7.23 Cases cited: Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391 Aristocrat Technologies Australia Pty Ltd v Ainsworth Game Technology Ltd [2018] FCA 1511 Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397 Echo Tasmania Pty Ltd v Imperial Chemical Industries plc [2008] FCAFC 58 Hooper v Kirella Pty Ltd [1999] FCA 1584; (1999) 96 FCR 1 Objectivision Pty Ltd v Visionsearch Pty Ltd [2014] FCA 1087; (2014) 108 IPR 244 Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133; (2008) 169 FCR 435 Quanta Software International Pty Ltd v Computer Management Services Pty Ltd [2000] FCA 969; (2000) 49 IPR 25 St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Number of paragraphs: 30 Date of hearing: 30 July 2024 Counsel for the Applicants: Mr E Heerey KC and Ms F St John Solicitor for the Applicants: Jones Day Counsel for the Respondent: Mr A Bannon SC and Mr C McMeniman Solicitor for the Respondent: Gilbert + Tobin ORDERS NSD 623 of 2024 BETWEEN: LIGHT & WONDER, INC First Applicant LNW GAMING ANZ PTY LTD (ACN 001 660 537) Second Applicant MS EMMA CHARLES (and another named in the Schedule) Third Applicant AND: ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED (ACN 001 660 715) Respondent order made by: JACKMAN J DATE OF ORDER: 7 August 2024 THE COURT ORDERS THAT: 1. The application for leave to appeal be dismissed. 2. The applicants pay the respondent's costs of the application for leave to appeal. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT JACKMAN J: Introduction 1 This is an application for leave to appeal from Orders 1 to 5 of the orders of the primary judge made in Aristocrat Technologies Australia Pty Ltd v Light & Wonder, Inc. [2024] FCA 439. The applicants for leave to appeal, being Light & Wonder, Inc., LNW Gaming ANZ Pty Ltd and others (together L&W), accept that leave to appeal is required under s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA). The application is opposed by the respondent (Aristocrat). 2 The National Appeals Coordinating Judge previously considered that it was appropriate to list the application for leave to appeal immediately prior to, or concurrently with, the proposed appeal during the Full Court sittings in November 2024. However, L&W filed an interlocutory application seeking expedition of the hearing of the application for leave to appeal, and if leave to appeal is granted, the appeal itself. The application for expedition was a term of a stay of Orders 1 to 5 by the primary judge. When the Court inquired whether or not a listing for the application for expedition was still required, it appeared that the parties had differing views as to the appropriate way forward, and accordingly the application for expedition was referred to me. I regarded it as appropriate that the hearing of the application for leave to appeal be expedited. Accordingly, when the matter came before me on 9 July 2024 to deal with the application for expedition, I fixed the hearing of the application for leave to appeal (which was already almost two months old) for hearing before me on 30 July 2024. Reasons of the Primary Judge 3 The application before the primary judge was brought by Aristocrat against four prospective respondents, seeking preliminary discovery pursuant to r 7.23 of the Federal Court Rules 2011 (Cth). Aristocrat is engaged in the design and supply of electronic gaming machines (EGMs) and games played on EGMs. Aristocrat holds all the intellectual property rights in the Lightning Link and Dragon Link Games which were designed by High Roller Gaming Pty Ltd (HRG) for Aristocrat. Those games were launched in 2014 and 2016 respectively, and Aristocrat describes them as its best performing games since the time of their launch: [2]. 4 L&W competes with Aristocrat in the supply of EGMs and games played on EGMs. The third prospective respondent (Ms Charles) and the fourth prospective respondent (Mr Sefton) previously worked for Aristocrat and now work for L&W: [3]. The evidence showed that Ms Charles and Mr Sefton were directly involved during the period of their employment by Aristocrat (and, in the case of Ms Charles, HRG) in the development of Aristocrat's Lightning Link and Dragon Link Games. Ms Charles was involved in the design of the mathematics underlying the games and Mr Sefton, a graphics designer, was involved in the design of artwork associated with the games: [5]. Ms Charles was directly involved in the design and development of L&W's Dragon Train game, which was launched in August 2023: [7]. 5 The primary judge referred to evidence which suggested that Ms Charles may have used confidential information obtained by her during the course of her work with Aristocrat and HRG in developing Lightning Link and Dragon Link while working on the design of L&W's Dragon Train. In particular, there was evidence that suggested that Ms Charles may have made use of a confidential spreadsheet and other confidential information created by her or other employees of Aristocrat or HRG in the course of developing Lightning Link and Dragon Link. There was also evidence that Mr Sefton was, while working for L&W, in possession of artwork which he created while working for Aristocrat: [8]. 6 Aristocrat contended that it has reasonable grounds to believe that it may have a right to obtain relief in the Court from each of the prospective respondents for the following causes of action: (a) breach of confidence and breach of contract for misuse of Aristocrat's confidential information (including the maths documents and source code that underpinned Lightning Link and Dragon Link) in the development of Dragon Train; (b) infringement of copyright in respect of pay tables, reel strips, waiting tables, underlying maths spreadsheets, game specifications, underlying source code, original artwork or cinematograph films for Dragon Link and Lightning Link; (c) passing off by way of misrepresenting that Dragon Train is part of the Dragon Link family of games or is a game associated with Dragon Link; and (d) making misleading or deceptive representations to customers or potential customers about the features of Dragon Train relative to Dragon Link. Aristocrat contended that, having made reasonable enquiries, it did not have sufficient information to decide whether to start a proceeding in the Court for relief in respect of those causes of action: [9]. 7 The primary judge set out the terms of r 7.23 at [11] as follows: (1) A prospective applicant may apply to the Court for an order under subrule (2) if the prospective applicant: (a) reasonably believes that the prospective applicant may have the right to obtain relief in the Court from a prospective respondent whose description has been ascertained; and (b) after making reasonable inquiries, does not have sufficient information to decide whether to start a proceeding in the Court to obtain that relief; and (c) reasonably believes that: (i) the prospective respondent has or is likely to have or has had or is likely to have had in the prospective respondent's control documents directly relevant to the question whether the prospective applicant has a right to obtain the relief; and (ii) inspection of the documents by the prospective applicant would assist in making the decision. (2) If the Court is satisfied about matters mentioned in subrule (1), the Court may order the prospective respondent to give discovery to the prospective applicant of the documents of the kind mentioned in subparagraph (1)(c)(i). 8 The primary judge then referred at [12] to the judgment of Lindgren J in relation to O 15A, r 6 of the former Federal Court Rules in Alphapharm Pty Ltd v Eli Lilly Australia Pty Ltd [1996] FCA 391 at pp 29–33, which provides much-cited authority that the then para (b) (requiring that it be shown that the applicant for preliminary discovery lacks "sufficient information to enable a decision to be made whether to commence a proceeding") was an objective matter, and importantly that para (b): contemplates that after making all reasonable inquiries, the applicant has come up against a problem, namely, that it is lacking a piece of information or pieces of information reasonably necessary to enable it to decide whether to commence a proceeding. 9 The primary judge referred at [13] to Lindgren J's summary of the relevant principles as having been applied by the Full Court in Hooper v Kirella Pty Ltd [1999] FCA 1584; (1999) 96 FCR 1 at [40] (Wilcox, Sackville and Katz JJ), in a passage cited with approval by the Full Court in Optiver Australia Pty Ltd v Tibra Trading Pty Ltd [2008] FCAFC 133; (2008) 169 FCR 435 at [32] (Heerey, Gyles and Middleton JJ). At [14], the primary judge said that even if the prospective applicant has sufficient information with which to plead a cause of action, it does not necessarily follow that the prospective applicant has sufficient information to decide whether to start a proceeding for relief in this Court. The primary judge said that a prospective applicant may be entitled to preliminary discovery to determine the extent of the prospective respondent's breach and the strength of any potential defences, citing St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147 at [26(f)] (Hely J). 10 The primary judge referred at [20] to the submission made by the prospective respondents with regard to subpara (b) of r 7.23(1) to the effect that Aristocrat already has sufficient information to decide whether to start a proceeding in the Court to obtain relief. The prospective respondents submitted that what Aristocrat was really seeking to do by means of preliminary discovery was to obtain information which would allow it to fully assess the strength of its case against the prospective respondents before making any decision to commence a proceeding, and that the material sought by Aristocrat went beyond what was reasonably necessary to enable it to make such a decision. In support of that submission, the prospective respondents pointed to Aristocrat's evidence as including a document voluntarily produced to Aristocrat's solicitors by the prospective respondents' solicitors, and another spreadsheet produced by Aristocrat, and the similarities between the two as identified by an independent expert engaged by Aristocrat, Mr Ellis: [21]. The prospective respondents submitted that that material was more than adequate to enable Aristocrat to make its decision whether or not to commence a proceeding in this Court, although they made clear that they did not accept that the information in the documents had been used in the design of Dragon Train: [22]. The prospective respondents denied copying and positively asserted independent creation: [22]. 11 In further support of their submissions, the prospective respondents referred to the existence of a proceeding in which Aristocrat has sued L&W in the United States District Court for Nevada (the US Proceeding), which was commenced on about 26 February 2024, some months after Aristocrat filed its originating application for preliminary discovery in this Court: [23]. The primary judge referred to the complaint in the US Proceeding as making various allegations against L&W including the following: (a) L&W developed Dragon Train using Ms Charles's knowledge about how Dragon Link and Lightning Link work; (b) there are similarities between Dragon Link and Dragon Train that seemingly cannot be explained by any legitimate reverse engineering; (c) absent this misappropriation of Aristocrat's trade secrets, L&W could not have replicated the signature game play and "feel" of Dragon Link and Lightning Link to the degree it did; (d) L&W's misappropriation of Aristocrat's trade secrets has been wilful, malicious and part of a sustained and systemic effort to "rip off" the signature elements (and "free-ride" on the commercial success) of Aristocrat's Dragon Link games; (e) L&W's replicating of the Dragon Link Trade Dress on its own gaming machines and digital games constitutes false designation of origin, false or misleading description, and/or false or misleading representation; (f) L&W has acquired through improper means one or more of Aristocrat's trade secrets embodied in the Dragon Link and Lightning Link games, including in so far as L&W knew or had reason to know that it had received the information from persons, including Ms Charles and/or Mr Sefton, who owed a duty to Aristocrat to maintain the secrecy of the information, to not disclose the information, and to not use it for the benefit of others; and (g) L&W has used without authorisation one or more of Aristocrat's trade secrets to develop L&W's Dragon Train games, which L&W intentionally designed to copy and compete with Aristocrat's Dragon Link and Lightning Link games. 12 The primary judge referred to the prospective respondents' submission that these are the same allegations that Aristocrat relies on in this proceeding: [23]. The primary judge referred to the submission by the prospective respondents that the fact that Aristocrat was willing to file the complaint in the US Proceeding indicates that Aristocrat is already in possession of the information it reasonably requires in order to make a decision to commence a proceeding in this Court. Further, the primary judge referred to the submission by the prospective respondents that, if the Court is satisfied that the requirements of r 7.23(1) are met, then it should nevertheless, in the exercise of its discretion, decline to make any order for preliminary discovery. That submission was put on two bases: the fact that Aristocrat has already commenced a proceeding in the United States District Court based on the same factual allegations, and because L&W has already undertaken a substantial review of its records and produced several documents voluntarily. 13 At [26], the primary judge said the following, which was not the subject of any direct challenge by L&W at the hearing before me: At the core of Aristocrat's concerns is the possibility that its confidential information or copyright works have been embodied or used in the design of Dragon Train. The material voluntarily supplied by L&W to Aristocrat suggests that this may have in fact occurred but stops well short of disclosing whether or not such material was actually used in the design of Dragon Train. In this context, the correctness of the prospective respondents' assertion that Dragon Train was not the product of copying, but of independent creation, cannot be sensibly assessed by Aristocrat without knowing more about the underlying design of Dragon Train and, in particular, the mathematical rules, formulae and models used to create or implement the game. 14 The primary judge considered that Aristocrat was entitled to preliminary discovery of such material for the purpose of assessing whether or not its confidential information may have been used in the design or implementation of Dragon Train: [27]. However, as to the source code, the primary judge said that there did not appear to be any reasonable basis to believe that either Ms Charles or Mr Sefton had copied or disclosed source code for Dragon Link or Lightning Link, and therefore declined to require the prospective respondents to produce the source code for Dragon Train: [28]. 15 In relation to the US Proceeding, the primary judge did not accept the prospective respondents' submission that it showed that Aristocrat already had sufficient information with which to make its decision to commence a proceeding in this Court: [29]. The primary judge referred to the evidence as including a copy of a motion filed by L&W in the US Proceeding on or about 9 April 2024 seeking to have Aristocrat 's complaint dismissed on the basis that Aristocrat's allegations were "speculative" and "wholly insufficient to plausibly allege that any L&W Defendant knowingly used Aristocrat's trade secrets", and that "circumstantial allegations regarding product similarity, even if true, do not support a reasonable inference that L&W used Aristocrat's trade secrets to develop its Dragon Train product": [29]. 16 The primary judge said that, presumably, L&W would say of similar proceedings in this Court without additional evidence that such proceedings would also be speculative and implausible and seek an order for summary dismissal on that basis: [30]. At the hearing before me, L&W accepted that that was an appropriate inference. The primary judge said that the fact that L&W is seeking summary dismissal of the US Proceeding reinforced his Honour's view that it would not be reasonable to require Aristocrat to make its decision as to whether or not to commence a similar proceeding in this Court, without first obtaining preliminary discovery: [30]. The primary judge noted that on the evidence, preliminary discovery is not available in the US. Accordingly, the primary judge said that the commencement of the US Proceeding did not, in itself, demonstrate that Aristocrat has no right to seek preliminary discovery in this jurisdiction: [30]. 17 As to the prospective respondents' submissions based on the Court's general discretion, the primary judge said "there is in my view no sufficient reason shown for not making an order for preliminary discovery": [31]. The primary judge referred to the confidentiality of the material sought by Aristocrat, but noted that the Full Court had observed in Optiver at [40] that confidentiality is ordinarily protected by appropriate directions and undertakings: [31]. 18 The primary judge then turned to the detailed drafting of the categories of preliminary discovery sought by Aristocrat, distinguishing between documents reasonably required to enable a prospective applicant to make its decision to commence a proceeding, on the one hand, and documents which, though not reasonably necessary for that purpose, would be good to have before commencing a proceeding, on the other hand: [32]–[38]. The primary judge noted that the parties were in substantial agreement with regard to the confidentiality regime to apply to the prospective respondents' discovery: [39]. His Honour concluded that the confidentiality regime proposed by the prospective applicant provided the prospective respondents with adequate protection in relation to such material: [39]. Application for Leave to Appeal 19 There was no dispute between the parties that the applicable tests for the grant of leave to appeal are that: (a) the decision is attended with sufficient doubt to warrant its reconsideration on appeal; and (b) supposing the decision to be wrong, substantial injustice would result if leave were refused: Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; (1991) 33 FCR 397 at 398–9 (Sheppard, Burchett and Heerey JJ). Further, L&W submits, and I accept, that although orders for preliminary discovery are technically interlocutory, they have a degree of finality in that they effectively require the prospective respondent to produce documents for inspection that otherwise it would be entitled to keep to itself: Echo Tasmania Pty Ltd v Imperial Chemical Industries plc [2008] FCAFC 58 at [40] (Black CJ and Sackville J). 20 The first of the proposed grounds of appeal is that the primary judge erred in principle at [26]–[30] by finding the requirements of para (b) of r 7.23(1) to be satisfied in circumstances where Aristocrat believed the information stated in the complaint filed in the US Proceeding, including the work which Ms Charles and Mr Sefton had performed at Aristocrat and HRG on Lightning Link and Dragon Link and the objective similarities between those games and L&W's Dragon Train. Those matters are alleged in the US Proceeding to form the basis of an allegation that Ms Charles and/or Mr Sefton used Aristocrat's confidential information in developing Dragon Train, and that L&W was aware of and complicit in that misuse of confidential information. It is thus said by L&W that, assessed objectively for the purposes of r 7.23(1)(b), Aristocrat has reasonably sufficient information to decide whether to start a proceeding in this Court. L&W submits that Aristocrat is in the position of a party which hopes to be comforted in taking the decision to commence a proceeding which it already has sufficient information to enable it to take, citing Alphapharm at p 38. L&W accepts that the primary judge correctly stated the legal principles at [12]–[14], but submits that the primary judge misapplied those principles. 21 In my view, that ground of appeal has no realistic prospect of success. L&W has not demonstrated any error by the primary judge, let alone an error of principle so as to call for appellate intervention. 22 In the first place, L&W makes no challenge to the primary judge's finding at [26] to the effect that the material voluntarily supplied by L&W to Aristocrat suggests that it is possible that Aristocrat's confidential information or copyright works have been embodied or used in the design of Dragon Train, but stops well short of disclosing whether or not such material was actually used in the design of Dragon Train. Nor does L&W make any direct challenge to the finding at [26] that the correctness of the prospective respondents' assertion that Dragon Train was not the product of copying, but of independent creation, cannot be sensibly assessed by Aristocrat without knowing more about the underlying design of Dragon Train and, in particular, the mathematical rules, formulae and models used to create or implement the game. There was ample evidence adduced before the primary judge to support those findings, and the contrary was not submitted by L&W. 23 Second, it is wrong to characterise all of the allegations in the US Proceeding as "information" which Aristocrat has. The allegations comprise both matters of primary fact, and matters of inference drawn from the primary facts. Only the matters of primary fact can properly be described as "information". The case articulated by Aristocrat in the US Proceeding is a circumstantial one, relying on inferences sought to be drawn from primary facts concerning the opportunity available to Ms Charles and Mr Sefton to misuse Aristocrat's trade secrets and primary facts concerning the objective similarities between the rival products. The case is thus comparable to the circumstances considered in Optiver at [37], which the Full Court described as a purely circumstantial case relying upon inference, in which, for all the prospective applicant knew, there may have been facts which made it equally likely, or more probable than not, that the prospective respondent obtained its software in ways that did not infringe any of the prospective applicant's rights. This has been a typical feature of cases where preliminary discovery has been successfully sought in respect of alleged copyright infringement and misuse of confidential information in computer programs and similar technology in circumstances where the prospective applicant does not have the underlying program or formula which drives the prospective respondent's product: Aristocrat Technologies Australia Pty Ltd v Ainsworth Game Technology Ltd [2018] FCA 1511 at [70] (Yates J); Objectivision Pty Ltd v Visionsearch Pty Ltd [2014] FCA 1087; (2014) 108 IPR 244 at [92] (Perry J); Quanta Software International Pty Ltd v Computer Management Services Pty Ltd [2000] FCA 969; (2000) 49 IPR 25 at [28] (Sackville J). 24 Third, L&W has taken the position in the US Proceeding that the allegations are speculative and implausible, and accepts that the primary judge was correct to infer at [30] that L&W would say the same of similar proceedings commenced in Australia, in the event that Aristocrat were to commence a proceeding in this Court without additional evidence. L&W accepts that the procedural rules governing the US Proceeding differ from the rules of this Court. The important point, however, is that L&W regards the inferences sought to be drawn by Aristocrat as being at the very least attenuated and tendentious. In my view, that undermines L&W's submission that Aristocrat should be treated as having known the matters which are the subject of its allegations. The mere fact that Aristocrat may be said to have genuinely believed that those allegations are true cannot be sufficient to satisfy the objective question as to whether Aristocrat has sufficient information to decide whether to start a proceeding in this Court. 25 The second proposed ground of appeal is that, in circumstances where Aristocrat had decided to start the US Proceeding, the primary judge erred in principle at [26]–[30] by failing to consider whether Aristocrat reasonably needs further information to know whether the cost and risk of litigation in this Court are worthwhile, and ought to have found that Aristocrat did not reasonably need further information to make that decision. In my view, that ground does not enjoy any realistic prospect of success for the reasons given above in relation to the first proposed ground. In addition, there is no merit in the contention that the primary judge failed to consider whether Aristocrat reasonably needs further information to know whether the cost and risk of litigation in this Court are worthwhile, that being the very matter which the primary judge was addressing at [26]–[30]. There was no need for the primary judge to use the particular words "cost and risk" of litigation in circumstances where it is difficult to see any other practical point of the obstacles facing Aristocrat in deciding whether to commence proceedings here. 26 The third proposed ground of appeal is that the primary judge erred in principle by giving effect to r 7.23(1)(b) in a way that: (a) lost sight of the special and intrusive nature of preliminary discovery; (b) lost sight of the context of the Court's adversary system of forensic contest in which a proposed respondent is ordinarily entitled to withhold its evidence, certainly prior to the commencement of proceedings; (c) in effect, granted discovery of documents which would give Aristocrat comfort in taking the decision which it already had sufficient information to enable it to take; and (d) in effect, applied a threshold for the satisfaction of r 7.23(1)(b) that was so low that it would encourage a perception that preliminary discovery is available in almost any case. 27 For the reasons given above, I do not regard that proposed ground as having any merit. Indeed, comparison with the other cases to which I have referred above concerning preliminary discovery for prospective proceedings concerning copyright and confidential information in computer programs indicates that the primary judge's reasons and conclusion were consistent with a substantial body of comparable case law. 28 The fourth proposed ground of appeal is that the primary judge erred in the exercise of discretion at [31] by considering whether there was "sufficient reason shown for not making an order for preliminary discovery", thereby placing the onus on L&W to establish sufficient reason not to exercise the discretion to grant preliminary discovery. 29 This ground turns on a misreading of the primary judge's reasons at [31]. Having found that the elements of r 7.23(1) were satisfied, the primary judge then turned to L&W's submissions based on the general discretion, and in that context found that there was no sufficient reason shown for not making an order for preliminary discovery. That statement did not reflect any reversal of onus. The primary judge was, in effect, saying no more than the Full Court said in Optiver at [45] that normally there will be little scope for refusal of relief where the requirements of the rule governing preliminary discovery have been met, in that the remedy is beneficial and should not be refused, save for good cause. The primary judge found that no such good cause was established in the present case. 30 Accordingly, the decision of the primary judge is not attended with sufficient doubt to warrant its reconsideration on appeal. There is therefore no need to consider whether, supposing the decision to be wrong, substantial injustice would result if leave were refused. The application for leave to appeal is dismissed with costs. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackman. Associate: Dated: 7 August 2024 SCHEDULE OF PARTIES NSD 623 of 2024 Applicants Fourth Applicant: MR LLOYD SEFTON