The Case Against Roxor, Part 2: The Fur Has Started to Fly

by Lost_Sage, 18 August 05

The Case Against Roxor, Part 2: The Fur Has Started to Fly
By Shane Dizon, J.D., U.C. Hastings College of the Law ’05

With the filing of three key pre-trial documents in the Konami v. Roxor case, it’s time to bring things up to speed. There are a lot of paragraphs to sort through in these filings, so we’ll cover the basics.

I. Roxor’s Answer

A. Admissions and Denials

Roxor’s answer is not really surprising given what we addressed in Part 1 of this series. Defendants have to be careful to deny every allegation made by the complaint, or else they are deemed admitted.

What Roxor has admitted to are its basic contact information, personal jurisdiction, subject matter jurisdiction, supplemental jurisdiction, and venue. In short, Roxor agrees that Konami has sued in a proper place and has alleged a suit proper for being addressed in federal court.

As to the bulk of the allegations in Konami’s complaint, Roxor has denied practically every one of them. The wording used – indicating that Roxor is without sufficient information or belief – is a signal that the factual contention will be resolved through discovery and trial, not through the pleadings.

B. Affirmative Defenses

In addition to its denials of Konami’s allegations, Roxor plead a few affirmative defenses. Affirmative defenses are those, which if found true, absolve the defendant of liability. The first few aren’t earth shattering: Konami doesn’t have any intellectual property that can be infringed in violation of law.

The two affirmative defenses with which people might not be familiar are the statute of limitations and laches. They are somewhat related to each other, so I’ll address them together.

The statute of limitations simply sets a time limit on how long the plaintiff has to bring suit as a result of the defendant’s conduct. In civil litigation, the clock usually starts at one of two points: (a) when the injury occurs, (b) when the plaintiff discovers the injury. Roxor is only alleging that the clock “has run out,” on some ground out there, and Konami can’t bring its claims as a result.

Laches is closely related. In the case of laches, the statute of limitations hasn’t necessarily run. What the defendant is saying is that plaintiff has purposefully “sat” on its claim to accumulate damages, so when it does file suit, it can ask for more relief.

Laches is almost always asserted in punitive damage cases such as this one because in practice, punitive damages are usually some multiplier of the compensatory relief awarded. So keeping the compensatory damages low – or flat out saying the plaintiff shouldn’t get them – also keeps punitive damages under control.

Laches is an intriguing issue in this case. Admittedly, at some point Konami found out what Roxor was doing with the cabinets. But in theory, Konami should have brought the suit a reasonable time after it found out – I say reasonable time because, of course, it needed to talk to its lawyers and file the suit properly. But did it wait too long? Did it conveniently time the filing of the suit to coincide with the console release of ITG, now facing more potential harm than if it had filed prior to the console release? Was it supposed to wait, because the console release is really powerful “I told you so – they were infringing” evidence related to its underlying claim that illuminates in what way the “Boxor” allegations were infringing its intellectual property?

C. Roxor’s Counterclaims

What is slightly more surprising, albeit not completely, is Roxor’s three sets of counterclaims – concerning the viability of Konami’s intellectual property, Konami’s alleged unfair competition, and a weird little cause of action called tortious interference with prospective business relations. Let’s tackle each one in turn.

1. Intellectual Property

Well, this one’s not a surprise. Roxor is asking the court to declare that Konami’s DDR patent, trademarks, trade dress, and other federally and state protected intellectual property are invalid. After all, if it’s invalid, Roxor couldn’t have infringed on it.

Such a form of relief is called declaratory judgment: a party asks the court for a pronouncement that an act of its own or another party is legally valid or invalid. Declaratory judgment is sought so that the party knows, going forward, what its legal rights and obligations are, as opposed to having to wait for a trial down the road. In theory, Roxor could have brought suit for declaratory judgment separately. But it would obviously like to know its rights and obligations now. It is, after all, presently releasing and planning to release more ITG games and would like to know, going forward, whether these releases would violate state and federal law!

2. Unfair Competition

This claim is also not a shocking allegation. I know a lot you are asking how Konami’s competitive practices had previously messed with Roxor. Well, again, this is just an allegation. Roxor has all of discovery and trial to prove Konami was a bad-faith competitor.

3. Tortious Interference with Prospective Business Relations

The tortious interference claim is always a tricky one to prove. Doubly so because Roxor is not claiming interference with existing business relations or contracts, but interference with prospective business relations. In other words, something Konami is doing intentionally and unfairly limits Roxor’s ability to do future business.

The heart of the unfair competition and tortious interference claims will obviously be the “emotional” highlight of Roxor’s part of the jury trial, if the case makes it that far. These are “bad actor” claims against Konami. Of course, capitalism allows for and encourages competition. But both common law (which is where tortious interference comes from – it evolved from court decisions) and statutes (which largely govern unfair competition) lay down the ground rules for competition.

II. Konami’s Answer to Roxor’s Counterclaims

Not much of note here. Again, Konami must answer the claims plead by Roxor in its answer or will be held to admit them. It is not disputing the court’s jurisdiction over them. It simply admits all of its “biographical” information and denies all the factual allegations against it.

III. The Discovery Order

I provided a brief overview of civil litigation in my first piece on the lawsuit. We’re at the point where discovery – the fact-finding process of civil litigation – is about to begin. The order for discovery is a good example of what the legal system expects out of parties and how exhaustive the process is.

The federal courts expect parties to cooperate fully with each other during discovery. You’ll see on the document a number of case management conferences. These conferences are for the judge to check up on what the parties should be doing themselves anyways – disclosing required information, making records available, taking depositions, and resolving disputes amicably. Judges don’t want fights over every little piece of fact-finding in discovery. They want it to go smoothly. They want the parties to drive the process to an endpoint, when trial begins. Hence the schedule that was submitted. Based on the extent of discovery, the parties will eventually discuss with the judge how many days of trial the case will take.

Even with the desire for scheduling, efficiency, and cooperation, discovery takes a long, long time. It’s the phase of trial where firms bill up the wazoo – so much has to be sorted through, analyzed, marked as useful or irrelevant. Experts have to be brought in to do research on things such as what is or is not an infringement.

IV. Looking Ahead

A. Can This Suit End Before Trial?

It can, but it’s unlikely. Summary judgment is available to a party that can prove that there are no genuine issues of material fact, and that it is entitled to judgment as a matter of law. In other words: on everything that’s undisputed, after all our factfinding, the law says we win.

You can see the immediate problem with getting summary judgment in an intellectual property case. The issues are very hard to decide. For example, the judge may very well find there is a genuine issue as to whether there is or is not infringement, and will want that disputed issue to go the jury, where it belongs. Aside from any confidence we might have in a jury to decide complex matters of hardware and software engineering, the jury is the trier of disputed facts.

A party can get summary judgment as to the whole set of claims or as to part of them. So, for example, if the discovery process gives us a set of undisputed facts about Konami’s business behavior, but that behavior still does not legally constitute unfair competition or tortious interference, Konami could get summary judgment on those claims.

Lastly, let’s not forget about settlement. Konami and Roxor could decide to call it off and settle the claims. As of now, both sides want to see how “well” discovery goes before evaluating the strength of their bargaining positions.

B. Brief Commentary on Damages and Representation

Remember this important rule of patent litigation: loser pays legal fees. Yeouch! The government has decided the protection of intellectual property is that important to override the normal rule that each side bears its own legal costs.

Also, let me remind readers that both parties are represented by very big, experienced law firms. Konami’s counsel is Baker & McKenzie; Roxor’s counsel is Wilson Sonsini Goodrich & Rosati. Some of you know that WSG&R is based right here in Silicon Valley. Both firms are well known and well respected in our legal community, so it’s unlikely we’ll see any bad litigation behavior or poorly done filings.