Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 1 of 22 Page ID #:1653 1 Eric A. Buresh (pro hac vice) 2 eric.buresh@eriseip.com Clifford T. Brazen (pro hac vice) 3 cliff.brazen@eriseip.com 4 Chris R. Schmidt chris.schmidt@eriseip.com 5 Erise IP, P.A. 6 7015 College Blvd. Suite 700 7 Overland Park, KS 66211 8 Phone: (913) 777-5600 Facsimile: (913) 777-5601 9 10 Ben M. Davidson (Cal. Bar. No. 181464) ben@dlgla.com 11 Davidson Law Group, a Law Corporation 12 4500 Park Granada Boulevard, Suite 202 Calabasas, CA 91302 13 Telephone: (818) 918-4622 14 Facsimile: (310) 473-2941 15 Attorneys for Plaintiff Crytek GmbH 16 IN THE UNITED STATES DISTRICT COURT 17 FOR THE CENTRAL DISTRICT OF CALIFORNIA 18 WESTERN DIVISION 19 CRYTEK GMBH, ) Case No. 2:17-cv-08937-DMG-FFM 20 ) Plaintiff, ) [HON. DOLLY M. GEE] 21 ) v. ) CRYTEK GMBH’S REPLY IN 22 ) SUPPORT OF MOTION FOR CLOUD IMPERIUM GAMES CORP. ) VOLUNTARY DISMISSAL 23 and ROBERTS SPACE INDUSTRIES ) WITHOUT PREJUDICE CORP., ) 24 ) DATE: February 7, 2020 Defendants. ) Time: 9:30 AM 25 ) Courtroom: 8C ) 26 ) REDACTED VERSION OF ) DOCUMENT PROPOSED TO BE 27 ) FILED UNDER SEAL 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 2 of 22 Page ID #:1654 1 2 TABLE OF CONTENTS 3 I. INTRODUCTION ............................................................................................... 1 A. Crytek’s Motion Is About Timing and Efficient Case Management............... 1 4 1. Breach of the GLA is based on Development of Squadron 42 as a standalone game, not the actual release of Squadron 42 ............................ 2 5 2. Crytek Should not be Faulted for Assuming the Truth of CIG’s Public Statements ................................................................................................... 3 6 3. Crytek’s Motion Positions The Parties to Litigate Only Once .................... 5 4. Crytek Proposed Reasonable Conditions on Dismissal ............................... 6 7 B. This Case Remains In Its Early Stages ............................................................ 8 8 II. ARGUMENT....................................................................................................... 9 9 A. Crytek’s Proposed Conditions for Dismissal without Prejudice Protect both Parties’ Legal Rights and Interests................................................................... 9 10 B. CIG’s Demand of Dismissal With Prejudice is Unsupported ....................... 10 1. None of CIG’s Expenses Will be Wasted .................................................. 10 11 2. Crytek Has Diligently Prosecuted its Case and This Motion ..................... 11 3. Crytek’s Basis for Dismissal is not “Suspect” ........................................... 11 12 4. This Case Remains in its Early Stages ....................................................... 12 5. The “Typical Cases” Warranting Dismissal with Prejudice Are Quite 13 Different From The Present Case ............................................................. 12 6. The Central District’s Toyo Tire Decision Bears no Resemblance to this 14 Case ........................................................................................................... 14 15 C. CIG’s Proposed Conditions are Punitive and Unreasonable ......................... 16 1. The Payment of Fees is Unnecessary to Protect CIG ................................ 16 16 2. Dismissal of Crytek’s Credits Claim along with its Squadron 42 Claim is a Matter of Judicial Economy ...................................................................... 17 17 III. CONCLUSION ................................................................................................. 19 18 19 20 21 22 23 24 25 26 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE ii Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 3 of 22 Page ID #:1655 1 TABLE OF AUTHORITIES 2 Cases 3 FEMA Trailer Formaldahyde Prods. Liab. Litig., 628 F.3d 157 (5th Cir. 2010) ..... 13 4 Nash v. Krauss, No. CV 05-2293 SVW (JTLx), 2006 WL 8440813 (C.D. Cal. 5 Apr. 4, 2006) ................................................................................................... 16 6 Toyo Tire & Rubber Co. v. Doublestar Dong Feng Tyre Co., No. 15 Civ. 246, 7 2018 WL 1896310 (C.D. Cal. Mar. 28, 2018) .............................. 11, 14, 15, 16 8 Viriyapanthu v. Bank of Am., N.A., No. SA CV 12-1285-DOC(ANx), 2013 9 WL 3188848 (C.D. Cal. June 21, 2013)............................................................ 7 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE iii Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 4 of 22 Page ID #:1656 1 I. INTRODUCTION 2 A. Crytek’s Motion Is About Timing and Efficient Case Management 3 CIG’s Opposition repeatedly suggests, with ample vitriol and hyperbole, that 4 CIG has all but won this case and that Crytek is “surrendering.” Whether CIG is 5 posturing for the Court or the public, CIG’s spin could not be less accurate. Crytek 6 filed its motion for the simple reason that CIG, as unbelievable as it sounds several 7 years into game development, purports 8 . While it seems far-fetched 9 that any video game developer, who has been working extensively on a game and is 10 pressing toward a release date, , CIG stated 11 this position in a recent verified discovery response. This has suggested to Crytek that 12 CIG has fully embraced a delay strategy. To prevent CIG from running out the clock 13 with its delay strategy, Crytek’s motion seeks to dismiss the current case without 14 prejudice so that the exact same case can be re-filed as soon as CIG stops flip-flopping 15 regarding how it is developing Squadron 42. This dismissal is a matter of timing, 16 nothing more. 17 CIG seeks sanctions, not conditions, on the basis that Crytek is taking a cut-and- 18 run approach to avoid an imminent adverse ruling that leads to a fee award. None of 19 CIG’s characterizations are true. Crytek is not running, and there is no imminent 20 adverse ruling whatsoever. Crytek, unlike CIG, is willing to back its words with deeds. 21 Crytek has affirmatively offered conditions, set out in Section I.A.4, that conclusively 22 demonstrate it is not running away from this lawsuit, it is not seeking to avoid an 23 adverse ruling, and it is not seeking to avoid a fee award. Crytek’s own proposed 24 conditions would not permit any of this to occur. Instead, Crytek simply requests to 25 dismiss its case temporarily to prevent CIG’s delay tactics from running out the clock 26 on the current case and creating great inefficiencies. Crytek will refile upon the release 27 of Squadron 42, and it firmly believes it will prevail. Crytek seeks dismissal of its 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 1 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 5 of 22 Page ID #:1657 1 entire case, including its independent credits claim, because it is an obvious principle 2 of judicial economy that all claims should proceed together at one time in an efficient 3 manner. Crytek is not losing, it is waiting. Once CIG stops delaying Squadron 42 and 4 releases it in a manner that constitutes a breach of the GLA, Crytek will re-file its 5 claims with the utmost of confidence. 6 1. Breach of the GLA is based on Development of Squadron 42 7 as a standalone game, not the actual release of Squadron 42 8 CIG spends much of its Opposition arguing that Crytek had to have known that 9 Squadron 42 had not yet been released as a standalone game from the start of this case. 10 See e.g., CIG’s Opposition, at 2, 8-9, 17. The underlying premise of CIG’s arguments 11 is the incorrect notion that the restrictions in the GLA only become effective upon 12 release of Squadron 42, and CIG repeatedly cites its own pleadings (e.g., ECF 26, 13 17:4-10; ECF 53, 17:13-16; ECF 57-1, 14:13-14) in support of this premise, apparently 14 assuming that its own arguments are evidence. 15 The breach that Crytek has been and will be asserting pertains to Section 2.1.2 16 of the GLA, which gives CIG the right “to exclusively embed CryEngine in the Game 17 and develop the Game which right shall be sub-licensable pursuant to Sec. 2.6.” GLA, 18 ECF 107-1 at § 2.1.2. Exhibit 2 to the GLA further explains that “the Game does not 19 include any content being sold and marketed separately, and not being accessed 20 through the Star Citizen Game client, e.g. a fleet battle RTS sold and marketed as a 21 separate, standalone PC game[.]” Id. at Ex. 2. CIG does not have any rights to embed 22 the CryEngine in and develop any game that does not fit the GLA’s definition of a 23 Game. From the inception of this case, it has been Crytek’s position that CIG’s 24 development of Squadron 42 as a standalone game was, by itself, a breach of the GLA 25 whether or not Squadron 42 was ever released at all. 26 As set forth in the motion and in the next section, Crytek had every reason to 27 believe based on CIG’s own public statements that CIG was developing Squadron 42 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 2 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 6 of 22 Page ID #:1658 1 as a standalone game in breach of the GLA. Crytek did not become aware that 2 3 until Crytek received CIG’s verified response to Crytek’s 4 Interrogatory No. 1 in late November 2019. Crytek intends to re-file its claims after 5 CIG actually releases Squadron 42, not because the release is a necessary precondition 6 to Crytek’s breach claim, but because CIG will no longer have any ability to hide how 7 it has been developing Squadron 42 once it releases it. CIG’s delay games will end, 8 and once CIG releases Squadron 42 as a standalone game (in line with its public 9 statements), it will indisputably confirm that CIG has been developing Squadron 42 10 as a standalone game in breach of the GLA. 11 2. Crytek Should not be Faulted for Assuming the Truth of 12 CIG’s Public Statements 13 Crytek’s claims have been guided consistently by CIG’s public statements. Yet, 14 in the context of this litigation, CIG has waffled from one position to another with 15 apparent abandon. As explained in Crytek’s opening motion, CIG itself described 16 Squadron 42 with the exact language that would exclude it from the definition of “the 17 Game” in the GLA just days after Crytek filed its Complaint. See Crytek’s 18 Memorandum in Support of Motion to Dismiss, ECF 95 at 2; see also Ex. C to Crytek’s 19 Memorandum, ECF 93-3 (“Watch the standalone Squadron 42 Vertical Slice 20 Gameplay Demo . . .”) (emphasis added). That video was posted more than a year after 21 CIG’s supposed “most recent public statement on the matter.” See CIG Opposition, 22 17; Declaration of Ortwin Freyermuth, ECF 107 at ¶¶ 13-16. Now, CIG appears to 23 claim in its brief that it is developing Squadron 42 to be accessed through the Star 24 Citizen game client. CIG’s Opposition, 17. Yet, in its verified discovery response from 25 late November 2019, . CIG claims that Crytek had no 26 reason to be confused by CIG’s public statements regarding the development of 27 Squadron 42, but CIG cannot get its own story straight from one pleading or discovery 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 3 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 7 of 22 Page ID #:1659 1 response to another. Until CIG’s feet are set in stone by the release of Squadron 42, it 2 will proffer whatever suits it in a particular context. That is the whole point of Crytek’s 3 motion—if the Court allows Crytek to dismiss and re-file after the release of Squadron 4 42, CIG will have no further ability to shift from one statement to another at its 5 convenience. In summary, CIG provided many public statements giving Crytek every 6 reason to believe it was developing Squadron 42 as a standalone game in violation of 7 the GLA. CIG’s recent verified discovery response states that 8 . Based on that 9 response, Crytek decided to voluntarily dismiss this present case until CIG’s position 10 shifting comes to a hard stop at which point Crytek will re-file. 11 In addition to the mode of development for Squadron 42, CIG’s flip-flopping 12 also has plagued this case from the start with respect to whether CIG “switched” to 13 Amazon’s Lumberyard. Initially, CIG stated to the public that it had switched from 14 CryEngine to Lumberyard. CIG’s Memorandum ISO Motion for Bond, ECF 57-1, at 15 3 (“On December 23, 2016, CIG publicly announced its switch from CryEngine to 16 Lumberyard.”). Crytek brought its lawsuit premised, in part, on this understanding. 17 Because it suited CIG’s litigation positions, however, CIG later admitted that it did 18 not actually switch to Amazon’s Lumberyard. CIG’s Reply ISO Motion for Bond, ECF 19 74, at 8. Rather, CIG was still using the CryEngine code itself, just under a separate 20 license from Amazon. Id. The issues have now evolved in such a way that CIG once 21 again claims that it has switched to Lumberyard. CIG’s Opposition, 3 (“[Crytek] 22 misleads the Court . . . by falsely claiming that CIG did not switch to Amazon 23 Lumberyard”). CIG’s repeated reversals make it extremely hard to litigate the parties’ 24 disputes in an organized fashion or to even decide what discovery is necessary because 25 CIG’s litigation statements are discarded at its convenience. Notwithstanding, based 26 on CIG’s prior representations to this Court, CIG entered into a license for the 27 Lumberyard engine offered by Amazon, 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 4 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 8 of 22 Page ID #:1660 1 which provided a license to use CryEngine . ECF 105-4 at 2 1. CIG never stopped using the same CryEngine code originally licensed under the 3 GLA, and CIG has never provided a single authority stating that taking a second 4 license from a third party to develop using the same code covered by the first license 5 somehow voids the restrictions of the first license. Crytek thus remains confident that, 6 as soon as CIG admits (or can no longer claim ignorance to the fact) that it is 7 developing a standalone version of Squadron 42, it will be in breach of the GLA and 8 that CIG’s Amazon license provides CIG no shelter from the GLA. 9 3. Crytek’s Motion Positions The Parties to Litigate Only Once 10 Crytek’s motion is necessary solely because CIG is delaying the final steps of 11 Squadron 42 development to run out the clock on this current case, which will only 12 force Crytek to file another case in the near future. This obviously makes no sense 13 when the Federal Rules provide a simple mechanism to dismiss this first case without 14 prejudice so that the litigation can proceed efficiently (only once) in a later case. This 15 is not a case where Crytek is seeking to dismiss because it is losing—Crytek is 16 confident that CIG does, in fact, intend to develop Squadron 42 into a standalone 17 game. Nor is this a case where Crytek is seeking to dismiss following an adverse ruling 18 from the Court. Instead, as explained above, Crytek is seeking to dismiss to address a 19 timing issue caused by CIG’s delay strategy. Despite CIG’s assertions to the contrary, 20 Crytek’s remaining claims are not only viable, they are more than winnable. To date 21 CIG has never been able to identify any authority for its novel defense that it is excused 22 from its obligations under the GLA simply because it took a separate license to the 23 same software from a third party. 24 Given those timing issues, the only sensible path forward for Crytek was to 25 bring the present motion. All other alternatives would result in significant waste for 26 both the parties and this Court. 27 First, Crytek could have pressed forward with all of its claims. This path would 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 5 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 9 of 22 Page ID #:1661 1 result in considerable wasted expense to both the parties and the Court. The parties 2 would be forced to press forward through fact and expert discovery as well as 3 dispositive motion briefing until Crytek received an order from the Court on Crytek’s 4 Squadron 42 claim that Crytek learned in November 2019 was not ripe. The case 5 would then press forward through trial on Crytek’s credits claims. But even following 6 trial and any subsequent appeals, the parties’ dispute would remain. Eventually, CIG 7 will release Squadron 42 as a standalone game revealing development in breach of the 8 GLA, and those new actions would give rise to a new claim. Crytek’s motion simply 9 seeks to wait for those inevitable actions by CIG to take place and then re-file. 10 Second, Crytek could have sought to dismiss just its claims based on Squadron 11 42. But, following dismissal of its Squadron 42 claim, all of the same problems with 12 pressing forward would remain in this approach. At some point, either during the 13 pendency of the parties’ existing case or after its conclusion, CIG would release 14 Squadron 42. At that time, a second case (including a new credits claim), duplicative 15 discovery, duplicative motions, and a duplicative trial would all follow. 16 The path represented by Crytek’s motion eliminates all of this potential waste. 17 The requested dismissal without prejudice will cure the recently disclosed ripeness 18 issue with Crytek’s Squadron 42 claim. Once CIG releases Squadron 42 as a 19 standalone game revealing the violative development activity, Crytek will refile this 20 action and the parties will be in exactly the same position as they are now—with all 21 legal rights and defenses intact—with the only difference being that Crytek’s breach 22 claim relating to Squadron 42 will be fully ripe. All of the parties work to date would 23 be preserved, and the case could efficiently proceed through an appropriate discovery 24 period before proceeding to dispositive motions and trial. 25 4. Crytek Proposed Reasonable Conditions on Dismissal 26 Immediately following the parties’ status conference with the Court on January 27 10, Crytek reached out to CIG to discuss appropriate conditions for its proposed 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 6 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 10 of 22 Page ID #:1662 1 dismissal. Ex. A, Correspondence from C. Brazen to J. Goldman dated 1/10/2020 and 2 1/13/2020. On a subsequent call, Crytek renewed its offer of reasonable conditions 3 originally raised with CIG during the parties’ prior meet and confer on December 30, 4 2019. Brazen Decl. ¶¶ 4–5. CIG rejected Crytek’s proposals. Id. at ¶ 5. 5 Crytek’s proposed conditions eliminate any prejudice that could result to CIG 6 as a result of the requested dismissal without prejudice. In essence, Crytek proposed 7 conditions designed to place both parties in the same position as they are currently. 8 Specifically, Crytek proposed the following: 9 1. The parties could rely upon any and all claims from the current action in 10 support of or in defense of a motion for fees/prevailing party motion 11 following the conclusion of the second action; 12 2. Crytek would agree to leave its posted bond of $500,000 intact until the 13 conclusion of the second action or resolution of any motion under 14 condition 3, or until such time as the parties resolve their dispute and so 15 notify the court; 16 3. The parties would agree that, in the unlikely event Crytek did not bring a 17 second action, either party could bring a motion for fees/prevailing party 18 motion in a declaratory action presented to this Court. 19 These proposed conditions completely protect both the parties’ legal rights, 20 interests, and ability to seek fees as a prevailing party at the actual conclusion of the 21 parties’ dispute. As this Court has recognized, the Court’s job in considering if and 22 how to dismiss is to prevent prejudice and protect the legitimate legal rights of the 23 defendant. See Viriyapanthu v. Bank of Am., N.A., No. SA CV 12-1285-DOC(ANx), 24 2013 WL 3188848 at *2 (C.D. Cal. June 21, 2013). Under Crytek’s proposed 25 conditions, all of CIG’s complained of “harms” can be addressed following the 26 conclusion of the second action. Crytek’s conditions are reasonably tailored to the 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 7 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 11 of 22 Page ID #:1663 1 specific circumstances underlying the present motion, and the Court should adopt 2 them. 3 CIG’s conditions, on the other hand, are punitive. They seek to punish Crytek 4 when Crytek is only seeking to manage its ongoing claims in an appropriate and 5 efficient manner. While the type of conditions CIG proposes may be appropriate where 6 a party is seeking to cut its losses early or to avoid a potential fees motion, they simply 7 do not fit the circumstances in this case.1 The conditions ultimately imposed on 8 Crytek’s voluntary dismissal without prejudice should be tied to the specific facts of 9 this case. The only procedural vehicle available to Crytek to create the pause necessary 10 to end CIG’s delay strategy was the present motion to dismiss. Requesting such a 11 pause when a second case is forthcoming should not open Crytek up to the punitive 12 conditions proposed by CIG. 13 B. This Case Remains In Its Early Stages 14 CIG places much weight on the notion that this case has entered its third year. 15 Detached from the specific context of this case, CIG is hoping to imply that this case 16 is in its late stages. The actual procedural details, however, plainly lead to the opposite 17 conclusion. Crytek filed this case on December 12, 2017. The parties remained in the 18 pleadings stage of the case until CIG filed its Answer to the Second Amended 19 Complaint in February 2019. ECF 53. The Court did not enter a case schedule until 20 March 7, 2019—less than a year ago. ECF. 55. Moreover, per this Court’s order, CIG 21 did not even need to respond to Crytek’s discovery requests until September 18, 22 2019—thirty days after Crytek posted its bond. ECF 59, at 2. Thus, discovery, for 23 Crytek, opened only 4 months ago. 24 25 1 And to this point, CIG knows full well that Crytek has no intent to “cut and run,” as 26 CIG put it. CIG’s Opposition, 20. In fact, one of Crytek’s proposed conditions above was explicitly proposed to protect CIG’s legal right to seek fees in the unlikely event 27 that Crytek ultimately decides not to bring another action following the release of Squadron 42. 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 8 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 12 of 22 Page ID #:1664 1 Moreover, as recently as January 2, 2020, both parties recognized—and jointly 2 represented to this Court—that the parties have significant discovery left to take. ECF 3 89, 3 (“[T]he parties believe there is good cause for the Court to grant the requested 4 continuance because, despite the parties’ best efforts, much discovery remains to be 5 conducted in this case[.]”). No depositions have been taken, neither party has made 6 any email production, not a single expert has been disclosed by either side, expert 7 reports and discovery still needs to occur, and the Court recently vacated the existing 8 schedule in response to the parties’ joint request for a continuance and Crytek’s filing 9 of this motion. ECF 97. While in its abundance of exuberance, CIG claims to have 10 already prepared for trial, this cannot possibly be the case given the actual status of 11 this case. By any reasonable measure, this case is in the early stages of discovery. 12 II. ARGUMENT 13 A. Crytek’s Proposed Conditions for Dismissal without Prejudice 14 Protect both Parties’ Legal Rights and Interests 15 The conditions proposed by Crytek in Section I.A.4 above ensure that when 16 Crytek refiles its action following the release of Squadron 42 as a standalone game, or 17 in the unlikely event Crytek does not refile its action, the parties will be in exactly the 18 same position they are in now, with all legal rights and interests intact. The analysis 19 courts perform in deciding whether voluntary dismissal is proper in the first place is 20 to ensure exactly what Crytek’s conditions achieve—preventing prejudice or 21 unfairness to the non-moving party. See Viriyapanthu, 2013 WL 3188848 at *2. CIG 22 has neither suggested nor explained why Crytek’s conditions fail to achieve this goal. 23 Thus, dismissal of this case under the terms proposed by Crytek provide fair 24 protections. 25 This stands in stark contradiction to CIG’s proposal which is not designed to 26 protect CIG, but to punish Crytek. The imposition of conditions for this purpose is 27 unsupported in the law, and the Court should reject CIG’s conditions. 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 9 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 13 of 22 Page ID #:1665 1 B. CIG’s Demand of Dismissal With Prejudice is Unsupported 2 While it is within the Court’s discretion to convert a motion for voluntary 3 dismissal without prejudice to one with prejudice, CIG has set forth no legally 4 sufficient reason for this Court to do so. CIG’s opposition pays little more than lip 5 service to the factors the Court should consider in deciding whether to dismiss with or 6 without prejudice while relying heavily on entirely inapposite case law. 7 1. None of CIG’s Expenses Will be Wasted 8 CIG’s argument is premised on the idea that Crytek is going to “walk away . . . 9 after forcing CIG to expend so much time and effort only to pack up right before the 10 close of discovery.” CIG’s Opposition, 15. For CIG to argue this is disingenuous. 11 Throughout this process, Crytek could not have been more clear that it has no intention 12 of walking away—as soon as CIG releases Squadron 42 as a standalone game as all 13 of CIG’s actions suggest it will, Crytek will refile its action. That has always been the 14 point of Crytek dismissing without prejudice, i.e., so that it can refile its action when 15 it is fully ripe. If Crytek had wanted to “walk away,” it would have negotiated 16 appropriate terms for a dismissal with prejudice. That is simply not what is happening. 17 When Crytek refiles its action, CIG will be in exactly the same position it is in now. 18 The fees it has purportedly expended to date (while wasteful in their volume) will have 19 the exact same value to the second case as they do to the current case. In the unlikely 20 event that Crytek does not bring a second action, then Crytek’s dismissal without 21 prejudice becomes tantamount to a dismissal with prejudice, and Crytek has already 22 proposed a condition in that circumstance to allow CIG to seek its fees at that point. 23 Simply put, Crytek’s proposed conditions on its dismissal without prejudice remove 24 any risk that CIG’s incurred fees would have been wasted, making a dismissal with 25 prejudice unwarranted under this factor. 26 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 10 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 14 of 22 Page ID #:1666 1 2. Crytek Has Diligently Prosecuted its Case and This Motion 2 For whatever reason, CIG focuses largely on claims that have already been 3 dismissed from this case, either by Court order under Rule 12 or by prior party 4 agreement, arguing they were prosecuted “without diligent research.” CIG’s 5 Opposition, at 15-16. CIG’s past success in the Rule 12 context has nothing to do with 6 the present motion. The correct inquiry is whether the claims Crytek is seeking to 7 voluntarily dismiss without prejudice—its current claims—have been prosecuted 8 without diligence. Toyo Tire, 2018 WL 1896310, at *4 (quoting Burnette, 828 F. Supp. 9 at 1444, where the plaintiff had admitted that it had not diligently researched the claim 10 for which dismissal was being sought). 11 CIG does not suggest that Crytek has failed to be diligent in prosecuting its 12 credits claims. Regarding Crytek’s Squadron 42 claim, Crytek brought that claim, as 13 explained in detail above in Section I.A.2, based on repeated statements to the public 14 by CIG that it was developing Squadron 42 as a standalone game. See also Crytek’s 15 Memorandum ISO Motion for Voluntary Dismissal, ECF 95, at 2. Crytek had a good 16 faith belief until late November that CIG was actively engaged in conduct that would 17 constitute breach under the GLA—the development of Squadron 42 as a standalone 18 game. Following CIG’s verified discovery response in late November, Crytek 19 promptly began discussions with CIG in attempts to agree on a fair procedure for 20 dismissal without prejudice as explained in Section I.A.2 above. 21 3. Crytek’s Basis for Dismissal is not “Suspect” 22 To avoid belaboring the point, Crytek will not reiterate the many confusing and 23 shifting statements CIG made to the public and in its briefing in this matter. See supra 24 Section I.A.2. Crytek had a good faith belief that CIG was developing Squadron 42 as 25 a standalone game up until CIG stated 26 in its verified discovery response in late November 2019. 27 The basis, or impetus, for Crytek’s motion was that CIG’s verified discovery response 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 11 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 15 of 22 Page ID #:1667 1 indicated that . This was the 2 first time Crytek understood CIG’s position in this regard. As noted at the outset, the 3 conduct constituting a breach of the GLA is CIG’s development of Squadron 42 as a 4 standalone game, and Crytek had every reason to believe this conduct had been 5 occurring since CIG announced to the public that Squadron 42 would be standalone. 6 Separately, CIG provides only a single, conclusory sentence to challenge 7 Crytek’s “judicial economy” argument. CIG made no real attempt to refute that the 8 same facts and witnesses will be at issue when Crytek refiles its claims; it made no 9 attempt to refute that having to litigate the credits claim now and the Squadron 42 10 claim later makes no practical sense. Finally, CIG cannot dispute the obvious 11 inefficiency in having to prosecute these closely related claims in two separate cases. 12 CIG’s willingness to entertain duplicative litigation rather than simply pause this 13 litigation undercuts its position and its alleged concern over its fees, and makes clear 14 that Crytek’s dismissal without prejudice is the proper course. 15 4. This Case Remains in its Early Stages 16 CIG’s assertion that this litigation is in its late stages is simply not credible as 17 explained in detail above in Section I.B. While CIG suggests that the parties would 18 have quickly approached the end of discovery had Crytek not filed this motion, CIG 19 ignores the fact that less than a month ago, the parties jointly represented to this Court 20 that there was still much discovery left to do and jointly requested a continuance to the 21 remaining pretrial dates. ECF 89, at 3. CIG then concludes that it would be inequitable 22 to CIG to dismiss this case “right before the close of discovery,” again seemingly 23 forgetting that there is no close of discovery even scheduled at this point in view of 24 the Court’s order on the parties’ joint request for a continuance. ECF 97. 25 5. The “Typical Cases” Warranting Dismissal with Prejudice 26 Are Quite Different From The Present Case 27 CIG points this Court to three “typical examples” of when dismissal with 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 12 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 16 of 22 Page ID #:1668 1 prejudice is warranted. Those cases present three situations, not one of which is even 2 arguably relevant here: (1) the case is at a late stage of pretrial proceedings; (2) the 3 plaintiff is seeking to avoid a near-certain adverse ruling; and (3) it would be 4 inequitable or prejudicial to defendant to allow plaintiff to refile this action. CIG’s 5 Opposition, 13. The first of these need not be addressed any further. As explained in 6 Sections I.B and II.B.4 above, this case is in no way at a late stage of pretrial 7 proceedings.2 8 There is no Near-Certain Adverse Ruling for Crytek to Avoid. At the outset, CIG’s 9 argument is completely off its foundations—there is no “summary judgment and trial 10 deadline on the horizon.” CIG’s Opposition, 17. Those deadlines are not even in place. 11 Nor has this Court suggested, through its bond order or otherwise, how it will rule at 12 some point in the future on Crytek’s remaining claims. 13 The questions addressed by the Court at the bond stage were whether CIG had 14 satisfied the “relatively low” hurdle of establishing a possibility of success. ECF 81, 15 at 2. Indeed, this Court noted at footnote 4 of its Order, “[n]othing in this Order shall 16 be construed as a final decision on which party has prevailed or will prevail as a matter 17 of fact. The Court only analyzes here whether Defendants have a reasonable possibility 18 of making such a showing.” Id. at n.4. CIG’s suggestion that the Court indicated a near 19 certain adverse ruling against Crytek was already expressly rejected through the 20 Court’s own words. CIG’s suggestion to the contrary is simply an overreach. 21 Furthermore, the Court in its bond order did not even indirectly address any of 22 the discrete legal or factual disputes that would be before the Court in any future 23 24 2 CIG’s own cited case law demonstrates just how inappropriate it would be to 25 dismiss this case with prejudice. In In re: FEMA, in addition to being only three months from trial—which is not the case here—the Court’s affirmance of the dismissal 26 with prejudice was based in large part on the Plaintiff’s attempt to “manipulate the integrity of the court’s bellwether process” in MDL litigation. In re: FEMA Trailer 27 Formaldahyde Prods. Liab. Litig., 628 F.3d 157, 163 (5th Cir. 2010). Obviously, no such facts are present here. 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 13 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 17 of 22 Page ID #:1669 1 dispositive motions or at trial. Regarding Crytek’s Squadron 42 breach claim, it was 2 simply enough that the GLA defined “the Game” as potentially including Squadron 3 42. ECF 81, at 3. Of course, the parties’ dispute has never been as to whether Squadron 4 42 is mentioned in the definition of “the Game,” the dispute has been over whether 5 CIG is developing Squadron 42 in accordance with the terms of the GLA. The Court 6 gave no indication one way or another of its views on that issue. Id. Similarly, the 7 Court’s analysis on Crytek’s credit claim rested on CIG’s now refuted assertion that it 8 had actually switched to the Lumberyard engine. Id. at 4 (“It is enough . . . that CIG 9 switched the copyright and trademark notices only after it began using Lumberyard 10 instead of CryEngine.”). In sum, this Court, by the Court’s own express statement to 11 this effect, has provided no indication how it may ultimately rule on the issues in this 12 case. And given that CIG has not provided any authority or support for the notion that 13 its license with Amazon voids its obligations under the GLA, Crytek is confident no 14 such adverse ruling is forthcoming. 15 CIG Faces no Inequities from Temporarily Dismissing this Case. CIG’s argument that 16 it would be inequitable to allow Crytek to refile its claims against CIG is nothing more 17 than a summary of its prior arguments. For all the reasons already set forth, none of 18 the factors used in deciding whether to dismiss with prejudice support such a dismissal 19 here. And, more fundamentally, the unique circumstances underpinning Crytek’s 20 motion confirm that it is Crytek who would face inequity if its claims are dismissed 21 with prejudice. 22 6. The Central District’s Toyo Tire Decision Bears no 23 Resemblance to this Case 24 CIG places much emphasis on the Central District’s decision in Toyo Tire & 25 Rubber Co. v. Doublestar Dong Feng Tyre Co., No. 15 Civ. 246, 2018 WL 1896310 26 (C.D. Cal. Mar. 28, 2018). To describe Toyo Tire as “distinguishable” from this case 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 14 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 18 of 22 Page ID #:1670 1 does not capture just how little it has to do with the facts and circumstances before this 2 Court now. 3 First, and most critically, Toyo Tire had already received an actual adverse 4 merits determination from the Court prior to Toyo Tire’s motion to dismiss. 5 Specifically, the Court had determined that the defendant had no involvement in the 6 allegedly infringing conduct underpinning Toyo Tire’s claim. Toyo Tire, 2018 WL 7 1896310 at *2. Not only is there no doubt in the present case that CIG is responsible 8 for the conduct Crytek alleges, there has been no adverse ruling on the claims Crytek 9 seeks to dismiss without prejudice as there was in Toyo Tire. Moreover, that the 10 defendant definitively had no involvement in the allegedly infringing conduct was a 11 driving factor in the dismissal with prejudice. Id. at *5 (noting that because “Toyo 12 concedes it cannot bring its claims against [the defendant] based on the evidence in 13 the record, Toyo ‘cannot proffer a logical explanation for the need to take a dismissal 14 without prejudice’ against [the defendant].’”). Obviously, that is not the case here 15 where it is not in dispute that CIG is currently engaged in the conduct underlying 16 Crytek’s claims—developing Squadron 42 and removing Crytek’s credits. 17 Second, Toyo Tire knew more than a year before it moved to dismiss that the 18 defendant was not involved in the allegedly infringing conduct. Id. And during that 19 time, Toyo Tire continued to seek contempt sanctions against the defendant knowing 20 they had no involvement in the allegedly infringing conduct, ultimately leading the 21 Court to deny Toyo Tire’s motion for a lack of evidence. Id. By contrast, Crytek only 22 learned that 23 roughly two months ago and promptly began taking the steps to file this 24 motion. And more importantly, the information that Crytek learned was not that CIG 25 was innocent, as was the case in Toyo Tire, but that in 26 an attempt to avoid liability for its conduct. The Central District’s decision in Toyo 27 Tire does not support dismissal with prejudice under such circumstances. 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 15 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 19 of 22 Page ID #:1671 1 Finally, and at risk of belaboring this point, CIG’s contention that this case is in 2 its late stages, similar to Toyo Tire, lacks any merit. See supra Sections I.B and II.B.4. 3 Toyo Tire is inapposite, CIG’s arguments lack merit, and dismissal without prejudice 4 should be granted. 5 C. CIG’s Proposed Conditions are Punitive and Unreasonable 6 CIG seeks to impose two punitive conditions on Crytek’s dismissal without 7 prejudice. First, CIG seeks to be awarded the entirety of Crytek’s $500,000 bond. 8 Because the condition of fees is not necessary in the present case to protect CIG’s 9 interests, that condition should be rejected. Second, CIG seeks to condition Crytek’s 10 dismissal without prejudice on a condition that its credits claim is dismissed with 11 prejudice. There is no legally viable basis to force Crytek to give up a substantive 12 claim in exchange for delaying a different claim through a dismissal without prejudice. 13 CIG seeks to gain not protection through this proposed condition, but an unfair 14 advantage. 15 1. The Payment of Fees is Unnecessary to Protect CIG 16 A Court is not required to impose fees as a condition for voluntary dismissal but 17 may do so when it is necessary for the protection of the defendant. Nash v. Krauss, 18 No. CV 05-2293 SVW (JTLx), 2006 WL 8440813 at *5 (C.D. Cal. Apr. 4, 2006). And 19 as explained in Crytek’s opening motion, the factors this Court considers in exercising 20 its discretion do not favor the imposition of fees in the present case. Crytek’s 21 Memorandum ISO Motion for Voluntary Dismissal, ECF 95, at 8-10. Here, Crytek has 22 offered perfectly reasonable conditions to protect CIG’s interests in its ability to seek 23 fees. In fact, CIG’s interest in protecting its ability to ultimately seek its fees is entirely 24 addressed by Crytek’s proposed conditions. See supra Section I.A.4. 25 As evidenced from the tone of CIG’s motion, CIG is not requesting fees for its 26 own protection, but to gain an advantage it would not have even if this case proceeded. 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 16 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 20 of 22 Page ID #:1672 1 This is not the intended or proper purpose of conditioning a Plaintiff’s voluntary 2 dismissal without prejudice. 3 2. Dismissal of Crytek’s Credits Claim along with its Squadron 4 42 Claim is a Matter of Judicial Economy 5 CIG’s argument in support of dismissing Crytek’s credits claim with prejudice 6 is built on mischaracterizations. First, the foundation of CIG’s argument is wrong. CIG 7 argues that it would have no obligation to credit Crytek if it switched to an engine 8 different from the CryEngine covered by the GLA. Of course, the reverse is equally 9 true, i.e., CIG does have an obligation to credit Crytek if it has not switched away from 10 the CryEngine. As detailed in Section I.A.2, CIG has already stated that it continues 11 to rely on the same CryEngine code covered by the GLA—there was no switch. CIG’s 12 actual contention is that taking a second license to the CryEngine from Amazon 13 somehow voids the GLA. Crytek has never suggested that it agrees with that 14 contention, nor has CIG ever provided any legal authority to support it. 15 Furthermore, Crytek never admitted it has not suffered damage as a result of 16 CIG’s failure to credit Crytek. This is yet another overreach by CIG. As an initial 17 matter, Crytek is not limited to a lost profits theory of damages and Crytek has already 18 articulated a separate basis for damages based on the advertising it has been deprived 19 of by CIG in response to CIG’s Interrogatory No. 18. Moreover, the “admission” CIG 20 points to is nothing more than a statement that Crytek does not have internal 21 documents detailing the damage it had sustained as a result of CIG’s breach of the 22 credits requirement. As the Court is likely well-aware, establishing lost-profit and lost- 23 advertising damages is virtually always done through expert analysis. It is not 24 surprising in the least that Crytek did not have internal documents quantifying these 25 types of damages, and it certainly is not an admission that such damages do not exist. 26 Further still, CIG entirely misrepresents Crytek’s position regarding its pursuit 27 of lost profits. Crytek’s actual position, including the portions omitted from CIG’s 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 17 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 21 of 22 Page ID #:1673 1 brief, was: 2 Crytek will confirm that it is not and will not seek damages based on a 3 theory that it has lost sales of its Crytek-developed games as a result of 4 CIG’s removal of Crytek’s credits from Star Citizen. 5 Brazen Decl. ¶ 7. Crytek has not contended that CIG’s removal of credits has had any 6 impact on Crytek’s ability to sell its own games. The impact has been on Crytek’s 7 licensing business, not its game business. In the same correspondence to CIG, Crytek 8 explained another of its objections to CIG’s overbroad requests for general financial 9 information inclusive of Crytek’s games business: 10 Crytek’s general financial documents include financial information that 11 has no relation to its licensing business, including all the Crytek 12 developed game information Crytek has already objected to producing 13 above. Moreover, Crytek has already confirmed that Crytek is not 14 seeking damages on a theory of lost profits.” 15 Id. at ¶ 8. In sum, Crytek’s admission that its game business was not damaged is not 16 in any way an admission that Crytek’s licensing business has not been damaged or 17 that Crytek has not been harmed from the loss of advertising it was entitled to under 18 the GLA. Crytek’s credits claim is meritorious and is supported by significant 19 damages caused by CIG’s decisions. Crytek seeks to dismiss its credits claim solely 20 in the interests of judicial efficiency so that Crytek’s credits claim can proceed at one 21 time with the Squadron 42 claim when Crytek renews that claim upon its ripeness. 22 CIG’s condition should be rejected. 23 24 25 26 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 18 Case 2:17-cv-08937-DMG-FFM Document 115-2 Filed 01/24/20 Page 22 of 22 Page ID #:1674 1 III. CONCLUSION 2 For the foregoing reasons, Crytek respectfully requests that the Court grant its 3 motion for voluntary dismissal without prejudice and subject to the conditions set forth 4 above in Section I.A.4. 5 6 DATED: January 24, 2020 7 ERISE IP, P.A. 8 By: /s/ Eric A. Buresh 9 Eric A. Buresh (pro hac vice) Attorneys for Plaintiff 10 CRYTEK GMBH 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CRYTEK’S REPLY IN SUPPORT OF MOTION FOR VOLUNTARY DISMISSAL WITHOUT PREJUDICE 19