Light & Wonder, Inc v Aristocrat Technologies Australia Pty Limited

Light & Wonder, Inc v Aristocrat Technologies Australia Pty Limited [2024] FCA 870 is a Federal Court decision refusing leave to appeal from an earlier preliminary discovery ruling. The underlying dispute concerned alleged misuse of confidential information and copyright material connected to electronic gaming machine games.

The key point is procedural. The Court did not decide whether Light & Wonder actually copied Aristocrat's material or whether any final IP claim would succeed. It decided only that Light & Wonder had not shown enough doubt about the primary judge's preliminary discovery decision to justify appellate intervention.

As a result, the earlier order for targeted preliminary discovery remained in place, subject to the limits already imposed at first instance, including the refusal to order production of source code on the material then before the Court.

Aristocrat and Light & Wonder are competitors in the supply of electronic gaming machines and games played on those machines. Aristocrat said it held all intellectual property rights in the Lightning Link and Dragon Link games, which were designed by High Roller Gaming Pty Ltd for Aristocrat and launched in 2014 and 2016. The judgment records that Aristocrat described those games as its best performing games since launch.

The dispute sharpened because former Aristocrat personnel moved to Light & Wonder. Ms Charles had worked on the mathematics underlying Lightning Link and Dragon Link. Mr Sefton, a graphics designer, had worked on artwork associated with those games. Both later worked for Light & Wonder. Ms Charles was directly involved in the design and development of Light & Wonder's Dragon Train game, launched in August 2023.

Aristocrat relied on evidence suggesting that confidential information or copyright works connected to its earlier games may have been embodied or used in Dragon Train. The judgment refers to evidence suggesting that Ms Charles may have used a confidential spreadsheet and other confidential information created during development of Lightning Link and Dragon Link. It also refers to evidence that Mr Sefton, while working for Light & Wonder, possessed artwork he had created while working for Aristocrat.

Aristocrat did not immediately sue on a full Australian claim. Instead, it sought preliminary discovery under r 7.23 of the Federal Court Rules 2011 (Cth). It said it had reasonable grounds to believe it may have claims for breach of confidence, breach of contract, copyright infringement, passing off, and misleading or deceptive conduct, but that after making reasonable inquiries it still lacked enough information to decide whether to commence proceedings in the Federal Court.

The central legal framework was r 7.23 of the Federal Court Rules 2011 (Cth). The judgment sets out the rule and the Court's discussion of it. In practical terms, a prospective applicant can seek preliminary discovery if four core requirements are met.

First, the applicant must reasonably believe it may have a right to obtain relief from an identified prospective respondent. Second, after making reasonable inquiries, it must still not have sufficient information to decide whether to start a proceeding in the Court. Third, it must reasonably believe the prospective respondent has, or is likely to have had, documents directly relevant to that decision. Fourth, inspection of those documents must assist in making the decision whether to sue.

The judgment also repeats an important point from earlier authority. The question under r 7.23(1)(b) is objective. It is not enough to say the applicant wants more comfort before suing. The applicant must have come up against a real information gap, meaning a piece or pieces of information reasonably necessary to decide whether to commence a proceeding.

At the same time, the Court recognised that having enough information to plead a cause of action does not necessarily mean having enough information to decide whether to start proceedings. In some cases, preliminary discovery may be available to help assess the extent of the possible breach and the likely strength of potential defences.

Light & Wonder argued that Aristocrat already had enough information to decide whether to sue in Australia. It said Aristocrat was really trying to strengthen or test its case before filing, rather than fill a genuine information gap. In support of that position, Light & Wonder pointed to material already available to Aristocrat, including a document voluntarily produced by its solicitors and another spreadsheet produced by Aristocrat, together with similarities identified by Aristocrat's expert.

Light & Wonder also denied copying and positively asserted independent creation. That mattered because the primary judge had to consider whether Aristocrat could sensibly assess that assertion without seeing more of Dragon Train's underlying design material.

A major part of Light & Wonder's challenge was the related US proceeding. Aristocrat had commenced proceedings in the United States District Court for Nevada on or about 26 February 2024, after filing its Australian originating application for preliminary discovery. Light & Wonder said the US complaint contained the same factual allegations and showed that Aristocrat had already decided it had enough information to sue.

On the leave application, Light & Wonder advanced four proposed grounds of appeal. Broadly, it argued that the primary judge had misapplied r 7.23(1)(b), had failed to properly consider whether Aristocrat reasonably needed more information to assess the cost and risk of Australian litigation, had treated preliminary discovery too loosely despite its intrusive nature, and had effectively reversed the onus when dealing with discretion.

Jackman J dismissed the application for leave to appeal. The Court held that the proposed grounds had no realistic prospect of success and that the primary judge's decision was not attended with sufficient doubt to warrant reconsideration on appeal.

The Court placed weight on findings made by the primary judge that were not directly challenged by Light & Wonder. In particular, the primary judge had found that the material voluntarily supplied by Light & Wonder suggested it was possible that Aristocrat's confidential information or copyright works had been embodied or used in the design of Dragon Train, but that the material stopped well short of showing whether that had actually occurred. The primary judge had also found that Aristocrat could not sensibly assess Light & Wonder's assertion of independent creation without knowing more about Dragon Train's underlying design, especially the mathematical rules, formulae and models used to create or implement the game.

The Court also rejected the argument based on the US proceeding. Jackman J drew a clear distinction between primary facts and inferences. The allegations in the US complaint were not all 'information' that Aristocrat objectively possessed. Many were inferences drawn from primary facts such as employee access and objective similarities between products. The Court described Aristocrat's case as circumstantial. In that setting, the fact that Aristocrat genuinely believed its allegations did not mean it objectively had sufficient information to decide whether to start Australian proceedings.

Another important point was Light & Wonder's own position in the US case. The judgment records that Light & Wonder had sought dismissal there on the basis that Aristocrat's allegations were speculative and implausible. The primary judge had inferred that Light & Wonder would likely say the same about similar Australian proceedings brought without additional evidence, and Light & Wonder accepted that inference before Jackman J. That undermined the submission that Aristocrat already knew enough to sue here.

The Court also rejected the argument that the primary judge had reversed the onus when considering discretion. Read fairly, the primary judge had simply concluded that once the requirements of r 7.23 were met, no good reason had been shown to refuse relief. Jackman J said that was consistent with authority recognising that there will normally be little scope to refuse preliminary discovery where the rule's requirements are satisfied.

The judgment is useful because it shows the kinds of facts that can support preliminary discovery in an IP and confidential information dispute. Aristocrat did not rely on a direct admission of copying. Instead, it relied on a combination of staff movement, access to sensitive material, product similarity, and evidence suggesting possession or use of confidential spreadsheets, other confidential information, and artwork connected to the earlier games.

The Court treated the underlying design of Dragon Train as especially important. The primary judge considered that Aristocrat needed more information about the mathematical rules, formulae and models used to create or implement Dragon Train in order to assess whether confidential information had been used and whether the independent creation explanation could sensibly be tested.

At the same time, the Court accepted limits. The primary judge declined to order production of source code because there did not appear to be a reasonable basis to believe that source code for Dragon Link or Lightning Link had been copied or disclosed by Ms Charles or Mr Sefton. That is a practical reminder that preliminary discovery must remain tied to the evidence and to what is reasonably necessary for the decision whether to sue.

For businesses that own valuable IP, this case shows that you do not always need a complete merits case before approaching the Court. If you have made reasonable inquiries and can point to a real information gap, preliminary discovery may be available to help you decide whether to sue. That is particularly relevant where the suspected misuse concerns software, formulas, game mathematics, design files, artwork, or other material that cannot be assessed from the finished product alone.

For businesses defending these applications, the case is a reminder that preliminary discovery is intrusive but not exceptional in the sense of being unavailable whenever the applicant has suspicions and some supporting material. If your position is that the product was independently created, the Court may consider whether that assertion can be tested only by looking at internal development records. A bare denial may not be enough.

There is also a strong records lesson. Businesses hiring from competitors should have clear onboarding rules, instructions not to bring competitor material, and practical controls around access to legacy files, spreadsheets, artwork and code. Businesses developing similar products should keep contemporaneous records showing who created what, when they created it, what source materials were used, and how design decisions were made. Those records may become central at the preliminary discovery stage, well before any trial.

Finally, businesses should remember the procedural nature of this decision. Winning or losing a preliminary discovery fight does not determine the final merits. It determines whether one side gets access to targeted documents to make an informed decision about whether to commence proceedings.

The leave application was heard on 30 July 2024 and decided on 7 August 2024 by Jackman J in the Federal Court of Australia. The judgment records that the application for leave to appeal was dismissed and that the applicants were ordered to pay the respondent's costs of the leave application.

The judgment was an appeal-related procedural decision arising from an earlier first instance ruling in Aristocrat Technologies Australia Pty Ltd v Light & Wonder, Inc. [2024] FCA 439. The leave judgment confirms that the earlier preliminary discovery order remained undisturbed.