Aristocrat Technologies Australia Pty Ltd v Light & Wonder, Inc.

1 INTRODUCTION

1.1 The proceedings and interlocutory dispute

1.2 Litigation Background

1.3 Lightning Link, Dragon Link and Dragon Train

1.4 Background chronology

2 THE SUBMISSIONS

3 CONSIDERATION

4 DISPOSITON

1. Aristocrat Technologies Australia Pty Ltd seeks urgent interlocutory relief against Light & Wonder, Inc., LNW Gaming ANZ Pty Ltd (collectively, L&W) and initially also against Emma Jane Charles and Lloyd Gilbert Sefton, although the interlocutory application against Ms Charles has been resolved by agreement and Aristocrat does not press its claim for interlocutory relief against Mr Sefton.
2. L&W is a competitor of Aristocrat in the supply of electronic gaming machines (EGM) for the purposes of gambling. Ms Charles was employed as a principal game designer by Aristocrat and one of their design studios High Roller Gaming Pty Ltd (HRG), from December 2008 until 2017. Mr Sefton was employed by Aristocrat first as a graphics designer and then as lead artist in the period from May 2001 until February 2016. Both took up employment with L&W in July 2021.
3. Aristocrat filed an originating application and statement of claim on 4 October 2024 that were amended on 1 November 2024 and 12 December 2024 respectively.
4. In the proceedings, Aristocrat alleges that Ms Charles took confidential materials with her when she left its employment and upon commencing work at L&W used them in the design of an electronic gaming machine (EGM) loaded with software that enabled a game called Dragon Train to play. Dragon Train was launched internationally by L&W in August 2023. Aristocrat contends that the design of Dragon Train utilises confidential information deployed in two of its most successful EGMs, named Lightning Link and Dragon Link and that L&W is implicated in the misuse of its confidential information. Further, Aristocrat alleges that Mr Sefton admits to retaining artworks for Aristocrat games when he left its employment and that he and L&W used those materials in designing the artwork for Dragon Train. As a result of these actions, Aristocrat contends; that the respondents have engaged in breaches of confidence, copyright infringement, contraventions of s 183 of the Corporations Act 2001 (Cth), that L&W has engaged in misleading and deceptive conduct in breach of s 18 of the Australian Consumer Law (ACL) (Schedule 2 of the Competition and Consumer Act 2010 (Cth)) and that Ms Charles and Mr Sefton has acted in breach of their contracts of employment with Aristocrat.
5. For the purposes of its application for interlocutory relief, Aristocrat presses only its cause of action arising from misuse of confidential information. In its amended statement of claim Aristocrat defines in [15] the Aristocrat Confidential Information by reference to the fact that "the gameplay of Lightning Link and Dragon Link is driven by their underlying mathematical design in the form of tables, worksheets, spreadsheets and compilations including, but not limited to" a listed set in sub-system-paragraphs (a) - (m) of identified spreadsheets and worksheets.
6. Prior to the hearing of the application, L&W gave an open undertaking in the form set out in Annexure A to these reasons. It contains two substantive parts. First, that L&W will conduct themselves on the basis that the US Order's restraint that they be enjoined from:

using or disclosing any of [Aristocrat's] (alleged) trade secrets (as described in the US order) or other confidential information relating to the mathematical design of Dragon Link or Lightning Link or selling or leasing of Dragon Train (meaning, both the EGM and online versions of the game in the form in which it was previously supplied and distributed in Australia and the United States), applies to any of their conduct in Australia in relation to Aristocrat Confidential Information (as defined in Aristocrat's Amended Statement of Claim dated 1 November 2024).

(emphasis added.)

1. This awkwardly formulated undertaking takes the form of an order made by the United States District Court in Nevada (US Order) and adopts what may be a broader definition of "confidential information" as pleaded by Aristocrat in the statement of claim.
2. Secondly, L&W undertakes, with various reservations of rights, to conduct itself on the basis that the US Order's restraint, being that L&W:

be enjoined from accessing, transferring, copying, disseminating, modifying or destroying any documents or materials in [their] possession, custody or control reflecting any of [Aristocrat's] alleged trade secrets, (as described in the US Order) or other confidential or proprietary information relating to the mathematical design of Dragon Link or Lightning Link except to the extent necessary to comply with the US Order, applies to any conduct in Australia of [L&W] in relation to Aristocrat Confidential Information ... [except] to the extent that [L&W] and their legal representatives (and any experts) engage in any conduct for the purposes of ... the present litigation ... and any appeals.

(emphasis added.)

1. Aristocrat makes no criticism of this undertaking insofar as it provides a restraint upon the conduct of L&W in relation to the Aristocrat Confidential Information, but it contends that there is a further class of harm that it will suffer pending trial not addressed by the undertakings. In the present interlocutory application, the only remaining issue is whether or not the following additional orders ought to be made:

Upon the usual undertaking as to damages in paragraph 2.2 of the Usual Undertaking as to Damages Practice Note (GPN-UNDR) being provided by the Applicant, the Court orders that, within 30 days of this order, and until further order:

1. L&W Inc and LNW Gaming (by themselves, their servants, agents or otherwise) withdraw any licence or authorisation to use the Dragon Train software under agreements with customers in respect of Dragon Train EGMs executed before 23 September 2024 (Existing Agreements).

2. L&W Inc and/or LNW Gaming notify their customers who have Dragon Train Products in Australia, in writing, that:

(a) Aristocrat alleges that the Dragon Train software contains and was created using Aristocrat Confidential Information without Aristocrat's consent and that L&W was and is not entitled to provide or licence customers to use the Dragon Train software. L&W disputes that allegation.

(b) The Federal Court of Australia has also ordered, pending a final hearing, that L&W withdraw any licence or authorisation to use the Dragon Train software under Existing Agreements.

1. L&W disputes that the additional orders are appropriate.
2. The parties provided an electronic court book prior to the hearing of the application that occupied over 6,000 pages of material. Although the issues narrowed in the course of argument, little can be said to justify such excess. I was taken to a fraction of this material in argument.
3. Aristocrat relies on 20 affidavits in support of its application; four by Marc Foodman, Senior Vice President, IP special projects at Aristocrat Technologies Inc; four from Matthew Deitz, Head of Game Design at HRG, a game design studio exclusive to Aristocrat, to which Ms Charles was seconded whilst employed at Aristocrat; four from Benjamin Ellis, an independent expert retained by Aristocrat; one from Anthony Beier, General Manager - Sales at Aristocrat and 10 from John Lee, partner at Gilbert + Tobin, the solicitors representing Aristocrat.
4. L&W has filed 10 affidavits in opposition to the interlocutory application: two from Benjamin Frederiksen, Managing Director of LNW Gaming; two from Richard Schneider, Senior Advisor at Light & Wonder, one from Daniel Dale, an independent expert retained by L&W; one from Neil Spencer, a further independent expert retained by L&W, one from Murray Johnstone, director and owner of Pinnacle Consultancy Group Pty Ltd and three from David Fixler, partner at Corrs Chambers Westgarth, solicitors for L&W. As Aristocrat noted in submissions, L&W relied on no affidavit evidence from Ms Charles that sheds light on her conduct.

1. The present application comes against the background of an application that Aristocrat brought in April 2024 for preliminary discovery of documents concerning, amongst other things, mathematical rules, formulae or models used to create or implement Dragon Train and documents related to Dragon Link and Lightning Link or other Aristocrat games removed from Aristocrat or retained by Ms Charles and Mr Sefton. The application was opposed by L&W. However, on 30 April 2024 preliminary discovery was ordered; Aristocrat Technologies Australia Pty Ltd v Light & Wonder, Inc. [2024] FCA 439 (Nicholas J) (Aristocrat v Light & Wonder). In August 2024, L&W sought leave to appeal from that decision, which was refused; Light & Wonder, Inc v Aristocrat Technologies Australia Pty Limited [2024] FCA 870 (Jackman J) (Light & Wonder v Aristocrat).
2. A central basis for the opposition by L&W to the production of documents is summarised by Nicholas J at [26]:

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.

1. Some 6,000 documents were subsequently provided.
2. On 20 September 2024, the United States District Court in Nevada ordered a preliminary injunction restraining Light & Wonder and two of its related entities from using Aristocrat's trade secrets, selling further Dragon Train games and requiring the removal of such games from venues within 30 days; Aristocrat Technologies Incv Light & Wonder Inc (D Nev, 2:24-cv-00382-GMN-MDC, 20 September 2024) (US decision).
3. The Court found that Aristocrat had shown a fair chance of success on its trade secret misappropriation claim by demonstrating that L&W had acquired its trade secrets by hiring Ms Charles (US decision, slip op 11) and that it had demonstrated a likelihood of irreparable harm (US decision, slip op 17). In relation to the latter, Navarro J found at slip op 17 (citations omitted):

The Court finds that Aristocrat has demonstrated a likelihood of irreparable harm if L&W is allowed to continue profiting from a game created with the misappropriation of Aristocrat's trade secrets. L&W misappropriated Aristocrat's trade secrets and was able to develop Dragon Train without investing the equivalent time and money. A competitor's use of trade secrets gives them an unfair advantage, and injunctions can be used to prevent this unfair advantage ... Aristocrat further provide an email and Teams message demonstrating that Ms Charles has disclosed their trade secrets to particular colleagues, and L&W will likely be making new versions of Dragon Train, which puts Aristocrat at risk of further dissemination of its trade secrets ... Additionally as Dragon Train has recently overtaken Dragon Link as the number one game for new placements among premium games, Aristocrat has demonstrated sufficient evidence of potential market loss.

1. The Court found that the balance of hardships favoured the grant of the interlocutory relief sought, noting that because L&W decided to launch Dragon Train in the United States after it put L&W on notice of its trade secret misappropriation claim it could not complain about the consequence of its conduct (slip op 18). Despite L&W arguing that a wrongfully issued injunction would be devastating because the Dragon Train represents "millions of dollars and years of investment" the balance favoured Aristocrat (slip op 18). The Court found that no public interest militated against the grant of the injunction and that Aristocrat put up sufficient bond to account for L&W's potential profit loss (slip op 19).
2. The substantive orders made in the US decision (US Orders), at slip op 20, are that L&W was enjoined:

(1) pending a final determination on the merits, from using or disclosing Aristocrat's trade secrets or other confidential and proprietary information relating to the mathematical design of Dragon Link and Lightning Link (defined as the Plaintiff's Trade Secrets) including:

(a) any current or planned game development efforts that would involve the use or disclosure of the Plaintiff's Trade Secrets; and

(b) any continued or planned sale, leasing or other commercialization of Dragon Train.

(2) from accessing, transferring, copying, disseminating, modifying or destroying any documents or materials in L&W's possession, custody or control reflecting the Plaintiff's Trade Secrets, except to the extent necessary to comply with the orders.

1. After these orders were made, L&W sought clarification of aspects of the orders made. It asked whether it must remove or replace pre-existing installations of Dragon Train in use by customers. The Court confirmed that it must do so; Aristocrat Technologies, Inc v Light & Wonder Inc (D Nev, 2:24-cv-00382-GMN-MDC, 27 September 2024), slip op 1-2.

1.3 Lightning Link, Dragon Link and Dragon Train

1. In 2014 and 2016 respectively, Aristocrat released two EGM game families, Lightning Link and Dragon Link followed by the release of online "social casino" versions. Each includes:

(a) a base game, being the ordinary, non-feature state the game plays in;

(b) free games, being a series of feature games awarded from a trigger event of landing three or more "SCAT1" symbols ("SCAT" being an internal term that is an abbreviation of "scatter") in the base game;

(c) a hold and spin feature, which is triggered when six or more "SCAT2" symbols are landed on a single spin, in the base or free game, with the aim being to win the Grand or Major Jackpots and Mini or Minor Bonuses.

1. In play, if a player collects 15 SCAT2, they will win the Grand Jackpot. The SCAT2 symbols display the prize value, as well as jackpot and bonus prizes. Upon entry into the hold and spin feature, the six or more SCAT2 symbols are held in place and all remaining positions that do not contain a SCAT2 turn into individual spinning reels. Each SCAT2 gained during the spins are added to the player's SCAT2 total. When the player enters the hold and spin feature, they are awarded three free spins, which reset each time an additional SCAT2 is collected. For convenience, because the game play for both is relevantly the same, I refer to both Lightning Link and Dragon Link as "Dragon Link" below.
2. There is no dispute that the Dragon Link games are highly successful. It has been Aristocrat's leading gaming product since its release, both in Australia and overseas. Lightning Link and Dragon Link have been purchased by at least 389 and 319 venues respectively throughout Australia.
3. L&W's Dragon Train game features are the same as the game features in the Dragon Link games with the exception of an additional secondary hold and spin feature that occurs at the end of the normal hold and spin feature if a player lands on a "Dragon Train symbol" during the hold and spin feature, or as part of a hold and spin trigger. Aristocrat contends that this additional feature is similar to another of Aristocrat's games, called "Midnight Express", and is built on the mathematics that underlies Dragon Link.

1. The evidence available in the present application indicates that the release of the Dragon Train product took place against the following background of events.
2. Internal correspondence produced on discovery by L&W indicates that in November 2017, L&W set out to compete with the successful Dragon Link and Lightning Link Aristocrat products by using reverse engineering obtained from public sources. Mr Ellis gives evidence that, upon his analysis of the documents, L&W failed to reverse engineer the underlying game mathematics from publicly available materials.
3. In July 2021, Ms Charles joined Scientific Games Corporation (now known as L&W).
4. Later in July 2021, Ms Charles sent an email from her personal Gmail account to her L&W email which contained the reel strips for the base game in Dragon Link. L&W has not filed any evidence from Ms Charles explaining her conduct in doing this or her subsequent conduct.
5. L&W internal documents dated July 2022 promote the fact that L&W intends to develop a game design that is "Lightning Link/Dragon Link with a twist ... (e.g. Midnight Express, Dragon Unleashed)" because Dragon Link games are "top of the charts" in the "ANZ and US markets". The documents say that no one has managed to "topple" Dragon Link and that "[w]e want to preserve as many of the important elements [of Dragon Link] as we can, while offering a new exciting experience".
6. Dragon Train was launched in Australia in August 2023. The evidence indicates that the customers of L&W are clubs, pubs and other premises where gaming machines are permitted by law to be sold. Following the launch there have been many thousand such machines sold to hundreds of different venues around Australia. I refer to the terms and conditions of the sales later in these reasons.
7. In September 2023, the solicitors representing Aristocrat sent a letter to L&W and Ms Charles putting them on notice of Aristocrat's concerns that the Dragon Train game copied, amongst other things, the underlying maths of Dragon Link.
8. On 21 December 2023, Aristocrat filed an application for preliminary discovery, and on 30 April 2024 the court made orders that preliminary discovery be given by L&W: Aristocrat v Light & Wonder. L&W filed an application for leave to appeal from the decision on 14 May 2024.
9. In August 2024, the Court dismissed the application for leave to appeal: Light & Wonder v Aristocrat.
10. L&W subsequently released new games in the Dragon Train "family of games".
11. In September 2024, the respondents produced documents pursuant to the preliminary discovery orders.
12. On 20 September 2024, the US decision made its orders for interlocutory injunctive relief against L&W.
13. On 26 September 2024, Aristocrat sent a letter of demand including requests for undertakings which, when not granted to their fullest extent, prompted Aristocrat to file the present application.

1. Aristocrat advances its case on the basis that its former employee, Ms Charles, was employed by L&W in July 2021. In early 2022, L&W briefed its game design studio, Star Studio, to develop a new game and in April 2022 Ms Charles was promoted to design lead of Star Studio. The aim of the L&W project was to preserve as many of the important elements in Dragon Link as possible to "topple" Dragon Link. In August 2023, L&W launched Dragon Train, actively promoting it as being developed by Ms Charles, who had worked on the Lightning Link project for many years.
2. Although the pleading of the Aristocrat Confidential Information is identified in the statement of claim by reference to various documents listed in [15] of that document, for the purposes of the interlocutory injunction, in its submissions, Aristocrat identifies four classes of information that it identifies as "key confidential maths structures":

(a) the first base game and free game reel strips; being the composition, layout and length of the base game and free game reel strips, symbol counts per reel, associated calculations and hit rates;

(b) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED]; [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] in the base game, free games and the hold and spin feature;

(c) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], which is an innovative way to [REDACTED] [REDACTED] [REDACTED] of the game; and

(d) [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] involved in a unique mathematical structure that in turn determines the probability of getting a Grand Jackpot.

1. Aristocrat contends that L&W has used Aristocrat confidential information to create Dragon Train during its development and in the final product by reference to four L&W maths spreadsheets produced in discovery and pleaded in the statement of claim. The documents are identified in the submissions and footnoted references in the submissions are to the parts of Mr Ellis' evidence concerning each. L&W's independent expert, Mr Dale, has reviewed the documents and responded to Mr Ellis' evidence. Mr Ellis and Mr Dale are said by Aristocrat to agree that the impugned maths spreadsheets (Dragon Train maths spreadsheets) could not have been created independently without reference to the Aristocrat confidential information. Aristocrat's submission in this regard is supported by the evidence and not disputed in this application by L&W.
2. Aristocrat submits that it has a strong prima facie case of breach of confidential information. It contends that the balance of convenience supports the grant of the additional orders because continued sale and operation of Dragon Train in Australia is having significant impact on Aristocrat's market share. Prior to the release of Dragon Train, Aristocrat was the clear market leader in "ship share" (the number of EGMs installed by a manufacturer as a proportion of the total number of new EGMs installed over a particular time period) but L&W has since overtaken Aristocrat, 92% of which, in NSW and Queensland, it submits, based on the evidence of Mr Beier is attributable to Dragon Train. It submits that sales market and regulatory limitations on the number of EGMs permitted in venues, each sale of Dragon Train has eroded Aristocrat's addressable market. The consequence is that placements that L&W has secured by misusing Aristocrat's confidential information are unlikely to be addressable for several years. It cites the evidence of Mr Frederiksen (of LNW) who gives evidence that losing floor space can be catastrophic in the long term because regulations only permit a certain number of games in venues, such that there is only about 10% turnover a year.
3. Aristocrat submits that following receipt of notice of its concerns, L&W "flooded the market" with Dragon Train and sold the vast majority of Dragon Train games after receiving that notice. To remain competitive against Dragon Train, Aristocrat had to reduce its premium price and lost significant revenue. It submits that the negative impact of the reduced value proposition, saleability and performance of Aristocrat's leading products is unquantifiable and will continue if Dragon Train remains on the market.
4. More specifically, in relation to the withdrawal of the L&W licence from customers in additional order 1, Aristocrat submits that L&W has converted 2,100 EGMs across North America and Europe in response to the US Orders and submits that if the additional orders are made, L&W customers could readily convert their EGMs to alternative, non-offending games sold by L&W. This is what L&W offered in North America and Europe. Furthermore, the evidence of Mr Beier is that such conversions are common in the context of the highly regulated environment in Australia. It submits that any damage to L&W's reputation as a result comes at L&W's own risk because it has been notified of Aristocrat claim, has had to convert EGMs as a result of the US Orders and, in any event, L&W has notified its Australian customers of the US proceedings and subsequent injunction.
5. L&W submits that the undertakings that it offers are adequate to address the totality of the interlocutory application and that Aristocrat should not be permitted to secure the amended form orders that it now seeks.
6. It submits that it is doubtful that Aristocrat will achieve the relief now sought by way of final relief. In this regard, whilst it does not dispute the chain of events concerning Ms Charles being her disclosure and use of the confidential information, it contends that it must be doubted that final relief would extend to preventing third parties to proceedings (the clubs and other venues that have installed L&W EGMs containing Dragon Train) from continuing to use the EGMs after property has passed to them. It relies on the terms and conditions that it has with its customers that, it submits, provide no basis upon which L&W can withdraw its licence to use the Dragon Train software.
7. L&W submits that its customers are proper parties to the application for interlocutory relief who have not been joined. They submit that they must be joined and be permitted to represent their position in relation to the contract and balance of convenience. It also submits that as a matter of the exercise of discretion, the final relief sought by Aristocrat is an order that it be declared a constructive trustee of the intellectual property in Dragon Train because of the misuse of confidential information alleged. It submits that it is dubious that such a constructive trust would be ordered over the whole of the copyright in Dragon Train having regard to the limited nature of the confidential information identified by Aristocrat in its application. It also submits that even if it were, there are real questions whether it is appropriate, as final relief, to terminate the licences provided to customers who have not been joined and have not been a party to the alleged misuse of confidential information. Title to the EGMs has passed to those customers and there is no contractual basis for L&W to terminate or suspend the licence. L&W submits that Dragon Train is a successful and valuable product for its customers and the removal of the licence to them would cause them significant financial loss that would be impossible to calculate.
8. Finally, L&W submits that if the Court were to make the additional orders, the effect of them is difficult to foretell and more difficult to police. A customer that receives notice in accordance with order 2 of the proposed additional orders may not agree to cease using the EGM. The question then arises as to whether L&W must take further steps to terminate the licence or whether additional proceedings are required.

1. In Australian Broadcasting Corporation v O'Neill [2006] HCA 46; 227 CLR 57 at [19], Gleeson CJ and Crennan J explained that in all applications for an interlocutory injunction, a court will ask whether the plaintiff has shown that; there is a serious question to be tried as to the plaintiff's entitlement to relief; the plaintiff is likely to suffer injury for which damages will not be an adequate remedy; and the balance of convenience favours the granting of an injunction. These were described to be the organising principles to be applied, having regard to the nature and circumstances of the cause under which issues of justice and convenience are to be addressed.
2. The requirement of a prima facie case does not mean that the applicant for relief must show that it is more probable than not that it will succeed at trial. It is sufficient if the applicant shows a sufficient likelihood of success to justify, in the circumstances, the preservation of the status quo pending trial. How strong that probability needs to be depends upon the nature of the rights that are being asserted and the practical consequences likely to flow from the order that is sought; O'Neill (Gummow and Hayne JJ) at [65] citing Beecham Group Ltd v Bristol Laboratories Pty Ltd [1968] HCA 1; 118 CLR 618 (Kitto J) at 622. Whilst an applicant for relief need not show that its case is likely to succeed, it may be that in order sufficiently to recognise the serious consequences for the respondent of the grant of interlocutory relief, the applicant should reasonably be expected to demonstrate such likelihood; Samsung Electronics Co Ltd v Apple Inc [2011] FCAFC 156; 217 FCR 238 (Dowsett, Foster and Yates JJ) at [51].
3. In the present case the primary contest concerns whether or not the additional orders, which in substance take the form of a mandatory injunction, ought to be made. In the past there was some debate as to whether a higher or different standard in determining the balance of convenience applies when, in the course of a contested interlocutory application, an applicant seeks orders that are mandatory. That debate was synthesised and resolved by Yates J in Instyle Contract Textiles Pty Limited v Good Environmental Choice Services Pty Ltd (No 2) [2010] FCA 38 (Yates J) at [75]-[81]. In JTA Le Roux Pty Ltd v Lawson [No 2] [2013] WASC 373, Edelman J, then sitting on the Western Australia Supreme Court, summarised the position at [17]:

On the other side of the conflict in the authorities, it has been held that the test to be met in applications for mandatory interlocutory injunctions is no different from the standard to be met in applications for prohibitory interlocutory injunctions. This is now, by far, the dominant view. Although the test for a mandatory interlocutory injunction is no different from a prohibitory interlocutory injunction, an important question in assessing the balance of convenience is the risk of injustice to the party to whom the injunction issues. This risk is usually, but not always, high in cases involving mandatory interlocutory injunctions.

1. The elevation of the potential for risk was also discussed by Gummow J in Businessworld Computers v Australian Telecommunications Commission [1988] FCA 127; 82 ALR 499 at 503, where Gummow J said:

These writers indicate two matters of importance for the present case. First, it has long been the case that interlocutory mandatory injunctions would be more likely to issue where the defendant was compelled, not to embark upon a fresh course of conduct, but, as here, to revert to a course of conduct pursued before the occurrence of the acts or omissions that provoked the litigation. Secondly, whilst there has been a natural reluctance to decree burdensome relief without a full hearing, prohibitory injunctions may have that tendency just as much as mandatory relief, and there has never been general acceptance of any precise verbal formula controlling the grant of interlocutory mandatory relief.

1. The importance of consideration of harm to third parties, such as L&W's customers, was considered in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia [1998] HCA 30; 195 CLR 1 at [65], [66] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ). The High Court noted that a court will be concerned to examine and in appropriate cases to protect, pending the trial, the moving party's right to relief against that party's opponent. It said at [65]:

... But the rights of plaintiff and defendant are not the only rights considered in determining where the balance of convenience lies. In Wood v Sutcliffe Sir Richard Kindersley V C said:

"whenever a Court of Equity is asked for an injunction in cases of such a nature as this, it must have regard not only to the dry strict rights of the Plaintiff and Defendant, but also to the surrounding circumstances, to the rights or interests of other persons which may be more or less involved: it must, I say, have regard to those circumstances before it exercises its jurisdiction (which is unquestionably a strong one), of granting an injunction."

The principle in Wood v Sutcliffe was approved by Cumming-Bruce LJ in Miller v Jackson:

"Courts of equity will not ordinarily and without special necessity interfere by injunction where the injunction will have the effect of very materially injuring the rights of third persons not before the court."

His Lordship cited with approval a passage from Dr Spry's Equitable Remedies. We too adopt the author's statement:

"the interests of the public and of third persons are relevant and have more or less weight according to the other material circumstances. So it has been said that courts of equity 'upon principle, will not ordinarily and without special necessity interfere by injunction, where the injunction will have the effect of very materially injuring the rights of third persons not before the courts'. Regard must be had 'not only to the dry strict rights of the plaintiff and the defendant, but also the surrounding circumstances, to the rights or interests of other persons which may be more or less involved'. So it is that where the plaintiff has prima facie a right to specific relief, the court will, in accordance with these principles, weigh the disadvantage or hardship that he would suffer if relief were refused against any hardship or disadvantage that might be caused to third persons or to the public generally if relief were granted, even though these latter considerations are only rarely found to be decisive. (Conversely, detriment that might be caused to third persons or to the public generally if an injunction were refused is taken into account.)"

1. I turn first to the position advanced by Aristocrat against L&W in relation to confidential information.
2. The principles relevant to the protection of confidential information are well established. They were summarised in Dart Industries Inc v David Bryar & Associates Pty Ltd [1997] FCA 481; 38 IPR 389 at 406-7 (Goldberg J) and relied upon by Aristocrat without dispute from L&W:

Information to be confidential must be capable of being given the attribution or quality of confidence, that is it must be something which is not within the public knowledge: Saltman Engineering Co Ltd v Campbell Engineering Co Ltd (1948) 65 RPC 203, 215; AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515, 521. A useful analysis of relevant indicia of confidential information is found in Mense & Ampere Electrical Manufacturing Co Pty Ltd v Milenkovic [1973] VicRp 78; [1973] VR 784 at 796-798 and I adopt that analysis. A proceeding for breach of confidence requires the establishment of three elements - the information must have the necessary quality of confidence, the information must have been imparted in circumstances identifying an obligation of confidence and there must be an unauthorised use of that information to the detriment of the person who claims the confidence: Coco v A N Clark (Engineers) Ltd [1969] RPC 41, 47; The Commonwealth v John Fairfax & Sons Ltd [1980] HCA 44; (1980) 147 CLR 39, 50. The information in respect of which confidentiality is claimed must be capable of being identified with a degree of specificity; it is insufficient to claim confidentiality in general or global terms: O'Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310, 326-328; Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) [1987] FCA 266; (1987) 14 FCR 434, 443. Apart from cases of contract or where property rights are involved, a court will intervene where the circumstances are such that it is unconscionable for a party to use confidential information: Fraser v Evans [1969] 1 QB 349, 361; Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VicRp 17; [1979] VR 167, 191.

1. As to the element of confidentiality, the Court in a well-known passage in Saltman Engineering Co Ltd v Campbell Engineering Co (1948) 65 RPC 203 at 215 (Lord Greene MR) said:

The information, to be confidential, must, I apprehend, apart from contract, have the necessary quality of confidence about it, namely it must not be something which is public property and public knowledge. On the other hand it is perfectly possible to have a confidential document, be it a formula, a plan, a sketch, or something of that kind, which is the result of work done by the maker upon materials which may be available for the use of anybody; but what makes it confidential is the fact that the maker of the document has used his brain and thus produced a result which can only be produced by somebody who goes through the same process.

1. For the purposes of its interlocutory application, Aristocrat identifies the four classes of information to which I have referred above. It does so by reference to the information contained in four specific documents produced by L&W in respect of which Ms Charles, during her employment at L&W, was the author either by herself or in collaboration with another L&W employee. This is sufficient, at the interlocutory stage, to meet the requirement set out in the authorities that the confidential information relied upon be identified with specificity; O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310 at 326-8 (Mason J).
2. The expert evidence of Mr Ellis makes a comparison of the information in each of the four L&W documents with the information contained in Aristocrat documents that have been shown to have been authored by Ms Charles during her tenure at Aristocrat. That comparison yields his opinion that there has been clear use of the Aristocrat information in the creation of the L&W documents. As I have noted, Mr Dale, the independent expert retained by L&W, does not dispute the correctness of that opinion.
3. One of the documents identified by Aristocrat ("L&W 2371") was confirmed by L&W to contain the maths used in the final version of the Dragon Train software. Having regard to the matters raised, in my view the evidence sufficiently supports the proposition for the purposes of the present interlocutory application that the documents used by Ms Charles and others within L&W were deployed in the design of the final version of the Dragon Train game.
4. The case advanced in response by L&W is that there are serious difficulties in establishing the four classes of information identified are not in the public domain or have the necessary quality of confidence to justify a finding that Aristocrat is likely to establish a finding in its favour for the final relief sought. L&W contends that there is a real contest as to whether or not any of the classes of information are truly confidential or whether it is publicly available information.
5. As an instance, in the case of the base game and free game reel strips in class (a), (being the composition, layout and length of the base game and free game reel strips, symbol counts per reel, associated calculations and hit rates) L&W contends that by watching a machine or a video of a machine, the contents of the reels are readily ascertained by repeated gameplay. Mr Dale expresses the view that it would take about 50 games or four minutes of gameplay to determine the contents of the reels in the base game. "Hit rates" merely refer to the calculated average number of spins required to trigger a particular feature. In short, L&W contends that it is just a matter of watching gameplay long enough to determine the matters raised in this class of information. In response, Mr Ellis contends that the contents of the reels are not "readily ascertainable from gameplay". In relation to the remaining three classes of information, L&W does not contend that it is known or ascertainable information. For class (b) it contends that the use of weight tables in the industry is common, and that there are only limited options for the way that they can be configured. Accordingly, it could be readily remembered information to a former employee. For class (c), being the use of a [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], which is an innovative way to [REDACTED] [REDACTED] [REDACTED] of the game, L&W contends, based on the evidence of Mr Dale, that the method deployed of using [REDACTED] [REDACTED] [REDACTED] [REDACTED] "could be readily implemented using [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED], and the user experience would be the same". For class (d) being the [REDACTED] [REDACTED] [REDACTED] [REDACTED] [REDACTED] of getting a Grand Jackpot, L&W points to a conflict in the evidence about the commonality of such a structure in the industry.
6. Aristocrat points to the evidence of Mr Ellis that disputes each of these propositions.
7. It may be noted that L&W does not contest the evidence relied upon by Aristocrat that Ms Charles took the information from Aristocrat and applied it in making the design of the Dragon Train products. L&W submits, however, that it is by no means certain that a constructive trust over the whole of the copyright owned by L&W in the Dragon Train software would be granted upon final relief raising several different points.
8. First, by reason of its criticism of the four classes of information described above, L&W contends that the information will not be found to have the necessary quality of confidence. This can only apply to class (a) of the information. However, the apparent fact that Ms Charles did not exercise any independent effort to obtain that information but rather took it from Aristocrat in breach of confidence tends to indicate that the source of the information held by L&W was not independent endeavour. For classes (b) to (d) there is no dispute that the information was taken, but rather L&W makes submissions to the effect that it may form part of a game developer's know-how, that it is a matter of simple selection from limited variables or that it would easily have been derived.
9. On the basis of the evidence to which I have been referred that L&W, via its employee Ms Charles, knowingly used that information in the determination of the maths that underlies the Dragon Train software and that that software forms a basis for the operation of the Dragon Train game, I am satisfied that Aristocrat has, for the purpose of this application, established a prima facie case of entitlement to relief.
10. I am presently unable to assess whether or not the confidential information forms the basis for the totality of the Dragon Train game. L&W submits that Dragon Train has an additional secondary feature that is not part of Dragon Link, but Aristocrat relies on its independent expert evidence to contend that this feature too depends on the mathematics taken by Ms Charles.
11. Taken at the level required at this stage, I am satisfied that there is a serious question to be tried as to whether the software underlying the whole of the Dragon Train game, as used in L&W's EGMs, has been developed by the misuse of confidential information of Aristocrat. This approach is consistent with that taken in similar cases, see Dart at 415. As observed in the passage from Saltman Engineering set out above, it is not at this stage sufficient for L&W to submit that someone may be able to assemble information, the fact of the matter is that it appears to be no part of L&W's case that this happened.
12. L&W next submits that the additional orders ought not be made in any event because its customers have not been joined and that in any event the inconvenience to them arising from the additional orders is such that the relief ought not be granted. It submits that, taken together with the undertakings it has given, Aristocrat's position is sufficiently protected and that damages will be an adequate remedy.
13. The form of agreements between LNW Gaming and its customers is in evidence. Although they are in a few different types, the relevant terms are sufficiently similar to refer to them generally.
14. By clause 3 a customer purchases the "equipment" on the terms and conditions set out in the agreement. The term "equipment" is defined in clause 1 to include any EGM, software (meaning all software and other intellectual property supplied in connection with the EGM) artwork and game. The "intellectual property" is defined to include confidential information.
15. By clause 9.1 title and ownership of all software shall remain the property of LNW Gaming and its related entities, and the customer acknowledges that the software is proprietary to LNW Gaming.
16. By clause 9.2, LNW Gaming grants the customer a perpetual licence to display the software to the extent that the equipment incorporates it, and pursuant to the terms of the agreement.
17. Clause 9.3 provides for termination of the perpetual licence. This may occur automatically if the customer breaches certain identified terms or if the game is returned and the customer wishes to terminate. LNW may terminate by notice if, after giving five days' written notice, the customer has not rectified a breach.
18. Clause 15 is under the heading "General Provisions". Clause 15.1 provides:

15.1 Compliance with Laws

Each party shall comply with all federal, state and municipal laws, ordinances, rules, regulations and orders pertaining to its rights and obligations under this Agreement at its own cost and expense. Both parties shall promptly take all measures necessary to remedy any violations of any such law, ordinance, rule, regulation or order. This Agreement will be governed under the laws of New South Wales.

1. It would appear from these terms that upon receipt of payment for the EGM, title in the EGM passes to the customer who owns that equipment subject only to fact that LNW Gaming grants a perpetual licence over the software. The effect of order 1 of the additional orders sought will be to require L&W to withdraw that perpetual licence in relation to any Dragon Train EGMs executed before 23 September 2024.
2. It may be noted that L&W has sold thousands of Dragon Train EGMs to, I infer hundreds of customers. The first such sales took place in August 2023. L&W has been on notice of Aristocrat's claims since September 2023. On or around 24 September 2024, it would appear that L&W informed each of its Australian and New Zealand customers of the present proceedings and that they "were unable to ship further copies or place additional Dragon Train games at this time".
3. The parties are at issue as to whether, before the additional orders can be made, each of the customers who entered such an agreement must be joined. L&W submits the issue of joinder was raised with Aristocrat in October 2024, but no attempt was made to join parties. It submits that the joinder of a party directly affected by an order is not generally a matter of discretion but a matter of obligation on the party seeking the order.
4. In John Alexander's Clubs Pty Limited v White City Tennis Club Limited [2010] HCA 19; 241 CLR 1 at [131]-[133], the High Court accepted the proposition that where a court is invited to make or proposes to make, orders directly affecting the rights or liabilities of a non-party, the non-party is a necessary party and ought to be joined; citing Victoria v Sutton [1998] HCA 56; 195 CLR 291 at [77] (McHugh). In both John Alexander's and Victoria, it is apparent that the Court was addressing circumstances relevant to a final hearing. In the latter case at [77] McHugh J observed that the rules of natural justice require that before a court makes an order that may affect the rights or interests of a person, that person should be given an opportunity to contest the making of that order. The reasons given included the avoidance of duplication of hearing on the same issues and the avoidance of the spectre of inconsistent decisions by courts or the judges of the same court. Such observations most aptly apply to final proceedings where an order is determinative of rights, rather than interlocutory applications where necessarily the orders are not final. Indeed, in both John Alexander's and Victoria the Courts were concerned with the grant of final relief.
5. In my view, a hard and fast rule that parties affected by interlocutory orders be joined as parties would often be antithetical to policy and purpose underlying the grant of urgent interlocutory relief, which is that the court may make such orders, at least against the parties to the proceedings against whom final relief might be a granted, as are needed to ensure the effective exercise of the jurisdiction invoked; Patrick Stevedores at [35]. In the passage in Patrick Stevedores concerning third parties which I have set out above, quoting Miller v Jackson [1977] EWCA Civ 6; [1977] QB 966 at 988 (Cumming-Bruce LJ), the observation is made that courts of equity will not ordinarily interfere by injunction where the injunction "will have the effect of very materially injuring the rights of third persons not before the Court". That passage appears to recognise that third party rights may be affected by the grant of interlocutory relief, notwithstanding that they have not been joined or represented. In my view the better proposition is that the court should weigh the disadvantage or hardship that Aristocrat would suffer if relief were refused against any hardship or disadvantage that might be caused to third persons or to the public generally if relief were granted but there is no requirement that third parties affected - even very materially - by interlocutory orders be joined as parties. No doubt the appropriateness and necessity for the joinder of such parties to an interlocutory application will depend on the particular circumstances of the case.
6. In the present case, L&W's interests closely align with those of its customers. It has raised points relevant to those interests and in my view there is no requirement - or need in the present case - for those customers to be joined.
7. I now turn to consider those submissions, together with the opposing submissions advanced by Aristocrat, in the context of my determination of whether Aristocrat is likely to suffer injury for which damages will not be an adequate remedy and whether the balance of convenience favours the granting of an injunction. In this regard it is relevant to note that L&W has agreed to a restraint on its conduct in the form of the undertakings that it has given. The additional orders require in terms that it engage in conduct that affects third parties, namely, its customers.
8. Order 1 of the additional orders requires L&W to withdraw any licence or authorisation to use the Dragon Train software under any agreements with customers executed before 23 September 2024. I have set out a brief chronology in section 1.4 above. The Dragon Train product was launched in August 2023. By 23 September 2024, the evidence indicates that thousands of EGMs loaded with the Dragon Train software had been sold over a period of 13 months in numerous venues including clubs and pubs throughout Australia.
9. By the terms of the agreements that LNW Gaming has with its customers, it grants a permanent licence to them to use the Dragon Train software upon full payment being made for the EGM. Upon acquisition of the EGM the customer utilises the game to generate gambling revenue. Many customers have been using the Dragon Train game in their premises for over a year.
10. The claim for final relief brought by Aristocrat includes damages or equitable damages and in the alternative a declaration that L&W holds the Dragon Train products - including the rights associated with Dragon Train - on constructive trust for Aristocrat. It submits that the additional orders would serve to protect it against further infringing activity in the form of the use of the offending Dragon Train games because it would entitle Aristocrat to terminate the perpetual licences purported to be granted by LNW Gaming. Whether or not such a trust will be granted as a matter of final relief is a matter for determination at trial. Although Aristocrat has established a prima facie case of misuse of confidential information, it is by no means a foregone conclusion that a trust will be granted in respect of the whole of the Dragon Train software. Amongst other things, the outcome of this aspect of the case will involve an evaluation of the significance of the misused confidential information to the game and the software used in it as a whole, a subject not traversed in this application. It may also involve consideration of any competing rights that the customers may claim under their contracts.
11. The status quo for many of the customers is that they have received and own the EGMs containing Dragon Train for over a year, or at least many months prior to the present application. The grant of the additional orders would serve to disrupt that status quo by the termination of the licences.
12. In the case of restraint against L&W it has been forcefully argued that L&W has engaged in conduct with its eyes wide open as to the potential consequence of interlocutory orders against it. That argument has considerable justification in light of the conduct above. It would appear that when faced with the prospect of being restrained, L&W doubled down on its conduct to ensure sales took place before any court order took place. However, the evidence does not support the view that the conduct of L&W's customers can be coloured in the same way.
13. Aristocrat submits that L&W has in Europe and North America ensured that all EGMs with Dragon Train software on them have been withdrawn or converted to other L&W games in its portfolio. However, the evidence suggests that the contractual arrangements between L&W and its customers in those places are different to the arrangements in Australia. It is arguable, as L&W submits, that by terminating the perpetual licence granted under clause 9.2, LNW Gaming will be in breach of its agreement with its customers. Aristocrat contends that a court order will sanctify any breach because the terms of clause 15.1 requires the parties to the agreement to comply with orders, which, it submits, would include the additional orders. There is an argument on either side in that regard, but not one capable of resolution in this application.
14. Regardless of the position, one consequence of the additional orders will be to create confusion as to the status of the contractual arrangements between L&W and its customers. Several variables arise. One is that customers decline to accept that the Dragon Train game should be replaced, in which case they will be acting in breach of a licence that L&W has been required - against its will - to withdraw. Further litigation may be necessary to enforce that position.
15. Another is that customers comply with the withdrawal of their licences and cease to use Dragon Train. In the event that Aristocrat does not prevail at final hearing in relation to their use of Dragon Train there would arise an entitlement on the part of the customers to claim on the undertaking as to damages. Many of the clubs and pubs will, I infer, not have the resources to conduct litigation against Aristocrat to claim on the undertaking. The complexities of such claims has been remarked upon elsewhere: Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth [2018] FCA 1556; 136 IPR 8 at [1336] (Jagot J). Many small clubs and pubs may elect not to advance a claim, thereby leaving any harm they have suffered unrecompensed.
16. On the other hand, the harm that arises from the continued use of the EGMs with Dragon Train must in any event be quantified by reference to damages because, as I have noted, thousands of such EGMs have already been sold. Many of these have been for many months and some for over a year. The loss of revenue to Aristocrat caused by reason of sales of machines using unauthorised confidential information will have to be calculated, and for the most part will be readily calculated. As I have noted, there is no claim advanced against customers in respect of profits that they accrue from the use of the Dragon Train game. Aristocrat is a manufacturer and vendor of EGMs and is not in the business of gaming.
17. In the meantime, the undertakings provided by L&W ensure that no further sales are made and none of the defined Aristocrat Confidential Information will be used in the design of further machines.
18. Aristocrat contends that one form of continued harm arising by reason of the unrestrained use of the Dragon Train EGMs by customers lies in the erosion of its goodwill, market reputation and competitive advantage based on the similarities in the gameplay of Dragon Link and Dragon Train. It is likely that much of this harm, if suffered, has taken place since August 2023 and will need to be assessed in pecuniary form in any event. I do not accept that any further harm suffered is any less quantifiable. It is likely to be qualitatively lesser than that which occurred in the months after the release of Dragon Train.
19. Aristocrat also contends that the sale and operation of Dragon Train has had a significant impact on Aristocrat's market share and pricing policy. However, the undertakings given by L&W are such that no further sales will take place. The continued use of the Dragon Train EGMs may have an impact on market share and pricing, but it is difficult to see how this is so.
20. Taking all of these matters into consideration, in my view the balance does not lie in the grant of the additional orders. Damages will be an adequate remedy for Aristocrat.

1. The interlocutory application must be dismissed. The question of costs will be reserved pending the outcome of the final hearing.

I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Burley.

1. The First and Second Respondents undertake to the Applicant to the extent they engage in conduct in Australia, pending further order from the Federal Court of Australia (reserving the right to apply to the Court following a further order from the Nevada Court including any final determination on the merits) to conduct themselves on the basis that the US Order's restraint that they be enjoined from using or disclosing any of the Applicant's (alleged) trade secrets (as described in the US Order) or other confidential information relating to the mathematical design of Dragon Link or Lighting Link or selling or leasing of Dragon Train (meaning, both the EGM and online versions of the game in the form in which it was previously supplied and distributed in Australia and the United States), applies to any conduct in Australia in relation to Aristocrat Confidential Information (as defined in Aristocrat's Amended Statement of Claim dated 1 November 2024).
2. The First Respondent and Second Respondent undertake to the Applicant, to the extent they engage in conduct in Australia, pending further order from the Federal Court of Australia (reserving the right to apply to the Court following a further order from the Nevada Court including any final determination on the merits) and subject to (3) below to conduct themselves on the basis that the US Order's restraint that the First Respondent be enjoined from accessing, transferring, copying, disseminating, modifying or destroying any documents or materials in the First Respondent's possession, custody or control reflecting any of the Applicant's alleged trade secrets (as described in the US Order) or other confidential or proprietary information relating to the mathematical design of Dragon Link or Lighting Link, except to the extent necessary to comply with the US Order, applies to any conduct in Australia of the First Respondent or the Second Respondent in relation to Aristocrat Confidential Information.
3. Paragraph 2 does not apply to the extent that the First and Second Respondents and their legal representatives (and any experts) engage in any conduct for the purposes of providing advice or representation in relation to the present litigation (Federal Court Proceeding NSD1410/2024 and any appeals or related proceedings).