Skillz Platform Inc. v. AviaGames Inc.

Background

AviaGames moved to continue the trial or, alternatively, to bifurcate it. A continuance is a delay of a scheduled proceeding. Bifurcation means dividing a trial into separate phases or trials. AviaGames sought relief because a grand-jury investigation had begun after Skillz alleged that AviaGames used and concealed “bots,” meaning non-human, non-real-time players. AviaGames’s executives, Vickie Chen and Peng Zhang, had retained separate criminal-defense counsel, and separate criminal-defense counsel for AviaGames appeared in the civil case after Skillz received a grand-jury subpoena from the United States Attorney’s Office.

Request to Stay the Case

AviaGames initially sought a stay— a pause in the civil case—until the criminal proceedings ended. It argued that witnesses might invoke their Fifth Amendment privilege against self-incrimination and that additional time would help its lawyers prepare. Skillz opposed a stay, arguing that no AviaGames employees had been indicted, that the delay could last many years, and that witnesses’ memories could fade or witnesses could become unavailable.

The court applied six factors used to decide whether to pause a civil case during a criminal proceeding: the effect on the defendant’s Fifth Amendment rights, prejudice to the plaintiff from delay, the burden on the defendant, judicial efficiency, the interests of nonparties, and the public interest. The court found that these factors weighed against a stay. It emphasized that no AviaGames employee had been indicted and that AviaGames itself did not have Fifth Amendment rights to assert. The court also found that the investigation was in its early stages, so a stay could last many years and substantially prejudice Skillz. The court therefore denied AviaGames’s motion to stay the case pending the grand-jury investigation.

Request to Bifurcate the Trial

AviaGames alternatively sought one trial on liability, without evidence concerning bots, followed by another trial on willfulness and damages. AviaGames argued that this structure would avoid inflammatory evidence, reduce jury confusion, and improve efficiency.

Skillz argued that evidence concerning bots was important to its infringement arguments and its response to AviaGames’s noninfringement theories. The court agreed with Skillz, finding that the bot evidence was relevant to liability and that excluding it from the proposed liability trial would prejudice Skillz. The court also stated that concerns about prejudice or jury confusion could be raised as evidentiary objections at trial. It found that the proposed structure would effectively require separate juries because of the expected time between the two portions and would not promote judicial efficiency. The court therefore denied AviaGames’s request to bifurcate the trial.

Continuance Under Rule 16

At the pretrial conference, AviaGames clarified that it sought a continuance so its counsel could prepare in light of the grand-jury investigation, rather than a delay lasting until the criminal proceedings concluded. The court applied the “good cause” standard for modifying a case schedule and found that AviaGames had acted diligently. Although AviaGames had known about Skillz’s bot-related fraud allegations since August 2023, the assertion of the crime-fraud exception to attorney-client privilege and the grand-jury investigation began within the preceding two months. AviaGames filed its motion one week after learning about the grand-jury subpoena served on Skillz.

The court also found that a brief continuance would not substantially prejudice Skillz and would give both sides more time to prepare. It concluded that the trial should be continued to February 2, 2024. Because the delay created a risk to Skillz’s potential recovery if a jury later awarded damages, the court conditioned the continuance on AviaGames’s posting a $5 million bond as security for potential infringement damages. The bond was to be posted with the Clerk of Court for deposit in the court registry by November 17, 2023, and released to AviaGames when the trial began.

Order and Effect

The court ordered that AviaGames’s motion to continue the trial or, alternatively, bifurcate it was GRANTED IN PART and DENIED IN PART. The trial was continued to February 2, 2024, subject to the $5 million bond requirement. This was a trial-management ruling; the opinion did not decide the merits of Skillz’s patent claims or AviaGames’s defenses.