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Emily D. Swoboda

Taken to Task (Again)

11 April 2007

An inventor in California has initiated another round of patent infringement lawsuits against a new crop of online gambling companies.

Dr. Scott Lewis, head of 1st Technology and the inventor and patent holder of a method for the enhancement of transmitted multimedia content, in 2002 began a string of lawsuits against several online gaming companies, claiming each of their online poker products violated 1st Technology's patent.

Companies involved in the last suit (2005) included Boss Media, CryptoLogic, Wagerworks, MGM Mirage Online, Las Vegas From (LVFH), Real Time Gaming, Terra Networks, Sportingbet, NDS Group, Ongame E-solutions and Orbis Technology.

Most of the parties settled to avoid litigation, which could have cost the companies millions of dollars. LVFH, for instance, settled by agreeing to pay a $100,000 "licensing" fee plus royalty fees based on rake income. The other companies signed similar, but undisclosed, agreements.

In this new lawsuit filed Sept. 7, 2006, Lewis has made the same claims against PokerStars, Bodog and Futurebet.

PokerStars has appeared and is represented, said William Gantz of Chicago-based law firm DLA Piper, who represented two of the companies in Lewis' most recent suit (2005).

Bodog is now subject to default judgment because it failed to appear or answer the suit. 1st Technology on March 21 filed an application for the default judgment and asked for damages in excess of $46 million.

Cory Aronovitz, a lawyer with Chicago-based Casino Law Group who served as co-counsel with Gantz on the 2005 case, said there is no doubt the judge will grant the default. Aronvitz also said it's entirely possible the judge will grant Lewis the full amount in damages, but that Bodog could settle the case today for $2 million.

Aronovitz theorizes that the reason Bodog hasn't answered is because it doesn't want to enter the United States and run the risk of having any of its officers arrested.

On the other hand, Gantz said that one can orchestrate the worst result--in this case, default--at any time before some point later in the case should personnel be required to appear in the United States. Therefore, fear of having to appear personally does not automatically command a default judgment.

Lewis' patent, filed in 1996, is for a system for enhancing graphics over the Internet, but it's not a tangible product like software--it's a method or an idea. The problem with the patent is that the "method of enhancing graphics" would seemingly extend far beyond Internet gaming.

"The arguments that they've made are so broad that they would seemingly apply to any interactive Web site function," Gantz said. "If you accept their argument, which we never have, it could have universal application. What their patent is and what they allege it to be are two different things, but no one really has taken them to task in litigation."

Aronovitz said the odds are stacked against the online gaming companies in these cases, based on the current attitudes in the United States toward the online gambling industry. This is the reason some of them either don't answer the charges or settle out of court.

"A gaming company isn't going to spend a million dollars to defend a case that it could potentially lose based simply not on the facts, but on the feeling that this isn't palatable," he said. "These offshore companies shouldn't be able to exploit this solo guy here in the United States. And then you get a juror who maybe works for the land-based casino industry."

But Aronovitz and Gantz, and the other companies' lawyers, were able to settle in past actions brought by Lewis, which Aronovitz attributes to a weak argument on the plaintiff's side.

"In my opinion, there is prior art and there are technical difficulties," Aronovitz said. "I think that if it was a bench trial, the patent could potentially be defeated, and there are a lot of lawyers who would agree with me.

Aronovitz added that he learned of an identical technology that existed long before Lewis filed for his patent, which is what established prior art and enabled them to settle the cases.

Lewis has not limited his lawsuits to Internet gambling companies. In January 2007, under the company name 1st Media LLC (under which he registered another patent for the same graphic enhancement method), Lewis filed a joint action against online file sharing company Napster and Web-based karaoke service kSolo. He made the same infringement charges against the companies, claiming they transacted business by making, using, selling or offering to sell, and distributing products that violated his patent. Lewis settled with kSolo on April 5.

Lewis/1st Media is also in the middle of a lawsuit against TouchTunes Music Corporation, FatBurger Corp., ECast, Inc. and Rock-Ola Manufacturing Corp., claiming, again, the same infringement on his patent by way of digital touch screen juke boxes. ECast settled in October 2006.

While neither Gantz nor Aronovitz are involved in the current cases, both would like to see a company see a case through to trial.

"We've always viewed this group of patents as dubious and subject to significant prior art defenses," Gantz said. "It's just that in economic reality, no one has stepped up to fully defend the case and take it through a hearing or trial. As far as I can tell, the decision not to take this to trial can only be purely a business decision, not one of concern that the patents are applicable or being infringed."

Click here to view a copy of 1st Technology Complaint against PokerStars, Bodog and Futurebet.

Click here to view a copy of the Bodog default judgment motion.

Click here to view a copy of the 1st Media Complaint.

Click here to view 1st Technology's patent.

Taken to Task (Again) is republished from
Emily D. Swoboda
Emily D. Swoboda