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Best of Howard Stutz

Gaming Guru

Howard Stutz

IGT wins; battle begins

12 September 2008

A federal judge has ruled in favor of International Game Technology in a patent infringement dispute with rival gambling equipment maker Bally Technologies.

The lawsuit is related to a slot machine gaming wheel product. But Wall Street said the fight is far from finished.

Bally and IGT have several patent infringement lawsuits filed against each another in U.S. District Court concerning each company's slot machine enhancements, which give gamblers bonus rounds on a game that could lead to increased jackpots.

Both companies hailed Wednesday's decision by U.S. District Judge Edward Reed. Each announced the ruling in separate statements late Wednesday.

"We feel this decision strengthens our position in the other litigation brought by IGT," Bally Technologies Chief Executive Officer Richard Haddrill said in a statement.

IGT CEO TJ Matthews countered, saying the judge vindicated the company's position.

"IGT believes strongly in the United States patent system and respects the valid intellectual property rights of others," Matthews said.

Bally claimed in its lawsuit that IGT's slot machines, including the highly popular "Wheel of Fortune" game, infringed on one of its patents. The judge said the patent infringement claims were invalid due to obviousness and prior art. IGT asked for a ruling before a trial because of a lack of evidence.

In its statement, Bally said the court order does not hurt its existing products.

Other lawsuits between the two companies are pending and gaming analysts said the companies' battles aren't ending.

One of the lawsuits, involving IGT's spinning wheel games and Bally's iView technology, is scheduled to go on trial in October. IGT alleges that Bally infringed on six patents held by IGT.

"This case could have more significant implications to both Bally and IGT and we believe that when a decision is reached it will finally remove an overhang on both companies' shares," Stifel Nicolaus gaming analyst Steven Wieczynski said in a note to investors. "We still expect this trial to be settled out of court which, in our opinion, would be beneficial to both companies."

Wall Street had differing opinions on which company benefited from the judge's ruling this week.

Wieczynski thought the judge's favorable decision for IGT might have a negative impact on the slot machine maker.

"Yesterday's ruling, in our opinion, has zero financial impact to either company, Wieczynski said. "Bally expected to lose this case. This ruling could be used as a benchmark in the upcoming cases involving Bally and IGT."

JPMorgan gaming analyst Joe Greff thought the decision favored Bally but was neutral for IGT.

"IGT's patent infringement lawsuit claims are probably weakened, which makes a settlement discussion more likely in our opinion," Greff said in a note to investors.

Roth Capital Partners gaming analyst Todd Eilers said the ruling could help Bally in the lawsuit scheduled to go to trial in October.

"We believe the judge could likely rule certain IGT patents invalid," Roth said in a note to investors.

Shares of both IGT and Bally's traded up Thursday on the New York Stock Exchange. IGT closed at $20.12, up 17 cents, or 0.85 percent. Bally climbed $1.95, or 6.09 percent, to close at $33.95.

IGT wins; battle begins is republished from