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Howard Stutz

Judge deals setback to Shuffle Master in patent case

5 February 2008

LAS VEGAS, Nevada -- Gambling equipment maker Elixir Gaming has won a summary judgment ruling in federal court against rival manufacturer Shuffle Master.

The U.S. District Court in Nevada said automated card shufflers built by Elixir, formerly known as Vending Data Corp., did not infringe on patents owned by Shuffle Master.

The order was signed Friday by U.S. District Judge Brian Sandoval.

In a statement, Elixir said the order ends Shuffler Master's move to block sales of the company's PokerOne product. Elixir said it would seek to recover $3 million from Shuffle Master from a preliminary injunction bond. Elixir also hopes to recover its legal fees from Shuffle Master.

"When Shuffle Master wrongfully attempted to bar the company from competing with Shuffle Master, we were forced to defend ourselves so as to protect the interests of our customers and shareholders," Elixir Chairman and CEO Gordon Yuen said in the statement. "We intend to immediately and vigorously pursue Shuffle Master for the harm caused to our company and its shareholders."

Shuffle Master first brought the patent infringement action against Elixir in 2004 when the company operated as Vending Data, and a preliminary injunction was granted. But in December 2005, the U.S. Court of Appeals said the preliminary injunction was erroneously granted and the case was returned to the lower court for more proceedings.

Elixir is a subsidiary of Melco International and operates primarily in the Asia Pacific region.

Deutsche Bank gaming analyst Bill Lerner said he expects Shuffle Master to appeal the ruling but that he doesn't expect the matter to affect Shuffle Master much.

"Despite being able to freely sell and market the PokerOne shuffler for over two years, (Elixir) has not enjoyed commercial success and therefore we do not believe is a threat to Shuffle Master's virtual monopoly in the shuffler business," he said.

After the close of trading on the stock markets Monday, Shuffle Master announced plans to appeal the judge's order.

Shuffle Master Chairman and CEO Mark Yoseloff said Elixir hasn't been able to achieve any significant sales of its poker shuffler since the temporary injunction was lifted.

"We are disappointed in and respectfully disagree with the court's ruling and believe that it will be reversed on appeal," Yoseloff said.

Elixir, which is traded on the American Stock Exchange, closed at $4.47 Monday, up 5 cents, or 1.13 percent. Shuffle Master shares, traded on the Nasdaq National Market, closed at $9.51, down 71 cents, or 6.95 percent.