HGN Seeks Depositions, Documents from DrHo.com

Anyone trying to get a feel for the direction of a patent infringement lawsuit between Asian-based casino operator DrHo.com and U.S.-based Home Gambling Network would be hard pressed to pick a favorite after talking to both sides.

An official with HGN told Interactive Gaming News on Friday that a recent emergency motion in Nevada District Court last week to compel Stanley Ho's Caribbean Online Ltd. to respond to allegations that COL infringed on HGN's copyrights was indication that things are looking up for HGN.

"I said all along that we would win this, and we are winning it now," said Mel Molnick, the treasurer of i2corp, a subsidiary of HGN.

"Our lawyers really feel we would win this, but at what cost? I really think we would too, but it also is a gamble, anytime you go to court you are taking a gamble. We aren't gamblers, we are just operators."

-Peter Kjaer

The case centers on the use of DrHo.com's real-time gaming system that allows users to play various casino games through a live video feed.

i2corp owns a patent covering live casino games broadcast over the Internet for gambling purposes. The patent specifically applies to games involving electronic betting and payments.

The emergency motion is the latest in a long battle between the two parties, and officials with COL feel HGN isn't using the best business practices by suing companies for patent infringement while never producing a system of its own based on the patent.

Macau casino tycoon Stanley Ho won the first round of his legal battle against i2corp in early May. Ho's Internet casino was allowed to continue to operate after HGN and i2corp filed injunctions against the site asking the court to order Ho's site to cease operations.

The court allowed the site to continue to operate and dropped all charges against Ho the individual, and a host of other defendants that were named in the original case, leaving only the Antigua-based site and its corporation (COL) as the defendants in the case.

Ho's online casino has been the only operation able to launch a site featuring live games on the Internet.

In response to the launch of Ho's real-time games, which are accessible through Ho's DrHo.com casino portal, i2corp filed an injunction to force the site to cease operating.

Having avoided the injunction, the Ho site continued to operate with moderate success, according to company officials.

Having lost the injunction, HGN turned to the courts once again last Friday asking COL officials to turn over documents and be available for depositions regarding what HGN's court documents call "lack of cooperation and non-responsive conduct in the scheduling of depositions, and COL's complete failure to provide a majority of the non-objectionable documents requested in HGN's initial June 25, 2002 document request."

Part of the motion to compel that was filed in the U.S. District Court of Nevada was a sworn declaration from HGN lawyer Michael Rounds stating that no progress had been made in securing documents or dispositions from defendants.

DrHo.com CEO Peter Kjaer told IGN that he would make himself available for HGN depositions within the next two weeks. He said any perceived delay in turning over documents was due to officials with Dr. Ho trying to determine what course of action would be best regarding the case.

Part of the May injunction case that went in Ho's favor was based on the fact that HGN only has a patent and not an operating system. The court ruled that more damage would be done to Dr. Ho by not being allowed to open the site than to HGN since they didn't have an existing product that would be penalized by Ho moving forward.

Now that the site has been up and running successfully, Kjaer said DrHo executives have to determine if it is cost effective for them to challenge the suit. He said published media reports that the site is generating "millions of hits per month and hundreds of millions of dollars in revenue per year," are way off.

"I wish those were true," he said.

Stanley Ho, and the DrHo gaming brand, are well known in Asia, and the company uses the Internet as a way to further is global brand awareness. Even with a functioning online casino, though, Kjaer said less than 10 percent of the traffic to the site comes from U.S. players. The majority of them, he said, have Asian surnames.

He said Ho has already spent more than $250,000 defending the patent-infringement case. If the company chooses to fight the battle to the end, he predicted that cost could reach $1 million.

The HGN patent is only applicable in the United States, so Ho could chose to limit access to the real-time games from the United States or reach some other settlement with HGN, Kjaer said.

"We just need to determine if it is worth it for us to fight this, and incur the cost associated with that, to maintain what is really a small percentage of our business," he said.

Although Molnick said his side is "winning" the battle, Kjaer feels confident Ho has a good claim to win the court battle.

"Our lawyers really feel we would win this, but at what cost?" he asked. "I really think we would too, but it also is a gamble, anytime you go to court you are taking a gamble. We aren't gamblers, we are just operators."

To read the declaration of Michael Rounds, HGN's lawyer, click here.