Hi, and welcome back to Legal Geek. This week, we review how patent acquisition and enforcement in a potentially trolling manner can backfire to the tune of millions of dollars, in a case over automatic card shufflers used in gaming settings like casinos.
https://archive.org/details/LegalGeekEp145
An Illinois federal court awarded over $300 million dollars of trebled damages to a group of companies this week in a dispute over automatic card shufflers. That's a pile of money even a casino would pay attention to. How did this seemingly simple technology get to this verdict in court?
The story begins in 2012 when a company called Shuffle Tech patented and developed some new automatic card shuffling machine technology, and then collaborated with other companies like DigiDeal to manufacture and market these to casinos and other gaming establishments. The goal was to make and sell about 1200 of these machines a year, with a profit margin of $7,500 dollars on each one.
But when this machine debuted in late 2013 and began to be sold, a patent infringement lawsuit was filed by Scientific Games, another player in the shuffling market. The patent infringement lawsuit was expensive as always in the U.S., and defending this lawsuit ate up most of the seed money Shuffle Tech had collected for building its business. Thus, Shuffle Tech had to quit making shuffling machines and sell its own IP, pushing this new company out of the market.
Shuffle Tech and the collaborators then filed an antitrust lawsuit against Scientific Games, arguing that Scientific Games enforced patents which it knew to be invalid. To this end, in the U.S. there is an obligation for patent applicants to cite any material and relevant prior art they are aware of so that the Patent Office can properly consider all the evidence before granting a patent. Shuffle Tech noted that prior art that seemed to invalidate the patents they were sued upon was cited by Scientific Games in other cases at the Patent Office, but not these ones. In other words, the claim was that Scientific Games knowingly committed fraud on the Patent Office, and thus, was violating antitrust laws when enforcing invalid patents against Shuffle Tech.
Scientific Games argued against this assertion, noting that it had a good faith belief these non-cited prior art documents were not highly relevant to the new cases. But the Illinois court apparently disagreed, imposing a verdict and damages of $105 million dollars against Scientific Games this month, and then tripling the damages to $315 million, as is customary in antitrust law cases. So whether Scientific Games was using troll-type litigation activity or just bad faith in the patent process, the end result was a massive verdict against it. Perhaps just competing in the open market with Shuffle Tech would have been better.
The Bottom Line is, while some companies may not want to comply with the U.S. patent rules to disclose a lot of prior art information when that information is known, the potential risks outweigh the potential gains. By not doing proper due diligence when applying for the patent here, Scientific Games lost in the end their patents and also millions of dollars on top of it. You truly do have to know when to hold em and know when to fold em in this field, which is something a casino equipment company should likely know.
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