FreedomAtStake's Blog

More patent woes for online casinos

By FreedomAtStake | View all Posts
Posted Tuesday, May 06, 2008 01:33 PM   2 comments
After its success against Bodog, it looks like 1st Technology is continuing its quest to sue online casinos over some obscure patent matter.

I am not going to comment on the validity of the patent or any potential infringements, as I am not especially familiar with the case.

That being said, I will concede that from a purely strategic perspective, their plan is very sound. By concentrating on mainly offshore casinos, 1st Technology is choosing operations with management teams that may have reasons not to visit America. This adds a level of complexity to a defense which the outdated American patent system already makes pretty difficult.

As somebody who has a bit of experience in American patent litigation (someday, I will tell the whole story), I can tell you that it is a system set up very much in favor of the patent-holders, and defending a suit can get very expensive in a hurry.

The system is designed in a manner that the patent trolls lawyers can simply use photocopiers and fill-in-the-blank forms to generate mounds of document requests and court filings, while the defendant needs to spend many thousands of dollars simply trying to keep up, let alone mount a strong defense.

A company can easily get wrongfully included in a patent suit, and still have to spend $100K or more just to get their name taken off the suit - and there is zero hope for a return of court costs. Something as small as this could easily bankrupt a small business, and exposes a serious flaw in the American patent law system - and nobody seems interested in fixing anything because the lawyers love it so much.

One of the curious aspects of the patent system is that patents are only applicable in the countries in which they are filed. However, as the Bodog situation proved, that doesn't mean that foreign companies can simply ignore any lawsuits and be damned with the results.

As Bodog learned when it lost its domain to 1st Technology, there are many ways in which compensation can be applied. Furthermore, many countries have treaties where legal judgments entered in one country can be enforced in others.

So, no matter where you are, you still need to file a defense, no matter how mush of an expensive nuisance it is.

All of that being said, I'd be very interested to see what happens if and when some of those online operations have settlements levied against them. They will not be pleased.

2 comments
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stvstv says:
05/07/08 09:06AM
“I am not going to comment on the validity of the patent”... You just did (“some obscure patent matter”).

What is a patent troll?

According to some a patent troll is a firm who licenses patents they do not themselves commercialize. Yet many of the large firms who are most critical of the practice do it themselves. Out licensing is now an important profit center of most every firm. Often, as a result they end up licensing out patents covering technologies they themselves do not use as they are not consistent with their corporate plan. Rather hypocritical isnt it?

The sad truth is that entities some call “trolls” are often small companies or independent inventors who cant get the money to commercialize their inventions and end up on the curb watching others benefit from their creations. It’s enough to drive one mad. It’s certainly enough to kill the goose that lays the golden egg.

FreedomAtStake says:
05/07/08 10:18AM
stvstv... let's dance.

I'm not sure that "some obscure patent matter" qualifies as a criticism of the patent's validity. This is an obscure patent, and I have no idea if it is valid or not.

That being said, I have had personal involvement in a patent lawsuit. Without giving details - as it is still an ongoing matter - this patent was a "method" patent written in a manner so vague that it could cover virtually anything.

And that is the major problem I have with the American patent system.

It is as if I thought to myself "Wow. It'd be great if there was an automatic bread-buttering machine", and so I wrote a patent saying "a machine that dips a buttering device into butter and then spreads it on bread."

The problem is, this vague and detail-less patent can then be potentially used against some ACTUAL ENTREPRENEUR who makes grilled cheese sandwiches using a device he ACTUALLY BUILT HIMSELF that simply holds the bread in place while he puts cheese on it himself. I'm not lying.

Sure, it sounds like the two processes are completely different, but since the patent is sufficiently vague, these patent trolls can then go an sue this poor guy and basically say to him "Give us $100K or you are going to spend three times as much in a courtroom."

You might now say, "Well, how come he can't get that thrown out of court since the two processes are so different and that patent is so vague?"

Because the legal system currently has a policy of "if it passed the standards of the Patent Office, then the onus of proving it actually isn't a valid patent is on the defendant". Furthermore, the specifics of the patent (ie. butter) don't have to be identical. So according to the patent laws, a patent describing an automatic buttering machine might actually also apply to a bread-holding device used for grilled cheese sandwiches. As far as the law is concerned, that is something for a jury to decide.

Which basically means that ANY activity involving anything remotely similar to a patent is fair game, and since it is fair game, there is a very small chance of recovering court costs.

And with no legal recourse allowing the victim to recover court costs, he has no choice but to either cough up the extortion settlement offer, or face HUGE court fees which could put him out of business. An honest man, being victimized by unscrupulous lawyers and a system that encourages it to happen. There is no other way to describe it.

Now, don't get me wrong. I don't have any problem with valid patents, and I 100% agree that valid patent holders need to be protected. But there needs to be better definition inside of those patents.

But sometime in the last 20 years, the Patent office lost its way and started rubber stamping these "method" patents which cover nothing more than a concept. And now that the Internet has arrived, all of these concepts are coming home to roost.

It's like domain squatting. If you got in on the business early enough, you could have patented concepts like "a computer system that stores time-based events" and then sued Microsoft for all of its revenue coming from Outlook.

As for the specific patent being described in this story, I have no idea whether or not this patent is really applicable and valid or not. But I will say that the methods being used by the plaintiffs (only suing companies that will have a hard time mounting a defense) reeks of the presence of trolls looking for easy targets who will settle quickly and cough up a lot of money.

And they aren't done.

From what I see - and I haven't seen a lot - this patent might be be applied against virtually any gaming site that allows people to download the game and play. They aren't going after the casual gaming sites, yet. Instead they are going after the easy marks. But once they are done, I would be very concerned if I was a site like World Gaming or Pogo. They could be next.

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