Antitrust Law Daily Wrap Up, ANTITRUST—N.D. Ill.: Developer of casino card shuffler raises stakes in monopolization suit, (Oct 13, 2015)

By Linda O’Brien, J.D., LL.M.

A developer of a casino card shuffler and its distributor and investor sufficiently pleaded monopolization claims that a gaming device manufacturer allegedly used sham patent infringement litigation against the developer’s licensee to foreclose competition in the casino shuffler market, the federal district court in Chicago has ruled. However, the developer’s claims for declaratory relief and deceptive trade practices claims were dismissed (Shuffle Tech International, LLC v. Scientific Games Corporation, October 12, 2015, Kennelly, M.).

Scientific Games Corp. and its subsidiary Bally Technologies, Inc. manufacture and distribute technology-based gaming devices and services to casinos and lottery organizations worldwide. In 2012, Shuffle Tech developed a prototype single-deck card shuffler intended for use by casinos and entered into a patent and technology license agreement with DigiDeal Corp., distributor Aces Up Gaming, and investor Poydras-Talrick Holdings to mass produce a series of shufflers for casinos using Shuffle Tech technology. Until that time, however, Scientific Games Corp. and Bally had 100 percent of the card shuffler market in the United States and nearly 100 percent market share worldwide.

After DigiDeal displayed the prototype card shuffler to customers at the 2012 Las Vegas Global Gaming Expo, which offered a lower retail and monthly lease price for casinos, Scientific Games Corp. and Bally filed a patent infringement lawsuit against DigiDeal, claiming infringement of their patents, U.S. Patent Nos. 6,651,982 (the ’982 patent) and 7,523,935 (the ’935 patent). In April 2015, Shuffle Tech, Aces Up, and Poydras-Talrick brought claims against Scientific Games Corp. and Bally for unfair competition, deceptive trade practices, and monopolization in violation of the Sherman Act, Clayton Act, Lanham Act, and Illinois unfair competition and deceptive trade practices laws, for making misrepresentations in the market regarding the validity and enforcement of their patents. The defendants moved for dismissal.

Monopoly claims. The court found that the plaintiffs sufficiently pleaded facts to show an antitrust injury and support antitrust standing. The plaintiffs alleged that, because the prototype card shuffler was designed under the Shuffle Tech license agreement, Bally’s suit seeking to prevent DigiDeal from introducing the device to the casino shuffler market was directed at preventing Shuffle Tech from entering the casino shuffler market.

The defendants’ contention that the plaintiffs’ only claimed injuries were lost future royalties under the DigiDeal licensing agreement, which were not antitrust injuries, was rejected. The court noted that Bally’s alleged patent abuse limited competition and directly prevented DigiDeal from introducing Shuffle Tech’s licensed products. Therefore, the plaintiffs sufficiently showed that Bally’s fraud in procuring its patents and subsequent patent enforcement action against DigiDeal was an act of monopolization intended to prevent Shuffle Tech, Aces Up, and Poydras-Talrick from participating in the casino shuffler market through the license agreement with DigiDeal, the court concluded.

Claims against Scientific Games. However, the court determined that Scientific Games was not a proper defendant since the plaintiffs failed to sufficiently allege a basis for holding the parent company liable for unlawful acts of its wholly owned subsidiary. There were no allegations against Scientific Games directly or that Scientific Games was the alter ego of Bally.

Declaratory relief. The court also found that the Shuffle Tech, Aces Up, and Poydras-Talrick lacked standing to seek a declaratory judgment that the ‘982 and ‘935 patents were invalid and unenforceable. Bally did not sue or threaten to sue any of the plaintiffs for patent infringement. The license agreement between Shuffle Tech and DigiDeal expressly defined the licensed products and indemnity provision did not obligate Shuffle Tech to defend DigiDeal in Bally’s infringement suit. Shuffle Tech’s involvement in the suit was merely voluntary and sought to vindicate an economic interest in clarifying its client’s rights under the patents. Since no actual controversy existed, the court lacked subject matter jurisdiction.

Deceptive trade practices claims. Finally, the plaintiffs failed to state federal and state unfair competition claims, according to the court. The only misrepresentations alleged in the plaintiffs’ complaint were Bally’s misrepresentations made in the course of prosecuting the ‘982 and ‘935 patents against its competitors. Claims under the Lanham Act or Illinois unfair competition and deceptive trade practices laws do not apply to statements made in the course of litigation. In this case, the plaintiffs failed to allege that any misrepresentations were made outside of the litigation or administrative context, the court concluded.

The case is No. 1:15-cv-03702.

Attorneys: Jacob D. Koering (Freeborn & Peters LLP) and Joseph S. Presta (Nixon & Vanderhye, PC) for Shuffle Tech International LLC, Aces Up Gaming, Inc., and Poydras-Talrick Holdings LLC. David Kenneth Callahan and Sean M. Berkowitz (Latham & Watkins LLP) for Scientific Games Corp., Bally Technologies, Inc., and Bally Gaming, Inc.

Companies: Scientific Games Corp.; Bally Technologies, Inc.; Bally Gaming, Inc.; Shuffle Tech International, LLC; Aces Up Gaming, Inc.; Poydras-Talrick Holdings LLC

Cases: Antitrust StateUnfairTradePractices IllinoisNews