Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Casino card shuffler maker allegedly used sham patent litigation to foreclose competition, (Apr 30, 2015)

By Linda O’Brien, J.D., LL.M.

The subsidiary of a manufacturer of gaming industry products and services created and maintained a monopoly in the market for card shuffling equipment by pursuing sham patent litigation against competitors, according to a complaint filed in the federal district court in Chicago (Shuffle Tech International, LLC v. Scientific Games Corporation, April 28, 2015).

Scientific Games Corporation, and its subsidiary Bally Technologies (SHFL), manufacture and distribute technology-based gaming devices and services to casinos and lottery organizations worldwide.

The complaint states that casinos routinely use automatic card shuffling machines on gaming tables to automate the process of shuffling physical playing cards between each hand of play. Shuffle Tech developed and manufactured card shufflers primarily for private consumer use. In 2012, Shuffle Tech developed a prototype single-deck card shuffler intended for use by casinos. The company entered into a patent and technology license agreement with Digideal Corporation, Aces Up Gaming, and Poydras-Talrick Holdings to mass produce a series of shufflers for casino using Shuffle Tech technology.

Digideal displayed the prototype card shuffler for the first time to customers at the 2012 Global Gaming Expo in Las Vegas. The proposed retail and monthly lease price for casinos was far less than what SHFL sold or leased its equipment for. Digideal also offered customers’ substantial savings from increased reliability and lower routine maintenance costs. The market response was very positive and demand was considerable from the start.

Until 2012, SHFL had 100 percent of the card shuffler market in the U.S. and nearly 100 percent market share worldwide. Recognizing the threat of Shuffle Tech’s improved technology and lower prices, SHFL allegedly filed a sham patent infringement lawsuit against Digideal. The suit falsely alleged that Digideal’s card shuffling machine infringed its U.S. patents 6,651,982 (the ‘982 patent) and 7,523,935 (the ‘935 patent). SHFL conducted no reasonable pre-filing investigation of Digideal’s machine prior to filing suit, according to the plaintiff. SHFL could have inspected Digideal’s method and structure and would have determined that it bore no relation to the patented inventions under any reasonable construction of the claims. Each of the infringement assertions made by SHFL were objectively baseless, invalid, and were asserted for the purpose of inflicting anticompetitive injury, according to the complaint.

The complaint states that the ‘982 patent was originally issued to its named inventors in 2003 and later assigned to SHFL. The ‘935 patent was originally issued in 2009 to the same group of inventors and later assigned to SHFL. In January 2014, Digideal initiated ex-parte examination of the contested claims of the ‘982 and ‘985 patents and the U.S. Patent and Trademark Office (USPTO) found that previously undisclosed prior art raised substantial questions of patentability. Multiple prior art references were known to SHFL as early as October 1997 but were not disclosed to the USPTO during the prosecution or reexamination of the claims against Digideal. These acts and omissions by SHFL were part of a deliberately-planned scheme to defraud the USPTO and gain allowance of claims that would not otherwise be allowed, the complaint asserted. SHFL knew that the ‘982 and ‘985 patents were invalid and unenforceable at the time it filed suit against Digideal.

The complaint also alleges that the litigation against Digideal was not an isolated incident, but rather a continuation of a longtime strategy to engaging in sham litigation against other competitors. Prior to its suit against Digideal, SHFL filed patent infringement litigation against every other competitor in the market: CARD LLC in 2003; VendingData in 2004; Taiwan Fulgent in 2009; and TCS Huxley in 2012. After filing suit, SHFL either acquired their assets at a discount price or drove them out of the market. In each prior case, SHFL asserted patents procured from the USPTO by fraud. Through fits predatory patent litigation, SHFL has raised substantial barriers to entry for any competing maker of card shuffling machines.

The plaintiffs assert claims for unfair competition, deceptive trade practices, and monopolization in violation of Sections 1 and 2 of the Sherman Act, Clayton Act, Lanham Act, and Illinois Unfair Competition and Deceptive Trade Practices Laws. The action seeks declaratory relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

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

Attorneys: Jonathan Hill and Jacob D. Koering (Freeborn & Peters LLP) and Robert A. Rowan, Joseph S. Presta, and Michael E. Crawford (Nixon & Vanderhye P.C.) for Shuffle Tech International, LLC, Aces Up Gaming, Inc., and Poydras-Talrick Holdings LLC.

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

News: Antitrust IllinoisNews