The latest court decree in Aristocrat Leisure’s ongoing lawsuit against Light & Wonder “is an incremental positive” for the latter. So said Jefferies Equity Research analyst David Katz in a June 25 investor note.
A Nevada district court evidently found Aristocrat’s latest discovery request overly broad. It held that Light & Wonder isn’t obligated to disclose all of its math models for its hold-and-spin games and that Aristocrat needs to be specific as to which trade secrets it’s endeavoring to shield.
“We view the case generally as background noise in the near term, financially limited,” Katz wrote, “and beside the key point of our thesis: For the time being, these are the only two large suppliers in the market.”
Aristocrat and Light & Wonder have been ordered by the court to confer. At the heart of the dispute is a former Aristocrat game developer’s work for Light & Wonder in crafting the now-withdrawn Dragon Train and Jewel of the Dragon slot games. Aristocrat has accused its rival of misappropriating trade secrets in the design of those machines.
Although Katz conceded that the lawsuit was “a bit more than another day at the office,” he was otherwise dismissive of it. “Through history covering the gaming equipment and technology segment of the industry, IP lawsuits are a normal course occurrence,” he explained.
Katz continued, however, that this case is more prominent than others of its ilk. For one thing, Light & Wonder “indicated that one of its core strengths is its game development studios, some of which were successful at other companies,” Aristocrat included. For another, the kerfuffle has proven to be of more consequence than Light & Wonder had initially indicated.
For yet another matter, “The competition between the two companies is intense, given their positioning as the only two large-scale game developers globally and the number of people at Light & Wonder that were formerly at Aristocrat.” Katz believed that Light & Wonder could end up paying a substantial, but not crippling, penalty to Aristocrat, one that would not alter his investment theses on either company.
