Patent reform is not a subject matter typically associated with casino gaming, but industry heavyweights are throwing their weight behind bipartisan congressional proposals to crack down on abusive litigation by patent “trolls”.
The American Gaming Association, in conjunction with are other business groups, is seeking to highlight the negative economic impacts of frivolous litigation on small and large businesses alike.
Geoff Freeman, AGA President and CEO, applauded the Innovation Act of 2013, introduced last month by House Judiciary Chair Bob Goodlatte, saying it “would greatly limit patent trolls and frivolous patent litigation that negatively impacts U.S. gaming businesses … by hindering our ability to innovate and inhibiting economic growth.”
At a Senate subcommittee hearing exploring the issue, earlier this month, Nevada Senator Dean Heller also expressed concern over the effects of frivolous patent litigation on the gaming industry. “If frivolous lawsuits are being filed across my state of Nevada because…a Las Vegas Casino receives a demand letter on a game they offer, it can have a negative impact on the economy because it could hinder innovation and economic growth.”
Gaming is among a broad range of industries that have banded together to fight the patent troll problem. The coalition includes groups such as retail, grocery and restaurants, whose members are expressing angst over being increasingly targeted by patent trolls on everything from Wi-Fi to store locator technologies.
The groups say that the enormous costs associated with fighting patent disputes in court force the recipients of demand letters – which accuse the recipient of infringing on a patented product or procedure – into a less expensive monetary settlement. But when a company agrees to settle, it can result in more demand from trolls – who often have a large portfolio of patents – who see easy prey.
This growing outcry from a wide variety of companies shows that the patent litigation arena is no longer confined to just high-tech companies fighting over smartphones; it is now a more widespread business issue.
“It’s clearly no longer limited to big companies in Silicon Valley,” said Whitaker Askew, Vice President of the AGA. Askew said that gaming has become a target of trolls because the industry is more than traditional casinos – it now involves innovative technology for slot machines and internet gaming platforms. “Casinos are much broader than what you’d think of sitting at a gaming table,” Askew said.
Observers point to an ongoing lawsuit filed by MGT Gaming against a host of casino operators and gaming manufacturers, alleging infringement of patented slot machine technology, as an example of how patent litigation can stifle innovation while driving up costs. “It’s become an issue not just for high-tech product manufacturers but also for the casino companies themselves – MGM, Caesars have all been involved in suits where someone is suing them over a patent,” said Gene Johnson of Spectrum Gaming Group.
But others, pointing to the difficulty in determining which patent assertion entities are indeed “trolls” and which are legitimate, are urging caution in the reform process to ensure that the constitutional rights of lawful patent holders are not stymied. Since just two years have elapsed since the passage of the America Invents Act – the largest overhaul to the patent system in half a century – they fear that changes to the patent system will be made on an “ad hoc” basis based on anecdotal rather than empirical evidence.
“We have almost no data yet on the effects of the changes of (the AIA)” said Adam Mossoff, a professor at George Mason School of Law in Arlington Virginia. “Increasing changes brings increasing uncertainty into the innovation system.”
Adding to the ambiguity, the data that does exist on the effects of trolls can be interpreted to draw differing conclusions.
For example, a Government Accountability Office study commissioned this summer found that the number of both patent infringement lawsuits filed and defendants targeted has increased markedly over the past five years. However, the share of these suits filed by “troll” entities has remained steady at a roughly 20 percent – implying that their strategy has been targeting multiple defendants simultaneously as opposed to filing more lawsuits.
But the 2011 AIA limits the number of defendants that can be targeted in a single lawsuit, leading some to conclude that the patent troll problem, while real, is being exaggerated by interests who see an opportunity to reduce their legal costs by cracking down on all types of patent infringement lawsuits.
“I don’t think it’s this national economic crisis that some of the proponents of the (Goodlatte) legislation are making it out to be,” said Howard Susser, chair of Intellectual Property litigation at the Boston-based firm Burns & Levinson. “There are some interests that wouldn’t mind getting rid of the not-so-bad offenders.” Others contend that the increasing frequency of patent litigation is a natural consequence of innovation and, therefore, a positive indicator that new products and ideas are being developed.
Regardless, both sides agree that entities that abusively exploit loopholes in the current system exist and need to be dealt with. “I don’t deny that there are bad actors. You have to have your head in the sand not to recognize that,” said Mossoff.
But these loopholes oftentimes trace back to more fundamental issues in the US patent regime, such as the existence of overly broad and nebulous patents that can easily be wielded by trolls when bringing litigation.
One of the key components of the Goodlatte bill would expand a provisional post-grant review program, known as the covered business method review, which was enacted under the AIA. It provides a mechanism for defendants to challenge the legitimacy of a plaintiff’s patent with the U.S. Patent and Trade Office.
Advocates say that such an expansion would greatly aid in weeding out bad patents. “We applaud any effort to broaden or expand (the covered business method review) program,” said Askew of AGA.
More than anything, both sides are seeking a middle ground that protects end-users from abusive litigation while upholding the rights of patent holders to incentivize innovation.
“It’s just fairness. If main street business or big corporations are put in a position where they are unfairly targeted by trolls that aren’t doing anything to create growth, we have to be able to defend ourselves,” Askew said.
