Scientific Games ordered to pay $315 million to four companies following a federal jury verdict

Scientific Games ordered to pay $315 million to four companies following a federal jury verdict

  • Howard Stutz, CDC Gaming Reports
August 7, 2018 10:56 PM
  • Howard Stutz, CDC Gaming Reports

Scientific Games was ordered Tuesday to pay $315 million to four companies after a federal jury in Chicago ruled the gaming equipment manufacturer initiated sham litigation to assert invalid patents and keep a rival automatic card shuffling device out of the market.

U.S. District Judge Matthew Kennelly tripled the jury’s original $105 million award after announcing the verdict. The judge ordered Scientific Games to file any post-trial motions by Sept. 5. Scientific Games was also ordered to pay the plaintiff’s legal fees.

“We’re quite happy, but it’s so fresh, we’re not sure what the next steps are,” Rick Schultz, the CEO of Chicago-based Shuffle Tech said in a phone interview Tuesday afternoon.

The Chicago trial lasted 10 days.

Shuffle Tech filed an antitrust lawsuit against Scientific Games in 2014, which came out a 2012 patent-infringement lawsuit filed in Nevada by SHFL Entertainment – which is now part of Scientific Games – against DigiDeal Corp., Aces Up Gaming Inc. and Poydras-Talrick Holdings LLC, all of whom Shuffle Tech worked with in 2012 to launch its first automatic card-shuffler.

The jury verdict awarded $45 million to Shuffle Tech, $25 million to Poydras, $15 million to Aces Up and $20 million to DigiDeal, which assigned its rights in the suit to Shuffle Tech.

The judge tripled those awards.

In a filing with the Securities and Exchange Commission Tuesday, Scientific Games said, “The company believes the jury reached the wrong result and will seek review of both the finding of liability and the damages award, both before the trial court and, if necessary, on appeal.”

Scientific Games said in the filing the district court in 2015 “dismissed all of the plaintiffs’ claims with prejudice, except for the claims of violation of antitrust laws related to the fraudulent procurement of patents on card shufflers.”

The verdict came down in the middle of the day and caused a bit of a sell-off in Scientific Games, according to Stifel gaming analyst Brad Boyer. Shares of the company, traded on the Nasdaq, closed at $34.85, up 5 cents or 0.14 percent.

Boyer, in a research note, said he spoke with company officials and came away with “two important takeaways.”

“First, as expected, the jury’s verdict, including the amount of related damage payments, is subject to appeal,” Boyer said. “Although we are not legal experts, we have seen similar matters stay in the hands of the courts for several months, if not years, before cash actually changes hands. That said, we do not believe investors need to fret about whether or not Scientific Games has to come up with $330 million of cash tomorrow or, more importantly, how it would source the funds.”

According to the Law360 website, which covered the trial, Shuffle Tech collaborated with gambling equipment manufacturer DigiDeal on a card-shuffling machine the company would market to casino operators. DigiDeal would manufacture the products and pay Shuffle Tech a royalty to use its technology and patents, according to the deal described in the company’s complaint.

The companies debuted the device at the Global Gaming Expo in Las Vegas. However, SHFL Entertainment filed a patent infringement suit against DigiDeal. Shuffle Tech said the company knew the patents were unenforceable.

SHFL Entertainment was acquired by Bally Technologies in 2013 for $1.3 billion. A year later, Scientific Games acquired Bally for $5.1 billion.

Shuffle Tech had planned to make and sell 800 shufflers during their first year on the market and 1,200 every year after, with a nearly $7,500 profit on each shuffler, the company’s attorney claimed during the trial.

In an interview, Schultz said legal fees consumed the company’s investment money it planned to use to develop the games. DigiDeal agreed to stop making and selling the card shuffler.

“Being a small company, we had the ability to develop a great product, but we didn’t have the ability to compete with a large corporation with those type of resources and defend ourselves against a sham lawsuit,” Schultz said.

He said the intellectual property Shuffle Tech owned for the shuffler were sold to another gaming company. He said Shuffle Tech now makes and sells automatic card shufflers for consumer use, such as home card games.

“We were basically put out of the gaming industry,” Schultz said,

Law360 contributed to this report.

Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at Follow @howardstutz on Twitter