U.S.: the value of slot machine patents

by DLA Piper
Contact

I’ve been litigating patent cases involving slot machines for the past decade, and there are still a lot of misconceptions about what aspects of a gaming machine can be patented and why these patents are so valuable.

In fact, everything from the security systems to the bill validators to the play of the game is patentable, and a search of the Patent Office database shows over 6,000 patents with the words “slot machine.” As microprocessors and other computer-related inventions have appeared in the past 30 years, a slot machine has really become a fancy computer, and subject to as many development patents as a PC or laptop.

One of the seminal inventions in the gaming industry is a patent by Inge Telnaes, U.S. Patent No. 4,448,419, entitled “Electronic gaming device utilizing a random number generator for selecting the reel stop positions.” This short patent, with only three pages of text, revolutionized the gaming industry. Previously, the odds—and jackpots—for slot machines were limited because the machine reels that showed the game results could only contain so many symbols (for example, 7s or cherries). But Telnaes’ patent disclosed using a random number generator behind the scenes as a “virtual reel,” so that there could be a million (or more) symbol combinations that could trigger a win, as it is all controlled by a microprocessor and not by the physical reels. Players noticed no difference on the reels (the additional combinations being essentially imperceptible), but now bigger odds and jackpots were possible.

All modern slot machines use some variation of the Telnaes patent. Telnaes’ patent was bought by International Game Technology (IGT) in 1988, and IGT subsequently licensed it to the entire industry. WMS came out with a competing slot machine with virtual reels in 1993, and a six-year litigation battle ended with a finding that WMS’ machine did infringe, leading to a substantial settlement.

The value of the Telnaes and other slot machine patents has led to patent litigation becoming increasingly important to the slot manufacturers and the gaming industry. For much of the past decade, there was extensive patent litigation over the so-called “Wheel” patents, which were the basis for many of the slot machines that use a wheel to award a bonus prize, such as Wheel of Fortune. Both Bally Gaming and IGT claimed to be the first to invent wheel bonusing, each pointing to their many patents as well as many games that were released prior to the patents. Eventually, neither company was successful in convincing judges that one side had valid patents that the other side infringed.

Millions of dollars are spent each year on gaming patent litigation to determine who owns a slot machine invention and how valuable that invention is to the machine’s success. It can be money well spent—the tight regulation and heavy competition within the slot industry allows companies to control market share through its enforceable patents. For example, Ernie Moody patented a new type of poker, which is now popularized as multi-play poker worldwide. IGT has successfully enforced Moody’s patents in litigation and taken a dominant market share with this concept.

Because of the value of these patents, virtually every slot machine manufacturer has been involved in patent litigation since the Telnaes patent. Typically, these litigations have involved new types of bonusing, including wheel bonusing, mystery bonusing triggers and 3-D reel overlay bonusing, to name a few examples.

Another reason why patent rights are so valuable in the slot machine industry is that there is a constant demand for new and varied games. In order to produce new games regularly, game designers must invent many different concepts every year. All of these new concepts may be patentable.

Gaming patents are an essential part of the business. Companies developing any element of slot machines should be quick to apply for patents and use them effectively against infringers, especially given how quickly new machines appear in the marketplace.

Original story published in Casino Journal which can be accessed here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© DLA Piper | Attorney Advertising

Written by:

DLA Piper
Contact
more
less

DLA Piper on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.