Friday, June 15, 2012

Gaming Patents and Pala

Today's post is on the gaming patents behind slot machines.  Understanding patents can get pretty complicated particularly if one if not familiar with the intricate details of the invention.

First, a little Patent 101.  Let's say you invent something.  You would then like to sell that product or service you have invented.  But before one starts selling their invention they typically like to get some legal protection in the form of a patent.  The inventor then would draft their patent and submit it to the United States Patent and Trademark Office for consideration.

Often there are multiple inventors and Patent Attorneys need to be hired to do an exhaustive patent search to make sure the invention doesn't already exist.  More often than not an idea you may think is unique is already patented.

Usually the patent office rejects the first patent submission.  The inventors then decide if they are going to revise the patent and resubmit or abandon the project.  All this can cost a lot of money.  Usually the minimum amount a patent will cost is about $7000 to $10,000.  This is a rare case where the inventor can write the patent themselves, submit it themselves, do the patent search themselves, and address any concerns raised by the patent office themselves.

Patent costs can soar if a similar invention is found and legal challenges are mounted against the patent.  Every reiteration and resubmission a patent goes through costs more money.

But if the inventors make it through this process then they are the proud owners of a U.S. Patent.  It doesn't stop there though.  If one plans to sell their product or service internationally one may decide to pursue patenting their invention in other countries such as in Japan or the European Union.

After all that the owners of the patent can do several things.  First, then can produce and market their product on their own.  Or they can sell the patent to another company.  Or, more often than not, they can license their patent to another company or multiple companies who then use the patented technology to produce products and sell them.  The owners of the patent are often paid Royalties and/or Licensing Fees for the right to use their intellectual property (IP).

Further, a patent can be licensed and sub-licensed multiple times.  Even more complicated, if a company gets bought out that has a license to the technology then the company that bought the other company will assume ownership of that license.

Ok, for this discussion we also need a little background on Indian Gaming.  A good primer on Indian Gaming is on Wiki about Native American Gaming.  In a nut shell in the 1970's a couple of tribal members living on Indian Land in Minnesota received a property tax bill.  Feeling they did not owe the property tax since they were on Indian Land they challenged the State and County in court.  They lost.  They appealed that decision to the Supreme Court which not only reviewed the case but made a ruling that " not only that states do not have authority to tax Indians on Indian reservations, but that they also lack the authority to regulate Indian activities by Indians on Indian reservations. (from Wiki)"

This paved the way for tribal gaming under the premise of tribal sovereignty.   In 1980 the Cabazon Band of Mission Indians in California began operating a Bingo Hall.  The Indio Police and Riverside County Sheriff promptly shut down the Bingo Hall.  Cabazon took their case to the Supreme Court in 1986.  The Supreme Court once again "ruled that Indian gaming was to be regulated exclusively by Congress and the federal government, not state government; with tribal sovereignty upheld, the benefits of gaming became available to many tribes. (from Wiki)"

Indian Gaming was born but complications still arose.

One complication was in California where Class III gaming was still illegal (traditional slot machines, craps, roulette, etc).  California did have a State Lottery, Horse Race Tracks, and Poker Parlors but Class III gaming was still illegal.

Seeking ways to increase revenue tribes began looking at slot-like machines called Video Lottery Terminals.  Since Bingo was already legal they sought slot machines that used a Bingo Mechanism instead of the Random Number Generators most Class III slot machines have.  This lead to the creation of Class II Slot-like machines.

In the early days of Indian Gaming I remember people complaining about the machines.  They didn't like the printed ticket.  They wanted to feel the coins and hear the coins hit the tray.  In the late 1990's this lead to a push at least in California to make Class III gaming legal on Indian Reservations.  This lead to several tribes pursuing compacts with the State and ultimately lead to several ballot initiatives making Indian Gaming legal in California.

But while tribes could now operate Class III slot machines they were limited to 2000 machines per casino, had to pay the state a fee per machine, and still could not operate other games such as craps or roulette.

This lead to another round of inventions and patents that lead to the creation of crap-like and roulett-like games.  I know Pala and Pechange both have "Pala Craps" and roulette and "Pechanga Craps" and roulette.  Instead of rolling dice, cards are dealt that have pictures of dice.  In the case of roulette instead of a ball landing on a number the wheel a card is drawn from a spinning wheel with a number on it.

Those of you who remember the early days of Indian Gaming may also remember playing Black Jack where an ante or "fee" had to be paid to the House.  This was because at that time Black Jack had to be player banked and not house banked.  The house could not make money on the loses of players.

The first document I have here is an article that appeared in the Los Angeles Times in 1998 titled The Slot Machine That Isn't.

Here is an excerpt:

"The Pala tribe promptly commissioned a Nevada company called Sierra Design Group to build a gambling device that met all the requirements and still, as they say, quacked like a slot machine.

Six months and several million dollars later, Sierra Design rolled out the result.
It has the soul of a lottery but the look and feel of a slot machine.

The new system actually conducts a lottery as described in the compact. It's just that the gambler is hardly aware of it."
The Slot Machine That Isn't - Los Angeles Times

This patent for this slot machine was issued.  It's titled Video Lottery Game United States Patent US 6,168,521, B1.  The inventors of the patent are very familiar names:  Robert Luciano (Sierra Design Group), Art Bunce, Glenn Feldman, George Foreman, Jerome Levine, and on the last page Howard Dickstein was also added as an inventor.

Presumably this is the invention Pala commissioned and paid for.  Yet no where is Pala mentioned in the patent.  It could be there is another patent similar to this I have not yet seen.

Here is the patent:
Video Lottery Game United States Patent US 6,168,521, B1


Other patents were developed.  Two were developed by Jerry Turk who managed the Pala Casino for 7 years.  One of those patents is for Pala Craps and Pala Roulette.  The Pala Band of Mission Indians is the Assignee on one of the patents.
United States Patent US 7,540,498 B2 Systems and Methods for Card Games That Simulate Non-Card Casino Table...
United States Patent Application US 2005/0032569 A1 Methods and Systems For Interactive Lottery Game Jerry ...

In 2003 Alliance Gaming Corp bought Robert Luciano's Sierra Design Group. which is now known as Bally Technologies
Alliance to buy Reno’s Sierra Design Group

After Prop 5 passed Class III slot machines seemed to be preferred to Class II slot machines.  People who go to Vegas are familiar with Class III games and thus if they go to an Indian Casino with the same games there is a familiarity there that helps pry the dollars from their wallet.

But lately Class II machines are in resurgence.  First off, the NIGC does not regulate Class II machines.  Second, there are no limitations on how many Class II slot machines an Indian Casino can operate.  Indian Casinos are limited to 2000 (or 2500?) Class III machines.

Second, Indian Casinos have successfully developed their own brand and no longer rely on Vegas familiarity.  Indian Casinos now have their own unique games and even slot machines that their customers specifically come to play.

Thirdly, it is increasingly difficult to tell a Class II from a Class III machine. Often the only way to tell is by the internal mechanism.  But some Class II machines have made them easier to identify.  With each spin of the wheel there is a little bingo card near the top of the machine that displays the numbers drawn.

You thought you were playing a slot machine but you were really playing Bingo!