Wheel of ... litigation

IGT v. Alliance Gaming Corp., 2007 WL 911773 (D. Nev.)

The parties are competitors in the market for computerized gaming machines, specifically "wheel of fortune" type machines. IGT sued defendants (collectively Bally) for patent infringement. Defendants counterclaimed for declarations of invalidity, noninfringement, and unenforceability, as well as antitrust violations and false advertising based on IGT’s allegedly fraudulent acts in receiving its patents and claiming on its website that Bally was an infringer of those patents.

Usually, it’s difficult to maintain a false advertising claim based on a competitor’s statements about IP violations. The exception, which applied here, is when the relevant consumers are sophisticated businesses that can be expected to pay attention to allegations of patent infringement. The remaining hurdle is that courts generally impose an intent requirement – indeed, a bad faith requirement -- not otherwise present in the Lanham Act, in order to allow people to make good-faith but mistaken claims about patent validity. Bally avoided summary judgment on this issue, because of disputed factual issues about what IGT knew about the validity of its patents when it issued a press release claiming that it filed a patent infringement case to “stop [Bally] from misappropriating IGT’s patented innovations.” Given the factual issue on bad faith, Bally could also take advantage of the presumption that intentional deception actually deceives the public.

Another potential issue is whether press releases count as “advertising or promotion”; again, at least with sophisticated consumers, it’s likely that they do. Indeed, Bally submitted evidence that it received numerous concerned inquiries as a result of the press release and lost at least one order for 100 machines. Given that patent owners can pursue end-users of infringing devices, Bally’s customers were right to be concerned. IGT did, however, win summary judgment on Bally’s intentional interference with prospective economic advantage claim, because there was no evidence IGT knew about this particular lost order.