Electronic Gaming Patents Found Invalid under § 101

In the U.S. District Court for the Southern District of Texas (Houston Division), Plaintiff Epic Tech, LLC (a seller of so-called "sweepstakes games") sued Defendants Fusion Skill, Inc. and Texas Wiz, LLC for infringement of U.S. Patent Nos. 9,589,423 and 8,545,315 with the distribution of gaming systems similar to Epic Tech's sweepstakes games.

The two patents at issue are related to the play of sweepstakes games.  The first patent (the '423 patent) is directed to a method of conducting a sweepstakes game in which a computer-based system operating the game immediately determines and credits a player's account with any prize earned before showing the user the results of the game.  According to Epic Tech, this method is beneficial because it "further reinforces to regulators that the prizes are predetermined and that there is no chance or skill involved in the simulated game."

This is important because gambling is illegal in many states, but various methods of evading this prohibition now exist, including converting a gambling-machine-like game into a lottery-like game.  In this method, the result of the game is not determined by random.  Instead, the system is loaded with a finite number of results—i.e., some number of winning tickets and a larger number of losing tickets—from which a ticket is randomly selected upon initiation of the game.  In other words, whereas in a traditional gambling machine game it would be mathematically possible for a player to lose—or win—one trillion times in a row, the precise number of winners and losers over the long run is predetermined in a lottery-based slot machine.  Further distinguishing these sweepstakes games from gambling-like games is the payment method.  Whereas a traditional gambling machine game is played by inserting a payment directly into the machine, a sweepstakes game might be initiated with a token that is given away for free along with an ostensibly unrelated purpose.  Because such a game does not technically require consideration on the part of the player, it can be defined as something other than gambling.

The second patent (the '315 patent) describes a method for conducting computer-based sweepstakes bonus games, or "game-in-games" in the patent's lexicology.  The '315 patent claims a method whereby the playing of a game-in-game is triggered automatically, without player interference, upon the selection of a winning ticket for the initial game.

The Defendants argued that each patent is invalid because it claims an abstract idea as proscribed by 35 U.S.C. § 101.

1.  The '423 patent

The '423 patent is directed to a method of dispensing prizes in an electronic sweepstakes game.  Its purported innovation is for the computer server on which the game is played to credit a player's account with the prize corresponding to the selected sweepstakes entry prior to displaying the results.  This innovation apparently makes the game more appealing to regulators.

Claim 1 of the '423 patent is set forth here:

1.  A method of providing a sweepstakes prize, the method comprising:
    a.  facilitating, by one or more processors, selection of a first plurality of sweepstakes tickets from a second finite plurality of sweepstakes tickets in response to a request from a user;
    b.  prior to a visual display of the results of the first plurality of tickets to a user account, determining, by the one or more processors, a prize associated with each of the first plurality of sweepstakes tickets and a total value for the prizes associated with the first plurality of sweepstakes tickets;
    c.  prior to a visual display of the results of the first plurality of tickets to a user account, crediting to an account for the user, by the one or more processors, the total prize value associated with the first plurality of sweepstakes tickets; and
    d.  providing to the user a visual display of the results of the first plurality of sweepstakes tickets.

The Court followed the two-step Alice test, asking first whether the patent is "directed to a patent-ineligible concept," such as an "abstract idea," and second whether, "if so, the particular elements of the claim, considered both individually and as an ordered combination, do not add enough to transform the nature of the claim into a patent-eligible application."

The Court stated that the '423 patent "flunks" Alice step one because it is directed to an abstract idea.  When computer-related patents are at issue, the critical distinction is whether the focus of the claims is on the specific asserted improvement in computer capabilities or, instead, on a process that qualifies as an abstract idea for which computers are invoked merely as a tool.

Here, the '423 patent claim merely deploys computers as a tool to implement a novel method of executing a sweepstakes game—specifically, in Epic Tech's own words, a new "method for awarding a sweepstakes prize developed by the patentee."  The '423 patent does not describe, and Epic Tech does not claim, any innovation in computer software; instead, the patent merely sets out a new method for using computers to award sweepstakes prizes.  Thus, the Court found the focus of the claims is not on such an improvement in computers as tools, but on certain independently abstract ideas that use computers as tools.

Because the '423 patent was found to be directed to an abstract idea, the Court proceeded to step two of the Alice test.

The Court viewed step two as deciding whether this case is closer to DDR Holdings or Electric Power.  In DDR Holdings, the court held valid a patent that described a novel method for Internet advertising because its claims specified how interactions with the Internet are manipulated to yield a desired result—a result that overrides the routine and conventional sequence of events ordinarily triggered by the click of a hyperlink.  DDR Holdings, LLC v. Hotels.com, LP, 773 F.3d 1245 (Fed. Cir. 2014).

In Electric Power, the patent claimed a method of gathering and displaying information for electric power grid operators, but lacked details for how to accomplish those functions.  The claims alternatively were directed to the solution itself.  Electric Power Group, LLC v. Alstom, S.A., 830 F.3d 1350 (Fed. Cir. 2016).

The Court here found the '423 patent to be more like that in Electric Power.  The '423 patent was found to offer no "arguably inventive" method; rather, it simply instructs a computer to send information to another computer at an earlier step than it otherwise would in the normal course of a sweepstakes game.  The claims were found to lack meaningful details that would save them from § 101 destruction.

2.  The '315 patent

The '315 patent describes a method for operating sweepstakes bonus games, or "game-in-games."  The '315 patent describes its invention as "a method of playing a game-within-a-game" and "a method . . . providing a plurality of gaming terminals within a network."  Specifically, the '315 patent claims two networked computer terminals that simultaneously play a first game and, if the player wins the first game, trigger the playing of a second game.  Notably, the '315 patent does not claim any specific software or hardware necessary to implement this system.

Claim 1 of the '315 patent is set forth here:

1.  A computer-implemented method, comprising:
    a.  providing a plurality of gaming terminals linked together via a network, the plurality of gaming terminals comprising at least a first gaming terminal;
    b.  receiving a first request from a first player to play a first sweepstakes game on the first gaming terminal, wherein the first request qualifies the first player to be eligible to win an award associated with the first sweepstakes game;
    c.  in response to receiving the first request:
        i.  receiving a participation credit to play the first sweepstakes game;
        ii.  presenting an option to the first player to participate in a first sweepstakes game-in-game on the first gaming terminal so that the first player can play the first sweepstakes game and concurrently be eligible to win one or more prizes from the first sweepstakes game-in-game, wherein an outcome of the first sweepstakes game-in-game is independent of the outcome of the first sweepstakes game;
        iii.  receiving a second request; and
        iv.  in response to receiving the second request within a predetermined time limit, granting the first player eligibility to win one or more prizes from the first sweepstakes game-in-game;
    d.  triggering a play of the first sweepstakes game-in-game; and
    e.  notifying the first player of their eligibility to win one or more prizes from the play of the first sweepstakes game-in-game,
    wherein once the second sweepstakes game-in-game is triggered to play, the second sweepstakes game-in-game automatically plays on a server without input from the first gaming terminal.

Again, the Court found that the '315 patent "flunks" Alice step one.  Like the '423 patent, the '315 patent expressly describes itself as directed to methods, but does not claim any novel usage or configuration of computer hardware or software.

Next, under Alice step two, the Court found that the '315 patent cannot survive.  Here, the '315 patent merely describes a set of steps that could be performed by any computer—or a fast-moving store clerk—without adding any novel or inventive step.

The '315 patent claims a method of operating two games simultaneously in which the second game is triggered by certain conditions in the first game.  If the '315 patent described some technologically innovative mechanism by which the second game is triggered, it might well be inventive.  But, it does not.  Rather, it simply claims the idea of putting two computers next to each other and having the second computer initiate a game if the first computer produces a winning result.  That idea is abstract and thus unpatentable.

Epic Tech contended that the '315 patent's processes cannot be performed solely by humans because the patent claims a system that "independently control[s]" the game-in-game and "takes no input from the individual human players playing on the gaming terminals."

But the Court found that a human is perfectly capable of independently running a basic game of luck without taking input from a human player—in fact, that is what a casino's croupiers do every day.  In any event, the question is not whether the patent claims a process that cannot be performed by a human, but whether the patent claims a non-ordinary process.

Thus, Defendants' Motion for Partial Summary Judgment on Invalidity was granted as to both patents.

Epic Tech, LLC v. Fusion Skill, Inc. (S.D. Tex. 2021)
Memorandum and Order by U.S. District Judge Ellison