Judge limits coverage of LV firm’s Internet gambling patent

David Strow

Friday, May 3, 2002 | 10:48 a.m.

A Las Vegas Internet gaming company suffered a setback this week in its legal battle against Macau casino tycoon Stanley Ho.

Home Gambling Network Inc., a subsidiary of i2 Corp., had sued Ho in federal court in an effort to shut down Ho's Internet casino. i2 had claimed the online casino -- licensed by the Caribbean island of Antigua -- violated i2's Internet gambling patent.

But in a Wednesday order, U.S. District Judge Larry Hicks in Las Vegas denied HGN's request for a preliminary injunction that would shut down Ho's Internet gambling site -- and suggested the defendants were more likely to prevail in the litigation.

Hicks also dismissed most of the defendants in the case, including Ho and his Macau casino operating company, saying the court didn't have proper jurisdiction because they lacked connections to Nevada. The only remaining defendant in the case is Caribbean Online Ltd., the Ho-controlled company that operates the Internet casino.

"It's what we expected, though obviously we wanted to try," Mel Molnick, president of HGN, said. "We're only disappointed they'll be able to continue taking wagers in the United States, and let a lot of people continue doing an illegal activity."

i2 controls a patent covering live casino games broadcast over the Internet for gambling purposes. The patent specifically applies to games involving electronic betting and payments.

Hicks said Ho's company was more likely to prevail in the lawsuit, since winnings are sent to players by check, not electronic transfer.

"The patent does not patent all live casino gambling over the Internet," Hicks wrote. "There is no allegation that the drho.com website pays debits and credits in (an instantaneous, electronic) manner."

But Molnick said the company still believes it can win the case. It plans to argue during trial that what Ho's website does is equivalent to electronic transfers, which would be covered under the i2 patent. That argument was not used in the motion for an injunction, Molnick said.

"It absolutely does violate the patent," Molnick said.

Hicks added that Ho's company was far more likely to suffer irreparable harm if the court issued a shutdown order, since it would close an operating business. HGN currently has no operating Internet casinos, but intends to license its patent to other Internet operators.

"Enjoining (Ho's) website would close an active business -- not a speculative opportunity," Hicks wrote. "(HGN) will continue to have the opportunity, if the injunction relief is denied, to ultimately prevail and seek either a licensing fee or an injunction of infringing conduct."