Station Casinos claims key patent victory

By Liz Benston

Monday, May 24, 2004 | 11:54 a.m.

Station Casinos Inc. today said it won partial victories in a drawn-out patent dispute with Harrah's Entertainment Inc. that has implications for casinos nationwide.

At issue is a lawsuit Harrah's filed against Station Casinos in July 2001, claiming Station's popular "Boarding Pass" slot club loyalty program infringed on three patents held by Harrah's that govern its competing "Total Rewards" program.

In patents filed with the U.S. Patent and Trademark Office, Harrah's claims to be the first to offer a loyalty program that allows gamblers to rack up points and perks across several casinos. Such programs have since been adopted by most major casino companies on the Strip and beyond.

Station Casinos has spent millions of dollars to fight the suit, most recently spending about $1.3 million in the first quarter.

Station Casinos filed a counterclaim against Harrah's in October 2001, denying it had infringed on Harrah's patents. Station also claimed the patents are invalid and unenforceable because Harrah's deceived U.S. Patent and Trademark Office investigators when it originally obtained its patents. Harrah's failed to disclose previous patents for similar systems, Station claimed. Harrah's has denied those claims.

Station said that last week, U.S. District Court Judge David Ezra granted Station Casinos Inc.'s motion for partial summary judgment. Station said the May 19 order invalidates two of three patents at issue.

Ezra ruled the patents weren't specific enough in their claims. The judge did not rule on the claims that Harrah's hid information from patent officers. In a separate order also issued last week, Ezra said several issues of fact were outstanding that Station Casinos could pursue at trial.

Station said it has another motion pending on the remaining patent, which covers a method of activating "physical instrumentalities" such as a telephone or lockable cabinet.

"We are gratified that the court agreed with Station's position that substantially all the claims at issue were invalid for indefiniteness and lacking in adequate description," Station Casinos Vice President and General Counsel Rich Haskins said.

Harrah's spokesman Gary Thompson declined to comment on the orders, saying the company only became aware of the orders today and doesn't yet have copies of them.

In court, Harrah's said its patents were granted because they "represent pioneering advances in casino management technology."

Station said "the subject matter is far from 'pioneering' and the patents were only granted because the plaintiffs withheld material information from the U.S. Patent and Trademark Office while procuring the patents. Numerous systems predate the asserted claims."

One such system was developed by a predecessor to slot maker International Game Technology in the early 1990s, a system that Harrah's bought and offered in its more than a year before before applying for its own patents but failed to disclose to patent examiners, Station said.

Harrah's said it acknowledges using IGT software but said that software didn't track player activity across multiple properties through use of a single membership card as well as "computer database and telecommunications systems." Harrah's said it had been involved in discussions with IGT since at least 1991 about developing player tracking software. Harrah's also denied hiding information from patent examiners.

Harrah's said its patents acknowledge the presence of gambler tracking programs in place at other casinos but that those systems tend to be locally based. The Harrah's claim is different because its system tracks gambler activity across multiple casinos, the company said.

The company sued Station instead of other companies now using multi-property loyalty programs because Station was one of the first to develop a similar program after Harrah's and because its system appears to be the most direct infringement of the "Total Rewards" patents, Harrah's executives have said.