The Importance of Intellectual Property Rights as a Regulatory Concern
By Derek Webb

Editor’s Note: This article explores the growing importance of intellectual property in the gaming industry and the potential regulatory responses. It is meant to complement Robert Rowan’s article, "Prime v. Progressive: An IP Battle That Will Shape the Gaming Industry," printed on the opposite page.

Intellectual property relates to patents, trademarks, design rights, copyrights, etc. They are "intellectual," as they are intangibles; and they are "property," as they are owned by someone. All casino operators and all casino vendors of proprietary games are intellectual property owners. Increasingly, the value of a gaming company is directly tied to its intellectual property rights. For example, what is the value of the name "Caesars Palace" to Harrah’s or the name and patents associated with "Wheel of Gold" to IGT? The industry as a whole, as well as the governments that derive revenues from its continued success, should have an interest in protecting bona fide intellectual property ownership and in defending against spurious clams of proprietary rights.

We are now in an intellectual property revolution, with a growing part of the total wealth of the world resting in intellectual property rights. Just as in previous revolutions, the law does not always keep pace with economic changes. Intellectual property abuse has many forms, including theft or attempted theft of intellectual property of another party; false representations to acquire or defeat intellectual property rights; and theft or attempted theft of the revenue of others, based on improperly acquired intellectual property rights or evasion of intellectual property rights. These actions can result in financial losses and injuries that can be just as devastating to the injured party as physical theft.

All readers will understand the history of gaming and the need for regulation. The basic premises are: participation in gaming is a privilege rather than a right; gaming should be fair and honest and should not be brought into disrepute; and organized crime should not have involvement in gaming operations.

As part of gaming regulation, a process of background investigation checks the character and suitability of applicants for gaming licensees, including owners, operators, certain employees and certain classes of vendors, depending upon the jurisdiction. These investigations are important because past behavior is often predictive of how an applicant will behave as a licensee. Part of the background checks relate to assessment of probity and integrity. If these are essential requirements of a gaming licensee and if abuse of intellectual property rights is an indicator of a low standard of probity and integrity, then it follows that gaming regulators should be willing to investigate intellectual property abuse.

Is Intellectual Property Regulated Properly?

Some regulators will say, "This is a commercial issue, so we are not going to get involved." Those regulators should consider if this view is consistent with their public policies. Regulators requiring background investigations for vendors of intellectual property rights only (no physical equipment) also should require representations regarding the intellectual property rights and should maintain the ability to investigate those representations. As intellectual property representations are the sole basis for the relationship between the vendor and the gaming industry, if these core representations are not subject to investigation, it can render the overall investigation meaningless.

Creating other intellectual property issues are: the growth of Internet gaming; the possibly of legalized intranet state gaming in the United States; the possibility of legalized Internet gaming in the United States; and the entry into non-U.S. Internet gaming by licensed casinos and suppliers in the United States. Intellectual property in Internet gaming is a cross-border matter. However, many regulators of Internet gaming do not even require that their licensees comply will the laws of all countries in which they transact business.

In a survey of U.K. Internet players commissioned by Prime Table Games, one question was, "Should Internet casinos get permission from the inventors of games before using their games?" Answers were: No — 6 percent; Don’t Know — 11 percent; and Yes — 83 percent. Surely players are entitled to know that no one will profit from their losses through intellectual property abuse.

If there is any dispute over game content intellectual property between any parties, then those parties should be required to notify regulators of that dispute. Regulators should have the ability to investigate the dispute. This should be a minimum regulatory standard.

Changing economic dynamics, such as the growth of intellectual property and the growth of remote wagering, mandate that regulators re-examine outdated or inadequate regulations and procedures. This re-examination should focus on the ownership and abuse of intellectual property and Internet rights, especially when matters relating to such rights have already been determined or adjudicated by another regulatory or judicial body and are matters of public record or have otherwise been brought to the attention of gaming regulators. This should become a regular and continuing part of the background checks of probity and integrity of persons or entities governed by gaming regulations.

Derek Webb is a Principal of Prime Table Games, a provider of new table games primarily in the United States and the United Kingdom. Prime Table Games created and marketed Three Card Poker, the most successful proprietary table game in the industry. While Prime Table Games retained the U.K. rights to Three Card Poker, Shuffle Master acquired the United States and other rights from Prime Table Games in 1999. He can be reached at derek@primetablegames.net.