DCT
1:21-cv-01695
Diogenes Ltd v. DraftKings Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: Diogenes Limited and Colossus (IOM) Limited (Isle of Man)
- Defendant: DraftKings, Inc. (Delaware)
- Plaintiff’s Counsel: DLA Piper LLP (US)
- Case Identification: 1:21-cv-01695, D. Del., 02/07/2022
- Venue Allegations: Venue is alleged to be proper in the District of Delaware based on Defendant being incorporated in the State of Delaware.
- Core Dispute: Plaintiff alleges that Defendant’s DraftKings Sportsbook platform infringes eight U.S. patents related to methods and systems for online wagering that provide a "buy-out" or "cash out" feature.
- Technical Context: The technology at issue addresses the technical challenges of offering bettors an opportunity to settle a multi-part wager for a dynamically calculated value before the final outcome of the wagered-upon events is known.
- Key Procedural History: The complaint alleges that Plaintiff provided Defendant with pre-suit notice of potential infringement. An initial notice letter was allegedly sent on August 9, 2018, identifying U.S. Patent Nos. 8,721,439; 9,117,341; 9,275,516; 9,424,716; and 9,704,338. A subsequent letter was allegedly sent on July 20, 2021, identifying U.S. Patent Nos. 10,970,969 and 10,997,822. This history of alleged notice is central to the complaint's allegations of willful infringement.
Case Timeline
| Date | Event |
|---|---|
| 2012-09-06 | Earliest Priority Date for all Asserted Patents |
| 2014-05-13 | U.S. Patent No. 8,721,439 Issues |
| 2015-08-25 | U.S. Patent No. 9,117,341 Issues |
| 2016-03-01 | U.S. Patent No. 9,275,516 Issues |
| 2016-08-23 | U.S. Patent No. 9,424,716 Issues |
| 2017-07-11 | U.S. Patent No. 9,704,338 Issues |
| 2018-08-09 | Plaintiff allegedly sends first pre-suit notice letter to Defendant |
| 2021-04-06 | U.S. Patent No. 10,970,969 Issues |
| 2021-05-04 | U.S. Patent No. 10,997,822 Issues |
| 2021-07-20 | Plaintiff allegedly sends second pre-suit notice letter to Defendant |
| 2021-12-14 | U.S. Patent No. 11,200,779 Issues |
| 2022-02-07 | Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 8,721,439 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 8,721,439, issued May 13, 2014 (Compl. ¶38).
- The Invention Explained:
- Problem Addressed: The patent addresses technical problems specific to online wagering platforms, which, unlike in-person sportsbooks, must service numerous users across different devices and locations simultaneously (Compl. ¶11). A specific problem identified is generating an offer to cash out a wager that accurately reflects real-time event variability and is consistent across this plurality of devices, a task described as impossible for human operators to perform in real-time (Compl. ¶¶ 21, 29, 39).
- The Patented Solution: The invention is a method for managing a multi-outcome wager through a "system controller" that communicates with user "wagering input devices" (Compl. ¶41). The controller initiates the wagering event, and at any time before its completion, it can initiate a "buy-out" or "partial buy-out" offer to players whose wagers are still potentially winning (Compl. ¶41). The patent describes this offer as a fractional amount of the potential prize, allowing a player to "cash in and avoid the risk of being eliminated on a later leg" (’439 Patent, col. 2:32-63, as cited in Compl. ¶33). The system is designed to process real-time data from multiple sources to generate and transmit an accurate and uniform offer value to all similarly situated users (Compl. ¶¶ 22, 27).
- Technical Importance: This technology provided a systematic, computer-implemented solution for managing risk and retaining user engagement in complex, multi-leg online bets by offering an early settlement option based on real-time data (Compl. ¶¶ 13, 30).
- Key Claims at a Glance:
- The complaint asserts independent claim 1 and dependent claims 20, 21, and 22 (Compl. ¶153).
- Independent Claim 1 includes the following essential elements:
- A method of providing one or more wagering input devices in communication with a system controller for a multi-outcome wagering event with a defined number of legs.
- The system controller initiates the wagering event.
- The system controller initiates at least one of a buy-out offer and partial buy-out offer to eligible players before the event is completed.
- The system controller receives an acceptance of the buy-out offer.
- Players who accept the offer are no longer eligible to exclusively win the jackpot.
- The system controller completes the remainder of the legs to finish the event.
- The system controller determines if any players have won the jackpot (Compl. ¶41).
- The complaint does not explicitly reserve the right to assert other dependent claims for this patent.
U.S. Patent No. 9,117,341 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 9,117,341, issued August 25, 2015 (Compl. ¶50).
- The Invention Explained:
- Problem Addressed: The patent addresses the same technical problem as the ’439 Patent: how to generate and present a consistent, real-time offer to dispose of a wager across a distributed network of online users and devices (Compl. ¶51).
- The Patented Solution: This patent claims a method of conducting a wagering event where a player is presented with a buy-out offer before the event's completion (Compl. ¶53). The method relies on a system controller communicating with wagering input devices to initiate the event, receive a wager, identify players eligible to win, initiate the buy-out offer at any time before completion, identify acceptances, complete the event, and determine the winner(s) (’341 Patent, col. 1:52-3:21, as cited in Compl. ¶52; Compl. ¶53).
- Technical Importance: This technology provided a structured, automated method for offering early bet settlements, improving upon prior art online wagering systems that lacked this systematic capability (Compl. ¶¶ 56, 57).
- Key Claims at a Glance:
- The complaint asserts independent claim 1 and dependent claims 21 and 22 (Compl. ¶166).
- Independent Claim 1 includes the following essential elements:
- A method of conducting a wagering event where a player is presented with a buy-out or partial buy-out offer.
- Providing wagering input devices communicating with a system controller.
- The system controller is adapted for: initiating the event, receiving a wager, identifying eligible players, initiating the buy-out offer before completion, identifying acceptances, completing the event, and determining winners (Compl. ¶53).
- The complaint does not explicitly reserve the right to assert other dependent claims for this patent.
U.S. Patent No. 9,275,516 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 9,275,516, issued March 1, 2016 (Compl. ¶62).
- Technology Synopsis: This patent is directed to a wagering apparatus comprising a server system controller that communicates with wagering devices (Compl. ¶65). The controller is programmed to perform the core functions of displaying wagering events, accepting wagers, generating tickets, determining player qualification for a jackpot, and generating and causing the display of a cash out option (Compl. ¶65).
- Asserted Claims: Independent claim 68 and dependent claims 73 and 74 (Compl. ¶179).
- Accused Features: The DraftKings Sportsbook platform, which allegedly comprises a server system controller that provides the "Cash Out" feature to users (Compl. ¶¶ 141, 179).
U.S. Patent No. 9,424,716 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 9,424,716, issued August 23, 2016 (Compl. ¶74).
- Technology Synopsis: This patent claims a wagering system with a system controller configured to manage a wagering event by receiving wagers, monitoring outcomes, identifying eligible players, and initiating the display of buy-out offers (Compl. ¶77). The claim specifies that the buy-out offer can be for a full or partial cash out on single or multiple bets, including accumulator or parlay wagers (Compl. ¶77).
- Asserted Claims: Independent claim 54 and dependent claims 60 and 65 (Compl. ¶192).
- Accused Features: The DraftKings Sportsbook platform, which allegedly functions as the claimed wagering system providing a "Cash Out" feature for various bet types, including parlays (Compl. ¶¶ 139, 143, 192).
U.S. Patent No. 9,704,338 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 9,704,338, issued July 11, 2017 (Compl. ¶85).
- Technology Synopsis: This patent claims a method of conducting a multi-outcome wagering event comprising a defined number of legs, where a "trading exchange module" within the system controller initiates and displays buy-out offers (Compl. ¶¶ 88-89). The claim details the consequences of accepting a full buy-out (no longer eligible for jackpot) versus a partial buy-out (remains eligible for a portion) (Compl. ¶89).
- Asserted Claims: Independent claim 1 and dependent claims 7, 9, and 21 (Compl. ¶205).
- Accused Features: The DraftKings Sportsbook platform is alleged to practice the claimed method, with its "Cash Out" feature functioning as the claimed buy-out offer initiated by a trading exchange module (Compl. ¶¶ 141, 205).
U.S. Patent No. 10,970,969 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 10,970,969, issued April 6, 2021 (Compl. ¶98).
- Technology Synopsis: This patent is directed to a non-transitory computer readable medium containing instructions for a central server system to conduct a wagering event (Compl. ¶101). The instructions cause the server to initiate an event, accept a wager from an input device, and generate a cash out offer by evaluating the event's status, determining player eligibility, and calculating an offer amount (Compl. ¶101).
- Asserted Claims: Independent claim 21 and dependent claims 22 and 23 (Compl. ¶¶ 101, 218).
- Accused Features: The software of the DraftKings Sportsbook platform, which allegedly constitutes the claimed non-transitory medium with instructions for providing the "Cash Out" feature (Compl. ¶¶ 135, 218).
U.S. Patent No. 10,997,822 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 10,997,822, issued May 4, 2021 (Compl. ¶109).
- Technology Synopsis: This patent claims a system for processing a payment for a wager, comprising a communications interface, a processor, and memory (Compl. ¶112). The processor is programmed to receive a wager from a first input device, receive a cash out offer from a second input device, identify an acceptance of the offer from the first device, process the offer, and transmit the value to the first device (Compl. ¶112).
- Asserted Claims: Independent claim 1 and dependent claims 2, 4, and 15 (Compl. ¶231).
- Accused Features: The hardware and software of the DraftKings Sportsbook platform, which allegedly constitutes the claimed system for processing "Cash Out" payments (Compl. ¶¶ 135, 144, 231).
U.S. Patent No. 11,200,779 - Wagering Apparatus, Methods and Systems
- Patent Identification: U.S. Patent No. 11,200,779, issued December 14, 2021 (Compl. ¶121).
- Technology Synopsis: This patent is directed to a system for conducting a real-time wagering event, including a system controller with a "trading engine module," a database, and a plurality of input devices (Compl. ¶124). The controller is configured to receive wagers, continuously retrieve real-time data on the event's progress, recalculate wager information, and generate real-time options for participants to cash out for a portion of an award (Compl. ¶124).
- Asserted Claims: Independent claim 16 and dependent claims 23 and 25 (Compl. ¶244).
- Accused Features: The DraftKings Sportsbook platform, which is alleged to be the claimed real-time wagering system that uses a trading engine to generate "Cash Out" options (Compl. ¶¶ 141-143, 244).
III. The Accused Instrumentality
Product Identification
The accused products are collectively identified as the "DraftKings Sportsbook," a sports betting platform accessible through kiosks, mobile applications for iOS and Android, and web applications (collectively, the "Accused Products") (Compl. ¶¶ 135-136).
Functionality and Market Context
The Accused Products provide a feature named "Cash Out," which allows a user to "close out their active bet before the outcome is decided" (Compl. ¶141). This functionality is available for pre-game, live, future, and parlay bets (Compl. ¶143). The complaint includes a screenshot from the DraftKings website which describes "Cash Out" as a new feature that gives users the opportunity to secure part of their winnings or cut their losses as odds change (Compl. ¶34). A user with an active bet can navigate to a 'My Bets' section of the application or website and select a yellow "Cash Out" button to accept the offered payout, which is then deposited into the user's account (Compl. ¶144). The complaint alleges that this feature is an important tool for user engagement and has been widely adopted by the industry (Compl. ¶¶ 34, 36).
IV. Analysis of Infringement Allegations
’439 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| a method of providing one or more wagering input devices in communication with a system controller through which the one or more players may participate in a multi-outcome wagering event comprising a defined number of legs | The DraftKings Sportsbook platform consists of user devices (e.g., smartphones, computers, kiosks) in communication with DraftKings' servers, through which users place multi-leg parlay bets. | ¶¶135, 136, 139 | col. 41:1-11 |
| said system controller being adapted for: initiating the multi-outcome wagering event | DraftKings' servers initiate and offer multi-leg parlay wagering events to users on the platform. | ¶139 | col. 41:12-13 |
| initiating at least one of a buy-out offer and partial buy-out offer to any number of the one or more players that are eligible to win at least one jackpot at any time before the multi-outcome wagering event has been completed | The DraftKings Sportsbook platform offers the "Cash Out" feature on active bets, including parlays, allowing users to close out their bet before all legs are completed. | ¶¶141, 143, 144 | col. 41:14-20 |
| receiving an acceptance of the buy-out offer from at least one of the players | Users accept the "Cash Out" offer by selecting the yellow Cash Out button within the 'My Bets' section of the Accused Products. | ¶144 | col. 41:21-22 |
| wherein each of the players accepting the buy-out offer will no longer be eligible to exclusively win the at least one jackpot | Upon accepting the "Cash Out" offer, the user's original wager is closed out, and they receive the offered amount rather than the full potential jackpot of the parlay bet. | ¶¶141, 142, 144 | col. 41:23-26 |
| completing the remainder of the defined number of legs to finish the multi-outcome wagering event; and determining if any of the players have won the at least one jackpot or portion thereof | For players who do not cash out, the underlying sporting events continue to completion, and DraftKings' system determines the final outcome of the wager. | ¶141 | col. 41:27-31 |
’341 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| A method of conducting a wagering event for one or more players, wherein a player is presented with at least one of a buy-out offer and a partial buy-out offer prior to completion of the wagering event | The DraftKings Sportsbook platform conducts wagering events (e.g., parlay bets) and presents the "Cash Out" feature to users before the event is decided. | ¶¶139, 141 | col. 16:53-57 |
| said system controller being adapted for: initiating the wagering event for one or more players | DraftKings' servers initiate wagering events, such as sporting events on which parlay bets can be placed. | ¶139 | col. 17:1-2 |
| receiving a wager via the one or more wagering input devices in response to a player desiring to participate in the wagering event | Users place wagers through the user interface of the DraftKings mobile app, website, or kiosk. | ¶¶135, 136 | col. 16:63-67 |
| identifying one or more players eligible to win from among players participating in the wagering event | The DraftKings system tracks active bets and identifies which wagers are still potentially winning based on the outcome of completed legs of a parlay. | ¶141 | col. 17:3-5 |
| initiating at least one of a buy-out offer and partial buy-out offer to any number of the one or more players that are eligible to win...at any time before the wagering event has been completed | The DraftKings Sportsbook makes the "Cash Out" feature available for eligible bets at various times before the final outcome of the wagering event. | ¶¶141, 143 | col. 17:6-12 |
| identifying any acceptances of said at least one of a buy-out offer | The system identifies a user's acceptance when the user selects the "Cash Out" button and confirms the action. | ¶144 | col. 17:13-15 |
| completing the wagering event; and determining if any of the players have won | The underlying sporting events for the wager are completed, and the system determines the final outcome for any bets not cashed out. | ¶141 | col. 17:16-18 |
Identified Points of Contention
- Scope Questions: A central question may be whether the architecture of the DraftKings Sportsbook platform maps onto the claimed "system controller" in communication with "wagering input devices." The patents describe a specific server architecture, including a "mid-tier server architecture" depicted in Figure 3, which is used to generate buy-out offers (Compl. ¶27). The dispute may focus on whether DraftKings' potentially more modern, distributed server architecture meets the structural or functional requirements of the claimed "system controller."
- Technical Questions: The patents are framed as solving the problem of generating accurate and uniform buy-out offers for all similarly situated bettors in real-time (Compl. ¶¶ 22, 35). A key technical question will be what evidence the complaint provides that the "Cash Out" feature operates in this systematic way, as opposed to a more discretionary system where offers may not be uniformly generated or presented to all eligible users simultaneously.
V. Key Claim Terms for Construction
The Term: "system controller"
- Context and Importance: This term appears in the independent claims of both the ’439 and ’341 patents and is foundational to the claimed invention. The definition of "system controller" will be critical to determining whether the server-side infrastructure of the DraftKings Sportsbook platform, which facilitates the wagering and "Cash Out" functionalities, falls within the scope of the claims.
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The claims describe the "system controller" functionally, defining it by what it is "adapted for" (e.g., initiating events, receiving wagers, initiating buy-out offers) (Compl. ¶¶ 41, 53). This functional language may support a construction that is not limited to a specific hardware configuration and could read on a variety of server architectures that perform the recited functions.
- Evidence for a Narrower Interpretation: The complaint repeatedly references a "specific mid-tier server architecture, as depicted in Figure 3 of the asserted patents," which includes a "Cash-In program and related subroutines" (Compl. ¶¶ 27, 49). A defendant may argue that this specific disclosure limits the scope of "system controller" to the particular architecture shown, potentially excluding different server arrangements.
The Term: "initiating...a buy-out offer...to any number of the one or more players that are eligible"
- Context and Importance: Practitioners may focus on this term because it relates directly to the problem the patents purport to solve: providing consistent, uniform offers across a plurality of users (Compl. ¶¶ 29, 39). The dispute will likely involve whether "initiating" requires the system to proactively push an offer to all eligible users or if merely making the "Cash Out" feature available for a user to check constitutes "initiating."
- Intrinsic Evidence for Interpretation:
- Evidence for a Broader Interpretation: The term "initiating" could be interpreted broadly to mean making the feature available or beginning the process by which an offer can be generated and accepted, which would align with the description of a user visiting 'My Bets' to find the offer (Compl. ¶144).
- Evidence for a Narrower Interpretation: The patent's emphasis on overcoming the limitations of human operators and providing "uniform" offers "independent of bettors' geography" (Compl. ¶¶ 22, 35) suggests "initiating...to any number" may require a systematic and comprehensive process where the controller actively generates and makes available an offer to the entire population of eligible players, not just passively waiting for a player to check for one.
VI. Other Allegations
- Indirect Infringement: The complaint alleges inducement of infringement based on Defendant's alleged actions of instructing and encouraging its customers and partners to use the Accused Products in an infringing manner, specifically by providing detailed instructions on how to use the "Cash Out" feature on its website (Compl. ¶¶ 158-160, 171-173).
- Willful Infringement: The complaint alleges willful infringement based on Defendant's alleged pre-suit knowledge of the patents. The allegations state that Plaintiff sent notice letters to Defendant identifying five of the asserted patents as early as August 9, 2018, and two additional patents on July 20, 2021, and that Defendant has continued its allegedly infringing activities post-notice (Compl. ¶¶ 147, 151, 154, 164).
VII. Analyst’s Conclusion: Key Questions for the Case
- A core issue will be one of architectural equivalence: can the "system controller" recited in the patent claims, which is described in the specification with a specific mid-tier server architecture, be construed to cover the potentially different, modern, and distributed server architecture of the accused DraftKings Sportsbook platform?
- A key evidentiary question will be one of functional performance: does the accused "Cash Out" feature perform the claimed step of systematically "initiating" a buy-out offer to all eligible players to solve the problem of real-time consistency, as the patents describe, or does it merely make a discretionary cash-out option available for players to request, potentially creating a mismatch in technical operation?
- A central legal question, particularly relevant to damages, will be one of willfulness: given the detailed allegations of pre-suit notice letters dating back to 2018, what was the nature of Defendant's conduct after allegedly being made aware of the asserted patents, and does that conduct rise to the level of willful infringement?