Computer Tracking Systems LLC v. Penn National Gaming Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Computer Tracking Systems LLC (Texas)
  • Defendant: Penn National Gaming, Inc. (Pennsylvania)
  • Plaintiff’s Counsel: Devlin Law Firm LLC
• Case Identification: 2:16-cv-00767, E.D. Tex., 07/12/2016
• Venue Allegations: Venue is asserted based on Defendant conducting business within the Eastern District of Texas and the alleged acts of infringement occurring in the district.
• Core Dispute: Plaintiff alleges that Defendant’s online casino platform infringes two patents related to systems and methods for tracking a player's spending on games of chance and allocating a portion of those funds to a dedicated player account.
• Technical Context: The technology relates to player tracking and loyalty systems within the online gaming and gambling industry, a market where operators compete to attract and retain users through various reward mechanisms.
• Key Procedural History: The complaint indicates U.S. Patent No. 6,872,138 is a divisional of the application that resulted in U.S. Patent No. 6,666,768. This shared prosecution history may lead a court to interpret common claim terms consistently across both patents.

Case Timeline

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 6,872,138 - System and Method for Tracking Game of Chance Proceeds

• Patent Identification: U.S. Patent No. 6,872,138, "System and Method for Tracking Game of Chance Proceeds," issued March 29, 2005.

The Invention Explained

• Problem Addressed: The patent's background describes state-sponsored gaming entities (e.g., lotteries) as facing fierce competition and negative public perception, partly because a "disproportionate amount of the gaming public" is composed of "economically, educationally and/or socially disadvantaged citizens" (’138 Patent, col. 2:25-33).
• The Patented Solution: The invention proposes a computerized method to address this by linking gaming activity to savings. The method involves identifying and registering a player, then establishing a "set aside" where a predetermined portion of the player's purchases is accumulated. Once this "set aside" reaches a specified threshold, the funds are transferred to a separate registered player account, such as a retirement or savings account, thereby increasing the "social acceptance" of gaming (’138 Patent, Abstract; col. 2:4-15). The method is depicted in a flowchart in Figure 8 of the patent.
• Technical Importance: The invention sought to create a technical framework for transforming gaming expenditures into a mechanism for personal savings, distinct from conventional win/loss outcomes, thereby adding a layer of social utility to games of chance (’138 Patent, col. 2:4-15).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 3 and 6 (Compl. ¶16).
• Independent Claim 1 recites a method for establishing a player account and set aside, comprising the key steps of:
  • Receiving and validating a player's identification
  • Obtaining authorization and registering the player
  • Establishing a "registered player set aside"
  • Establishing a "registered player account"
  • Increasing the set aside by a portion of the player's purchase
  • Transferring the set aside to the account once a predetermined threshold is met over a period of time
• The complaint does not explicitly reserve the right to assert additional claims, but this is common practice.

U.S. Patent No. 6,666,768 - System and Method for Tracking Game of Chance Proceeds

• Patent Identification: U.S. Patent No. 6,666,768, "System and Method for Tracking Game of Chance Proceeds," issued December 23, 2003.

The Invention Explained

• Problem Addressed: As the parent to the ’138 patent, this patent addresses the same problem of improving the competitiveness and public image of sponsored games of chance, such as state lotteries (’768 Patent, col. 1:11-53).
• The Patented Solution: The invention claims a system architecture for tracking game proceeds. This system includes a player communication device (e.g., personal computer) and a sponsor computer. The sponsor computer receives purchase information, stores it, and calculates a "set aside amount" based on the purchase, where the availability of this amount is "not dependent upon a result of the game of chance item" (’768 Patent, Abstract; col. 6:7-15). Figure 3 illustrates this system with player devices communicating with a central sponsor computer.
• Technical Importance: This patent describes a technical architecture for decoupling a player rewards/savings mechanism from the outcome of the game itself, and centralizing the tracking of purchases made via distributed player devices (’768 Patent, col. 2:1-9).

Key Claims at a Glance

• The complaint asserts independent claims 13, 26, and 31, along with numerous dependent claims (Compl. ¶37).
• Independent Claim 13 recites a tracking system comprising:
  • At least one player communication device for facilitating and communicating player purchases
  • A sponsor computer for receiving and storing purchase information
  • The sponsor computer calculates a "set aside amount" based on the purchase information
  • A limitation that the "availability of the set aside amount is not dependent upon a result of the game of chance item"
• The complaint does not explicitly reserve the right to assert additional claims.

III. The Accused Instrumentality

Product Identification

The Defendant's "Hollywood Casino online casino gaming products," which are available through the website www.hollywoodcasino.com (the "Accused Instrumentalities") (Compl. ¶16, ¶37).

Functionality and Market Context

The complaint alleges the Accused Instrumentalities are used to "register, identify, track individual players and to set aside a predetermined amount of a player's electronic purchases to be deposited into a registered player's account based on predetermined conditions" (Compl. ¶16). The complaint alleges these products are marketed and used throughout the United States (Compl. ¶23, ¶62). The complaint does not provide sufficient detail for analysis of the specific "predetermined conditions" or the technical operation of the account crediting mechanism. No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

’138 Patent Infringement Allegations

’768 Patent Infringement Allegations

Identified Points of Contention

• Scope Questions: A central question may be whether the patents’ claims, which use language and examples rooted in state-sponsored physical lotteries (e.g., "lottery tickets"), can be construed to read on the systems and transactions of a modern online casino platform. For example, does a player's wager in an online slot machine constitute the purchase of a "game of chance item" in the manner contemplated by the patents?
• Technical Questions: The complaint provides little technical detail on how the accused system's rewards or account crediting functions operate. A key factual dispute will likely be whether the accused system's functionality matches the claimed "set aside" mechanism. The complaint alleges the set aside is based on "predetermined conditions" (Compl. ¶16), which is vague and may differ from the patent's teaching of a "predetermined portion of the registered player's purchase" (’138 Patent, col. 11:19-20). Evidence will be needed to show that any value credited to a player's account is independent of game outcomes and is specifically tied to purchase amounts, rather than other metrics like play volume, duration, or win/loss ratios, which are common in casino loyalty programs.

V. Key Claim Terms for Construction

"set aside amount"

• Context and Importance: This term is the core of the invention's contribution. Its construction will be critical because the infringement case hinges on whether the accused online casino's loyalty or crediting system creates what can be legally defined as a "set aside amount." Practitioners may focus on this term to determine if it is limited to a specific type of savings-oriented fund or if it can broadly cover modern loyalty points systems.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The claims themselves define the "set aside amount" functionally as something calculated based on purchase information and not dependent on a game's result (’768 Patent, col. 12:10-18). Plaintiff may argue that any player credit meeting these functional requirements infringes, regardless of its ultimate purpose.
  • Evidence for a Narrower Interpretation: The specification repeatedly frames the "set aside" as a precursor to a deposit into a separate, managed account for long-term goals like a "personal retirement account, medical savings account, real estate investment account," etc. (’768 Patent, col. 2:5-9). Defendant may argue that this context limits the term to a mechanism for funding segregated, long-term savings vehicles, not a general-purpose in-game credit or loyalty point system.

"game of chance item"

• Context and Importance: This term defines the type of transaction the patented system and method are designed to track. Whether an online casino wager is a "game of chance item" is fundamental to the applicability of the patents to the accused products.
• Intrinsic Evidence for Interpretation:
  • Evidence for a Broader Interpretation: The term itself is not facially limited. The claims do not explicitly restrict it to lotteries. Plaintiff could argue it encompasses any monetized chance-based event, including a spin on a virtual slot machine.
  • Evidence for a Narrower Interpretation: The patent's background is exclusively focused on "State-operated games of chance (e.g., lotteries)" (’768 Patent, col. 1:19-20). Specific claim embodiments refer to "lottery tickets," "scratch and win tickets," and "video lottery terminal" purchases (’768 Patent, col. 12:62-65). Defendant may argue these examples confine the scope of "game of chance item" to the context of state-sponsored lotteries.

VI. Other Allegations

Indirect Infringement

The complaint alleges both induced and contributory infringement. Inducement is based on Defendant allegedly providing "instruction materials, training, and services" that encourage infringement by end-users (Compl. ¶26, ¶65). Contributory infringement is based on allegations that the Accused Instrumentalities are a "material component" for practicing the patents and are not a "staple article of commerce suitable for substantial non-infringing use" (Compl. ¶27, ¶66). Notably, the contributory infringement allegations for both patents refer to "computerized interactive nutrition programs," which appears to be a significant drafting error copied from an unrelated document (Compl. ¶27, ¶66).

Willful Infringement

Willfulness is alleged based on Defendant's knowledge of the patents and infringement "at least as early as the filing of this Complaint" (Compl. ¶24, ¶63). This pleading supports a claim for post-suit willful infringement.

VII. Analyst’s Conclusion: Key Questions for the Case

• A core issue will be one of definitional scope: can the term "game of chance item", which is described in the patents primarily in the context of state-sponsored lottery tickets, be construed to cover the electronic wagers and virtual credits used in Defendant's online casino platform? The answer will determine if the patents are applicable to the accused technology at all.
• A key evidentiary question will be one of functional equivalence: does the accused platform's player rewards or account system perform the specific function of calculating a "set aside amount" that is based on a "predetermined portion" of a purchase and is verifiably independent of game outcomes, or is it a conventional loyalty system tied to different metrics like gameplay volume, which may not meet the claim limitations?
• The case may also turn on a question of architectural mismatch: do the patents require a distinct, temporary "set aside" that is periodically transferred to a separate, managed "player account" for savings, and if so, does the accused platform, likely a unified system, embody this claimed two-stage architecture?