DK Crown Holdings Inc. (formerly DraftKings Inc.), a Delaware corporation v. Diogenes Limited

1. Case Identification

• Case #: IPR2023-00267
• Patent #: Patent 10,997,822
• Filed: December 2, 2022
• Petitioner(s): DK Crown Holdings Inc. (formerly DraftKings Inc.)
• Patent Owner(s): Diogenes Limited
• Challenged Claims: 1, 7, 15, and 21

2. Patent Overview

• Title: Wagering System with Pre-Completion Buy-Out Feature
• Brief Description: The ’822 patent discloses a system for managing wagering events, such as sports betting or casino games, over a network. The core inventive concept is a feature that allows a player to be presented with and accept a "buy-out" or "cash-out" offer, either for the full value or a partial value of their wager, prior to the final completion of the wagering event.

3. Grounds for Unpatentability

Ground 1: Anticipation over Scott - Claims 1, 7, 15, and 21 are anticipated by Scott.

• Prior Art Relied Upon: Scott (Application # 2012/0309503).
• Core Argument for this Ground:
  • Prior Art Mapping: Petitioner argued that Scott discloses every limitation of the challenged claims. Scott teaches a multiplayer gaming system comprising servers and gaming machines where players can exchange wagers on non-final game outcomes. This system allegedly meets the limitations of claim 1 by providing a networked system for processing wager payments. Specifically, Scott's system allows a first player to offer their wager for sale on an electronic marketplace, a second player to submit a counter-offer (the "cash out offer"), and the server to identify the first player's acceptance and process the payment transfer between the players, all before the game ends. Petitioner contended that Scott's disclosure of a player valuing their hand and another player making a counter-offer anticipates the "buy-out" and "partial buy-out" features of claim 15. The adjusting limitation of claims 7 and 21 was allegedly met by Scott's teaching that a counter-offer, by definition, adjusts the value of the wager after the initial offer is received.

Ground 2: Obviousness over Scott in view of Schugar - Claims 7, 15, and 21 are obvious over Scott in view of Schugar.

• Prior Art Relied Upon: Scott (Application # 2012/0309503) and Schugar (Application # 2008/0311981).
• Core Argument for this Ground:
  • Prior Art Mapping: This ground was presented as an alternative, in case the Board determines that the claims require both a full "buy-out offer" and a distinct "partial buy-out offer" to be presented. Petitioner argued Scott provides the primary framework of a networked wagering system with a full cash-out option via its marketplace. Schugar was introduced for its explicit teaching of allowing a player to "cash[] out a portion of a current bet in progress" while continuing to play with a reduced stake. Schugar describes this as "banking" a portion of the profit to limit losses while remaining in the game, which directly corresponds to the "partial buy-out" limitation.
  • Motivation to Combine: A POSITA would combine Scott and Schugar to enhance the gaming experience and increase operator revenue. Adding Schugar's partial cash-out feature to Scott's system would provide players with more flexibility and options, keeping them engaged. It would also create additional transaction opportunities on which an operator could charge commissions, a primary driver of casino revenue. The multi-round and multi-stage games described in both references are analogous, making the combination straightforward.
  • Expectation of Success: A POSITA would have a reasonable expectation of success in combining the references. Scott already teaches the underlying architecture for transacting wagers and adjusting their value via counter-offers. Implementing Schugar's partial cash-out would be a simple modification, requiring only basic calculations to adjust the remaining wager and payout, well within the skill of a POSITA.

Ground 3: Anticipation over DeWaal - Claims 1, 7, 15, and 21 are anticipated by DeWaal.

• Prior Art Relied Upon: DeWaal (Application # 2008/0113765).

• Core Argument for this Ground:

  • Prior Art Mapping: Petitioner argued that DeWaal, which is incorporated by reference into the ’822 patent, anticipates all challenged claims. DeWaal discloses a "multi-round bonus event" where, between rounds, the system "offers each advancing player an award to quit the bonus event." Petitioner asserted this "offer to quit" is the same as the claimed "cash out offer." DeWaal’s system architecture, with a central controller communicating with player gaming devices over a network, was argued to meet the system limitations of claim 1. Petitioner further contended that DeWaal's offer to quit for an accumulated award, which is received by the central server from a "second input device" (either a remote display or a back-end processor), anticipates the "buy-out offer" of claim 15. The "adjusting" limitation of claims 7 and 21 was allegedly met because DeWaal's award offers can be randomly generated based on probability data, thus adjusting the value for each player after the initial wager is received.

• Additional Grounds: Petitioner asserted additional obviousness challenges, including that claims 7, 15, and 21 are obvious over DeWaal in view of Schugar, relying on the same logic for combining a base system (DeWaal) with the partial cash-out feature taught by Schugar.

4. Arguments Regarding Discretionary Denial

• Petitioner argued that discretionary denial under §314(a) and §325(d) is not appropriate.
  • §314(a): Petitioner made a Sotera-style stipulation, agreeing not to pursue in the co-pending district court litigation any invalidity grounds that were raised or could have been reasonably raised in this IPR if a Final Written Decision is issued.
  • §325(d): Petitioner argued denial is improper under the Advanced Bionics framework because the petition presents new prior art and arguments. Specifically, Scott and Schugar were not previously considered by the Examiner. Petitioner also argued the Examiner erred during the prosecution of a parent patent (the ’341 patent) by adopting an Applicant's argument that the phrase "at least one of a buy-out offer and a partial buy-out offer" was conjunctive, requiring both types of offers. Petitioner contended this flawed interpretation, which contradicts the plain language and dependent claims of the ’822 patent, led the Examiner to erroneously allow the claims and should not bar institution.

5. Relief Requested

• Petitioner requests institution of an inter partes review and cancellation of claims 1, 7, 15, and 21 of Patent 10,997,822 as unpatentable.