DK Crown Holdings Inc v. Diogenes Ltd

1. Case Identification

• Case #: IPR2023-00267
• 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: System for Processing Wager Payments with Buy-Out Options
• Brief Description: The ’822 patent discloses a networked wagering system that allows a player to accept a full or partial "buy-out" or "cash-out" offer for their wager prior to the completion of the underlying wagering event.

3. Grounds for Unpatentability

Ground 1: Anticipation of Claims 1, 7, 15, and 21 over 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 where a player can sell their wager (a "non-final set of indicia") before the game concludes. This system includes servers and gaming machines that constitute the claimed "system for processing a payment." The petition mapped Scott’s "offer price" from a first player to the claimed "designated amount" and a "counter-offer" from a second player to the claimed "cash out offer." Scott's server receives and processes these offers and acceptances, transferring payment upon agreement, thus anticipating the limitations of independent claims 1 and 15.
  • Prior Art Mapping (Dependent Claims): Petitioner asserted that claim 7, which requires "adjusting the designated amount," is met by Scott's disclosure of a second player making a counter-offer, which by definition adjusts the initial offer price. Claim 21 is a non-transitory medium claim that depends on claim 15 and adds the same "adjusting" limitation found in claim 7, which Petitioner argued is also disclosed by Scott's counter-offer functionality.

Ground 2: Obviousness of Claims 7, 15, and 21 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, particularly if claim 15 is interpreted conjunctively to require both a full "buy-out offer" and a "partial buy-out offer." Petitioner contended that Scott’s system provides the framework for a full buy-out. Schugar was introduced because it explicitly teaches "cashing out a portion of a current bet in progress" while allowing the player to continue wagering with the remaining amount. Schugar describes this as "banking" a portion of the expected profit, which directly maps to the "partial buy-out offer" limitation.
  • Motivation to Combine: A Person of Ordinary Skill in the Art (POSITA) would combine Scott's marketplace with Schugar's partial cash-out feature for clear commercial benefits. The combination would provide players with greater flexibility and control, thereby increasing player engagement. For the system operator, offering partial cash-outs creates additional transaction opportunities on which to charge commissions or fees, thus increasing revenue. Schugar itself described the benefits of partial cash-outs for both players (limiting losses) and the house (making money).
  • Expectation of Success: A POSITA would have a reasonable expectation of success in this combination. Scott’s system already managed offers, counter-offers, and fund transfers. Integrating a partial cash-out option as taught by Schugar would be a predictable extension of this existing functionality, involving straightforward modifications to the transaction logic rather than overcoming any technical hurdles.

Ground 3: Obviousness of Claims 7, 15, and 21 over DeWaal in view of Schugar

• Prior Art Relied Upon: DeWaal (Application # 2008/0113765) and Schugar (Application # 2008/0311981).

• Core Argument for this Ground:

  • Prior Art Mapping: This ground argues that DeWaal, which is applicant-admitted prior art, discloses a gaming system that provides a multi-round bonus event where advancing players are given an "offer to quit" in exchange for an award. Petitioner asserted this feature meets the "cash out offer" limitation. If DeWaal is found to only disclose a full buy-out, Schugar was added to provide the explicit teaching of a "partial buy-out offer," as detailed in Ground 2.
  • Motivation to Combine: Petitioner argued a POSITA would be motivated to modify DeWaal’s system to include Schugar's partial cash-out feature to address a "continuing need to provide new and different" gaming systems and awards. Adding a partial cash-out option complements DeWaal's full cash-out by giving players an attractive alternative that keeps them engaged in the game, thereby increasing player enjoyment and operator revenue, consistent with the stated goals of both references.
  • Expectation of Success: The combination would be routine and predictable. The necessary computer instructions for presenting a partial cash-out offer, receiving user input, and adjusting the player's wager would parallel the existing functionality for the full cash-out offer in DeWaal and involve only basic mathematical functions as demonstrated in Schugar.

• Additional Grounds: Petitioner also asserted that claims 1, 7, 15, and 21 are anticipated by DeWaal alone and are obvious over DeWaal in view of the general knowledge of a POSITA.

4. Arguments Regarding Discretionary Denial

• §314(a) (Fintiv Factors): Petitioner argued against discretionary denial by making a Sotera-style stipulation. It agreed not to pursue in a co-pending district court litigation any invalidity ground that was raised or could have been reasonably raised in the inter partes review (IPR) if a Final Written Decision (FWD) is issued.
• §325(d) (Advanced Bionics Framework): Petitioner contended that denial under §325(d) would be inappropriate. It argued that the petition presents new prior art, as neither Scott nor Schugar were considered by the Examiner during prosecution. Furthermore, Petitioner argued that the Examiner made a clear error during prosecution of the ’822 patent’s parent by adopting the applicant's flawed argument that the claims required both a full and a partial buy-out offer. Petitioner asserted this flawed interpretation carried over to the examination of the ’822 patent, causing the Examiner to overlook otherwise invalidating prior art and improperly allow the claims.

5. Relief Requested

• Petitioner requested institution of an IPR and cancellation of claims 1, 7, 15, and 21 of the ’822 patent as unpatentable.