Blog Goodwin Gaming March 25, 2013

Preparing for the Inevitable Wave of Gaming & Gambling Patent Litigation

What do cellphones and gaming have in common?

Six years ago, the mobile phone market was relatively fragmented, with Nokia being the dominant player worldwide and four other vendors (Samsung, Motorola, LG, and Sony Ericsson) enjoying healthy portions of that market.  The iPhone had been on sale for six months by then, but Apple’s sales didn’t justify breaking them out into their own category.  Each of those companies was, at the time, the holder of anywhere from several hundred to several thousand patents that were relevant to mobile devices.  Yet, at the time, patent litigation was infrequent and certainly didn’t capture daily headlines with news of billion-dollar verdicts.

Fast forward to 2013, and the cellphone market has become even more competitive.  Nokia’s share of the global market has shrunk, and Samsung is now the dominant player, with Apple and eight other vendors having single digit shares of the market, albeit a much larger market.  Each of these companies has sizeable and growing portfolios of patents that are relevant to mobile devices, and strategic patent litigation is an important tool for competitors to maintain their market share and profits.

Today, the Association of Gaming Equipment Manufacturers boasts 17 members.  Sixteen of those members have patent portfolios.  It’s no secret that, as states like Nevada, Delaware and New Jersey authorize online gambling, classic “brick and mortar” gaming companies will be going head-to-head with online gaming companies like Zynga in what could be a winner-take-all contest.  Patent litigation has yet to be employed in any significant way to gain or protect market share in the gaming space but, as the cellphone industry has shown us, that can change quickly.

Companies already in and entering the gaming business would do well to understand how potential patent disputes could affect their operations and business relationships, and to develop their own strategy for addressing these issues.  Experienced patent counsel can be helpful in developing that strategy.