16th of January 2011 Author: Ava Jackuard
WMS wants another bite?
This week’s news witnessed a déjà vu as a machine manufacturer WMS Gaming decided to come back for another bite and restart a US trademark infringement action against online gambling group Party Gaming.
There’s big money involved, with the Waukegan, Illinois-based company asking Party to pay over $287 million in a case which began four years ago, when WMS raised the issue against the Gibraltar company, claiming that the use of the names "Jackpot Party" and "Super Jackpot Party" on its Internet games infringed 1997 trademarks WMS had registered for its machines.
However, back then Party Gaming did not appear before the court, as they claimed that the US courts didn’t have jurisdiction; however, later on it was ruled that they should pay $2.6 million, which WMS thought was inadequate.
WMS has since gotten its appeal approved by a federal appeals court in the States, which granted them to continue pursuing the case and seek $287 million from Party Gaming, also assessing the existing award as insufficient to provide full redress for the machine manufacturer. The $287 million sought by WMS lawyers represent the profits earned by Party Gaming from its US operations in 2004, 2005 and 2006.
Reportedly, the company believed it is entitled to all of Party Gaming's U.S. profits for those years, even from games not in violation of its marks, relying on §35 of the Lanham Act, which governs trademark law, and in this particular point rules: winning plaintiff is entitled "to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action."
The company further claimed that, since Party Gaming failed to offer any breakdown of its profits from non-infringing games or any evidence why there should be an offset for business or other expenses, it should turn over all of its profits from the years it was in violation.
However, when Judge Blanche Manning heard the original action in the US District Court for Illinois North, she reduced the claim amount to the sum she thought is a "reasonable" estimate of WMS" actual damages from the infringement - $2.6 million. The sum was based on the company’s own assessment of actual damages incurred in 2004, multiplied by three by the judge.
This development wasn’t satisfactory for WMS, which then took the case to the 7th U.S. Circuit Court of Appeals in September. This court appeared to see things in the same way as WMS', so they agreed with their submission, and sent the case back to Manning, ordering a revision of the lower court’s order.
Since Party Gaming didn’t make an appearance during the proceedings, the court ruled that they should be deprived of their right to contest WMS' showing of its profits.
"Courts consistently find that when a trademark plaintiff offers evidence of infringing and the infringer fails to carry its statutory burden to offer evidence of deductions, the plaintiff's entitlement to profits under the Lanham Act is equal to the infringer's gross sales," wrote the court.
O the other hand, appeal judges referred to a 1916 U.S. Supreme Court decision - Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., - when a trademark infringement case proved to be difficult in terms of determining "what proportion of the profit is due to the trademark, and what to the intrinsic value of the commodity." The case was addressed by the Court in the following way: "it is more consistent with reason and justice that the owner of the trademark should have the whole profit than that he should be deprived of any part of it by the fraudulent act of the defendant."
Still, judging by its executive director Jeffrey Michel’s position, WMS seems to be quite confident that the new claim will prove successful. "I'm expecting that we will get the full amount, and I am not expecting Party Gaming to put in an appearance," Michel said, adding that even if Party Gaming attempts to make an appearance, "...the evidentiary segment has been closed, and I don't foresee any reduction in that [$287 million] amount."
However, when he was asked whether Party Gaming has any U.S. assets that could be seized, or whether they have any other strategic plans to force Party to comply with the court’s decision, Michel declined comment.
But a Party Gaming official, Communications Director John Shepherd, did have a word or two to say about this matter: "This issue is about jurisdiction. Party Gaming has never had any physical assets located in the US but is perfectly prepared to defend the merits of this claim in the appropriate jurisdiction.
"The Co[mpany] has made this point repeatedly to WMS. Both WMS's claims and the remedy it seeks are without foundation and justification."
These days are not all bad in terms of legal cases for Party Gaming, as last week they won against a 2006 class action suit, where they were accused by online punters of allowing other gamblers to collude, thus cheating unsuspecting players. U.S. District Judge Ann Aldrich of the Northern District of Ohio dismissed this case, ruling that the dispute should more properly be heard in Gibraltar.
Ever since the UIGEA was introduced in 2006, Party Gaming withdrew all its operations from the United States. Also, in 2010 it reached a $105 million settlement deal with the US Department of Justice to clean the slate on its pre-2006 presence in the country, thereby preventing the prosecution threat for that period of its operations.
At the moment, things are actually going rather well for Party Gaming, as the group is in the process of merging with another industry giant, Bwin Interactive – making big steps toward creating the world's largest online gambling corporate.
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