The Ho Must Go On

8 May 2002

A recent decision in a U.S. district court could have far reaching implications for online gaming operators the world over.

Macau casino tycoon Stanley Ho has won the first round of his legal battle against i2 Corp, but the war is far from over. Ho's Internet casino will continue to operate despite efforts from a Nevada-based company to shut it down. The company that operates the Antigua-based site, however, still faces a court trial on patent right infringements.

Home Gambling Network Inc., a subsidiary of i2 Corp., filed suit against Ho, his Internet casino and a host of other companies associated with the operation on the grounds that the online casino was in violation of i2's live-play Internet gambling patent.

i2 owns a patent covering live casino games broadcast over the Internet for gambling purposes. The patent specifically applies to games involving electronic betting and payments.

HGN has filed lawsuits against a handful of operators that have attempted or planned to launch live, real-time casino games on the grounds that they were in violation of the patent. Ho's online casino was one of the few operators to actually get live games up and running on its site.

In response to launch of Ho's real-time games, which are accessible through Ho's casino portal, i2 filed an injunction to force the site to cease operating.

U.S. District Judge Larry Hicks denied HGN's request for a preliminary injunction on grounds that the court didn't have proper jurisdiction because Ho and his companies had no connections to Nevada.

Hicks also pointed out that Ho was more likely to suffer irreparable damages if the injunction was granted because it was an operating business, while HGN, on the other hand, has no operating online casinos. Instead HGN plans to license its patent to other Internet operators.

"Enjoining (Ho's) Web site would close an active business--not a speculative opportunity," Hicks wrote. "(HGN) will continue to have the opportunity, if the injunction relief is denied, to ultimately prevail and seek either a licensing fee or an injunction of infringing conduct."

Hicks dismissed charges against several employees of Ho and who were named as defendants. The only charges that were not dropped were those against Caribbean Online Ltd., the Ho-controlled company that operates the Internet casino. The case go before a trial judge this summer.

Officials with DrHo .com said they won't comment on the proceedings until they consult with their attorneys. Phone calls to i2 Corp and HGN were not returned.

HGN President Mel Molnick told the Las Vegas Sun earlier this week the company isn't surprised by Hicks' decision.

"It's what we expected, though obviously we wanted to try," he said. "We're only disappointed they'll be able to continue taking wagers in the United States, and let a lot of people continue doing an illegal activity."

In his ruling, Hicks said Ho was likely to prevail in a lawsuit because the site pays out winnings via check and not electronic transfer.

"The patent does not patent all live casino gambling over the Internet," Hicks wrote. "There is no allegation that the Web site pays debits and credits in (an instantaneous, electronic) manner."

Molnick told the Sun, though, that his company will continue to fight and he is convinced they will win based on the fact that the way Ho pays out winnings is the equivalent to electronic transfers, which would be in violation of the patent.

"It absolutely does violate the patent," Molnick said.

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