Gambling Patents a Bad Bet at the Federal Circuit

This article first appeared in the January 31, 2019 edition of the Legal Intelligencer.

Casino games haven’t changed too much since James Bond first took a seat at the Royale-les-Eaux casino in the early 1950s. While Texas Hold ‘Em may have surpassed baccarat, the staples—blackjack, craps, roulette—have reigned supreme for decades. In an industry with such stable margins, one could be forgiven for assuming that there is no drive (and, in fact, no need) for innovation in casino gaming.

As a matter of fact, it is not the resources of the players but the rules of the game that may be stifling invention in the gaming arts. The Court of Appeals for the Federal Circuit’s recent decision in In re: Marco Guldenaar Holding B.V., No. 2017-2465 (Fed. Cir. Dec. 28, 2018) illustrates the long odds gaming innovators have on obtaining patent protection for their original games.

In 2011, Marco Guldenaar Holding (MGH) filed a patent application claiming a method of playing a new type of dice game. The dice game incorporated a novel set of dice having particularized markings, with only certain faces of each die marked. The claimed method recited providing the dice, placing wagers on the possibility of certain dice rolls, and making payouts based on the wagers. MGH alleged that the game’s novelty was specifically tied to the uniquely marked dice which are used to play the game.

Upon examination, MGH’s claims were rejected as being directed to patent-ineligible subject matter under 35 U.S.C. § 101. The examiner concluded that the claimed method of playing a dice game was directed to an abstract idea, namely a “method of organizing human activities.” See In re: Marco Guldenaar Holding, at 3. The examiner further held the claims unpatentable as obvious in view of U.S. Patent No. 4,247,114 to Carroll. While Carroll was directed to a board game including a different set of dice, the examiner concluded that the dice markings were mere “printed matter” that could not create a patentable distinction. See id. The Patent Trial and Appeal Board affirmed both rejections.

But the United States Patent and Trademark Office (USPTO) was not the only game in town, so MGH went for double or nothing at the Federal Circuit. On appeal, MGH disputed the characterization of its claims as “methods of organizing human activity,” arguing that the Board improperly used the phrase as a “catch-all” for rejecting claims under § 101. MGH further argued that its novel set of dice markings, and the permutations of those markings in the claimed dice rolls, amounted to “significantly more” than an abstract idea under the two-step framework laid out in Alice Corp. v. CLS Bank Int’l, 573 U.S. 208 (2014).

A reversal, however, was not in the cards. The Federal Circuit, relying heavily on its Alice precedent, affirmed the finding that the claimed dice game was ineligible subject matter. Applying step one of the Alice framework, the court agreed with the Board that rules for playing a game, such as those sought by MGH, constituted an abstract idea. See In re: Marco Guldenaar Holding, at 5. Particularly instructive in the Federal Circuit’s analysis was its prior holding in In re Smith, 815 F.3d 816 (Fed. Cir. 2016), in which the Federal Circuit found similarities between “rules for conducting a wagering game” and “a method for exchanging financial obligations.” Id. at 818-19. Noting the Supreme Court’s denial of patent protection for such financial methods in Alice and Bilski v. Kappos, 561 U.S. 593 (2010), the Federal Circuit broadly branded wagering games with the abstract idea label. See In re: Marco Guldenaar Holding, at 5.

Moving to the second step of the Alice framework, the court acknowledged that “[a]bstract ideas, including a set of rules for a game, may be patent-eligible if [the claims] contain an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.” Id. at 6 (quoting In re Smith, 815 F.3d at 819). On this issue, the Federal Circuit concluded that MGH’s unique dice were not an ace in the hole. The court noted that printed matter, such as the markings on MGH’s dice, cannot generally be relied on for subject matter eligibility under § 101. Id. Turning to the potentially functional role of the dice in the claimed method, the Federal Circuit held that “the markings on each of Appellant’s dice do not cause the die itself to become a manufacture with new functionality.” Id. at 7.

The court’s reasoning in upholding the § 101 rejection against MGH can seemingly be applied to any game featuring innovative game pieces (whether cards, dice, boards, or other items) which are used in an otherwise traditional fashion. And indeed one member of the deciding panel would have gone so far explicitly. Judge Haldane Mayer, concurring with the judgment of ineligible subject matter, wrote separately to express his belief that gaming innovations have no seat at the table when it comes to patent law. In Judge Mayer’s view, the Alice Court “articulated a ‘technological arts’ test for patent eligibility” which games can never satisfy: “While games may enhance our leisure hours, they contribute nothing to the existing body of technological and scientific knowledge. They should therefore be deemed categorically ineligible for patent.” See In re: Marco Guldenaar Holding, J. Mayer concurring, at 7.

Despite the Federal Circuit’s skepticism, the USPTO may have left a narrow opening for gaming inventors. In an update released this January, the Office announced new guidelines for assessing subject matter eligibility under § 101 during prosecution. See 2019 Revised Patent Subject Matter Eligibility Guidance, 84 Fed. Reg. 50 (January 7, 2019) (“Guidance”). Among the new changes, the Guidance instructs Examiners to consider, as part of the first step of the Alice framework, whether a claim that recites a judicial exception “as a whole integrates the recited judicial exception into a practical application of that exception.” Guidance, at 53. Applicants may overcome a § 101 rejection by showing that their claimed game “integrates a judicial exception into a practical application will apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception.” Id.

Notwithstanding the USPTO’s shift in examination guidelines, the deck is stacked against gaming inventions. Whether for lack of technological improvement or over-reliance on printed matter, novel permutations of traditional gaming styles are unlikely to survive the judicially-created exceptions to patent-eligible subject matter. Barring a change in the law, casinos are free to remain the home of traditional green felt tables, slot machine banks, and maybe the occasional British spy.