WMS Gaming v. Intern. Game Tech.

• Decision Date: 20 July 1999
• Citation: 51 USPQ2d 1385,184 F.3d 1339,1999 WL 508800
• Parties: (Fed. Cir. 1999) WMS GAMING INC., Plaintiff-Appellant, v. INTERNATIONAL GAME TECHNOLOGY, Defendant-Appellee. 97-1307,98-1053 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1339

184 F.3d 1339 (Fed. Cir. 1999)

WMS GAMING INC., Plaintiff-Appellant, v. INTERNATIONAL GAME TECHNOLOGY, Defendant-Appellee.

97-1307,98-1053

United States Court of Appeals for the Federal Circuit

DECIDED: July 20, 1999

Reheaing Denied; Suggestion for Rehearing In Banc Denied: September 17, 1999

Appealed from: U.S. District Court for the Northern District of Illinois.

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Judge James F. Holderman, Jr.

Raphael V. Lupo, McDermott, Will & Emery, of Washington, DC, argued for plaintiff-appellant. With him on the brief was Paul Devinsky. Of counsel on the brief were Kimball R. Anderson, and Don J. Mizerk, Winston & Strawn, of Chicago, Illinois; and Arthur M. Handler, and Robert S. Goodman, Burns Handler & Burns LLP, of New York, New York. Of counsel were Donna M. Tanguay and Mark G. Davis, of McDermott, Will & Emery.

Robert G. Krupka, Kirkland & Ellis, of Chicago, Illinois, argued for defendant-appellee. With him on the brief was Barry F. Irwin. Also on the brief was Jay I. Alexander, of Washington, DC. Of counsel on the brief were Marc D. Foodman, Associate Corporate Counsel, International Game Technology, of Reno, Nevada; and Michael B. Allen, Laff, Whitesel, Conte & Saret, of Chicago, Illinois.

Before RICH,^* RADER, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

WMS Gaming Inc. (WMS) appeals the decision of the United States District Court for the Northern District of Illinois that it willfully infringed United States Patent No. 4,448,419 and that the patent is not invalid. See WMS Gaming Inc. v. International Gaming Tech., No. 94-C-3062 (N.D. Ill. March 7, 1997) (WMS Gaming). WMS also appeals the order of the district court denying its motion for a new trial based on newly discovered evidence. See WMS Gaming Inc. v. International Gaming Tech., No. 94-C-3062 (N.D. Ill. October 1, 1997). We affirm-in-part, reverse-in-part, vacate-in-part, and remand.

BACKGROUND

I.

United States Patent No. 4,448,419, entitled "Electronic Gaming Device Utilizing a Random Number Generator for Selecting the Reel Stop Positions," was issued to Inge S. Telnaes on May 15, 1984 (the Telnaes patent) and was assigned to International Gaming Technology (IGT) in 1988. The Telnaes patent claims a slot machine that decreases the probability of winning while maintaining the external appearance of a standard mechanical slot machine. The decreased probability of winning permits higher payoffs, which attracts players.

In general, standard mechanical slot machines include a plurality of reels with symbols around the perimeters of the reels. The symbols may include, for example, fruits, such as cherries or plums; bars, such as double-bars or triple-bars; the number "7"; and blanks. There are typically fewer unique symbols on a reel than there are reel stop positions, i.e., some symbols appear at multiple positions around the reel. For example, a reel with 20 stop positions may include six cherry symbols, five double-bar symbols, three triple-bar symbols, five blank symbols, and one "7" symbol. The number of stop positions to which a symbol is fixed affects the odds of that symbol being the displayed outcome when the machine is played. In the above example, a cherry symbol is six times more likely to be displayed than a "7" symbol.

The number of reels and the number of stop positions on each reel dictate the lowest probability of winning. For example, in a three reel slot machine with 20 stop positions per reel, the lowest probability of winning is 1 in 8000 (20 x 20 x 20). Prior to the Telnaes invention, the conventional way to decrease the odds of winning was either to increase the number of reels or to increase the number of stop positions per reel. Increasing the number of stop positions per reel typically increases the size of the reels, which, in turn, typically increases the size of the slot machine. Experience has shown that players are less attracted to slot machines that have more than three reels and to larger slot machines.

The Telnaes patent discloses a slot machine that is capable of decreasing the probability of winning while maintaining the external appearance of a standard mechanical slot machine. Telnaes, col. 2, lines 10-27. Generally speaking, Telnaes discloses a slot machine in which the reels are electronically-controlled. Id., col. 4, lines 19-21. Each time the machine is played, the control circuitry randomly determines the stop position of each reel and then stops the reels at the randomly determined positions. Id., col. 3, lines 1-4. The reels only serve the function of displaying the randomly chosen result. Id., col. 3, lines 10-12. To decrease the probability of certain symbols appearing, the control circuitry randomly chooses a number from a range greater than the number of stop positions. Id., col. 4, line 53 - col. 5, line 4. The range of numbers is non-uniformly mapped to the stop positions, e.g., a memory based look-up table, that is programmed by either the manufacturer or the operator, may be used to map the range of numbers to stop positions.¹ Thus, in a slot machine with 20 stop positions per reel, the control circuitry may use a random number generator to select a number between 1 and 40. The 40 numbers are non-uniformly assigned to correspond to the 20 stop positions on a reel. For example, only one number may be assigned to the symbol "7," while six numbers may be assigned to the "cherry" symbol. This non-uniform mapping of numbers to stop positions allows the probability of stop position combinations, and thus the probability of winning, to be adjusted without altering the configuration of the reels. Id., col. 3, lines 13-16. The odds-manipulating slot machines with physical reels disclosed in the Telnaes patent are referred to as "virtual reel" slot machines.

The virtual reel slot machines claimed in the Telnaes patent have been widely accepted in the marketplace. Several competitors have licensed the patent from IGT and have paid substantial royalties. Virtual reel slot machines comprise the vast majority of the slot machines sold throughout the world, and the percentage of casino revenues derived from slot machines has increased dramatically since the introduction of virtual reel slot machines.

II.

In 1993, WMS introduced its Model 400 slot machine, the accused device. The WMS 400 slot machine is a reel-type slot machine that manipulates the odds of winning. The WMS 400 slot machine is an embodiment of the slot machine disclosed in United States Patent No. 5,456,465, entitled "Method for Determining Payoffs in Reel-Type Slot Machines," issued to Timothy J. Durham (the Durham patent). Because the parties stipulated that the Durham patent describes the accused device, our discussion of the accused device refers to the Durham patent.

The Durham patent discloses a different approach to calculating payoffs than the Telnaes patent. In the Telnaes patent, the stop positions of the reels are determined first and then the payoff is calculated based on the stop positions. In the Durham patent, the payoff is calculated first and then stop positions that represent that payoff are chosen. Durham, col. 1, lines 40-54. As disclosed in the Durham patent, a random number generator selects two random numbers and maps those numbers to two payoff multipliers. Id., col. 3, lines 9-19. The payoff amount is determined by multiplying the payoff multipliers together. Id., col. 3, lines 3-37. The stop positions of the reels then are determined by randomly selecting a group of stop positions that corresponds to the payoff amount. Id., col. 4, lines 1-7.

Referring to Figures 5-8 of the Durham patent, which are reproduced below, the random number generator selects a first number (R1) from a known range, and the selected number is mapped to a first payoff multiplier (X). Id., Figure 5. R1 is randomly chosen from the range of 1 to 632. If R1 is one, then payoff multiplier X is 10, if R1 is between 182 and 632, then payoff multiplier X is zero, etc. The random number generator then selects another number (R2) from a second range of numbers, and R2 is mapped to a second payoff multiplier (Y). Id., Figure 6. The actual payoff amount (Z) is determined by multiplying X times Y. Id., col. 3, lines 3-37. For example, if X is 10 and Y is 10, the actual payoff amount is 100. Alternatively, if X is 10 and Y is zero, the actual payoff amount is zero.

Once the actual payoff amount is determined, the WMS 400 slot machine uses the random number generator to select a group of stop positions that match the payoff amount. Id., col. 4, lines 1-7. For example, eight different groups of stop positions may represent a payoff amount of 100. Id., Figure 7. If the payoff amount is 100, then the random number generator selects a third number (R3) between one and eight (because as indicated in Fig. 7, there are eight possible ways of displaying a payoff of 100), and the slot machine displays a group of stop positions that corresponds to the selected number. Id., Figure 8. [Tabular or Graphical Material Omitted]

In the WMS 400 slot machine, there are 22 different ways to get a payoff amount of 100 when X is 10 and Y is 10 (R1 must be 1 and R2 must between 2 and 23). Id., Figures 5 and 6. Additionally, as just noted, there are eight groups of stop positions that represent a payoff of 100. Id., Figures 7 and 8. As seen in Figure 7, a payoff amount of 100 equates to three double-bars. At the same time, as seen in Figure 8, each reel includes two stop positions with a double-bar symbol. This is because in Figure 8, a "1" identifies the first double-bar symbol on a reel, while a "2" identifies the second double-bar symbol on a reel. In other words, stop position 1 and stop position 2 on each reel display a double bar symbol. Thus, there are eight combinations of double-bars on the three reels. Accordingly, the third iteration of the random number generator selects a number (...