Let It Ride: Gambling Patent Survives Early Section 101 Challenge, Requires Claim Construction
The plaintiff asserted four sports gambling patents against two defendants. The Patent Trial and Appeal Board (PTAB) instituted inter partes review proceedings on three of the asserted patents and defendants moved to dismiss the fourth.
The court treated claim 1 as representative and found that it comprises the following six steps:
- receiving "state information of a live event in substantially real time,"
- creating a betting market for possible future states,
- determining probabilities for each of those future states,
- receiving bets,
- closing the betting market, and
- resolving bets.
Defendants argued that this is the abstract idea of "managing a betting market during a live sporting event." Plaintiff countered that defendants oversimplified the claim and that, instead, the claim is directed to solving a technical problem in computer technology. Plaintiff’s argument did not convince the court.
The benefit claimed by the patent was not a solution to a technical problem. Instead, "the benefit of the claimed invention is that it automates the preexisting betting system." The claimed invention improved upon prior art by avoiding problems due to limited manpower and human error in calculating odds and probabilities, and the court found the claims to be directed to the abstract idea of managing a betting market during a live sporting event.
At step two of the Alice inquiry, the plaintiff argued that the claims teach the inventive concept of obtaining "accurate and reliable probabilities in real time, for betting markets of future events after the start of the game or event." This is allegedly done through a "reliability algorithm."
"Reliability algorithm," however, is not a claim term. As the court noted, the asserted claims do not disclose any algorithm. The claims teach determining a probability with a processor based on "probability information" and "reliability information."
Because of this, plaintiff argued that "reliability information" required claim construction before the § 101 challenge could be decided. Defendants argued that this claim was unsupported because the patent specification does not "disclose anything that could conceivably be considered a complex algorithm or teach a novel networked system connected to various sources of information."
The court disagreed with the defendants and found the defendants to be conflating §§ 101 and 112: "There is some support for plaintiff’s allegations based on reliability algorithm. Whether the specification sufficiently describes or enables such an algorithm is a separate issue beyond the scope of § 101."
The court concluded that because "reliability algorithm" is not a claim term, it can only serve as an inventive concept if it is considered part of the claimed invention via "reliability information." And for this reason, the court stated that it will not complete the § 101 analysis until after it construes "reliability information."
Claim 1 of the asserted patent reads:
1. A method, comprising:
receiving by at least one processor state information of a live event in substantially real time, in which the live event comprises a sporting event played by human players according to predetermined rules that are used to determine at least one winner of the sporting event;
after a start of the sporting event, creating by the processor a first betting market for betting on at least one of the plurality of possible future states, in which the plurality of users comprises a first user, and in which the act of creating a first betting market comprises:
determining by the processor a probability for each of the plurality of possible future states based on probability information, in which the act of determining a probability comprises determining a probability for at least one of the plurality of possible future states based on probability information and reliability information associated with the probability information;
based at least in part on the probabilities, determining by the processor odds for betting on at least one of the plurality of possible future states; and causing information about the plurality of possible future states and the odds to be displayed to the plurality of users;
after creating the first betting market, receiving by the processor from a first of a plurality of users a first bet comprising a selection of one of the plurality of possible future states;
after receiving the first bet, closing by the processor the first betting market;
sending from the at least one processor an instruction signal to close the first betting market;
determining by the at least one processor that the possible future state selected by the first user has occurred; and
causing, by the at least one processor, a payout to be paid to the first user based on the first bet and the act of determining that the possible future state selected by the first user has occurred.