A Delaware federal court will be the arena when DraftKings gets to answer to a lawsuit filed by Colossus Bets, a betting operator based in the UK. According to the court documents that have already been served to DraftKings, Colossus Bets is accusing the US betting operator of patent infringement. The accusation is that DraftKings has introduced a “cash out” option on its online sportsbook which violated patent law.
In a statement issued by Bernard Marantelli, who is the founder of Colossus bets, the UK based outfit emphasized that the company does not take lightly matters to do with intellectual property. Since the situation is beyond the control of the parties involved, the company has now decided to allow the courts to take over.
DraftKings is also licensed in the UK as a tech supplier that supports the operations of retail betting companies. Having entered the United States gambling market in 2019, the company has recorded massive growth because it has since setup betting operations in North Dakota and recently in Oregon.
This lawsuit does not come as a surprise to DraftKings who has in the past also been served with another one. The first lawsuit is however filed in favor of customers who accused the betting operator of misrepresenting their services and offers.
Marantelli argues that his company was issued with a patent for the function that DraftKings is now using on its platform. Having been issued back in 2014, the management of Colossus bets argues that DraftKings should have approached them for a deal. Given that they went ahead to violate the patent as issued by the US Patent and Trademark Office (USPTO), they are in direct violation and hence the court action.
The Cash-Out function
Gambling related promotions have over the past few months been dominated by Cash-Out as a new feature. Although some companies adopted this feature earlier than others, there is that one person who thought up the idea and therefore must be paid for it whenever it is used.
When the Cash-Out option is used, bettors are able to recover their bet money provided that the event is still ongoing. This option clearly gives power to bettors who can now rethink their betting activities and go back to correct them while the still have the power to do so. Correct score predictions will be most likely to be cancelled as a result of a Cash-Out application. If the predicted score is 2-0 for instance and a 1-1 draw is achieved by halftime, it definitely means that the bet as it was placed has failed.
With Cash-Out, the betting operator agrees to refund players’ money but only after they have deducted a small portion of it. You still lose some money at Cash-Out but it is better than losing everything if you had to wait till the end of the event.
The bare truth is that Colossus Bets were not the inventors of this concept; it was first introduced by Betfair. According to official company records, the Cash-Out function was showcased on the Betfair betting exchange of 2011 and was used on its fixed-odd sportsbook of 2013.
In their defense, the management of Colossus Bets argues that the patent rightfully belongs to them since they were responsible for the “technological improvements to technological problems” that made the product usable at its current form. The problems that Colossus Bets claimed to have sorted out are according to the management, “neither conventional nor generic at the time of their invention, but rather required novel and nonobvious solutions to problems and shortcomings in the art at the time.”
Between 2014 and 2021, Colossus bets have been renewing the Cash-Out patent to keep in line with new updates being made on the technology. Since DraftKings has been using this feature since they launched their New Jersey casino operation in 2018, they have been violating an existing patent for 4 years now.
Action before the lawsuit
Even though DraftKings has already been served with the lawsuit, it does not come to them as a shock since Colossus Bets alleges that they have on numerous occasions raised their concerns with the betting operator. Marantelli claims that they contacted DraftKings on the matter for the first time in 2018 as soon as they noticed the infringement. They have been reminding them of this position frequently but no action has been forthcoming from DraftKings as a sign of goodwill.
In his statement, Marantelli considers the lawsuit as a last resort in resting this matter and believes that it will protect its income and business rights in the US market. Colossus Bets now wants the courts to grant it access to patent right on all bets that were made on the DraftKings sportsbook which had the Cash-Out function applied to them. If the court rules in favor of Colossus Bets, they will claim patent rights dating over three years ago.
To further substantiate their claim on the Cash-Out function patent, Colossus Bets refers to the current agreement which they have with Bet365. The betting operator signed a licensing deal with Colossus to use this function when they were entering the United States gambling market on 2019.
Intellectual property infringement is a serious crime especially in the technology sector where businesses rake in huge revenues from a single application or section thereof. For a business that has been caught up in such a case unknowingly, the simple solution is to come to an agreement which will see the original patent holder earning from their innovation. Sometimes companies are unable to come to an agreement over copyright and that is when it is important to involve the legal experts. DraftKings has been in a similar scenario before so the management is not new to such controversy. Losing this battle could mean a big blow to their business so there must be a reason they choose to hold on. This will be an interesting court battle to witness and the outcome will be just as epic.