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Race Tech versus Kentucky Downs.

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Now, Council, you should be aware I'm still a member of the Nevada Bar.

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I'll be gentle.

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Mr. Brokey?

[00:00:55] Speaker 02:
Yes, sir.

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And you want to reserve a file?

[00:00:57] Speaker 02:
Please, thank you.

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Go ahead.

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Good morning, please.

[00:01:00] Speaker 02:
Good morning, and may it please the court.

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I'm here representing RaceTech.

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RaceTech is the owner of three patents that relate to methods and systems for what we're calling paramutual wagering on historic racing.

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And I'd like to start with just a little overview of what that actually is.

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You rely on Ultramershal in here, as opposed to Ultramershal 2.

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Yes, sir.

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I'm at a loss how you can do that.

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Then perhaps we shouldn't have.

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Is there a particular point that we relied on that you're having a concern with, Ron?

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Sure, if you want me to.

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Please.

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Page 10 of your brief, you say dismissal is only appropriate if the well-plated allegations and the complaint construed in the light most favorable to the plaintiff suffice to establish the defense.

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and you cite Ultramershal and then say vacated and under their grounds.

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The Supreme Court vacated Ultramershal and remanded it to this court in light of Alice.

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This court then issued Ultramershal, the Hulu 772, F3rd 709, Ultramershal 2.

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Nowhere in Ultramershal 2 does this court discuss the issue of presumed validity.

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requiring clear and convincing evidence under 101 analysis.

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That is a fair point, Your Honor.

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Thank you.

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That was not an intent to mislead the court in any way, shape, or form.

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Oh, you didn't.

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OK, excellent.

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On the other hand, you miscited.

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That's fair, Your Honor.

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That's fair.

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And I think, I'll be honest, one of the questions that we had coming into today is what exactly the standard is for review at this point, at the Rule 12

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I think both parties here have stated in their briefing that it's a clear and convincing standard.

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I know there's been some disagreement about that at the rules 12 stage.

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And so I think that's one issue that I certainly had a question about.

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And I think that's, if I understand your question correctly, I think that's something that you're pointing out to me.

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So I guess just getting back to kind of the overview, the way this technology works is

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a patron will come into a wagering establishment and will be presented with information, anonymized information about a historic race, let's say a horse race, what the horses weigh, what the track conditions are, and so forth.

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The patron will then place a wager based on what he or she believes is the right outcome.

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Then the outcome will be revealed.

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And in our invention, it's through a video replay of the actual event to determine whether that wager was a good one or a bad one, and whether that patron will receive money or not.

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There are some basic components that comprise this system.

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There is a game server that houses anonymous information about the race.

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That's a computer, right?

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It is a computer, yes, at its core.

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It controls wagering activity.

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It calculates and manages payouts and so forth.

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You're not claiming any of that, though, right?

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I mean, that's a paramutual system.

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You're not claiming that you invented paramutual wagering.

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No, Your Honor.

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No, you're not.

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I think there's a different question as to whether anyone has ever had the idea of conducting paramutual wagering on past events.

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That is the key idea that your client had here.

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That's correct, Your Honor.

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Everything else is conventional.

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I wouldn't say that everything else is conventional.

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And the reason I say that is it's not just the idea of paramutual wagering on a past historic race that is an idea, a new idea, but it's also the

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methods and systems that are implemented to enjoy that idea.

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So I would submit that the combination of a game server, as described in the patent, with a video server, as described in the patent, with gaming terminals, as are described in the patent.

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What's the specific technology and the claims that's different for past races versus current races?

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There is, I think, a huge difference.

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And the reason I say that is,

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There really isn't any technology that relates to paramutual wagering on current live races.

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Because all you need to do is watch the race happen and collect your money.

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The entire technological infrastructure that is claimed in this patent, these patents, relates to the particular elements that are required to allow that past race to be used as the engine that drives the paramutual wagering activity.

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Just out of idle curiosity.

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Yes, your honor.

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What happens when I develop a program into which I feed track length, conditions, number of horses, weight, jockey weight, and so on, and it spits out what race that was in the past, and then I place my bet based on the outcome?

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I think the information that is provided is so anonymous.

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There are so many races, and the information is so discreet that it's

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darn near impossible for you to have that kind of table where you can cross reference and find the actual answer.

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That's the point of having this database of races is that it's so large you can't know the outcome.

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So I guess the big point here, and obviously you've read the briefs, you understand the technology, this is not a case in which an idea existed, like Alice, where an idea existed and we said do it on a computer.

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That's not this case.

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No one had the idea of paramutual wagering on a past event before.

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And the systems that we've claimed in our patent are specifically designed to make use of that new idea.

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So we have a new idea and we have new hardware componentry and software configured to implement that idea.

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I think that's the key distinction between cases like Alice and what we're talking about here today.

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I'm puzzled by what you think is new to implement the idea, except that

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you look at a past race for results rather than a current race.

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I mean, you're still using basic paramutual wagering systems, right?

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The paramutual wagering system that is implemented in the embodiments taught in the patent are slightly different.

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And I'll admit, I don't have a technical background in paramutual wagering.

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But my understanding of it is that given the nature of the invention, the instant.

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I mean, here's a problem.

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You're going to start saying things that aren't in the claims.

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I mean, if we look at claim eight, I don't know if you think claim eight is representative, but it certainly seems like one of the basic ones.

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Where does it suggest that the paramutual wagering system you use is any different from the same paramutual wagering system that is used in thousands of racetracks across the country?

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And you're, I'm sorry, Your Honor, you're referring to claim eight in the 887 patent?

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737.

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Oh, okay.

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I mean, if you want to point me to a different claim, that's fine.

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I didn't see anything that described paramutual wagering in any different way.

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I think some exemplary claims would be claims 9 and 17 of the 887 patent.

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That's appendix 50 and 51 in the record.

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And to answer your specific question, to conduct a paramutual wagering game using live events, you need

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None of what is in these claims.

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You can, and I'll explain that, you can literally show up to a racetrack.

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But have people used what's in these claims previously?

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Even if you could show up and use it with people.

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And you can go to a computer terminal.

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I feel as if your argument is presuming that there isn't paramutual wagering on current events on a computer system.

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I understand.

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I think there is.

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I understand.

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And you're right.

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There are computerized systems that enable paramutual wagering on live events.

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And in fact, I haven't.

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I mean, it's been going on for decades.

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Yes.

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you can sit down and bet on races going on all over the country.

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That's correct.

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That's exactly right.

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The difference between those, those technologies and what we have claimed here, and by the way, the patent talks about plugging into those, allowing this new system to also operate as one of those, is that those older systems do nothing but display the possible races on which you can wager and allows you to place that wager.

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This system

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adds a whole host of new elements, which includes presenting anonymized information, which didn't exist and doesn't exist with live racing, showing video of the results, which doesn't exist and didn't exist with respect to live wagering.

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What do you mean?

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Of course it did.

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I mean, that's what they're doing.

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They're sitting there watching the race and seeing who wins.

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Well, that's a live feed from a racetrack.

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Well, that's what we're getting back to, though.

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It seems to me that the only thing you keep saying that's new is it presents results from an old race.

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I would say, and I don't want to give short shrift to all the claim language because there's a lot here, but I would say two things that are exemplary.

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One is the need for a system that houses and shows anonymized information about a race.

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That is new.

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That is not required to do live, paramutual wagering because there's no need to anonymize anything because there's nothing to anonymize.

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The race hasn't taken place yet.

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So that's one thing.

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a video server that houses historic video that is then played to the patron.

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That's another thing that to conduct live racing not only didn't exist but can't exist because you can't store a video of a race before it actually happens.

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And so those are elements that are necessary to enable this historic wagering.

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You think that there were no video servers that stored race tapes?

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I mean, that's what you're saying.

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I mean, and you may not be showing the whole race, I understand.

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I think some of them just showed the last few seconds.

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That's correct.

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But you're showing video footage from an actual race.

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That's correct.

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That's correct.

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I mean, where did you get that video footage from?

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Well, the video footage is recorded simulcast video.

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So it's the live video recorded and stored.

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Right.

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I mean, you can go onto any number of websites and go back and look at any historic race

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since they've been recording for years.

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My dad does it all the time.

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There's nothing new about showing video of old races.

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And I don't think that's our contention, Your Honor.

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And I understand I'm into my rebuttal time.

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If I could continue for just a moment.

[00:11:32] Speaker 02:
Two things.

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One, although I agree that, of course, the concept of a computer that stores a video that can replay a video is nothing new.

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And we're not claiming that that's our invention.

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I will say that other elements of these claims, for example, the gaming server and the types of information it has to store and feed to a gaming terminal, that is new because that hasn't been done before.

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I think the video server is particularly susceptible to concluding that nothing's new because of what it is.

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But the other components are new.

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And there's no evidence in the record at all that those components have ever existed before.

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Remember rule 12 here.

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On top of that, we also have to look, we have to step back and look at the combination of those elements.

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The game server combined with the gaming terminal.

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When you say those components are new, I don't want to eat up too much of your time, but what you're saying is these are generic computers that are programmed in new ways.

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You didn't invent a new gaming server, right?

[00:12:28] Speaker 02:
We didn't invent a micro.

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You're using off-the-shelf computer equipment.

[00:12:33] Speaker 02:
That's correct, Your Honor.

[00:12:34] Speaker 02:
For the most part, we're using off-the-shelf computer equipment, but

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Just like the Baskin case, for example, just because we're using off-the-shelf computer equipment doesn't mean that we can't have an invention.

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And we're not claiming that we invented the Dell computers, that one of the things we say you can go out and buy.

[00:12:50] Speaker 03:
We're saying that... Here's the issue.

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You're saying your gaming server is new.

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Where in these claims beyond just saying gaming server,

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does it describe in detail what that gaming server does?

[00:13:03] Speaker 02:
The dependent claims, I would give you as an example, provide information about the role that the gaming server plays, the types of information that it stores, the databases, what information it feeds into the gaming terminal.

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I mean, if you're relying on types of information, how is information packable?

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We're not relying on the information.

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It's the role of those.

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Each component has very specific roles.

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And those components have all been combined in these claims to perform a new function that has never been claimed before.

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I'll reserve the remainder of my time.

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Thank you.

[00:13:46] Speaker 00:
May it please the court, my name is Spiro Beravescos.

[00:13:48] Speaker 00:
I represent EXACTA, formerly known as ENCOR.

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Kentucky Downs Council has left me to do the arguing, so I'll be arguing the appeal.

[00:13:58] Speaker 00:
Let's start.

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We'd like to start with claims 61 through 71 that kind of got us started in this process.

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Claims 61 through 71 say nothing about video servers.

[00:14:09] Speaker 00:
In which patent?

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I'm sorry?

[00:14:11] Speaker 04:
In which patent?

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Those are in the 887, Your Honor.

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If you look at claims 61 through 71, they are completely abstract descriptions.

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For example, 61.

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says, receiving money from a player to establish a credit balance, randomly selecting a historical gaming event, receiving player winner selections, and determining payout to player based on results of historical gaming event and player selection.

[00:14:44] Speaker 00:
While it's not in the record, I think I may have done that with my friends on occasion when we talked about, hey, who won the 1956 World Series or something?

[00:14:54] Speaker 00:
Let's bet on it.

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And then let's look it up on Google or something.

[00:14:57] Speaker 00:
But clearly claims 61 through 71 have none of this computer stuff, no video servers, nothing of that.

[00:15:04] Speaker 00:
So we wanted to start there because one of the things they complained about in their reply is we didn't talk about the claims.

[00:15:10] Speaker 00:
So let me talk about the claims.

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61 through 71 has nothing in it that, I'm sorry, not 71, I misspoke.

[00:15:17] Speaker 00:
61 through 70 are the claims that have no,

[00:15:22] Speaker 03:
processing whatsoever.

[00:15:23] Speaker 03:
Why don't you address the ones that your colleague said had some patentable ideas in them?

[00:15:28] Speaker 00:
Absolutely.

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And there I'll turn to, again in the 887, claim one, for example.

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In there it says, very generically, well,

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In actuality, if you look at the claim, if you take the preamble out, you're left with nothing.

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You're left with a video server comprising a database having video images of gaming events stored therein, which exists.

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You're left with a game server comprising a computer system, which doesn't tell you anything.

[00:16:08] Speaker 00:
And you're left with a plurality of terminals, said video server and plurality of terminals communicably coupled to said game server.

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What do I have when I put all those pieces together, the video server, the game server, and the terminals?

[00:16:22] Speaker 00:
I don't know.

[00:16:22] Speaker 00:
I have to go look at the preamble to find out if there's any invention.

[00:16:25] Speaker 00:
And the preamble says, a system for paramutual wagering on actual past events.

[00:16:32] Speaker 00:
So that's the only thing in claim one that arguably could be new.

[00:16:36] Speaker 00:
And that's an abstract idea, as shown by this court's decisions in cases like Planet Bingo and Inray Smith.

[00:16:43] Speaker 00:
So claim one has nothing in it.

[00:16:45] Speaker 00:
As I descend through the claims, you get to, for example, claim six, a system in accordance with claim five, where each set game terminal comprises.

[00:16:55] Speaker 00:
And it talks about a user interface, cash acceptor, a printer, a document reader, a sound card, a credit and debit card reader.

[00:17:02] Speaker 00:
Well, that's all conventional stuff you'll find on gaming machines that have been around for a long time, if you go to Las Vegas and look around.

[00:17:09] Speaker 00:
I mean, that is not new technology.

[00:17:13] Speaker 00:
In fact, that's the entire problem with this patent.

[00:17:16] Speaker 00:
is that they came up with the idea of, look, people are going to the gaming parlors.

[00:17:22] Speaker 00:
They're going to their racetracks.

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They're betting on simulcast.

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They put their money into a machine.

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They pick the winner.

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And then they watch the race.

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And then they get paid or they lose.

[00:17:33] Speaker 00:
And they said, you know what?

[00:17:34] Speaker 00:
Let's change the video to a historical race.

[00:17:39] Speaker 00:
And there's nothing about anonymizing in the claims.

[00:17:41] Speaker 00:
I have not found any discussion in any of these claims where it says,

[00:17:44] Speaker 00:
do it on an anonymous basis.

[00:17:46] Speaker 00:
But in any event, that system existed.

[00:17:49] Speaker 00:
And the only shift they made, there was no technological impediment.

[00:17:53] Speaker 00:
All the cases where this court has said.

[00:17:56] Speaker 03:
So why isn't the idea of doing it on old races that have already been run a new idea?

[00:18:04] Speaker 03:
Why isn't that a patentable distinction?

[00:18:07] Speaker 00:
Because that idea is abstract, just as abstract as, for example, the idea that was rejected in Ray Smith.

[00:18:14] Speaker 00:
where the person came up with a blackjack game.

[00:18:17] Speaker 00:
And they had that one twist in the blackjack game, where if the cards added up to 10, then something else happened than what normally happens in a casino in blackjack.

[00:18:28] Speaker 00:
But this court said in Ray Smith, no, this is abstract.

[00:18:32] Speaker 00:
You need to have something more.

[00:18:34] Speaker 00:
And wagering is the type of financial activity just like in Alice.

[00:18:39] Speaker 00:
I mean, one could argue that investment is nothing but wagering by a different name.

[00:18:44] Speaker 00:
And the cases that do risk analysis and what have you, like Alice and like Bilsky, were rejected by the Supreme Court as being the types of abstract ideas that are not eligible for patent.

[00:18:55] Speaker 00:
And it's the same type of thing.

[00:19:00] Speaker 00:
I mean, we could spend a lot of time and money for me to go out and try to find prior art where somebody had bet on an old sporting event.

[00:19:08] Speaker 00:
I probably would find it pretty easily.

[00:19:10] Speaker 01:
I'll bet, yeah.

[00:19:12] Speaker 01:
White horses never won the Kentucky Derby.

[00:19:14] Speaker 00:
In answer to one of your questions, your honor, I know in blackjack you can kind of game the system by counting the cards.

[00:19:23] Speaker 00:
And so that was kind of where you were going.

[00:19:25] Speaker 01:
I was talking about something called happy toes in which computer shoes were developed in which the card counter would tap the numbers in very early technology.

[00:19:39] Speaker 00:
Right.

[00:19:39] Speaker 00:
Well, you could with these machines theoretically go out

[00:19:43] Speaker 00:
And if you spent a little bit of time, and it's scary to our clients, that somebody goes out, and with a little bit of time, accesses the database.

[00:19:53] Speaker 00:
And you probably won't get all the races that are in our machine, but you might get a substantial number.

[00:19:57] Speaker 00:
And if you sit there at the terminal with your little computer, and you say, OK, here is the data I'm given.

[00:20:04] Speaker 00:
Tell me which race this was, you might be able to pull that off.

[00:20:07] Speaker 00:
I think what would happen is the same thing that happens in Las Vegas.

[00:20:11] Speaker 00:
you would have a very courteous security guard come over and say, excuse me, ma'am, you can't play in this game any longer.

[00:20:19] Speaker 00:
So that's, I think, the answer to that question.

[00:20:22] Speaker 01:
And like I said, people who cheat for a living spend an awful lot more time developing their systems than the money they make by and large.

[00:20:37] Speaker 00:
Well, there are systems by which, even in Las Vegas, you can go after slot machines, if you know what you're doing.

[00:20:43] Speaker 00:
So this game, yes, would be susceptible to that, especially since the data is historic data.

[00:20:49] Speaker 00:
I think the way you deal with that, though, is you ask the patron to leave.

[00:20:52] Speaker 00:
Because I don't think anybody has the mental capacity, with the possible exception of maybe a rain man, to do this mentally.

[00:20:58] Speaker 00:
You would need a computer.

[00:21:00] Speaker 00:
I'll give you an example of betting on a historical race, the state.

[00:21:05] Speaker 00:
That's what that movie is really all about.

[00:21:07] Speaker 00:
If you remember, they're trying to get him.

[00:21:10] Speaker 00:
They say, we know how the race turned out and bet on it.

[00:21:13] Speaker 00:
So there's a well-known example of betting on a historical race.

[00:21:19] Speaker 00:
So the only thing I'm going to emphasize is there was no technological impediment.

[00:21:25] Speaker 00:
There's no new technology here.

[00:21:28] Speaker 00:
There was no use of algorithms to solve some technological problem.

[00:21:34] Speaker 00:
How do we find a way to get people to bet on old races?

[00:21:40] Speaker 00:
And the way we do it is we just show them the old race and say, you can bet on it.

[00:21:44] Speaker 00:
And it didn't require any technology to accomplish that.

[00:21:47] Speaker 00:
It just meant, as the judge found, you put in the VCR, instead of the live feed of the simulcast race, you put in a VCR tape of the old race.

[00:21:57] Speaker 00:
And we don't think that's an invention, neither did Judge Stivers, and I don't think the Supreme Court would either under the Alice and Bilsky decisions.

[00:22:03] Speaker 00:
If there's nothing further, I'll sit down.

[00:22:08] Speaker 01:
Thank you, counsel.

[00:22:09] Speaker 01:
Thank you.

[00:22:15] Speaker 02:
I think the problem we have here is a gross oversimplification of the claims.

[00:22:19] Speaker 02:
The things that my colleague just mentioned ignores all of the actual limitations in the claims.

[00:22:25] Speaker 02:
He said he doesn't see anything in there that relates to anonymized data.

[00:22:28] Speaker 02:
It's in claim nine, where it's referencing a menu that shows historical racing data.

[00:22:33] Speaker 02:
We have not done a claim construction.

[00:22:36] Speaker 02:
We don't know what these terms mean, other than whatever the defendant wants to craft for purposes of 101 arguments.

[00:22:44] Speaker 02:
And I guarantee if we were to do claim construction... Claim nine in what?

[00:22:47] Speaker 02:
Claim nine of the 887 patent, Your Honor, refers to displaying a winner selection menu and historical racing data.

[00:22:53] Speaker 02:
That is the anonymized data.

[00:22:55] Speaker 02:
Of course, that's my... Where's it say anonymous?

[00:22:58] Speaker 02:
Well, that's part of the problem, Your Honor.

[00:22:59] Speaker 02:
If we were to do a claim construction, it would likely be construed that way.

[00:23:03] Speaker 02:
But we haven't done that yet.

[00:23:04] Speaker 02:
And that's part of the problem here.

[00:23:06] Speaker 02:
Similarly, we have not developed any facts.

[00:23:09] Speaker 02:
You heard my colleague say, that's something I did with my friends, or go to Vegas and look around.

[00:23:14] Speaker 02:
That's not in the record.

[00:23:15] Speaker 02:
The record is a Rule 12 record.

[00:23:17] Speaker 02:
And the only thing in the record is the specification saying, this invention is new.

[00:23:22] Speaker 02:
And no one's ever done it before.

[00:23:23] Speaker 02:
And there is zero evidence to refute that.

[00:23:25] Speaker 02:
So how can we invalidate these claims without claim construction, without truly looking at representative claims?

[00:23:32] Speaker 02:
Council's happy to point about claim 61.

[00:23:34] Speaker 03:
Isn't that the whole point of Alice in these cases?

[00:23:37] Speaker 03:
That you may come up with a new way of using an abstract idea with a computer, it still doesn't make it patent eligible.

[00:23:45] Speaker 03:
It may even be a new idea of using a computer that can make money, but it doesn't make it patent eligible.

[00:23:52] Speaker 02:
I think the way I would answer that, Your Honor, is to say, Alice is all about saying, we're not going to let you, by saying, do it on a computer, capture something that is old and well-known.

[00:24:02] Speaker 02:
What Alice doesn't stand for, and what cases like DDR and Bascom and others stand for, is the possibility that someone could come up with something new.

[00:24:11] Speaker 02:
And just because you're using a computer to implement it doesn't mean that it's not inventive.

[00:24:16] Speaker 02:
You can still get a patent if you can show that that thing has never been done before.

[00:24:22] Speaker 04:
I don't think it's enough that it's the thing hasn't been done before.

[00:24:26] Speaker 04:
The question is, is there some technological improvement outside of the abstract idea that provides the something more in step two under Alice?

[00:24:36] Speaker 02:
I guess I'm running out of time.

[00:24:37] Speaker 02:
My answer would be

[00:24:40] Speaker 02:
I agree, but it doesn't need to be a solution to make the computer better.

[00:24:44] Speaker 02:
The computer can be used to make some other technological field, like electronic gaming, better.

[00:24:50] Speaker 02:
And that's what this invention is directed to, using computers to make electronic gaming better.

[00:24:55] Speaker 02:
That's where the idea is.

[00:24:57] Speaker 02:
Any questions?

[00:24:58] Speaker 02:
Thank you very much.