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Lottotron to Collect $10M From Gaming Websites

(CN) - Three companies that infringed on a patent for "Computerized Lottery Wagering System" must pay more than $10 million, a federal judge ruled.

New Jersey-based Lottotron sued several interactive gaming websites for infringing on its patent in August 2010, and moved for default judgment the following year against 16 companies that never responded to its complaint.

While U.S. District Judge Jose Linares granted Lottotron's motion as to liability, he referred the damages assessment to U.S. Magistrate Judge Michael Hammer.

Lottotron ultimately requested damages solely as to iNetbet Internet Gaming Services, Trenan Ltd., and Winward Hall Ltd., the three defaulting defendants still offering online gaming in July 2012.

None of the defendants attended a proof hearing held via telephone conference on Oct. 1, despite being provided notice.

Judge Hammer recommended entry of judgment against the defendants on Nov. 16, citing the analogous case Lottotron, Inc. v. EH New Ventures, and the royalty calculation method employed therein by expert witness Stacy Friedman.

"As plaintiff argues in its application, the defaulting defendants did not provide discovery, thereby preventing Lottotron from obtaining more particularized information regarding the defaulting defendants' revenues," Hammer wrote. "These defendants had notice of Lottotron's motion for default judgment and the subsequent hearing before the court on damages, but did not respond or participate in the matter. Consequently, in the absence of additional financial discovery or more precise revenue information, Friedman's royalty calculation method provides a sufficient framework for the court to ascertain a reasonable royalty for Lottotron."

Noting that the defendants offer several games beyond their progressive jackpots, the judge later wrote: "Each defendant earns revenue from those online games, but the court cannot ascertain precisely how much revenue. Therefore, an upward adjustment of 10 percent of the progressive jackpot funding percentage and the RTP [return to player] percentage is reasonable."

Lottotron attorney George Summerfield calculated an appropriate royalty rate against the defendants' royalty bases, the 16-page decision states.

"Summerfield relies wholly on Friedman's analysis and applies a 'conservative' royalty rate of 10 percent to the royalty base of each defendant. For the reasons articulated by Friedman in EH New Ventures, the court here finds that a 10 percent royalty rate is indeed reasonable," Hammer wrote.

The court recommended entry of judgment against iNetbet for more than $4.1 million, Trenan for more than $2.1 million, and Winward for more than $4.1 million.

He gave the parties 14 days to file objections to the report and recommendation.

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