Olympic Amusements Pty Ltd v Aristocrat Leisure Industries P/L

[1994] APO 47

official notice

decision of a delegate of the commissioner of patents

Application        :  No. 632454 in the name of 0LYMPIC AMUSEMENTS PTY LTD

Title:  IMPROVEMENTS IN VIDEO GAMING MACHINES

Action: Application under S.69 of the Patents Act 1990 for extension of term of a petty patent. Notice under S.28 by ARISTOCRAT LEISURE INDUSTRIES PTY LTD.  Hearing.

Decision:  Issued            .

Abstract:  Patent invalid.  Claims not novel and not inventive.  Opportunity to amend.

patents act 1990

decision of a delegate of the commissioner of patents

Re:Petty patent No. 632454 in the name of OLYMPIC AMUSEMENTS PTY LTD and Section 28 Notice by ARISTOCRAT LEISURE INDUSTRIES PTY LTD.

background

Petty patent No. 632454 (the patent) was filed as application 18428/92 on 19 June 1992, with the same priority, by OLYMPIC AMUSEMENTS PTY LTD (Olympic), and sealed on 24 December 1992.  On 22 October 1993 Olympic applied for the grant of an extension of term of the patent and this application was advertised on 18 November 1993.

On 24 November 1993 a section 28(1) Notice was lodged by ARISTOCRAT LEISURE INDUSTRIES PTY LTD (Aristocrat), which notified information which (it was asserted) affects the validity of the claims of the patent for lack of compliance with section 18(1)(b) of the Patents Act 1990, that is, novelty and inventive step.

Olympic lodged evidence in response on 10 February 1994, and a hearing was set down for 3 May 1994 in Canberra.  Present at the hearing were Messrs C Owen and B Lunn of FB Rice & Co for Aristocrat, and Mr P Kildea on behalf of Griffith Hack & Co for Olympic.  Also present at the hearing was Ms L Oldfield, Aristocrat's declarant.

Further Information

On the day before the hearing Aristocrat lodged further information, together with an application for an extension of time under section 223 to bring it within the prescribed time of section 28(1) and a supporting declaration.  At the hearing I said that the Commissioner would almost certainly consider this further information in reaching a decision, but the manner in which it would be proceeded with would be decided later, and that attorney for Aristocrat could not speak to the further information at the hearing.

In the event, Aristocrat were advised that the declaration accompanying the application was not in accordance with regulation 22.11, and the application would not be further considered until a suitable declaration was filed.

Also, Olympic were informed according to the provisions of section 28(3) that the Commissioner had become aware of information that may affect the validity of the patent, other than that notified under section 28(1), and was allowed a time in which to respond.  A written response was filed on 4 July 1994.

Amendments

On 25 May 1994 Olympic proposed amendments to the claims of the patent.  This of course was after the hearing and before the issue of this decision; Olympic were advised that this decision would only have regard to the claims before amendment.

SPECIFICATION

In this decision I use the term "slot machine" to mean the spinning reel type of game machine, and "poker machine" for one which simulates a poker game.  Also, by "video" game machine is meant one which has an electronic video display.

The specification describes and claims a video game machine of the general kind common in hotels, clubs and casinos, on which money is wagered.  Some extracts from the description follow, which readily explain the nature of the invention.

"Field of the invention
This invention relates to video gaming machines and particularly to a gaming machine so that it is appealing to players yet still retains control over the percentage payout of monies invested.

Description of the prior art
Video (or poker) machines have considerable popularity throughout all States of Australia, with quite substantial amounts of money wagered on these machines.  There is a growing tendency for State governments to legalise the use of gaming machines by licensing operators, with concomitant revenue gains through taxation of monies invested.  The licensed operation of gaming machines is the subject of State legislation and regulation.  This regulation most always dictates a maximum (sic) percentage payout for a gaming machine.  For example, a maximum (sic) of 87% of monies invested must be returned as winnings, and manufacturers of gaming machines therefore must design their machines around these regulatory controls.

Because of the burgeoning nature of the gaming machine market there is intense competition between manufacturers to supply the various existing and new venues.  When it comes to selecting a supplier of gaming machines, the operator of venues will often pay close attention to which particular games are the most popular with their patrons.  Therefore, it is in the interest of gaming machine manufacturers to devise games which are popular with players, and in that way improve their chances of obtaining further sales.

Many various strategies have been tried in the past to make the games more enticing to players, including the commonly known double-up feature, whereby, if a player wins a particular game, they can risk the winnings of that game in a double-or-nothing mode in which they gamble on a subsequent, and often different, game such as whether a red or black card will be the next card drawn.

Other techniques adopted in the past have been to provide complexity in the numbering and combinations of indicia which would result in a win, thereby hoping to convince the player that there is a greater chance of winning and to keep their interest in a particular game.

Object and Statement of the Invention
It is an object of the present invention to attempt to provide an improved gaming machine."

"Description of a Preferred Embodiment
The embodiment will be described with reference to the card game of draw poker as will be implemented on a video gaming machine.  It is to be understood that the methodology could be applied to a number of other games that might be played on a video gaming machine."

"In order to enhance enjoyment for the player the draw poker game has a special feature, whereby if the result of a player of a hand is a full house then a second mode of operation is entered, in which the player receives four free subsequent games.  If the player wins on any one of the four subsequent plays then double the normal prize is awarded."

The specification concludes with three claims, as follows.

"1. A gaming machine having a video display screen, a computer controller for controlling screen displays thereon and gameplay, input control means which are user operable to initiate gameplay at a cost to the user and to interact with the game, and a software programme controlling said computer controller, said software being operable during game play to place the machine in a mode following a win which will pay for that win and also provide for a number of subsequent games to be played free to the player, and operable if one of the number of subsequent games played results in a win to increase the winning payout for that win outcome by double.

2. A gaming machine as claimed in claim 1, wherein the software is configured so the game is poker and the said particular one of the winning outcomes is a full house.

3. A gaming machine as claimed in either of claim 1 or claim 2, wherein the software is configured so the number of subsequent games is four in number."

EVIDENCE

Section 28(1) Notice

This consists of the Notice itself, and a statutory declaration by Lynne Cheryl Oldfield, Marketing Area Manager for Aristocrat.  This declaration is accompanied by exhibits LCO 1 to LCO 7, mainly concerning the playing characteristics and approval dates of some known gaming machines.

Evidence in Response

This consists of a statement in rebuttal prepared by attorneys for Olympic.

Further Information

As I have said earlier this is being treated as a section 28(3) matter.  It consists of a further statutory declaration by Ms Oldfield together with exhibits LCO 1 to LCO 7, and is almost wholly a further explanation of the features and history of the game machine known as Lion's Share, also cited in the section 28(1) Notice.

Section 28(3) Response

This consists of a further statement prepared by attorneys for Olympic, dated 4 July 1994.  Importantly, this statement concedes that -

"claim 1 is not novel when compared with the information made publicly available by the installation of the Lion's Share game in one or more gaming houses before the priority date."

I agree with this and so find.

SUBMISSIONS

Most of the submissions made at the hearing were of course directed to claim 1 and are now not very relevant; I will not go through them except to the extent to which they relate to the validity of claims 2 and 3.

The statements and exhibits filed by Aristocrat are concerned with the gameplay characteristics of a number of (in fact seven) video gaming machines previously manufactured by Aristocrat, together with some details of NSW Liquor Administration Board approval dates, numbers of machines sold in particular years, publication in various industry magazines, some machine installation locations, and so on.

All the machines have a video display, play under program control, and award free games on the occurrence of certain winning combinations, determined by the software.  The number of free games varies with the machine, typically ranging from five to ten.  One machine awards from one to twelve free games depending on the course of gameplay.  In addition, all machines multiply  the prize value of a win on a free game, typically times two, three, or five, depending on the machine.

One of the machines is a poker machine, the others are slot machines.

Mr Owens submitted for Aristocrat that the evidence establishes slot and poker machines, with video display, program control, free games, and a multiplier, as being in the common general knowledge of the gaming machine industry in Australia at the relevant date, and I am inclined to agree.

Mr Kildea for Olympic did not appear to seriously dispute this, but rather submitted that the prior art cited in the Notice does not show the particular combination of features of claim 1, and further, that the combination cannot be said to be obvious because of the subtle attractions of particular aspects of gameplay.

In the event, Olympic has subsequently conceded that the Aristocrat game Lion's Share anticipates claim 1.  Claims 2 and 3 are still in dispute, and I will now concentrate on the submissions only insofar as they relate to the validity of these claims.

Claim 2 includes the feature that the game played is poker and that the free games are awarded on the deal of a full house.  Claim 3 adds the further feature that the number of free games is four.

In fairly brief submissions on these claims Mr Owens referred to the features of known video gaming machines, and in particular to the poker machine Superbucks, which awards a free game on a two pair win and has a multiplier function.  It was submitted that the claims defined mere workshop variations of equipment known for many years and were consequently not novel and lacked an inventive step in view of common general knowledge.

In similarly brief submissions on these claims, Mr Kildea pointed out the appeal that may be generated for players by apparently minor differences in gameplay, with easier wins, increased options, and the possibility of higher prize value.  Mr Kildea also referred me to a number (ten) of recent Australian patents, which, he argued, demonstrates that quite small differences in the software can result in a machine sufficiently different to be patentable.

I refer now to the submissions made by Attorneys for Olympic in response to the section 28(3) Notice.  This statement refers only to the Lion's Share machine, properly so since this was all the further information was concerned with, and to claim 2.  It is argued that on the "reverse infringement test" claim 2 is novel.  It is also argued that claim 2 is inventive when considered in view of the common general knowledge in the industry, and specifically that the evidence does not show that the Lion's Share machine and its rules are part of this knowledge. Also, it is submitted that this machine was not information falling within section 7(3) of the Patents Act 1990, or if it was, there is still a sufficient "scintilla of invention" for the claim to be non-obvious.

Another mention is made of the large number of apparently quite similar Australian patents relating to gaming machines, and, it is said, the present patent is no closer to the prior art than is the norm.

DECISION

In deciding this matter I have considered the further information filed by Aristocrat.  However it is almost entirely concerned with claim 1 and the Lion's Share machine.  I have not relied on any of it in reaching any part of my decision.

Novelty

Under this heading I apply the "reverse infringement test" (Meyers Taylor Pty Ltd v Vicarr Industries Pty Ltd (1977) CLR 228), and also ask whether each and every one of the essential features of the claim have been disclosed (Rodi & Wienenberger AG v Henry Showell Ltd (1969) RPC 367).

Since the invention is concerned almost wholly with gameplay, then it seems clear to me that the features claimed by claims 2 and 3 relating to gameplay, that is the game of poker, a full house win, free game or games, and times-two multiplier, must all be essential.

The evidence does not establish that each and every one of these features was possessed by any one of the prior machines.  In my opinion the closest is the Superbucks poker machine, however the winning combination for a free game on this machine is a two pair, and there may be other differences.
Therefore I conclude that claims 2 and 3 are novel.

Inventive Step         

It is clear from section 7(2) of the Patents Act 1990 that the question of inventive step has to be considered against the background of the common general knowledge in the art. In doing this I have regard to what was said by Aickin J in Minnesota Mining and Manufacturing Co v Beiersdorf (Aust) Ltd 144 CLR 253 at page 292:

"The notion of common general knowledge involves the use of that which is known or used by those in the relevant trade in considering the making of new products, or the making of improvements in old, and it must be treated as being used by an individual as a general body of knowledge."

In determining this I rely primarily on the declaration by Ms Oldfield, and conclude that the evidence shows that the following general features of gaming machines were part of the common general knowledge in the game machine industry at the relevant date:

* machines with a video display;
* gameplay controlled by software; the software may:
 * simulate spinning reels;
 * simulate a poker hand;
 * award free game(s) on winning combinations;
 * provide a multiplier on winning a free game.

In saying this I do not mean that the gameplay features of any particular machine are part of the common general knowledge, but only that the basic structure of the machines, the types of games they play, and the various rewards for winning (however a "win" may be defined) and/or inducements to continue playing, are indeed part of this knowledge.

In particular I do not consider that the evidence establishes the game of Superbucks as part of this knowledge, and I do not think I can say, simply in the light of the common general knowledge which I have identified, that the invention defined by claims 2 or 3 is obvious.

The next question is whether the existence of the Superbucks machine is an "information" within section 7(3) of the Act, which may then be considered together with the common general knowledge. For this to be so, section 7(3) requires that the information be of a kind the person skilled in the art could "be reasonably expected to have ascertained, understood and regarded as relevant", before the priority date of the claim. In deciding this I need to consider the prior art problem of which the claimed invention is a solution.

Problem

The problem can only be broadly described.  The parties are in general agreement that so far as gameplay is concerned gaming machines must attempt to satisfy three main criteria.  The game must be attractive to the player; that is it must appear winnable and offer good prizes, award inducements to continue play, be visually appealing, and so on.  Also, it must be profitable for the operator.  Further, it must satisfy legislation dictated rates of return to players.

Thus it would seem manufacturers are engaged in a continuing search for combinations of features which meet these requirements, as is testified by the multitude of similar but different machines in existence.

I would describe the problem then as the gameplay design of a video poker machine offering better player satisfaction while remaining profitable and lawful.

Ascertain, Understand and Regard as Relevant

The evidence states that Superbucks was approved by the NSW LAB on 4 October 1989, was displayed at the Australian Gaming Expo held at the Darling Harbour Exhibition Centre Sydney in August 1990, and that about 150 machines were sold to NSW hotels and clubs from September 1990 to date.  The evidence shows sales to an inner city hotel and an outer suburban hotel in Sydney in early 1991.  The relevant priority date is 19 June 1992.

In my opinion the only real question here is whether the Superbucks game could be reasonably expected to have been ascertained.

It could be said in this matter that Aristocrat's evidence is not as detailed as it could have been, and no doubt would have been had the focus not been on claim 1.  For example, details of the numbers of machines in use at particular locations  and on particular dates is not provided. 

However Olympic have made no relevant submissions on this matter about Superbucks, probably for the same reason.  Submissions were made about Lion's Share in response to the section 28(3) Notice, which could perhaps be applied to Superbucks.  If I do this however I do not find it very helpful; the submissions are of a very general nature and mainly set out the above-mentioned faults in Aristocrat's evidence.

I think that the evidence establishes the game machine industry as one which is competitive and intense.  Superbucks was displayed at an industry exhibition about two years before the priority date; whether or not open to the public is not apparent.  It was sold in substantial numbers to hotels and clubs in NSW from late 1990, presumably for installation and use by the public.  Having regard to the nature of the industry, I consider that Superbucks was an information that a person skilled in the industry could reasonably be expected to have ascertained in addressing the problem.

The skilled person would readily have understood Superbucks and considered it to be relevant, as it was an attempt to solve the same problem, as would be known by that person.

Therefore I consider that Superbucks is an information within the meaning of section 7(3).

Superbucks and the Claims

As stated earlier Superbucks is a poker machine with video display, and is software configured to provide a free game on a two pair win.  It is not entirely clear from the evidence whether only a single free game is awarded or a number of games; the evidence (Ms Oldfield's declaration page 3) indicates five free games but elsewhere (page 4) refers to "a free game" or "the free game".

Ms Oldfield also declares that both the slot and poker machines previously referred to (in her declaration), which includes Superbucks, include a multiplier on winning a free game.  The magnitude is not specified for Superbucks.

Claim 2 is for a video poker machine which provides free games on a full house win and a doubler on a free game win; claim 3 provides four free games.

The clear difference then is that free games are awarded for a full house instead of a two pair.  The number of free games and the magnitude of the multiplier is uncertain, but I will assume for present purposes that Superbucks awards a single free game and has a multiplier of unknown magnitude.  Is this inventive?

The quantum of invention required to validate a patent is small.  Thus in Killick v Pye [1958] RPC 366 at page 377 Omerod J said:

"It is well settled that the validity of a patent, challenged on the ground of inventiveness, may be established though the inventive step represent a very small advance."

I have no doubt that the design of a successful gaming machine (though there is no evidence of commercial success of the claimed machine) requires the exercise of substantial skills, both technical and non-technical, but I do not consider that it necessarily requires the exercise of the inventive faculty.

In Safreans AB v Ford Motor Co (England) 44 RPC 49 at page 61 Tomlin J said:

"...(the claim)...as I have construed it does not go beyond ordinary skilled designing work, and cannot be considered as having required the exercise of any invention."

In my opinion that is the case here.  Superbuck's winning outcome of a two pair is changed to full house, with different probability of success, but coupled with a plural number of free games and a times-two multiplier.  Free games of various number and multipliers of different magnitude are common knowledge in the industry.  No particular advantage gained or disadvantage avoided has been stated, except the general one of player appeal.  In my opinion this choice was available to any skilled designer, without invention.

In saying this I do not mean that gameplay design as an arrangement of features generally known could never be inventive.  It is a matter of the facts of the case and what the evidence establishes.  Olympic have drawn my attention to a number of prior Australian patents as suggesting the validity of the present patent.  They are indeed directed to video gaming machines, including poker machines, under program control, and are mostly concerned with details of gameplay.  I can only say that I have to decide this case, and the existence of patents of similar subject matter which may or may not prove to be valid under challenge does not seem to me to be very relevant.

CONCLUSION    

I find that the patent is invalid under section 28(1)(b); claim 1 is not novel and claims 2 and 3 lack invention. It is not clear to me that the specification discloses patentable subject matter, however given section 69(4) I allow Olympic 60 days from the date of this decision during which amendment of the specification may be requested to remove the grounds of invalidity, else I will refuse to grant the extension of term, subject of course to any appeal.

COSTS

As the informant has been wholly successful, and the patentee's concession on claim 1  was not made until after the hearing, I follow the usual practice and award costs against the patentee, Olympic.

RG Tolhurst
Delegate of the Commissioner of Patents

Patent attorneys for the patentee    :  Griffith Hack & Co,    Melbourne

Patent attorneys for the informant   :  FB Rice & Co, Sydney