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Thursday, April 13, 2006

Retiree Caught in a Legal Web Over his Gambling Patent


Mel Molnick is an unlikely adversary of the Internet gambling industry. He is not a foe of gambling. But the retired contractor has spent the last several years suing dozens of online casinos. Molnick, 63, claims to own a method patent that governs live, electronic betting from a remote location. In other words, the process by which just about every Internet gambling site does business.

"When I first got my patent, people said, 'You must be living in a spaceship. You're a crazy old man,' " said Molnick, whose long white beard and grandfatherly demeanor have a Santa Claus quality.

A method patent is a controversial and often litigated type of patent that covers a process rather than a particular product. Molnick's patent was filed with the U.S. Patent Office in 1995 and published in 1998. The patent has since been approved in other parts of the world, including Asia and Europe.

Molnick has been called a kook and an opportunist for making the bold - some say ridiculous - claim that he invented and patented the idea for Internet gambling. Others say his patent will have little legal weight in the United States because of the quirks of Internet commerce and the complexities of patent law.

Internet gambling was a fledgling enterprise in 1995, a shadow of the $12 billion-plus business it is now. Web casinos operating at that time were primitive versions of the sophisticated, well-advertised brands they are today.

Yet Molnick has had some success with his patent by reaching pretrial settlements with several Web casinos, according to court documents. Those that didn't settle have disappeared into cyberspace - although it's possible they simply popped up elsewhere under different names.

For years Molnick didn't command the respect he expected. If anything, he and his patent were largely ignored. Companies blew off the lawsuits or have paid token settlements, attorneys familiar with the cases say.

Molnick won't disclose the amount of the settlements, citing confidentiality agreements.

Recently, however, Internet gambling companies are taking notice. Molnick has managed to do what some legal experts thought couldn't be done - proceed with a federal lawsuit against the world's largest Web casino company.

The lawsuit, filed in federal court last year, named London-based Sportingbet Plc along with many other Internet gambling sites. In contrast with previous suits, several defendants were larger, more profitable companies and included publicly traded entities.

"I'm going after the big boys now," Molnick said. "These people have made billions off my patent, and now they're going to have to pay."

Last month, a federal judge in Las Vegas rejected Sportingbet's motion to dismiss the suit based on a lack of jurisdiction, saying there was enough evidence that Sportingbet does business in the United States. The ruling, however, merely allowed the case to proceed and did not delve into its merits.

A Sportingbet spokesman declined to comment and referred a call to the company's overseas attorney, who was unavailable for comment.

Patent experts say the ruling could potentially expose the business practices of an Internet gambling company that, like many others, makes a large chunk of its money off American gamblers.

Internet gambling in the United States has been declared illegal by the Justice Department, although there's been some disagreement in the courts as to whether certain Internet gambling games are illegal under federal law.

The pending court battle is new territory for Molnick.

Some Internet experts say Molnick will face an uphill battle against the Web gambling giants regardless of their murky legal status in the United States.

For one thing, they are based outside the United States - far from the Justice Department's reach.

Foreign companies that are sued often say they aren't subject to legal jurisdiction in the United States, even if they do business with Americans. Companies have also been known to ignore judgments from U.S. courts. If defendants don't show up in court, enforcing default judgments in other countries can be difficult at best, some attorneys say.

Molnick's attorney, Craig Marquiz, said foreign companies are still subject to international treaties that apply to patents.

Under those treaties U.S. companies would be able to collect judgments in foreign countries, Marquiz said.

Others are skeptical of Molnick's patent, which governs "a method by which a person may participate in a live casino game and place bets from a location remote from the casino at which the game is being played."

The patent further describes a table with a live dealer whose image is broadcast to players at their remote locations.

Molnick said the depiction of a live dealer is merely one example of how the patent could be used. But critics say Molnick is trying to broadly interpret a fairly narrow patent - one that applies to Web casinos that use real dealers.

Some of the first Internet casinos used Webcasts of real dealers as a way to get players comfortable with the idea of wagering their money online. But the practice is little used today, an age when many customers have grown accustomed to buying various products online.

Molnick's original lawsuits were against gambling sites that broadcast images of live dealers. But his latest suit targets sites that merely use electronic images of games in progress.

For Molnick to win his case, "he would have to show that every single step - the placing of the bet, the transmission of the bet, the involvement of the financial institution, the place where the live casino game is taking place - is in the United States," said Michael McCue, a patent attorney in Las Vegas who is not involved in the Molnick dispute.

Attorneys say that scenario would be highly unlikely, as most Internet gambling companies are based abroad along with the computer servers that process the bets.

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