5 Common Intellectual Property Mistakes Made By Casinos (and Other Businesses)
July 2012

Originally published in Northern Nevada Business Weekly.

When it comes to intellectual property, casinos in general and Reno casinos in particular have much to protect. Yet surprisingly, casinos often fail in this area - and the consequences are often measured in dollar signs. Those casinos that don’t effectively guard their own trademarks, copyrights and patents risk losing rights to them, which could have an adverse impact on the company’s brand and economic future. Similarly, casinos that fail to get the appropriate rights to use intellectual property owned by third parties potentially face expensive lawsuits and/or exorbitant fines.

Each year, Reno’s hotel and casino industry attracts more than 5 million visitors and adds over $4 billion to the local economy. Given what’s at stake, it is imperative that the casinos in our great city work to avoid the most common and costly mistakes related to intellectual property. Non-casino businesses can also learn from these mistakes.

Mistake #1: Failing to Clear Rights

Before a casino names anything - a new nightclub, a new slot tournament, a new tagline - the casino owner should conduct a trademark search to ensure that the name is not already owned by another person or business. Comprehensive trademark searches cost several thousand dollars; trademark litigation could cost 100x that amount.

Casinos embarking on construction and renovation projects also frequently fail to obtain related intellectual property rights. Lighting, hardware and many other fixtures may be protected by design patents. Other design elements could be protected under copyright law. Design teams should be educated about these and other intellectual property issues. Designers should refrain from using protected works in design “specs” unless permission is granted by the intellectual property owner. Using contractual provisions requiring vendors to indemnify and defend the casino from infringement claims is also recommended.

Casinos also need to make sure their outside marketing and advertising agencies aren’t violating intellectual property rights in the creation of marketing and advertising campaigns for the casino. Unless the agency has agreed to indemnify and defend the casino against any claims that arise, the casino is ultimately liable for any infringing activity.

Mistake #2: Failing to Investigate Infringement Actions Against the Casino

Casinos should never ignore a letter from a third party or its attorneys claiming that the casino is infringing some form of intellectual property owned by the third party. Doing so could increase the amount of damages owed by the casino if the third party’s action is successful. Upon receiving notice alleging infringement, casino managers should immediately send the letter to the casino’s internal or external lawyers for evaluation. A prompt response from legal counsel often helps diffuse liability, limit potential damages, and avoid a lawsuit.

Mistake #3: Losing the Ability to Protect Patentable Items

Casinos often fail to seek protection for patentable inventions and business methods such as proprietary games, software, player loyalty programs, and casino signage systems. In the United States, if a casino publicly discloses an invention and then doesn’t file a patent application within one year, the casino forever forfeits the ability to patent that invention. The simple lesson here is for a casino to file a patent application for an invention before that invention is publically disclosed or economically exploited.

Mistake #4: Failing to Adopt Clear Policies about Employee Inventions

Casinos based in Reno are fortunate in this regard. By statute in Nevada, any invention conceived and developed by an employee in Nevada in the normal course of his or her employment is owned by the employer. In all other states, title to an invention stays with the employee unless a written agreement assigns rights to employee inventions to the employer. However, if a casino based in Reno decides to expand into other states, it is important that the company develop clear policies regarding obtaining ownership of inventions created by employees.

Mistake #5: Failing to Protect and Police Your Own Intellectual Property Rights

By failing to obtain patent protection for their inventions, casinos lose the ability to license their inventions to third parties - thereby eliminating a potential revenue stream. Patent protection - in excluding their competitors from leveraging the same invention for a certain period time - could serve as a competitive advantage for the casino. Failing to do so therefore could end up as a competitive disadvantage.

Failing to protect their own trademarks means that a casino could lose their trademark rights altogether, thus allowing third parties to use that or a similar trademark for their own purposes. Casinos also risk losing the value of their brand, harming their reputation and confusing customers. It is imperative that casinos pursue state and federal trademark registrations; registrations that only cover their home state can make it difficult to expand and/or advertise in other markets.

Also, casinos can’t file a copyright infringement action and collect associated attorneys’ fees and damages from an infringer unless the copyrighted works are formally registered. To be clear, copyright protection is not dependent on registration; however, copyright registration is inexpensive and registration is a prerequisite for filing an action against an infringer. At the very least, casinos should register their most important works.

Final Thoughts

Casinos can avoid - or at least reduce - these common mistakes by doing two things: implementing policies and procedures relating to intellectual property and educating managers and employees about intellectual property issues.

Offensive policies and procedures should focus on protecting and enforcing the casino’s intellectual property rights. Defensive policies and procedures should help the casino steer clear of third party claims of intellectual property infringement.

From an education standpoint, casino managers and employees must learn what the casino’s intellectual property assets are and how to identify intellectual property issues as they arise. This is the first line of defense in avoiding these common mistakes.

Click here to view the full article in PDF.