Anyone who knows about fantasy leagues—or watches any professional or collegiate games—has undoubtedly heard of DraftKings and FanDuel. Both companies offer a Daily Fantasy Sports (“DFS”) gaming website that allows people to compete in single-day online games for cash and prizes for a variety of professional and collegiate sports. These two websites are incredibly popular, and have apparently provided large cash prizes to some of its members. One DraftKings member won $350,000 in one week—though this win actually opened up a claim of insider trading because the player won from the rival site FanDuel.
Of course, the more successful a company is, the more liability it inevitably opens itself up to. However, these DSF sites probably never contemplated being sued for patent infringement over the technology it uses for the interactive fantasy sports.
In November of 2015, Virtual Gaming Technologies LLC (“Virtual Gaming”) filed a complaint for patent infringement, claiming DraftKings and FanDuel are infringing two patents, U.S. Patent Nos. 5,860,862 and 6,193,610 (the “patents”), through the companies’ respective websites. The listed inventor of the patents is William W. Junkin, founder of FantaSports, who Virtual Gaming claims to be a “fantasy sports ‘pioneer’” in the complaint.
DraftKings and FanDuel argue the patents are invalid, and are seemingly preparing for a full-out battle to invalidate the patents—at least it appears to be that way at this early stage. Virtual Gaming has sued several other entities, including DraftPot, a less popular DFS platform. The suit against DraftPot was jointly dismissed when it settled in Texas on Friday, January 8, 2016.
In addition to DraftKings, FanDuel, and DraftPot, Virtual Gaming filed suits against Fox Sports, DraftDay and ESPN.com. All suits have been filed in the Eastern District of Texas. Based on where the complaints were filed, and the overall behavior of Virtual Gaming, it appears that these defendants are most likely dealing with patent-troll like behavior. For those who are unaware, the Eastern District of Texas is one of the most popular venues for patent-trolls to bring lawsuits.
If this teaches us anything about the world of patent law, it’s that no company or industry is immune from being accused of infringing a patent. Fortunately for FanDuel and DraftKings, they most likely have the resources to fight the lawsuit, whereas smaller companies (such as DraftPot), may be forced to settle with Virtual Gaming for a lump sum of money.