Universal Entertainment Accuses Founder of Directing Patent Infringement Through American Subsidiary for Personal Gain

On March 30th, Japanese gaming firm Universal Entertainment Corporation (TYO:6425) filed a complaint alleging patent infringement and other claims against Las Vegas, NV-based entity Aruze Gaming America as well as Kazuo Okada, the founder of Universal Entertainment (UEC) and the sole shareholder and director of Aruze Gaming. The suit, filed in the District of Nevada, alleges that Okada directed patent infringing activities of Aruze while he was also an officer with UEC.

UEC is asserting a series of four patents in this case, including:

  • U.S. Patent No. RE46472, titled Slot-Type Gaming Machine with Improved Cabinet. Issued last July, it covers a gaming machine with an improved cabinet configuration which enables easy access for machine maintenance while also conserving space with regard to adjacent gaming machines.
  • U.S. Patent No. RE46473, same title as the ‘472 reissue patent. It claims a similar gaming machine with improved cabinet having an input device with bet and start buttons configured to alleviate player fatigue from forming in the wrist.
  • U.S. Patent No. 8088013, titled Gaming Machine. Issued in January 2012, it discloses a gaming machine configured for improved heat dissipation without using any ventilation techniques which could increase the risk that a person could tamper with the gaming machine.
  • U.S. Patent No. 8246047, titled Display for Game and Gaming Machine. It claims a display for a game including a plurality of independently rotatable reels rotating around a common access with a more effective stop operation which allows players to employ some expertise to have a better chance at winning a “challenge time” style game.

UEC alleges that various gaming machine product lines marketed by Aruze Gaming infringe upon the patents-in-suit, including the G-Series and Cube-X family of games. The accused infringing products also include slot machines marketed by Aruze including those marketed under titles such as King of Dragons, Mighty Lion, Changing 7’s and Burning Hot Jackpot.

This infringement was allegedly made possible by defendant Okada’s usurpation of corporate opportunities, according to UEC’s complaint. After founding UEC in 1972, Okada served as its Representative Director (Japanese law equivalent to Chief Executive Officer) through September 2004. Between January 2006 and June 2017, Okada served UEC as Chairman of its Board of Directors. In the two years between June 2008 and June 2010, UEC underwent a corporate restructuring that wound up with Okada being placed in charge of UEC’s foreign businesses, including those in the U.S.

UEC’s suit alleges that Okada was able to use his influence over the company’s patent department, as well as his control over UEC’s American business, to direct the sales of the accused products by Aruze Gaming, which operated as a subsidiary of UEC. A series of stock purchases by Okada, however, allegedly gave Okada 50.5 percent ownership of Aruze by January 2009, compared to UEC’s 49.5 percent ownership stake. Then UEC executed an agreement to transfer the rest of its Aruze shares to Okada by March 2010. Okada then allegedly directed UEC’s patent department head to neither pursue a patent licensing agreement with Aruze nor disclose the lack of a license to UEC’s Board of Directors. This suit from UEC follows a report last August from a special investigation committee which found that Okada’s actions for personal gain cost UEC 2.2 billion JPY ($20.5 million USD).

UEC’s complaint lists counts for infringement of each of the four patents in suit. It also includes counts for tortious interference with prospective economic advantage, breach of fiduciary duty of loyalty, fraudulent misrepresentation and unjust enrichment. Requested relief includes an accounting of damages caused by Aruze’s infringing activities, enhanced damages for willful infringement and punitive damages for the conscious disregard of UEC’s patent rights.


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