High drama erupted today at the G2E Asia gaming industry exhibition at Venetian Macau, with a legal war being played out on the floor of the show between two rival electronic table game manufacturers, in full view of the entire Asian gaming industry.
Hong Kong and Macau-based LT Game and Las Vegas-based multi-national Shuffle Master duked it out in a confrontation involving Court injunctions, patents, the Macau Customs Service, and threats from conference co-organizers the American Gaming Association (AGA) and Reed Exhibitions of ejecting LT Game or cutting the crucially-important power supply to LT Game’s stand at the show.
Chairman of LT Game Mr Jay Chun at this morning’s press conference
This war is all about control of the highly lucrative live dealer baccarat market in Macau. This market is already firmly established and is set to explode over the next few years on the back of table cap and labor shortage issues in the Chinese gambling mecca. The term “live dealer baccarat” refers to hybrid electronic table games where the dealer is a human being, but huge numbers of players place their bets on electronic gaming terminals.
World Gaming has previously reported on the live dealer phenomenon. Macau’s Kampek casino is the flagship of this style of gaming, with up to 527 players betting on games dealt by just five dealers. Venetian Macau and Sands Macau were the first of the BIG9 casinos to adopt the concept with the launch of Imperial Stadium, originally employing Shuffle Master technology. A few months later, Venetian and Sands abruptly removed Shuffle Master from Imperial Stadium and installed LT Game’s product in its place, and when Sands Cotai Central opened in Macau on April 11 this year it also created its own 151-terminal Imperial Stadium incorporating the LT Game product.
When asked today by World Gaming what the reason for the change from Shuffle Master to LT Game last year was, Mr Eric Persson, Executive Vice President of Corporate Slots and Marketing for Las Vegas Sands (LVS) replied, “Because we couldn’t have live dealer baccarat because of patent litigation.” LVS is the Las Vegas-based parent company of Sands China Limited, the company that operates Venetian Macau, Sands Macau and Sands Cotai Central.
LT Game’s side of the story
World Gaming today sat down with LT Game to hear their side of the story. LT Game says they hold two Macau patents which effectively give them the monopoly over the live dealer market for any multi-game terminals and even more importantly for any baccarat games throughout Macau. They also claim they have patent protection for this technology in the US market.
G2E Asia, held annually at Venetian Macau, is currently the largest trade show for the gaming industry in Asia. It’s where manufacturers offer their new products to casinos. The games on the exhibition floor of G2E Asia are the games players see in the casinos in the months and years following the show.
Sensing that rival manufacturers might breach LT Game’s patents at this year’s G2E, LT Game applied to the Macau Court of First Instance for an injunction to stop any rivals showing gaming products that breached LT Game’s patents. The application was successful and last Friday Reed Exhibitions was presented with the Court injunction, which named four companies: Alfastreet, F2 Systems, Interblock and Shuffle Master.
LT Game says Reed Exhibitions reacted badly, asserting that they (Reed) reserved the right to be compensated by LT Game for any loss to Reed caused by LT Game’s actions of protecting its patent rights. It appears Reed was concerned that if manufacturers other than LT Game were not able to display products for the live dealer market, show exhibitor numbers would be down in future years.
LT Game says amicable arrangements were made with Alfastreet, F2 Systems and Interblock, with those companies agreeing to not display the products in question, but Alfastreet did say they intend to pull out of G2E Asia from next year in response to LT Game’s apparent lock on the market. However, Shuffle Master made no such arrangements with LT Game.
LT Game says they were approached by Michael Johnson, Director of Sales & Industry Development for Reed Exhibitions, who tried to negotiate alternative arrangements where all manufacturers could exhibit, such as the non-LT Game exhibitors displaying a “not selling in Macau” sign on their stands, but no such arrangements were finalized.
Fast forward to yesterday, when Macau Customs Service officials discovered Shuffle Master had a multi-table multi-game live dealer product on the floor of the exhibition. The officials forced Shuffle Master to cover the offending products with sheets. LT Game says the response to this was a visit to LT Game’s stand at the show by no less than the President and CEO of the AGA himself, Mr Frank Fahrenkopf. LT Game says Mr Farenkopf, somewhat incensed, said if LT Game continued to insist the Macau Customs Service enforce the Court injunction, then the AGA would close the LT Game booth and eject them from the show.
LT Game says the next step by conference organizers was the erection of partitions to surround and hide LT Game’s stand, but after some time these were removed.
LT Game further says this was followed by a threat this morning of cutting the electricity to LT Game’s stand, effectively rendering it useless. However, conference organizers did not carry out this threat.
What World Gaming witnessed today
We were on the floor of the show today, and witnessed what could well be described as a French farce. Those crazy 17th century aristocrats would have been proud! LT Game’s and Shuffle Master’s stands stood mere meters apart, and lawyers, Macau Customs Service officials, media and senior executives from LT Game, Shuffle Master and Reed Exhibitions hopped back and forth between the two stands all day. Instead of focussing on selling their wares, company executives were embroiled in deep conversation with lawyers and the media.
The day kicked off with LT Game holding a doorstep press conference around 11am, and throughout the day developments, well, developed.
The sheets covering the offending products at the Shuffle Master stand were removed around 12 noon, but later in the afternoon annoyed Macau Customs Service officials forced the sheets to be put back in place.
LT Game tells us that Reed Exhibitions threatened the Macau Customs Service, saying that if they enforced the Court injunction, that Reed and the AGA would abandon Macau and move the conference to Singapore in future years.
Shuffle Master’s side of the story
World Gaming spoke to Shuffle Master CEO Mr Gavin Isaacs this afternoon, and he told us, “this matter should be dealt with in Court”.
Shuffle Master then issued this brief statement exclusively to World Gaming around 3:30pm today:
Shuffle Master has always and will always comply with requirements of the regulatory authorities in Macau and to date, no court in Macau has found that we have infringed upon anyone’s patents. Therefore, we strongly believe in our lawful right to sell all of our products fairly and competitively in Macau and that no infringement of patents exists or will be found to exist.
Shuffle Master made no other official comment to us today.
Shuffle Master global CEO Mr Gavin Isaacs explains Shuffle Master’s position to World Gaming CEO Andrew W Scott, in front of the gaming terminals covered by the Macau Customs Service
The American Gaming Association and Reed Exhibitions
WGM spent much of the day trying to get comment from either the AGA or Reed Exhibitions. Despite repeated contact throughout the day, neither Reed Exhibitions nor the AGA made any statement to us about the matter, until 6:30pm this evening when a formal statement was issued. The statement’s only reference to today’s drama was as follows:
As seen on our show floor, the gaming industry is a highly technological and innovative market that strives to provide the most entertainment value for its customers. It is not uncommon that in such a competitive environment legal disputes may arise which must be resolved through the justice system.
G2E Asia should not and does not play any role in such conflicts. In order to maintain the reputation of individual companies, of the industry and of the host community, we are dedicated to providing a level playing field for all of our exhibitors. We maintain strict policies for all exhibitors to ensure the primary mission of G2E Asia – to provide new business opportunities for exhibitors and attendees alike – remains the focus of this annual gathering.
Whilst in public, Reed Exhibitions and the AGA says they should not play a role in such conflicts, World Gaming has seen an email from Reed Exhibitons to LT Game, dated May 18, with a thinly velied threat of legal action against LT Game:
…we [Reed Exhibitions] reserve the right to seek compensation for any loss and damages that may result to Reed Exhibitions from the quarrelling planned for next week.
Furthermore, the bullying tactics employed by the AGA and Reed Exhibitions against LT Game indicate that conference organizer’s claimed position of neutrality is far from the truth. World Gaming has learned that the AGA plans to lodge a formal complaint with the Macau Government after this year’s show has come to a close.
Our analysis
It is our opinion that the AGA and Reed Exhibitions are embarrassed that this drama has been played out in public, and are fearful of losing future revenue as more and more manufacturers come to the conclusion that G2E is becoming less relevant in this part of the world.
The AGA and Reed Exhibitions are saying one thing in public, but are acting very differently behind closed doors. Once again we find ourselves reminding our American friends that the borders of their country stretch only from coast to coast of the USA and do not extend to the rest of the planet. Asia now leads the gaming world, and Americans should learn that they are simply guests in Macau, and like any good guest, they must respect the laws, customs, culture and ways of their hosts. This means respecting government officials and the Court system.
With the inexorable rise of Asia, and the simultaneous stagnation of the US gaming market, US operators must learn to abandon their steamrolling practices of the past, and embrace the culture of the new epicenter of world gaming. If the AGA does not learn to make this transition, G2E Asia may lose what is remaining of their relevance and credibility.
