Who Is Suing DraftKings Over Its Use Of Cash-Out?

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DraftKings has been hit with a patent infringement lawsuit over its use of cash-out.

The suit was filed Wednesday in a Delaware District Court by UK-based Colossus Bets.

Colossus Bets primarily runs betting pools for consumers and B2B partners but also has a portfolio of patents.

Damages could be large

Colossus claims DraftKings infringed seven patents covering sports betting and gaming products with a cash-out betting feature.  Colossus believes its patents apply to all accepted US bets with a cash-out feature since the repeal of PASPA.

As a result, Colossus is looking to claim damages equivalent to the gross revenue from those bets. That could be more than $1 billion from DraftKings alone.

The number could also treble if Colossus can prove “willful and deliberate infringement” of its patents.

“We take our intellectual property very seriously,” said Colossus Bets founder Bernard Marantelli in a press release. “This is the next step towards protecting our rights and income across the industry in the US.”

DraftKings had not responded to a request for comment at the time of publication.

Fair warning

Marantelli said Colossus first contacted DraftKings about its patent in 2018 and has since provided “numerous notices of ongoing infringement.”

“We attempted to resolve this amicably and we gave them ample opportunity to do so,” Marantelli added.

This is the first time Colossus is attempting to enforce its patent on a US sportsbook. The company has already licensed the cash-out concept in the US to bet365 and Esports Technologies.

Colossus retained DLA Piper for the legal proceedings.

Patent problems for DraftKings?

DraftKings is already being sued by another company, EngineMedia, over alleged infringements of two more patents around the mechanics of sports betting.

That suit was filed back in July. DraftKings said in its Q3 filings it could not predict the outcome of those proceedings “with any degree of certainty … or determine the extent of any potential liabilities.”

The same filings also show ongoing patent disputes with Arrow Gaming and Interactive Games LLC.

A gamble?

In patent cases, the parties can agree to a settlement that may include a one-off payment or ongoing licensing deal.The dispute also can go to court, where a judge will decide whether the patent is valid and enforceable.

That is a potentially huge risk/reward. Colossus might have an enforceable patent on cash-out for all US sportsbooks and be due some significant damages.

Or it might have nothing.