Litigation Could Hurt Alliance Gaming Stock

LAS VEGAS -- Patent litigation brought by International Game Technology against rival slot machine manufacturer Alliance Gaming could be the latest adverse element affecting the company's slumping stock price, one gaming analyst said.

The action by IGT, which is seeking to keep Alliance from marketing a slot machine the company says infringes on a half-dozen patents covering machines and systems that feature additional payout opportunities, such as secondary bonus wheels, bonus reels and touch screen display devices, had been anticipated by investors.

"We believe IGT had been waiting on a third critical patent pertaining to the use of a wheel before proceeding with any legal action," Deutsche Bank analyst Marc Falcone wrote in an analyst's note Thursday.

That patent was issued Tuesday and IGT sued. Alliance faces the biggest impact by the lawsuit.

The company's stock price has dwindled since April, when it reached a 52-week high of $34.16. On Thursday, Alliance closed at $11.40, down 1 cent, or 0.09 percent.

Falcone gave Alliance a price target of $9 a share.

"We believe the filing is an important event for Alliance investors," Falcone said. "Many investors viewed this litigation as one of the last pieces of material negative news that could impact the stock."

Alliance issued a statement Wednesday stating the machine in question was introduced in the 1970s by the company's Bally Gaming and Systems unit and was updated and reintroduced three years ago.

"The company believes there is no merit to IGT's new claim that a game invented and introduced nearly 30 years ago infringes a recently issued patent," Alliance said in a statement.

For its part, IGT said in the statement that several Alliance games could infringe on company patents.

"IGT has always vigorously defended its intellectual property," IGT general counsel Dave Johnson said in statement. "Consistent with that philosophy, we have filed this case to stop defendants from misappropriating IGT's patented innovations."

Johnson said IGT had no plans to seek a preliminary injunction to stop the game from being used.

Falcone said he has discussed the matter with both companies and any resolution could take up to three years.

"We would expect that both IGT and Alliance may look to have settlement talks in order to avoid costly and lengthy litigation,"

Falcone said. Shares of International Game Technology closed Thursday up 61 cents, or 1.8 percent, at $34.41.