On March 30, 2018, Universal Entertainment Corporation (“Universal”) sued Aruze Gaming America, Inc. (“AGA”) and Japanese billionaire Kazuo Okada (“Okada”). The asserted patents generally relate to slot machines. The accused products include a wide variety of products made by AGA, including the G-SERIES, G-STATION, CUBE-X family of games (e.g., “Fire and Thunder,” “King of Dragons,” and “Mighty Lion”).
This case is interesting not necessarily because of the patents themselves, but rather because of the alleged corporate drama involving Okada, Universal, and AGA. According to the complaint, Okada was the founder of Universal, which at one point owned AGA as a subsidiary. Around 2008, Universal allegedly transferred all of its shares of AGA to Okada, spinning off AGA as an independent company. Around 2009, Okada allegedly instructed Universal employees to license certain patents to AGA, though a license was never executed. Around June of 2017, Universal purportedly discovered that Okada committed some form of “misconduct in relation to foreign business,” purportedly costing Universal around 2.2 billion Japanese Yen (around 20 million US dollars). According to the complaint and other news sources, Okada was later voted out of Universal (by, among others, his son, daughter, and wife), and Okada appears to have turned his attention to AGA while he attempts to regain control of Universal.
This case is an excellent example of a danger commonly faced by many companies: founder overreach. Savvy, charismatic leaders can enable companies to grow fast, but such founders can become overly powerful and dominate company decision-making. In the intellectual property context, this can easily result in inventorship disputes, questionable licensing practices, and attempted theft of intellectual property (e.g., trade secrets) by departing founders. Needless to say, such issues can easily be remedied through careful legal counsel.