Innovation Jackpot

Julian J. Kennedy never imagined he would lead a company that has developed two major technological breakthroughs poised to transform a nearly $200 billion industry. He just keeps creating, and walking.

“Some people refer to the innovation process as being like a corridor effect,” says the president of Vegas Amusement, a North Carolina-based company that invents, develops and licenses products for the gaming and lottery industries. “Not until you’ve walked down the entire corridor can you see the whole picture.” This far along the walk, Kennedy has been awarded 13 U.S. patents and granted an additional 28 internationally.

Vegas Amusement (VegasAmusement.com) is now marching into unchartered territory. Its revolutionary patented SEGO® Digital Playing Cards development led to a patented progressive technology, MAXLink®, that enables progressive jackpot slot machine technologies to be applied to electronic card games. “This solves a fundamental problem in the gaming industry that has been around since the creation of electronic card games,” Kennedy says. Both have the potential to reshape the casino card gaming industry segment and be literal game-changers for its millions of card game players worldwide.

A hobby turns serious

Headquartered in the North Carolina mountains near the small town of Bryson City, Vegas Amusement seems a world away from the vacation destination for which it’s named. So are the rural small towns of Ohoopee, Georgia, and Thorsby, Alabama, where Kennedy (known to friends as Jamey) and company Vice President Tim Price grew up.

The two met in graduate school at the University of Alabama, where both got their MBAs at the university’s Manderson Graduate School of Business. Kennedy, an Applied Mathematics graduate, and Price, an Electrical Engineering graduate, found a common interest in software development. “We started monkeying around with card games and designing software in 1993 just as a hobby, and here we are,” Kennedy says.

“When Jamey and I started doing this together, we were in our 20s, single, and just having fun,” Price says. It wasn’t about a passion for gambling—both describe themselves as casual gamblers—but about the software design and development process. “We were just putting money back into it and enjoying what we were doing. The more we did it, the more we wanted to see what we could do with it. It turned into a business before we knew it.”

The original operating entity, Vegas Amusement, Inc., was formed in 1994 and incorporated the next year. It’s primarily a software company, though it has a diverse collection of expertise in mechanical engineering, product design, data science and more. Five to seven developers, engineers and artists work steadily with the company, which also utilizes a larger group of 10 to 15 specialty substitutes. Light manufacturing, prototyping and software testing take place at their shop in the mountains.

Vegas Amusement LLC, an Intellectual Property Holding Company, was formed last year as part of a planned restructuring to focus more upon intellectual property development and licensing going forward. “Intellectual Property development is where we wanted to transition the business focus going forward,” Kennedy says.

The first breakthrough

SEGO, which stands for secondary game outcome, represents a major recent accomplishment. It’s a new line of electronic-only card games that retains all of the traditional playing card characteristics—card suit, card color, card value—while introducing a patented addition: an independent outcome from a second game of chance. The secondary game of chance can be any other game or event.

With SEGO dice cards, dealing each playing card also delivers the outcome of one dice roll. With SEGO lotto cards, dealing each card also delivers one number selected in a lottery draw. With SEGO roulette cards, dealing each card also delivers one result of a roulette wheel spin. Secondary outcomes are delivered with the exact statistics of their respective independent games. This sets up the possibility of an unlimited number of secondary game and event outcomes.

By utilizing the step of independent outcome, and depiction upon a playing card of that independent outcome, the cards provide the true statistics of the second game that’s being played independent of the respective playing card. This enables, for example, dealing five SEGO dice cards, which provides the random outcome of five cards being dealt plus the random outcome of five dice being rolled.

The game provides breakthrough mathematics, introducing new SEGO outcomes for game pay and unlimited new combinations of occurrences for pay. “The breakthrough was the random assignment of those symbols on the cards,” Kennedy says. “That’s the key to the SEGO games.” The company has been granted three U.S. patents for this invention.

As with most breakthroughs, it took an amount of time and energy that looks daunting in retrospect—“many years, maybe seven or eight, of card game statistical analysis,” Kennedy says, “easily 10 hours per week after work we were developing custom software simulations, mathematical models, etc. I bet that Tim and I colluded on 500-plus various statistical testing projects.”

The first SEGO game title was Roulette 21®, which was laboratory approved in 2013. (Laboratory approved is not the same as getting a patent. Gaming Laboratories Incorporated is an independent lab that tests all devices, system software, game software and updates for compliance with rules and regulations to more than 475 differing jurisdictions worldwide.)

“After three years in our original field trial eTable in Shawnee, Oklahoma, it’s wildly popular with millennials,” Kennedy says. “They like the additional stimulation. Try and overstimulate millennials. Good luck with that.”

Roulette 21’s success was an eye-opener. Price says Roulette 21 is his favorite SEGO game because it was the first. “When I look back at it, for years we worked upon this development, and to now get to see players really enjoy it is very rewarding.”

SEGO also filled the important role of providing exclusive content that could be played on Vegas Amusement’s original product development from the 1990s, the TableMAX® brand eTables—the electronic equivalent of live casino card tables without a dealer. “We didn’t just set out to create a new electronic card game,” Kennedy says. “It was from this context of trying to strategically create exclusive content for our eTable device that we went down this road.” One of the industry’s first PC-based gaming machines submitted in 1997, the first model TableMAX eTable received GLI approval in 2000.

Other new SEGO games have been developed and are currently pending laboratory approval: BigTime Blackjack®; Bluegrass Poker®; Roll The Dice Poker®; and Bonus Blackjack®. “We haven’t even scratched the surface of game possibilities,” Kennedy says. “We already have several video poker variations designed using SEGO cards.”

MAXLink, the game-changer

Just as the TableMAX eTable led to SEGO, SEGO has pushed Vegas Amusement toward even greater potential impact and opportunity in the casino gaming world. But it couldn’t have happened without Kennedy acquiring some important real-world education a couple years out of graduate school.

“I went down the road of building the first eTable device. As I learned more about the industry, I found out about a portfolio from intellectual property related to card games— including a world-famous card game called Caribbean Stud Poker® that was patented by a guy named Danny Jones. There were 20 to 30 patents in the related patent portfolio.

“It was exclusive, and people had to pay a monthly lease to lease the game. I found it all just fascinating and it influenced significantly what I wanted to do with the eTable. I went down and talked to the company, PGI, at their Florida headquarters in 1996 and told them what we were working on, the electronic table device development that later became the TableMAX brand eTables. Shortly thereafter, I was able to make what was a very significant investment at the time: Our company acquired the rights to utilize in electronic format their entire patent portfolio for one gaming market. So then we started developing all their games for eTable play and we got very familiar with all of the associated progressive technology that was being utilized on live card tables globally. This developmental experience had a significant influence in the product design and development of our first approved TableMAX eTable product.”

Kennedy’s timing proved to be very good with this original IP license acquisition in 1996. Two years later, PGI was sold to Mikohn Gaming for $35 million in cash. “We have been fortunate in that a couple of subsequent deals were made with partners and today all the original PGI games, including the card game Caribbean Stud Poker, are exclusive game content offered upon our TableMAX brand eTables worldwide.”

From the knowledge gained along this earlier path, and shortly after inventing the SEGO Digital Playing Cards and considering all of the mathematical possibilities, it became apparent to Kennedy that the company could utilize the patented random generation and SEGO assignment methodology to create a wide-area progressive (WAP) network of electronic card games.

“My prior experience of developing the first eTable utilizing the Jones Progressive Patent portfolio made me aware of technical issues with WAPs and electronic card games operation,” he says—namely, current limitations precluding the utilization of WAPs in electronic card games.

The first limitation: An initial challenge with card game-based WAPs is the aspect of multiple points of jackpot determination. Existing slot machine WAPs use a client/server architecture that enables a server to be the single source of calculating a jackpot award. A winning message is sent to a unique slot machine on the WAP network. Card game devices—dealing and scoring unique card hands—are each the source of jackpot award calculation. Modern, slot-based WAP network operation requires a central determination architecture.

Basic card game mathematics is another issue. “A royal flush was used commonly in the PGI live table game progressives—649,740 to 1 odds—and that’s not sufficient to run a WAP network jackpot that’s linking multiple properties and multiple machines,” Kennedy says. “You have to have a really big number, like 100 million to 1. However, in many card games as blackjack, which deals a two-card player hand initially, there simply is not a mathematical combination possible to reach the level needed.”

Third is the problem of segregation of card game jackpots. Because card games differ so significantly—from cards utilized, to game-playing rules, to possible jackpot awards—only card games with the same jackpot award mathematics can be linked to a common jackpot, resulting in many separate, smaller jackpots grouped by unique card game attributes.

MAXLink progressive technology solves these technical problems when connecting electronic card games to a WAP. It introduces a patented separation of electronic card game play and jackpot operation. With MAXLink, licensed card game software is developed to enable the award of WAP jackpots based upon instruction from the MAXLink server. The network operates with industry-standard client/server WAP architecture utilizing a single point of jackpot award determination handled by the MAXLink server.

Jackpot awards are no longer based on the use of card combination mathematics; instead, they’re formed by jackpot algorithms on the server that can utilize unlimited mathematics. Upon instruction of a jackpot winner, a licensed client device displays the jackpot award to the winning player during play of the respective card game.

“Now we can bring this whole industry segment that’s been ostracized from progressive jackpot WAP connectivity into the mainstream,” Kennedy says. “And that’s what the MAXLink progressive jackpot system is—a patented, progressive technology that enables popular slot machine large jackpots, such as Megabucks® or Wheel of Fortune®, to be played on electronic card games.” Says Price: “The beauty of MAXLink is anything that deals electronic cards, you can jackpot link it with the MAXLink progressive system.”

The company is now focused on deploying the first MAXLink network, “which will utilize 20 to 25 of our current E-series and new model eTable devices exclusively in one small jurisdiction,” Kennedy says. “We are going to complete a proof of concept and illuminate this patented competitive product feature on our eTable technology.”

A new industry hierarchy

Looking ahead has gotten a little more interesting lately, due to events out of the company’s control. Since Vegas Amusement filed its first MAXLink patent application in 2013, the industry has seen a dizzying flurry of mergers and consolidations in the past couple years, some of them chronicled by Global Gaming Business magazine: “Crane Payments acquired MEI. Scientific Games bought WMS. Bally acquired SHFL, and then was bought by Scientific Games. IGT acquired DoubleDown and then was scooped up by GTECH. And AGI/Novomatic seemed to be buying every company in Europe.”

The result, Kennedy says, is that Scientific Games Corp. and IGT are left standing as the two behemoths of the gaming and lottery industry. “Because they now manage state lotteries and gaming devices on casino floors, they have this new electronic cross platform product span, the technology, WAP connectivity, the branded jackpots, everything needed to implement this new MAXLink technology.

“Our goal is licensing another company to utilize and implement this technology as we continue to focus forward on our continued Intellectual Property development.” Vegas Amusement has had initial talks with Scientific Games.

“We’d really like to see MAXLink grow internationally through IGT and/or Scientific Games” Price says. However, there are some interesting smaller possibilities. “A multi-property group such as Caesars Entertainment could create a proprietary video poker-based WAP and award a jackpot exceeding $1 million weekly with just the properties upon the Las Vegas Strip.”

Vegas Amusement is confident that it has the technical experience, developer talent and continued innovation capability to successfully license the technology. “Developing software/products for the regulated Class 3 gaming industry does require a significant amount of capital, and the regulatory approval process required for approving new products is both costly and very time consuming,” Kennedy says. “You literally have 475-plus jurisdictions around the world that have different rules and regulations for gaming,” Price adds.

That said, Vegas Amusement has had success in obtaining patents for its two latest breakthroughs—even in a post-Bilski and post-Alice world. Those Supreme Court rulings, in 2010 and 2014, respectively, were major blows to software patent eligibility. “Since I filed this first patent application for MAXLink in 2013, the patents (three) have flown out of the patent office even in the face of those rulings,” Kennedy says.

“This application, although it’s a software patent, it represents a network. It has a very clear inventive step and it solves a problem that hasn’t been solved before. That’s what makes it patentable.”

He hopes to get full laboratory approval during 2017. “We’re excited it’s gotten this far,” he says, and is just as excited about what’s next down the corridor.

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