Wednesday, February 14, 2007

Anatomy of a Cybersquatter --- Introduction: Binion’s Horseshoe on the Ropes

(Author's note: I am not an agent for any of the parties mentioned in this series, and all statements herein are as true and honest an interpretation as possible based on the available evidence. I welcome all factual additions to the matters to be discussed in this series, and welcome documentary contributions, upon which I will reevaluate and potentially revise the following story. Nonetheless, over 200 hours of research have gone into the piece, including several hundred pages of legal documents and an exhaustive examination of Internet records. -- hh)

Las Vegas
, January 9, 2004-- It’s a bad day for Binion’s Horseshoe Casino, the last family-owned casino in Vegas. The triumphs and tribulations of patriarch Benny and his progeny have made the Binions -- and the Horseshoe -- the stuff of Vegas legend. But this day brings the demise of the Horseshoe in its original incarnation. Federal marshals, the IRS and Gaming Control Board agents raid the downtown landmark under the orders of two separate liens, one concerning $2.5 million in unpaid back taxes and the other dealing with payments that were scheduled, but never made, into the culinary workers’ union pension fund. Action ceases. The patrons are asked to leave and agents secure the assets of the casino.

Despite the suddenness of the action, it’s not a surprise. The cash-strapped Binion’s operation, hamstrung by its location in a seedy downtown Vegas, has been dodging creditors and shopping several of its properties to potential suitors for some time. One of those is the World Series of Poker tournament and brand name, the values of which are skyrocketing. Only a few months earlier, Tennessee accountant Chris Moneymaker had captured a gambling nation’s imagination by parlaying a $40 online-satellite buy-in into the champion’s share of the world’s richest and biggest event, the Main Event of the World Series of Poker. The WSOP, as it increasingly referred to, has experienced several years of exponential growth and will do the same for several more years, but it stands in stark contrast to the decline of a family casino in a non-Strip locale.

Three days after the January 9 raid and closure, Harrah’s Entertainment announces a deal in principal to take over the hotel/casino from Becky Behnen, the daughter of Benny Binion and current owner of the casino. Behnen had acquired control of Binion’s Horseshoe after a bitter family dispute years before. 

It’s as an outreach of this original dispute that Harrah’s initially acquires a financial interest in the property. Behnen had assumed control of Binion’s Horseshoe Casino in 1998, and that only after signing a long-term note compensating brother Jack Binion for his stake. Jack Binion’s interests are rolled into his Horseshoe Gaming Holdings corporation; they take the form of an in-default note from Becky Behnen worth as much as $20 million late in 2003, when Binion sells out his Horseshoe Gaming Holdings enterprise to Harrah’s. The total deal between Harrah's and Jack Binion, worth some $1.45 billion, takes place in late 2003 and includes this outstanding financial interest in the original Binion’s Horseshoe.

It has long been reported in the industry press that
Harrah’s has interest in the growing “Horseshoe” brand
name and affiliated properties such as the World Series of Poker, but little interest in the old downtown casino property itself. And some of the workers at Binion’s Horseshoe come to view Harrah’s as the Vegas version of the “evil empire”. Among them is Federico Schiavio, and at Becky Behnen’s casino he was the computer guy, the information technology director, and the self-styled guru of all things computer-related regarding the World Series of Poker. That  included the creation of a custom software application for the event. And post-deal at Harrah’s, except for short-term transition stuff, he’d have no job.

By most published accounts, Schiavio notices something at some point in 2003, as the financial situation at Binion’s Horseshoe grows dire and the viewed-as-predatory interest of Harrah’s builds. While there are any number of brand names, mottoes, and the like that have already been registered as trade names in connection with Binion’s Horseshoe and the World Series of Poker, one seems to have slipped through the cracks: No one has ever bothered to obtain the Internet domain name “,” or register “WSOP” as a federal trademark... or so it has seemed. 

It’s an oversight borne from an evolving market and trend towards acronyms and abbreviations in general, but with every passing day, the connection between the brand name “World Series of Poker” and the acronym WSOP”grows stronger. So Schiavio, certainly savvy in Internet matters, registers the domain, but not on behalf of Binion’s Horseshoe -- he registers it in his own name.

That's the prevailing wisdom. In its entirety, the above is incorrect.

The story, though, rolls on. Harrah's discovers Schiavio's registration of the domain months later, sometime during the acquisition of Binion's Horseshoe. Negotiations with Schiavio soon turn acrimonious, entwined with Schiavio's control over the World Series of Poker software application and any short-term continuation of Schiavio's job. Civil lawsuits unfold, although they're all related to the same core dispute: Who will own the rights to the trademark and Internet domain name based on the WSOP acronym?

What follows is the story of the domain, which still remains in Schiavio's control nearly three years after Binion’s Horseshoe Casino was turned over to Harrah’s. It’s a battle of legal maneuvers and one-upmanship, a bitter, protracted affair that examines the topic of cybersquatting (also called domain squatting). Whether or not this has occurred here is a matter of continuing debate, a matter of how valid one considers Schiavio's claim to to be. Harrah’s continues its litigation in an effort to wrest the domain from Schiavio, even as the domain itself is used for a series of ongoing, questionable enterprises.

This series will highlight the history of the legal battle, and it will also include materials never before published, pulled together to show that at least a portion of Schiavio's claim is quite arguably and knowingly false. The evidence suggests that Schiavio has acted in bad faith not just once, but on several occasions; however, the evidence also suggests that Harrah's attorneys and research staff did a less-than-adequate job of due diligence, jeopardizing a perhaps stronger claim to the acronym and causing untold additional legal expenses that continue to this day. But perhaps the biggest stunner is that the battle for has much older roots -- it is in fact one of the last outliers of the bitter war between siblings Jack Binion and Becky Binion Behnen for control of Binion's Horseshoe itself.

At the core of this dispute are the free-market beliefs that many poker players hold dear. Does getting there first always triumph over later, arguably more legitimate claims? What happens when the guiding force behind a company allows a high-ranking, well-regarded employee to purchase some rights and run an independent project benefiting the company, and after a rift erupts, such personal enmity ensues that a potentially valuable intellectual property is, in a word, trashed? And at what point does an acronym such as WSOP become so closely intertwined with the World Series of Poker that claims that the letters WSOP have other popular, in-common uses become laughable?

There's more to this, much more, so grab a beer, get comfy in the chair, and settle in.
Next -- Part 1: Bad Blood Runs Deep

© 2007, Haley L. Hintze. All Rights Reserved.
Creative Commons Rights Superceded on this Material.

Link to Introduction
Link to Part 1
Link to Part 2
Link to Part 3
Link to Part 4
Link to Part 5
Link to Part 6


Anonymous said...
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April said...

Intriguing! Looking forward to the rest.

Ignatious said...

awesome - can't wait for more.

23skidoo said...

This is really good Haley! Thanks.

I was downtown the day after they closed the Horseshoe, it was a bizarre sight to see.

I can't wait to read the rest.