12/22/2009 12:00AM

TVG-TrackNet dispute could affect bettors

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Television Games Network and a simulcasting partnership that controls the rights to all the tracks owned by Magna Entertainment and Churchill Downs Inc. have failed to settle a lawsuit TVG filed against the partnership, a situation that threatens the availability on TVG of popular tracks like Santa Anita and Gulfstream Park.

The lawsuit alleges that an account-wagering company owned by Magna is infringing on a patent held by TVG, and it implies that all account-wagering companies are infringing on that patent as long as they take bets over the internet. As part of an agreement reached earlier this year between the two companies that allows TVG to offer wagering on the Magna and Churchill tracks, the lawsuit has to be settled by Dec. 25 or the agreement will expire.

Officials for the simulcast partnership, TrackNet Media, began distributing warnings to racing officials about the dispute on Monday, four days before the agreement expires. It is likely that the two sides will negotiate up until the expiration date, and the situation will almost certainly remain fluid up until then.

Scott Daruty, the chief executive of TrackNet, said on Tuesday that officials of both companies have met consistently over the past several weeks in an effort to resolve the dispute.

"We talked yesterday, we talked over the weekend, we talked on Thursday and Friday, we sat down in Tucson two weeks ago to talk," Daruty said. "I expect we'll talk later today."

A spokesman for TVG, Kyle Fratini, said the company would not comment other than to say that "negotiations are continuing."

A blackout of the TrackNet content on TVG would be financially significant for both companies and resurrect concerns of racing fans about restrictions on what they can watch and wager. While TrackNet controls some of the most popular winter signals in the country, TVG is the largest account-wagering operation in the U.S.

According to a letter that Daruty distributed to racing regulators in California, the two sides signed an agreement on Oct. 31 that said that they would work to resolve the patent-infringement lawsuit by Dec. 25. In the language of that agreement, TrackNet said it wanted TVG to drop a lawsuit against Magna's account-wagering company, XpressBet, and promise not to pursue any lawsuit against Churchill's account-wagering company, twinspires.com.

TVG sued XpressBet in 2007, claiming that it held a patent on wagering over the internet. However, earlier this year, the judge presiding over the case ruled that the patent did not apply to internet wagering, but rather to wagering over an interactive television device.

"They continue to believe that somewhere and somehow they have patented something that is unpatentable," Daruty said.

Santa Anita, which is owned by Magna, opens on Dec. 26. Gulfstream, also owned by Magna, is scheduled to open its winter meet on Jan. 3. Tracknet's other properties include Fair Grounds in New Orleans and Golden Gate Fields in Northern California.

TVG and TrackNet only began to share content earlier this year after two years of withholding the rights to each other's signals. The agreement to share signals was reached after TVG was bought by the British bet-matching company Betfair.