| Q - I recently heard that Lottotron had patents which
covered aspects of the system that eLottery is using or plans to use. Does
eLottery believe that these patents will have a serious adverse effect on
its ability to pursue its business plan?
A - In 1995, eLottery was initially notified that Lottotron, Inc. was
the owner of US Patent # 5,415,416. Prior to launching the U.S. Lottery
business we thoroughly reviewed that patent and it was our opinion that
the '416 patent did not cover the system design for the US Lottery. On
November 9th, 1999, we were notified by Lottotron of other patents
Lottotron had since been granted. Based on our preliminary review, we do
not expect those patents to result in any significant effect on the
existing or contemplated operations of eLottery's business.
Q- What is eLottery's reaction to the passage of the Kyl bill in the
Senate?
A - It has always been the company's belief that authorized state
lotteries will not be prohibited from moving into e-commerce. Simply put,
we believe that the Kyl bill was aimed at off shore Internet casinos, not
authorized state lotteries. And of course, passage of a Bill in the Senate
does not make a law. It must still be adopted by the House of
Representatives and signed into law.
A version of the Bill has been introduced in the House of
Representatives. We believe that this Bill reflects the fact that state's
rights issues are paramount to many representatives from both sides of the
political aisle. HR 3125 introduced by VA congressman Goodlatte known as
the "Internet Gambling Prohibition Act" preserves the rights of
state lotteries to move onto the Internet, should they so desire. While
banning offshore Internet gambling, HR3125 specifically exempts state
lotteries that wish to use the web when the lottery ticket is purchased
using a state lottery-issued id and password or placed in a lottery
computer in a public facility.
After the Congress reconvenes next year, the House Judiciary Committee
is expected to approve language permitting states to offer their lotteries
on the Internet. The House Judiciary Committee's 1998 bill granted the
states similar authority.
Looking further down the road, all of the differences - including the
treatment of lotteries -- in the House-passed and Senate-passed bills will
have to be resolved by a conference committee. Between now and then,
governors, legislators and states rights advocates will be reminding
Congressional decision-makers that the federal government has always let
the states determine and enforce lottery policy within their respective
borders.
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