#151 ©Copyright 2002, all rights reserved worldwide Gambling and the Law® is a registered trademark of Professor I Nelson Rose, Whittier Law School, Costa Mesa, CA

The major obstacle to any Internet gambling operation is not the law or even the costs of doing business. It is getting customers. Add to this the limited number of “.com” and “.net” names available, and it is easy to see why there have been more lawsuits over brand names than over any other issue connected with online casinos.

The most interesting recent case involved a suit by the company that owned the Rio All Suite Casino Resort hotel-casino in Las Vegas (“RIO”) against a company calling itself Rio International Interlink (“RII”).

The suit drew worldwide attention in the legal and business communities, because the trial judge, Las Vegas-based federal judge Phillip M. Pro, allowed the plaintiff to serve the defendant with the summons and complaint by email. Judge Pro’s ruling was recently upheld by the important Ninth Circuit Court of Appeals.

RII is based in Costa Rica. It is an Internet sports gambling operation, doing business as Rio International Sportsbook, Rio Online Sportsbook, and Rio International Sports. RII accepts bets online via a 1-800 telephone number and at sites with names like www.riosports.com and www.betrio.com.

RIO did not know that RII existed, until RII took out an advertisement in the Football Betting Guide ’98 Preview. Soon, RIO was finding RII’s ads in its own backyard, in the Nevada edition of the Daily Racing Form and on Las Vegas radio stations.

RIO filed suit against RII to stop infringing its registered trademark, “Rio.”

RII grosses an estimated $3 million annually. RIO was not only concerned that it was losing millions of dollars in bets each year to RII. If RII did something terrible, such as failing to pay off winners, it would hurt RIO’s reputation.

This is not that far-fetched. RIO may not be taking bets on the Internet, but it does have a website, www.playrio.com.

The U.S. Constitution requires that state and federal court systems give all parties “due process.” In the case of a new lawsuit, this means letting the defendant know that it has been sued and giving it an adequate opportunity to get a lawyer, show up in court and make its defenses.

The problem for RIO was that RII could not be found. Even after putting an investigator on the case, RIO could not find anyone to serve.

Way back in July 1993, the New Yorker ran a copyrighted cartoon of a dog with his paw on a computer keyboard, talking to another dog on the floor. The caption read, “On the Internet, nobody knows you’re a dog.”

For all the RIO knew, RII could be run by canines in Canada.

RIO could not find RII in Costa Rica. Just because someone says online that they are in Costa Rica does not mean they are actually there.

Only on the Internet could a company advertise extensively, accept millions of dollars in bets and have no physical location.

RIO was able to get papers to an agent, RII’s international courier, IEC. IEC was not authorized to accept service on RII’s behalf, but it did forward the papers. A copy eventually ended up in the hands of John Carpenter, a lawyer in Los Angeles. Carpenter refused to accept service on behalf of RII.

RIO filed an emergency motion to be allowed “alternate service of process.” Of course, due process required that RIO first try to serve RII with notice of this motion. So it sent off more paper, which RII ignored.

Judge Pro granted RIO’s motion and ordered service of process on RII through the mail to Carpenter and IEC and via RII’s email address, email@betrio.com.

RII’s lawyer made a motion to dismiss for insufficient service of process. The motion was heard by Judge Pro, who had ordered the service by email. Not surprisingly, Judge Pro found that the service by email did give EII adequate notice and complied with federal law.

After that, RIO tried to get the case going. It sent out written questions, which RII was required to answer. RII cooperated half-heartedly at best, putting “NA” for many of its answers.

Judge Pro finally got fed up and entered a default judgment against RII. Rii appealed.

The Ninth Circuit agreed with Judge Pro. It held that a defendant could be served via email, so long as that is the only way to effect service.

Many countries, including the U.S., have signed a treaty, the Hague Convention, to make it easier for citizens of one country to serve legal papers on someone in another country. Because the Hague Convention was written before the Internet, it does not say anything about service by email.

The Ninth Circuit held that service by email would not have been good under the Hague Convention. Ironically, the treaty designed to make service easier would have prevented RIO from being able to serve RII at all.

Fortunately for RIO, Costa Rica never signed the Hague Convention.

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Professor I Nelson Rose is recognized as one of the world’s leading authorities on gambling law. His website is www.GamblingAndTheLaw.com