BY BEN L. KAUFMAN
The Cincinnati Enquirer
J.C. "Koos" Rasser and Patrick D. Lane are Procter & Gamble patent attorneys who are giving away a painstakingly assembled brainchild that could save corporations billions.
Their new National Patent Board is a private patent court to resolve infringement disputes faster and cheaper than traditional means.
"This will be an invaluable resource for P&G and all businesses," P&G President Durk I. Jager said. "Most patent lawsuits settle out of court but only after a lengthy and costly legal battle. The new patent court will go right to the key issues, quickly and at a fraction of the cost."
The P&G attorneys and fellow trustee Eric M. Dobrusin, a lawyer from Bloomfield Hills, Mich., have incorporated the board and are filling out the 15-member board, recruiting patent lawyers to sit as judges, looking for an executive director and seeking a home for the new court.
They also are asking P&G and another 200 patent-holding corporations for initial $5,000 grants to fund the board for at least three years. Participating law firms each are being
asked for $2,000 and individuals, $1,000.
Quick commitments would allow the court to open its inaugural case by year's end.
Mr. Rasser said the patent board's attractions include:
Even critics praise the idea, saying almost anything is better than the uncertainty and expense of federal courts where neither judges nor jurors specialize in patent law.
- An authoritative decision that can be respected by both sides.
- Quick resolution of disputes.
"What a terrific idea," U.S. District Judge Susan J. Dlott said. "They can have all my patent cases."
She said few judges have the expertise required to fulfill the pretrial task of determining "what the words in the claim mean." Mr. Rasser, vice president and general counsel for P&G patents worldwide, said: "The reason for being unhappy with each other is already there. We want someone else to tell us who's right."
Last year, 2,112 patent cases were filed in U.S. courts, and no one knows how many disputes were resolved by negotiation, mediation or arbitration.
Final disposition can take years, jeopardizing product development, factory construction and marketing plans.
Two years ago, those uncertainties and delays moved Mr. Rasser to ask, "You really wonder, why couldn't we do this much sooner?"
In response, the P&G pair began looking for a better way.
Using a neutral mediator to help opposing parties find a solution rarely works because both sides have decided "how to destroy the other guy in court," Mr. Rasser said.
Leaving decisions to a neutral arbitrator can be "very cumbersome" because "jostling for position" frequently takes almost as much time and money as a federal court trial, Mr. Rasser continued.
Going into court typically costs each party at least $1.2 million, Mr. Lane said, and 80 percent is
spent in pretrial preparation even though 95 percent of patent infringement disputes settle.
Positive motivation was Mr. Rasser's experience in European patent courts, where government judges know patent law and decide cases without juries or extensive, costly pretrial work.
Similarly, the National Advertising Division (NAD) of the Council of Better Business Bureaus has been resolving disputes for a quarter-century. Within 60 days of a complaint against an advertiser, a full-time hearing officer must decide whether there is a reasonable basis for an ad's claims.
NAD director Andrea Levine in New York said 4 percent of the rulings are challenged, and compliance with 96 percent of the recommended changes is typical, even though the forum is voluntary and decisions are nonbinding.
The new patent board emulates European courts and borrows heavily from NAD:
Unlike mediation and arbitration, where the neutral party, venue and rules change from case to case, the patent board will have a panel of lawyers from whom judges are chosen, fixed rules and a permanent home after trustees choose an executive director.
- Anyone can file a complaint regardless of whether they are cash supporters of the board.
- No one can be compelled to participate.
- Participants can decide in advance whether to accept the decision as binding or nonbinding.
- When both sides submit to board jurisdiction, briefs will be filed, and judges will convene a pretrial conference to focus the arguments.
- Except where both sides agree in advance, the judge will not determine damages.
- A one-day hearing will include oral arguments and a decision.
That "institutionalization" was a well-received selling point from the start, Mr. Rasser and Mr. Lane said.
Patent court costs will be modest by trial standards. Mr. Lane predicted that each party will spend $100,000 to
$250,000 to bring a case before the patent board.
Actual patent court costs, including judges' hourly rates, will be split evenly between the parties.
There is no appellate board; losers are free to go to court.
However, decisions will be "nonbinding with teeth," Mr. Lane said. The bite arises from patent board rules: A loser who goes to federal court but does not get a better decision must pay the other side's share of the patent board costs.
It's not clear whether the patent board will allow winners to use its decisions if losers sue in federal court, Mr. Rasser and Mr. Lane said.
That's a key issue for naysayer Joseph Jeffrey Hawley, assistant general counsel for Eastman Kodak Co. in Rochester, N.Y.:
Other skeptics could include outside attorneys who are paid by the hour for patent cases, said George H. Vincent, a Dinsmore & Shohl lawyer who sometimes represents P&G and helped set up and incorporate the patent board.
- If board rulings can be used as evidence, losers might drop valid cases rather than risk a loss in federal court and the possibility of triple damages under patent law. Confidentiality would ease that fear and objection.
- Telling a patent holder that you are bringing a challenge might surrender an "extremely valuable" competitive advantage by revealing early development and marketing plans.
On the other hand, Mr. Vincent said, faster resolution will make patent cases "a whole lot cheaper, and that makes your client a whole lot happier."