Mises Daily

Home | Library | Private Courts

Private Courts

April 14, 1999

The Legal Intelligencer
April 14, 1999

Patently Obvious
By Shannon P. Duffy
U.S. Courthouse Correspondent

Promising to slash the costs of litigating patent cases–both in money
and time–a group of in-house and private patent lawyers are touring the
country to persuade their colleagues to join the newly formed National
Patent Board.

Dubbed ``a court of first resort,'' the NPB is the brain-child of Jacobus
``Koos'' Rasser, Procter & Gamble's vice president and general counsel in
charge of patents worldwide. As the mother of all intellectual property
ADRs, the NPB says it can cut the average costs of battling over a patent
from $1.5 million down to $100,000.

And it's over in six months. That's a promise.

So far, industry seems extremely enthusiastic. Computer chip giant Intel
Corp. has signed on, along with General Electric, Mobil, DuPont, Rohm &
Haas and Hewlitt Packard.

In a recent interview in the offices of NPB trustee Mari M. Gursky Shaw of
Akin Gump Strauss Hauer & Feld, the Holland-born Rasser explained that the
idea for the NPB came to him when he learned that major corporations such
as his employer have just as many disputes over advertising, but spend just
a fraction on the litigation.

At first blush, he said, it might seem that advertising disputes are simply
simpler. But they're not. Since a claim of false advertising often involves
allegations of false claims, it can get complicated and expensive to

"It's not at all the case that advertising claims are less complex in a
technical sense than patent cases. The stakes are also just as high,''
Rasser said.

The secret, Rasser learned, is that many advertising disputes are resolved
before the National Advertising Board, an alternative dispute mechanism
that drastically cuts litigation costs and solves many disputes before they
ever go to court. Less than 1 percent of the NAB's decisions are appealed.

"They've been around for 25 years. Their decisions are thorough–and
fair,'' Rasser said.

With the NAB as his model, Rasser set out to design the NPB and quickly won
enthusiastic support from the top brass at Procter & Gamble.

Within two years, Rasser's proposal has developed completely: the NPB is
now a non-profit corporation with an executive director and a full board of
trustees, and is open for business, just waiting for its first case to

Unlike traditional arbitration, in which each side chooses one arbitrator
who in turn choose a third, the NPB will operate with teams of three
arbitrators hand-picked by the executive director for their expertise. To
save money, parties can also choose to have their cases heard by a single

Cases will be put on a strict six-month track, with discovery limited to
that which is requested by the arbitrators. Hearings will be one-day
affairs and decisions will be rendered within one month.

And while the NPB's decisions will be non-binding, the process is also
designed to discourage going to court since both sides agree that the
decision will be admissible in court and that the loser will pay the
winner's attorney fees.

Rasser was in Philadelphia recently to join Shaw in selling the idea of the
NPB to local corporations.

Shaw said that about 18 of those who attended the meeting were chief patent
counsel at local drug companies and other corporations that litigate patent
cases on a regular basis.

The best selling point of the NPB, Shaw said, is its cost savings.

While a patent case in federal court can easily cost more than $1 million
and take 19 months on average to litigate–with some cases costing as
much as $9 million–an NPB case can be decided for as little as $100,000
to $150,000.

And since the NPB doesn't have the same case-or-controversy requirements,
Rasser said that cases can be filed even before product development is

"Time is often the most important factor,'' Rasser said, noting that the
costs of patent litigation often pale in comparison to the wasted costs of
developing a product that is later ruled to infringe another patent.

And the quicker a patent dispute is resolved, he said, the less impact a
damages determination will have.

As a native European, Rasser said he brought his experience with Europe's
specialized courts to his development of the NPB. The idea of a one-day
hearing is new to Americans, he said, but quite common in Europe.

The NPB will be funded by users and members. Corporate memberships are
currently $5,000, while law firms pay $2,000 for the right to practice
before the NPB and individuals pay $1,000.

See also, in PDF, Bruce Benson's The Impetus for Recognizing Private Property and Adopting Ethical Behavior in a Market Economy: Natural Law, Government Law, or Evolving Self-Interest from the Review of Austrian Economics, Vol. 6, No. 2.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

Follow Mises Institute