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Private Courts

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Tags Free MarketsLegal SystemEntrepreneurship

04/14/1999Shannon P. Duffy

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 litigate.

"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 resolve.

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 arbitrator.

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 completed.

"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.


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