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There’s a new game in town for challenging patents. It’s the U.S. Patent and Trademark Office re-examination process, a low-cost administrative procedure that patent lawyers expect to surge in popularity under a bill recently passed by Congress. The reform, tucked into the Department of Justice reauthorizing legislation, is part of a package of broadly supported intellectual property measures expected to be signed into law by President George W. Bush this month. Also included in the bill is a provision that allows the United States to join the Madrid Protocol, a trademark treaty that makes it easier, faster, and cheaper to register a trademark internationally. The actual treaty must still be ratified by the Senate, where insiders expect it to pass, possibly before adjournment. “I want to thank our lawmakers for reinforcing confidence in our nation’s intellectual property system by providing American innovators new tools to advance technology and protect their international market share, and strengthening USPTO’s ability to issue quality patents,” said PTO Director James Rogan in a statement. The biggest change in patent law deals with the right of those challenging a patent to appeal PTO decisions directly to the U.S. Court of Appeals for the Federal Circuit and to submit documents, or “prior art,” in re-examinations. The PTO conducts a re-examination on an issued patent when prior art raises substantial new questions of patentability. The agency can then modify or invalidate the patent’s claims. Under current law, a third party can petition the PTO for a re-examination on a competitor’s patent and provide prior art that may have been overlooked. The American Inventors Protection Act of 1999 gave outsiders a new option to actively participate in the review and interact with the examiner. To date, though, this option, known as an inter partes, has been a complete flop — it has been used in only three cases. The biggest problem? While patent holders can appeal an adverse decision by the PTO to the Federal Circuit, third parties cannot. This made the process of challenging a patent at the PTO “so risky,” says Gregory Maier, a name partner at Oblon, Spivak, McClelland, Maier & Neustadt, that there was “very little incentive to use it. You couldn’t be sure [the PTO] would apply the law of the Federal Circuit.” But now, predicts former PTO Director Q. Todd Dickinson, a partner at Howrey Simon Arnold & White, re-examination may be an attractive alternative, especially for clients looking to save money. “It’s a much less costly process than litigation to test validity,” he says. Dickinson estimates that it costs about $50,000 for a third party to send in prior art alone. To participate in a re-examination inter partes would run up several hundred thousand dollars in legal fees. But to litigate in U.S. District Court could cost millions. Still, as Maier points out, re-examination is not going to replace traditional patent litigation. “In a situation where you have a major product and a major market value, cost isn’t the main consideration. Winning is,” he says. But re-examination may be appropriate when “there’s not so much at stake and the risk is lower — say, in the worst case, you could lose and still go forward with licensing.” A second prong of the new legislation deals with the admissibility of previously cited prior art in a re-examination. The bill overturns a 1997 Federal Circuit decision in In re Portola Packaging, which held that only new prior art could be considered during a re-examination — that is, “new information about pre-existing technology which may have escaped review.” What it didn’t allow was for third parties to ask a patent examiner to take another look at a document previously submitted. “Some patentees have a history of citing a tremendous number of references, and often buried in that large set may be a few diamonds — references that are extremely close to the filed patent application,” says James Myers, a D.C.-based partner at Kilpatrick Stockton. “Later, when there is a controversy, a challenger can’t go back, under current rules, to the Patent Office and say, ‘You made a mistake when you granted this patent. Here is one absolutely critical document for the examiner to reread.’ ” Now, they can, and Myers says this, too, will make re-examination a better option. Another noteworthy aspect of the new legislation deals with the Madrid Protocol, an international trademark agreement established in 1989. Long topping the business community’s trademark wish list, the treaty was previously derailed in the Senate by former Foreign Relations Committee Chairman Jesse Helms (R-N.C.), who linked it to a long-running fight between a French-Cuban joint venture and Bacardi over the trademark rights to Havana Club Rum. With the rum battle settled by the World Trade Organization, the treaty is no longer “held hostage by Havana Club,” says Intellectual Property Owners Association Executive Director Herbert Wamsley, who expects Senate ratification. Once enacted, the treaty will allow trademark filers to submit one application in English to the PTO — with one set of filing fees, in dollars. The application is then forwarded to all designated countries for review under local trademark laws. The 70 signatory countries include Australia, China, Japan, Russia, and the European Union member countries. “This ‘one-stop shopping’ system for trademark filing will be a great step forward,” said PTO Director Rogan in a speech at the International Trademark Association’s annual meeting in May. “It will benefit trademark owners around the globe by cutting red tape and lowering costs.” Whether it will benefit local trademark lawyers is less clear. “The bar is still trying to figure it out ourselves, what it will mean to our practice and our clients,” says Jody Drake, a trademark partner at Sughrue Mion. She anticipates less work for the firm’s foreign affiliates, who file trademark applications for Sughrue clients abroad. And it may mean less work for the firm filing foreign applications in the United States. She estimates that filing a trademark will cost around $17,000 if a client chooses to designate all 70 countries — less than by doing it country by country, although she couldn’t say how much less. Finally, on the copyright front, the law extends the current exemption of educational use of copyrighted materials to distance learning. That means teachers at schools and colleges don’t need permission from a copyright holder before sending digitized books, music, and movies over the Internet. The legislation had the backing of Sens. Patrick Leahy (D-Vt.) and Orrin Hatch (R-Utah), but initially was opposed by the publishing industry, which worried that the bill would undercut its educational market and that online materials would cut down on book purchases. Overall, says Wamsley of the IP owners group, which lobbied to help pass the legislation, the package is “a cleanup, a refinement, and an improvement of some provisions, which had all been pending for some time. We’re very pleased to see this.”

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