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While the Federal Trade Commission is calling on Congress to enact legislation that would alter key patent laws, experts say the most controversial provision will face stiff opposition. Among the agency’s recent proposals, the burden of proof required to invalidate a patent would be reduced from a “clear and convincing” evidence standard to a “preponderance of the evidence” standard. “That would quite definitely change the dynamic of how patent litigation is done and how negotiations are done,” said Michael Barclay, a partner at Wilson Sonsini Goodrich & Rosati of Palo Alto, Calif. “It is the most interesting recommendation and will probably be the most controversial.” Mark Janis, an intellectual property professor at the University of Iowa College of Law, said, “That would be perceived by the patent community as a hot-button issue and I think there would be a big, old bloody fight over that.” He said that battle took place 20 years ago, when legislation creating the U.S. Court of Appeals for the Federal Circuit was enacted. The court, which handles all patent appeals, was intended to bring uniformity to patent law. And one area at issue was the presumption of a patent’s validity. “The subtext of the past debate was that people wanted a strong application of the presumption of validity,” Janis said. “That was a problem in the 1960s, 1970s and early 1980s.” 315-page report The recommendation is included in a 315-page report, issued on Oct. 28, in which the FTC attempts to ease conflicts between patent and antitrust laws. Long awaited by the patent bar, the report is the culmination of a series of hearings convened by the FTC and Department of Justice (DOJ) in February 2002. The FTC report proposes 10 ways to improve patent quality through legislation or regulatory measures. The DOJ’s Antitrust Division is to issue its own report that will make similar recommendations for antitrust law. While most expect Congress to maintain its glacial pace on the more controversial proposals, a few pieces of the FTC proposals could be implemented within the next year, members of the patent bar say. “The most imminent is H.R. 1561,” the bill to increase funding for the U.S. Patent and Trademark Office (PTO), said Q. Todd Dickinson, the former head of the patent agency. The legislation cleared the House Judiciary Committee in July. Dickinson, now a partner in Howrey Simon Arnold & White of Washington, said several of the FTC’s recommendations are included in the patent office’s 21st century strategic plan, including a procedure for further review of patents after they have been granted. And other proposals would refine provisions of a 1999 law that overhauled the patent system. That law, the American Inventors Protection Act, took about five years to clear the House and Senate. One provision requires patent applications to be published 18 months after filing if an application was pending in a foreign country. The FTC calls for extending that notification to applications that are pending solely in the United States. Another FTC proposal to limit the award of treble damages for willful infringement is already being addressed by the Federal Circuit. The court is reviewing its previous policy that effectively requires parties to waive attorney-client privilege to defend against claims of willful infringement. Herbert Wamsley, head of the Intellectual Property Owners Association based in Washington, said PTO funding, post-grant review procedures, publication of patent applications and willful infringement reform could be tackled immediately by Congress. “I hope they could be passed before the end of 2004,” he said. The patent bar is divided on the issue of revising the standards for invalidating patents. Norman Beamer, a partner in the Palo Alto office of New York’s Fish & Neave, said changing the burden of proof is not the right thing to do and would not likely be adopted by Congress since it goes against an entrenched standard. People, whenever confronted with a patent, tend to say, “that’s obvious” or “that’s been done before,” Beamer said. “People can’t really prove it. That’s why there is a clear and convincing standard there. If a patent is invalid you have to have proof to back it up.” But the FTC pointed to the limited resources of patent examiners in urging that it be easier for individuals to challenge a patent in court. 1,000 applications daily With yearly applications of around 300,000, they arrive at the rate of about 1,000 each working day, the FTC said in its executive summary of the report. Patent examiners have from eight to 25 hours to read and understand each application, search for prior art, evaluate patentability, communicate with the applicant, work out necessary revisions and reach and write up conclusions. “Given these constraints, along with presumptions and procedures that favor the granting of a patent application, we believe the clear and convincing evidence burden can undermine the ability of the court system to weed out questionable patents,” the FTC said. Mark Lemley, a University of California, Berkeley School of Law professor who testified twice at the joint FTC-DOJ hearings, said the report tracks what scholars, policy-makers and researchers are saying must be done to change the system. “We need a cheaper way to attack the validity of a patent,” Lemley said. “The presumption of validity shouldn’t be as easy as it is given how easy it is to get a patent.” Dickinson said he was pleased with the FTC’s report overall, particularly the recognition of the agency’s need for more funding to ensure patent quality. “There is a little underappreciation by the FTC for the applications that don’t get allowed,” he said, adding that more than 80% of business-method patents are rejected. Dickinson also questioned the FTC’s statement that it would ask the patent and trademark director to re-examine questionable patents that raise competitive concerns. “Director-ordered re-exams can only happen on prior-art evidence,” he said. “Anti-competition is not grounds for reexamination.”

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