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The Federal Trade Commission is calling for Congress to enact legislation that would make it easier to prove a patent is invalid. Under the FTC proposal, 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.” “That would quite definitely change the dynamic of how patent litigation is done and how negotiations are done,” says Michael Barclay, a partner at Wilson Sonsini Goodrich & Rosati. “It is the most interesting recommendation and will probably be the most controversial.” The recommendation is included in a 315-page report, issued 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 the Department of Justice in February 2002. The FTC report proposes 10 ways to improve patent quality through legislation or regulatory measures. The Department of Justice’s Antitrust Division is to issue its own report that will make similar recommendations for antitrust law. The patent bar is divided on the issue of revising the standards for invalidating patents. Norman Beamer, a partner at Fish & Neave’s Palo Alto, Calif., office, says 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 says. “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. “With yearly applications approximating 300,000, they arrive at the rate of about 1,000 each working day,” the FTC says 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. Among its proposals, the FTC also recommends that Congress enact legislation to create a new procedure that would allow further review of patents after they have been granted; that the U.S. Patent and Trademark Office receive adequate funding; and that the PTO consider possible harm to competition before extending the scope of things that can be patented. University of California Boalt Hall School of Law professor Mark Lemley, who testified twice at the joint FTC-Department of Justice hearings, says 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,” he says. The presumption of validity shouldn’t be as easy as it is “given how easy it is to get a patent.” Q. Todd Dickinson, the former head of the PTO, says he was pleased with the commission’s report overall, particularly the recognition of the PTO’s funding needs to ensure patent quality. “There is a little underappreciation” by the FTC for the applications that don’t get allowed, he says, adding that more than 80 percent of business method patents are rejected. Dickinson, a partner at Howrey Simon Arnold & White, also questions 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 says. “Anti-competition is not grounds for re-examination.” Brenda Sandburg is a reporter at The Recorder, the American Lawyer Media newspaper in San Francisco, where this article first appeared.

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