Document Security Systems receives legal boost in patent fight with ECB

Document Security Systems receives legal boost in patent fight with ECB

Document Security Systems (DSS), a New York-based provider of anti-counterfeit software that filed a patent infringement lawsuit against the European Central Bank in 2005, says its lawyers are so confident in its case that they have agreed to accept stock in lieu of legal fees.

DSS filed a patent infringment suit against the ECB in August 2005 alleging that the euro banknotes produced by the ECB infringe a European patent it holds that covers a method of incorporating an anti-counterfeiting feature into bank notes to protect against forgeries by digital scanning and copying devices.

In March 2006 the ECB filed separate counterclaim lawsuits in the UK and Luxembourg patent courts seeking the invalidation of DSS's patent. Claims to invalidity, largely in the same form, in the Netherlands, Germany, Austria, Italy, Spain, Belgium and France were subsequently served.

The first hearing in the invalidity suits is scheduled to begin in London on 22 January 2007, and is expected to last for a week. DSS says a judgment could take a further 60-90 days and any subsequent appeal process could take a further year to complete.

The vendor says it has inked an agreement with law firm McDermott Will & Emery (MWE) that allows it to use its common stock to eliminate the cash requirements for legal fees related to the ECB litigation, not to exceed $1.2 million in stock.

If any legal services are provided for these cases by MWE over the $1.2 million cap, those fees will not be charged to DSS. Initially, 47,015 restricted shares will be issued to MWE under the agreement to cover all outstanding legal fees that were incurred through September 2006.

DSS says the deal shows that MWE has a high degree of confidence that patent validity and the ECB's infringement can be established. Patrick White, chairman, president and CEO, DSS, says: "MWE's commitment to the case is a strong message that we have the resources to see this case to its conclusion. MWE's commitment also confirms our belief that our case is valid and should not be taken lightly."

Commenting on the case, Laurence Cohen, partner at MWE UK, says: "Based on our extensive due-diligence prior to filing the infringement suit, and especially after having reviewed both parties’ expert opinions on validity which were recently filed with the English High Court, we believe DSS has a compelling case against the ECB."

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