Austrian Patent Office Announces Document Security Systems' European Patent Invalid in Austria

Document Security Systems, Inc. (Amex: DMC) ("DSS"), a world leader in the development and manufacturing of optical deterrent and authentication technologies that secure electronic data and help prevent counterfeiting and brand fraud from the use of desktop scanners and copiers in the market reported today that the Nullity Department of the Austrian patent office issued its decision in the patent invalidity hearing brought by the European Central Bank (the "ECB") against Document Security Systems, Inc.

The Austrian Patent Office has decided that European Patent No 0455750B1 (the "Patent"), that was awarded to the Company by the European Patent Office, has been deemed invalid in Austria due to "added matter". The judgment is the outcome of a hearing held in Vienna, Austria on October 14, 2009, and does not affect the validity of the patent in other European countries.

Patrick White, CEO of DSS, commented, "Interestingly, on the 13th of July 2009 the European Central Bank published information regarding euro banknote counterfeiting. According to their report, in the first half of 2009 a total of 413,000 counterfeit euro banknotes were withdrawn from circulation; this represents an increase of 32% on the number of banknotes seized in first half of 2008 (312,000). Therefore, the ECB continues to have rising counterfeiting problems. From our analysis they are using older outdated technologies such as ineffective holographs to protect the Euro which the counterfeiters are easily defeating at an ever increasing rate. We have several new technologies which are being patented in the United States and Europe that substantially reduce counterfeiting. This year we have manufactured over 4 million financial instruments for some of the largest consumer product companies on the planet with our technologies and none have been found or reported to be counterfeited. We welcome working with any interested company or Central Bank in updating their defenses against counterfeiting".

White further added: "In regards to the Austrian ruling, it's disappointing but it is somewhat meaningless at this point since it does not deter us from an aggressive stance in Germany and the Netherlands, where the Patent has been declared valid. Our victories in Germany (home of the ECB) and the Netherlands are really all the 'wins' we need as it has given Document Security Systems and our litigation partner, Trebuchet Capital Partners LLC the ability to move forward on infringement lawsuits that seek real monetary damages for the unauthorized use of our patent. In addition, there is no monetary impact on DSS from this decision as a result of the cost agreement we made with Trebuchet announced on August 21, 2008."

In August 1, 2005, DSS filed a patent infringement suit in the European Court of First Instance ("CFI") against the European Central Bank ("ECB") alleging that the Euro banknotes produced by the ECB infringe DSS's Patent In March 2006, the ECB initiated proceedings to invalidate the European Patent. To date, the Patent has been validated in Germany and the Netherlands and invalidated in the United Kingdom, France, Belgium and Austria and there are pending validity proceedings in Spain, Italy and Luxembourg.

Thus far, the determinations in Germany, The Netherlands and France are subject to appeal. The CFI ruled on September 5, 2007 that it was not the correct venue for infringement proceedings, which allows for country-by-country infringement litigation.


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