[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4370 Introduced in House (IH)]

<DOC>






118th CONGRESS
  1st Session
                                H. R. 4370

 To amend title 35, United States Code, to invest in inventors in the 
  United States, maintain the United States as the leading innovation 
economy in the world, and protect the property rights of the inventors 
  that grow the economy of the United States, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             June 27, 2023

  Mr. Buck (for himself and Ms. Ross) introduced the following bill; 
          which was referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
 To amend title 35, United States Code, to invest in inventors in the 
  United States, maintain the United States as the leading innovation 
economy in the world, and protect the property rights of the inventors 
  that grow the economy of the United States, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Promoting and Respecting 
Economically Vital American Innovation Leadership Act'' or the 
``PREVAIL Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) The patent property rights enshrined in the 
        Constitution of the United States provide the foundation for 
        the exceptional innovation environment in the United States.
            (2) Reliable and effective patent protection encourages 
        United States inventors to invest their resources in creating 
        new inventions.
            (3) United States inventors have made discoveries leading 
        to patient cures, positive changes to the standard of living 
        for all people in the United States, and improvements to the 
        agricultural, telecommunications, and electronics industries, 
        among others.
            (4) The United States patent system is an essential part of 
        the economic success of the United States.
            (5) Reliable and effective patent protection improves the 
        chances of success for individual inventors and small companies 
        and increases the chances of securing investments for those 
        inventors and companies.
            (6) Intellectual property-intensive industries in the 
        United States--
                    (A) generate tens of millions of jobs for 
                individuals in the United States; and
                    (B) account for more than \1/3\ of the gross 
                domestic product of the United States.
            (7) The National Security Commission on Artificial 
        Intelligence has emphasized that--
                    (A) the People's Republic of China is leveraging 
                and exploiting intellectual property as a critical tool 
                within its national strategies for emerging 
                technologies; and
                    (B) the United States has failed to similarly 
                recognize the importance of intellectual property in 
                securing its own national security, economic interests, 
                and technological competitiveness.
            (8) In the highly competitive global economy, the United 
        States needs reliable and effective patent protections to 
        safeguard national security interests and maintain its position 
        as the most innovative country in the world.
            (9) Congress last enacted comprehensive reforms of the 
        patent system in 2011.
            (10) Unintended consequences of the comprehensive 2011 
        reform of patent laws have become evident during the decade 
        preceding the date of enactment of this Act, including the 
        strategic filing of post-grant review proceedings to depress 
        stock prices and extort settlements, the filing of repetitive 
        petitions for inter partes and post-grant reviews that have the 
        effect of harassing patent owners, and the unnecessary 
        duplication of work by the district courts of the United States 
        and the Patent Trial and Appeal Board, all of which drive down 
        investment in innovation and frustrate the purpose of those 
        patent reform laws.
            (11) Efforts by Congress to reform the patent system 
        without careful scrutiny create a serious risk of making it 
        more costly and difficult for innovators to protect their 
        patents from infringement, thereby--
                    (A) disincentivizing United States companies from 
                innovating; and
                    (B) weakening the economy of the United States.

SEC. 3. PATENT TRIAL AND APPEAL BOARD.

    Section 6 of title 35, United States Code, is amended--
            (1) by redesignating subsections (b), (c), and (d) as 
        subsections (c), (d), and (e), respectively;
            (2) by inserting after subsection (a) the following:
    ``(b) Code of Conduct.--
            ``(1) In general.--The Director shall prescribe regulations 
        establishing a code of conduct for the members of the Patent 
        Trial and Appeal Board.
            ``(2) Considerations.--In prescribing regulations under 
        paragraph (1), the Director shall consider the Code of Conduct 
        for United States Judges and how the provisions of that Code of 
        Conduct may apply to the Patent Trial and Appeal Board.'';
            (3) by striking subsection (d), as so redesignated, and 
        inserting the following:
    ``(d) 3-Member Panels.--
            ``(1) In general.--Each appeal, derivation proceeding, 
        post-grant review, and inter partes review shall be heard by at 
        least 3 members of the Patent Trial and Appeal Board, who shall 
        be designated by the Director. The Patent Trial and Appeal 
        Board may grant rehearings.
            ``(2) Changes to constitution of panel.--After the 
        constitution of a panel of the Patent Trial and Appeal Board 
        under this subsection has been made public, any changes to the 
        constitution of that panel, including changes that were made 
        before the constitution of the panel was made public, shall be 
        noted in the record.
            ``(3) No direction or influence.--An officer who has 
        supervisory authority or disciplinary authority with respect to 
        an administrative patent judge of the Patent Trial and Appeal 
        Board (or a delegate of such an officer), and who is not a 
        member of a panel described in this subsection, shall refrain 
        from communications with the panel that direct or otherwise 
        influence any merits decision of the panel.
            ``(4) Ineligibility to hear review.--A member of the Patent 
        Trial and Appeal Board who participates in the decision to 
        institute an inter partes review or a post-grant review of a 
        patent shall be ineligible to hear the review.''; and
            (4) in subsection (e), as so redesignated--
                    (A) in the first sentence--
                            (i) by striking ``this subsection'' and 
                        inserting ``the date of enactment of the 
                        Promoting and Respecting Economically Vital 
                        American Innovation Leadership Act'';
                            (ii) by striking ``by the Director'' and 
                        inserting ``by the Director or the Secretary''; 
                        and
                            (iii) by inserting ``or the Secretary, as 
                        applicable,'' after ``on which the Director''; 
                        and
                    (B) in the second sentence--
                            (i) by inserting after ``by the Director'' 
                        the following: ``, or, before the date of 
                        enactment of the Promoting and Respecting 
                        Economically Vital American Innovation 
                        Leadership Act, having performed duties no 
                        longer performed by administrative patent 
                        judges,''; and
                            (ii) by striking ``that the administrative 
                        patent judge so appointed'' and inserting 
                        ``that the applicable administrative patent 
                        judge''.

SEC. 4. INTER PARTES REVIEW.

    (a) Standing and Real Parties in Interest.--Section 311 of title 
35, United States Code, is amended by adding at the end the following:
    ``(d) Persons That May Petition.--
            ``(1) Definition.--In this subsection, the term `charged 
        with infringement' means a real and substantial controversy 
        regarding infringement of a patent exists such that the person 
        would have standing to bring a declaratory judgment action in 
        Federal court.
            ``(2) Necessary conditions.--A person may not file with the 
        Office a petition to institute an inter partes review of a 
        patent unless the person, or a real party in interest or a 
        privy of the person, has been--
                    ``(A) sued for infringement of the patent; or
                    ``(B) charged with infringement of the patent.
    ``(e) Real Party in Interest.--For purposes of this chapter, a 
person that, directly or through an affiliate, subsidiary, or proxy, 
makes a financial contribution to the preparation for, or conduct 
during, an inter partes review on behalf of a petitioner shall be 
considered a real party in interest of that petitioner.''.
    (b) Institution Decision Rehearing Timing.--Section 314 of title 
35, United States Code, is amended by adding at the end the following:
    ``(e) Rehearing.--Not later than 45 days after the date on which a 
request for rehearing from a determination by the Director under 
subsection (b) is filed, the Director shall finally decide any request 
for reconsideration, rehearing, or review with respect to the 
determination, except that the Director may, for good cause shown, 
extend that 45-day period by not more than 30 days.''.
    (c) Eliminating Repetitive Proceedings.--
            (1) In general.--Section 315 of title 35, United States 
        Code, is amended--
                    (A) in subsection (b), by amending the second 
                sentence to read as follows: ``The time limitation set 
                forth in the preceding sentence shall not bar a request 
                for joinder under subsection (d), but shall establish a 
                rebuttable presumption against joinder for the 
                requesting person.'';
                    (B) by redesignating subsections (c), (d), and (e) 
                as subsections (d), (e), and (f), respectively;
                    (C) by inserting after subsection (b) the 
                following:
    ``(c) Single Forum.--
            ``(1) In general.--If an inter partes review is instituted 
        challenging the validity of a patent, the petitioner, a real 
        party in interest, or a privy of the petitioner may not file or 
        maintain, in a civil action arising in whole or in part under 
        section 1338 of title 28, or in a proceeding before the 
        International Trade Commission under section 337 of the Tariff 
        Act of 1930 (19 U.S.C. 1337), a claim, a counterclaim, or an 
        affirmative defense challenging the validity of any claim of 
        the patent on any ground described in section 311(b).
            ``(2) Considerations.--In determining whether to institute 
        a proceeding under this chapter, subject to the provisions of 
        subsections (a)(1) and (g), the Director may not reject a 
        petition requesting an inter partes review on the basis of the 
        petitioner, a real party in interest, or a privy of the 
        petitioner filing or maintaining a claim, a counterclaim, or an 
        affirmative defense challenging the validity of the applicable 
        patent in any civil action arising in whole or in part under 
        section 1338 of title 28, or in a proceeding before the 
        International Trade Commission under section 337 of the Tariff 
        Act of 1930 (19 U.S.C. 1337).'';
                    (D) by amending subsection (d), as so redesignated, 
                to read as follows:
    ``(d) Joinder.--
            ``(1) In general.--If the Director institutes an inter 
        partes review, the Director, in the discretion of the Director, 
        may join as a party to that inter partes review any person that 
        properly files a request to join the inter partes review and a 
        petition under section 311 that the Director, after receiving a 
        preliminary response under section 313 or the expiration of the 
        time for filing such a response, determines warrants the 
        institution of an inter partes review under section 314.
            ``(2) Time-barred person.--Pursuant to paragraph (1), the 
        Director, in the discretion of the Director, may join as a 
        party to an inter partes review a person that did not satisfy 
        the time limitation under subsection (b) that rebuts the 
        presumption against joinder, except that any such person shall 
        not be permitted to serve as the lead petitioner and shall not 
        be permitted to maintain the inter partes review unless a 
        petitioner that satisfied the time limitation under subsection 
        (b) remains in the inter partes review.'';
                    (E) by amending subsection (e), as so redesignated, 
                to read as follows:
    ``(e) Multiple Proceedings.--
            ``(1) In general.--Notwithstanding sections 135(a), 251, 
        and 252, and chapter 30, after a petition to institute an inter 
        partes review is filed, if another proceeding or matter 
        involving the patent is before the Office--
                    ``(A) the parties shall notify the Director of that 
                other proceeding or matter--
                            ``(i) not later than 30 days after the date 
                        of entry of the notice of filing date accorded 
                        to the petition; or
                            ``(ii) if the other proceeding or matter is 
                        filed after the date on which the petition to 
                        institute an inter partes review is filed, not 
                        later than 30 days after the date on which the 
                        other proceeding or matter is filed; and
                    ``(B) the Director shall issue a decision 
                determining the manner in which the inter partes review 
                or other proceeding or matter may proceed, including 
                providing for stay, transfer, consolidation, or 
                termination of any such matter or proceeding.
            ``(2) Considerations.--In determining whether to institute 
        a proceeding under this chapter, the Director shall, unless the 
        Director determines that the petitioner has demonstrated 
        exceptional circumstances, reject any petition that presents 
        prior art or an argument that is the same or substantially the 
        same as prior art or an argument that previously was presented 
        to the Office.'';
                    (F) by amending subsection (f), as so redesignated, 
                to read as follows:
    ``(f) Estoppel.--
            ``(1) In general.--A petitioner that has previously 
        requested an inter partes review of a claim in a patent under 
        this chapter, or a real party in interest or a privy of such a 
        petitioner, may not request or maintain another proceeding 
        before the Office with respect to that patent on any ground 
        that the petitioner raised or reasonably could have raised in 
        the petition requesting or during the prior inter partes 
        review, unless--
                    ``(A) after the filing of the initial petition, the 
                petitioner, or a real party in interest or a privy of 
                the petitioner, is charged with infringement of 
                additional claims of the patent;
                    ``(B) a subsequent petition requests an inter 
                partes review of only the additional claims of the 
                patent that the petitioner, or a real party in interest 
                or a privy of the petitioner, is later charged with 
                infringing; and
                    ``(C) that subsequent petition is accompanied by a 
                request for joinder to the prior inter partes review, 
                which overcomes the rebuttable presumption against 
                joinder set forth in subsection (b), and which the 
                Director shall grant if the Director authorizes an 
                inter partes review to be instituted on the subsequent 
                petition under section 314.
            ``(2) Joined party.--Any person joined as a party to an 
        inter partes review, and any real party in interest or any 
        privy of such person, shall be estopped under this subsection 
        and subsections (c)(1) and (e)(2) to the same extent as if that 
        person, real party in interest, or privy had been the first 
        petitioner in that inter partes review.''; and
                    (G) by adding at the end the following:
    ``(g) Federal Court and International Trade Commission Validity 
Determinations.--An inter partes review of a patent claim may not be 
instituted or maintained if, in a civil action arising in whole or in 
part under section 1338 of title 28, or in a proceeding before the 
International Trade Commission under section 337 of the Tariff Act of 
1930 (19 U.S.C. 1337), in which the petitioner, a real party in 
interest, or a privy of the petitioner is a party, the court, or the 
International Trade Commission, as applicable, has entered a final 
judgment that decides a challenge to the validity of the patent claim 
with respect to any ground described in section 311(b).''.
            (2) Technical and conforming amendments.--Section 316(a) of 
        title 35, United States Code, is amended--
                    (A) in paragraph (11), by striking ``section 
                315(c)'' and inserting ``section 315(d)''; and
                    (B) in paragraph (12), by striking ``section 
                315(c)'' and inserting ``section 315(d)''.
    (d) Conduct of Inter Partes Review.--Section 316 of title 35, 
United States Code, is amended--
            (1) in subsection (a)--
                    (A) by amending paragraph (5) to read as follows:
            ``(5) setting forth standards and procedures for discovery 
        of relevant evidence, including that such discovery shall be 
        limited to--
                    ``(A) the deposition of witnesses submitting 
                affidavits or declarations;
                    ``(B) evidence identifying the real parties in 
                interest of the petitioner; and
                    ``(C) what is otherwise necessary in the interest 
                of justice;'';
                    (B) by amending paragraph (9) to read as follows:
            ``(9) setting forth standards and procedures for--
                    ``(A) allowing the patent owner to move to amend 
                the patent under subsection (d) to cancel a challenged 
                claim or propose a reasonable number of substitute 
                claims;
                    ``(B) allowing the Patent Trial and Appeal Board to 
                provide guidance on substitute claims proposed by the 
                patent owner;
                    ``(C) allowing the patent owner to further revise 
                proposed substitute claims after the issuance of 
                guidance described in subparagraph (B); and
                    ``(D) ensuring that any information submitted by 
                the patent owner in support of any amendment entered 
                under subsection (d), and any guidance issued by the 
                Patent Trial and Appeal Board, is made available to the 
                public as part of the prosecution history of the 
                patent;'';
                    (C) in paragraph (12), by striking ``and'' at the 
                end;
                    (D) in paragraph (13), by striking the period at 
                the end and inserting ``; and''; and
                    (E) by adding at the end the following:
            ``(14) setting forth the standards for demonstrating 
        exceptional circumstances under sections 303(e)(1) and 
        315(e)(2).'';
            (2) by amending subsection (e) to read as follows:
    ``(e) Evidentiary Standards.--
            ``(1) Presumption of validity.--The presumption of validity 
        under section 282(a) shall apply to previously issued claims of 
        a patent that is challenged in an inter partes review under 
        this chapter.
            ``(2) Burden of proof.--In an inter partes review under 
        this chapter--
                    ``(A) the petitioner shall have the burden of 
                proving a proposition of unpatentability of a 
                previously issued claim of a patent by clear and 
                convincing evidence; and
                    ``(B) the petitioner shall have the burden of 
                persuasion, by a preponderance of the evidence, with 
                respect to a proposition of unpatentability for any 
                substitute claim proposed by the patent owner.''; and
            (3) by adding at the end the following:
    ``(f) Claim Construction.--For the purposes of this chapter--
            ``(1) each challenged claim of a patent, and each 
        substitute claim proposed in a motion to amend, shall be 
        construed as the claim would be construed under section 282(b) 
        in an action to invalidate a patent, including by construing 
        each such claim in accordance with--
                    ``(A) the ordinary and customary meaning of the 
                claim as understood by a person having ordinary skill 
                in the art to which the claimed invention pertains; and
                    ``(B) the prosecution history pertaining to the 
                patent; and
            ``(2) if a court has previously construed a challenged 
        claim of a patent or a challenged claim term in a civil action 
        to which the patent owner was a party, the Office shall 
        consider that claim construction.''.
    (e) Settlement.--Section 317(a) of title 35, United States Code, is 
amended by striking the second sentence.
    (f) Timing To Issue Trial Certificate and Decisions on Rehearing.--
Section 318 of title 35, United States Code, is amended--
            (1) in subsection (b), by inserting ``, not later than 60 
        days after the date on which the parties to the inter partes 
        review have informed the Director that the time for appeal has 
        expired or any appeal has terminated,'' after ``the Director 
        shall''; and
            (2) by adding at the end the following:
    ``(e) Rehearing.--Not later than 90 days after the date on which a 
request for rehearing of a final written decision issued by the Patent 
and Trial Appeal Board under subsection (a) is filed, the Board or the 
Director shall finally decide any request for reconsideration, 
rehearing, or review that is submitted with respect to the decision, 
except that the Director may, for good cause shown, extend that 90-day 
period by not more than 60 days.
    ``(f) Review by Director.--
            ``(1) In general.--The Director may grant rehearing, 
        reconsideration, or review of a decision by the Patent Trial 
        and Appeal Board issued under this chapter.
            ``(2) Requirements.--Any reconsideration, rehearing, or 
        review by the Director, as described in paragraph (1), shall be 
        issued in a separate written opinion that--
                    ``(A) is made part of the public record; and
                    ``(B) sets forth the reasons for the 
                reconsideration, rehearing, or review of the applicable 
                decision by the Patent Trial and Appeal Board.
    ``(g) Rule of Construction.--For the purposes of an appeal 
permitted under section 141, any decision on rehearing, 
reconsideration, or review of a final written decision of the Patent 
Trial and Appeal Board under subsection (a) of this section that is 
issued by the Director shall be deemed to be a final written decision 
of the Patent Trial and Appeal Board.''.
    (g) Timing To Issue Decisions on Remand.--Section 319 of title 35, 
United States Code, is amended--
            (1) by striking ``A party'' and inserting the following:
    ``(a) In General.--A party''; and
            (2) by adding at the end the following:
    ``(b) Timing on Remand After Appeal.--Not later than 120 days after 
the date on which a mandate issues from the court remanding to the 
Patent Trial and Appeal Board after an appeal under subsection (a), the 
Board or the Director shall finally decide any issue on remand, except 
that the Director may, for good cause shown, extend that 120-day period 
by not more than 60 days.''.

SEC. 5. POST-GRANT REVIEW.

    (a) Real Parties in Interest.--Section 321 of title 35, United 
States Code, is amended by adding at the end the following:
    ``(d) Real Party in Interest.--For purposes of this chapter, a 
person that, directly or through an affiliate, subsidiary, or proxy, 
makes a financial contribution to the preparation for, or conduct 
during, a post-grant review on behalf of a petitioner shall be 
considered a real party in interest of that petitioner.''.
    (b) Timing To Issue Decisions on Rehearing.--Section 324 of title 
35, United States Code, is amended by adding at the end the following:
    ``(f) Rehearing.--Not later than 45 days after the date on which a 
request for rehearing from a determination by the Director under 
subsection (c) is filed, the Director shall finally decide any request 
for reconsideration, rehearing, or review with respect to the 
determination, except that the Director may, for good cause shown, 
extend that 45-day period by not more than 30 days.''.
    (c) Eliminating Repetitive Proceedings.--Section 325 of title 35, 
United States Code, is amended--
            (1) by redesignating subsections (c) through (f) as 
        subsections (d) through (g), respectively;
            (2) by inserting after subsection (b) the following:
    ``(c) Single Forum.--
            ``(1) In general.--If a post-grant review is instituted 
        challenging the validity of a patent, the petitioner, a real 
        party in interest, or a privy of the petitioner may not file or 
        maintain, in a civil action arising in whole or in part under 
        section 1338 of title 28, or in a proceeding before the 
        International Trade Commission under section 337 of the Tariff 
        Act of 1930 (19 U.S.C. 1337), a claim, a counterclaim, or an 
        affirmative defense challenging the validity of any claim of 
        the patent.
            ``(2) Considerations.--In determining whether to institute 
        a proceeding under this chapter, subject to the provisions of 
        subsections (a)(1) and (h), the Director may not reject a 
        petition requesting a post-grant review on the basis of the 
        petitioner, a real party in interest, or a privy of the 
        petitioner filing or maintaining a claim, a counterclaim, or an 
        affirmative defense challenging the validity of the patent in 
        any civil action arising in whole or in part under section 1338 
        of title 28, or in a proceeding before the International Trade 
        Commission under section 337 of the Tariff Act of 1930 (19 
        U.S.C. 1337).'';
            (3) by amending subsection (e), as so redesignated, to read 
        as follows:
    ``(e) Multiple Proceedings.--
            ``(1) In general.--Notwithstanding sections 135(a), 251, 
        and 252, and chapter 30, after a petition to institute a post-
        grant review is filed, if another proceeding or matter 
        involving the patent is before the Office--
                    ``(A) the parties shall notify the Director of that 
                other proceeding or matter--
                            ``(i) not later than 30 days after the date 
                        of entry of the notice of filing date accorded 
                        to the petition; or
                            ``(ii) if the other proceeding or matter is 
                        filed after the date on which the petition to 
                        institute an inter partes review is filed, not 
                        later than 30 days after the date on which the 
                        other proceeding or matter is filed; and
                    ``(B) the Director shall issue a decision 
                determining the manner in which the post-grant review 
                or other proceeding or matter may proceed, including 
                providing for stay, transfer, consolidation, or 
                termination of any such matter or proceeding.
            ``(2) Considerations.--In determining whether to institute 
        a proceeding under this chapter, the Director shall, unless the 
        Director determines that the petitioner has demonstrated 
        exceptional circumstances, reject any petition that presents 
        prior art or an argument that is the same or substantially the 
        same as prior art or an argument that previously was presented 
        to the Office.'';
            (4) by amending subsection (f), as so redesignated, to read 
        as follows:
    ``(f) Estoppel.--
            ``(1) In general.--A petitioner that has previously 
        requested a post-grant review of a claim in a patent under this 
        chapter, or a real party in interest or a privy of a 
        petitioner, may not request or maintain another proceeding 
        before the Office with respect to that patent on any ground 
        that the petitioner raised or reasonably could have raised in 
        the petition requesting or during the prior post-grant review, 
        unless--
                    ``(A) after the filing of the initial petition, the 
                petitioner, or a real party in interest or a privy of 
                the petitioner, is charged with infringement of 
                additional claims of the patent;
                    ``(B) a subsequent petition requests an inter 
                partes review of only the additional claims of the 
                patent that the petitioner, or a real party in interest 
                or a privy of the petitioner, is later charged with 
                infringing; and
                    ``(C) that subsequent petition is accompanied by a 
                request for joinder to the prior post-grant review, 
                which the Director shall grant if the Director 
                authorizes a post-grant review to be instituted on the 
                subsequent petition under section 324.
            ``(2) Joined party.--Any person joined as a party to a 
        post-grant review, and any real party in interest or any privy 
        of such person, shall be estopped under this subsection and 
        subsections (c)(1) and (e)(2) to the same extent as if that 
        person, real party in interest, or privy had been the first 
        petitioner in that post-grant review.''; and
            (5) by adding at the end the following:
    ``(h) Federal Court and International Trade Commission Validity 
Determinations.--A post-grant review of a patent claim may not be 
instituted or maintained if, in a civil action arising in whole or in 
part under section 1338 of title 28, or in a proceeding before the 
International Trade Commission under section 337 of the Tariff Act of 
1930 (19 U.S.C. 1337), in which the petitioner, a real party in 
interest, or a privy of the petitioner is a party, the court, or the 
International Trade Commission, as applicable, has entered a final 
judgment that decides a challenge to the validity of the patent 
claim.''.
    (d) Conduct of Post-Grant Review.--Section 326 of title 35, United 
States Code, is amended--
            (1) in subsection (a)--
                    (A) by amending paragraph (5) to read as follows:
            ``(5) setting forth standards and procedures for discovery 
        of relevant evidence, including that such discovery shall be 
        limited to--
                    ``(A) the deposition of witnesses submitting 
                affidavits or declarations;
                    ``(B) evidence identifying the real parties in 
                interest of the petitioner; and
                    ``(C) what is otherwise necessary in the interest 
                of justice;'';
                    (B) by amending paragraph (9) to read as follows:
            ``(9) setting forth standards and procedures for--
                    ``(A) allowing the patent owner to move to amend 
                the patent under subsection (d) to cancel a challenged 
                claim or propose a reasonable number of substitute 
                claims;
                    ``(B) allowing the Patent Trial and Appeal Board to 
                provide guidance on substitute claims proposed by the 
                patent owner;
                    ``(C) allowing the patent owner to further revise 
                proposed substitute claims after the issuance of 
                guidance described in subparagraph (B); and
                    ``(D) ensuring that any information submitted by 
                the patent owner in support of any amendment entered 
                under subsection (d), and any guidance issued by the 
                Patent Trial and Appeal Board, is made available to the 
                public as part of the prosecution history of the 
                patent;'';
                    (C) in paragraph (11), by striking ``section 
                325(c)'' and inserting ``section 325(d)'';
                    (D) in paragraph (12), by striking the period at 
                the end and inserting ``; and''; and
                    (E) by adding at the end the following:
            ``(13) setting forth the standards for demonstrating 
        exceptional circumstances under section 325(e)(2).'';
            (2) by amending subsection (e) to read as follows:
    ``(e) Evidentiary Standards.--
            ``(1) Presumption of validity.--The presumption of validity 
        under section 282(a) shall apply to previously issued claims of 
        a patent that is challenged in a post-grant review under this 
        chapter.
            ``(2) Burden of proof.--In a post-grant review under this 
        chapter--
                    ``(A) the petitioner shall have the burden of 
                proving a proposition of unpatentability of a 
                previously issued claim of a patent by clear and 
                convincing evidence; and
                    ``(B) the petitioner shall have the burden of 
                persuasion, by a preponderance of the evidence, with 
                respect to a proposition of unpatentability for any 
                substitute claim proposed by the patent owner.''; and
            (3) by adding at the end the following:
    ``(f) Claim Construction.--For the purposes of this chapter--
            ``(1) each challenged claim of a patent, and each 
        substitute claim proposed in a motion to amend, shall be 
        construed as the claim would be construed under section 282(b) 
        in an action to invalidate a patent, including by construing 
        each such claim in accordance with--
                    ``(A) the ordinary and customary meaning of the 
                claim as understood by a person having ordinary skill 
                in the art to which the claimed invention pertains; and
                    ``(B) the prosecution history pertaining to the 
                patent; and
            ``(2) if a court has previously construed a challenged 
        claim of a patent or a challenged claim term in a civil action 
        to which the patent owner was a party, the Office shall 
        consider that claim construction.''.
    (e) Settlement.--Section 327(a) of title 35, United States Code, is 
amended by striking the second sentence.
    (f) Timing To Issue Trial Certificates and Decisions on 
Rehearing.--Section 328 of title 35, United States Code, is amended--
            (1) in subsection (b), by inserting ``, not later than 60 
        days after the date on which the parties to the post-grant 
        review have informed the Director that the time for appeal has 
        expired or any appeal has terminated,'' after ``the Director 
        shall''; and
            (2) by adding at the end the following:
    ``(e) Rehearing.--Not later than 90 days after the date on which a 
request for rehearing of a final written decision issued by the Patent 
and Trial Appeal Board under subsection (a) is filed, the Board or the 
Director shall finally decide any request for reconsideration, 
rehearing, or review that is submitted with respect to the decision, 
except that the Director may, for good cause shown, extend that 90-day 
period by not more than 60 days.
    ``(f) Review by Director.--
            ``(1) In general.--The Director may grant rehearing, 
        reconsideration, or review of a decision by the Patent Trial 
        and Appeal Board issued under this chapter.
            ``(2) Requirements.--Any reconsideration, rehearing, or 
        review by the Director, as described in paragraph (1), shall be 
        issued in a separate written opinion that--
                    ``(A) is made part of the public record; and
                    ``(B) sets forth the reasons for the 
                reconsideration, rehearing, or review of the decision 
                by the Patent Trial and Appeal Board.
    ``(g) Rule of Construction.--For the purposes of an appeal 
permitted under section 141, any decision on rehearing, 
reconsideration, or review of a final written decision of the Patent 
Trial and Appeal Board under subsection (a) of this section that is 
issued by the Director shall be deemed to be a final written decision 
of the Patent Trial and Appeal Board.''.
    (g) Timing To Issue Decisions on Remand.--Section 329 of title 35, 
United States Code, is amended--
            (1) by striking ``A party'' and inserting the following:
    ``(a) In General.--A party''; and
            (2) by adding at the end the following:
    ``(b) Timing on Remand After Appeal.--Not later than 120 days after 
the date on which a mandate issues from the court remanding to the 
Patent Trial and Appeal Board after an appeal under subsection (a), the 
Board or the Director shall finally decide any issue on remand, except 
that the Director may, for good cause shown, extend that 120-day period 
by not more than 60 days.''.

SEC. 6. REEXAMINATION OF PATENTS.

    (a) Request for Reexamination.--Section 302 of title 35, United 
States Code, is amended by inserting after the second sentence the 
following: ``The request must identify all real parties in interest and 
certify that reexamination is not barred under section 303(d).''.
    (b) Reexamination Barred.--Section 303 of title 35, United States 
Code, is amended--
            (1) in subsection (a), by striking the third sentence; and
            (2) by adding at the end the following:
    ``(d) An ex parte reexamination may not be ordered if the request 
for reexamination is filed more than 1 year after the date on which the 
requester or a real party in interest or a privy of the requester is 
served with a complaint alleging infringement of the patent. For 
purposes of this chapter, a person that directly or through an 
affiliate, subsidiary, or proxy makes a financial contribution to the 
preparation for, or conduct during, an ex parte reexamination on behalf 
of a requester shall be considered a real party in interest of the 
requester.
    ``(e) In determining whether to order an ex parte reexamination, 
the Director--
            ``(1) shall, unless the Director determines that the 
        requestor has demonstrated exceptional circumstances, reject 
        any request that presents prior art or an argument that is the 
        same or substantially the same as prior art or an argument that 
        previously was presented to the Office; and
            ``(2) may reject any request that the Director determines 
        has used a prior Office decision as a guide to correct or 
        bolster a previous deficient request filed under this chapter 
        or a previous deficient petition filed under chapter 31 or 
        32.''.
    (c) Reexamination Order by Director.--Section 304 of title 35, 
United States Code, is amended, in the first sentence, by inserting 
after ``resolution of the question'' the following: ``, unless the 
Director determines that the request for reexamination should be 
rejected under subsection (d) or (e) of section 303, in which case the 
Director shall issue an order denying reexamination''.

SEC. 7. ELIMINATION OF USPTO FEE DIVERSION.

    (a) Funding.--Section 42 of title 35, United States Code, is 
amended--
            (1) in subsection (a), by striking ``All fees'' and 
        inserting the following:
    ``(a) Fees for Service by PTO.--All fees'';
            (2) in subsection (b)--
                    (A) by striking ``All fees paid to the Director and 
                all appropriations'' and inserting the following:
    ``(b) Innovation Promotion Fund.--All fees paid to the Director''; 
and
                    (B) by striking ``Patent and Trademark Office 
                Appropriation Account'' and inserting ``United States 
                Patent and Trademark Office Innovation Promotion 
                Fund'';
            (3) by striking subsection (c) and inserting the following:
    ``(c) Collection of Funds for PTO Activities.--
            ``(1) In general.--Fees authorized in this title or any 
        other Act to be charged or established by the Director shall be 
        collected by the Director and shall be available to the 
        Director until expended to carry out the activities of the 
        Patent and Trademark Office.
            ``(2) Use of fees.--
                    ``(A) Patent fees.--Any fees that are collected 
                under this title, and any surcharges on such fees, may 
                only be used for expenses of the Office relating to the 
                processing of patent applications and for other 
                activities, services, and materials relating to patents 
                and to cover a proportionate share of the 
                administrative costs of the Office.
                    ``(B) Trademark fees.--Any fees that are collected 
                under section 31 of the Trademark Act of 1946 (as 
                defined in subsection (d)(1)) (15 U.S.C. 1113), and any 
                surcharges on such fees, may only be used for expenses 
                of the Office relating to the processing of trademark 
                registrations and for other activities, services, and 
                materials relating to trademarks and to cover a 
                proportionate share of the administrative costs of the 
                Office.'';
            (4) by redesignating subsections (d) and (e) as subsections 
        (e) and (f), respectively;
            (5) by inserting after subsection (c) the following:
    ``(d) Revolving Fund.--
            ``(1) Definitions.--In this subsection--
                    ``(A) the term `Fund' means the United States 
                Patent and Trademark Office Innovation Promotion Fund 
                established under paragraph (2); and
                    ``(B) the term `Trademark Act of 1946' means the 
                Act entitled `An Act to provide for the registration 
                and protection of trademarks used in commerce, to carry 
                out the provisions of certain international 
                conventions, and for other purposes', approved July 5, 
                1946 (15 U.S.C. 1051 et seq.) (commonly referred to as 
                the `Trademark Act of 1946' or the `Lanham Act').
            ``(2) Establishment.--There is established in the Treasury 
        a revolving fund to be known as the `United States Patent and 
        Trademark Office Innovation Promotion Fund'.
            ``(3) Derivation of resources.--There shall be deposited 
        into the Fund any fees collected under--
                    ``(A) this title; or
                    ``(B) the Trademark Act of 1946.
            ``(4) Expenses.--Amounts deposited into the Fund under 
        paragraph (3) shall be available, without fiscal year 
        limitation, to cover--
                    ``(A) to the extent consistent with the limitation 
                on the use of fees under subsection (c), all expenses, 
                including all administrative and operating expenses, 
                determined by the Director to be ordinary and 
                reasonable, incurred by the Director for the continued 
                operation of all services, programs, activities, and 
                duties of the Office relating to patents and 
                trademarks, as such services, programs, activities, and 
                duties are described under--
                            ``(i) this title; and
                            ``(ii) the Trademark Act of 1946; and
                    ``(B) all expenses incurred pursuant to any 
                obligation, representation, or other commitment of the 
                Office.'';
            (6) in subsection (e), as so redesignated, by striking 
        ``The Director'' and inserting the following:
    ``(e) Refunds.--The Director''; and
            (7) in subsection (f), as so redesignated, by striking 
        ``The Secretary'' and inserting the following:
    ``(f) Report.--The Secretary''.
    (b) Effective Date; Transfer From and Termination of Obsolete 
Funds.--
            (1) Effective date.--The amendments made by subsection (a) 
        shall take effect on the first day of the first fiscal year 
        that begins on or after the date of enactment of this Act.
            (2) Remaining balances.--On the effective date described in 
        paragraph (1), there shall be deposited in the United States 
        Patent and Trademark Office Innovation Promotion Fund 
        established under section 42(d)(2) of title 35, United States 
        Code (as added by subsection (a)), any available unobligated 
        balances remaining in the Patent and Trademark Office 
        Appropriation Account, and in the Patent and Trademark Fee 
        Reserve Fund established under section 42(c)(2) of title 35, 
        United States Code, as in effect on the day before that 
        effective date.
            (3) Termination of reserve fund.--Upon the payment of all 
        obligated amounts in the Patent and Trademark Fee Reserve Fund 
        under paragraph (2), the Patent and Trademark Fee Reserve Fund 
        shall be terminated.

SEC. 8. INSTITUTIONS OF HIGHER EDUCATION.

    Section 123(d) of title 35, United States Code, is amended to read 
as follows:
    ``(d) Institutions of Higher Education.--
            ``(1) Definition.--In this subsection, the term 
        `institution of higher education' has the meaning given the 
        term in section 101(a) of the Higher Education Act of 1965 (20 
        U.S.C. 1001(a)).
            ``(2) Inclusions.--For purposes of this section, a micro 
        entity shall include an applicant who certifies that--
                    ``(A) the applicant's employer, from which the 
                applicant obtains the majority of the applicant's 
                income, is an institution of higher education;
                    ``(B) the applicant has assigned, granted, 
                conveyed, or is under an obligation by contract or law 
                to assign, grant, or convey, a license or other 
                ownership interest in the particular applications to an 
                institution of higher education;
                    ``(C) the applicant is an institution of higher 
                education; or
                    ``(D) the applicant is an organization described in 
                section 501(c)(3) of the Internal Revenue Code of 1986 
                and exempt from taxation under section 501(a) of such 
                Code that holds title to patents and patent 
                applications on behalf of an institution of higher 
                education for the purpose of facilitating 
                commercialization of the technologies of the patents 
                and patent applications.''.

SEC. 9. ASSISTING SMALL BUSINESSES IN THE UNITED STATES PATENT SYSTEM.

    (a) Definition.--In this section, the term ``small business 
concern'' has the meaning given the term in section 3 of the Small 
Business Act (15 U.S.C. 632).
    (b) Small Business Administration Report.--Not later than 1 year 
after the date of the enactment of this Act, the Administrator of the 
Small Business Administration, using existing resources, shall submit 
to the Committee on Small Business and Entrepreneurship of the Senate 
and the Committee on Small Business of the House of Representatives a 
report analyzing the impact of--
            (1) patent ownership by small business concerns; and
            (2) civil actions against small business concerns arising 
        under title 35, United States Code, relating to patent 
        infringement.
    (c) Free Online Availability of Public Search Facility Materials.--
Section 41(i) of title 35, United States Code, is amended by adding at 
the end the following:
            ``(5) Free online availability of public search facility 
        materials.--The Director shall make available online and at no 
        charge all patent and trademark information that is available 
        at the Public Search Facility of the Office located in 
        Alexandria, Virginia, including, except to the extent that 
        licenses with third-party contractors would make such provision 
        financially unviable--
                    ``(A) search tools and databases;
                    ``(B) informational materials; and
                    ``(C) training classes and materials.''.
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