[Congressional Record Volume 145, Number 114 (Thursday, August 5, 1999)]
[Extensions of Remarks]
[Pages E1788-E1793]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               AMERICAN INVENTORS PROTECTION ACT OF 1999

                                 ______
                                 

                               speech of

                           HON. HOWARD COBLE

                           of north carolina

                    in the house of representatives

                        Tuesday, August 3, 1999

  Mr. COBLE. Mr. Speaker, in light of eleventh-hour negotiations on a 
final suspension version of H.R. 1907, which the House of 
Representatives passed on August 4, 1999, changes have been made to the 
bill which are not reflected in the committee report that was filed. I 
therefore intend that this document supplement the report for purposes 
of detailing a more accurate legislative history of H.R. 1907. It 
should be noted that the later-adopted changes to the suspension 
version primarily concern title II, title V, and title VI, to which 
these supplementary comments will be confined. Changes to other 
sections of the bill are technical.

                    Title II--First Inventor Defense

       Generally. Title II strikes an equitable balance between 
     the interests of U.S. inventors who have invented and 
     commercialized business methods and processes, many of which 
     until recently were thought not to be patentable, and U.S. or 
     foreign inventors who later patent the methods and processes. 
     The title creates a defense for inventors who have reduced an 
     invention to practice in the U.S. at least one year before 
     the patent filing date of another, typically later, inventor 
     and commercially used the invention in the U.S. before the 
     filing date. A party entitled to the

[[Page E1789]]

     defense must not have derived the invention from the patent 
     owner. The bill protects the patent owner by providing that 
     the establishment of the defense by such an inventor or 
     entrepreneur does not invalidate the patent.
       The title clarifies the interface between two key branches 
     of intellectual property law--patents and trade secrets. 
     Patent law serves the public interest by encouraging 
     innovation and investment in new technology, and may be 
     thought of as providing a right to exclude other parties from 
     an invention in return for the inventor making a public 
     disclosure of the invention. Trade secret law, however, also 
     serves the public interest by protecting investments in new 
     technology. Trade secrets have taken on a new importance with 
     an increase in the ability to patent all business methods and 
     processes. It would be administratively and economically 
     impossible to expect any inventor to apply for a patent on 
     all methods and processes now deemed patentable. In order to 
     protect inventors and to encourage proper disclosure, this 
     title focuses on methods for doing and conducting business, 
     including methods used in connection with internal commercial 
     operations as well as those used in connection with the sale 
     or transfer of useful end results--whether in the form of 
     physical products, or in the form of services, or in the form 
     of some other useful results; for example, results produced 
     through the manipulation of data or other inputs to produce a 
     useful result.
       The earlier-inventor defense is important to many small and 
     large businesses, including financial services, software 
     companies, and manufacturing firms--any business that relies 
     on innovative business processes and methods. The 1998 
     opinion by the U.S. Court of Appeals for the Federal Circuit 
     in State Street Bank and Trust Co. v. Signature Financial 
     Group, \1\ which held that methods of doing business are 
     patentable, has added to the urgency of the issue. As the 
     Court noted, the reference to the business method exception 
     had been improperly applied to a wide variety of processes, 
     blurring the essential question of whether the invention 
     produced a ``useful, concrete, and tangible result.'' in the 
     wake of State Street, thousands of methods and processes used 
     internally are now being patented. In the past, many 
     businesses that developed and used such methods and processes 
     thought secrecy was the only protection available. Under 
     established law, any of these inventions which have been in 
     commercial use--public or secret--for more than one year 
     cannot now be the subject of a valid U.S. patent.
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     \1\ 149 F.3d 1368 (Fed. Cir. 1998) [hereinafter State Street]
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       Sec. 201. Short title. Title II may be cited as the ``First 
     to Invent Act.''
       Sec. 202. Defense to patent infringement based on earlier 
     inventor. In establishing the defense, subsection (a) of 
     Sec. 202 creates a new Sec. 273 of the Patent Act, which in 
     subsection (a) sets forth the following definitions:
       (5) commercially used and commercial use mean use of any 
     method in the United States so long as the use is in 
     connection with an internal commercial use or an actual sale 
     or transfer of a useful end result;
       (2) commercial use as applied to a nonprofit research 
     laboratory and nonprofit entities such as a university, 
     research center, or hospital intended to benefit the public 
     means that such entities may assert the defense only based on 
     continued use by and in the entities themselves, but that the 
     defense is inapplicable to subsequent commercialization or 
     use outside the entities;
       (3) method means any method for doing or conducting an 
     entity's business; and
       (4) effective filing date means the earlier of the actual 
     filing date of the application for the patent or the filing 
     date of any earlier U.S., foreign, or international 
     application to which the subject matter at issue is entitled 
     under the Patent Act.
       To be ``commercially used'' or in ``commercial use'' for 
     purposes of subsection (a), the use must be in connection 
     with either an internal commercial use or an actual arm's-
     length sale or other arm's-length commercial transfer of a 
     useful end result. The method that is the subject matter of 
     the defense may be an internal method for doing business, 
     such as an internal human resources management process, or a 
     method for conducting business such as a preliminary or 
     intermediate manufacturing procedure, which contributes to 
     the effectiveness of the business by producing a useful end 
     result for the internal operation of the business or for 
     external sale. Commercial use does not require the subject 
     matter at issue to be accessible to or otherwise known to the 
     public.
       Subject matter that must undergo a premarketing regulatory 
     review period during which safety or efficacy is established 
     before commercial marketing or use is considered to be 
     commercially used and in commercial use during the regulatory 
     review period.
       The issue of whether an invention is a method is to be 
     determined based on its underlying nature and not on the 
     technicality of the form of the claims in the patent. For 
     example, a method for doing or conducting business that has 
     been claimed in a patent as a programmed machine, as in the 
     State Street case, is a method for purposes of Sec. 273 if 
     the invention could have as easily been claimed as a method. 
     Form should not rule substance.
       Subsection (b)(1) of proposed Sec. 273 establishes a 
     general defense against infringement under Sec. 271 of the 
     Patent Act. Specifically, a person will not be held liable 
     with respect to any subject matter that would otherwise 
     infringe one or more claims to a method in another party's 
     patent if the person:
       (1) acting in good faith, actually reduced the subject 
     matter to practice at least one year before the effective 
     filing date of the patent; and
       (2) commercially used the subject matter before the 
     effective filing date of the patent.
       The first inventor defense is not limited to methods in any 
     particular industry such as the financial services industry, 
     but applies to any industry which relies on trade secrecy for 
     protecting methods for doing or conducting the operations of 
     their business.
       Subsection (b)(2) states that the sale or other lawful 
     disposition of a useful end result produced by a patented 
     method, by a person entitled to assert a Sec. 273 defense, 
     exhausts the patent owner's rights with respect to that end 
     result to the same extent such rights would have been 
     exhausted had the sale or other disposition been made by the 
     patent owner. For example, if a purchaser would have had the 
     right to resell a product or other end result if bought from 
     the patent owner, the purchaser will have the same right if 
     the product is purchased from a person entitled to a Sec. 273 
     defense.
       Subsection (b)(3) creates limitations and qualifications on 
     the use of the defense. First, a person may not assert the 
     defense unless the invention for which the defense is 
     asserted is for a commercial use of a method as defined in 
     Sec. 273(a) (1) and (3). Second, a person may not assert the 
     defense if the subject matter was derived from the patent 
     owner or persons in privity with the patent owner. Third, 
     subsection (b)(3) makes clear that the application of the 
     defense does not create a general license under all claims of 
     the patent in question--it extends only to the specific 
     subject matter claimed in the patent with respect to which 
     the person can assert the defense. At the same time, however, 
     the defense does extend to variations in the quantity or 
     volume of use of the claimed subject matter, and to 
     improvements that do not infringe additional, specifically-
     claimed subject matter.
       Subsection (b)(4) requires that the person asserting the 
     defense has the burden of proof in establishing it by clear 
     and convincing evidence. Subsection (b)(5) establishes that 
     the person who abandons the commercial use of subject matter 
     may not rely on activities performed before the date of such 
     abandonment in establishing the defense with respect to 
     actions taken after the date of abandonment. Such a person 
     can rely only on the date when commercial use of the subject 
     matter was resumed.
       Subsection (b)(6) notes that the defense may only be 
     asserted by the person who performed the acts necessary to 
     establish the defense, and, except for transfer to the patent 
     owner, the right to assert the defense cannot be licensed, 
     assigned, or transferred to a third party except as an 
     ancillary and subordinate part of a good-faith assignment or 
     transfer for other reasons of the entire enterprise or line 
     of business to which the defense relates.
       When the defense has been transferred along with the 
     enterprise or line of business to which it relates as 
     permitted by subsection (b)(6), subsection (b)(7) limits the 
     sites for which the defense may be asserted. Specifically, 
     when the enterprise or line of business to which the defense 
     relates has been transferred, the defense may be asserted 
     only for uses at those sites where the subject matter was 
     used before the later of the patent filing date or the date 
     of transfer of the enterprise or line of business.
       Subsection (b)(8) states that a person who fails to 
     demonstrate a reasonable basis for asserting the defense may 
     be held liable for attorneys' fees under Sec. 285 of the 
     Patent Act.
       Subsection (b)(9) specifies that the successful assertion 
     of the defense does not mean that the affected patent is 
     invalid. Paragraph (9) eliminates a point of uncertainty 
     under current law, and strikes a balance between the rights 
     of an inventor who obtains a patent after another inventor 
     has taken the steps to qualify for a prior use defense. The 
     bill provides that the commercial use of a method in 
     operating a business before the patentee's filing date, by an 
     individual or entity that can establish a Sec. 273 defense, 
     does not invalidate the patent. For example, under current 
     law, although the matter has seldom been litigated, a party 
     who commercially used an invention in secrecy before the 
     patent filing date and who also invented the subject matter 
     before the patent owner's invention may argue that the patent 
     is invalid under Sec. 102(g) of the Patent Act. Arguably, 
     commercial use of an invention in secrecy is not suppression 
     or concealment of the invention within the meaning of 
     Sec. 102(g), and therefore the party's earlier invention 
     could invalidate the patent. \2\
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     \2\ See Dunlop Holdings v. Ram Golf Corp., 524 F.2d 33 (7th 
     Cir. 1975), cert. denied, 424 US 985 (1976).
---------------------------------------------------------------------------
       Sec. 203. Effective date and applicability. The effective 
     date for Title II is the date of enactment, except that the 
     title does not apply to any infringement action pending on 
     the date of enactment or to any subject matter for which an 
     adjudication of infringement, including a consent judgment, 
     has been made before the date of enactment.

                Title V--Patent Litigation Reduction Act

       Generally. Title V is intended to reduce expensive patent 
     litigation in U.S. district

[[Page E1790]]

     courts by giving third-party requesters, in addition to the 
     existing ex parte reexamination in Chapter 30 of title 35, 
     the option of inter partes reexamination proceedings in the 
     PTO. Congress enacted legislation to authorize ex parte 
     reexamination of patents in the PTO in 1980, but such 
     reexamination has been used infrequently since a third party 
     who requests reexamination cannot participate at all after 
     initiating the proceedings. Numerous witnesses have suggested 
     that the volume of lawsuits in district courts will be 
     reduced if third parties can be encouraged to use 
     reexamination by giving them an opportunity to argue their 
     case for patent invalidity in the PTO. Title V provides that 
     opportunity as an option to the existing  parte reexamination 
     procedures.
       Title V leaves existing ex parte reexamination procedures 
     in Chapter 30 of title 35 intact, but establishes an inter 
     parte reexamination procedure which third-party requesters 
     can use at their option. Title V allows third parties who 
     request inter partes reexamination to submit one written 
     comment each time the patent owner files a response to the 
     PTO. In addition, such third-party requesters can appeal to 
     the PTO Board of Patent Appeals and Interferences from an 
     examiner's determination that the reexamined patent is valid, 
     but may not appeal to the Court of Appeals for the Federal 
     Circuit. To prevent harassment, anyone who requests inter 
     partes reexamination must identify the real party in interest 
     and third-party requesters who participate in an inter partes 
     reexamination proceeding are estopped from raising in a 
     subsequent court action or inter partes reexamination any 
     issue of patent validity that they raised or could have 
     raised during such inter partes reexamination.
       Title V contains the important threshold safeguard (also 
     applied in ex parte reexamination) that an inter partes 
     reexamination cannot be commenced unless the PTO makes a 
     determination that a ``substantial new question'' of 
     patentability is raised. Also, as under Chapter 30, this 
     determination cannot be appealed, and grounds for inter 
     partes reexamination are limited to earlier patents and 
     printed publications--grounds that PTO examiners are well-
     suited to consider.
       Sec. 501. Short title. Title V may be cited as the 
     ``Optional Inter Partes Reexamination Procedure Act.''
       Sec. 502. Clarification of Chapter 30. Section 502 
     distinguishes Chapter 31 from existing Chapter 30 by changing 
     the title of Chapter 30 to ``Ex Parte Reexamination of 
     Patents.''
       Sec. 503. Definitions. Section 503 amends Sec. 100 of the 
     Patent Act by defining ``third-party requester'' as a person 
     who is not a patent owner requesting ex parte reexamination 
     under Sec. 302 or inter partes reexamination under Sec. 311.
       Sec. 504. Optional Inter Partes Reexamination Procedure. 
     Section 504 amends Part 3 of title 35 by inserting a new 
     Chapter 31 setting forth optional inter partes reexamination 
     procedures.
       New Sec. 311 of Sec. 504 differs from Sec. 302 of existing 
     law in Chapter 30 of the Patent Act by requiring any person 
     filing a written request for inter partes reexamination
       Similar to Sec. 303 of existing law, new Sec. 312 of the 
     Patent Act confers upon the Director the authority and 
     responsibility to determine, within three months after the 
     filing of a request for inter partes reexamination, whether a 
     substantial new question affecting patentability of any claim 
     of the patent is raised by the request. Also, the decision in 
     this regard is final and not subject to judicial review.
       Proposed Sec. Sec. 313-14 of Sec. 504 are similarly modeled 
     after Sec. Sec. 304-305 of Chapter 30. Under proposed 
     Sec. 313, if the Director determines that a substantial new 
     question of patentability affecting a claim is raised, the 
     determination shall include an order for inter partes 
     reexamination for resolution of the question. The order may 
     be accompanied by the initial PTO action on the merits of the 
     inter partes reexamination conducted in accordance with 
     Sec. 314. Generally, under proposed Sec. 314, inter partes 
     reexamination shall be conducted according to the procedures 
     set forth in Sec. Sec. 132-133 of the Patent Act. The patent 
     owner will be permitted to propose any amendment to the 
     patent and a new claim or claims, with the same exception 
     contained in Sec. 305: No proposed amended or new claim 
     enlarging the scope of the claims will be allowed.
       Proposed Sec. 314 elaborates on procedure with regard to 
     third-party requesters who, for the first time, are given the 
     option to participate in inter partes reexamination 
     proceedings. With the exception of the inter partes 
     reexamination request, any document filed by either the 
     patent owner or the third-party requester shall be served on 
     the other party. In addition, the third party-requester in an 
     inter partes reexamination shall receive a copy of any 
     communication sent by the PTO to the patent owner. After each 
     response by the patent owner to an action on the merits by 
     the PTO, the third-party requester shall have one opportunity 
     to file written comments addressing issues raised by the PTO 
     or raised in the patent owner's response. Unless ordered by 
     the Director for good cause, the agency must act in an inter 
     partes reexamination matter with special dispatch.
       Proposed Sec. 315 prescribes the procedures for appeal of 
     an adverse PTO decision by the patent owner and the third-
     party requester in an inter partes reexamination. Both the 
     patent owner and the third-party requester are entitled to 
     appeal to the Patent Board of Appeals and Interferences 
     (Sec. 134 of the Patent Act), but only the patentee can 
     appeal to the U.S. Court of Appeals for the Federal Circuit 
     (Sec. Sec. 141-144); either may also be a party to any appeal 
     by the other to the Board of Patent Appeals and 
     Interferences. The patentee is not entitled to the 
     alternative of an appeal of an inter partes reexamination to 
     the U.S. District Court for the District of Columbia. Such 
     appeals are rarely taken from inter partes reexamination 
     proceedings under existing law and its removal should speed 
     up the process.
       To deter unnecessary litigation, proposed Sec. 315 imposes 
     constraints on the third-party requester. In general, a 
     third-party requester who is granted an inter partes 
     reexamination by the PTO may not assert at a later time in 
     any civil action in U.S. district court \3\ the invalidity of 
     any claim finally determined to be patentable on any ground 
     that the third-party requester raised or could have raised 
     during the inter partes reexamination. However, the third-
     party requester may assert invalidity based on newly 
     discovered prior art unavailable at the time of the 
     reexamination. Prior art was unavailable at the time of the 
     inter partes reexamination if it was not known to the 
     individuals who were involved in the reexamination proceeding 
     on behalf of the third-party requester and the PTO.
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     \3\ See 28 U.S.C. Sec. 1338.
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       Section 316 provides for the Director to issue and publish 
     certificates canceling unpatentable claims, confirming 
     patentable claims, and incorporating any amended or new claim 
     determined to be patentable in an inter partes procedure.
       Title V creates a new Sec. 317 which sets forth certain 
     conditions by which inter partes reexamination is prohibited 
     to guard against harassment of a patent holder. In general, 
     once an order for inter partes reexamination has been issued, 
     neither a third-party requester nor the patent owner may file 
     a subsequent request for inter partes reexamination until an 
     inter partes reexamination certificate is issued and 
     published, unless authorized by the Director. Further, if a 
     third-party requester asserts patent invalidity in a civil 
     action and a final decision is entered that the party failed 
     to provide the assertion of invalidity, or if a final 
     decision in an inter partes reexamination instituted by the 
     requester is favorable to patentability, after any appeals, 
     that third-party requester cannot thereafter request inter 
     partes reexamination on the basis of issues which were or 
     which could have been raised. However, the third-party 
     requester may assert invalidity based on newly discovered 
     prior art unavailable at the time of the civil action or 
     inter parties reexamination. Prior art was unavailable at the 
     time if it was not known to the individuals who were involved 
     in the civil action or inter parties reexamination proceeding 
     on behalf of the third-party requester and the PTO.
       Proposed Sec. 318 gives a patent owner the right, once an 
     inter partes reexamination has been ordered, to obtain a stay 
     of any pending litigation involving an issue of patentability 
     of any claims of the patent that are the subject of the inter 
     partes reexamination, unless the court determines that the 
     stay would not serve the interests of justice.
       Section 505. Conforming amendments. Section 505 makes the 
     following conforming amendments to the Patent Act:
       A patent owner must pay a fee of $1,210 for each petition 
     in connection with an unintentionally abandoned application, 
     delayed payment, or delayed response by the patent owner 
     during any reexamination.
       A patent applicant, any of whose claims have been twice 
     rejected; a patent owner in an reexamination proceeding; and 
     a third-party requester in an inter partes reexamination 
     proceeding may all appeal final adverse decisions from a 
     primary examiner to the Board of Patent Appeals and 
     Interferences.
       Proposed Sec. 141 states that a patent owner in a 
     reexamination proceeding may appeal an adverse decision by 
     the Board of Patent Appeals and Interferences only to the 
     U.S. Court of Appeals for the Federal Circuit as earlier 
     noted. A third-party requester in an inter partes 
     reexamination proceeding may not appeal beyond the Board of 
     Patent Appeals and Interferences.
       The Director is required pursuant to Sec. 143 (proceedings 
     on appeal to the Federal Circuit) to submit to the court the 
     grounds for the PTO decision in any reexamination addressing 
     all the issues involved in the appeal.
       Sec. 506. Report to Congress. Five years after the 
     effective date of title V, the Director must submit to 
     Congress a report evaluating whether the inter partes 
     reexamination proceedings set forth in the title are 
     inequitable to any of the parties in interest and, if so, the 
     report shall contain recommendations for change to eliminate 
     the inequity.
       Sec. 507. Estoppel Effect of Reexamination. Section 507 
     estops any party who requests inter partes reexamination from 
     challenging at a later time, in any civil action, any fact 
     determined during the process of the inter partes 
     reexamination, except with respect to a fact determination 
     later proved to be erroneous based on information unavailable 
     at the time of the inter partes reexamination. The estoppel 
     arises after a final decision in the inter partes 
     reexamination or a final decision in any appeal of such 
     reexamination. If Sec. 507 is held to be unenforcable, the 
     enforceability of the rest of title V or the Act is not 
     affected.
       Sec. 508. Effective date. Title V shall take effect on the 
     date that is one year after the

[[Page E1791]]

     date of enactment and shall apply to all inter partes 
     reexamination requests filed on or after such date.

                 Title VI--Patent and Trademark Office

       Generally. Title VI establishes the PTO as an agency of the 
     United States within the Department of Commerce. The 
     Secretary of Commerce gives policy direction to the 
     agency, but the agency itself is responsible for the 
     management and administration of operations and has 
     independent control of budget allocations and 
     expenditures, personnel decisions and processes, and 
     procurement. The Committee intends that the office will 
     conduct its patent and trademark operations without 
     micromanagement by Department of Commerce officials, with 
     the exception of policy guidance of the Secretary. The 
     agency is headed by an Under Secretary of Commerce for 
     Intellectual Property and Director of the United States 
     Patent and Trademark Office, a Deputy, and a Commissioner 
     of Patents and a Commissioner of Trademarks. The agency is 
     exempt from government-wide personnel ceilings. A patent 
     public advisory committee and a trademark public advisory 
     committee are established to advise the Director on agency 
     policies, goals, performance, budget and user fees.
       Sec. 601. Short title. Title VI may be cited as the 
     ``Patent and Trademark Office Efficiency Act.''


         Subtitle A--United States Patent and Trademark Office

       Sec. 611. Establishment of Patent and Trademark Office. 
     Section 611 establishes the PTO as an agency of the United 
     States within the Department of Commerce and under the policy 
     direction of the Secretary of Commerce. The PTO is explicitly 
     responsible for decisions regarding the management and 
     administration of its operations and has independent control 
     of budget allocations and expenditures, personnel decisions 
     and processes, procurements, and other administrative and 
     management functions. Patent operations and trademark 
     operations are to be treated as separate operating units 
     within the Office.
       The PTO shall maintain its principal office in the 
     metropolitan Washington, D.C., area, for the service of 
     process and papers and for the purpose of discharging its 
     functions. For purposes of venue in civil actions, the agency 
     is deemed to be a resident of the district in which its 
     principal office if located, except where otherwise provided 
     by law. The PTO is also permitted to establish satellite 
     offices in such other places in the United States as it 
     considers necessary and appropriate to conduct business.
       Sec. 612. Powers and duties. Subject to the policy 
     direction of the Secretary of Commerce, in general the PTO 
     will be responsible for granting and issuing patents, the 
     registration of trademarks, and the dissemination of patent 
     and trademark information to the public.
       The PTO will also possess specific powers, which include:
       (1) a requirement to adopt and use an Office seal for 
     judicial notice purposes and for authenticating patents, 
     trademark certificates and papers issued by the Office;
       (2) the authority to establish regulations, not 
     inconsistent with law, that
       (A) govern the conduct of PTO proceedings within the 
     Office,
       (B) are in accordance with Sec. 553 of title 5,
       (C) facilitate and expedite the processing of patent 
     applications, particularly those which can be processed 
     electronically,
       (D) govern the recognition, conduct, and qualifications of 
     agents, attorneys, or other persons representing applicants 
     or others before the PTO,
       (E) recognize the public interest in ensuring that the 
     patent system retain a reduced fee structure for small 
     entities, and
       (F) provide for the development of a performance-based 
     process for managing that includes quantitative and 
     qualitative measures, standards for evaluating cost-
     effectiveness, and consistency with principles of 
     impartiality and competitiveness;
       (3) the authority to acquire, construct, purchase, lease, 
     hold, manage, operate, improve, alter and renovate any real, 
     personal, or mixed property as it considers necessary to 
     discharge its functions;
       (4) the authority to make purchases of property, contracts 
     for construction, maintenance, or management and operation of 
     facilities, as well as to contract for and purchase printing 
     services without regard to those federal laws which govern 
     such proceedings;
       (5) the authority to use services, equipment, personnel, 
     facilities and equipment of other federal entities, with 
     their consent and on a reimbursable basis;
       (6) the authority to use, with the consent of the United 
     States and the agency, government, or international 
     organization concerned, the services, records, facilities or 
     personnel of any State or local government agency or foreign 
     patent or trademark office or international organization to 
     perform functions on its behalf;
       (7) the authority to retain and use all of its revenues and 
     receipts;
       (8) a requirement to advise the President, through the 
     Secretary of Commerce, on national and certain international 
     intellectual property policy issues;
       (9) a requirement to advise Federal departments and 
     agencies of intellectual property policy in the United States 
     and intellectual property protection abroad;
       (10) a requirement to provide guidance regarding proposals 
     offered by agencies to assist foreign governments and 
     international intergovernmental organizations on matters of 
     intellectual property protection;
       (11) the authority to conduct programs, studies of 
     exchanges regarding domestic or international intellectual 
     property law and the effectiveness of intellectual property 
     protection domestically and abroad;
       (12) a requirement to advise the Secretary of Commerce on 
     any programs and studies relating to intellectual property 
     policy that the PTO may conduct or is authorized to conduct, 
     cooperatively with foreign intellectual property offices and 
     international intergovernmental organizations; and
       (13) the authority to (A) coordinate with the Department of 
     State in conducting programs and studies cooperatively with 
     foreign intellectual property offices and international 
     intergovernmental organizations, and (B) transfer, with the 
     concurrence of the Secretary of State, up to $100,000 in any 
     year to the Department of State to pay an international 
     intergovernmental organization for studies and programs 
     advancing international cooperation concerning patents, 
     trademarks, and other matters.
       The specific powers set forth in new subsection (b) are 
     clarified in new subsection (c). The special payments of 
     paragraph (14)(B) are additional to other payments or 
     contributions and are not subject to any limitation imposed 
     by law. Nothing in subsection (b) derogates from the duties 
     of the Secretary of State or the United States Trade 
     Representative as set forth in Sec. 141 of the Trade Act of 
     1974,\4\ nor derogates from the duties and functions of the 
     Register of Copyrights. The Director is required to consult 
     with the Administrator of General Services when exercising 
     authority under paragraphs (3) and (4)(A). Finally, nothing 
     in Sec. 612 may be construed to nullify, void, cancel, or 
     interrupt any pending request-for-proposal let or contract 
     issued by the General Services Administration for the 
     specific purpose of relocating or leasing space to the PTO.
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     \4\ 19 U.S.C. Sec. 2171.
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       Sec. 613. Organization and management. Section 613 details 
     the organization and management of the agency. The powers and 
     duties of the PTO shall be vested in the Director, who shall 
     be appointed by the President, by and with the consent of the 
     Senate. The Director performs two main functions. As Under 
     Secretary of Commerce for Intellectual Property, she serves 
     as the policy advisor to the Secretary of Commerce on 
     intellectual property issues. As Director, she is responsible 
     for the management and direction of the PTO. She shall 
     consult with the Public Advisory Committees, infra, on a 
     regular basis regarding operations of the agency and before 
     submitting budgetary proposals and fee or regulation changes. 
     the Director shall take an oath of office. The President may 
     remove the Director from office, but must provide 
     notification to both houses of Congress.
       The Secretary of Commerce, upon nomination of the director, 
     shall appoint a Deputy Director to act in the capacity of the 
     Director if the Director is absent or incapacitated. The 
     Secretary of Commerce shall also appoint two Commissioners, 
     one for Patents, the other for Trademarks, without regard to 
     chapters 31, 51, or 53 of the U.S. Code. The Commissioners 
     will have five-year terms and may be reappointed to new terms 
     by the Secretary. Each Commissioner shall possess a 
     demonstrated experience in patent and trademark law, 
     respectively; and they shall be responsible for the 
     management and direction of the patent and trademark 
     operations, respectively. In addition to receiving a basic 
     rate of compensation under the Senior Executive Service 
     \5\ and a locality payment ,\6\ the Commissioners may 
     receive bonuses of up to 50 percent of their annual basic 
     rate of compensation, not to exceed the salary of the Vice 
     President, based on a performance evaluation by the 
     Secretary, acting through the Director. The Secretary may 
     remove Commissioners for misconduct or unsatisfactory 
     performance.
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     \5\ 28 U.S.C. Sec. 5382.
     \6\ 5 U.S.C. Sec. 5304(h)(2)(C).
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       The Director may also appoint other officers, agents, and 
     employees as she sees fit, and define their responsibilities 
     with equal discretion. The PTO is specifically not subject to 
     any administratively or statutorily imposed limits (full-time 
     equivalents, or ``FTEs'') on positions or personnel.
       The PTO is charged with developing and submitting to 
     Congress a proposal for an incentive program to retain senior 
     (of the primary examiner grade or higher) patent and 
     trademark examiners eligible for retirement for the sole 
     purpose of training patent and trademark examiners.
       The PTO will be subject to all provisions of title 5 of the 
     U.S. Code governing federal employees. All relevant labor 
     agreements which are in effect the day before enactment of 
     title VI shall be adopted by the agency. All PTO employees as 
     of the day before the effective date of Title VI shall remain 
     officers and employees of the agency without a break in 
     service. Other personnel of the Department of Commerce shall 
     be transferred to the PTO only if necessary to carry out 
     purposes of title VI of the bill and if a major function of 
     their work is reimbursed by the PTO they spend at least half 
     of their work time in support of the PTO, or a transfer to 
     the PTO would be in the interest of the agency, as determined 
     by the Secretary of Commerce in consultation with the 
     Director.

[[Page E1792]]

       On or after the effective date of the Act, the President 
     shall appoint an individual to serve as Director until a 
     Director qualifies under subsection (a). The persons serving 
     as the Assistant Commissioner for Patents and the Assistant 
     Commissioner for Trademarks on the day before the effective 
     date of the Act may serve as the Commissioner for Patents and 
     the Commissioner for Trademarks, respectively, until a 
     respective Commissioner is appointed under subsection (b)(2).
       Sec. 614. Public Advisory Committees. Section 613 provides 
     a new section 5 of the Patent Act which establishes a Patent 
     Public Advisory Committee and a Trademark Public Advisory 
     Committee. Each Committee has nine voting members with three-
     year terms appointed by and serving at the pleasure of the 
     Secretary of Commerce. Initial appointments will be made 
     within three months of the effective date of the Act; and 
     three of the initial appointees will receive one-year terms, 
     three will receive two-year terms, and three will receive 
     full terms. Vacancies will be filled within three months. The 
     Secretary will also designate chairpersons for three-year 
     terms.
       The members of the Committees will be U.S. citizens and 
     will be chosen to represent the interests of users. The 
     Patent Public Advisory Committee shall have members who 
     represent small and large entity applicants in the United 
     States in proportion to the number of applications filed by 
     the small and large entity applicants. In no case shall the 
     small entity applicants be represented by less than 25 
     percent of the members of the Patent Public Advisory 
     Committee, at least one of whom shall be an independent 
     inventor. The members of both Committees shall include 
     individuals with substantial background and achievement in 
     finance, management, labor relations, science, technology, 
     and office automation. The patent and trademark examiners' 
     unions are entitled to have one representative on their 
     respective Advisory Committee in a non-voting capacity.
       The Committees meet at the call of the chair to consider an 
     agenda established by the chair. Each Committee reviews the 
     policies, goals, performance, budget, and user fees that bear 
     on its area of concern and advises the Director on these 
     matters. Within 60 days of the end of a fiscal year, the 
     Committees prepare annual reports, transmit the reports to 
     the Secretary of Commerce, the President, and the Committees 
     on the Judiciary of the Congress, and publish the reports in 
     the Official Gazette of the PTO.
       Members of the Committees are compensated at a defined 
     daily rate for meeting and travel days. Members are provided 
     access to PTO records and information other than personnel or 
     other privileged information including that concerning patent 
     applications. Members are special Government employees within 
     the meaning of Sec. 202 of title 18. The Federal Advisory 
     Committee Act shall not apply to the Committees. Finally, 
     Sec. 614 provides that Committee meetings shall be open to 
     the public unless by a majority vote the Committee meets in 
     executive session to consider personnel or other confidential 
     information.
       Sec. 615. Patent and Trademark Office funding. Pursuant to 
     Sec. 42(c) of the Patent Act, fee available to the 
     Commissioner under Sec. 31 of the Trademark Act of 1946 \7\ 
     may be used only for the processing of trademark 
     registrations and for other trademark-related activities, and 
     to cover a proportionate share of the administrative costs of 
     the PTO. In an effort to more tightly ``fence'' trademark 
     funds for trademark purposes, Sec. 615 amends this language 
     such that all (trademark) fees available to the Commissioner 
     shall be used for trademark registration and other trademark-
     related purposes. In other words, the Commissioner may 
     exercise no discretion when spending funds; they must be 
     earmarked for trademark purposes.
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     \7\ 15 U.S.C. Sec. 1051, et. seq.
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       Sec. 616. Conforming amendments. Technical conforming 
     amendments to the Patent Act are set forth in Sec. 616.
       Sec. 617. Trademark Trial and Appeal Board. Section 617 
     amends Sec. 17 of the Trademark Act of 1946 by specifying 
     that the Director shall give notice to all affected parties 
     and shall direct a Trademark Trial and Appeal Board to 
     determine the respective rights of those parties before it in 
     a relevant proceeding. The section also invests the Director 
     with the power of appointing administrative trademark judges 
     to the Board. The Director, the Commissioner for Trademarks, 
     the Commissioner for Patents, and the administrative 
     trademark judges shall serve on the Board.
       Sec. 618. Board of Patent Appeals and Interferences. Under 
     existing Sec. 7 of the Patent Act, the Commissioner, Deputy 
     Commissioner, Assistant Commissioner, and the examiners-in-
     chief constitute the Board of Patent Appeals and 
     Interferences. Pursuant to Sec. 618 of Title VI, the Board is 
     comprised of the Director, the Commissioner for Patents, the 
     Commissioner for Trademarks, and the administrative patent 
     judges. In addition, the existing statute allows each 
     appellant a hearing before three members of the Board who are 
     designated by the Commissioner. Section 618 empowers the 
     Director with this authority.
       Sec. 619. Annual report of Director. No later than 180 days 
     after the end of each fiscal year, the Director must provide 
     a report to Congress detailing funds received and expended by 
     the PTO, the purposes for which the funds were spent, the 
     quality and quantity of PTO work, the nature of training 
     provided to examiners, the evaluations of the Commissioners 
     by the Secretary of Commerce, the Commissioners' 
     compensation, and other information relating to the agency.
       Sec. 620. Suspension or exclusion from practice. Under 
     existing Sec. 32 of the Patent Act, the Commissioner (the 
     Director pursuant to Sec. 632 of this Act) has the authority, 
     after notice and a hearing, to suspend or exclude from 
     further practice before the PTO any person who is 
     incompetent, disreputable, indulges in gross misconduct or 
     fraud, or is noncompliant with PTO regulations. Section 620 
     permits the Director to designate an attorney who is an 
     officer or employee of the PTO to conduct a hearing under 
     Sec. 32.
       Sec. 621. Pay of Director and Deputy Director. Section 621 
     replaces the Assistant Secretary of Commerce and Commissioner 
     of Patents and Trademarks with the Under Secretary of 
     Commerce for Intellectual Property and Director of the United 
     States Patent and Trademark Office to receive pay at Level 
     III of the Executive Schedule.\8\ Section 621 also 
     establishes the pay of the Deputy Director at Level IV of the 
     Executive Schedule.\9\
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     \8\ 5 U.S.C. Sec. 5314.
     \9\ 5 U.S.C. Sec. 5315.
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       Sec. 622. Study on fees. Section 622 call on the Under 
     Secretary of Commerce for Intellectual Property to conduct a 
     study of alternative fee structures to encourage maximum 
     participation by inventors in the PTO.


            Subtitle B--Effective Date; Technical Amendments

       Sec. 631. Effective Date. The effective date of Title VI is 
     four months after the date of enactment.
       Section 632. Technical and conforming amendments. Section 
     632 sets forth numerous technical and conforming amendments 
     related to Title VI.


                  Subtitle C--Miscellaneous Provisions

       Sec. 641. References. Section 641 clarifies that any 
     reference to the transfer of a function from a department or 
     office to the head of such department or office means the 
     head of such department or office to which the function is 
     transferred. In addition, in other federal materials to the 
     Commissioner of Patents and Trademarks refer, upon enactment, 
     to the Director of the United States Patent and Trademark 
     Office. Similarly, references to the Assistant 
     Commissioner for Patents deemed to refer to the 
     Commissioner for Patents and references to the Assistant 
     Commissioner for Trademarks are deemed to refer to the 
     Commissioner for Trademarks.
       Sec. 642. Exercise of authorities. Under Sec. 642, except 
     as otherwise provided by law, a federal official to whom a 
     function is transferred pursuant to Title VI may exercise all 
     authorities under any other provision of law that were 
     available regarding the performance of that function to the 
     official empowered to perform that function immediately 
     before the date of the transfer of the function.
       Sec. 643. Savings provisions. Relevant legal documents that 
     relate to a function which is transferred by Title VI, and 
     which are in effect on the date of such transfer, shall 
     continue in effect according to their terms unless later 
     modified or repealed in an appropriate manner. Applications 
     or proceedings concerning any benefit, service, or license 
     pending on the effective date of Title VI before an office 
     transferred shall not be affected, and shall continue 
     thereafter, but may later be modified or repealed in the 
     appropriate manner.
       Title VI will not affect suits commenced before the 
     effective date of passage. Suits or actions by or against the 
     Department of Commerce, its employees, or the Secretary shall 
     not abate by reason of enactment of Title VI. Suits against a 
     relevant government officer in her official capacity shall 
     continue post enactment, and if a function has transferred to 
     another officer by virtue of enactment, that other officer 
     shall substitute as the defendant. Finally, administrative 
     and judicial review procedures that apply to a function 
     transferred shall apply to the head of the relevant federal 
     agency and other officers to which the function is 
     transferred.
       Sec. 644. Transfer of assets. Section 644 states that all 
     available personnel, property, records, and funds related to 
     a function transferred pursuant to Title VI shall be made 
     available to the relevant official or head of the agency to 
     which the function transfers at such time or times as the 
     Director of the Office of Management and Budget (OMB) 
     directs.
       Sec. 645. Delegation and assignment. Section 645 allows an 
     official to whom a function is transferred under Title VI to 
     delegate that function to another officer or employee. The 
     official to whom the function was originally transferred 
     nonetheless remains responsible for the administration of the 
     function.
       Sec. 646. Authority of Director of the Office of Management 
     and Budget with respect to functions transferred. Pursuant to 
     Sec. 646, if necessary the Director of OMB shall make any 
     determination of the functions transferred pursuant to Title 
     VI.
       Sec. 647. Certain vesting of functions considered 
     transfers. Section 647 states that the vesting of a function 
     in a department or office pursuant to reestablishment of an 
     office shall be considered to be the transfer of that 
     function.
       Sec. 648. Availability of existing funds. Under Sec. 648, 
     existing appropriations and funds available for the 
     performance of functions and

[[Page E1793]]

     other activities terminated pursuant to title VI shall remain 
     available (for the duration of their period of availability) 
     for necessary expenses in connection with the termination and 
     resolution of such functions and activities subject to the 
     submission of a plan to House and Senate appropriators in 
     accordance with Public Law 105-277 (Departments of Commerce, 
     Justice, and State, the Judiciary and Related Agencies 
     Appropriations Act, Fiscal Year 1999).
       Sec. 649. Definitions. Function includes any duty, 
     obligation, power, authority, responsibility, right, 
     privilege, activity, or program.
       Office includes any office, administration, agency, bureau, 
     institute, council, unit, organizational entity, or component 
     thereof.

     

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