[Congressional Record Volume 150, Number 26 (Wednesday, March 3, 2004)]
[House]
[Pages H793-H804]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    UNITED STATES PATENT AND TRADEMARK FEE MODERNIZATION ACT OF 2003

  The SPEAKER pro tempore (Mr. Linder). Pursuant to House Resolution 
547 and rule XVIII, the Chair declares the House in the Committee of 
the Whole House on the State of the Union for the consideration of the 
bill, H.R. 1561.

                              {time}  1633


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the State of the Union for the consideration of the bill 
(H.R. 1561) to amend title 35, United States Code, with respect to 
patent fees, and for other purposes, with Mr. LaHood in the chair.
  The Clerk read the title of the bill.
  The CHAIRMAN. Pursuant to the rule, the bill is considered as having 
been read the first time.
  Under the rule, the gentleman from Wisconsin (Mr. Sensenbrenner) and 
the gentleman from California (Mr. Berman) each will control 30 
minutes.
  The Chair recognizes the gentleman from Wisconsin (Mr. 
Sensenbrenner).
  Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may 
consume.
  Mr. Chairman, H.R. 1561 will help implement the Patent and Trademark 
Office's Strategic Business Plan to transform the agency's operations. 
The bill incorporates a revised fee schedule previously submitted by 
the PTO that will generate much-needed additional revenue. The plan 
also includes a true structural reform of the office, which 
demonstrates that the PTO is not simply saying give us more money and 
we will solve the problem. The implementation of the strategic plan is 
the first step forward toward improving patent and trademark quality 
while reducing application backlogs and pendency at the agency.
  These goals are critical to the health of cutting-edge industries in 
particular and our economy in general. Americans lead the world in the 
production and export of intellectual property and related goods and 
services. Time is money in the intellectual property world. If the PTO 
cannot issue quality patents and trademarks in a timely manner, then 
inventors and trademark filers are the losers.
  By granting patents and registering trademarks, the PTO affects the 
vitality of businesses and entrepreneurs, paving the way for investment 
in research and development. Industries based on intellectual property, 
like biotechnology and motion pictures, represent the largest single 
sector of the United States economy. Approximately 50 percent of 
American exports depend upon some form of IP protection.
  While intellectual property protection is increasing in importance, 
the PTO is collapsing under an increasingly complex and massive 
workload. Patent pendency, the amount of time of patent application is 
pending before a patent is issued, now averages over 2 years. Without 
fundamental changes in the way the PTO operates, average pendency in 
these areas will likely more than double to 6 to 8 years in the next 
few years.
  I would point out that the patent term is 20 years from the date of 
filing. So if it takes 6 to 8 years before the PTO can decide whether 
or not an application is indeed patentable and grants a patent, that 
will be that much less time that the patent is actually good, and, 
thus, that much less valuable to the person who has successfully 
invented a new technology or product and patented it.
  Moreover, the backlog of applications awaiting a first review by an 
examiner will grow from the current level of 475,000 to over a million. 
These delays pose a grave threat to American businesses and 
entrepreneurs. The nature of technology and the nature of the 
marketplace make these delays unacceptable and unsustainable.

  And what I would point out to the gentlewoman from Ohio and others 
who complain about this bill and the fee increases that are contained 
to modernize the system is that if our competitors in an increasingly 
globalized economy, in Europe and in Japan and elsewhere, are able to 
obtain more prompt decisions from their patent offices, that will put 
American inventors at a disadvantage considerably.
  To fund the initiatives set forth in the strategic plan, the 
administration has proposed in H.R. 1561 an increase in patent and 
trademark fees. The proposed fee changes accurately reflect the PTO's 
cost of doing business. They will benefit the PTO's customers by 
reducing application filing fees and allowing applicants to evaluate 
the commercial value of their inventions and recover the cost of search 
and examination as the situation warrants. Most importantly, the new 
fee structure will enable the PTO to reduce pendency time, improve 
quality and customer service through electronic processing, and pursue 
greater enforcement of intellectual property rights abroad.
  For example, the additional revenue provided by the fee bill will 
allow the PTO to hire an additional 2,900 patent examiners, these are 
Federal employees, not outsourced employees, and move to full 
electronic processing of patent and trademark applications.
  The Committee on the Judiciary unanimously approved this bill on July 
9, 2003. The administration and private sector strongly advocated the 
adoption of the fee bill as a necessary means to address the workload 
crisis at the PTO. Failure to pass the restructuring contained in H.R. 
1561 will result in further degrading of PTO operations and increasing 
the already unacceptable delays to patent and trademark applicants.
  Mr. Chairman, I will soon offer a bipartisan compromise amendment on 
section 5 of this bill. This portion of the bill, as reported, would 
essentially have taken the PTO off budget, a result that our friends at 
the Committee on Appropriations strongly opposed. My amendment, 
developed with their input, as well as that of the majority leader's 
office, the Congressional Budget Office, and the Committee on the

[[Page H794]]

Budget, would deposit any fees collected in a given fiscal year in 
excess of that actually appropriated in a Fee Reserve Fund. At the end 
of the fiscal year, the director would then be empowered to rebate the 
reserve-fund revenue to users of the agency.
  I understand that the CBO and the Committee on the Budget believe 
this compromise accomplishes the twin goals set forth by the majority 
leader's office in backing these discussions; that we will have 
eliminated the incentive to use PTO revenue for non-agency purposes 
without compromising the ability of the Committee on Appropriations to 
exercise their oversight prerogatives in providing appropriations for 
the agency. The mainstream user groups have signaled their intent to 
support the amendment based on this interpretation.
  I appreciate very much the cooperation of the appropriators in 
working out this compromise, and I would call on them to take this 
opportunity to fully fund the strategic plan. Full funding will be 
crucial to achieving the changes that we all want to see at the PTO.
  Now, let me say a couple of words of what the consequence will be if 
this bill is voted down. First, if this bill is voted down, the current 
fee diversion that occurs, where up to 30 percent of the fees that are 
collected by the PTO are not spent on PTO activities but instead are 
diverted into other areas under the jurisdiction of the Subcommittee on 
Commerce, Justice, State, Judiciary and Related Agencies of the 
Committee on Appropriations, will continue.
  Patent and trademark applicants should no longer be required to fund 
functions of the Federal Government that have no relationship 
whatsoever to Patent and Trademark Office operations. This bill, and 
the amendment that I will be proposing at the conclusion of the general 
debate, will end the fee diversion and will mean that fees that are 
collected by the PTO will either be used by the PTO or refunded to the 
applicants and other users.
  Second, if this bill gets voted down, instead of having a 2-year 
delay between the time of the application and the time that the 
application is acted upon, within the next several years that will 
expand to 6 or 8 years. And if it is 8 years, that means that the 
patent will only be good and effective for 12 years, because the patent 
term is 20 years from the date of application. That puts our successful 
patent applicants at a considerable disadvantage over those competitors 
who choose to patent their inventions overseas, where patent and 
trademark offices will work in a more expeditious manner.
  I would point out that the small- and medium-sized enterprises who 
apply for patents under the compromise that is worked out will get a 
significant fee reduction from a large corporation that is applying for 
a patent. So there still is a break for small inventors. But there are 
fee increases; and we need these fee increases to be able to prevent 
unacceptably long backlogs from occurring, because it is anticipated 
that the business of the PTO will double in the next few years.
  If we do not give them more money and we do not make this into a user 
fee, then the constitutional protection that the gentlewoman from Ohio 
and others are referring to will end up becoming very much debased in 
terms of their worth. I do not think that we want to see this happen, 
and that is why this legislation is essential to maintain the 
competitiveness of American intellectual property inventions and the 
inventiveness that has marked American society since the beginning days 
of our Republic.
  The amendment that I offer in this bill is necessary for the improved 
performance of the PTO, and failure to enact this legislation will 
truly be a disaster for American innovation. I urge Members to support 
this bill.
  Mr. Chairman, I reserve the balance of my time.
  Mr. BERMAN. Mr. Chairman, I yield myself such time as I may consume.
  Mr. Chairman, H.R. 1561 is a wonderful illustration of the principle 
that something does not have to be interesting to be important.

                              {time}  1645

  This bill is of critical importance to the health of our information 
economy. Intangible property, such as patents, trademarks and 
copyrights, now constitute well over 50 percent of the assets of U.S. 
corporations, both large and small. Most of the great advances in 
pharmaceuticals, telecommunications, biotechnology, and Internet fields 
began as patented inventions. Patent protection played a critical role 
in the creation and dissemination of inventions from the telephone to 
fiberoptics, from injectable insulin to laser eye surgery.
  The Patent and Trademark Office, which issues both patents and 
trademarks, has a critical role to play in creating and securing these 
assets. By facilitating many needed reforms, H.R. 1561 ensures that the 
PTO plays a positive role in stimulating our information economy, 
rather than becoming an obstacle to it.
  Furthermore, H.R. 1561 does not saddle the U.S. taxpayer with the 
cost of these reforms. The PTO is fully funded by fees from the patent 
and trademark applicants, and this bill raises some of those fees to 
enable those reforms. H.R. 1561 pays for other reforms by ending the 
innovation tax. Throughout the last decade, over $650 million in fees 
paid to PTO by American inventors and small businesses have been 
diverted to unrelated agencies. H.R. 1561 stops this tax on innovators 
by ending diversion once and for all.
  The PTO is in a crisis that threatens the stability and usefulness of 
our patent and trademark systems. At congressional urging, the PTO has 
crafted a 21st-century strategic plan to address this crisis, but it 
needs this legislation to implement that plan.
  H.R. 1561 is necessary because the patent system is coming apart at 
the seams. A perfect storm of sorts has hit the PTO, which administers 
the patent system. This storm threatens to make the patent system 
dysfunctional. This perfect storm involves a tremendous growth in the 
amount and complexity of PTO workload, matched by a decreasing ability 
to handle that workload. The number of patent applications received 
annually by the PTO doubled between 1992 and 2003 to a figure of over 
350,000 last year. What is more, the number of applications continued 
to grow throughout our recent recession and is expected to increase 
another 5 percent this year. This growth is fed in part by the 
expanding scope of patentability. Due to a string of court opinions, 
patentable inventions now include software, business methods, and 
anything else made under the sun by man.
  The technology boom in the United States has also resulted in 
applications for patents on inventions in areas of technology that did 
not exist just a few years ago. On a daily basis, PTO is asked to 
review applications for patents on such things as genetic tests and 
laser vision technologies.
  The numerical growth, and the expanding scope, are matched by a 
growth in complexity. For instance, some biotechnology patents covering 
genetic sequences can occupy the equivalent of 10,000 pages. The PTO 
must hire new examiners with the requisite skills in these areas or 
fund extensive retraining for current examiners.
  The PTO's decreasing ability to deal with this increasing workload is 
the result of several factors. Most responsible is the cumulative 
effect of more than a decade of fee diversion. The PTO is entirely 
funded by user fees. Patent and trademark holders and applicants pay 
the PTO a variety of fees to obtain and retain their patent and 
trademark rights. The fees are supposed to reflect the cost of services 
provided by the PTO; but between 1992 and 2003, Congress denied the PTO 
the ability to spend $654 million of the fees paid to it. Instead, 
Congress appropriated these fees for unrelated programs. This will stop 
as a result of this bill.
  As a result of that diversion, the PTO has been forced to gradually 
cannibalize itself. It has deferred critical information technology 
upgrades. It has squeezed every ounce of possible productivity out of 
examiners, and appears now to be asking them to review applications in 
an unrealistic time frame. It even laid off almost one-third of its 
trademark examining corps. Despite these drastic measures, the PTO only 
managed to delay, not avert, a train wreck. By all objective measures, 
that train wreck is upon us.
  I could go through, and my the statement in the Record will contain a 
full

[[Page H795]]

statistical explanation of the incredible increase in the backlog for 
patent applications, but in conclusion, it takes more than 2 years now 
for a patent application to be granted or disposed. In many cases, more 
than 60 months is the pendency for a patent application.
  Why does this pendency matter? Why do we care about these backlogs? 
It affects both the patent applicants and society at large. Patent 
ownership enables individual inventors and small businesses to obtain 
capital. Patent ownership gives prospective financiers, such as venture 
capitalists and banks, important reassurance that investment in a small 
entity is sound.
  Long patent pendency also negatively affects society at large. Long 
patent pendency and patent backlogs creates substantial uncertainty in 
the marketplace and thus makes it difficult for all businesses to 
operate. A backlog of 500,000 patent applications may cover business 
methods now common in the financial service business, software 
contained in every personal computer, or a type of computer chip that 
will cost billions to manufacture.
  As troubling as the lengthy patent pendencies are, they are not the 
gravest problem facing the PTO. Even greater concern should be given to 
the quality of the patents granted by PTO. When PTO grants patents in 
error to things that are not true inventions, many negative side 
effects occur. Low-quality patents can deter scientific research, 
create obstacles to legitimate commercial activities, and create 
opportunities for illegitimate rent-seeking. A bad patent on a 
pharmaceutical drug means that consumers cannot obtain a cheaper 
generic version. A bad patent on Web browser technology may force the 
redesign of every piece of software interoperating with current Web 
browsers.
  Using a random sampling methodology, the PTO estimates its error rate 
for patents issued in fiscal year 2003 at 4.4 percent. That means more 
than 7,000 patents were issued in error. That means that at any given 
time given the 7-year pendency term for patents, there are over 120,000 
bad patents in force.
  Enactment of this legislation will enable the PTO to substantially 
improve patent quality. It will also enable the PTO to hire 750 new 
patent examiners a year between 2004 and 2006, and additional numbers 
in subsequent years. It will take time to train these new examiners. 
They will eventually be able to shoulder some of the patent examination 
workload that threatens to swamp the current examining corps. With an 
expanded examining corps, the PTO will be able to give patent examiners 
more flexibility in the amount of time they spend on any one 
application.
  I am convinced that H.R. 1561 is an important part of the solution to 
the pendency and quality problems. It is a first absolutely necessary 
step to reforming the PTO. There are other legislative proposals that 
deal with a number of these issues, but this is the key first step. I 
urge my colleagues to approve H.R. 1561.
  Mr. Chairman, I reserve the balance of my time.
  Mr. SENSENBRENNER. Mr. Chairman, I yield 3 minutes to the gentlewoman 
from Pennsylvania (Ms. Hart).
  Ms. HART. Mr. Chairman, I thank the gentleman from Wisconsin (Mr. 
Sensenbrenner) for yielding me this time.
  I rise in support of the legislation, H.R. 1561. Congress has been 
working on this legislation for a number of years, in fact, since 
before I got here. I know since the 106th Congress, they have attempted 
to solve the problem that exists in the Patent and Trademark Office, 
that is, funding problems, structural problems, and approval-time 
problems.
  Passage of this bill is imperative, and it is long overdue. 
Unfortunately, quality, pendency, and overall efficiency have continued 
to be a problem throughout these years. In fact, there is a greater 
threat to the health of American's intellectual property system than 
ever. The longer we wait to confront these issues and pass this bill, 
the more costly and time consuming it will be to overcome the problems.
  Through working on the legislation, it has become clear to me that a 
strong patent and trademark system is not only essential for continued 
growth of the high-tech industry here in this country, but for our 
entire economy.
  H.R. 1561 has fee readjustments that will enable the Patent and 
Trademark Office to fund its operations as needed to ensure that the 
long-term goals of enhanced efficiency and proficiency of staff are met 
by providing a more vibrant, seamless, and cost-effective intellectual 
property system.
  The readjustment of the fees will generate an additional $201 million 
in revenue for improvements at the Patent and Trademark Office. That 
means less time to review a patent, better quality staffing, and better 
quality patents.
  While fee readjustment alone is insufficient, the enactment of this 
bill is a necessary precursor to the implementation of crucial 
administrative changes, such as quality checks at every stage of the 
examination process, improvements in patent practitioners in customer 
service and ability to provide competent analysis of applications, 
refinement of training and performance assessment programs, testing for 
and evaluations of these patent examiners to ensure thorough 
understanding of relevant technology, applicable law, and related 
internal procedures.
  Also of key importance is acceleration of processing time by 
transitioning from paper to e-government processing, hiring of almost 
3,000 examiners, reduction in the pendency of these applications and 
the backup at the PTO. All of these issues will be addressed under this 
bill.
  Failure to enact the bill will mean that quality and pendency issues 
will continue to cause harm to American innovators and to American job 
creators. Without this legislation, the backlog of applications will 
skyrocket to over 1 million applications by 2008, more than double the 
current amount. The pendency time will also continue to increase. This 
cannot be tolerated. We need to pass this bill.
  Finally, families in the communities I represent are dependent upon 
this bill's success. A significant number of the people in my 
communities are employed in the coatings industry, in the glass 
industry, plastics, specialty steel, not to mention high-technology 
communications and technology for health care devices. These products 
are unique processes and are unique products. We need to have these 
products patented to keep these jobs in the United States, to keep 
these people in my community employed.
  I know that employers and innovators are at the heart of providing 
these jobs. We need to protect their innovations and their processes. 
We need to make sure that our Patent and Trademark Office works for 
them. I urge my colleagues to support this bill.
  Mr. BERMAN. Mr. Chairman, I yield 3 minutes to the gentlewoman from 
California (Ms. Lofgren), a member of the Committee on the Judiciary 
and the first articulator of the principle ``no end to diversion, no 
fee increase.''
  Ms. LOFGREN. Mr. Chairman, I thank the ranking member of the 
subcommittee and the chairman. Yes, it is true that we have been 
objecting to the diversion of fees from the Patent and Trademark Office 
for some time. In fact, since 1962 some $6 million has been diverted 
from the PTO and put to other uses; and according to the Patent Public 
Advisory Committee, this has created a crisis at the PTO. There is 
inadequate funding, and there is also a significant increase in patent 
and trademark applications.
  The diversion of fees is not the cause of the problems in the Patent 
Office. It is the cause of the inability to deal with the problem in 
the Patent Office. We know that we have to spend more to implement the 
plan that Jim Rogan, our prior colleague, headed up when he was at the 
Patent Office. We need to upgrade the computer system so we have a 
priority search that really is worthy of our country. We know that the 
amount of time that each patent examiner has to examine a patent is 
insufficient. It is impossible to do the kind of job that we want them 
to do and they want to do in the time available.
  Because of the problems in the act and the diversion of fees, I think 
we have had some problems with some of the patents that have been 
generated in recent times. There have been substantial questions 
generated about some of them. We hear a lot about the business methods 
patents, but it is not

[[Page H796]]

just about those patents; and it is important that we do not grant a 
patent that cannot withstand a court challenge. It is costly and wastes 
valuable resources; but more importantly, it grants unwarranted rights 
of exclusivity that deter otherwise lawful activity and impedes 
competition and innovation.

                              {time}  1700

  Furthermore, the pendency for patents is now averaging 24.7 months, 
which is an unbelievable delay. When we think about the pace of 
technological change that a patent should on average take, 24.7 months 
is really not a good thing for the innovation high-tech economy. To 
quote a former First Lady, those of us on the Committee on the 
Judiciary believe we should just say no to patent fee diversion. 
Patentors and inventors do not object to being taxed on their income 
just the way other Americans are taxed on their income but to divert 
patent fees to general purposes is basically a tax on innovation, a 
special tax on innovation. That is something that we should object to.
  I believe that the bill before us with the compromises that have been 
made is one that I can support. I think in the end it will well serve 
our country. It will well serve our economy. Because as someone from 
Silicon Valley, I know as well as anyone that it is innovation that 
really grows the American economy and by making the Patent Office 
better, by precluding the diversion of fees, we will help that 
innovation economy.
  I would note further that in all of my dealings with innovators in 
Silicon Valley and really around the country, not one has objected to 
the increase in fees. Not a single one. What they object to is the 
diversion of fees. I recommend this bill.
  Mr. SENSENBRENNER. Mr. Chairman, I yield myself 4 minutes.
  Mr. Chairman, I rise today to express my sincere gratitude and 
appreciation to my good friend, the distinguished chairman of the 
Subcommittee on Commerce, Justice, State, Judiciary and Related 
Agencies of the Committee on Appropriations, for his work with me on 
this bill. Working to reform the PTO to ensure timely and effective 
intellectual property protection for American inventors and businesses 
has been a multiyear effort for many of us, authorizers and 
appropriators, on both sides of the aisle. Today, we see the fruits of 
these efforts. Thanks to the support of Chairman Wolf and full 
committee Chairman Young, our committees have come together and reached 
an agreement on a funding mechanism that will enable the USPTO to fully 
fund its restructuring and reform activities. It is my understanding 
that this rebate mechanism would ensure that all revenue from patent 
and trademark fees would in fact go to the USPTO or would be rebated to 
those who have paid the fees. As a result, the USPTO, which receives no 
taxpayer dollars and is fully fee-funded, would now be able to retain 
its fee revenue and to fully fund their widely supported 5-year 
strategic plan. Is that the gentleman from Virginia's understanding?
  Mr. WOLF. If the gentleman from Wisconsin will yield, I concur with 
the reading of the intent of this funding mechanism. I would add that 
an important tool the Committee on Appropriations uses in its oversight 
of the Patent and Trademark Office as a Federal agency is control over 
its discretionary appropriation. We will ensure that this new funding 
mechanism maintains that control and does not give the Patent and 
Trademark Office a blank check particularly at a time when all 
discretionary spending is tight.
  The USPTO must modernize. The Committee on the Judiciary and USPTO's 
user groups have developed a comprehensive 5-year blueprint to 
streamline the operations of the office. Given the significant increase 
in funding that this bill would provide, I have asked the General 
Accounting Office and the National Academy of Public Administration to 
conduct comprehensive reviews to ensure the moneys are spent to reduce 
pendency and increase the quality of our patent and trademark system.
  Particularly in the high-tech sector, a company's competitiveness is 
directly related to the amount of time it takes to receive a patent for 
their new product. They are disadvantaged when the life cycle of their 
products expires before they are able to get a patent. I would also 
like to thank the chairman for including language to ensure that 
searches are not outsourced offshore. I think it is important for 
Members to know under no circumstances should this be outsourced to 
another country and under no circumstances should these searches be 
conducted by non-U.S. citizens.
  I commend and thank the gentleman from Wisconsin for his work on this 
measure, and I urge its adoption.
  Mr. BERMAN. Mr. Chairman, notwithstanding the difference of view we 
have on this issue, I yield 3 minutes to the gentlewoman from Ohio (Ms. 
Kaptur), a tenacious fighter for that in which she believes.
  Ms. KAPTUR. Mr. Chairman, I want to thank the gentleman from 
California for allowing this institution to function as it should and 
to allow those who disagree with this bill an opportunity to speak.
  Mr. Chairman, across our country we see the dismantling of jobs and 
business in this country. This particular bill, H.R. 1561, dismantles 
the Patent and Trademark Office as we have known it. If one reads 
article 1, section 8, it says, the Congress shall have the power to 
secure for inventors the exclusive right to their respective writings 
and discoveries. Throughout the over 200-year history of our country, 
that has been done through the U.S. Patent and Trademark Office. The 
bill before us on page 11 reads, the Director can provide that searches 
be done by commercial entities.
  That is not what the Constitution says. That is not the U.S. Patent 
Office. That is a commercial entity. Yes, searches will be outsourced 
from the U.S. Patent Office. You could say they would be contracted 
out. That is not the U.S. Patent Office. We have plenty of examples in 
this world of copycatting of inventions, of counterfeiting of 
intellectual property, particularly by the Chinese and by patent 
thieves and by submarine patents. There are plenty of things going on 
in this world that contracting out or outsourcing of the Patent Office 
does not help because you cannot secure the honesty or the integrity of 
those instrumentalities. And though the bill says business concerns, it 
does not say corporations, it says business concerns organized under 
the laws of the United States that indeed can be a foreign corporation, 
because a foreign corporation operating inside the United States, be it 
Chinese, Japanese, Bangladeshi, Indian, whatever, is defined as a U.S. 
corporation. That is not the Patent and Trademark Office of the United 
States of America. Patent holders actually will not know if their 
search is being outsourced or contracted out and they will not know to 
whom. And in terms of the fees being charged, the additional tax being 
put on small inventors and small companies, all this bill has, with all 
due respect to the Committee on Small Business, is a study. It does not 
stop those fees and taxes from being imposed. It increases them. How in 
heaven's name does this make America any more secure?
  I might point out to my dear friend from Wisconsin, as good a Badger 
as he is, that indeed the Japanese patent system and the European 
patent system are not the American system. We have the protections 
here, which is why other countries want to file their patents here. We 
do not want to harmonize with systems unlike ours. We want them to be 
like us. Why are we doing this? And if a patent search takes a while, 
that is a good thing. It protects my rights, particularly my rights as 
a small inventor. So I would say with all due respect to the authors of 
this legislation, changing the U.S. Patent Office, why? Why dismantle 
it after over two centuries of success?
  I deeply thank the gentleman from California for yielding me this 
time. At least we had the opportunity to put our views on the record. I 
would ask my colleagues to vote ``no'' on H.R. 1561.
  Mr. SENSENBRENNER. Mr. Chairman, I yield myself 4 minutes.
  Mr. Chairman, one of our jobs in Congress is to make the government 
work. We have heard ample data that has been presented on both sides of 
the aisle that the PTO is in crisis and unless we pass legislation, 
things will get worse rather than better. What this bill does is that 
it allows the PTO to

[[Page H797]]

add an additional 2,900 patent examiners, government employees, so that 
there will be more people on the government payroll to examine these 
applications. If the bill goes down, those 2,900 people will not be 
there.
  And we have heard a lot about diversion from the gentleman from 
California (Mr. Berman), the gentlewoman from California (Ms. Lofgren) 
and others. This bill ends the diversion. So we will not be using PTO 
fees for other government programs. If the bill goes down, the 
diversion will continue. The outsourcing issue, the amendment that has 
been agreed to will, number one, require that the outsourcing if it is 
done be done by a U.S. corporation; two, it will be done by American 
citizens; and, three, it will be done in the United States of America.
  If we do not do that, then we are going to further complicate the 
patent process. I would point out that our patent law is such that if 
there is an infringement suit the patent holder must prove that the 
patent is valid. That is not the case under foreign patent laws. So if 
there is a bad patent that is issued because the PTO is rushed, then it 
is going to cost the patent holder more when an infringement suit is 
filed. That does not happen in the case of a patent that is issued by a 
foreign country. This bill makes the quality of the patents that are 
issued by the Patent Office better because we have got more people 
looking at them and they are not as rushed.
  Ms. KAPTUR. Mr. Chairman, will the gentleman yield?
  Mr. SENSENBRENNER. I yield to the gentlewoman from Ohio.
  Ms. KAPTUR. I thank the gentleman very much for yielding and would 
just wish to ask him this question. If there are additional staff that 
will be working directly for the U.S. Patent and Trademark Office, then 
why does this bill permit commercial entities to do the review process, 
which means you are outsourcing or contracting out work that should 
legitimately be done by the office?
  Mr. SENSENBRENNER. The answer to the question is that it speeds up 
the process. And with the WTO treaty changing the patent term to 20 
years from the date of filing, every day that there is a delay in 
actually determining whether the application results in the patentable 
invention means that there is one less day of patent protection before 
that patent expires. So if it takes 8 years for the PTO to act on an 
application, that means that somebody who has invented something only 
has got 12 years left. With software technology increasing at such a 
rapid rate, by the time the PTO acts if we do not do something about 
it, the invention is going to be practically useless.
  Ms. KAPTUR. If the gentleman could clarify, he has stated then that 
because of the World Trade Organization, the WTO requirements, this is 
why we are having to pass this bill?
  Mr. SENSENBRENNER. If the gentlewoman from Ohio will refresh her 
recollection, the WTO treaty was ratified by Congress. It was urged 
upon us and signed by President Clinton. I joined the gentlewoman from 
Ohio in opposing the WTO treaty when it came up in 1994 but we lost on 
that and the extension or the change in the patent term from the 
previous 17 years of the date of granting of the patent by the Patent 
Office was changed to 20 years from the date of filing. The gentlewoman 
and I voted against it but it is the law and we have to face up to the 
fact that the longer the PTO delays in issuing a patent, the less time 
of patent protection there is for an applicant for a patent who 
succeeds.
  Mr. Chairman, I yield 1 minute to the gentleman from Illinois (Mr. 
Manzullo).
  Mr. MANZULLO. Mr. Chairman, I want to thank Chairman Sensenbrenner 
and Chairman Lamar Smith for their very important changes for small 
entities and other Patent and Trademark Office users. I also want to 
thank their dedicated and excellent staffs, Phil Kiko, Steve Pinkos and 
Blaine Merritt. I also want to thank the majority leader and his staff 
led by Brett Loper for crafting a very excellent amendment to this bill 
that as the chairman of the Committee on Small Business I am satisfied 
that the small inventor is protected.
  Mr. BERMAN. Mr. Chairman, I yield myself 30 seconds.
  The gentlewoman argued in favor of her position, take more time. 
There is no problem with taking time. The fact is we want a thorough 
investigation. We want a good quality patent. But simply taking more 
time, the argument against that is not simply the one made by the 
chairman about the patent term and how much of it will be left, it is 
that in that backlog that is getting longer and longer and longer are 
lifesaving medical devices, new drugs, new technologies to make America 
more productive and efficient, fascinating and important inventions 
that need to be disseminated and distributed and will not be until that 
patent issues.

                              {time}  1715

  That time is costing our economy and our people both in terms of 
quality of life, health care, and economic efficiency.
  Mr. Chairman, I yield 2 minutes to the gentleman from Florida (Mr. 
Wexler), a member of the subcommittee.
  Mr. WEXLER. Mr. Chairman, as a member of the Subcommittee on Courts, 
the Internet, and Intellectual Property and as a co-chair of the 
Congressional IP Caucus, I rise in strong support of H.R. 1561, and I 
am quite pleased that the House leadership has allowed this compromise 
to be reached and that we have the debate today.
  The Patent and Trademark Office is in severe need of additional 
resources to ensure the expedience and quality of the patent 
examination process. Without these valuable changes, an overburdened 
and slow patent examination system will deter the innovations of 
American business. Given the importance to our lives and our economy, 
patent reform is one of the most important issues for increasing the 
growth and strength of the economy for both small and large businesses. 
Congress has the opportunity with this bill to give the PTO the 
flexibility they have been asking for to strengthen and improve 
America's patent system.
  The gentlewoman from Ohio (Ms. Kaptur) is correct to raise the issue 
and the concern of loss of jobs in America and the outsourcing of jobs. 
I would respectfully argue that one of the ways in which to assist 
American workers in regaining what they have lost over the past 3 years 
is to allow the Patent and Trademark Office these reforms that are in 
desperate need and should have been done years ago.
  Mr. SENSENBRENNER. Mr. Chairman, I yield 5 minutes to the gentleman 
from Texas (Mr. Smith), who is the chairman of the subcommittee.
  Mr. SMITH of Texas. Mr. Chairman, first of all, I would like to 
personally thank the gentleman from Wisconsin (Chairman Sensenbrenner); 
the gentleman from Illinois (Chairman Manzullo); the gentleman from 
Florida (Chairman Young); the gentleman from Virginia (Chairman Wolf); 
and also the gentleman from California (Mr. Berman), ranking member, 
for their help in pulling this bill together. They helped to iron out 
the wrinkles. They helped resolve the differences between many parties, 
and it is much appreciated.
  Mr. Chairman, this legislation that I authored modernizes the U.S. 
Patent and Trademark Office. It was inspired by two principles 
essential to a democracy: the protection of intellectual property 
rights and the freedom to exchange goods and services.
  The Patent and Trademark Office does not receive the attention of 
other government agencies such as the Department of State and 
Department of Justice, but it should. The Patent and Trademark Office 
is crucial to the health of our economy and to the lives of millions of 
Americans.
  The Patent and Trademark Office protects the rights of all American 
inventors. From the lone individual working in their garage to the 
small business owner with a breakthrough idea to the large high-tech 
company that applies for hundreds of patents, all rely on a responsive 
Patent and Trademark Office. Without a strong PTO, our economy would be 
devastated, our quality of life would be diminished, and jobs would be 
lost or never created in the first place.
  Mr. Chairman, this bill prevents the diversion of Patent and 
Trademark Office fees paid by inventors to fund government programs 
unconnected to the agency. The diversion of fees to the office is 
unfair, counterproductive, and an obstacle to sustained economic

[[Page H798]]

growth. Approximately $750 million has been diverted from the PTO in 
the last decade alone. Such a large revenue loss has deprived the 
Patent and Trademark Office of the resources it must have to serve the 
patent and trademark holders of the United States. At a time when the 
office is struggling to pay its examiners enough and to keep up with 
applications, particularly in high-tech areas, Congress should take an 
interest in protecting our economy by keeping patents and trademark 
fees within the Patent and Trademark Office.
  This bill enables the Patent and Trademark Office to hire 2,900 new 
patent examiners. Today the average time to process a patent exceeds 2 
years. Without the new examiners, agency delays will soon reach 3 or 
even 4 years. If this fee bill does not become law, it is estimated 
that 140,000 patents will not be issued over the next 5 years. That is 
140,000 missed opportunities for the American people.
  If nothing is done, if the status quo continues, it means new 
products will not make it to the market, jobs will not be created, and 
the inventors who came up with new ideas and products will not have 
their intellectual property protected and so will not market their 
inventions.
  This bill helps small businesses and nonprofit institutions. It 
provides a 50 percent discount on most services to small businesses, 
universities, and other nonprofit entities. The benefits of an improved 
and streamlined PTO will help small businesses and universities and 
encourage new research and innovation.
  Mr. Chairman, I would like to again thank the gentleman from 
Wisconsin (Mr. Sensenbrenner), chairman of the Committee on the 
Judiciary, for making this issue a priority for our committee and 
working with the appropriators to resolve our differences on PTO 
funding.
  Since U.S. Patent No. 1 was issued in 1837 for traction wheels, the 
patent system and the creativity, genius, and talent that defined it 
have benefited all Americans. From the revolutionary electric light 
bulb to the latest software technology, patents reflect America and 
contribute to our economic prosperity.
  This bipartisan bill is supported by these organizations: the 
Information Technology Industry Council, Chamber of Commerce, the 
National Association of Manufacturers, the Intellectual Property 
Owners, the International Trademark Association, the Association of 
American Universities, and the Association for Competitive Technology, 
as well as many others.
  Mr. Chairman, this bill is good for innovation, good for the economy, 
and good for the American people. The PTO has rarely been more 
important than it is today. It must have the resources it needs to 
professionally and expeditiously process patent and trademark 
applications. American jobs, profits, and the future of entrepreneurial 
capitalism are literally at stake.
  Mr. BERMAN. Mr. Chairman, I yield 2 minutes to the gentleman from 
Washington (Mr. Inslee).
  (Mr. INSLEE asked and was given permission to revise and extend his 
remarks.)
  Mr. INSLEE. Mr. Chairman, this bill is consistent with an idea 
expressed by a former Member of this Chamber who did pretty well for 
himself, Abraham Lincoln. Lincoln said that the Patent Office adds the 
flame of interest to the light of creativity. And that is why we need 
to improve the effectiveness of our Patent Office. We need to do so 
because what we all recognize in this Chamber is one answer to the 
$64,000 question of how we are going to grow jobs in this country, is 
we are going to do this by playing to our American unique strength; and 
the uniquely American strength is we are the best innovators, we are 
the best technologists, we are the best creators for new devices the 
world has ever seen. And we need to play to this unique American 
strength in our strategy on how to deal with the development of the 
global economy. And this bill, although it will be little noted, it 
should be long remembered in our ability to play to that strength 
because we have people in every district in this country who today are 
working on inventions who will have the added flame of interest to 
their light of creativity.
  Let me give the Members an example. I have got some folks this 
afternoon who are working on a potential drug in Bothell, Washington, 
that could potentially actually cure in a meaningful way one type of 
diabetes. Those folks who are laboring over their computers and bunsen 
burners today deserve an American Patent Office that will process 
patents in a timely fashion, which we simply do not have now. We do not 
want to see the time period move from a horrendous 2-year delay today 
up to a 4- or 6-year delay in 5 or 6 years.
  So I want to show my appreciation for the chairman and the gentleman 
from California (Mr. Berman), who have worked on this to get this bill 
to the floor. It is one answer to how we are going to really compete in 
a global economy. Let us play to the American strength. Let us improve 
the Patent office. Let us grow jobs in this country.
  Mr. BERMAN. Mr. Chairman, I yield myself such time as I may consume.
  I have no further requests for time, but I do want to address this 
issue of outsourcing just to get the record straight here. As a general 
principle, I am opposed. I share the feelings of the gentlewoman from 
Ohio regarding the general proposition, the farming government 
responsibilities and jobs out to private entities and particularly when 
we are dealing with core government functions; and I think searches 
performed by patent examiners may be such core functions. But in H.R. 
1561 what we took was an open-ended proposal from the Patent Office to 
allow outsourcing of searches, and working with the gentleman from 
Texas (Chairman Smith), with other committee members, with the PTO, 
with PTO employee unions, and with all the various industry groups, we 
put constraints on the ability to outsource allowed by the bill. 
Together with the gentleman from Texas (Chairman Smith), we developed a 
limiting amendment that was accepted with essentially no opposition in 
the Committee on the Judiciary; and the bill, as so amended, was 
reported out with Democrats and Republicans expressing just about 
unanimous support for the bill.
  H.R. 1561 prohibits the PTO from outsourcing until all of the 
following criteria are met: the PTO conducts a pilot project of limited 
scope for not more than 18 months to test the efficacy of outsourcing 
patent searches; secondly, that the pilot program must demonstrate that 
the searches performed by commercial entities are accurate and at least 
meet or exceed the standards conducted and used by the PTO; the 
director, third, must submit a report to Congress detailing the 
methodology of the pilot and containing a comparative evaluation of 
outsourced and patent examiner searches, addressing factors such as 
productivity, costs, and quality; fourth, and very importantly, the 
Patent Public Advisory Committee, an independent entity consisting of 
patent union representatives and PTO user groups, has to submit a 
report to Congress with a detailed analysis of the pilot project.
  And even after that, if that independent committee, all that 
concludes that it makes sense to outsource patent searches, nothing can 
happen until after 1 year so that Congress has a year to decide whether 
or not to continue to prohibit search outsourcing despite the results 
of these reports.
  H.R. 1561 prohibits the PTO from outsourcing searches unless all of 
these criteria are met. The National Treasury Union, every patent user 
organization that I know of, large companies, small companies, 
universities, nonprofits, all of them involved in the patent process 
all think this bill does not destroy the Patent Office. This bill is 
the most important thing to saving the whole patent process. And the 
whole point of even entertaining the idea of outsourcing is simply to 
deal with better quality, better productivity, and more time. I urge 
that H.R. 1561 be passed.
  Mr. GOODLATTE. I rise today in strong support of the U.S. Patent and 
Trademark Fee Modernization Act.
  America's commitment to protecting intellectual property gives 
America a distinct competitive advantage in the global marketplace. 
When a country provides an atmosphere that is conducive to innovation 
and encourages the aggressive enforcement of intellectual property 
rights, businesses will seek the protection of

[[Page H799]]

that country and will make conscious decisions to innovate there. 
America must continue to be the world leader in protecting intellectual 
property so that it will continue to be the world leader in innovation.
  H.R. 1561, the U.S. Patent and the Trademark Fee Modernization Act, 
would codify a revised fee schedule that would give the USPTO the 
resources it needs to increase the quality of issued patents and 
trademarks, to hire additional examiners, and to reduce the backlog of 
applications that is currently pending.
  In addition, H.R. 1561 represents an important compromise that 
effectively ends ``fee diversion,'' the current practice of diverting 
the excess fees collected by the USPTO to the Federal Government. Under 
the compromise, if the USPTO collects more in fees than it is 
appropriated, the balance would be rebated back to the users.
  Furthermore, the bill protects small businesses by reducing the 
filing fee for any small entity or independent inventor by 75 percent 
if those entities file their applications electronically, in addition 
to other protections for small businesses.
  This legislation is an important step in the ongoing effort to 
enhance the quality and timeliness of patent and trademark processing. 
Our Nation's investors deserve nothing less than the most efficient and 
accurate patent and trademark office in the world. I urge each of my 
colleagues to support this important legislation.
  Mr. CANTOR. Mr. Chairman, I rise today in favor of the United States 
Patent and Trademark Fee Modernization Act (H.R. 1561). This 
legislation is crucial to America maintaining its role as the world 
leader in innovative technology.
  Intellectual Property is the currency that drives innovation in 
America's high-tech economy, and the U.S. Patent and Trademark Office 
(PTO) is charged with granting the important patents and trademarks for 
these innovations. The PTO serves a critical role in the promotion and 
development of new products and commercial activity in our country.
  The PTO is of vital importance to the technology sector of our 
economy, and it is vital that this agency have proper funding to 
execute its mission. This legislation will allow the PTO to accomplish 
this goal--while allowing small business innovators to compete with 
larger corporations.
  H.R. 1561 will eliminate patent fee diversion and will ensure that 
all fees paid to the PTO will be used to expedite the time-consuming 
and costly procedures associated with granting patents and trademarks.
  This legislation is the first step toward improving patent and 
trademark quality while reducing application backlogs. This reform will 
help eliminate some of the bureaucracy that hinders businesses from 
success in the marketplace and hinders the advancement of technology in 
America.
  I urge final passage of H.R. 1561.
  Mr. LATHAM. Mr. Chairman, I stand in support of H.R. 1561. The 
legislation is the culmination of years of hard work between the 
appropriators and the members of the Judiciary Committee. It allows the 
appropriators to retain oversight of the Patent and Trademark Office, 
while permanently ending the practice of diverting fees paid by users 
of the Patent and Trademark Office. In the past, these fees were used 
for unrelated government programs. I am pleased because these fees will 
specifically go to improving patent quality, reducing the time it takes 
to examine a patent and increasing efficiency of the Patent and 
Trademark Office in total. These are the goals of the 21st Century 
Strategic Plan that was developed by the Patent Office and reviewed by 
the Congress.
  Finally and most importantly this bill ensures that companies can and 
will continue to have opportunities to innovate and remain competitive 
in this global economy.
  Mr. MORAN of Virginia. Mr. Chairman, I rise in support of the U.S. 
Patent and Trademark Fee Modernization Act (H.R. 1561).
  This legislation builds upon a strong foundation first established 
back on April 5, 1790, when the first patent statute was passed by the 
Congress of the 12 United States. That's right, we had our first patent 
law before Rhode Island became our 13th State.
  At the time, the first law directed the Secretary of State, the 
Secretary of War and the Attorney General to determine if they, or any 
two of them thought ``the invention or discovery sufficiently useful 
and important'' to merit a patent.
  A hefty fee between $4 and $5 was collected to process and approve 
each patent petition. Interestingly, the payment did not go to the 
newly created Federal Government but to a government employee, the 
Chief Clerk of the Department of State. The funds went to support the 
patent operations and later financed the construction of the first 
Patent Office, not to support the general funds of the U.S. Treasury.
  Today, the U.S. Patent and Trademark Office, an office that I am 
proud to say resides in my congressional district, is struggling with 
an increasingly complex and voluminous workload. Last year, the office 
received more than 330,000 patent applications and more than 260,000 
trademark applications.
  Patent applications have doubled since 1992. As a result, patent 
pendency (the amount of time a patent application is pending before a 
patent is issued) now averages over 2 years and is even longer in more 
complicated technologies.
  Without more examiners, average pendency in areas such as computer-
related technologies will double to 6 to 8 years in the next few years. 
This delay is a drag, holding back our economy's full potential, 
unfairly punishing American businesses and entrepreneurs at a time when 
intellectual-property-based industries are essential to economic 
growth.
  As application processing times grow, the incentives for investment 
diminish, especially for individuals and small entities with limited 
resources whose inventions are in greater danger of being counterfeited 
or pirated.
  The status quo is a recipe for disaster, and H.R. 1561 represents a 
well-conceived and bipartisan way out of this dilemma. Without the 
bill, the backlog of unexamined patents will more than double--from 
475,000 today to 1 million by 2008.
  This legislation will allow the Patent and Trademark Office to 
implement its 21st Century Strategic Plan by improving productivity, 
patent quality, and e-government. It will give the agency the revenue 
it needs to hire 2,900 needed new patent examiners.
  I support the compromise that was brokered between members of the 
Judiciary and Appropriations Committees that will give the 
appropriators the deference they need to set the funding levels, but 
will provide the authorizers and the patent community the assurances 
they need to make sure that any additional funds raised through the 
fees will be spent for their designated purpose. Any balance of funds 
are to be returned to the patent applicants, and not be spent elsewhere 
by the Federal Government.
  Let me also make it clear that while I have some concerns about 
outsourcing and potential liability issues outsourcing might create, 
let's recognize that this is just a pilot program with ample 
opportunity for Congress to exercise appropriate oversight. Whatever 
civil service jobs might one day be lost by outsourcing will more than 
be made up by the thousands of jobs this legislation will help create.
  The Patent and Trademark Office plans to increase its patent 
examining staff by about 1,000 annually in fiscal years 2005 and 2006, 
reaching and maintaining a stable level of about 4,500 examiners after 
that.
  Mr. Chairman, our future is made more secure through a system that 
protects the rights of inventors.
  At the centennial celebration of the U.S. Patent Office in 1890, 
Commissioner Charles Elliot Mitchell eloquently stated the important 
decision of our Founding Fathers to provide protections for 
intellectual property when drafting the Constitution:

       For who is bold enough to say that the Constitution could 
     have overspread a continent if the growth of invention and 
     inventive achievement had not kept pace with territorial 
     expansion. It is invention which brought the Pacific Ocean to 
     the Alleghanies. It is invention which, fostered, by a single 
     sentence in their immortal work, has made it possible for the 
     flag of one republic to carry more than forty symbolic stars.

  My colleagues for the sake of this great Nation, modernize the Patent 
and Trademark Office; support the U.S. Patent and Trademark Fee 
Modernization Act of 2003.
  Mr. BERMAN. Mr. Chairman, I yield back the balance of my time.
  Mr. SENSENBRENNER. Mr. Chairman, I yield back the balance of my time.
  The CHAIRMAN. All time for general debate has expired.
  Pursuant to the rule, the committee amendment in the nature of a 
substitute shall be considered as an original bill for the purpose of 
amendment under the 5-minute rule and shall be considered read.
  The text of the committee amendment in the nature of a substitute is 
as follows:

                               H.R. 1561

       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 ``United States Patent and 
     Trademark Fee Modernization Act of 2003''.

     SEC. 2. FEES FOR PATENT SERVICES.

       (a) General Patent Fees.--Section 41(a) of title 35, United 
     States Code, is amended to read as follows:
       ``(a) General Fees.--The Director shall charge the 
     following fees:
       ``(1) Filing and basic national fees.--
       ``(A) On filing each application for an original patent, 
     except for design, plant, or provisional applications, $300.

[[Page H800]]

       ``(B) On filing each application for an original design 
     patent, $200.
       ``(C) On filing each application for an original plant 
     patent, $200.
       ``(D) On filing each provisional application for an 
     original patent, $200.
       ``(E) On filing each application for the reissue of a 
     patent, $300.
       ``(F) The basic national fee for each international 
     application filed under the treaty defined in section 351(a) 
     of this title entering the national stage under section 371 
     of this title, $300.
       ``(G) In addition, excluding any sequence listing or 
     computer program listing filed in an electronic medium as 
     prescribed by the Director, for any application the 
     specification and drawings of which exceed 100 sheets of 
     paper (or equivalent as prescribed by the Director if filed 
     in an electronic medium), $250 for each additional 50 sheets 
     of paper (or equivalent as prescribed by the Director if 
     filed in an electronic medium) or fraction thereof.
       ``(2) Excess claims fees.--In addition to the fee specified 
     in paragraph (1)--
       ``(A) on filing or on presentation at any other time, $200 
     for each claim in independent form in excess of 3;
       ``(B) on filing or on presentation at any other time, $50 
     for each claim (whether dependent or independent) in excess 
     of 20; and
       ``(C) for each application containing a multiple dependent 
     claim, $360.

     For the purpose of computing fees under this paragraph, a 
     multiple dependent claim referred to in section 112 of this 
     title or any claim depending therefrom shall be considered as 
     separate dependent claims in accordance with the number of 
     claims to which reference is made. The Director may by 
     regulation provide for a refund of any part of the fee 
     specified in this paragraph for any claim that is canceled 
     before an examination on the merits, as prescribed by the 
     Director, has been made of the application under section 131 
     of this title. Errors in payment of the additional fees under 
     this paragraph may be rectified in accordance with 
     regulations prescribed by the Director.
       ``(3) Examination fees.--
       ``(A) For examination of each application for an original 
     patent, except for design, plant, provisional, or 
     international applications, $200.
       ``(B) For examination of each application for an original 
     design patent, $130.
       ``(C) For examination of each application for an original 
     plant patent, $160.
       ``(D) For examination of the national stage of each 
     international application, $200.
       ``(E) For examination of each application for the reissue 
     of a patent, $600.

     The provisions of section 111(a)(3) of this title relating to 
     the payment of the fee for filing the application shall apply 
     to the payment of the fee specified in this paragraph with 
     respect to an application filed under section 111(a) of this 
     title. The provisions of section 371(d) of this title 
     relating to the payment of the national fee shall apply to 
     the payment of the fee specified in this paragraph with 
     respect to an international application. The Director may by 
     regulation provide for a refund of any part of the fee 
     specified in this paragraph for any applicant who files a 
     written declaration of express abandonment as prescribed by 
     the Director before an examination has been made of the 
     application under section 131 of this title, and for any 
     applicant who provides a search report that meets the 
     conditions prescribed by the Director.
       ``(4) Issue fees.--
       ``(A) For issuing each original patent, except for design 
     or plant patents, $1,400.
       ``(B) For issuing each original design patent, $800.
       ``(C) For issuing each original plant patent, $1,100.
       ``(D) For issuing each reissue patent, $1,400.
       ``(5) Disclaimer fee.--On filing each disclaimer, $130.
       ``(6) Appeal fees.--
       ``(A) On filing an appeal from the examiner to the Board of 
     Patent Appeals and Interferences, $500.
       ``(B) In addition, on filing a brief in support of the 
     appeal, $500, and on requesting an oral hearing in the appeal 
     before the Board of Patent Appeals and Interferences, $1,000.
       ``(7) Revival fees.--On filing each petition for the 
     revival of an unintentionally abandoned application for a 
     patent, for the unintentionally delayed payment of the fee 
     for issuing each patent, or for an unintentionally delayed 
     response by the patent owner in any reexamination proceeding, 
     $1,500, unless the petition is filed under section 133 or 151 
     of this title, in which case the fee shall be $500.
       ``(8) Extension fees.--For petitions for 1-month extensions 
     of time to take actions required by the Director in an 
     application--
       ``(A) on filing a first petition, $120;
       ``(B) on filing a second petition, $330; and
       ``(C) on filing a third or subsequent petition, $570.''.
       (b) Patent Maintenance Fees.--Section 41(b) of title 35, 
     United States Code, is amended to read as follows:
       ``(b) Maintenance Fees.--The Director shall charge the 
     following fees for maintaining in force all patents based on 
     applications filed on or after December 12, 1980:
       ``(1) 3 years and 6 months after grant, $900.
       ``(2) 7 years and 6 months after grant, $2,300.
       ``(3) 11 years and 6 months after grant, $3,800.

     Unless payment of the applicable maintenance fee is received 
     in the United States Patent and Trademark Office on or before 
     the date the fee is due or within a grace period of 6 months 
     thereafter, the patent will expire as of the end of such 
     grace period. The Director may require the payment of a 
     surcharge as a condition of accepting within such 6-month 
     grace period the payment of an applicable maintenance fee. No 
     fee may be established for maintaining a design or plant 
     patent in force.''.
       (c) Patent Search Fees.--Section 41(d) of title 35, United 
     States Code, is amended to read as follows:
       ``(d) Patent Search and Other Fees.--
       ``(1) Patent search fees.--(A) The Director shall charge a 
     fee for the search of each application for a patent, except 
     for provisional applications. The Director shall establish 
     the fees charged under this paragraph to recover an amount 
     not to exceed the estimated average cost to the Office of 
     searching applications for patent either by acquiring a 
     search report from a qualified search authority, or by 
     causing a search by Office personnel to be made, of each 
     application for patent.
       ``(B) For purposes of determining the fees to be 
     established under this paragraph, the cost to the Office of 
     causing a search of an application to be made by Office 
     personnel shall be deemed to be--
       ``(i) $500 for each application for an original patent, 
     except for design, plant, provisional, or international 
     applications;
       ``(ii) $100 for each application for an original design 
     patent;
       ``(iii) $300 for each application for an original plant 
     patent;
       ``(iv) $500 for the national stage of each international 
     application; and
       ``(v) $500 for each application for the reissue of a 
     patent.
       ``(C) The provisions of section 111(a)(3) of this title 
     relating to the payment of the fee for filing the application 
     shall apply to the payment of the fee specified in this 
     paragraph with respect to an application filed under section 
     111(a) of this title. The provisions of section 371(d) of 
     this title relating to the payment of the national fee shall 
     apply to the payment of the fee specified in this paragraph 
     with respect to an international application.
       ``(D) The Director may by regulation provide for a refund 
     of any part of the fee specified in this paragraph for any 
     applicant who files a written declaration of express 
     abandonment as prescribed by the Director before an 
     examination has been made of the application under section 
     131 of this title, and for any applicant who provides a 
     search report that meets the conditions prescribed by the 
     Director.
       ``(E) For purposes of subparagraph (A), a `qualified search 
     authority' may not include a commercial entity unless--
       ``(i) the Director conducts a pilot program of limited 
     scope, conducted over a period of not more than 18 months, 
     which demonstrates that searches by commercial entities of 
     the available prior art relating to the subject matter of 
     inventions claimed in patent applications--
       ``(I) are accurate; and
       ``(II) meet or exceed the standards of searches conducted 
     by and used by the Patent and Trademark Office during the 
     patent examination process;
       ``(ii) the Director submits a report on the results of the 
     pilot program to the Congress and the Patent Public Advisory 
     Committee that includes--
       ``(I) a description of the scope and duration of the pilot 
     program;
       ``(II) the identity of each commercial entity participating 
     in the pilot program;
       ``(III) an explanation of the methodology used to evaluate 
     the accuracy and quality of the search reports; and
       ``(IV) an assessment of the effects that the pilot program, 
     as compared to searches conducted by the Patent and Trademark 
     Office, had and will have on--

       ``(aa) patentability determinations;
       ``(bb) productivity of the Patent and Trademark Office;
       ``(cc) costs to the Patent and Trademark Office;
       ``(dd) costs to patent applicants; and
       ``(ee) other relevant factors;

       ``(iii) the Patent Public Advisory Committee reviews and 
     analyzes the Director's report under clause (ii) and the 
     results of the pilot program and submits a separate report on 
     its analysis to the Director and the Congress that includes--
       ``(I) an independent evaluation of the effects that the 
     pilot program, as compared to searches conducted by the 
     Patent and Trademark Office, had and will have on the factors 
     set forth in clause (ii)(IV); and
       ``(II) an analysis of the reasonableness, appropriateness, 
     and effectiveness of the methods used in the pilot program to 
     make the evaluations required under clause (ii)(IV); and
       ``(iv) the Congress does not, during the 1-year period 
     beginning on the date on which the Patent Public Advisory 
     Committee submits its report to the Congress under clause 
     (iii), enact a law prohibiting searches by commercial 
     entities of the available prior art relating to the subject 
     matter of inventions claimed in patent applications.
       ``(2) Other fees.--The Director shall establish fees for 
     all other processing, services, or materials relating to 
     patents not specified in this section to recover the 
     estimated average cost to the Office of such processing, 
     services, or materials, except that the Director shall charge 
     the following fees for the following services:
       ``(A) For recording a document affecting title, $40 per 
     property.
       ``(B) For each photocopy, $.25 per page.
       ``(C) For each black and white copy of a patent, $3.

     The yearly fee for providing a library specified in section 
     12 of this title with uncertified printed copies of the 
     specifications and drawings for all patents in that year 
     shall be $50.''.
       (d) Adjustments.--Section 41(f) of title 35, United States 
     Code, shall apply to the fees established under the 
     amendments made by this section, beginning in fiscal year 
     2005.
       (e) Conforming Amendments.--

[[Page H801]]

       (1) Section 41 of title 35, United States Code, is 
     amended--
       (A) in subsection (c), by striking ``(c)(1)'' and inserting 
     ``(c) Late Payment of Fees.--(1)'';
       (B) in subsection (e), by striking ``(e)'' and inserting 
     ``(e) Waivers of Certain Fees.--'';
       (C) in subsection (f), by striking ``(f)'' and inserting 
     ``(f) Adjustments in Fees.--'';
       (D) in subsection (g), by striking ``(g)'' and inserting 
     ``(g) Effective Dates of Fees.--'';
       (E) in subsection (h), by striking ``(h)(1)'' and inserting 
     ``(h) Reductions in Fees for Certain Entities.--(1)''; and
       (F) in subsection (i), by striking ``(i)(1)'' and inserting 
     ``(i) Search Systems.--(1)''.
       (2) Section 119(e)(2) of title 35, United States Code, is 
     amended by striking ``subparagraph (A) or (C) of''.

     SEC. 3. ADJUSTMENT OF TRADEMARK FEES.

       (a) Fee for Filing Application.--The fee under section 
     31(a) of the Trademark Act of 1946 (15 U.S.C. 1113(a)) for 
     filing an electronic application for the registration of a 
     trademark shall be $325. If the trademark application is 
     filed on paper, the fee shall be $375. The Director may 
     reduce the fee for filing an electronic application for the 
     registration of a trademark to $275 for any applicant who 
     prosecutes the application through electronic means under 
     such conditions as may be prescribed by the Director. 
     Beginning in fiscal year 2005, the provisions of the second 
     and third sentences of section 31(a) of the Trademark Act of 
     1946 shall apply to the fees established under this section.
       (b) Reference to Trademark Act of 1946.--For purposes of 
     this section, the ``Trademark Act of 1946'' refers to 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.).

     SEC. 4. CORRECTION OF ERRONEOUS NAMING OF OFFICER.

       (a) Correction.--Section 13203(a) of the 21st Century 
     Department of Justice Appropriations Authorization Act 
     (Public Law 107-273; 116 Stat. 1902) is amended--
       (1) in the subsection heading, by striking ``Commissioner'' 
     and inserting ``Director''; and
       (2) in paragraphs (1) and (2), by striking ``Commissioner'' 
     each place it appears and inserting ``Director''.
       (b) Effective Date.--The amendments made by subsection (a) 
     shall be effective as of the date of the enactment of Public 
     Law 107-273.

     SEC. 5. PATENT AND TRADEMARK OFFICE FUNDING.

       Section 42 of title 35, United States Code, is amended--
       (1) in subsection (b), by striking ``Appropriation''; and
       (2) in subsection (c), in the first sentence--
       (A) by striking ``To the extent'' and all that follows 
     through ``fees'' and inserting ``Fees''; and
       (B) by striking ``shall be collected by and shall be 
     available to the Director'' and inserting ``shall be 
     collected by the Director and shall be available until 
     expended''.

     SEC. 6. EFFECTIVE DATE, APPLICABILITY, AND TRANSITIONAL 
                   PROVISION.

       (a) Effective Date.--Except as provided in section 4 and 
     this section, this Act and the amendments made by this Act 
     shall take effect on October 1, 2003, or the date of the 
     enactment of this Act, whichever is later.
       (b) Applicability.--
       (1)(A) Except as provided in subparagraphs (B) and (C), the 
     amendments made by section 2 shall apply to all patents, 
     whenever granted, and to all patent applications pending on 
     or filed after the effective date set forth in subsection (a) 
     of this section.
       (B)(i) Except as provided in clause (ii), sections 
     41(a)(1), 41(a)(3), and 41(d)(1) of title 35, United States 
     Code, as amended by this Act, shall apply only to--
       (I) applications for patents filed under section 111(a) of 
     title 35, United States Code, on or after the effective date 
     set forth in subsection (a) of this section, and
       (II) international applications entering the national stage 
     under section 371 of title 35, United States Code, for which 
     the basic national fee specified in section 41 of title 35, 
     United States Code, was not paid before the effective date 
     set forth in subsection (a) of this section.
       (ii) Section 41(a)(1)(D) of title 35, United States Code as 
     amended by this Act, shall apply only to applications for 
     patent filed under section 111(b) of title 35, United States 
     Code, before, on, or after the effective date set forth in 
     subsection (a) of this section in which the filing fee 
     specified in section 41 of title 35, United States Code, was 
     not paid before the effective date set forth in subsection 
     (a) of this section.
       (C) Section 41(a)(2) of title 35, United States Code, as 
     amended by this Act, shall apply only to the extent that the 
     number of excess claims, after giving effect to any 
     cancellation of claims, is in excess of the number of claims 
     for which the excess claims fee specified in section 41 of 
     title 35, United States Code, was paid before the effective 
     date set forth in subsection (a) of this section.
       (2) The amendments made by section 3 shall apply to all 
     applications for the registration of a trademark filed or 
     amended on or after the effective date set forth in 
     subsection (a) of this section.
       (c) Transitional Provisions.--
       (1) Search fees.--During the period beginning on the 
     effective date set forth in subsection (a) of this section 
     and ending on the date on which the Director establishes 
     search fees under the authority provided in section 41(d)(1) 
     of title 35, United States Code, the Director shall charge--
       (A) for the search of each application for an original 
     patent, except for design, plant, provisional, or 
     international application, $500;
       (B) for the search of each application for an original 
     design patent, $100;
       (C) for the search of each application for an original 
     plant patent, $300;
       (D) for the search of the national stage of each 
     international application, $500; and
       (E) for the search of each application for the reissue of a 
     patent, $500.
       (2) Timing of fees.--The provisions of section 111(a)(3) of 
     title 35, United States Code, relating to the payment of the 
     fee for filing the application shall apply to the payment of 
     the fee specified in paragraph (1) with respect to an 
     application filed under section 111(a) of title 35, United 
     States Code. The provisions of section 371(d) of title 35, 
     United States Code, relating to the payment of the national 
     fee shall apply to the payment of the fee specified in 
     paragraph (1) with respect to an international application.
       (3) Refunds.--The Director may by regulation provide for a 
     refund of any part of the fee specified in paragraph (1) for 
     any applicant who files a written declaration of express 
     abandonment as prescribed by the Director before an 
     examination has been made of the application under section 
     131 of title 35, United States Code, and for any applicant 
     who provides a search report that meets the conditions 
     prescribed by the Director.
       (d) Existing Appropriations.--The provisions of any 
     appropriation Act that make amounts available pursuant to 
     section 42(c) of title 35, United States Code, and are in 
     effect on the effective date set forth in subsection (a) 
     shall cease to be effective on that effective date.

     SEC. 7. DEFINITION.

       In this Act, the term ``Director'' means the Under 
     Secretary of Commerce for Intellectual Property and Director 
     of the United States Patent and Trademark Office.

     SEC. 8. CLERICAL AMENDMENT.

       Subsection (c) of section 311 of title 35, United States 
     Code, is amended by aligning the text with the text of 
     subsection (a) of such section.

  The CHAIRMAN. No amendments to the committee amendment in the nature 
of a substitute are in order except the amendments printed in House 
Report 108-431. Each amendment may be offered only in the order printed 
in the report, by a Member designated in the report, shall be 
considered read, shall be debatable for the time specified in the 
report, equally divided and controlled by the proponent and an 
opponent, shall not be subject to amendment, and shall not be subject 
to a demand for division of the question.
  It is now in order to consider amendment No. 1 printed in House 
Report 108-431 and made in order by the order of the House of earlier 
today.


              Amendment No. 1 Offered by Mr. Sensenbrenner

  Mr. SENSENBRENNER. Mr. Chairman, I offer an amendment.
  The CHAIRMAN. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Amendment made in order pursuant to the order of the House 
     of today and House Resolution 547 offered by Mr. 
     Sensenbrenner:
       Strike section 5 and insert the following:

     SEC. 5. PATENT AND TRADEMARK FUNDING.

       Section 42(c) of title 35, United States Code, is amended--
       (1) by striking ``(c)'' and inserting ``(c)(1)''; and
       (2) by adding at the end the following new paragraph:
       ``(2) There is established in the Treasury a Patent and 
     Trademark Fee Reserve Fund. If fee collections by the Patent 
     and Trademark Office for a fiscal year exceed the amount 
     appropriated to the Office for that fiscal year, fees 
     collected in excess of the appropriated amount shall be 
     deposited in the Patent and Trademark Fee Reserve Fund. After 
     the end of each fiscal year, the Director shall make a 
     finding as to whether the fees collected for that fiscal year 
     exceed the amount appropriated to the Patent and Trademark 
     Office for that fiscal year. If the amount collected exceeds 
     the amount appropriated, the Director shall, if the Director 
     determines that there are sufficient funds in the Reserve 
     Fund, make payments from the Reserve Fund to persons who paid 
     patent or trademark fees during that fiscal year. The 
     Director shall by regulation determine which persons receive 
     such payments and the amount of such payments, except that 
     such payments in the aggregate shall equal the amount of 
     funds deposited in the Reserve Fund during that fiscal year, 
     less the cost of administering the provisions of this 
     paragraph.''.
       In section 6(a), strike ``Except as'' and all that follows 
     through the end of the sentence and insert ``Except as 
     otherwise provided in this Act and this section, this Act and 
     the amendments made by this Act shall take effect on October 
     1, 2004, or on the date of the enactment of this Act, 
     whichever occurs later.''.
       Page 12, strike lines 17 through 20 and insert the 
     following:
       (d) Adjustments.--
       (1) In general.--Section 41(f) of title 35, United States 
     Code, shall apply to the fees established under the 
     amendments made by this section, beginning in fiscal year 
     2005.
       (2) Conforming amendment.--Effective October 1, 2004, 
     section 41(f) of title 35, United

[[Page H802]]

     States Code, is amended by striking ``(a) and (b)'' and 
     inserting ``(a), (b), and (d)''.
       Page 11, add the following after line 24:
       ``(F) The Director shall require that any search by a 
     qualified search authority that is a commercial entity is 
     conducted in the United States by persons that--
       ``(i) if individuals, are United States citizens; and
       ``(ii) if business concerns, are organized under the laws 
     of the United States or any State and employ United States 
     citizens to perform the searches.
       ``(G) A search of an application that is the subject of a 
     secrecy order under section 181 or otherwise involves 
     classified information may only be conducted by Office 
     personnel.
       ``(H) A qualified search authority that is a commercial 
     entity may not conduct a search of a patent application if 
     the entity has any direct or indirect financial interest in 
     any patent or in any pending or imminent application for 
     patent filed or to be filed in the Patent and Trademark 
     Office.
       Page 12, insert the following after line 20 and redesignate 
     the succeeding subsection accordingly:
       (e) Fees for Small Entities.--Section 41(h) of title 35, 
     United States Code, is amended--
       (1) in paragraph (1), by striking ``Fees charged under 
     subsection (a) or (b)'' and inserting ``Subject to paragraph 
     (3), fees charged under subsections (a), (b), and (d)(1)''; 
     and
       (2) by adding at the end the following new paragraph:
       ``(3) The fee charged under subsection (a)(1)(A) shall be 
     reduced by 75 percent with respect to its application to any 
     entity to which paragraph (1) applies, if the application is 
     filed by electronic means as prescribed by the Director.''.
       (f) Size Standards for Small Entities.--
       (1) Study.--The Director, in conjunction with the 
     Administrator of the Small Business Administration and the 
     Chief Counsel for Advocacy of the Small Business 
     Administration, shall conduct a study on the effect of patent 
     fees on the ability of small entity inventors to file patent 
     applications. Such study shall examine whether a separate 
     category of reduced patent fees is necessary to ensure 
     adequate development of new technology by small entity 
     inventors.
       (2) Report.--The Director shall, not later than 6 months 
     after the date of the enactment of this Act, submit a report 
     on the results of the study under paragraph (1) to the 
     Committee on the Judiciary and the Committee on Small 
     Business of the House of Representatives and the Committee on 
     the Judiciary and the Committee on Small Business and 
     Entrepreneurship of the Senate.
       Page 8, line 3, add the following after the period: ``For 
     the 3-year period beginning on October 1, 2004, the fee for a 
     search by a qualified search authority of a patent 
     application described in clause (i), (iv), or (v) of 
     subparagraph (B) may not exceed $500, of a patent application 
     described in clause (ii) of subparagraph (B) may not exceed 
     $100, and of a patent application described in clause (iii) 
     of subparagraph (B) may not exceed $300. The Director may not 
     increase any such fee by more than 20 percent in each of the 
     next 3 1-year periods, and the Director may not increase any 
     such fee thereafter.''.

  The CHAIRMAN. Pursuant to House Resolution 547, the gentleman from 
Wisconsin (Mr. Sensenbrenner) and a Member opposed each will control 10 
minutes.
  The Chair recognizes the gentleman from Wisconsin (Mr. 
Sensenbrenner).
  Mr. SENSENBRENNER. Mr. Chairman, I yield myself such time as I may 
consume.
  I have a lengthy statement that I will not read in full, but will 
insert in the Record. But let me state that a significant part of this 
amendment deals with the agreement that we have reached with the 
appropriators that was discussed in the colloquy which I had earlier 
today with the gentleman from Virginia (Mr. Wolf), the distinguished 
chairman of the Subcommittee on Commerce, Justice, State, Judiciary and 
Related Agencies of the Committee on Appropriations.
  Let me also state that the amendment contains various provisions that 
the gentleman from Illinois (Mr. Manzullo) and I have agreed upon 
relative to our previous differences over the treatment of small 
entities under this bill. And pursuant to this agreement, my amendment 
applies a 50 percent discount to all searches for small entities, 
prohibits commercial searches that apply to classified matters, 
prevents commercial entities from performing searches when they have a 
financial interest or other conflict at stake, caps the search fee 
after the 6th year, and requires a joint PTO and Small Business 
Administration study regarding the effects of the fee structure on 
small entities.

                              {time}  1730

  This, I believe, meets the objections that members of the Committee 
on Small Business had relative to the cost to small business of 
applying for and hopefully obtaining a patent. I hope that this 
amendment clears the way for the other body to consider this bill and 
bring real reform to the PTO.
  Mr. Chairman, I am delighted to report that this amendment reflects a 
thoughtful compromise between myself and Mr. Wolf, chairman of the CJS 
Appropriations Subcommittee, as well as a fair deal between the 
Judiciary Committee and the chairman of the Small Business Committee, 
the gentleman from Illinois, Mr. Manzullo. I want to thank both of them 
for working so steadfastly and productively on this important issue.
  Mr. Chairman, the heart of my amendment creates a ``refund'' program 
to eliminate the potential incentive for diverting PTO revenue to non-
PTO programs. Briefly, if fee collections in a given fiscal year exceed 
the amount appropriated to the agency, the excess or overage shall be 
deposited in a PTO ``Reserve Fund.'' At the end of the fiscal year the 
Director determines if there are sufficient funds to make payments to 
persons who paid fees during that year.
  The Director is empowered to determine which recipients qualify and 
in what amounts, except that the payments in aggregate must equal the 
amount of revenue in the Reserve Fund during that fiscal year, less the 
cost of administering the program.
  This text is crucial to the bill before us. We have been at 
loggerheads with the Appropriations committee on this matter for nearly 
a decade, so I am glad to say that we have struck an acceptable 
compromise that serves the interests of both committees. I am grateful 
to the appropriators and the majority leader for working with us on 
this point. I emphasize that without this language, support for the 
bill dissipates.
  In addition, the bill as reported contains a pilot program to 
determine the efficacy of allowing commercial entities to perform the 
search function, thereby relieving the agency of the burden and freeing 
up examiners to do other work. The amendment specifies that 
participation in the pilot program will be restricted to American 
businesses and American citizens. We have worked closely with Chairman 
wolf's staff on this point.
  Also, in furtherance of the ongoing modernization efforts at PTO, the 
Director is required to reduce the filing fee for any small entity, 
independent inventor, or nonprofit organization by 75 percent provided 
those so qualified file their applications electronically.
  As I noted a moment ago, Mr. Manzullo, and I have resolve dour 
differences over the treatment of small entities under H.R. 1561. 
Pursuant to recently agreed-upon changes, my amendment: Applies a 50 
percent discount to all searches for small entities; prohibits 
commercial searches that apply to classified matters; prevents 
commercial entities from performing searches when they have a financial 
interest or other conflict at stake; caps the search fee after the 
sixth year; and requires a joint PTO-SBA study regarding the effects of 
the fee structure on small entities.
  Mr. Chairman, by addressing the fee diversion and other issues, this 
amendment clears the way for the other body to consider H.R. 1561 and 
bring real reform to the PTO. I urge its adoption.
  Mr. BERMAN. Mr. Chairman, will the gentleman yield?
  Mr. SENSENBRENNER. I yield to the gentleman from California.
  Mr. BERMAN. Mr. Chairman, I thank the gentleman for yielding.
  Mr. Chairman, I simply want to express my strong support for this 
amendment. If I were a betting man, I would have bet a lot of money 
that the chairman would not have been able to deal with the end of 
diversion in the fashion that he was able to without at least 25 or 30 
appropriators on the House floor. I congratulate both him and the 
subcommittee chairman for their excellent work, and I urge the 
manager's amendment be adopted.
  Mr. SMITH of Texas. Mr. Chairman, I strongly support this amendment, 
which is the result of careful negotiations between the Judiciary and 
Appropriations Committees.
  The two goals of the underlying bill are to improve PTO operations 
and to end fee diversion. This amendment makes sure those goals are 
achieved.
  In order to eliminate the incentive to divert fees from the PTO, the 
amendment establishes a rebate program that will deposit any fee 
collections that exceed the amount of money appropriated to the PTO in 
a ``reserve fund.'' At the end of each year, the PTO Director will 
determine whether there are sufficient funds to make payments to users 
who paid applicant fees that year. By ending fee diversion and allowing 
the PTO to keep the fees its users pay each year, the agency will be 
able to make many much-needed reforms to increase its efficiency and 
productivity.
  This amendment also contains provisions that will ensure the PTO will 
operate effectively. It establishes a pilot program to allow

[[Page H803]]

private entities to perform the search function associated with 
obtaining a patent. This will free up patent examiners to focus on 
other work.
  Some have mischaracterized this provision as ``outsourcing'' that 
will cut American jobs and send work overseas. In fact, this amendment 
specifies that participation in the pilot program is restricted to 
American businesses and American citizens. By allowing patent searches 
to be performed by commercial entities, this pilot program will simply 
allow the private sector to take some of the load off of an already 
overburdened patent evaluation system at the PTO.
  Twenty-five to thirty percent of the 355,000 patent applications the 
PTO receives each year come from small businesses. The Sensenbrenner 
amendment has many provisions to help small businesses obtain patents.
  The PTO is one of the most important agencies in the country. It is 
the agency behind the innovation and invention that drives our economy. 
We must give it the funding it needs to implement meaningful reform and 
improve its operations.
  This amendment strengthens the underlying bill and I urge my 
colleagues to support it.
  Mr. SENSENBRENNER. Mr. Chairman, I have no further requests for time, 
and I yield back the balance of my time.
  The CHAIRMAN. Does anyone seek time in opposition?
  The question is on the amendment offered by the gentleman from 
Wisconsin (Mr. Sensenbrenner).
  The amendment was agreed to.
  The CHAIRMAN. It is now in order to consider Amendment No. 2 printed 
in House Report 108-431.
  The gentleman from Illinois apparently is not offering his amendment.
  It is now in order to consider Amendment No. 3 printed in House 
Report 108-431.


                         Parliamentary Inquiry

  Ms. KAPTUR. Mr. Chairman, I have a parliamentary inquiry.
  The CHAIRMAN. The gentlewoman will state it.
  Ms. KAPTUR. Mr. Chairman. I just wanted to ask, is this the final 
amendment in the series, and then will we move to final passage?
  The CHAIRMAN. The gentlewoman is correct.
  The Chair is ready to proceed. Apparently the gentlewoman from Texas 
does not offer her amendment.
  The question is on the committee amendment in the nature of a 
substitute, as amended.
  The committee amendment in the nature of a substitute, as amended, 
was agreed to.
  The CHAIRMAN. Under the rule, the Committee rises.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
Cunningham) having assumed the chair, Mr. LaHood, Chairman of the 
Committee of the Whole House on the State of the Union, reported that 
that Committee, having had under consideration the bill (H.R. 1561) to 
amend title 35, United States Code, with respect to patent fees, and 
for other purposes, pursuant to House Resolution 547, he reported the 
bill back to the House with an amendment adopted by the Committee of 
the Whole.

  The SPEAKER pro tempore. Under the rule, the previous question is 
ordered.
  Is a separate vote demanded on the amendment to the committee 
amendment in the nature of a substitute adopted by the Committee of the 
Whole? If not, the question is on the committee amendment in the nature 
of a substitute.
  The committee amendment in the nature of a substitute was agreed to.
  The SPEAKER pro tempore. The question is on the engrossment and third 
reading of the bill.
  The bill was ordered to be engrossed and read a third time, and was 
read the third time.
  The SPEAKER pro tempore. The question is on the passage of the bill.
  The question was taken; and the Speaker pro tempore announced that 
the ayes appeared to have it.
  Mr. SENSENBRENNER. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The vote was taken by electronic device, and there were--yeas 379, 
nays 28, not voting 26, as follows:

                             [Roll No. 38]

                               YEAS--379

     Abercrombie
     Ackerman
     Akin
     Alexander
     Allen
     Andrews
     Baca
     Bachus
     Baird
     Baker
     Baldwin
     Ballance
     Barrett (SC)
     Barton (TX)
     Bass
     Beauprez
     Becerra
     Bell
     Bereuter
     Berkley
     Berman
     Biggert
     Bilirakis
     Bishop (GA)
     Bishop (NY)
     Bishop (UT)
     Blackburn
     Blumenauer
     Blunt
     Boehlert
     Boehner
     Bonilla
     Bonner
     Bono
     Boozman
     Boswell
     Boucher
     Boyd
     Bradley (NH)
     Brady (PA)
     Brady (TX)
     Brown (SC)
     Brown, Corrine
     Brown-Waite, Ginny
     Burgess
     Burns
     Burr
     Burton (IN)
     Buyer
     Camp
     Cannon
     Cantor
     Capito
     Capps
     Capuano
     Cardin
     Cardoza
     Carter
     Case
     Chabot
     Chandler
     Chocola
     Clyburn
     Coble
     Collins
     Conyers
     Cooper
     Cox
     Cramer
     Crane
     Crenshaw
     Crowley
     Cubin
     Culberson
     Cunningham
     Davis (AL)
     Davis (CA)
     Davis (FL)
     Davis (IL)
     Davis (TN)
     Davis, Jo Ann
     Davis, Tom
     Deal (GA)
     DeFazio
     DeGette
     Delahunt
     DeLauro
     DeLay
     DeMint
     Deutsch
     Diaz-Balart, L.
     Diaz-Balart, M.
     Dicks
     Dingell
     Doolittle
     Doyle
     Dreier
     Duncan
     Dunn
     Edwards
     Ehlers
     Emanuel
     Emerson
     Engel
     English
     Eshoo
     Etheridge
     Everett
     Farr
     Fattah
     Feeney
     Ferguson
     Filner
     Flake
     Foley
     Forbes
     Ford
     Fossella
     Frank (MA)
     Franks (AZ)
     Frelinghuysen
     Frost
     Gallegly
     Garrett (NJ)
     Gephardt
     Gerlach
     Gibbons
     Gilchrest
     Gillmor
     Gingrey
     Gonzalez
     Goode
     Goodlatte
     Gordon
     Goss
     Granger
     Graves
     Green (TX)
     Green (WI)
     Greenwood
     Grijalva
     Gutierrez
     Gutknecht
     Harman
     Harris
     Hart
     Hastings (WA)
     Hayes
     Hayworth
     Hefley
     Hensarling
     Herger
     Hill
     Hinchey
     Hobson
     Hoeffel
     Hoekstra
     Holden
     Honda
     Hostettler
     Houghton
     Hoyer
     Hulshof
     Hyde
     Inslee
     Isakson
     Israel
     Issa
     Jefferson
     Jenkins
     John
     Johnson (CT)
     Johnson (IL)
     Johnson, E. B.
     Johnson, Sam
     Jones (OH)
     Keller
     Kelly
     Kennedy (MN)
     Kennedy (RI)
     Kildee
     Kilpatrick
     Kind
     King (IA)
     King (NY)
     Kingston
     Kirk
     Kleczka
     Kline
     Knollenberg
     Kolbe
     LaHood
     Lampson
     Langevin
     Larsen (WA)
     Larson (CT)
     Latham
     LaTourette
     Leach
     Lee
     Levin
     Lewis (CA)
     Lewis (KY)
     Linder
     Lipinski
     LoBiondo
     Lofgren
     Lowey
     Lucas (KY)
     Lynch
     Majette
     Maloney
     Manzullo
     Markey
     Marshall
     Matheson
     Matsui
     McCarthy (MO)
     McCarthy (NY)
     McCollum
     McCotter
     McCrery
     McDermott
     McGovern
     McHugh
     McInnis
     McIntyre
     McKeon
     McNulty
     Meehan
     Meeks (NY)
     Mica
     Michaud
     Millender-McDonald
     Miller (FL)
     Miller (MI)
     Miller (NC)
     Miller, Gary
     Miller, George
     Mollohan
     Moore
     Moran (KS)
     Moran (VA)
     Murphy
     Murtha
     Musgrave
     Myrick
     Nadler
     Napolitano
     Neal (MA)
     Nethercutt
     Neugebauer
     Ney
     Northup
     Norwood
     Nunes
     Nussle
     Olver
     Ortiz
     Osborne
     Ose
     Otter
     Owens
     Oxley
     Pallone
     Pascrell
     Pastor
     Payne
     Pearce
     Pelosi
     Peterson (MN)
     Peterson (PA)
     Petri
     Pickering
     Pitts
     Platts
     Pombo
     Pomeroy
     Porter
     Portman
     Price (NC)
     Pryce (OH)
     Putnam
     Quinn
     Radanovich
     Rahall
     Ramstad
     Rangel
     Regula
     Rehberg
     Renzi
     Reyes
     Reynolds
     Rogers (AL)
     Rogers (KY)
     Rogers (MI)
     Rohrabacher
     Ros-Lehtinen
     Ross
     Rothman
     Roybal-Allard
     Royce
     Rush
     Ryan (OH)
     Ryan (WI)
     Ryun (KS)
     Sabo
     Sanchez, Loretta
     Saxton
     Schiff
     Schrock
     Scott (GA)
     Scott (VA)
     Sensenbrenner
     Serrano
     Sessions
     Shadegg
     Shaw
     Shays
     Sherman
     Sherwood
     Shimkus
     Shuster
     Simmons
     Simpson
     Skelton
     Slaughter
     Smith (MI)
     Smith (NJ)
     Smith (TX)
     Smith (WA)
     Snyder
     Solis
     Souder
     Spratt
     Stark
     Stearns
     Stenholm
     Stupak
     Sweeney
     Tancredo
     Tanner
     Tauscher
     Tauzin
     Taylor (MS)
     Taylor (NC)
     Terry
     Thomas
     Thompson (CA)
     Thompson (MS)
     Thornberry
     Tiahrt
     Tiberi
     Tierney
     Towns
     Turner (OH)
     Turner (TX)
     Udall (CO)
     Udall (NM)
     Upton
     Van Hollen
     Velazquez
     Vitter
     Walden (OR)
     Walsh
     Wamp
     Watt
     Waxman
     Weiner
     Weldon (FL)
     Weller
     Wexler
     Whitfield
     Wicker
     Wilson (NM)
     Wilson (SC)
     Wolf
     Wu
     Young (AK)

                                NAYS--28

     Bartlett (MD)
     Brown (OH)
     Carson (IN)
     Clay
     Costello
     Cummings
     Evans
     Hastings (FL)
     Holt
     Hunter
     Jackson (IL)
     Jackson-Lee (TX)
     Jones (NC)
     Kanjorski
     Kaptur
     Lewis (GA)
     Meek (FL)
     Oberstar
     Obey
     Paul
     Ruppersberger
     Sanders
     Schakowsky
     Strickland
     Visclosky
     Waters
     Watson
     Wynn

                             NOT VOTING--26

     Aderholt
     Ballenger
     Berry
     Calvert
     Carson (OK)
     Castle
     Cole
     Doggett
     Dooley (CA)
     Hall
     Hinojosa
     Hooley (OR)
     Istook
     Kucinich
     Lantos
     Lucas (OK)
     Menendez
     Pence
     Rodriguez
     Sanchez, Linda T.
     Sandlin
     Sullivan
     Toomey
     Weldon (PA)
     Woolsey
     Young (FL)

[[Page H804]]




                Announcement by the Speaker Pro Tempore

  The SPEAKER pro tempore (Mr. LaHood) (during the vote). Members are 
advised there are 2 minutes remaining in this vote.

                              {time}  1802

  Messrs. JACKSON of Illinois, OBEY, WYNN and RUPPERSBERGER changed 
their vote from ``yea'' to ``nay.''
  So the bill was passed.
  The result of the vote was announced as above recorded.
  A motion to reconsider was laid on the table.

                          ____________________