[Congressional Record Volume 155, Number 37 (Tuesday, March 3, 2009)]
[Senate]
[Pages S2706-S2716]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEAHY (for himself, Mr. Hatch, Mr. Schumer, Mr. Crapo, Mr. 
        Whitehouse, Mr. Risch, and Mrs. Gillibrand):
  S. 515. A bill to amend title 35, United States Code, to provide for 
patent reform; to the Committee on the Judiciary.
  Mr. LEAHY. Mr. President, ingenuity and innovation have been a 
cornerstone of the American economy from the time Thomas Jefferson 
issued the first patent to today.
  The Founding Fathers recognized the importance of promoting 
innovation, and the Constitution explicitly grants Congress the power 
to ``promote the progress and science and useful arts, by securing for 
limited times to . . . inventors the exclusive right to their 
respective . . . discoveries.'' The discoveries made by American 
inventors and research institutions, commercialized by our companies, 
and protected and promoted by our patent laws have made our system the 
envy of the world.
  The legislation I introduce today with Senator Hatch, and many others 
and from across the political spectrum, will keep America in its 
longstanding position at the pinnacle of innovation. This bill will 
establish a more efficient and streamlined patent system that will 
improve patent quality and limit unnecessary and counterproductive 
litigation costs, while making sure no party's access to court is 
denied.
  Innovation and economic development are not uniquely Democratic or 
Republican objectives. I have been working on the Patent Reform Act on 
a bipartisan basis with Senator Hatch and others for several years--and 
Senator Hatch and I worked on various patent issues for many years 
before that.
  Last Congress, I introduced, along with Senator Hatch, the Patent 
Reform Act of 2007, which is the precursor to the legislation we 
introduce today. That bill was the subject of consideration and 
amendments over four weeks of mark-up sessions in the Senate Judiciary 
Committee. After the Judiciary Committee voted to approve the bill in 
July 2007, we continued to hold numerous meetings, briefings, and 
stakeholder roundtables--again, on a bipartisan basis.
  The legislation we introduce today picks up where we left off in 
those discussions. We have made some changes from the Committee-
approved bill in response to concerns we heard from groups ranging from 
labor unions to small inventors to manufacturers. We have removed the 
requirement that all patent applications be published 18 months after 
they are filed and we have removed the requirement for Applicant 
Quality Submissions. We have also adopted the House approach to 
improving the current inter partes reexamination process, rather than 
creating a new second window post-grant review.

[[Page S2707]]

  Perhaps the most hotly debated topic in the patent reform debate last 
Congress was the damages provision. The reasonable royalty language in 
the bill we introduce today is identical to the language approved by 
the Judiciary Committee last Congress. While I strongly support this 
language, I am prepared to continue the conversation and debate from 
the last Congress in order to find the best language we can.
  There have been several positive developments since the Committee 
voted to report the legislation in July 2007. Senator Specter has made 
constructive suggestions about a ``gate keeping'' role for the court in 
damage calculations. The Supreme Court's Quanta decision may offer a 
useful way of describing the truly inventive feature of a patent. There 
is much work to do on this provision and I am optimistic that by 
continuing to work together, we will find the right language.
  During consideration of the Patent Reform Act of 2007 in Committee 
last Congress, I offered an amendment, which was adopted, to codify the 
inequitable conduct doctrine. Senator Hatch has asked that the 
provision be removed on introduction this year. I understand that the 
issue of inequitable conduct is very important to Senator Hatch, and I 
will work with him to address any statutory changes.
  It has been more than 50 years since Congress significantly updated 
the patent system. In the decades since, our economy has changed 
dramatically. No longer is the economy defined only by assembly lines 
and brick-and-mortar production. We are living in the Information Age, 
and the products and processes that are being patented are changing as 
quickly as the times themselves.
  A patent system developed for a 1952 economy, needs to be 
reconsidered in light of 21st century realities, while staying true to 
our constitutional imperative. The patent laws that were sufficiently 
robust for promoting innovation and economic development are now 
actually impeding growth, harming innovators and raising prices on 
consumers.
  The array of voices heard in this debate--representing virtually all 
sectors of the economy and all interests in the patent system--have 
certainly not been uniform, but three major areas of concern with the 
current patent system can be distilled from their discussions.
  First, there is significant concern that the U.S. Patent and 
Trademark Office, PTO, is issuing low quality patents. Patent examiners 
are facing a difficult task given the explosion in the number of 
applications and the increasing complexity of those applications. When 
Congress last overhauled the patent system in 1952, the PTO received 
approximately 60,000 patent applications; in 2006, it received 440,000. 
Clearly, this puts a strain on the system and understandably affects 
the quality of patents issued.
  Second, the costs and uncertainty associated with patent litigation 
have escalated in recent years, and are creating an unbearable drag on 
innovation. Damage awards are inconsistent and too often fail to focus 
on the value of the invention to the infringing product. This 
disconnect and uncertainty is a problem that also leads to unreasonable 
posturing during licensing negotiations.
  Third, as business and competition become more global, patent 
applicants are increasingly filing patent applications in other 
countries for protection of their inventions. The filing system in the 
United States, known as ``first-to-invent,'' differs from that in other 
patent-issuing jurisdictions, which have ``first-to-file'' systems. 
This causes confusion and inefficiencies for American companies and 
innovators.
  The Patent Reform Act of 2009 promotes innovation, and will improve 
our economy, by addressing these impediments to growth. As the 
administration endeavors to guide the economy out of the recession, as 
payrolls shrink and the jobless rate rises, Congress cannot afford to 
sit idly by while innovation--the engine of our economy--is impeded by 
outdated laws.
  Our legislation ensures that, in the Information Age, we have the 
legal landscape necessary for our innovators to flourish. It will 
improve the quality of patents and remove the ambiguity from the 
process of litigating patent claims, which will promote innovation 
stifled by the current system. As innovation is encouraged, and 
excessive litigation costs are removed, competition will increase and 
the consumer cost of products will fall. In this way, the bill directly 
benefits both creators and consumers of inventive products.
  Patent reform is ultimately about economic development. It is about 
jobs, it is about innovation, and it is about consumers. All benefit 
under a patent system that reduces unnecessary costs, removes 
inefficiencies, and holds true to the vision of our Founders that 
Congress should establish a national policy that promotes the progress 
of science and the useful arts.
  When Thomas Jefferson issued that first patent in 1790--a patent that 
went to a Vermonter--no one could have predicted how the American 
economy would develop and what changes would be needed for the law to 
keep pace, but the purpose then remains the purpose today--promoting 
progress.
  As I said when I introduced the Patent Reform Act last Congress: If 
we are to maintain our position at the forefront of the world's 
economy, if we are to continue to lead the world in innovation and 
production, if we are to continue to benefit from the ideas of the most 
creative citizens, then we must have a patent system that produces high 
quality patents, that limits counterproductive litigation over those 
patents, and that makes the entire system more streamlined and 
efficient.
  Now is the time to bolster our role as the world leader in 
innovation. Now is the time to create jobs at home. Now is the time for 
Congress to act on patent reform.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 515

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Patent 
     Reform Act of 2009''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Right of the first inventor to file.
Sec. 3. Inventor's oath or declaration.
Sec. 4. Right of the inventor to obtain damages.
Sec. 5. Post-grant procedures and other quality enhancements.
Sec. 6. Definitions; patent trial and appeal board.
Sec. 7. Preissuance submissions by third parties.
Sec. 8. Venue and jurisdiction.
Sec. 9. Patent and trademark office regulatory authority.
Sec. 10. Residency of Federal Circuit judges.
Sec. 11. Micro-entity defined.
Sec. 12. Technical amendments.
Sec. 13. Effective date; rule of construction.
Sec. 14. Severability.

     SEC. 2. RIGHT OF THE FIRST INVENTOR TO FILE.

       (a) Definitions.--Section 100 of title 35, United States 
     Code, is amended by adding at the end the following:
       ``(f) The term `inventor' means the individual or, if a 
     joint invention, the individuals collectively who invented or 
     discovered the subject matter of the invention.
       ``(g) The terms `joint inventor' and `coinventor' mean any 
     1 of the individuals who invented or discovered the subject 
     matter of a joint invention.
       ``(h) The `effective filing date of a claimed invention' 
     is--
       ``(1) the filing date of the patent or the application for 
     the patent containing the claim to the invention; or
       ``(2) if the patent or application for patent is entitled 
     to a right of priority of any other application under section 
     119, 365(a), or 365(b) or to the benefit of an earlier filing 
     date in the United States under section 120, 121, or 365(c), 
     the filing date of the earliest such application in which the 
     claimed invention is disclosed in the manner provided by the 
     first paragraph of section 112.
       ``(i) The term `claimed invention' means the subject matter 
     defined by a claim in a patent or an application for a 
     patent.
       ``(j) The term `joint invention' means an invention 
     resulting from the collaboration of inventive endeavors of 2 
     or more persons working toward the same end and producing an 
     invention by their collective efforts.''.
       (b) Conditions for Patentability.--
       (1) In general.--Section 102 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 102. Conditions for patentability; novelty

       ``(a) Novelty; Prior Art.--A patent for a claimed invention 
     may not be obtained if--
       ``(1) the claimed invention was patented, described in a 
     printed publication, or in public use, on sale, or otherwise 
     available to the public--
       ``(A) more than 1 year before the effective filing date of 
     the claimed invention; or
       ``(B) 1 year or less before the effective filing date of 
     the claimed invention, other than

[[Page S2708]]

     through disclosures made by the inventor or a joint inventor 
     or by others who obtained the subject matter disclosed 
     directly or indirectly from the inventor or a joint inventor; 
     or
       ``(2) the claimed invention was described in a patent 
     issued under section 151, or in an application for patent 
     published or deemed published under section 122(b), in which 
     the patent or application, as the case may be, names another 
     inventor and was effectively filed before the effective 
     filing date of the claimed invention.
       ``(b) Exceptions.--
       ``(1) Prior inventor disclosure exception.--Subject matter 
     that would otherwise qualify as prior art based upon a 
     disclosure under subparagraph (B) of subsection (a)(1) shall 
     not be prior art to a claimed invention under that 
     subparagraph if the subject matter had, before such 
     disclosure, been publicly disclosed by the inventor or a 
     joint inventor or others who obtained the subject matter 
     disclosed directly or indirectly from the inventor or a joint 
     inventor.
       ``(2) Derivation, prior disclosure, and common assignment 
     exceptions.--Subject matter that would otherwise qualify as 
     prior art only under subsection (a)(2), after taking into 
     account the exception under paragraph (1), shall not be prior 
     art to a claimed invention if--
       ``(A) the subject matter was obtained directly or 
     indirectly from the inventor or a joint inventor;
       ``(B) the subject matter had been publicly disclosed by the 
     inventor or a joint inventor or others who obtained the 
     subject matter disclosed, directly or indirectly, from the 
     inventor or a joint inventor before the effective filing date 
     of the application or patent set forth under subsection 
     (a)(2); or
       ``(C) the subject matter and the claimed invention, not 
     later than the effective filing date of the claimed 
     invention, were owned by the same person or subject to an 
     obligation of assignment to the same person.
       ``(3) Joint research agreement exception.--
       ``(A) In general.--Subject matter and a claimed invention 
     shall be deemed to have been owned by the same person or 
     subject to an obligation of assignment to the same person in 
     applying the provisions of paragraph (2) if--
       ``(i) the claimed invention was made by or on behalf of 
     parties to a joint research agreement that was in effect on 
     or before the effective filing date of the claimed invention;
       ``(ii) the claimed invention was made as a result of 
     activities undertaken within the scope of the joint research 
     agreement; and
       ``(iii) the application for patent for the claimed 
     invention discloses or is amended to disclose the names of 
     the parties to the joint research agreement.
       ``(B) For purposes of subparagraph (A), the term `joint 
     research agreement' means a written contract, grant, or 
     cooperative agreement entered into by 2 or more persons or 
     entities for the performance of experimental, developmental, 
     or research work in the field of the claimed invention.
       ``(4) Patents and published applications effectively 
     filed.--A patent or application for patent is effectively 
     filed under subsection (a)(2) with respect to any subject 
     matter described in the patent or application--
       ``(A) as of the filing date of the patent or the 
     application for patent; or
       ``(B) if the patent or application for patent is entitled 
     to claim a right of priority under section 119, 365(a), or 
     365(b) or to claim the benefit of an earlier filing date 
     under section 120, 121, or 365(c), based upon 1 or more prior 
     filed applications for patent, as of the filing date of the 
     earliest such application that describes the subject 
     matter.''.
       (2) Conforming amendment.--The item relating to section 102 
     in the table of sections for chapter 10 of title 35, United 
     States Code, is amended to read as follows:

``102. Conditions for patentability; novelty.''.

       (c) Conditions for Patentability; Nonobvious Subject 
     Matter.--Section 103 of title 35, United States Code, is 
     amended to read as follows:

     ``Sec. 103. Conditions for patentability; nonobvious subject 
       matter

       ``A patent for a claimed invention may not be obtained 
     though the claimed invention is not identically disclosed as 
     set forth in section 102, if the differences between the 
     claimed invention and the prior art are such that the claimed 
     invention as a whole would have been obvious before the 
     effective filing date of the claimed invention to a person 
     having ordinary skill in the art to which the claimed 
     invention pertains. Patentability shall not be negated by the 
     manner in which the invention was made.''.
       (d) Repeal of Requirements for Inventions Made Abroad.--
     Section 104 of title 35, United States Code, and the item 
     relating to that section in the table of sections for chapter 
     10 of title 35, United States Code, are repealed.
       (e) Repeal of Statutory Invention Registration.--
       (1) In general.--Section 157 of title 35, United States 
     Code, and the item relating to that section in the table of 
     sections for chapter 14 of title 35, United States Code, are 
     repealed.
       (2) Removal of cross references.--Section 111(b)(8) of 
     title 35, United States Code, is amended by striking 
     ``sections 115, 131, 135, and 157'' and inserting ``sections 
     131 and 135''.
       (f) Earlier Filing Date for Inventor and Joint Inventor.--
     Section 120 of title 35, United States Code, is amended by 
     striking ``which is filed by an inventor or inventors named'' 
     and inserting ``which names an inventor or joint inventor''.
       (g) Conforming Amendments.--
       (1) Right of priority.--Section 172 of title 35, United 
     States Code, is amended by striking ``and the time specified 
     in section 102(d)''.
       (2) Limitation on remedies.--Section 287(c)(4) of title 35, 
     United States Code, is amended by striking ``the earliest 
     effective filing date of which is prior to'' and inserting 
     ``which has an effective filing date before''.
       (3) International application designating the united 
     states: effect.--Section 363 of title 35, United States Code, 
     is amended by striking ``except as otherwise provided in 
     section 102(e) of this title''.
       (4) Publication of international application: effect.--
     Section 374 of title 35, United States Code, is amended by 
     striking ``sections 102(e) and 154(d)'' and inserting 
     ``section 154(d)''.
       (5) Patent issued on international application: effect.--
     The second sentence of section 375(a) of title 35, United 
     States Code, is amended by striking ``Subject to section 
     102(e) of this title, such'' and inserting ``Such''.
       (6) Limit on right of priority.--Section 119(a) of title 
     35, United States Code, is amended by striking ``; but no 
     patent shall be granted'' and all that follows through ``one 
     year prior to such filing''.
       (7) Inventions made with federal assistance.--Section 
     202(c) of title 35, United States Code, is amended--
       (A) in paragraph (2)--
       (i) by striking ``publication, on sale, or public use,'' 
     and all that follows through ``obtained in the United 
     States'' and inserting ``the 1-year period referred to in 
     section 102(a) would end before the end of that 2-year 
     period''; and
       (ii) by striking ``the statutory'' and inserting ``that 1-
     year''; and
       (B) in paragraph (3), by striking ``any statutory bar date 
     that may occur under this title due to publication, on sale, 
     or public use'' and inserting ``the expiration of the 1-year 
     period referred to in section 102(a)''.
       (h) Repeal of Interfering Patent Remedies.--Section 291 of 
     title 35, United States Code, and the item relating to that 
     section in the table of sections for chapter 29 of title 35, 
     United States Code, are repealed.
       (i) Action for Claim to Patent on Derived Invention.--
     Section 135 of title 35, United States Code, is amended to 
     read as follows:
       ``(a) Dispute Over Right to Patent.--
       ``(1) Institution of derivation proceeding.--An applicant 
     may request initiation of a derivation proceeding to 
     determine the right of the applicant to a patent by filing a 
     request which sets forth with particularity the basis for 
     finding that an earlier applicant derived the claimed 
     invention from the applicant requesting the proceeding and, 
     without authorization, filed an application claiming such 
     invention. Any such request may only be made within 12 months 
     after the date of first publication of an application 
     containing a claim that is the same or is substantially the 
     same as the claimed invention, must be made under oath, and 
     must be supported by substantial evidence. Whenever the 
     Director determines that patents or applications for patent 
     naming different individuals as the inventor interfere with 
     one another because of a dispute over the right to patent 
     under section 101, the Director shall institute a derivation 
     proceeding for the purpose of determining which applicant is 
     entitled to a patent.
       ``(2) Determination by patent trial and appeal board.--In 
     any proceeding under this subsection, the Patent Trial and 
     Appeal Board--
       ``(A) shall determine the question of the right to patent;
       ``(B) in appropriate circumstances, may correct the naming 
     of the inventor in any application or patent at issue; and
       ``(C) shall issue a final decision on the right to patent.
       ``(3) Derivation proceeding.--The Board may defer action on 
     a request to initiate a derivation proceeding until 3 months 
     after the date on which the Director issues a patent to the 
     applicant that filed the earlier application.
       ``(4) Effect of final decision.--The final decision of the 
     Patent Trial and Appeal Board, if adverse to the claim of an 
     applicant, shall constitute the final refusal by the United 
     States Patent and Trademark Office on the claims involved. 
     The Director may issue a patent to an applicant who is 
     determined by the Patent Trial and Appeal Board to have the 
     right to patent. The final decision of the Board, if adverse 
     to a patentee, shall, if no appeal or other review of the 
     decision has been or can be taken or had, constitute 
     cancellation of the claims involved in the patent, and notice 
     of such cancellation shall be endorsed on copies of the 
     patent distributed after such cancellation by the United 
     States Patent and Trademark Office.
       ``(b) Settlement.--Parties to a derivation proceeding may 
     terminate the proceeding by filing a written statement 
     reflecting the agreement of the parties as to the correct 
     inventors of the claimed invention in dispute. Unless the 
     Patent Trial and Appeal Board finds the agreement to be 
     inconsistent with the evidence of record, it shall take 
     action consistent with the agreement. Any written settlement 
     or understanding of the parties

[[Page S2709]]

     shall be filed with the Director. At the request of a party 
     to the proceeding, the agreement or understanding shall be 
     treated as business confidential information, shall be kept 
     separate from the file of the involved patents or 
     applications, and shall be made available only to Government 
     agencies on written request, or to any person on a showing of 
     good cause.
       ``(c) Arbitration.--Parties to a derivation proceeding, 
     within such time as may be specified by the Director by 
     regulation, may determine such contest or any aspect thereof 
     by arbitration. Such arbitration shall be governed by the 
     provisions of title 9 to the extent such title is not 
     inconsistent with this section. The parties shall give notice 
     of any arbitration award to the Director, and such award 
     shall, as between the parties to the arbitration, be 
     dispositive of the issues to which it relates. The 
     arbitration award shall be unenforceable until such notice is 
     given. Nothing in this subsection shall preclude the Director 
     from determining patentability of the invention involved in 
     the derivation proceeding.''.
       (j) Elimination of References to Interferences.--(1) 
     Sections 6, 41, 134, 141, 145, 146, 154, 305, and 314 of 
     title 35, United States Code, are each amended by striking 
     ``Board of Patent Appeals and Interferences'' each place it 
     appears and inserting ``Patent Trial and Appeal Board''.
       (2) Sections 141, 146, and 154 of title 35, United States 
     Code, are each amended--
       (A) by striking ``an interference'' each place it appears 
     and inserting ``a derivation proceeding''; and
       (B) by striking ``interference'' each additional place it 
     appears and inserting ``derivation proceeding''.
       (3) The section heading for section 134 of title 35, United 
     States Code, is amended to read as follows:

     ``Sec. 134. Appeal to the Patent Trial and Appeal Board''.

       (4) The section heading for section 135 of title 35, United 
     States Code, is amended to read as follows:

     ``Sec. 135. Derivation proceedings''.

       (5) The section heading for section 146 of title 35, United 
     States Code, is amended to read as follows:

     ``Sec. 146. Civil action in case of derivation proceeding''.

       (6) Section 154(b)(1)(C) of title 35, United States Code, 
     is amended by striking ``interferences'' and inserting 
     ``derivation proceedings''.
       (7) The item relating to section 6 in the table of sections 
     for chapter 1 of title 35, United States Code, is amended to 
     read as follows:

``6. Patent Trial and Appeal Board.''.

       (8) The items relating to sections 134 and 135 in the table 
     of sections for chapter 12 of title 35, United States Code, 
     are amended to read as follows:

``134. Appeal to the Patent Trial and Appeal Board.
``135. Derivation proceedings.''.

       (9) The item relating to section 146 in the table of 
     sections for chapter 13 of title 35, United States Code, is 
     amended to read as follows:

``146. Civil action in case of derivation proceeding.''.

       (10) Certain Appeals.--Section 1295(a)(4)(A) of title 28, 
     United States Code, is amended to read as follows:
       ``(A) the Patent Trial and Appeal Board of the United 
     States Patent and Trademark Office with respect to patent 
     applications, interference proceedings (commenced before the 
     date of enactment of the Patent Reform Act of 2009), 
     derivation proceedings, and post-grant review proceedings, at 
     the instance of an applicant for a patent or any party to a 
     patent interference (commenced before the effective date of 
     the Patent Reform Act of 2009), derivation proceeding, or 
     post-grant review proceeding, and any such appeal shall waive 
     any right of such applicant or party to proceed under section 
     145 or 146 of title 35;''.
       (k) Search and Examination Functions.--Section 131 of title 
     35, United States Code, is amended by--
       (1) by striking ``The Director shall cause'' and inserting 
     ``(a) In General.--The Director shall cause''; and
       (2) by adding at the end the following:
       ``(b) Search and Examination Functions.--To the extent 
     consistent with United States obligations under international 
     agreements, examination and search duties for the grant of a 
     United States patent are sovereign functions which shall be 
     performed within the United States by United States citizens 
     who are employees of the United States Government.''.

     SEC. 3. INVENTOR'S OATH OR DECLARATION.

       (a) Inventor's Oath or Declaration.--
       (1) In general.--Section 115 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 115. Inventor's oath or declaration

       ``(a) Naming the Inventor; Inventor's Oath or 
     Declaration.--An application for patent that is filed under 
     section 111(a), that commences the national stage under 
     section 363, or that is filed by an inventor for an invention 
     for which an application has previously been filed under this 
     title by that inventor shall include, or be amended to 
     include, the name of the inventor of any claimed invention in 
     the application. Except as otherwise provided in this 
     section, an individual who is the inventor or a joint 
     inventor of a claimed invention in an application for patent 
     shall execute an oath or declaration in connection with the 
     application.
       ``(b) Required Statements.--An oath or declaration under 
     subsection (a) shall contain statements that--
       ``(1) the application was made or was authorized to be made 
     by the affiant or declarant; and
       ``(2) such individual believes himself or herself to be the 
     original inventor or an original joint inventor of a claimed 
     invention in the application.
       ``(c) Additional Requirements.--The Director may specify 
     additional information relating to the inventor and the 
     invention that is required to be included in an oath or 
     declaration under subsection (a).
       ``(d) Substitute Statement.--
       ``(1) In general.--In lieu of executing an oath or 
     declaration under subsection (a), the applicant for patent 
     may provide a substitute statement under the circumstances 
     described in paragraph (2) and such additional circumstances 
     that the Director may specify by regulation.
       ``(2) Permitted circumstances.--A substitute statement 
     under paragraph (1) is permitted with respect to any 
     individual who--
       ``(A) is unable to file the oath or declaration under 
     subsection (a) because the individual--
       ``(i) is deceased;
       ``(ii) is under legal incapacity; or
       ``(iii) cannot be found or reached after diligent effort; 
     or
       ``(B) is under an obligation to assign the invention but 
     has refused to make the oath or declaration required under 
     subsection (a).
       ``(3) Contents.--A substitute statement under this 
     subsection shall--
       ``(A) identify the individual with respect to whom the 
     statement applies;
       ``(B) set forth the circumstances representing the 
     permitted basis for the filing of the substitute statement in 
     lieu of the oath or declaration under subsection (a); and
       ``(C) contain any additional information, including any 
     showing, required by the Director.
       ``(e) Making Required Statements in Assignment of Record.--
     An individual who is under an obligation of assignment of an 
     application for patent may include the required statements 
     under subsections (b) and (c) in the assignment executed by 
     the individual, in lieu of filing such statements separately.
       ``(f) Time for Filing.--A notice of allowance under section 
     151 may be provided to an applicant for patent only if the 
     applicant for patent has filed each required oath or 
     declaration under subsection (a) or has filed a substitute 
     statement under subsection (d) or recorded an assignment 
     meeting the requirements of subsection (e).
       ``(g) Earlier-Filed Application Containing Required 
     Statements or Substitute Statement.--The requirements under 
     this section shall not apply to an individual with respect to 
     an application for patent in which the individual is named as 
     the inventor or a joint inventor and that claims the benefit 
     under section 120 or 365(c) of the filing of an earlier-filed 
     application, if--
       ``(1) an oath or declaration meeting the requirements of 
     subsection (a) was executed by the individual and was filed 
     in connection with the earlier-filed application;
       ``(2) a substitute statement meeting the requirements of 
     subsection (d) was filed in the earlier filed application 
     with respect to the individual; or
       ``(3) an assignment meeting the requirements of subsection 
     (e) was executed with respect to the earlier-filed 
     application by the individual and was recorded in connection 
     with the earlier-filed application.
       ``(h) Supplemental and Corrected Statements; Filing 
     Additional Statements.--
       ``(1) In general.--Any person making a statement required 
     under this section may withdraw, replace, or otherwise 
     correct the statement at any time. If a change is made in the 
     naming of the inventor requiring the filing of 1 or more 
     additional statements under this section, the Director shall 
     establish regulations under which such additional statements 
     may be filed.
       ``(2) Supplemental statements not required.--If an 
     individual has executed an oath or declaration under 
     subsection (a) or an assignment meeting the requirements of 
     subsection (e) with respect to an application for patent, the 
     Director may not thereafter require that individual to make 
     any additional oath, declaration, or other statement 
     equivalent to those required by this section in connection 
     with the application for patent or any patent issuing 
     thereon.
       ``(3) Savings clause.--No patent shall be invalid or 
     unenforceable based upon the failure to comply with a 
     requirement under this section if the failure is remedied as 
     provided under paragraph (1).
       ``(i) Acknowledgment of Penalties.--Any declaration or 
     statement filed pursuant to this section shall contain an 
     acknowledgment that any willful false statement made in such 
     declaration or statement is punishable under section 1001 of 
     title 18 by fine or imprisonment of not more than 5 years, or 
     both.''.
       (2) Relationship to divisional applications.--Section 121 
     of title 35, United States Code, is amended by striking ``If 
     a divisional application'' and all that follows through 
     ``inventor.''.
       (3) Requirements for nonprovisional applications.--Section 
     111(a) of title 35, United States Code, is amended--

[[Page S2710]]

       (A) in paragraph (2)(C), by striking ``by the applicant'' 
     and inserting ``or declaration'';
       (B) in the heading for paragraph (3), by striking ``and 
     oath''; and
       (C) by striking ``and oath'' each place it appears.
       (4) Conforming amendment.--The item relating to section 115 
     in the table of sections for chapter 11 of title 35, United 
     States Code, is amended to read as follows:

``115. Inventor's oath or declaration.''.

       (b) Filing by Other Than Inventor.--Section 118 of title 
     35, United States Code, is amended to read as follows:

     ``Sec. 118. Filing by other than inventor

       ``A person to whom the inventor has assigned or is under an 
     obligation to assign the invention may make an application 
     for patent. A person who otherwise shows sufficient 
     proprietary interest in the matter may make an application 
     for patent on behalf of and as agent for the inventor on 
     proof of the pertinent facts and a showing that such action 
     is appropriate to preserve the rights of the parties. If the 
     Director grants a patent on an application filed under this 
     section by a person other than the inventor, the patent shall 
     be granted to the real party in interest and upon such notice 
     to the inventor as the Director considers to be 
     sufficient.''.
       (c) Specification.--Section 112 of title 35, United States 
     Code, is amended--
       (1) in the first paragraph--
       (A) by striking ``The specification'' and inserting ``(a) 
     In General.--The specification''; and
       (B) by striking ``of carrying out his invention'' and 
     inserting ``or joint inventor of carrying out the 
     invention''; and
       (2) in the second paragraph--
       (A) by striking ``The specifications'' and inserting ``(b) 
     Conclusion.--The specifications''; and
       (B) by striking ``applicant regards as his invention'' and 
     inserting ``inventor or a joint inventor regards as the 
     invention'';
       (3) in the third paragraph, by striking ``A claim'' and 
     inserting ``(c) Form.--A claim'';
       (4) in the fourth paragraph, by striking ``Subject to the 
     following paragraph,'' and inserting ``(d) Reference in 
     Dependent Forms.--Subject to subsection (e),'';
       (5) in the fifth paragraph, by striking ``A claim'' and 
     inserting ``(e) Reference in Multiple Dependent Form.--A 
     claim''; and
       (6) in the last paragraph, by striking ``An element'' and 
     inserting ``(f) Element in Claim for a Combination.--An 
     element''.

     SEC. 4. RIGHT OF THE INVENTOR TO OBTAIN DAMAGES.

       (a) Damages.--Section 284 of title 35, United States Code, 
     is amended to read as follows:

     ``Sec. 284. Damages

       ``(a) In General.--Upon finding for the claimant the court 
     shall award the claimant damages adequate to compensate for 
     the infringement but in no event less than a reasonable 
     royalty for the use made of the invention by the infringer, 
     together with interest and costs as fixed by the court, 
     subject to the provisions of this section.
       ``(b) Determination of Damages; Evidence Considered; 
     Procedure.--The court may receive expert testimony as an aid 
     to the determination of damages or of what royalty would be 
     reasonable under the circumstances. The admissibility of such 
     testimony shall be governed by the rules of evidence 
     governing expert testimony. When the damages are not found by 
     a jury, the court shall assess them.
       ``(c) Standard for Calculating Reasonable Royalty.--
       ``(1) In general.--The court shall determine, based on the 
     facts of the case and after adducing any further evidence the 
     court deems necessary, which of the following methods shall 
     be used by the court or the jury in calculating a reasonable 
     royalty pursuant to subsection (a). The court shall also 
     identify the factors that are relevant to the determination 
     of a reasonable royalty, and the court or jury, as the case 
     may be, shall consider only those factors in making such 
     determination.
       ``(A) Entire market value.--Upon a showing to the 
     satisfaction of the court that the claimed invention's 
     specific contribution over the prior art is the predominant 
     basis for market demand for an infringing product or process, 
     damages may be based upon the entire market value of that 
     infringing product or process.
       ``(B) Established royalty based on marketplace licensing.--
     Upon a showing to the satisfaction of the court that the 
     claimed invention has been the subject of a nonexclusive 
     license for the use made of the invention by the infringer, 
     to a number of persons sufficient to indicate a general 
     marketplace recognition of the reasonableness of the 
     licensing terms, if the license was secured prior to the 
     filing of the case before the court, and the court determines 
     that the infringer's use is of substantially the same scope, 
     volume, and benefit of the rights granted under such license, 
     damages may be determined on the basis of the terms of such 
     license. Upon a showing to the satisfaction of the court that 
     the claimed invention has sufficiently similar noninfringing 
     substitutes in the relevant market, which have themselves 
     been the subject of such nonexclusive licenses, and the court 
     determines that the infringer's use is of substantially the 
     same scope, volume, and benefit of the rights granted under 
     such licenses, damages may be determined on the basis of the 
     terms of such licenses.
       ``(C) Valuation calculation.--Upon a determination by the 
     court that the showings required under subparagraphs (A) and 
     (B) have not been made, the court shall conduct an analysis 
     to ensure that a reasonable royalty is applied only to the 
     portion of the economic value of the infringing product or 
     process properly attributable to the claimed invention's 
     specific contribution over the prior art. In the case of a 
     combination invention whose elements are present individually 
     in the prior art, the contribution over the prior art may 
     include the value of the additional function resulting from 
     the combination, as well as the enhanced value, if any, of 
     some or all of the prior art elements as part of the 
     combination, if the patentee demonstrates that value.
       ``(2) Additional factors.--Where the court determines it to 
     be appropriate in determining a reasonable royalty under 
     paragraph (1), the court may also consider, or direct the 
     jury to consider, any other relevant factors under applicable 
     law.
       ``(d) Inapplicability to Other Damages Analysis.--The 
     methods for calculating a reasonable royalty described in 
     subsection (c) shall have no application to the calculation 
     of an award of damages that does not necessitate the 
     determination of a reasonable royalty as a basis for monetary 
     relief sought by the claimant.
       ``(e) Willful Infringement.--
       ``(1) Increased damages.--A court that has determined that 
     an infringer has willfully infringed a patent or patents may 
     increase damages up to 3 times the amount of the damages 
     found or assessed under subsection (a), except that increased 
     damages under this paragraph shall not apply to provisional 
     rights under section 154(d).
       ``(2) Permitted grounds for willfulness.--A court may find 
     that an infringer has willfully infringed a patent only if 
     the patent owner presents clear and convincing evidence that 
     acting with objective recklessness--
       ``(A) after receiving written notice from the patentee--
       ``(i) alleging acts of infringement in a manner sufficient 
     to give the infringer an objectively reasonable apprehension 
     of suit on such patent, and
       ``(ii) identifying with particularity each claim of the 
     patent, each product or process that the patent owner alleges 
     infringes the patent, and the relationship of such product or 
     process to such claim,

     the infringer, after a reasonable opportunity to investigate, 
     thereafter performed 1 or more of the alleged acts of 
     infringement;
       ``(B) the infringer intentionally copied the patented 
     invention with knowledge that it was patented; or
       ``(C) after having been found by a court to have infringed 
     that patent, the infringer engaged in conduct that was not 
     colorably different from the conduct previously found to have 
     infringed the patent, and which resulted in a separate 
     finding of infringement of the same patent.
       ``(3) Limitations on willfulness.--
       ``(A) In general.--A court may not find that an infringer 
     has willfully infringed a patent under paragraph (2) for any 
     period of time during which the infringer had an informed 
     good faith belief that the patent was invalid or 
     unenforceable, or would not be infringed by the conduct later 
     shown to constitute infringement of the patent.
       ``(B) Good faith established.--An informed good faith 
     belief within the meaning of subparagraph (A) may be 
     established by--
       ``(i) reasonable reliance on advice of counsel;
       ``(ii) evidence that the infringer sought to modify its 
     conduct to avoid infringement once it had discovered the 
     patent; or
       ``(iii) other evidence a court may find sufficient to 
     establish such good faith belief.
       ``(C) Relevance of not presenting certain evidence.--The 
     decision of the infringer not to present evidence of advice 
     of counsel is not relevant to a determination of willful 
     infringement under paragraph (2).
       ``(4) Limitation on pleading.--Before the date on which a 
     court determines that the patent in suit is not invalid, is 
     enforceable, and has been infringed by the infringer, a 
     patentee may not plead and a court may not determine that an 
     infringer has willfully infringed a patent. The court's 
     determination of an infringer's willfulness shall be made 
     without a jury.''.
       (b) Report to Congressional Committees.--
       (1) In general.--Not later than 2 years after the date of 
     enactment of this Act, the Director shall report to the 
     Committee on the Judiciary of the Senate and the Committee on 
     the Judiciary of the House of Representatives, the findings 
     and recommendations of the Director on the operation of prior 
     user rights in selected countries in the industrialized 
     world. The report shall include the following:
       (A) A comparison between patent laws of the United States 
     and the laws of other industrialized countries, including the 
     European Union, Japan, Canada, and Australia.
       (B) An analysis of the effect of prior user rights on 
     innovation rates in the selected countries.
       (C) An analysis of the correlation, if any, between prior 
     user rights and start-up enterprises and the ability to 
     attract venture capital to start new companies.
       (D) An analysis of the effect of prior user rights, if any, 
     on small businesses, universities, and individual inventors.

[[Page S2711]]

       (E) An analysis of legal and constitutional issues, if any, 
     that arise from placing trade secret law in patent law.
       (2) Consultation with other agencies.--In preparing the 
     report required under paragraph (1), the Director shall 
     consult with the Secretary of State and the Attorney General.
       (c) Defense to Infringement Based on Earlier Inventor.--
     Section 273(b)(6) of title 35, United States Code, is amended 
     to read as follows:
       ``(6) Personal defense.--The defense under this section may 
     be asserted only by the person who performed or caused the 
     performance of the acts necessary to establish the defense as 
     well as any other entity that controls, is controlled by, or 
     is under common control with such person and, except for any 
     transfer to the patent owner, the right to assert the defense 
     shall not be licensed or assigned or transferred to another 
     person except as an ancillary and subordinate part of a good 
     faith assignment or transfer for other reasons of the entire 
     enterprise or line of business to which the defense relates. 
     Notwithstanding the preceding sentence, any person may, on 
     its own behalf, assert a defense based on the exhaustion of 
     rights provided under paragraph (3), including any necessary 
     elements thereof.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to any civil action commenced on or after the 
     date of enactment of this Act.

     SEC. 5. POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS.

       (a) Citation of Prior Art.--Section 301 of title 35, United 
     States Code, is amended to read as follows:

     ``Sec. 301. Citation of prior art

       ``(a) In General.--Any person at any time may cite to the 
     Office in writing--
       ``(1) prior art consisting of patents, printed 
     publications, or evidence that the claimed invention was in 
     public use or sale in the United States more than 1 year 
     prior to the date of the application for patent in the United 
     States, which that person believes to have a bearing on the 
     patentability of any claim of a particular patent; or
       ``(2) written statements of the patent owner filed in a 
     proceeding before a Federal court or the Patent and Trademark 
     Office in which the patent owner takes a position on the 
     scope of one or more patent claims.
       ``(b) Submissions Part of Official File.--If the person 
     citing prior art or written submissions under subsection (a) 
     explains in writing the pertinence and manner of applying the 
     prior art or written submission to at least one claim of the 
     patent, the citation of the prior art or documentary evidence 
     (as the case may be) and the explanation thereof shall become 
     a part of the official file of the patent.
       ``(c) Procedures for Written Statements.--
       ``(1) Submission of additional materials.--A party that 
     submits written statements under subsection (a)(2) in a 
     proceeding shall include any other documents, pleadings, or 
     evidence from the proceeding that address the patent owner's 
     statements or the claims addressed by the written statements.
       ``(2) Limitation on use of statements.--Written statements 
     submitted under subsection (a)(2) shall not be considered for 
     any purpose other than to determine the proper meaning of the 
     claims that are the subject of the request in a proceeding 
     ordered pursuant to section 304 or 313. Any such written 
     statements, and any materials submitted under paragraph (1), 
     that are subject to an applicable protective order shall be 
     redacted to exclude information subject to the order.
       ``(d) Identity Withheld.--Upon the written request of the 
     person making the citation under subsection (a), the person's 
     identity shall be excluded from the patent file and kept 
     confidential.''.
       (b) Request for Reexamination.--The first sentence of 
     section 302 of title 35, United States Code, is amended to 
     read as follows: ``Any person at any time may file a request 
     for reexamination by the Office of any claim on a patent on 
     the basis of any prior art or documentary evidence cited 
     under paragraph (1) or (3) of subsection (a) of section 301 
     of this title.''.
       (c) Reexamination.--Section 303(a) of title 35, United 
     States Code, is amended to read as follows:
       ``(a) Within three months following the filing of a request 
     for reexamination under section 302, the Director shall 
     determine whether a substantial new question of patentability 
     affecting any claim of the patent concerned is raised by the 
     request, with or without consideration of other patents or 
     printed publications. On the Director's own initiative, and 
     at any time, the Director may determine whether a substantial 
     new question of patentability is raised by patents, 
     publications, or other evidence discovered by the Director, 
     is cited under section 301, or is cited by any person other 
     than the owner of the patent under section 302 or section 
     311. The existence of a substantial new question of 
     patentability is not precluded by the fact that a patent, 
     printed publication, or other evidence was previously 
     considered by the Office.''.
       (d) Request for Inter Partes Reexamination.--Section 311(a) 
     of title 35, United States Code, is amended to read as 
     follows:
       ``(a) In General.--Any third-party requester at any time 
     may file a request for inter partes reexamination by the 
     Office of a patent on the basis of any prior art or 
     documentary evidence cited under paragraph (1) or (3) of 
     subsection (a) of section 301 of this title.''.
       (e) Conduct of Inter Partes Proceedings.--Section 314 of 
     title 35, United States Code, is amended--
       (1) in the first sentence of subsection (a), by striking 
     ``conducted according to the procedures established for 
     initial examination under the provisions of sections 132 and 
     133'' and inserting ``heard by an administrative patent judge 
     in accordance with procedures which the Director shall 
     establish'';
       (2) in subsection (b), by striking paragraph (2) and 
     inserting the following:
       ``(2) The third-party requester shall have the opportunity 
     to file written comments on any action on the merits by the 
     Office in the inter partes reexamination proceeding, and on 
     any response that the patent owner files to such an action, 
     if those written comments are received by the Office within 
     60 days after the date of service on the third-party 
     requester of the Office action or patent owner response, as 
     the case may be.''; and
       (3) by adding at the end the following:
       ``(d) Oral Hearing.--At the request of a third party 
     requestor or the patent owner, the administrative patent 
     judge shall conduct an oral hearing, unless the judge finds 
     cause lacking for such hearing.''.
       (f) Estoppel.--Section 315(c) of title 35, United States 
     Code, is amended by striking ``or could have raised''.
       (g) Reexamination Prohibited After District Court 
     Decision.--Section 317(b) of title 35, United States Code, is 
     amended--
       (1) in the subsection heading, by striking ``Final 
     Decision'' and inserting ``District Court Decision''; and
       (2) by striking ``Once a final decision has been entered'' 
     and inserting ``Once the judgment of the district court has 
     been entered''.
       (h) Post-Grant Opposition Procedures.--
       (1) In general.--Part III of title 35, United States Code, 
     is amended by adding at the end the following new chapter:

               ``CHAPTER 32--POST-GRANT REVIEW PROCEDURES

``Sec.
``321. Petition for post-grant review.
``322. Timing and bases of petition.
``323. Requirements of petition.
``324. Prohibited filings.
``325. Submission of additional information; showing of sufficient 
              grounds.
``326. Conduct of post-grant review proceedings.
``327. Patent owner response.
``328. Proof and evidentiary standards.
``329. Amendment of the patent.
``330. Decision of the Board.
``331. Effect of decision.
``332. Settlement.
``333. Relationship to other pending proceedings.
``334. Effect of decisions rendered in civil action on post-grant 
              review proceedings.
``335. Effect of final decision on future proceedings.
``336. Appeal.

     ``Sec. 321. Petition for post-grant review

       ``Subject to sections 322, 324, 332, and 333, a person who 
     is not the patent owner may file with the Office a petition 
     for cancellation seeking to institute a post-grant review 
     proceeding to cancel as unpatentable any claim of a patent on 
     any ground that could be raised under paragraph (2) or (3) of 
     section 282(b) (relating to invalidity of the patent or any 
     claim). The Director shall establish, by regulation, fees to 
     be paid by the person requesting the proceeding, in such 
     amounts as the Director determines to be reasonable.

     ``Sec. 322. Timing and bases of petition

       ``A post-grant proceeding may be instituted under this 
     chapter pursuant to a cancellation petition filed under 
     section 321 only if--
       ``(1) the petition is filed not later than 12 months after 
     the issuance of the patent or a reissue patent, as the case 
     may be; or
       ``(2) the patent owner consents in writing to the 
     proceeding.

     ``Sec. 323. Requirements of petition

       ``A cancellation petition filed under section 321 may be 
     considered only if--
       ``(1) the petition is accompanied by payment of the fee 
     established by the Director under section 321;
       ``(2) the petition identifies the cancellation petitioner;
       ``(3) for each claim sought to be canceled, the petition 
     sets forth in writing the basis for cancellation and provides 
     the evidence in support thereof, including copies of patents 
     and printed publications, or written testimony of a witness 
     attested to under oath or declaration by the witness, or any 
     other information that the Director may require by 
     regulation; and
       ``(4) the petitioner provides copies of the petition, 
     including any evidence submitted with the petition and any 
     other information submitted under paragraph (3), to the 
     patent owner or, if applicable, the designated representative 
     of the patent owner.

     ``Sec. 324. Prohibited filings

       ``A post-grant review proceeding may not be instituted 
     under section 322 if the petition for cancellation requesting 
     the proceeding--
       ``(1) identifies the same cancellation petitioner and the 
     same patent as a previous petition for cancellation filed 
     under such section; or
       ``(2) is based on the best mode requirement contained in 
     section 112.

     ``Sec. 325. Submission of additional information; showing of 
       sufficient grounds

       ``(a) In General.--The cancellation petitioner shall file 
     such additional information

[[Page S2712]]

     with respect to the petition as the Director may require. For 
     each petition submitted under section 321, the Director shall 
     determine if the written statement, and any evidence 
     submitted with the request, establish that a substantial 
     question of patentability exists for at least one claim in 
     the patent. The Director may initiate a post-grant review 
     proceeding if the Director determines that the information 
     presented provides sufficient grounds to believe that there 
     is a substantial question of patentability concerning one or 
     more claims of the patent at issue.
       ``(b) Notification; Determinations Not Reviewable.--The 
     Director shall notify the patent owner and each petitioner in 
     writing of the Director's determination under subsection (a), 
     including a determination to deny the petition. The Director 
     shall make that determination in writing not later than 60 
     days after receiving the petition. Any determination made by 
     the Director under subsection (a), including whether or not 
     to institute a post-grant review proceeding or to deny the 
     petition, shall not be reviewable.

     ``Sec. 326. Conduct of post-grant review proceedings

       ``(a) In General.--The Director shall prescribe 
     regulations, in accordance with section 2(b)(2)--
       ``(1) establishing and governing post-grant review 
     proceedings under this chapter and their relationship to 
     other proceedings under this title;
       ``(2) establishing procedures for the submission of 
     supplemental information after the petition for cancellation 
     is filed; and
       ``(3) setting forth procedures for discovery of relevant 
     evidence, including that such discovery shall be limited to 
     evidence directly related to factual assertions advanced by 
     either party in the proceeding, and the procedures for 
     obtaining such evidence shall be consistent with the purpose 
     and nature of the proceeding.
     In carrying out paragraph (3), the Director shall bear in 
     mind that discovery must be in the interests of justice.
       ``(b) Post-Grant Regulations.--Regulations under subsection 
     (a)(1)--
       ``(1) shall require that the final determination in a post-
     grant proceeding issue not later than one year after the date 
     on which the post-grant review proceeding is instituted under 
     this chapter, except that, for good cause shown, the Director 
     may extend the 1-year period by not more than six months;
       ``(2) shall provide for discovery upon order of the 
     Director;
       ``(3) shall provide for publication of notice in the 
     Federal Register of the filing of a petition for post-grant 
     review under this chapter, for publication of the petition, 
     and documents, orders, and decisions relating to the 
     petition, on the website of the Patent and Trademark Office, 
     and for filings under seal exempt from publication 
     requirements;
       ``(4) shall prescribe sanctions for abuse of discovery, 
     abuse of process, or any other improper use of the 
     proceeding, such as to harass or to cause unnecessary delay 
     or unnecessary increase in the cost of the proceeding;
       ``(5) may provide for protective orders governing the 
     exchange and submission of confidential information; and
       ``(6) shall ensure that any information submitted by the 
     patent owner in support of any amendment entered under 
     section 329 is made available to the public as part of the 
     prosecution history of the patent.
       ``(c) Considerations.--In prescribing regulations under 
     this section, the Director shall consider the effect on the 
     economy, the integrity of the patent system, and the 
     efficient administration of the Office.
       ``(d) Conduct of Proceeding.--The Patent Trial and Appeal 
     Board shall, in accordance with section 6(b), conduct each 
     post-grant review proceeding authorized by the Director.

     ``Sec. 327. Patent owner response

       ``After a post-grant proceeding under this chapter has been 
     instituted with respect to a patent, the patent owner shall 
     have the right to file, within a time period set by the 
     Director, a response to the cancellation petition. The patent 
     owner shall file with the response, through affidavits or 
     declarations, any additional factual evidence and expert 
     opinions on which the patent owner relies in support of the 
     response.

     ``Sec. 328. Proof and evidentiary standards

       ``(a) In General.--The presumption of validity set forth in 
     section 282 shall not apply in a challenge to any patent 
     claim under this chapter.
       ``(b) Burden of Proof.--The party advancing a proposition 
     under this chapter shall have the burden of proving that 
     proposition by a preponderance of the evidence.

     ``Sec. 329. Amendment of the patent

       ``(a) In General.--In response to a challenge in a petition 
     for cancellation, the patent owner may file one motion to 
     amend the patent in one or more of the following ways:
       ``(1) Cancel any challenged patent claim.
       ``(2) For each challenged claim, propose a substitute 
     claim.
       ``(3) Amend the patent drawings or otherwise amend the 
     patent other than the claims.
       ``(b) Additional Motions.--Additional motions to amend may 
     be permitted only for good cause shown.
       ``(c) Scope of Claims.--An amendment under this section may 
     not enlarge the scope of the claims of the patent or 
     introduce new matter.

     ``Sec. 330. Decision of the Board

       ``If the post-grant review proceeding is instituted and not 
     dismissed under this chapter, the Patent Trial and Appeal 
     Board shall issue a final written decision addressing the 
     patentability of any patent claim challenged and any new 
     claim added under section 329.

     ``Sec. 331. Effect of decision

       ``(a) In General.--If the Patent Trial and Appeal Board 
     issues a final decision under section 330 and the time for 
     appeal has expired or any appeal proceeding has terminated, 
     the Director shall issue and publish a certificate canceling 
     any claim of the patent finally determined to be unpatentable 
     and incorporating in the patent by operation of the 
     certificate any new claim determined to be patentable.
       ``(b) New Claims.--Any new claim held to be patentable and 
     incorporated into a patent in a post-grant review proceeding 
     shall have the same effect as that specified in section 252 
     for reissued patents on the right of any person who made, 
     purchased, offered to sell, or used within the United States, 
     or imported into the United States, anything patented by such 
     new claim, or who made substantial preparations therefor, 
     before a certificate under subsection (a) of this section is 
     issued.

     ``Sec. 332. Settlement

       ``(a) In General.--A post-grant review proceeding shall be 
     terminated with respect to any petitioner upon the joint 
     request of the petitioner and the patent owner, unless the 
     Patent Trial and Appeal Board has issued a written decision 
     before the request for termination is filed. If the post-
     grant review proceeding is terminated with respect to a 
     petitioner under this paragraph, no estoppel shall apply to 
     that petitioner. If no petitioner remains in the proceeding, 
     the panel of administrative patent judges assigned to the 
     proceeding shall terminate the proceeding.
       ``(b) Agreement in Writing.--Any agreement or understanding 
     between the patent owner and a petitioner, including any 
     collateral agreements referred to in the agreement or 
     understanding, that is made in connection with or in 
     contemplation of the termination of a post-grant review 
     proceeding, must be in writing. A post-grant review 
     proceeding as between the parties to the agreement or 
     understanding may not be terminated until a copy of the 
     agreement or understanding, including any such collateral 
     agreements, has been filed in the Office. If any party filing 
     such an agreement or understanding requests, the agreement or 
     understanding shall be kept separate from the file of the 
     post-grant review proceeding, and shall be made available 
     only to Government agencies on written request, or to any 
     person on a showing of good cause.

     ``Sec. 333. Relationship to other proceedings

       ``(a) In General.--Notwithstanding subsection 135(a), 
     sections 251 and 252, and chapter 30, the Director may 
     determine the manner in which any reexamination proceeding, 
     reissue proceeding, interference proceeding (commenced with 
     respect to an application for patent filed before the 
     effective date provided in section 3(k) of the Patent Reform 
     Act of 2009), derivation proceeding, or post-grant review 
     proceeding, that is pending during a post-grant review 
     proceeding, may proceed, including providing for stay, 
     transfer, consolidation, or termination of any such 
     proceeding.
       ``(b) Stays.--The Director may stay a post-grant review 
     proceeding if a pending civil action for infringement of a 
     patent addresses the same or substantially the same questions 
     of patentability raised against the patent in a petition for 
     the post-grant review proceeding.
       ``(c) Effect of Commencement of Proceeding.--The 
     commencement of a post-grant review proceeding--
       ``(1) shall not limit in any way the right of the patent 
     owner to commence an action for infringement of the patent; 
     and
       ``(2) shall not be cited as evidence relating to the 
     validity of any claim of the patent in any proceeding before 
     a court or the International Trade Commission concerning the 
     patent.

     ``Sec. 334. Effect of decisions rendered in civil action on 
       post-grant review proceedings

       ``If a final decision is entered against a party in a civil 
     action arising in whole or in part under section 1338 of 
     title 28 establishing that the party has not sustained its 
     burden of proving the invalidity of any patent claim--
       ``(1) that party to the civil action and the privies of 
     that party may not thereafter request a post-grant review 
     proceeding on that patent claim on the basis of any grounds, 
     under the provisions of section 321, which that party or the 
     privies of that party raised or could have raised; and
       ``(2) the Director may not thereafter maintain a post-grant 
     review proceeding that was requested, before the final 
     decision was so entered, by that party or the privies of that 
     party on the basis of such grounds.

     ``Sec. 335. Effect of final decision on future proceedings

       ``If a final decision under section 330 is favorable to the 
     patentability of any original or new claim of the patent 
     challenged by the cancellation petitioner, the cancellation 
     petitioner may not thereafter, based on any ground that the 
     cancellation petitioner raised during the post-grant review 
     proceeding--
       ``(1) request or pursue a reexamination of such claim under 
     chapter 31;
       ``(2) request or pursue a derivation proceeding with 
     respect to such claim;

[[Page S2713]]

       ``(3) request or pursue a post-grant review proceeding 
     under this chapter with respect to such claim;
       ``(4) assert the invalidity of any such claim in any civil 
     action arising in whole or in part under section 1338 of 
     title 28; or
       ``(5) assert the invalidity of any such claim in defense to 
     an action brought under section 337 of the Tariff Act of 1930 
     (19 U.S.C. 1337).

     ``Sec. 336. Appeal

       ``A party dissatisfied with the final determination of the 
     Patent Trial and Appeal Board in a post-grant proceeding 
     under this chapter may appeal the determination under 
     sections 141 through 144. Any party to the post-grant 
     proceeding shall have the right to be a party to the 
     appeal.''.
       (i) Conforming Amendment.--The table of chapters for part 
     III of title 35, United States Code, is amended by adding at 
     the end the following:

``32. Post-Grant Review Proceedings..........................321''.....

       (j) Repeal.--Section 4607 of the Intellectual Property and 
     Communications Omnibus Reform Act of 1999, as enacted by 
     section 1000(a)(9) of Public Law 106-113, is repealed.
       (k) Effective Dates.--
       (1) In general.--The amendments and repeal made by this 
     section shall take effect at the end of the 1-year period 
     beginning on the date of the enactment of this Act.
       (2) Applicability to ex parte and inter partes 
     proceedings.--Notwithstanding any other provision of law, 
     sections 301 and 311 through 318 of title 35, United States 
     Code, as amended by this section, shall apply to any patent 
     that issues before, on, or after the effective date under 
     paragraph (1) from an original application filed on any date.
       (3) Applicability to post-grant proceedings.--The 
     amendments made by subsections (h) and (i) shall apply to 
     patents issued on or after the effective date under paragraph 
     (1).
       (l) Regulations.--The Under Secretary of Commerce for 
     Intellectual Property and Director of the United States 
     Patent and Trademark Office (in this subsection referred to 
     as the ``Director'') shall, not later than the date that is 1 
     year after the date of the enactment of this Act, issue 
     regulations to carry out chapter 32 of title 35, United 
     States Code, as added by subsection (h) of this section.

     SEC. 6. DEFINITIONS; PATENT TRIAL AND APPEAL BOARD.

       (a) Definitions.--Section 100 of title 35, United States 
     Code, (as amended by section 2 of this Act) is further 
     amended--
       (1) in subsection (e), by striking ``or inter partes 
     reexamination under section 311''; and
       (2) by adding at the end the following:
       ``(k) The term `cancellation petitioner' means the real 
     party in interest requesting cancellation of any claim of a 
     patent under chapter 31 of this title and the privies of the 
     real party in interest.''.
       (b) Patent Trial and Appeal Board.--Section 6 of title 35, 
     United States Code, is amended to read as follows:

     ``Sec. 6. Patent Trial and Appeal Board

       ``(a) Establishment and Composition.--There shall be in the 
     Office a Patent Trial and Appeal Board. The Director, the 
     Deputy Director, the Commissioner for Patents, the 
     Commissioner for Trademarks, and the administrative patent 
     judges shall constitute the Patent Trial and Appeal Board. 
     The administrative patent judges shall be persons of 
     competent legal knowledge and scientific ability who are 
     appointed by the Secretary of Commerce. Any reference in any 
     Federal law, Executive order, rule, regulation, or delegation 
     of authority, or any document of or pertaining to the Board 
     of Patent Appeals and Interferences is deemed to refer to the 
     Patent Trial and Appeal Board.
       ``(b) Duties.--The Patent Trial and Appeal Board shall--
       ``(1) on written appeal of an applicant, review adverse 
     decisions of examiners upon application for patents;
       ``(2) on written appeal of a patent owner, review adverse 
     decisions of examiners upon patents in reexamination 
     proceedings under chapter 30;
       ``(3) conduct derivation proceedings under subsection 
     135(a); and
       ``(4) conduct post-grant opposition proceedings under 
     chapter 32.
     Each appeal and derivation proceeding shall be heard by at 
     least 3 members of the Patent Trial and Appeal Board, who 
     shall be designated by the Director. Only the Patent Trial 
     and Appeal Board may grant rehearings. The Director shall 
     assign each post-grant review proceeding to a panel of 3 
     administrative patent judges. Once assigned, each such panel 
     of administrative patent judges shall have the 
     responsibilities under chapter 32 in connection with post-
     grant review proceedings.''.

     SEC. 7. PREISSUANCE SUBMISSIONS BY THIRD PARTIES.

       Section 122 of title 35, United States Code, is amended by 
     adding at the end the following:
       ``(e) Preissuance Submissions by Third Parties.--
       ``(1) In general.--Any person may submit for consideration 
     and inclusion in the record of a patent application, any 
     patent, published patent application, or other publication of 
     potential relevance to the examination of the application, if 
     such submission is made in writing before the earlier of--
       ``(A) the date a notice of allowance under section 151 is 
     mailed in the application for patent; or
       ``(B) either--
       ``(i) 6 months after the date on which the application for 
     patent is published under section 122, or
       ``(ii) the date of the first rejection under section 132 of 
     any claim by the examiner during the examination of the 
     application for patent,
     whichever occurs later.
       ``(2) Other requirements.--Any submission under paragraph 
     (1) shall--
       ``(A) set forth a concise description of the asserted 
     relevance of each submitted document;
       ``(B) be accompanied by such fee as the Director may 
     prescribe; and
       ``(C) include a statement by the person making such 
     submission affirming that the submission was made in 
     compliance with this section.''.

     SEC. 8. VENUE AND JURISDICTION.

       (a) Venue for Patent Cases.--Section 1400 of title 28, 
     United States Code, is amended by striking subsection (b) and 
     inserting the following:
       ``(b) Notwithstanding section 1391 of this title, in any 
     civil action arising under any Act of Congress relating to 
     patents, a party shall not manufacture venue by assignment, 
     incorporation, or otherwise to invoke the venue of a specific 
     district court.
       ``(c) Notwithstanding section 1391 of this title, any civil 
     action for patent infringement or any action for declaratory 
     judgment may be brought only in a judicial district--
       ``(1) where the defendant has its principal place of 
     business or in the location or place in which the defendant 
     is incorporated or formed, or, for foreign corporations with 
     a United States subsidiary, where the defendant's primary 
     United States subsidiary has its principal place of business 
     or is incorporated or formed;
       ``(2) where the defendant has committed substantial acts of 
     infringement and has a regular and established physical 
     facility that the defendant controls and that constitutes a 
     substantial portion of the operations of the defendant;
       ``(3) where the primary plaintiff resides, if the primary 
     plaintiff in the action is--
       ``(A) an institution of higher education as defined under 
     section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 
     1001(a)); or
       ``(B) a nonprofit organization that--
       ``(i) qualifies for treatment under section 501(c)(3) of 
     the Internal Revenue Code (26 U.S.C. 501(c)(3));
       ``(ii) is exempt from taxation under section 501(a) of such 
     Code; and
       ``(iii) serves as the patent and licensing organization for 
     an institution of higher education as defined under section 
     101(a) of the Higher Education Act of 1965 (20 U.S.C. 
     1001(a)); or
       ``(4) where the plaintiff resides, if the sole plaintiff in 
     the action is an individual inventor who is a natural person 
     and who qualifies at the time such action is filed as a 
     micro-entity pursuant to section 123 of title 35.
       ``(d) If a plaintiff brings a civil action for patent 
     infringement or declaratory judgment relief under subsection 
     (c), then the defendant may request the district court to 
     transfer that action to another district or division where, 
     in the court's determination--
       ``(1) any of the parties has substantial evidence or 
     witnesses that otherwise would present considerable 
     evidentiary burdens to the defendant if such transfer were 
     not granted;
       ``(2) such transfer would not cause undue hardship to the 
     plaintiff; and
       ``(3) venue would be otherwise appropriate under section 
     1391 of this title.''.
       (b) Interlocutory Appeals.--Subsection (c)(2) of section 
     1292 of title 28, United States Code, is amended by adding at 
     the end the following:
       ``(3) of an appeal from an interlocutory order or decree 
     determining construction of claims in a civil action for 
     patent infringement under section 271 of title 35.
     Application for an appeal under paragraph (3) shall be made 
     to the court within 10 days after entry of the order or 
     decree. The district court shall have discretion whether to 
     approve the application and, if so, whether to stay 
     proceedings in the district court during the pendency of such 
     appeal.''.
       (c) Technical Amendments Relating to Venue.--Sections 32, 
     145, 146, 154(b)(4)(A), and 293 of title 35, United States 
     Code, and section 21(b)(4) of 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 (commonly referred to as the ``Trademark Act of 
     1946'' or the ``Lanham Act''; 15 U.S.C. 1071(b)(4)), are each 
     amended by striking ``United States District Court for the 
     District of Columbia'' each place that term appears and 
     inserting ``United States District Court for the Eastern 
     District of Virginia''.

     SEC. 9. PATENT AND TRADEMARK OFFICE REGULATORY AUTHORITY.

       (a) Fee Setting.--
       (1) In general.--The Director shall have authority to set 
     or adjust by rule any fee established or charged by the 
     Office under sections 41 and 376 of title 35, United States 
     Code or under section 31 of the Trademark Act of 1946 (15 
     U.S.C. 1113) for the filing or processing of any submission 
     to, and for all other services performed by or materials 
     furnished by, the Office, provided that such fee amounts are 
     set to reasonably compensate the Office for the services 
     performed.
       (2) Reduction of fees in certain fiscal years.--In any 
     fiscal year, the Director--

[[Page S2714]]

       (A) shall consult with the Patent Public Advisory Committee 
     and the Trademark Public Advisory Committee on the 
     advisability of reducing any fees described in paragraph (1); 
     and
       (B) after that consultation may reduce such fees.
       (3) Role of the public advisory committee.--The Director 
     shall--
       (A) submit to the Patent or Trademark Public Advisory 
     Committee, or both, as appropriate, any proposed fee under 
     paragraph (1) not less than 45 days before publishing any 
     proposed fee in the Federal Register;
       (B) provide the relevant advisory committee described in 
     subparagraph (A) a 30-day period following the submission of 
     any proposed fee, on which to deliberate, consider, and 
     comment on such proposal, and require that--
       (i) during such 30-day period, the relevant advisory 
     committee hold a public hearing related to such proposal; and
       (ii) the Director shall assist the relevant advisory 
     committee in carrying out such public hearing, including by 
     offering the use of Office resources to notify and promote 
     the hearing to the public and interested stakeholders;
       (C) require the relevant advisory committee to make 
     available to the public a written report detailing the 
     comments, advice, and recommendations of the committee 
     regarding any proposed fee;
       (D) consider and analyze any comments, advice, or 
     recommendations received from the relevant advisory committee 
     before setting or adjusting any fee; and
       (E) notify, through the Chair and Ranking Member of the 
     Senate and House Judiciary Committees, the Congress of any 
     final decision regarding proposed fees.
       (4) Publication in the federal register.--
       (A) In general.--Any rules prescribed under this subsection 
     shall be published in the Federal Register.
       (B) Rationale.--Any proposal for a change in fees under 
     this section shall--
       (i) be published in the Federal Register; and
       (ii) include, in such publication, the specific rationale 
     and purpose for the proposal, including the possible 
     expectations or benefits resulting from the proposed change.
       (C) Public comment period.--Following the publication of 
     any proposed fee in the Federal Register pursuant to 
     subparagraph (A), the Director shall seek public comment for 
     a period of not less than 45 days.
       (5) Congressional comment period.--Following the 
     notification described in paragraph (3)(E), Congress shall 
     have not more than 45 days to consider and comment on any 
     proposed fee under paragraph (1). No proposed fee shall be 
     effective prior to the end of such 45-day comment period.
       (6) Rule of construction.--No rules prescribed under this 
     subsection may diminish--
       (A) an applicant's rights under this title or the Trademark 
     Act of 1946; or
       (B) any rights under a ratified treaty.
       (b) Fees for Patent Services.--Division B of Public Law 
     108-447 is amended in title VIII of the Departments of 
     Commerce, Justice and State, the Judiciary, and Related 
     Agencies Appropriations Act, 2005, in section 801(a) by 
     striking ``During fiscal years 2005, 2006 and 2007'', and 
     inserting ``Until such time as the Director sets or adjusts 
     the fees otherwise,''.
       (c) Adjustment of Trademark Fees.--Division B of Public Law 
     108-447 is amended in title VIII of the Departments of 
     Commerce, Justice and State, the Judiciary and Related 
     Agencies Appropriations Act, 2005, in section 802(a) by 
     striking ``During fiscal years 2005, 2006 and 2007'', and 
     inserting ``Until such time as the Director sets or adjusts 
     the fees otherwise,''.
       (d) Effective Date, Applicability, and Transitional 
     Provision.--Division B of Public Law 108-447 is amended in 
     title VIII of the Departments of Commerce, Justice and State, 
     the Judiciary and Related Agencies Appropriations Act, 2005, 
     in section 803(a) by striking ``and shall apply only with 
     respect to the remaining portion of fiscal year 2005, 2006 
     and 2007.''.
       (e) Rule of Construction.--Nothing in this section shall be 
     construed to affect any other provision of Division B of 
     Public Law 108-447, including section 801(c) of title VII of 
     the Departments of Commerce, Justice and State, the Judiciary 
     and Related Agencies Appropriations Act, 2005.
       (f) Definitions.--In this section:
       (1) Director.--The term ``Director'' means the Director of 
     the United States Patent and Trademark Office.
       (2) Office.--The term ``Office'' means the United States 
     Patent and Trademark Office.
       (3) Trademark act of 1946.--The term ``Trademark Act of 
     1946'' means an Act entitled ``Act to provide for the 
     registration and protection of trademarks used in commerce, 
     to carry out the provisions of certain international 
     conventions, and for other purposes'', approved July 5, 1946 
     (15 U.S.C. 1051 et seq.) (commonly referred to as the 
     Trademark Act of 1946 or the Lanham Act).

     SEC. 10. RESIDENCY OF FEDERAL CIRCUIT JUDGES.

       (a) Residency.--The second sentence of section 44(c) of 
     title 28, United States Code, is repealed.
       (b) Facilities.--Section 44 of title 28, United States 
     Code, is amended by adding at the end the following:
       ``(e)(1) The Director of the Administrative Office of the 
     United States Courts shall provide--
       ``(A) a judge of the Federal judicial circuit who lives 
     within 50 miles of the District of Columbia with appropriate 
     facilities and administrative support services in the 
     District of the District of Columbia; and
       ``(B) a judge of the Federal judicial circuit who does not 
     live within 50 miles of the District of Columbia with 
     appropriate facilities and administrative support services--
       ``(i) in the district and division in which that judge 
     resides; or
       ``(ii) if appropriate facilities are not available in the 
     district and division in which that judge resides, in the 
     district and division closest to the residence of that judge 
     in which such facilities are available, as determined by the 
     Director.
       ``(2) Nothing in this subsection may be construed to 
     authorize or require the construction of new facilities.''.

     SEC. 11. MICRO-ENTITY DEFINED.

       Chapter 11 of title 35, United States Code, is amended by 
     adding at the end the following new section:

     ``Sec. 123. Micro-entity defined

       ``(a) In General.--For purposes of this title, the term 
     `micro-entity' means an applicant who makes a certification 
     under either subsections (b) or (c).
       ``(b) Unassigned Application.--For an unassigned 
     application, each applicant shall certify that the 
     applicant--
       ``(1) qualifies as a small entity, as defined in 
     regulations issued by the Director;
       ``(2) has not been named on 5 or more previously filed 
     patent applications;
       ``(3) has not assigned, granted, or conveyed, and is not 
     under an obligation by contract or law to assign, grant, or 
     convey, a license or any other ownership interest in the 
     particular application; and
       ``(4) does not have a gross income, as defined in section 
     61(a) of the Internal Revenue Code (26 U.S.C. 61(a)), 
     exceeding 2.5 times the average gross income, as reported by 
     the Department of Labor, in the calendar year immediately 
     preceding the calendar year in which the examination fee is 
     being paid.
       ``(c) Assigned Application.--For an assigned application, 
     each applicant shall certify that the applicant--
       ``(1) qualifies as a small entity, as defined in 
     regulations issued by the Director, and meets the 
     requirements of subsection (b)(4);
       ``(2) has not been named on 5 or more previously filed 
     patent applications; and
       ``(3) has assigned, granted, conveyed, or is under an 
     obligation by contract or law to assign, grant, or convey, a 
     license or other ownership interest in the particular 
     application to an entity that has 5 or fewer employees and 
     that such entity has a gross income, as defined in section 
     61(a) of the Internal Revenue Code (26 U.S.C. 61(a)), that 
     does not exceed 2.5 times the average gross income, as 
     reported by the Department of Labor, in the calendar year 
     immediately preceding the calendar year in which the 
     examination fee is being paid.
       ``(d) Income Level Adjustment.--The gross income levels 
     established under subsections (b) and (c) shall be adjusted 
     by the Director on October 1, 2009, and every year 
     thereafter, to reflect any fluctuations occurring during the 
     previous 12 months in the Consumer Price Index, as determined 
     by the Secretary of Labor.''.

     SEC. 12. TECHNICAL AMENDMENTS.

       (a) Joint Inventions.--Section 116 of title 35, United 
     States Code, is amended--
       (1) in the first paragraph, by striking ``When'' and 
     inserting ``(a) Joint Inventions.--When'';
       (2) in the second paragraph, by striking ``If a joint 
     inventor'' and inserting ``(b) Omitted Inventor.--If a joint 
     inventor''; and
       (3) in the third paragraph, by striking ``Whenever'' and 
     inserting ``(c) Correction of Errors in Application.--
     Whenever''.
       (b) Filing of Application in Foreign Country.--Section 184 
     of title 35, United States Code, is amended--
       (1) in the first paragraph, by striking ``Except when'' and 
     inserting ``(a) Filing in Foreign Country.--Except when'';
       (2) in the second paragraph, by striking ``The term'' and 
     inserting ``(b) Application.--The term''; and
       (3) in the third paragraph, by striking ``The scope'' and 
     inserting ``(c) Subsequent Modifications, Amendments, and 
     Supplements.--The scope''.
       (c) Reissue of Defective Patents.--Section 251 of title 35, 
     United States Code, is amended--
       (1) in the first paragraph, by striking ``Whenever'' and 
     inserting ``(a) In General.--Whenever'';
       (2) in the second paragraph, by striking ``The Director'' 
     and inserting ``(b) Multiple Reissued Patents.--The 
     Director'';
       (3) in the third paragraph, by striking ``The provision'' 
     and inserting ``(c) Applicability of This Title.--The 
     provisions''; and
       (4) in the last paragraph, by striking ``No reissued 
     patent'' and inserting ``(d) Reissue Patent Enlarging Scope 
     of Claims.--No reissued patent''.
       (d) Effect of Reissue.--Section 253 of title 35, United 
     States Code, is amended--
       (1) in the first paragraph, by striking ``Whenever'' and 
     inserting ``(a) In General.--Whenever''; and
       (2) in the second paragraph, by striking ``in like manner'' 
     and inserting ``(b) Additional Disclaimer or Dedication.--In 
     the manner set forth in subsection (a),''.
       (e) Correction of Named Inventor.--Section 256 of title 35, 
     United States Code, is amended--

[[Page S2715]]

       (1) in the first paragraph, by striking ``Whenever'' and 
     inserting ``(a) Correction.--Whenever''; and
       (2) in the second paragraph, by striking ``The error'' and 
     inserting ``(b) Patent Valid if Error Corrected.--The 
     error''.
       (f) Presumption of Validity.--Section 282 of title 35, 
     United States Code, is amended--
       (1) in the first undesignated paragraph, by striking ``A 
     patent'' and inserting ``(a) In General.--A patent'';
       (2) in the second undesignated paragraph, by striking ``The 
     following'' and inserting ``(b) Defenses.--The following''; 
     and
       (3) in the third undesignated paragraph, by striking ``In 
     actions'' and inserting ``(c) Notice of Actions; Actions 
     During Extension of Patent Term.--In actions''.

     SEC. 13. EFFECTIVE DATE; RULE OF CONSTRUCTION.

       (a) Effective Date.--Except as otherwise provided in this 
     Act, the provisions of this Act shall take effect 12 months 
     after the date of the enactment of this Act and shall apply 
     to any patent issued on or after that effective date.
       (b) Continuity of Intent Under the Create Act.--The 
     enactment of section 102(b)(3) of title 35, United States 
     Code, under section (2)(b) of this Act is done with the same 
     intent to promote joint research activities that was 
     expressed, including in the legislative history, through the 
     enactment of the Cooperative Research and Technology 
     Enhancement Act of 2004 (Public Law 108-453; the ``CREATE 
     Act''), the amendments of which are stricken by section 2(c) 
     of this Act. The United States Patent and Trademark Office 
     shall administer section 102(b)(3) of title 35, United States 
     Code, in a manner consistent with the legislative history of 
     the CREATE Act that was relevant to its administration by the 
     United States Patent and Trademark Office.

     SEC. 14. SEVERABILITY.

       If any provision of this Act or of any amendment or repeals 
     made by this Act, or the application of such a provision to 
     any person or circumstance, is held to be invalid or 
     unenforceable, the remainder of this Act and the amendments 
     and repeals made by this Act, and the application of this Act 
     and such amendments and repeals to any other person or 
     circumstance, shall not be affected by such holding.

  Mr. HATCH. Mr. President, I rise to introduce with Senate Judiciary 
Committee chairman Patrick Leahy the Patent Reform Act of 2009, S. 515. 
I consider introduction of this bill to be a milestone in the progress 
we have made so far in the effort to reform our patent system--a system 
that has not been updated significantly since 1952. There is no doubt 
we have come a long way in our pursuit to accomplish comprehensive 
patent law reform. Reform is so vitally necessary to keep our nation 
competitive in our technologically advanced global economy, especially 
during these difficult economic times.
  I have always believed that passing patent reform legislation would 
be a multi-Congress endeavor. The Hatch-Leahy patent bill, S. 3818, 
formally started the legislative process in 2006. We continued the 
momentum in the 110th Congress by introducing S. 1145, the Patent 
Reform Act of 2007. In June 2007, my colleagues and I on the Senate 
Judiciary Committee approved S. 1145 by a vote of 13-5. While I would 
have liked to see S. 1145 pass the full Senate, I believe the process 
already provided makes passage of the Patent Reform Act of 2009 even 
more likely this Congress.
  S. 515 represents a bipartisan and bicameral commitment to streamline 
our nation's patent system that will improve patent quality and limit 
unnecessary and counterproductive litigation costs.
  House Judiciary chairman John Conyers and ranking minority member 
Lamar Smith are true partners in this important legislation. For those 
who might say nothing has changed, I can attest that it has. Just look 
at the bill. We have listened to many of the concerns raised by 
stakeholders and have changed the legislative text accordingly.
  Let me highlight some of the significant changes we have made to the 
bill.
  For example, S. 515 does not contain an applicant quality submissions 
provision due to near uniform opposition we heard from the patent 
community about the burdens this would place on applicants.
  Additionally, the Patent Reform Act of 2007 would have eliminated the 
current opt-out provision for publication of patent applications. 
Current law permits applicants to request upon filing that their 
application not be published at 18 months if a certification is made 
that the invention disclosed in the application has not and will not be 
the subject of an application filed in another country. Because of 
serious concerns raised by independent inventors and small entities, we 
have removed this provision from S. 515.
  Patents may be challenged either in court or at the U.S. Patent and 
Trademark Office, USPTO. The current administrative review process at 
the USPTO is widely viewed as ineffective and inefficient. Accordingly, 
last year's bills proposed a process more like a court proceeding than 
the current re-examination process. Both bills had a 1-year window for 
challenges during which patents would not be presumed valid, and a 
patent could be invalidated by a ``preponderance of evidence'' against 
it. However, the Senate bill, S. 1145, added a second window during the 
life of the patent where only ``clear and convincing'' evidence could 
invalidate the patent. Most in the patent community prefer the post-
grant review language as passed in the House because, instead of 
creating a ``second window,'' it improved upon the existing inter-
partes reexamination. As such, S. 515 adopts the House approach to 
expanding interpartes, but includes ``public use or sale in the United 
States'' as a basis for challenging a patent. Further, our bill ensures 
that ex parte reexamination proceedings are maintained, which is an 
important tool for challenging patents that should not have issued.
  With patent litigation costs escalating, the threat of enhanced 
damages can be quite substantial. For this reason, the Senate and House 
bills introduced in the 110th Congress narrowed the circumstances under 
which treble damages could be awarded for willful infringement of a 
patent. After introduction of the Patent Reform Act of 2007, the 
Federal Circuit issued an in banc decision, In re Seagate, which 
instituted an objective recklessness standard to prove willfulness. 
After considerable discussion with stakeholders in the patent 
community, we believe the Seagate decision is a positive improvement to 
the law and, therefore, have sought to incorporate correlating language 
into S. 515.
  There are other changes we made to the Patent Reform Act of 2009, but 
I want to focus my remaining remarks on two key issues: how damages are 
awarded in infringement lawsuits and inequitable conduct reform.
  I am aware of the concerns that some have raised about the damages 
provision contained in S. 1145. I have heard from some who are 
concerned that courts have allowed damages for infringement to be based 
on the market for an entire product, when all that was infringed is a 
minor component of the product. I have also heard from some who argue 
that the current language will severely limit the amount of damages an 
infringer has to pay, thereby encouraging infringing behavior.
  The sponsors of the Patent Reform Act of 2009 all agree that we need 
to improve the damages provision. In crafting a fair damages provision, 
we can rely upon well-reasoned and persuasive case law, scholarship, 
and other texts. I am confident that we will achieve consensus language 
in this area, but make no mistake: it will take willing partners to 
craft a compromise that will not have deleterious affects on any one 
sector of our economy.
  For years I have been arguing if we are serious about enacting 
comprehensive patent law reform then we must take steps to ensure that 
the inequitable conduct doctrine is applied in a manner consistent with 
its original purpose: to sanction true misconduct and to do so in a 
proportional and fair manner. Inequitable conduct reform is core to 
this bill, as it dictates how patents are prosecuted years before 
litigation. The inequitable conduct defense is frequently pled, rarely 
proven, and always drives up the cost of litigation tremendously.
  Under current law, any perceived transgression of the patent owner is 
being painted as ``fraud.'' If an inequitable conduct claim wins, a 
valid patent will be held entirely void, and the infringer walks away 
without any liability. There is virtually no downside for the infringer 
to raise this type of attack. This is why inequitable conduct 
challenges are raised in nearly every patent case. It has become, in 
the words of the Federal Circuit, a ``plague'' on the patent system.
  The development of a more objective and clearer inequitable conduct 
standard will remove the uncertainty and confusion that defines current 
patent litigation. We cannot settle for mere

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codification of current practices. Chairman Leahy and Chairman Conyers 
both know of my strong interest in this area and have agreed to 
incorporate changes to the law. There is no doubt that inequitable 
conduct reform has the potential to single-handedly revolutionize the 
manner in which patent applications are prosecuted. Arguably, reform in 
this area will have the most favorable impact on patent quality and the 
ability for the USPTO to reduce its pendency--thereby fostering a 
strong and vibrant environment for all innovation and entrepreneurship.
  Now more than ever, our industries need reassurance and 
predictability in order to move forward in these challenging times. I 
believe the Patent Reform Act of 2009 has the potential to complement 
all of the stimulatory efforts currently under way. Now is the time to 
act.
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