[Congressional Record Volume 157, Number 90 (Wednesday, June 22, 2011)]
[House]
[Pages H4420-H4452]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
AMERICA INVENTS ACT
The SPEAKER pro tempore. Pursuant to House Resolution 316 and rule
XVIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for the consideration of the bill, H.R. 1249.
{time} 1933
In the Committee of the Whole
Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the bill
(H.R. 1249) to amend title 35, United States Code, to provide for
patent reform, with Mr. Graves of Georgia in the chair.
The Clerk read the title of the bill.
The CHAIR. Pursuant to the rule, the bill is considered read the
first time.
An initial period of general debate shall be confined to the question
of the constitutionality of the bill and shall not exceed 20 minutes
equally divided and controlled by the gentleman from Texas (Mr. Smith)
and the gentlewoman from Ohio (Ms. Kaptur) or their designees.
The Chair recognizes the gentleman from Texas.
Mr. SMITH of Texas. I yield myself such time as I may consume.
Mr. Chairman, individuals who raise questions about the
constitutionality of this legislation perhaps should review the
Constitution itself. The Constitution expressly grants Congress the
authority to ``promote the progress of science and useful arts.'' That
is precisely what this bill does. H.R. 1249 improves the patent system,
ensuring the protection and promotion of intellectual property that
spurs economic growth and generates jobs.
The bill's inclusion of a move to a first-inventor-to-file system is
absolutely consistent with the Constitution's requirement that patents
be awarded to the ``inventor.''
A recent letter by professors of law from across the country--from
universities including Emory, Indiana, Washington University in St.
Louis, Missouri, NYU, New Hampshire, Wisconsin, Albany, Stanford,
Chicago, Georgia, Richmond, Vanderbilt, and Washington--states that
claims of unconstitutionality ``cannot be squared with well-accepted
and longstanding rules of current patent law.'' And
[[Page H4421]]
former Attorney General Michael B. Mukasey has said that the provision
is both ``constitutional and wise.''
In a letter to PTO Director David Kappos, General Mukasey stated that
the bill's constitutionality is assured because it ``leaves unchanged
the existing requirement that a patent issue only to one who `invents
or discovers.' ''
Also, this provision actually returns us to a system that our
Founders created and used themselves. Early American patent law, that
of our Founders' generation, did not concern itself with who was the
first-to-invent. The U.S. operated under a first-inventor-to-register,
which is a system very similar to the first-inventor-to-file.
It wasn't until the 1870s, when the courts created interference
proceedings, that our patent system began to consider who was the
first-to-invent an invention. These interference proceedings
disadvantaged independent inventors and small businesses. Over time,
interference proceedings have become a costly litigation tactic that
has forced some manufacturers to take the path of least resistance and
move operations and jobs overseas rather than risk millions or billions
of dollars in capital investment. The America Invents Act does away
with interference proceedings and includes a provision to address prior
user rights without jeopardizing American businesses and jobs.
Opponents of the first-inventor-to-file system claim that it may
disadvantage independent inventors who cannot file quickly enough. But
the current system lulls inventors into a false sense of security based
on the belief that they can readily and easily rely on being the first-
to-invent. Inventors forget that, to have any hope of winning an
interference proceeding, they must comply with complex legal procedures
and then spend over $500,000 to try to prove that they were the first-
to-invent.
In the last 7 years, under the current system of interference
proceedings, only one independent inventor out of 3 million patent
applications has proved an earlier date of invention over the inventor
who filed first, one out of 3 million. In fact, the current patent
system's costly and complex legal environment is what truly
disadvantages independent inventors, who often lose their patent rights
because they can't afford the legal battle over ownership.
The America Invents Act reduces frivolous litigation over weak or
overbroad patents by establishing a pilot program to review a limited
group of business method patents that never should have been awarded in
the first place. Section 18 deals with mistakes that occurred following
an activist judicial decision that created a new class of patents
called business method patents in the late 1990s. The PTO was ill
equipped to handle the flood of business method patent applications.
Few examiners had the necessary background and education to
understand the inventions, and the PTO lacked information regarding
prior art. As a result, the PTO issued some weak patents that have lead
to frivolous lawsuits. The pilot program allows the PTO to reexamine a
limited group of questionable business method patents, and it is
supported by the PTO.
Former 10th Circuit Federal Appeals Court Judge Michael McConnell
sent me a constitutional analysis of the bill's reexamination
proceedings. He stated that ``there is nothing novel or unprecedented,
much less unconstitutional, about the procedures proposed in sections 6
and 18. The application of these new reexamination procedures to
existing patents is not a taking or otherwise a violation of the
Constitution.''
Supporters of this bill understand that if America's inventors are
forced to waste time with frivolous litigation, they won't have time
for innovation. That's why the U.S. Chamber of Commerce, National
Association of Manufacturers, PhRMA, BIO, the Information Technology
Industry Council, American Bar Association, Small Business &
Entrepreneurship Council, Independent Community Bankers of America,
Credit Union National Association, Financial Services Roundtable,
American Insurance Association, Property Casualty Insurers Association
of America, the Securities Industry and Financial Markets Association,
the American Institute of CPAs, industry leaders, the Coalition for
21st Century Patent Reform, the Coalition for Patent Fairness,
independent inventors, and all six major university associations all
support H.R. 1249.
To quote the Chamber of Commerce: ``This legislation is crucial for
American economic growth, jobs, and the future of U.S.
competitiveness.''
We can no longer allow our economy and job creators to be held
hostage to legal maneuvers and the judicial lottery.
{time} 1940
American inventors have led the world for centuries in new
innovations, from Benjamin Franklin and Thomas Edison to the Wright
Brothers and Henry Ford. But if we want to continue as leaders in the
global economy, we must encourage the innovators of today to develop
the technologies of tomorrow.
This bill holds true to the Constitution, our Founders and our
promise to future generations that America will continue to lead the
world as a fountain for discovery, innovation and economic growth.
Mr. Chairman, I reserve the balance of my time.
Ms. KAPTUR. I yield myself such time as I may consume.
Mr. Chairman, if this bill is passed into law, it will violate the
first right explicitly named in our Constitution, the intellectual
property clause. This bill makes a total mockery of article 1, section
8, clause 8, which requires Congress to secure for inventors the
exclusive right to their respective writings and discovery.
Supporters of this bill say it is an attempt to modernize our patent
system. What they really mean is that this bill Europeanizes our patent
system by granting the rights to an invention to whoever wins the race
to the Patent Office.
The Supreme Court has been consistent on this issue throughout our
history. First inventors have the exclusive constitutional right to
their inventions. This right extends to every citizen, not just those
with deep pockets and large legal teams. A politicized patent system
will further entrench those very powerful interests with deep pockets
and lots of lobbying offices over on K Street.
Claiming to be an inventor is not the same thing as being that
inventor, the person who actually made the discovery. A patent should
be challenged in court, not in the U.S. Patent Office.
Since the first Congress, which included 55 delegates to the
Constitutional Convention, our nation has recognized that you are the
owner of your own ideas and innovations. This bill throws that out the
window and replaces it with a system that legalizes a rather clever
form of intellectual property theft.
I assure you of one thing: If this bill mistakenly passes, this
debate will not be over. We will see it head straight to the courts
with extended litigation for years to come, along with complete
uncertainty to our markets, killing jobs and killing innovation.
I urge my colleagues to vote ``no'' on H.R. 1249.
I yield 3 minutes to the former chairman of the Judiciary Committee,
our esteemed colleague from Wisconsin (Mr. Sensenbrenner).
Mr. SENSENBRENNER. Mr. Chairman, in the first day of this session we
all took an oath to preserve and protect and defend the Constitution of
the United States against all enemies, foreign and domestic. And a day
or two later, for the first time in history, we read the Constitution
on the floor from beginning to end.
We changed the rules to have a constitutional debate when the
constitutionality of legislation before us was in question. And this is
the first time in the history of the United States House of
Representatives when a question serious enough to have a constitutional
debate is being debated on the floor for 20 minutes.
Unlike what my friend from Texas (Mr. Smith) has said, this bill is
unconstitutional, and voting for this bill will violate one's oath of
office. And here is why.
The intellectual property clause of the Constitution gives the
protection to the first-to-invent, and what happens later in the Patent
Office only protects that right. It doesn't denigrate the right, and
the right is given to the person who is first-to-invent. If someone who
was the first-to-invent
[[Page H4422]]
ends up losing the race to the Patent Office, this bill takes away a
property right, and that violates the Fifth Amendment.
Now, inventor means first inventor in the Constitution. And earlier
this month, in Stanford University v. Roche, the Chief Justice has
said, since 1790 the patent law has operated on the premise that in an
invention, the rights belong to the inventor. And since the founding of
our Republic, that has been the law.
Even in the beginning of our Republic, the 1793 act created an
interference provision and set up an administrative procedure to
resolve competing claims for the same invention. The Patent Board
rejected the proposal that the patent should be awarded to the first
person to file an application. And Thomas Jefferson served on that
Patent Board that rejected first-to-file.
Secondly, early Supreme Court decisions confirm that patents must be
granted to inventors, not when they file, but when they invent it. And
that began in 1813 with Chief Justice Marshall, reaffirmed in 1829, and
last month in Stanford v. Roche in the Supreme Court of the United
States.
I think it is clear from all of the precedents that a first-to-invent
and a first-to-file provision is unconstitutional because it adds a
layer of compliance in winning the race to the Patent Office for
someone who already has that right.
Let's vote ``no'' to uphold our oaths of office under the
Constitution of the United States.
Mr. SMITH of Texas. Mr. Chairman, I reserve the balance of my time.
Ms. KAPTUR. I yield 1 minute to the gentleman from Nebraska (Mr.
Terry).
Mr. TERRY. Mr. Chairman, since the founding of the Republic, our
patent system has been based on the premise that an inventor is
entitled to a patent for their work, and not simply the first person to
file a patent application. Indeed, article 1, section 8, clause 8 of
the Constitution specifically states that to promote the progress of
science and useful arts, Congress shall have the power to secure to
authors and inventors the exclusive right to their respective writings
and discoveries. Nowhere does it say filers have that right. Under no
rule of construction or interpretation can this clause mean anything
other than what it says.
And Mr. Chairman, I find it comforting to know that certainly I'm not
alone in my concern over the constitutionality over first-to-file. None
other than Chief Justice of the United States Supreme Court John
Roberts recently wrote in an opinion, joined by six of his fellow
Supreme Court justices that, ``Since 1790, the patent law has operated
on the premise that rights in an invention belong to the inventor.''
Mr. SMITH of Texas. It is nice to be able to yield 1 minute to the
gentleman from New York (Mr. Nadler), who is the ranking member of the
Constitution Subcommittee of the Judiciary Committee.
Mr. NADLER. Mr. Chairman, some have argued that the first-to-file
provision in this bill violates the constitutional provision giving
Congress the power to promote the progress of science and useful arts
by securing for limited times for authors and inventors the exclusive
rights to their respective writings and discoveries.
The first key point to note is that the text does not define
inventor. Under H.R. 1249, one still has to be an inventor to be
awarded the patent, as the Constitution requires. Indeed, former Bush
administration Attorney General Michael Mukasey noted in a May 2011
letter to Patent Office Director David Kappos that ``the second
inventor is no less an inventor for having invented second.'' And
former Attorney General Mukasey correctly points out that the
Constitution grants Congress the power to ``promote the progress of the
science and useful arts'' but does not say how it can or should do so.
Congress deciding that awarding patents to inventors who are the first-
to-file is consistent with that constitutional power.
The Patent Act of 1793 makes no mention of needing to be the first-
to-invent. A patent was valid as long as the invention was not an
invention already in the public domain or derived from another person.
It was not until 1870 that there was a specific process put in place to
even determine who the first-to-invent was.
The bottom line is that this bill is a clear exercise of Congress'
constitutional power to secure patent rights to inventors.
{time} 1950
Ms. KAPTUR. Mr. Chairman, may I inquire as to my remaining time,
please.
The CHAIR. The gentlewoman from Ohio has 4 minutes remaining.
Ms. KAPTUR. I yield 1 minute to the gentleman from New Jersey (Mr.
Garrett).
Mr. GARRETT. Mr. Chairman, as founder and chairman of the
Constitution Caucus, I applaud the opportunity to debate the
constitutionality of this bill. This is the first of what I hope will
be many more instances to discuss the constitutionality of legislation
considered on this floor.
What this bill does is change the U.S. patent system from one which
allows the moment of invention to determine who is entitled to a patent
to one which confers this power to a government agency. Such a change
would violate the intellectual property clause of the Constitution. Why
is that? Because the Founders rejected the idea that rights are
bestowed to the people by the government in favor of the revolutionary
principle that men are born with natural rights.
Our Constitution instituted a government that secures only these
natural and preexisting rights. So inventions created by the fruits of
intellectual labor are the property of the inventor. These and only
these first and true inventors then are entitled to public protection
of their rightful property. To remain true to the principles of
liberty, we must preserve a system that protects the true and first
inventor.
Mr. SMITH of Texas. Mr. Chairman, may I inquire as to how much time
remains on each side.
The CHAIR. The gentleman from Texas has 2\1/2\ minutes remaining, and
the gentlewoman from Ohio has 3 minutes remaining.
Mr. SMITH of Texas. I yield 2 minutes to the gentleman from Virginia
(Mr. Goodlatte), who is the chairman of the Intellectual Property
Subcommittee of the Judiciary Committee.
Mr. GOODLATTE. I also very much appreciate this debate on the
constitutionality of this issue. I had the honor of leading the reading
of the Constitution on the second day of this new Congress.
I want to make it very clear because there's a lot of confusion on
the part of a lot of people who think this is a first-to-file--even if
you're not the inventor--gets the patent. That is most assuredly not
the case. This is first-inventor-to-file. You must be a bona fide
inventor to qualify for this.
Our Constitution grants exclusive rights to inventors. Now, in point
of fact, when our Constitution was first adopted and our Patent Office
was established, there was no interference provision, and it was 80
years later before that took place. In fact, in at least one case
patents were granted to more than one inventor. So the issue here I
think is not at all well-founded.
This is clearly constitutional. We have submitted and we will make
part of the Record writings by 20 constitutional law professors--
Attorney General Mukasey who has noted this as well. The Constitution
grants Congress the authority to award inventors the exclusive rights
to their inventions; however, the Constitution leaves to Congress how
to settle disputes between two individuals who claim to have invented a
certain idea.
Article I, section 8, of the Constitution declares that patent rights
are to be granted in order to ``promote the progress of science and
useful arts.'' A first-inventor-to-file system ensures this by awarding
patent protections to the first actual inventor to disclose and make
productive use of its patent.
Our Nation has adopted different standards for settling these issues
in the past. Currently, we have a first-to-invent standard. The reality
is that a first-to-invent standard subjects small businesses and
individual inventors who have filed for patent protection to surprise
and costly litigation in what are called interference actions to
determine who invented the idea first. This is a better idea, and this
is a constitutional idea.
We can make this process much easier by awarding a patent to the
first inventor to make
[[Page H4423]]
use of his invention by seeking patent protection. This will reward the
inventor who is making productive use of his patent and will discourage
individuals from sitting idly on their ideas.
Let us make clear--switching to First-Inventor-to-File does not allow
a subsequent party to steal an invention. It requires that a subsequent
inventor had to have come up with the idea independently and
separately.
Switching to a First-Inventor-to-File system fits squarely within the
plain meaning of the Constitution and will reward inventors who are
working to launch our nation into the next level of innovation and job
creation.
Ms. KAPTUR. I yield 1 minute to my distinguished colleague and
cosponsor in opposition to this bill, the gentleman from California
(Mr. Rohrabacher).
Mr. ROHRABACHER. Mr. Chairman, our Constitution was designed and
written to protect inventors, not filers. The words are very clear.
``Inventor'' is in the Constitution, ``filers'' is not in the
Constitution. So why are we having this dispute about the
constitutionality of this provision which is very clearly in the
Constitution?
Are there all sorts of problems that we have people fighting as to
who really invented something? No, we don't have a lot of problems. The
reason why we have to change this is to harmonize our law, American
patent law, with Europe. There are opponents that stated this over and
over again in the early part of this debate, that the purpose was
harmonizing American law with the rest of the world. Well, American law
has always been stronger; we've had the strongest patent protection in
the world. So what does harmonize mean? It means weakening our
constitutionally protected patent rights.
The purpose of the bill is to weaken a constitutionally protected
right that has been in place since the founding of our country. It
should be rejected.
Ms. KAPTUR. I would like to inquire as to the remaining time on both
sides, please.
The CHAIR. The gentlewoman from Ohio has 2 minutes remaining; the
gentleman from Texas has 30 seconds remaining.
Ms. KAPTUR. Mr. Chairman, this bill is unconstitutional. It will
stifle American job creation, cripple American innovation. It throws
out over 220 years of patent protections for individual inventors and
violates the CutGo rules, increasing our deficit by over $1 billion by
2021.
The proponents claim that the bill is constitutional because it
contains the word ``inventor'' and leaves in place the existing
statutory language awarding patents to those who invent or discover.
But adding a word to the title of a bill cannot paper over its
constitutional flaws. The bill denies a patent to the actual inventor
simply because he or she files second, and therefore it is
unconstitutional.
Earlier this month, in a decision issued on June 6, the Supreme Court
reaffirmed that since 1790, the patent law has operated on the premise
that the rights in an invention belong to the inventor. Chief Justice
John Marshall explained in 1813 that the Constitution and law, taken
together, give to the inventor from the moment of invention an inchoate
property therein which is completed by suing out a patent. And in 1829,
the Supreme Court held that under the Constitution the right is created
by the invention and not by the patent. And a New York district judge
stated in 1826 that it is very true that the right to a patent belongs
to him who is the first inventor.
If this very flawed bill passes, I guarantee you it is going to be
tied up in litigation for years to come. With the job situation being
what it is, with our need for innovation in this economy, the last
thing we should do is try to undermine a system that works. More
patents are filed in this country than anyplace else in the world. It
is dependable. And it is the first right, even before the Bill of
Rights, contained in our Constitution.
We should stand for what is in the Constitution and not try to
undermine it for any interest that comes before the Members of this
Congress.
Mr. Chairman, I yield back the balance of my time and I ask my
colleagues to vote against this bill. Support our own Constitution and
the very successful record we've had of American innovation.
Mr. SMITH of Texas. I yield myself the balance of my time.
Mr. Chairman, I know my colleagues know a lot about this subject, but
I don't think they know more than the Founders themselves. The
Founders, including those who wrote the Constitution, operated under a
first-to-register patent system starting in 1790. This is a very
similar system to the first-inventor-to-file provision in the bill. So
if the Founders liked the concept and thought it was constitutional, so
should Members of Congress.
Mr. Chairman, I yield back the balance of my time.
The CHAIR. All time for debate on the question of the
constitutionality of the bill has expired.
A subsequent period of general debate shall be confined to the bill
and shall not exceed 1 hour equally divided and controlled by the chair
and ranking minority member of the Committee on the Judiciary.
The gentleman from Texas (Mr. Smith) and the gentlewoman from
California (Ms. Zoe Lofgren) each will control 30 minutes.
The Chair recognizes the gentleman from Texas.
Mr. SMITH of Texas. I yield myself such time as I may consume.
Mr. Chairman, the foresight of the Founders in creating an
intellectual property system in the Constitution demonstrates their
understanding of how patent rights benefit the American people.
Technological innovation from our intellectual property is linked to
three-quarters of America's economic growth, and American IP industries
account for over one-half of all of our exports. These industries also
provide millions of Americans with well-paying jobs.
{time} 2000
Our patent laws, which provide a time-limited monopoly to inventors
in exchange for their creative talent, helped create this prosperity.
The last major patent reform was nearly 60 years ago. During this
time we have seen tremendous technological advancements, going from
computers the size of a closet to the use of wireless technology in the
palm of your hand. But we cannot protect the technologies of today with
the tools of the past.
The current patent system is outdated and dragged down by frivolous
lawsuits and uncertainty regarding patent ownership. Unwarranted
lawsuits that typically cost $5 million to defend prevent legitimate
inventors and industrious companies from creating products and
generating jobs. And while America's innovators are forced to spend
time and resources defending their patents, our competitors are busy
developing new products that expand their businesses and their
economies.
According to a recent media report, China is expected to surpass the
United States for the first time this year as the world's leading
patent publisher. The more time we waste on frivolous litigation, the
less time we have for innovation.
Another problem with the patent system is the lack of resources
available to the PTO. The average wait time for a patent approval is 3
years or more. These are products and innovations that will create jobs
and save lives. Inadequately funding the PTO harms inventors and small
businesses.
The bill allows the Director to adjust the fee schedule with
appropriate congressional oversight and prevents Congress from spending
agency funds on unrelated programs. This will enable the PTO to become
more efficient and productive, reducing the wait time for patent
approval. Patent quality will improve on the front end, which will
reduce litigation on the back end.
The patent system envisioned by our Founders focused on granting a
patent to the first inventor who registered their invention. This is
similar to the first-inventor-to-file provision in H.R. 1249. This
improvement makes our system similar to the international standard that
other countries use, only it is better. We retain both a 1-year grace
period that protects universities and small inventors before they file,
as well as the CREATE Act, which ensures collaborative research does
not constitute prior art that defeats patentability.
There are some who think this bill hurts small businesses and
independent inventors, but they are wrong. It ensures that independent
inventors are able to compete with larger companies,
[[Page H4424]]
both here and abroad. American inventors seeking protection here in the
United States will have taken the first step toward protecting their
patent rights around the world.
The bill also makes the small business ombudsman at the PTO
permanent. That means that small businesses will always have a champion
at the PTO looking out for their interests and helping them as they
secure patents for their inventions. This bill protects small
businesses and independent inventors by reducing fees for both.
This bill represents a fair compromise and creates a better patent
system than exists today for inventors and innovative industries.
Patents are important to the United States and the world. For
example, during the War of 1812, American troops burned the Canadian
town of York, known today as Toronto. In retaliation, the British
marched on Washington in the summer of 1814 to put the capital city to
the torch.
Dr. William Thorton, the Superintendent of the Patent Office,
delivered an impassioned speech to the British officer commanding 150
Redcoats who were tasked to burn Blodgett's Hotel, where the Patent
Office was located. Thorton argued that the patent models stored in the
building were valuable to all mankind and could never be replaced. He
declared that anyone who destroyed them would be condemned by future
generations, as were the Turks who burned the library in Alexandria.
The British officer relented and Blodgett's Hotel was spared, making it
the only major public building in Washington not burned that day.
American inventors have led the world in innovation and new
technologies for centuries, from Benjamin Franklin and Thomas Edison to
the Wright Brothers and Henry Ford. But if we want to foster future
creativity, we must do more to encourage today's inventors. Now is the
time to act.
I urge the House to support the America Invents Act.
Mr. Chairman, I reserve the balance of my time.
Ms. ZOE LOFGREN of California. I yield myself such time as I may
consume to oppose H.R. 1249.
I have worked on the patent reform effort since 1997 and am
disappointed that here today I am unable to support the bill as it
exists. I did vote to report this bill out of our Judiciary Committee,
but since that time we have seen two unfortunate things occur that have
made this bill simply not viable. The first, and exceedingly important,
is the protections for patent fees, so that all the fees would stay in
the office, have been removed. The regular appropriations process will
allow for fee diversions in the future.
It has been the policy of the House, for example, not to divert fees
from the Office. However, fees continue to be diverted. In fact, in the
CR approved by the House this year, we diverted between $85 million and
$100 million in fees from the Patent Office, and that is under the
existing prohibition. So that is a major reason why the bill is
defective.
I would note also that if we are moving to a first-to-file system,
there has to be robust protection for prior user rights, including
prior user rights in the grace period that exists under current law.
Sadly, those protections are missing in this bill. The manager's
amendment talks about disclosures only. It is a shame that other prior
art, such as trade secrets and the like, would not receive the same
protection.
So I would urge that the bill, unfortunately, cannot be supported. I
intend to oppose it, as well as the manager's amendment.
I yield such time as he may consume to the honorable gentleman from
North Carolina (Mr. Watt), the distinguished ranking member of the
Intellectual Property Subcommittee.
Mr. WATT. I thank the gentlewoman for yielding time.
As the gentlewoman has indicated, I am the ranking member of the
Subcommittee on Intellectual Property of Judiciary, and I too supported
reporting the bill favorably to the House floor. The problem is that
the bill we may end up debating is not the bill that we reported
favorably from the Judiciary Committee, and there are reasons for that.
I understand what those reasons are, but if the amendment that is being
offered as the manager's amendment passes, it will put us in a position
where substantial people who supported the bill will be unable to do
so.
Here is the equation. One of the primary purposes for which there was
a strong alliance of people and groups and interests supporting patent
reform was that in the past fees that have been paid to the Patent and
Trademark Office have gone through the appropriations process, and over
the last 10 years almost $800,000 of those fees have been diverted to
other purposes, other than the use of the Patent and Trademark Office.
The effect of that is that there has been a hidden tax on innovation in
our country.
The United States Senate passed a bill that would end that diversion.
They passed it by a vote of 85-4. We passed a bill out of our Judiciary
Committee that would end that diversion, and all of a sudden we come to
the floor and a manager's amendment is being offered that, if it is not
defeated, will undermine that unifying thing that has held the groups
together and allowed people to support the bill. So I have to be in a
position where I am strongly opposing the manager's amendment to this
bill.
I don't think the groups out there support it. It is not often that I
come to the floor and say I am speaking for the U.S. Chamber of
Commerce. The Chamber of Commerce would like for the diversion of fees
to stop.
{time} 2010
It's not often that I come to the floor and say that I'm speaking, I
think, for the United States Senate. They've already passed a bill that
would stop the diversion of fees. It's not often that I come to the
floor standing up for the bill that came out of our committee against
forces that have taken it over and are putting forward a manager's
amendment that we simply cannot support.
Now, I understand how we got here. The appropriators would like to
continue to control the process. They said, Well, we are going to
object to this, and we will raise a point of order. And they came up
with language that professes to solve the problem. The problem is that
that raised another point of order because the Congressional Budget
Office said, Well, if you do it that way, you are going to put yourself
in a situation where we have to score this bill in a different way. So
then the leadership on the chairman's side said, Okay, well, we can
waive that rule. And I'm saying, Well, if you can waive the rule, you
are the people who have been so much worried about the deficit, if you
can waive the rule that gets around worrying about the deficit, why
couldn't you waive the rule that allows us to take up the bill that we
passed out of committee?
So I need to be addressing my Republican colleagues here. If they
want to start this process over, the way to start the process over is
to vote against the manager's amendment. That's the simple way to do
it. At that point we can get back, hopefully, to a bill that does
clearly not divert fees and that the whole population of supporters has
said we would support.
That's where I am, Mr. Chairman. I don't want to belabor this. I
don't want to take away time from other people who want to speak. But
it's not the bill itself that came out of committee that's the problem.
If we pass the manager's amendment, we've got a problem here. We could
tinker around the edges of the bill that came out of the committee, and
we could solve the minor concerns that we've got there. But there's no
way to tinker around the edges of this diversion issue. Either you
support diversion of money, or you don't support diversion of money.
I think it's time for us to stop this hidden tax that we have imposed
on innovation in this country. The only way to do that is to defeat the
manager's amendment.
Mr. SMITH of Texas. Madam Chair, I yield 3 minutes to the gentleman
from North Carolina (Mr. Coble), the chairman of the Courts,
Commercial, and Administrative Law Enforcement Subcommittee of the
Judiciary Committee.
Mr. COBLE. I thank the gentleman from Texas. And I say to my friend
from North Carolina, it was my belief that diversion had ended. But let
me make my statement, and maybe we can get to this subsequently.
A robust patent system, Madam Chairman, is critical to a strong,
developed economy. And H.R. 1249, in my
[[Page H4425]]
opinion, serves that goal by ending diversion of user fees to other
agencies. Ending diversion is essential to a robust and strong patent
system, it seems to me. This is not a new concept. It's been a
controversial issue for many years; but we're at a point where if
something isn't done, the office is going to be overwhelmed.
When someone asks why I support patent reform, I respond, The answer
is simple, two words: backlog and pendency. The number of pending
applications, I am told, is around 700,000, and the average time for an
application to be reviewed is 30 months. This is unacceptable. The
number of pending claims should be approximately 300,000 and the
pendency time period should be approximately 20 months, or 10 months
less than what it is now. Patents provide innovative and economic
incentives for creators. If our patent system loses its efficacy, those
incentives will become diluted. The dilution begins very simply when
inventors decide to find other forms of protection for their ideas or
begin marketing their ideas independently to avoid the cost and
sometimes hassle of filing for patent protection.
Reducing the backlog and pendency rate depends on the office's
ability to improve the performance of examiners and to provide
additional examiners. Enacting H.R. 1249, in my opinion, Mr. Chairman,
and ending diversion will provide that needed certainty for the office
to begin making the changes to meet these goals.
I urge Members to vote in favor of the bill.
Ms. ZOE LOFGREN of California. Madam Chairman, I yield 30 seconds to
the gentlewoman from Ohio (Ms. Kaptur).
Ms. KAPTUR. I thank the gentlelady for yielding to me. I will place
in the Record dozens and dozens of organizations that oppose this bill.
They oppose the manager's amendment. And what is amazing about these
groups is they range the vast ideological spectrum from liberal to
conservative to moderate. And they all represent people--thousands and
thousands of people--such as the American Bar Association, the Eagle
Forum, the American Civil Rights Union, the Christian Coalition, the
Family Research Council Action, Friends of the Earth, National
Association of Realtors, Innovation Alliance. If one looks across this
list, they have deep concerns about this bill and oppose it.
The following groups oppose H.R. 1249 or specific
provisions of it or the Manager's Amendment: U.S. Business
and Industry Council; National Association of Realtors;
Innovation Alliance, American Bar Association; American
Medical Association; ACLU; Breast Cancer Action; US-Israel
Science & Technology Foundation (Sections 3 and 5); Public
Citizen (Section 16); American Association for Justice
(Section 16); Joan Claybrook, President Emeritus, Public
Citizen; National Consumers League; Trading Technologies;
Patent Office Professional Association (POPA); Generic
Pharmaceutical Association (Section 12); Eagle Forum;
Intellectual Ventures (Section 18); Data Treasury (Section
18).
Angel Venture Forum; BlueTree Allied Angels; Huntsville
Angel Network; Private Investors in Entrepreneurial
Endeavors; Institute of Electrical and Electronic Engineers
(IEEE-USA); Wisconsin Alumni Research Foundation; Brigham
Young University; University of Kentucky; Hispanic Leadership
Fund; American Innovators for Patent Reform; National
Association of Patent Practitioners (NAPP); National Small
Business Association; IPAdvocate.org; National Association of
Seed & Venture Funds; National Congress of Inventor
Organizations; Inventors Network of the Capital Area;
Professional Inventors Alliance USA; Public Patent
Foundation; Edwin Meese, III, Former Attorney General of the
United States; Let Freedom Ring.
American Conservative Union; Southern Baptist Ethics and
Religious Liberty Convention; 60 Plus; Tradition, Family,
Property; Gun Owners of America; Council for America;
American Civil Rights Union; Christian Coalition; Patriotic
Veterans, Inc.; Center for Security Policy; Family PAC
Federal; Liberty Central; Americans for Sovereignty;
Association of Christian Schools International; Conservative
Inclusion Coalition; Oregon Health & Science University;
North Dakota State University; South Dakota University;
University of Akron Research Foundation; University of New
Hampshire.
University of New Mexico; University of Utah; University of
Wyoming; Utah Valley University; Weber State University;
WeReadTheConstitution.com; Family Research Council Action;
Friends of the Earth; National Women's Health Network; Our
Bodies Ourselves; Center for Genetics and Society;
International Center for Technology Assessment; Southern
Baptist Ethics & Religious Liberty Commission; United
Methodist Church--General Board of Church and Society;
American Society for Clinical Pathology; American Society for
Investigational Pathology; Association for Molecular
Pathology; College of American Pathologists; Association of
Pathology Chairs.
Mr. SMITH of Texas. Madam Chair, I yield 5 minutes to the gentleman
from Virginia (Mr. Goodlatte), who is the chairman of the Intellectual
Property Subcommittee of the Judiciary Committee.
Mr. GOODLATTE. I thank the chairman for yielding and for his
leadership on this issue, and I rise in strong support of H.R. 1249.
For the better part of the past decade, Congress has been working to
update our patent laws to ensure that the incentives our Framers
envisioned when they wrote article I, section 8, of our Constitution
remain meaningful and effective. The U.S. patent system must work
efficiently if America is to remain the world leader in innovation. It
is only right that as more and more inventions with increasing
complexity emerge, we examine our Nation's patent laws to ensure that
they still work efficiently and that they still encourage and not
discourage innovation.
The core principles that have guided our efforts have been to ensure
that quality patents are issued by the PTO in the first place and to
ensure that our patent enforcement laws and procedures do not create
incentives for opportunists with invalid claims to exploit while
maintaining strong laws that allow legitimate patent owners to enforce
their patents effectively. H.R. 1249 addresses these principles.
With regard to ensuring the issuance of quality patents, this
legislation allows third parties to submit evidence of prior art during
the examination process, which will help ensure examiners have the full
record before them when making decisions. In addition, after the PTO
issues a patent, this legislation creates a new post-grant opposition
system in which third parties can raise objections to a patent
immediately after its issuance, which will both help screen out bad
patents while bolstering valid ones.
{time} 2020
Furthermore, the bill contains a provision on fee diversion where any
fees that are collected but not appropriated to the PTO will be placed
in a special fund to be used only by the PTO for operations. This
solves the fee diversion issue, and it assures that the problem that we
have had in the past will not take place in the future; but at the same
time it also assures that the Congress will continue its oversight
authority because the Patent Office will have to come to the Congress,
to the Appropriations Committee, to justify those expenditures. They
can't be spent on anything else, but they have to be justified to the
Congress before the funds are appropriated. These funds will still be
subject to appropriation but will be set aside to only fund the PTO.
With a backlog of almost a million patent applications and many waiting
3 years to get an initial action on their patent applications, this
agreement could not come at a more crucial time. We have been trying
for 10 years, by the way, and this is the closest we have ever come.
In addition to these patent quality improvements, H.R. 1249 also
includes provisions to ensure that patent litigation benefits those
with valid claims but not those opportunists who seek to abuse the
litigation process. Many innovative companies, including those in the
technology and other sectors, have been forced to defend against patent
infringement lawsuits of questionable legitimacy. When such a defendant
company truly believes that the patent being asserted is invalid, it is
important for it to have an avenue to request the PTO to take another
look at the patent in order to better inform the district court of the
patent's validity. This legislation retains an inter partes re-exam
process, which allows innovators to challenge the validity of a patent
when they are sued for patent infringement.
In addition, the bill allows the Patent and Trademark Office to
reexamine some of the most questionable business method patents, which
opportunists have used for years to extort money from legitimate
businesses. By allowing the PTO to take another look at
[[Page H4426]]
these patents, we help ensure that invalid patents will not be used by
aggressive trial lawyers to game the system.
The bill also ensures that abusive false markings litigation is put
to an end. Current law allows private individuals to sue companies on
behalf of the government to recover statutory damages in false markings
cases. After a court decision 2 years ago that liberalized the false
markings damages awards, a cottage industry has sprung up, and false
markings claims have risen exponentially. H.R. 1249 maintains the
government's ability to bring these actions but limits private lawsuits
to those who have actually suffered competitive harm. This will
discourage opportunistic lawyers from pursuing these cases.
The bill also restricts joinder rules for patent litigation.
Specifically, it restricts joinder of defendants to cases arising out
of the same facts and transactions, which ends the abusive practice of
treating as codefendants parties who make completely different products
and have no relation to each other.
Furthermore, the bill addresses the problem of tax strategy patents.
Unbelievably, tax strategy patents grant monopolies on particular ways
that individual taxpayers can comply with the Tax Code.
The Acting CHAIR (Ms. Foxx). The time of the gentleman has expired.
Mr. SMITH of Texas. I yield the gentleman an additional 30 seconds.
Mr. GOODLATTE. Over 140 tax strategy patents have already been
issued, and more applications are pending. Tax strategy patents have
the potential to affect tens of millions of everyday taxpayers, many
who do not even realize that these patents exist. The Tax Code is
already complicated enough without also expecting taxpayers and their
advisers to become ongoing experts in patent law.
Scores, hundreds of organizations in fact, support these reforms. It
is important that this House supports the manager's amendment; and by
the way, the United States Chamber of Commerce supports the manager's
amendment and the bill.
That is why I worked to include in H.R. 1249 a provision to ban tax
strategy patents. H.R. 1249 contains such a provision which deems tax
strategies insufficient to differentiate a claimed invention from the
prior art. This will help ensure that no more tax strategy patents are
granted by the PTO.
Importantly, the House worked hard to find a compromise that will
ensure Americans have equal access to the best methods of complying
with the Tax Code while also preserving the ability of U.S. technology
companies to develop innovative tax preparation and financial
management software solutions. I believe the language in H.R. 1249
strikes the right balance.
By giving the necessary tools to the Patent Office to issue strong
patents and by enacting litigation reforms, we will help to inject
certainty about the patents that emerge from this process--patents
rights that are more certain to attract more investment capital. This
will allow independent inventors, as well as small, medium and large-
sized enterprises to grow our economy and create jobs.
Ms. ZOE LOFGREN of California. Madam Chair, may I inquire as to how
much time remains?
The Acting CHAIR. The gentlewoman from California has 20 minutes
remaining, and the gentleman from Texas has 17\1/2\ minutes remaining.
Ms. ZOE LOFGREN of California. At this point, I would be honored to
yield 3 minutes to the gentlelady from Texas, a member of the Judiciary
Committee, Ms. Sheila Jackson Lee.
Ms. JACKSON LEE of Texas. I thank the distinguished Member from
California.
To my colleagues on the floor, this has to be, could have been or
hopefully can be one of the greatest opportunities for bipartisanship
that we have seen in any number of years. That was the process that was
proceeded under on the Judiciary Committee, though obviously there are
always disagreements; but the whole idea of our debate and the support
of the present underlying legislation without the manager's amendment
was to, in fact, create jobs.
In the committee, a number of my amendments were accepted, but in
particular, the focus of converting from a first-inventor-to-use system
to a first-inventor-to-file was thought to promote the progress of
science by securing for a limited time to inventors the exclusive right
for their discoveries and to provide inventors with greater certainty
regarding the scope of protections granted by these exclusive rights.
Further, this new system was to be, or should be, able to harmonize
the United States patent registration system with similar systems used
by nearly all other countries with whom the United States conducts
trade. This was to shine the light and open the door on American
genius.
In addition, so many of us have waited so long to be able to give the
resources to the PTO in order for it to do its job. We were aghast in
hearings to hear that there is a 7,000-application backlog, so I rise
as well to express enormous concern with the manager's amendment,
which, as the PTO director has indicated, Dave Kappos, every time we do
not process a PTO, or a patent, for some genius here in the United
States, for some hardworking inventor, every patent that sits on the
shelf at the PTO office is taking away an American job, and that job is
not being created. As well, it is denying a product from going to the
market, and it is someone's life that is not being saved, and our
country ceases to grow.
We need jobs in this country. We need a Patent Office that is going
to expedite and move forward. We don't need discussions about lawyers
fighting lawyers or trial lawyers. This is not a case of anti-lawyer
legislation. We hope that some of the small businesses and large
companies have their lawyers fighting to preserve and protect their
patents. This bill will give them the opportunity to have that
protection, but I am disappointed that all of a sudden the manager's
amendment changed around and took an enormous amount of those fees and
invested them elsewhere instead of helping our small businesses. I am
also disappointed that we don't recognize that a bill that helps big
businesses can help small businesses as well, so I had offered an
amendment that would extend the grace period while the small business
is working to fund its patent.
The Acting CHAIR. The time of the gentlewoman has expired.
Ms. ZOE LOFGREN of California. I yield the gentlewoman an additional
15 seconds.
Ms. JACKSON LEE of Texas. The period is now a year--I'd indicated 18
months--because small businesses have to reach to others to help fund
their inventions, and they let their secrets out of the bag. Eighteen
months protects their disclosures for a period of time for them to be
able to move forward.
Lastly, I had a sunset provision that would help small businesses as
well as relates to the sunset of the business method patents review.
This could be a good bill. I hope that we can correct it, and I ask
my colleagues to consider correcting this bill.
Madam Chair, I rise in support of H.R. 1249, ``America Invents Act.''
However I am concerned over the drastic fee charges that were made in
the new Manager's Amendment completely contrary to our agreement in the
House Judiciary markup--it takes enormous amounts of money from the
work of the PTO. As a Senior member of the Judiciary Committee and a
member of the Subcommittee on Intellectual Property, Competition and
the Internet, I am proud to support this legislation because in many
ways the current patent system is flawed, outdated, and in need of
modernization.
The Judiciary Committee labored long and hard to produce legislation
that reforms the American patent system so that it continues to foster
innovation and be the jet fuel of the American economy and remains the
envy of the world. This legislation incorporates amendments that I
offered during the full committee markup as it recognizes the
importance of converting from a first-inventor-to-use system to a
first-inventor-to file will promote the progress of science by securing
for a limited time to inventors the exclusive rights to their
discoveries and provide inventors with greater certainty regarding the
scope of protections granted by these exclusive rights. Further, this
new system will harmonize the United States patent registration system
with similar systems used by nearly all other countries with whom the
United States conducts trade. This legislation will continue to ensure
that the United States is at the helm of innovation.
Our Nation's Founders recognized the integral role the patent system
would play in the
[[Page H4427]]
growth of our nation. Within our Constitution, they explicitly granted
Congress with the power to issue patents. The Founders were supporting
a fundamental part of the American dream which is to live in a free
land where ideas can be shared thereby leading to the individual
ingenuity, invention, and innovation.
Madam Chair, Article I, Section 8, clause 8 of the Constitution
confers upon the Congress the power:
To promote the Progress of Science and useful Arts, by
securing for limited Times to Authors and Inventors the
exclusive Right to their respective Writings and Discoveries.
In order to fulfill the Constitution's mandate, we must examine the
patent system periodically. The legislation before us represents the
first comprehensive review of the patent system in more than a
generation. It is right and good and necessary that the Congress now
reexamine the patent system to determine whether there may be flaws in
its operation that may hamper innovation, including the problems
described as decreased patent quality, prevalence of subjective
elements in patent practice, patent abuse, and lack of meaningful
alternatives to the patent litigation process.
On the other hand, we must always be mindful of the importance of
ensuring that small companies have the same opportunities to innovate
and have their inventions patented and that the laws will continue to
protect their valuable intellectual property.
The role of venture capital is very important in the patent debate,
as is preserving the collaboration that now occurs between small firms
and universities. We must ensure that whatever improvements we make to
the patent laws are not done so at the expense of innovators and to
innovation. The legislation before us, while not perfect, does a
surprisingly good job at striking the right balance.
From small towns to big cities, our country is filled with talent and
genius. As it stands, the United States has four times as many patent
applications filed here per year than in Europe. The United States
Patent and Trademark office must have the tools to meet this demand.
Failing to change the patent system as we know it will deny the men and
women from around our nation fair and equal access to a streamlined and
effective patent system.
The current system has a backlog of hundreds of thousands of patents,
nearly 700,000 applications are waiting to be reviewed. The USPTO is
currently reviewing applications from 2007/2008, and using the fees
received from the most recent patent applications to do so due to
limitations in the current system under which the USPTO is funded. This
has caused inventors and business creators to wait on average three
years prior to receiving a determination on whether or not their
patents are valid.
Without that determination it is nearly impossible for a small
business to receive the necessary venture capital. That's a three-year
waiting period for struggling small businesses; this is a three-year
gap filled with financial uncertainty which leads to a three-year delay
in job creation. Only 4 out of ten applications, or 42 percent, of
patent applications are approved. It is vital to have approval prior to
attaining financing because there is a 58 percent chance that a patent
will not be approved. Given our current economic environment, a three
year backlog is too long for any individual to wait to build a business
which will create new jobs, especially at a time when jobs are sourly
needed by many right now. Patent reform is the key to economic change
that could lead to untapped job growth.
Since the creation of the USPTO in 1790 it has issued 7,752,677
patents and many of those patents have resulted in the creation of new
jobs. In 2010, 121,179 patents granted by the USPTO originated in the
United States of those granted 8,027 went to applicants in Texas.
Imagine how many jobs could be created if there were not a 700,000
patent application backlog.
Our current system is outdated and the backlog makes it evident that
our system is in serious need of change. Patent reform must reflect the
major advances in our society over the last 50 years. Since the last
major patent reform how we live has been transformed by a variety of
inventions such as the home computer, ATM, video games, cellular phones
and mobile devices, and life saving technologies like the artificial
heart, all of which have been invented since any major reform of our
patent system.
Madam Chair, patent reform is a complex issue but one thing is clear
the innovation ecosystem we create and sustain today will produce
tomorrow's technological breakthroughs. That ecosystem is comprised of
many different operating models. It is for that reason that we
evaluated competing patent reform proposals thoroughly to ensure that
sweeping changes in one part of the system do not result in unintended
consequences to other important parts.
Let me discuss briefly some of the more significant features of this
legislation, which I will urge all members to support. H.R. 1249
converts the U.S. patent system from a first-to-invent system to a
first inventor-to-file system. The U.S. is alone in granting priority
to the first inventor as opposed to the first inventor to file a
patent. H.R. 1249 will inject needed clarity and certainty into the
system. While cognizant of the enormity of the change that a ``first
inventor-to-file'' system may have on many small inventors and
universities, a study regarding first-to-file will be conducted by the
Small Business Administration and the United States Patent Office to
identify any negative impact this change may have on these inventors.
Furthermore, H.R. 1249 adjusts the fee structure which funds the
USPTO, giving them greater control over the fees they collect for
patent services and enabling the USPTO to improve its efficiency and
review more patents at a greater speed. Currently, the USPTO is funded
solely by the fees its receives from it's users. However, not all the
fees collected are available for use by the USPTO because Congress
appropriates a specific amount, and any fees above the appropriated
amount are used for other non-USPTO purposes. Under H.R. 1249, the
USPTO will have greater control over the use of the fees it receives,
giving them greater flexibility to make necessary improvements to the
patent system.
SMALL BUSINESS FACTS
Several studies, including those by the National Academy of Sciences
and the Federal Trade Commission, recommended reform of the patent
system to address what they thought were deficiencies in how patents
are currently issued.
The U.S Department of Commerce defines small businesses as businesses
which employ less than 500 employees. According to the Department of
Commerce in 2006 there were 6 million small employers representing
around 99.7% of the nation's employers and 50.2% of its private-sector
employment. In 2002 the percentage of women who owned their business
was 28% while black owned was around 5%. Between 2007 and 2008 the
percent change for black females who were self employed went down 2.5%
while the number for men went down 1.5%.
There were 386,422 small employers in Texas in 2006, accounting for
98.7% of the state's employers and 46.8% of its private-sector
employment. Since small businesses make up such a large portion of our
employer network, it is important to understand how they will be
impacted as a result of patent reform.
In 2009, there were about 468,000 small women-owned small businesses
compared to over 1 million owned by men
The number of small employers in Texas was 386,422 in 2006,
accounting for 98.7% of the state's employers and 46.8% of its private-
sector employment, 88,000 small business owners are black, 77,000 are
Asian, 319,000 are Hispanic, 16,000 are Native Americans.
SMALL BUSINESSES AND JOB CREATION
Small Businesses:
Represent 99.7 percent of all employer firms.
Employ just over half of all private sector employees.
Generated 64 percent of net new jobs over the past 15 years.
Create more than half of the nonfarm private gross domestic product
(GDP).
Hire 40 percent of high tech workers (such as scientists, engineers,
and computer programmers).
Made up 97.3 percent of all identified exporters and produced 30.2
percent of the known export value in FY 2007.
Produce 13 times more patents per employee than large patenting
firms; these patents are twice as likely as large firm patents to be
among the one percent most cited.
Creativity and technological change are the engines for our economic
growth. In our current economic climate, patents spur innovation and
lay the foundation for future growth, by assuring inventors that they
will receive the rewards for their effort. I urge all members to join
me in supporting passage of this landmark legislation.
Mr. SMITH of Texas. Madam Chair, I yield 3 minutes to the gentleman
from Ohio (Mr. Chabot), who is the senior member of the Constitution
Subcommittee and a senior member of the Intellectual Property
Subcommittee of the Judiciary Committee.
Mr. CHABOT. I first want to thank Chairman Smith and Chairman
Goodlatte for their leadership in getting us to the point that we are
on this important legislation here this evening.
Section 8, clause 8 of the Constitution states that the Congress
shall have power to ``promote the progress of science and useful arts
by securing for limited times to authors and inventors the exclusive
right to their respective writings and discoveries.'' The Constitution
clearly grants Congress the authority to grant patent rights to
inventors, and it defers to the discretion
[[Page H4428]]
of Congress how best to procedurally award these rights to the
inventor.
I rise in support of H.R. 1249, the America Invents Act. The first-
inventor-to-file provision shifts us to a system used by all other
modern, industrial nations. This system would end the need for
expensive discovery and litigation over priority dates and would put an
end to expensive interference proceedings that small entities
overwhelmingly lose.
This provision also ensures that inventors can establish priority
dates by filing simple and inexpensive provisional applications. This
is a much needed change, which former U.S. Attorney General Michael
Mukasey indicated would be both constitutional and wise. Congress has
the right, in fact the duty, to protect those who invent or discover.
{time} 2030
Through in-depth studies conducted by former U.S. PTO commissioners,
the first-to-file system has been found to be faster and cheaper in
resolving disputes among inventors. The current system creates an
environment for exorbitantly expensive litigation. It has also become
cost prohibitive for small businesses and independent inventors to
fight the claims filed by larger corporations which can cost over half
a million dollars just to litigate.
In the past 7 years, only one independent inventor out of 3 million
patent applications filed has successfully proved an earlier date of
invention over the inventor who filed first. However, with the new
first-inventor-to-file system, a bold timeline of filing dates will
allow these small businesses and independent inventors to more easily
defend and settle their disputes over the rightful patent holder.
Lastly, the Supreme Court has never held that first-to-file is an
unconstitutional procedure. We are now simply returning to the system
that our Founders originally established. It is a commonsense procedure
that will spur more rapid innovation, yield new jobs, and stimulate the
economy; and I think as we all know if we ever needed to get this
economy moving and get America back to work, we're in that time right
now.
Ms. ZOE LOFGREN of California. I yield 2 minutes to the gentleman
from Illinois (Mr. Manzullo).
Mr. MANZULLO. Madam Chair, in my office there are two photographs,
one with me and Edwards Deming and the other of Dr. Ray Damadian, who
is the inventor of the MRI. Dr. Damadian visited our office, and I
said, What's wrong with this bill? He said, Everything. He said, If
this bill were law when I invented the MRI, today we would not have the
MRI.
There are a lot of problems with this bill. This is my fourth patent
fight with my esteemed colleague from Texas, but we do agree on most
issues; but now we have two persons who simply disagree on policy.
Back in 2004 when I chaired the Small Business Committee, I was
instrumental in putting in a fixed-fee structure for small businesses;
and to do that, I had stricken from the bill the authority of the PTO
Director to set fees. This new bill gives to the PTO Director the
ability to set fees, even though the initial filing fees for small
businesses have been lowered. The problem is that the PTO can come in
and simply raise fees to so-call ``manage their operations.''
In fact, two reports, ``The 21st Century Strategic Plan'' filed in
June of 2002 by the U.S. PTO, said fees were based upon a highly
progressive system aimed at strictly limiting applications containing
very high numbers of claims and also the same thing in 2007. Their idea
of decreasing claims in the patent office is to raise fees. Obviously,
who's that going to hurt? It's going to be the little guy, and that's
why it's one of many reasons I oppose this bill. But we should not
delegate the authority that Congress has to set fees in one of the few
constitutional functions that we have in this body over to somebody who
has already stated that he's going to raise fees.
You raise fees, guess who gets hurt--the future Ray Damadian, the
little inventor, the people who invent things in this country, the true
creators of jobs.
Madam Chair, I rise in strong opposition to this anti-innovation
bill. I believe this bill will stifle job creation and is
unconstitutional.
Over the past 40 years, the value of corporations has shifted from
tangible assets, such as real estate and machinery, to intellectual
property. During this same time period, the primary source of all net
new job creation has come from start-up small companies.
However, since the first major change to our patent system in 1994
that altered the length of the patent from 17 years from award to 20
years from filing, the number of patent awards from start-ups and
small, individual inventors has dropped dramatically. Patents awarded
to start-up firms decreased from 30 percent of all awards in 1993 to 18
percent in 2009. Patents awarded to small inventors dropped from 12
percent in 1993 to 5 percent in 2009.
Why? America has slowly shifted towards a European-style patent
system, which gives more opportunities to challenge a patent, resulting
in delays in receiving approval for granting a patent, thus shortening
the length of the exclusive use of the patent. Now, the average wait is
three years. This bill would finalize the shift towards a European-
style patent system through changing from a ``first-to-invent'' to
``first-to-file'' system; establishing a new set of ``prior use''
rights; and adopting a third European-style ``post-grant'' challenge.
This bill would prompt a litigation boom, primarily inside the
administrative review processes at the U.S. Patent and Trademark
Office. In Europe, five percent of patents are challenged. In the
United States, only 1.5 percent of patents are challenged in court,
contrary to the misinformation from the other side of this debate that
there is a litigation boom in patent cases. Japan dropped post-grant
review in 2004 because it consumed 20 percent of their patent office
resources. Canada saw a one-third increase in patent applications and
clogged up its system when it shifted to ``first-to-file.'' Commenting
on similar legislation in 2007, a former senior judge and Deputy
Director of the IP Division of the Beijing High People's Court said the
bill ``will weaken the right of patentees greatly, increase their
burden, and reduce the remedies for infringement . . . the bill favors
infringers and burdens patentees . . . It is not bad news for
developing countries which have lower technological development and
relatively fewer patents.'' That is why entrepreneurial organizations
such as the National Small Business Association (NSBA) and the Angel
Venture Forum oppose H.R. 1249.
Second, I believe the bill is unconstitutional on several grounds.
First, H.R. 1249 shifts from a ``first-to-invent'' system to ``first-
to-file.'' However, Article 1, Section 8 states that the Congress shall
have power ``to promote the progress of science . . . by securing for
limited times to . . . inventors the exclusive rights to their
respective . . . discoveries.''
The First Congress included 23 of the 55 delegates to the
Constitutional Convention. Three other delegates served in the
Executive Branch, including President George Washington. When examining
the 1790 Patent Act, we know the intent of the Founding Fathers in
patent law--the legislation clearly states that the patent goes to the
``first and true'' inventor.
This was recently reaffirmed in a June 6, 2011, Supreme Court
decision written by Chief Justice John Roberts in Stanford v. Roche, in
which he said that ``(s)ince 1790, the patent law has operated on the
premise that rights in an invention belong to the inventor . . .
Although much in intellectual property has changed in the 220 years
since the first Patent Act, the basic idea that inventors have the
right to patent their inventions has not.''
In addition, two constitutional scholars specializing in patent law
ranging the political spectrum agree that moving to a first to file
system is unconstitutional. Jonathan Massey, former law clerk to
Supreme Court Justice William Brennan and who represented former Vice
President Al Gore in Bush v. Gore said, ``Our nation's founders
understood that technological progress depends on securing patent
rights to genuine inventors, to enable them to profit from their
talents, investment, and effort . . . If the bill's provisions had been
law in the 20th Century, the Wright Brothers would have been denied a
patent for the airplane.''
Adam Mossoff, Professor of Law at George Mason University and
Chairman of the Intellectual Property Committee of the conservative
Federalist Society said, ``In shifting from a first-to-invent to a
first-to-file system, the America Invents Act contradicts both the text
and the historical understanding of the Copyright and Patent Clause in
the Constitution.'' But more importantly, of the only nine peer-
reviewed law journal articles on the subject of patent reform, all have
concluded that adopting a ``first-to-file'' system is unconstitutional.
So, if this bill becomes law, it will be tied up in litigation, further
delaying innovation, until the Supreme Court rules on its
constitutionality.
Section 18 of H.R. 1249 also creates a special class of patents in
the financial services sector subject to their own distinctive post-
grant administrative review and would apply retroactively to already
existing patents. Governmental abrogation of patent rights represents a
``taking'' of property and therefore
[[Page H4429]]
triggers Fifth Amendment obligations to pay ``just compensation.''
Section 18 would shift the cost of patent infringement from financial
services firms to the U.S. Treasury. Finally, the ``prior use''
provision in H.R. 1249 violates the ``exclusive'' use provision
guaranteed to inventors under the Constitution.
Thus, because this bill will hurt jobs and is unconstitutional, I
urge my colleagues to oppose the bill. The manager's amendment does not
fix any of the problems with the bill; in fact, it further compounds
the problems with the bill. The first step to fixing our patent system
is to fix the PTO. This manager's amendment would still allow patent
fee diversion to take despite promises made in recent days. Permitting
the PTO to retain its fees will allow the agency to hire more examiners
and modernize its information technology infrastructure to reduce the
massive backlog of pending patent applications. That's real patent
reform; not this bill.
Mr. SMITH of Texas. Madam Chair, I yield 1 minute to the gentleman
from New Hampshire (Mr. Bass) for purposes of a colloquy.
Mr. BASS of New Hampshire. I thank the chairman.
I want to discuss some important legislative history of a critical
piece of this bill, in particular, sections 102(a) and (b) and how
those two sections will work together. I think we can agree that it is
important that we set down a definitive legislative history of those
sections to ensure clarity in our meaning.
Mr. SMITH of Texas. I want to respond to the gentleman from New
Hampshire and say that one key issue for clarification is the interplay
between actions under section 102(a) and actions under section 102(b).
We intend for there to be an identity between 102(a) and 102(b). If an
inventor's action is such that it triggers one of the bars under
102(a), then it inherently triggers the grace period subsection 102(b).
Mr. BASS of New Hampshire. I believe that the chairman is correct.
The legislation intends parallelism between the treatment of an
inventor's actions under 102(a) and 102(b). In this way, small
inventors and others will not accidentally stumble into a bar by their
pre-filing actions. Such inventors will still have to be diligent and
file within the grace period if they trigger 102(a); but if an inventor
triggers 102(a) with respect to an invention, then he or she has
inherently also triggered the grace period under 102(b).
The Acting CHAIR. The time of the gentleman has expired.
Mr. SMITH of Texas. I yield myself 30 seconds.
Madam Chair, contrary to current precedent, in order to trigger the
bar in the new 102(a) in our legislation, an action must make the
patented subject matter ``available to the public'' before the
effective filing date. Additionally, subsection 102(b)(1)(B) is
designed to make a very strong grace period for inventors that have
made a disclosure that satisfies 102(b). Inventors who have made such
disclosures are protected during the grace period not only from their
own disclosure but from other prior art from anyone that follows their
disclosure. This is an important protection we offer in our bill.
Ms. ZOE LOFGREN of California. Madam Chairwoman, I yield 2 minutes to
my colleague from California (Mr. Rohrabacher).
Mr. ROHRABACHER. Thank you very much, and I hope everyone is paying
attention to what this is all about tonight.
First of all, we have Dan Lungren, one of our Members who is a former
Attorney General of California, along with Jim Sensenbrenner and John
Conyers both the former chairmen of the Judiciary Committees, all of
them adamant that this bill is unconstitutional. And now we have a
discussion and we have a lot of people talking about backlogs and
what's wrong with the efficiency of the patent system or the patent
office as if that's what this is all about.
It is not what this is all about. This, again, has been designed,
this is a patent fight that's been going on 20 years. Basically, you
have some very large multinational corporations who are trying to
harmonize American patent law with the rest of the world, even though
American patent law has been stronger than the rest of the world
throughout our Republic's history. You weaken the patent protection of
the American people; you are weakening their constitutional protections
in the name of harmonizing it with Europe. Is that what we want to do?
I don't think so. That will have dramatic impact on our country.
Hoover Institution, one of the most highly respected think-tanks in
the United States, had four of their scholars go after this bill; and
here's three of the points they've made, through the many points, that
said thumbs down on this America Invents Act. It is better called the
patent rip-off bill. Here's what Hoover Institution said: the America
Invents Act will protect large, entrenched companies at the expense of
market challenging competitors. Read that: overseas multinational
corporations. They also said, The bill wreaks havoc on property rights,
and predictable property rights are essential for economic growth.
This bill is a job killer, and the jobs that will be killed are in
the United States of America, not the multinational corporation.
The Acting CHAIR. The time of the gentleman has expired.
Ms. ZOE LOFGREN of California. I yield the gentleman an additional 30
seconds.
Mr. ROHRABACHER. These multinational corporations, they're creating
jobs overseas. They don't care if the jobs are lost here. The America
Invents Act--here's Hoover Institution again--the America Invents Act
would inject massive uncertainty into the patent system.
We have had the strongest patent system in the world, and it has
yielded us prosperity and security as a people. We do not need to
change the fundamentals of this system and to harmonize with weaker
systems throughout the world.
I call for the people to vote against this patent rip-off bill.
Mr. SMITH of Texas. Madam Chair, I yield 2 minutes to the gentleman
from Arizona (Mr. Quayle), who is also the vice chairman of the
Intellectual Property Subcommittee of the Judiciary Committee.
Mr. QUAYLE. I thank the gentleman for yielding.
Madam Chair, I rise in support of H.R. 1249, and one of the reasons I
do is because it encourages innovation and entrepreneurship by reducing
costly litigation within our patent system. Innovation is the key to
America's immediate and future economic growth; and right now, many
American innovators are being held back by an onerous and backlogged
patent system. In order to unleash their job-creating potential, we
must reform this system which hasn't been reformed in almost 60 years.
{time} 2040
One way this bill tackles patent reform is by creating a business
method patent pilot program in which administrative patent judges will
review the validity of these patents if a challenger presents evidence
showing that a patent is more likely than not invalid.
Business method patents were not patentable until the late 1990s and
have resulted in frivolous lawsuits which have cost between $5 million
to $10 million per patent.
These types of patents cover a ``method of doing or conducting
business'' which includes printing ads at the bottom of a billing
statement, ordering something online but picking it up in person, tax
strategies, or getting a text when your credit card gets swiped.
The tort abuse created by these patents has become legendary. Section
18 of this bill has broad bipartisan support in the Senate and is an
alternative to costly litigation that will save 90 percent of the costs
incurred in civil litigation.
I support Chairman Smith's work in creating a less costly, more
efficient alternative to this abusive litigation and oppose any effort
to strike section 18. As part of the Republican Conference's overall
effort to spur job creation and economic growth, I urge passage of this
important legislation.
Ms. ZOE LOFGREN of California. Madam Chairman, I yield myself such
time as I may consume.
I want to talk a little bit about the manager's amendment under this
general debate time because there is a very constrained amount of time
for that discussion.
I want to touch on two things in particular. First is the fee issue.
I know that there's been discussion that somehow the fees won't be
diverted under
[[Page H4430]]
the manager's amendment, and I just think that is not a credible
argument.
I remember back in the year 2000 when we were promised that the fees
would not be diverted by the appropriators, but then subsequent to
that, there was diversion. And the truth is that so long as this is
part of the appropriations process, the fees can, and I predict will
be, diverted just as they were diverted during the adoption of the CR
this year. The PTO estimates an $85 million to $100 million diversion
of fees in the CR that was adopted earlier this year. That conceptually
is really just a special tax on innovators. If you raise the fees and
you divert it for general purposes, that's just a special tax on
inventors, and I just think it's wrong and I cannot support it.
I want to talk also, my colleague, Mr. Watt, said that other than the
fee bill, we could resolve the issues, and I think we could have but
we're not. There are two issues that I want to address and they are
really closely related, and they're complicated but they're important.
Under our laws, an idea must be new, useful, and nonobvious in order
to receive patent protection, and this is evaluated in comparison to
what's known as prior art. That's the state of knowledge that exists
prior to an invention. If an idea already exists in the prior art, you
can't get a patent. Under current law, a variety of different things
create prior art, such as descriptions of an idea in previous patents,
printed publications, as well as public uses or sales. But current law
has what's known as the grace period, which provides 1 year for an
inventor to file a patent application after certain activities that
would otherwise create patent-defeating prior art.
So, for example, if an inventor published an article announcing a new
invention, he or she would have a year under this grace period to file
a patent application for it, and this is a very important provision of
patent law. It's pretty unique, actually, to the United States. The PTO
director, David Kappos, referred to this grace period as ``the gold
standard of best practices.''
As we move into the first-to-file system as is proposed in this bill,
it is absolutely essential that the revised grace period extend to
everything that is prior art under today's rules. Unfortunately, that
is not the case in the manager's amendment. The grace period would
protect, and this is a direct quote, ``only disclosures.'' Well, what
would that not protect? Trade secrets. Offers for sale that are not
public. You could have entrepreneurs who start an invention and start a
small business who won't be able to get a patent for their invention
under the grace period, and entrepreneurs might then be forced to delay
bringing their products to market, which would slow growth. This needs
to be addressed, not in a colloquy but in language, and we agreed in
the committee when we stripped out language that didn't fix this that
we would fix the 102(a) and (b) problem in legislation. There was a
colloquy on the Senate floor similar to one that has just taken place,
but we know that the language of the bill needs to reflect the intent.
Judges look to the statute first and foremost to determine its meaning,
and the legislative history is not always included.
So the ambiguity that's in the measure is troublesome. And although
we prepared an amendment to delineate it, it has not been put in order,
and, therefore, this remedy cannot be brought forth, and small
inventors and even big ones may have a problem.
We now have our iPads on the floor, and while I was sitting here, I
got an email from the general counsel of a technology company. I won't
read the whole thing, but here is what this general counsel said:
``The prior use rights clause as written will be a direct giveaway to
foreign competitors, especially those from countries where trade secret
test is rampant.''
What we're saying to American companies is that if you have a trade
secret that you want to protect under the grace period prior art rules,
you're out of luck. You are quite potentially out of luck. You'll
either have to disclose that trade secret, and we know that there are
serious concerns in doing that. We don't want to get into maligning
countries around the world, but there are some that do not have the
respect for intellectual property that we have. Or else we will say to
that inventor or company that you can't use your own invention that you
have devised without being held up for licensing fees with somebody who
got to the office before you did.
This is a big problem that is not resolved. Even if the manager's
amendment is defeated, this problem will remain in the bill. It is an
impediment to innovation and an impediment to making first-to-file
work. If we're going to have first-to-file, and I can accept that, it
must have robust, broad, rigorous protection under the grace period
with a broad definition of a prior art that is protected. That is just
deficient in this bill.
This is, I know, down in the weeds. It's a little bit nerdy. We've
spent many years talking about this in the Judiciary Committee. I'm
just so regretful that this bill after so many years has gone sideways
in the last 2 days and is something that we cannot embrace and
celebrate.
I reserve the balance of my time.
Mr. SMITH of Texas. Madam Chair, I yield 2 minutes to the gentleman
from Arkansas (Mr. Griffin), who is also a member of the Intellectual
Property Subcommittee of the Judiciary Committee.
Mr. GRIFFIN of Arkansas. Thank you, Mr. Chairman.
Madam Chairman, I rise today in strong support of H.R. 1249, the
America Invents Act, and I urge my colleagues to support it.
Make no mistake, the America Invents Act is a jobs bills. At no cost
to taxpayers, this legislation builds on what we as Americans do best:
We innovate. Bolstering American innovation will create jobs at a time
when we need it most.
The America Invents Act ends fee diversion and switches the U.S. to a
first-inventor-to-file system. These changes will streamline the patent
application process to help American innovators bring their inventions
to market. Each new commercialized invention has the potential to
create American jobs. This is a jobs bill.
A provision that I worked on included in the bill would make
permanent the Patent and Trademark Office's ombudsman program for small
business concerns. This program will provide support and services for
independent inventors who may not have the resources to obtain legal
counsel for guidance on obtaining a patent. This provision ensures that
the small guys will always have a champion at the PTO to help them
navigate the process.
{time} 2050
In addition, the America Invents Act finally puts an end to fee
diversion, a practice that has siphoned almost $1 billion in fees from
the PTO over the past 20 years. Too many patent applications have sat
untouched for years because the PTO does not have the resources it
needs to review them in a timely manner. Ending fee diversion will
expedite the review and unleash their potential to create American
jobs.
This bill is endorsed by the U.S. Chamber of Commerce, the National
Association of Manufacturers, and the Small Business & Entrepreneurship
Council. I urge my colleagues to support this jobs bill.
Ms. ZOE LOFGREN of California. I continue to reserve the balance of
my time.
Mr. SMITH of Texas. Madam Chair, I yield 3 minutes to the gentleman
from Virginia (Mr. Goodlatte), as I mentioned awhile ago, the chairman
of the Intellectual Property Subcommittee of the Judiciary.
Mr. GOODLATTE. Madam Chairman, it was mentioned earlier by one of
those speaking in opposition to the bill that the National Association
of Realtors was opposed to this legislation. And we will make available
for the Record a letter that we received, dated 2 days ago, from the
National Association of Realtors: ``On behalf of the 1.1 million
members of the National Association of Realtors, we are pleased to
support H.R. 1249, the America Invents Act.'' It goes on to explain in
great detail why they, along with literally hundreds of other
organizations, support this legislation. That includes the United
States Chamber of Commerce, the National Association of Manufacturers,
and the Retail Federation of America. There is a whole host of
organizations and individual companies,
[[Page H4431]]
both large and small, who support the legislation because they know
that this is what is vital for job creation in this country.
We need to have reform of our patent laws because, unfortunately in
recent years, countries like China have overtaken us in the
productivity of their patent office. And the fact of the matter is,
unless we change our patent laws, we are going to continue to be at a
disadvantage. And the advantages that we've had in the past are no
longer available to us because, quite frankly, the complexity of
inventions has increased; and more and more, we find ourselves in a
situation where the laws that we operate under today, which were last
updated in 1952, need to be updated to address a lot of the abuses that
you've heard described here this evening.
We also need to pass this legislation to make sure that the fee
diversion, that, as has been noted, has kept nearly $1 billion from
going to the operation of the Patent Office to work down the 3-year 1
million patent backlog, also can be addressed. And we also need to
recognize that this legislation, in addition to being a jobs bill, as
recognized by all of these many, many, many companies and associations
of various trade groups, it is also major litigation reform.
It cuts out the abuses with tax strategy patents and other business
method types of patents, where individuals do not produce anything
other than lie in wait for somebody else to come up with a similar idea
and then come forward and say, Hey, that was really my idea, and now
you pay me a lot of money. They aren't creating jobs. They, in fact,
are causing jobs to leave this country.
So there are many reasons to support this legislation, and I would
urge my colleagues to do so. We have not yet come to the manager's
amendment, but it provides a critical component to making sure that fee
diversion does not occur.
National Association
of Realtors,
Washington, DC, June 20, 2011.
House of Representatives,
Washington, DC.
Dear Representative: On behalf of the 1.1 million members
of the National Association of REALTORS (NAR), we are
pleased to support H.R. 1249, the America Invents Act. NAR's
support, however, is predicated upon the retention of
important anti-fee diversion provisions contained in section
22 of the bill. NAR believes it is critically important that
the U.S. Patent Trademark Office have access to all user fees
paid to the agency by patent and trademark applicants.
Without this reform, delays in processing patent applications
will continue to undermine American innovation and stymie the
nation's economy.
NAR, whose members identify themselves as REALTORS,
represents a wide variety of real estate industry
professionals. REALTORS have been early adopters of
technology and are industry innovators who understand that
consumers today are seeking real estate information and
services that are fast, convenient and comprehensive.
Increasingly, technology innovations are driving the delivery
of real estate services and the future of REALTORS'
businesses.
The nation's patent law system faces many of the same
issues but has not kept pace. It has been more than 50 years
since the patent system's last major overhaul. Modernization
is critically needed to improve the quality of issued
patents, reduce the burden of unnecessary litigation on
businesses and refocus the nation's efforts on innovation and
job creation.
As technology users, NAR and several of its members
currently find themselves facing onerous patent infringement
litigation over questionable patents launched by patent
holding companies and other non-practicing entities. Without
needed reforms that assure that asserted patent rights are
legitimate, the ability of businesses owned by REALTORS,
many of which are small businesses, to grow, innovate and
better serve modern consumers will be put at risk. For this
reason, NAR supports reforms such as expanded post-grant
review and prior user rights.
The America Invents Act contains needed reforms geared
towards improving patent quality. NAR supports greater
transparency in the patent application process including
creating a mechanism to allow practitioners with the
expertise and knowledge to review and comment on the
appropriateness of a patent application prior to the issuance
of the patent and the creation of a streamlined and more
effective process for challenging a patent outside of the
judicial system. Finally, it is critically important that the
U.S. Patent Trademark Office have access to all user fees
paid to the agency by patent and trademark applicants.
Without this reform, delays in processing patent applications
will continue to undermine American innovation.
The National Association of REALTORS supports H.R. 1249
with the section 22 anti-fee diversion provisions. We urge
the House to pass this much needed legislation with these
critical provisions.
Sincerely,
Ron Phipps,
2011 President.
Ms. ZOE LOFGREN of California. I yield myself such time as I may
consume.
I want to get back to the original reason why we've worked so hard on
this bill, only to be here at the end of this process with a bill that
we can't support. We started with hearings in the 1990s with the
Federal Trade Commission and the National Academy of Science. And one
of the things they pointed out was that there are more patents than
there are inventions. We started focusing in on the abuse of litigation
that occurred as well as the needs of the office.
My colleague is correct: The Patent Office has a tremendous backlog,
and that is a serious concern for inventors and really for the country.
The examiners have such an enormous backlog, they can't spend
sufficient time reviewing the applicants. This has led to a flood of
poor-quality patents that were issued over the last decade and a half
that I think--and most believe--should have been denied by the office.
These dubious patents do significant damage to particular industries,
like the information technology industry, as they can be used by
nonpracticing entities to demand rents from legitimate businesses and
to interfere with the development of legitimate products. Now, I don't
blame the examiners at the PTO. They are working hard, but they don't
have enough time to give each application the consideration it
deserves.
A bill, as approved by the Judiciary Committee, would have helped
remedy this problem by making sure--a lot of people don't realize that
the Patent Office doesn't get any taxpayer money. The Patent Office is
entirely supported by fees submitted by inventors. So keeping all of
those fees that the inventors are paying in the office so that the
patents can properly be dealt with in a timely fashion was a key
component of this measure. Unfortunately, under the manager's
amendment, that strong protection is simply gone.
And I know, as I said in the past, we've had unanimous votes in the
Judiciary Committee. We've had promises never to do it again; but the
diversions have continued, and it is clear that they will continue
under the manager's amendment provision because it allows the regular
process to continue as it has in the past.
I have not submitted lists of letters of who's in favor, who's
opposed to this bill. It's my understanding that the Realtors
Association is, in fact, opposed to the manager's amendment; but we're
not going to vote on these amendments tonight. We're rolling these
votes until tomorrow. So we will research that, and we will find the
truth of where they are and make that information available to the
Members because certainly Realtors are a very valuable part of our
Nation's economy.
I want to talk a little bit as well about whether we can fix the
defect on prior art by an amendment that will be offered later in the
week by the gentleman from Michigan (Mr. Conyers) and the gentleman
from California (Mr. Rohrabacher). They propose that the first-to-file
patent system that is being promoted to harmonize our system with other
countries would not go into effect until the grace period, which is the
critical part of the patent system, actually is fixed and harmonized.
If the manager's amendment is passed, the fatal defect of defining
the prior art is disclosures, I don't believe can be fully remedied by
this amendment, although I think that this amendment is a good one, and
I intend to support it. So I think it's very important that the
manager's amendment be defeated. I would hope that if that happens,
that we might have a chance to step back and to fully examine where we
are in terms of the prior user rights and the grace period because, as
the patent commissioner had said, this is the gold standard, the United
States has had the gold standard in patents with this grace period. It
would be a shame not just for the Congress but for our country and our
future as innovators to lose this genius part of our patent system.
I reserve the balance of my time.
[[Page H4432]]
{time} 2100
Mr. SMITH of Texas. Madam Chair, I yield 2\1/2\ minutes to the
gentleman from Virginia (Mr. Goodlatte).
Mr. GOODLATTE. Madam Chairman, the gentlewoman has expressed concern
about the fee diversion provision in the manager's amendment. I think
it is actually a very good provision; and it will, for the first time,
end fee diversion at the Patent and Trademark Office by statute. It
accomplishes both our overarching policy goals and maintains
congressional oversight.
For the first time, we are establishing an exclusive PTO reserve fund
that will collect all excess PTO fees and bring an end to fee
diversion. It's been expressed on the other side of the aisle that
maybe with the authority to set fees that is granted for a limited
period of time in this bill, there will be an abuse in the Patent
Office. But it can't be abused very much because the fees will still be
subject to appropriations here in the Congress. They can't spend them
on other things. They can't divert them, but they can put them in
escrow, and they can require the PTO to come in and justify those fees
before they're authorized. There will be no incentive to have excess
fees if there can't be excess expenditures because of congressional
oversight.
Patent reform has been a long road; and with the inclusion of this
provision, we have ensured that all funds collected by the PTO will
remain available to them and may not be diverted to any other use.
Ending fee diversion has been an important goal for all of us; and as
we crafted legislation, our ultimate policy goal was to ensure that PTO
funds are not diverted for other uses, such as earmarks or for other
agencies.
Working with leadership and the Appropriations Committee, we
developed a compromise provision that accomplishes our shared policy
goal through a statutorily created PTO reserve fund.
This compromise was carefully brokered by leadership to ensure that
it aligned with House rules and did not include mandatory spending that
would have resulted in a score. Just a few months ago, including a
provision like this one would have been unheard of, and no such
provision has been included in patent bills considered by previous
Congresses.
All excess fees that the PTO collects will be deposited into the PTO
reserve fund and amounts in the fund ``shall be made available until
expended only for obligation and expenditure by the Office.''
This compromise provision also ensures that the Appropriations and
Judiciary Committees will continue to have oversight over the PTO.
Though PTO remains within the appropriations process, the appropriators
no longer have an incentive to divert fees. In other words, because
excess fees are made available to the PTO, there will be no scoring
advantage to the Appropriations Committee to decrease the
appropriations, and this will not impact their 302(b) allocation for
Commerce, Justice, State appropriations.
I urge my colleagues to support the manager's amendment.
By creating the Reserve Fund, we have walled-off PTO funds from
diversion. All the excess fees are collected and deposited into the
Fund and are made available in Appropriations Acts and cannot be
``diverted'' to other non-PTO purposes.
PTO funding would still be provided in Appropriations Acts, but the
language carried in those Acts will appropriate excess fee collections
and provide a clear and easy mechanism for PTO to request access to
those funds.
By giving USPTO access to all its funds, the Manager's Amendment
supports the USPTO's efforts to improve patent quality and reduce the
backlog of patent applications. To carry out the new mandates of the
legislation and reduce delays in the patent application process, the
USPTO must be able to use all the fees it collects.
The language in the Manager's Amendment reflects the intent of the
Judiciary Committee, the Appropriations Committee and House leadership
to end fee diversion. USPTO is 100% funded by fees paid by inventors
and trademark filers who are entitled to receive the services they are
paying for. The language makes clear the intention not only to
appropriate to the USPTO at least the level requested for the fiscal
year but also to appropriate to the USPTO any fees collected in excess
of such appropriation.
Providing USPTO access to all fees collected means providing access
at all points during that year, including in case of a continuing
resolution. Access also means that reprogramming requests will be acted
on within a reasonable time period and on a reasonable basis. It means
that future appropriations will continue to use language that
guarantees USPTO access to all of its fee collections.
Appropriations Chairman Rogers is committed to this agreement and to
ending fee diversion at the PTO, and I appreciate his efforts.
This provision represents a sea change of improvement over the
current system and I urge all Members to strongly support this end to
fee diversion at the PTO. This amendment, including the commitment from
Chairman Rogers to Leadership ensures that all the user fees that the
PTO collects will be available to the PTO so that they can get to work
to reduce patent pendency and the backlog, and issue strong patents.
Ms. ZOE LOFGREN of California. May I inquire how much time remains.
The Acting CHAIR. The gentlewoman from California has 15 seconds
remaining.
Ms. ZOE LOFGREN of California. Well, I will use those 15 seconds,
Madam Chair, by saying just a few things. First, the litigation reform
mentioned is really to retroactively undo a case that was fairly and
squarely won in the courts.
Number two, that section 18 is basically just a giveaway to the
banks. There's some good things in this bill. The post-grant review,
overall it does more harm than good.
I yield back the balance of my time.
Mr. SMITH of Texas. I yield myself the balance of the time.
Madam Chair, in closing, I want to thank the patent principles who
devoted so much time, energy and intellect to this project. We've
worked together for the common goal of comprehensive patent reform for
the better part of 6 years.
While some of us still have differences over individual items, I want
these Members to know that I appreciate their contributions to the
project. This includes, among many others, Mr. Goodlatte, Mr. Watt, Mr.
Issa, and Mr. Berman.
In the Senate we've worked closely with Senators Leahy, Grassley,
Kyl, Hatch and others; and I want to thank them as well.
Also, we would not be at this point tonight without the support of
Commerce Secretary Locke and PTO Director Kappos.
Our country needs this bill. We can't thrive in the 21st century
using a 20th-century patent system. At a time when the economy remains
fragile and unemployment is unacceptably high, we must include the
patent system and the PTO, an agency that has been called an essential
driver of a pro-growth job-creating agenda.
This bill will catapult us into a new era of innovation and enhanced
consumer choice. I urge my colleagues to support H.R. 1249.
Mrs. CHRISTENSEN. Madam Chair, I rise today to express my strong
support for H.R. 1249--a smart bill that fixes an anomaly in the patent
law by addressing the confusion around the deadline for filing patent
term extensions. This bill--which has broad bipartisan support in both
chambers--will ensure that if the FDA notifies a company after normal
business hours that its drug has been approved, then the time that the
company has to file a patent term extension application does not begin
to run until the next business day.
I support this bill not only because it protects the rights of patent
holders, but also because it will help inspire greater investments in
the development of new drugs that not only could save millions of
lives, but also could play a pivotal role in reducing racial and ethnic
health disparities. Take, for example, a blood thinning drug that was
proven very effective in treating and preventing stroke--the third
leading cause of death in the nation, and a cause of death from which
African American men are 52% more likely to die than white men, and
African American women are 36% more likely to die than white women.
But for an unintentional one-day filing delay, the developer of this
drug would have been entitled to secure a patent term restoration. And,
with that term restoration, the company would have been positioned to
invest the additional resources to qualify the drug for the treatment
and prevention of stroke and for expanded use in heart surgeries. This
medical advancement would undoubtedly have saved countless lives and
improved the health and wellbeing of tens of thousands of Americans.
Absent the correction provided by this bill, however, none of what
could have--and should have--happened ever did happen, and, as a
result, a great medical advancement never came to fruition. This bill
would ensure that the situation that occurred with the promising blood
thinning drug does not happen
[[Page H4433]]
again. And, this bill fixes an anomaly that not only jeopardizes the
development of life-saving drugs, but also jeopardizes the health and
wellness of innocent, hardworking Americans. I urge all of my
colleagues to be a key part of the solution to this problem by
supporting this bill.
Ms. PELOSI. Madam Chair, I rise in opposition to this patent reform
bill, misnamed the America Invents Act.
It had been our hope that we would be voting on a patent bill that
encourages entrepreneurship, protects intellectual property rights, and
sends a message abroad that strengthens patent rights at home. The bill
before us fails on all these scores.
Instead, by favoring large international companies, we have before us
a missed opportunity to encourage entrepreneurship. It is a missed
opportunity to strengthen intellectual property rights here at home.
For these and other reasons, I urge my colleagues to vote no on the
Manager's amendment, yes on the Boren-Sensenbrenner-Waters-Schock
amendment, and no on the final passage of this disappointing bill.
Let's go back to the drawing board for a real bill to keep America
number one.
Ms. WASSERMAN SCHULTZ. Madam Chair, today I rise in support of H.R.
1249, the America Invents Act.
This vital reform to our nation's patent system would help spur
innovation, foster competition, and create and support American jobs.
Democrats in Congress have urged our colleagues across the aisle to
bring legislation to the Floor and today we have an opportunity to
support legislation to create jobs and support our recovering economy.
That is why this legislation is a priority of the Obama
Administration--the bill represents a significant step in the right
direction toward American job growth and is crucial to winning the
future through innovation.
I urge my colleagues to support this bill's benefits for American
inventors, manufacturers, and jobs.
I also urge my colleagues to support this bill because it includes a
provision that will help engender much-needed patient protection and
choice for patients undergoing genetic diagnostic tests.
As many, of you know, several years ago, I was diagnosed with breast
cancer.
Through genetic testing, I discovered that I am a carrier of the
BRCA-2 gene mutation, which drastically increased my lifetime risk of
ovarian cancer and recurring breast cancer.
As a result, I made the life-altering decision to have seven major
surgeries--a double mastectomy and an oophorectomy--from a single
administration of a single test.
You see, there is only one test on the market for this mutation.
The maker of this test not only has a patent on the gene itself; they
also have an exclusive license for limited laboratories to administer
the test.
Like genetic tests for colon cancer, Parkinson's disease, Alzheimer's
disease, stroke, and many other genetic disorders, there is no way to
get a truly independent second opinion.
In approximately 20 percent of all genetic tests, only one laboratory
can perform the test due to patent exclusivity for the diagnostic
testing, and often the actual human gene being tested.
Just imagine: Your genes hold the key to your survival; having major,
body-altering surgery or treatment could save you life; but the test
results fail to give you certainty.
The America Invents Act begins to address this problem.
A provision in the Manager's amendment simply directs a study by the
U.S. Patent and Trademark Office on ways to remove barriers for patient
access to second opinions on genetic testing on patented genes.
Such a study would address questions about the current effects such
patents have on patient outcomes and how best to provide truly
independent, confirmatory tests.
Given ongoing court cases on the issue of gene patents, let me be
clear: the study's focus on second opinion genetic testing is not
intended to express any opinion by Congress regarding the validity of
gene patents.
By allowing clinical laboratories to confirm the presence or absence
of a gene mutation found in a diagnostic test, we can help Americans
access the second opinions they truly deserve.
I know first-hand the stress of wanting a second opinion--but being
unable to get it.
With so much at stake, it is incredibly important that we give
everyone in this situation as much certainty as we possibly can.
We owe that much to those whose lives are in the balance.
Mr. GALLEGLY. Madam Chair, I rise in support of this amendment.
Development of new prescription drug therapies is critically
important if we are to successfully treat--or even cure--diseases such
as cancer, ALS and juvenile diabetes.
The problem is that medical research is expensive. A researcher can
spend years trying various drug combinations before developing one that
may be approved for testing in humans, and it can take even more years
after that to get final Food and Drug Administration, FDA approval. If
patent protection expires soon after the drug is approved, companies
may not be able to recover their investment, which would lead to less
research and development.
Congress recognized this problem when it passed the Hatch-Waxman Act
in 1984. Hatch-Waxman provides for extended patent protection if the
company applies within 60 days after the FDA approves a new drug.
Unfortunately, the FDA and the Patent and Trademark Office have
different interpretations of when the company must file the
application. The resulting confusion and uncertainty may be
discouraging people from investing in life-saving medical research.
This amendment simply clarifies when the 60-day period begins. This
is completely budget neutral and does not make any substantive change
to the law.
I urge my colleagues to support this common sense amendment.
Mr. GALLEGLY. Madam Chair, I rise in strong support of this bill.
First, I would like to recognize Chairman Smith's extraordinary work on
behalf of American inventors. This bill is a well-crafted compromise
that will streamline the patent process, while improving the quality of
patents.
Although I do not support every single provision of this legislation,
it is critical that the House of Representatives pass H.R. 1249.
I am especially pleased that Chairman Smith included a provision that
helps many businesses in the United States, including several in my
district, who have been forced to spend time and money to defend
themselves against so-called ``false marking'' lawsuits.
By law, patent holders are required to place the patent number on
their products. The problem is that after the patent expires, it may be
very costly for a business to recall their products to change the
label. Unfortunately, several law firms have discovered that suing
these manufacturers can be lucrative, and we have seen a sharp increase
in the number of these nuisance lawsuits.
This bill includes a common sense solution that will stop these
lawsuits and allow employers to devote resources to developing new
products and creating jobs.
I urge my colleagues to support this important legislation.
Mr. SMITH of Texas. Madam Chair, I yield back the balance of my time.
The Acting CHAIR. All time for general debate has expired.
Pursuant to the rule, the amendment in the nature of a substitute
printed in the bill shall be considered as an original bill for the
purpose of amendment under the 5-minute rule and shall be considered
read.
The text of the amendment in the nature of a substitute is as
follows:
H.R. 1249
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 ``America
Invents Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. First inventor to file.
Sec. 4. Inventor's oath or declaration.
Sec. 5. Defense to infringement based on earlier inventor.
Sec. 6. Post-grant review proceedings.
Sec. 7. Patent Trial and Appeal Board.
Sec. 8. Preissuance submissions by third parties.
Sec. 9. Venue.
Sec. 10. Fee setting authority.
Sec. 11. Fees for patent services.
Sec. 12. Supplemental examination.
Sec. 13. Funding agreements.
Sec. 14. Tax strategies deemed within the prior art.
Sec. 15. Best mode requirement.
Sec. 16. Marking.
Sec. 17. Advice of counsel.
Sec. 18. Transitional program for covered business method patents.
Sec. 19. Jurisdiction and procedural matters.
Sec. 20. Technical amendments.
Sec. 21. Travel expenses and payment of administrative judges.
Sec. 22. Patent and Trademark Office funding.
Sec. 23. Satellite offices.
Sec. 24. Designation of Detroit satellite office.
Sec. 25. Patent Ombudsman Program for small business concerns.
Sec. 26. Priority examination for technologies important to American
competitiveness.
Sec. 27. Calculation of 60-day period for application of patent term
extension.
Sec. 28. Study on implementation.
Sec. 29. Pro bono program.
Sec. 30. Effective date.
Sec. 31. Budgetary effects.
SEC. 2. DEFINITIONS.
In this Act:
(1) Director.--The term ``Director'' means the Under
Secretary of Commerce for Intellectual Property and Director
of the United States Patent and Trademark Office.
[[Page H4434]]
(2) Office.--The term ``Office'' means the United States
Patent and Trademark Office.
(3) Patent public advisory committee.--The term ``Patent
Public Advisory Committee'' means the Patent Public Advisory
Committee established under section 5(a)(1) of title 35,
United States Code.
(4) Trademark act of 1946.--The term ``Trademark Act of
1946'' means the Act entitled ``An Act to provide for the
registration and protection of trademarks used in commerce,
to carry out the provisions of certain international
conventions, and for other purposes'', approved July 5, 1946
(15 U.S.C. 1051 et seq.) (commonly referred to as the
``Trademark Act of 1946'' or the ``Lanham Act'').
(5) Trademark public advisory committee.--The term
``Trademark Public Advisory Committee'' means the Trademark
Public Advisory Committee established under section 5(a)(1)
of title 35, United States Code.
SEC. 3. FIRST INVENTOR TO FILE.
(a) Definitions.--Section 100 of title 35, United States
Code, is amended--
(1) in subsection (e), by striking ``or inter partes
reexamination under section 311''; and
(2) 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 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.
``(i)(1) The term `effective filing date' for a claimed
invention in a patent or application for patent means--
``(A) if subparagraph (B) does not apply, the actual filing
date of the patent or the application for the patent
containing a claim to the invention; or
``(B) the filing date of the earliest application for which
the patent or application is entitled, as to such invention,
to a right of priority under section 119, 365(a), or 365(b)
or to the benefit of an earlier filing date under section
120, 121, or 365(c).
``(2) The effective filing date for a claimed invention in
an application for reissue or reissued patent shall be
determined by deeming the claim to the invention to have been
contained in the patent for which reissue was sought.
``(j) The term `claimed invention' means the subject matter
defined by a claim in a patent or an application for a
patent.''.
(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 person shall be entitled to a
patent unless--
``(1) the claimed invention was patented, described in a
printed publication, or in public use, on sale, or otherwise
available to the public before the effective filing date of
the claimed invention; 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) Disclosures made 1 year or less before the effective
filing date of the claimed invention.--A disclosure made 1
year or less before the effective filing date of a claimed
invention shall not be prior art to the claimed invention
under subsection (a)(1) if--
``(A) the disclosure was made by the inventor or joint
inventor or by another who obtained the subject matter
disclosed directly or indirectly from the inventor or a joint
inventor; or
``(B) the subject matter disclosed had, before such
disclosure, been publicly disclosed by the inventor or a
joint inventor or another who obtained the subject matter
disclosed directly or indirectly from the inventor or a joint
inventor.
``(2) Disclosures appearing in applications and patents.--A
disclosure shall not be prior art to a claimed invention
under subsection (a)(2) if--
``(A) the subject matter disclosed was obtained directly or
indirectly from the inventor or a joint inventor;
``(B) the subject matter disclosed had, before such subject
matter was effectively filed under subsection (a)(2), been
publicly disclosed by the inventor or a joint inventor or
another who obtained the subject matter disclosed directly or
indirectly from the inventor or a joint inventor; or
``(C) the subject matter disclosed 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.
``(c) Common Ownership Under Joint Research Agreements.--
Subject matter disclosed 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 subsection (b)(2)(C) if--
``(1) the subject matter disclosed was developed and the
claimed invention was made by, or on behalf of, 1 or more
parties to a joint research agreement that was in effect on
or before the effective filing date of the claimed invention;
``(2) the claimed invention was made as a result of
activities undertaken within the scope of the joint research
agreement; and
``(3) the application for patent for the claimed invention
discloses or is amended to disclose the names of the parties
to the joint research agreement.
``(d) Patents and Published Applications Effective as Prior
Art.--For purposes of determining whether a patent or
application for patent is prior art to a claimed invention
under subsection (a)(2), such patent or application shall be
considered to have been effectively filed, with respect to
any subject matter described in the patent or application--
``(1) if paragraph (2) does not apply, as of the actual
filing date of the patent or the application for patent; or
``(2) 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) Continuity of intent under the create act.--The
enactment of section 102(c) of title 35, United States Code,
under paragraph (1) of this subsection 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 subsection
(c) of this section. The United States Patent and Trademark
Office shall administer section 102(c) 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.
(3) 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; non-obvious subject
matter
``A patent for a claimed invention may not be obtained,
notwithstanding that 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''.
(3) Effective date.--The amendments made by this subsection
shall take effect upon the expiration of the 18-month period
beginning on the date of the enactment of this Act, and shall
apply to any request for a statutory invention registration
filed on or after that effective date.
(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(b) would end before the end of that 2-year
period''; and
(ii) by striking ``prior to the end of the statutory'' and
inserting ``before the end of that 1-year''; and
(B) in paragraph (3), by striking ``any statutory bar date
that may occur under this title
[[Page H4435]]
due to publication, on sale, or public use'' and inserting
``the expiration of the 1-year period referred to in section
102(b)''.
(h) Derived Patents.--
(1) In general.--Section 291 of title 35, United States
Code, is amended to read as follows:
``Sec. 291. Derived Patents
``(a) In General.--The owner of a patent may have relief by
civil action against the owner of another patent that claims
the same invention and has an earlier effective filing date,
if the invention claimed in such other patent was derived
from the inventor of the invention claimed in the patent
owned by the person seeking relief under this section.
``(b) Filing Limitation.--An action under this section may
be filed only before the end of the 1-year period beginning
on the date of the issuance of the first patent containing a
claim to the allegedly derived invention and naming an
individual alleged to have derived such invention as the
inventor or joint inventor.''.
(2) Conforming amendment.--The item relating to section 291
in the table of sections for chapter 29 of title 35, United
States Code, is amended to read as follows:
``291. Derived patents.''.
(i) Derivation Proceedings.--Section 135 of title 35,
United States Code, is amended to read as follows:
``Sec. 135. Derivation proceedings
``(a) Institution of Proceeding.--An applicant for patent
may file a petition to institute a derivation proceeding in
the Office. The petition shall set forth with particularity
the basis for finding that an inventor named in an earlier
application derived the claimed invention from an inventor
named in the petitioner's application and, without
authorization, the earlier application claiming such
invention was filed. Any such petition may be filed only
within the 1-year period beginning on the date of the first
publication of a claim to an invention that is the same or
substantially the same as the earlier application's claim to
the invention, shall be made under oath, and shall be
supported by substantial evidence. Whenever the Director
determines that a petition filed under this subsection
demonstrates that the standards for instituting a derivation
proceeding are met, the Director may institute a derivation
proceeding. The determination by the Director whether to
institute a derivation proceeding shall be final and
nonappealable.
``(b) Determination by Patent Trial and Appeal Board.--In a
derivation proceeding instituted under subsection (a), the
Patent Trial and Appeal Board shall determine whether an
inventor named in the earlier application derived the claimed
invention from an inventor named in the petitioner's
application and, without authorization, the earlier
application claiming such invention was filed. The Director
shall prescribe regulations setting forth standards for the
conduct of derivation proceedings.
``(c) Deferral of Decision.--The Patent Trial and Appeal
Board may defer action on a petition for a derivation
proceeding until the expiration of the 3-month period
beginning on the date on which the Director issues a patent
that includes the claimed invention that is the subject of
the petition. The Patent Trial and Appeal Board also may
defer action on a petition for a derivation proceeding, or
stay the proceeding after it has been instituted, until the
termination of a proceeding under chapter 30, 31, or 32
involving the patent of the earlier applicant.
``(d) Effect of Final Decision.--The final decision of the
Patent Trial and Appeal Board, if adverse to claims in an
application for patent, shall constitute the final refusal by
the Office on those claims. The final decision of the Patent
Trial and Appeal Board, if adverse to claims in a patent,
shall, if no appeal or other review of the decision has been
or can be taken or had, constitute cancellation of those
claims, and notice of such cancellation shall be endorsed on
copies of the patent distributed after such cancellation.
``(e) Settlement.--Parties to a proceeding instituted under
subsection (a) 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, if any, it
shall take action consistent with the agreement. Any written
settlement or understanding of the parties 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.
``(f) Arbitration.--Parties to a proceeding instituted
under subsection (a) may, within such time as may be
specified by the Director by regulation, 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 the
patentability of the claimed inventions involved in the
proceeding.''.
(j) Elimination of References to Interferences.--(1)
Sections 134, 145, 146, 154, and 305 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)(A) Section 146 of title 35, United States Code, is
amended--
(i) by striking ``an interference'' and inserting ``a
derivation proceeding''; and
(ii) by striking ``the interference'' and inserting ``the
derivation proceeding''.
(B) The subparagraph heading for section 154(b)(1)(C) of
title 35, United States Code, is amended to read as follows:
``(C) Guarantee of adjustments for delays due to derivation
proceedings, secrecy orders, and appeals.--''.
(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 146 of title 35, United
States Code, is amended to read as follows:
``Sec. 146. Civil action in case of derivation proceeding''.
(5) 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.''.
(6) 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.''.
(k) Statute of Limitations.--
(1) In general.--Section 32 of title 35, United States
Code, is amended by inserting between the third and fourth
sentences the following: ``A proceeding under this section
shall be commenced not later than the earlier of either the
date that is 10 years after the date on which the misconduct
forming the basis for the proceeding occurred, or 1 year
after the date on which the misconduct forming the basis for
the proceeding is made known to an officer or employee of the
Office as prescribed in the regulations established under
section 2(b)(2)(D).''.
(2) Report to congress.--The Director shall provide on a
biennial basis to the Judiciary Committees of the Senate and
House of Representatives a report providing a short
description of incidents made known to an officer or employee
of the Office as prescribed in the regulations established
under section 2(b)(2)(D) of title 35, United States Code,
that reflect substantial evidence of misconduct before the
Office but for which the Office was barred from commencing a
proceeding under section 32 of title 35, United States Code,
by the time limitation established by the fourth sentence of
that section.
(3) Effective date.--The amendment made by paragraph (1)
shall apply in any case in which the time period for
instituting a proceeding under section 32 of title 35, United
States Code, had not lapsed before the date of the enactment
of this Act.
(l) Small Business Study.--
(1) Definitions.--In this subsection--
(A) the term ``Chief Counsel'' means the Chief Counsel for
Advocacy of the Small Business Administration;
(B) the term ``General Counsel'' means the General Counsel
of the United States Patent and Trademark Office; and
(C) the term ``small business concern'' has the meaning
given that term under section 3 of the Small Business Act (15
U.S.C. 632).
(2) Study.--
(A) In general.--The Chief Counsel, in consultation with
the General Counsel, shall conduct a study of the effects of
eliminating the use of dates of invention in determining
whether an applicant is entitled to a patent under title 35,
United States Code.
(B) Areas of study.--The study conducted under subparagraph
(A) shall include examination of the effects of eliminating
the use of invention dates, including examining--
(i) how the change would affect the ability of small
business concerns to obtain patents and their costs of
obtaining patents;
(ii) whether the change would create, mitigate, or
exacerbate any disadvantages for applicants for patents that
are small business concerns relative to applicants for
patents that are not small business concerns, and whether the
change would create any advantages for applicants for patents
that are small business concerns relative to applicants for
patents that are not small business concerns;
(iii) the cost savings and other potential benefits to
small business concerns of the change; and
(iv) the feasibility and costs and benefits to small
business concerns of alternative means of determining whether
an applicant is entitled to a patent under title 35, United
States Code.
(3) Report.--Not later than the date that is 1 year after
the date of the enactment of this Act, the Chief Counsel
shall submit to the Committee on Small Business and
Entrepreneurship and the Committee on the Judiciary of the
Senate and the Committee on Small Business and the Committee
on the Judiciary of the House of Representatives a report on
the results of the study under paragraph (2).
(m) Report on Prior User Rights.--
(1) In general.--Not later than the end of the 4-month
period beginning on the date of the 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
members of the European Union and Japan, Canada, and
Australia.
[[Page H4436]]
(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.
(E) An analysis of legal and constitutional issues, if any,
that arise from placing trade secret law in patent law.
(F) An analysis of whether the change to a first-to-file
patent system creates a particular need for prior user
rights.
(2) Consultation with other agencies.--In preparing the
report required under paragraph (1), the Director shall
consult with the United States Trade Representative, the
Secretary of State, and the Attorney General.
(n) Effective Date.--
(1) In general.--Except as otherwise provided in this
section, the amendments made by this section shall take
effect upon the expiration of the 18-month period beginning
on the date of the enactment of this Act, and shall apply to
any application for patent, and to any patent issuing
thereon, that contains or contained at any time--
(A) a claim to a claimed invention that has an effective
filing date as defined in section 100(i) of title 35, United
States Code, that is on or after the effective date described
in this paragraph; or
(B) a specific reference under section 120, 121, or 365(c)
of title 35, United States Code, to any patent or application
that contains or contained at any time such a claim.
(2) Interfering patents.--The provisions of sections
102(g), 135, and 291 of title 35, United States Code, as in
effect on the day before the effective date set forth in
paragraph (1) of this subsection, shall apply to each claim
of an application for patent, and any patent issued thereon,
for which the amendments made by this section also apply, if
such application or patent contains or contained at any
time--
(A) a claim to an invention having an effective filing date
as defined in section 100(i) of title 35, United States Code,
that occurs before the effective date set forth in paragraph
(1) of this subsection; or
(B) a specific reference under section 120, 121, or 365(c)
of title 35, United States Code, to any patent or application
that contains or contained at any time such a claim.
(o) Study of Patent Litigation.--
(1) GAO study.--The Comptroller General of the United
States shall conduct a study of the consequences of
litigation by non-practicing entities, or by patent assertion
entities, related to patent claims made under title 35,
United States Code, and regulations authorized by that title.
(2) Contents of study.--The study conducted under this
subsection shall include the following:
(A) The annual volume of litigation described in paragraph
(1) over the 20-year period ending on the date of the
enactment of this Act.
(B) The volume of cases comprising such litigation that are
found to be without merit after judicial review.
(C) The impacts of such litigation on the time required to
resolve patent claims.
(D) The estimated costs, including the estimated cost of
defense, associated with such litigation for patent holders,
patent licensors, patent licensees, and inventors, and for
users of alternate or competing innovations.
(E) The economic impact of such litigation on the economy
of the United States, including the impact on inventors, job
creation, employers, employees, and consumers.
(F) The benefit to commerce, if any, supplied by non-
practicing entities or patent assertion entities that
prosecute such litigation.
(3) Report to congress.--The Comptroller General shall, not
later than the date that is 1 year after the date of the
enactment of this Act, submit to the Committee on the
Judiciary of the House of Representatives and the Committee
on the Judiciary of the Senate a report on the results of the
study required under this subsection, including
recommendations for any changes to laws and regulations that
will minimize any negative impact of patent litigation that
was the subject of such study.
(p) Sense of Congress.--It is the sense of the Congress
that converting the United States patent registration system
from ``first inventor to use'' to a system of ``first
inventor to file'' will promote the progress of science by
securing for limited times to inventors the exclusive rights
to their discoveries and provide inventors with greater
certainty regarding the scope of protection granted by the
exclusive rights to their discoveries.
(q) Sense of Congress.--It is the sense of the Congress
that converting the United States patent registration system
from ``first inventor to use'' to a system of ``first
inventor to file'' will harmonize the United States patent
registration system with the patent registration systems
commonly used in nearly all other countries throughout the
world with whom the United States conducts trade and thereby
promote a greater sense of international uniformity and
certainty in the procedures used for securing the exclusive
rights of inventors to their discoveries.
SEC. 4. 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) or commences the national stage under section
371 shall include, or be amended to include, the name of the
inventor for any invention claimed in the application. Except
as otherwise provided in this section, each 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.--
``(1) Exception.--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 who claims the benefit under section 120,
121, or 365(c) of the filing of an earlier-filed application,
if--
``(A) 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;
``(B) a substitute statement meeting the requirements of
subsection (d) was filed in connection with the earlier filed
application with respect to the individual; or
``(C) 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.
``(2) Copies of oaths, declarations, statements, or
assignments.--Notwithstanding paragraph (1), the Director may
require that a copy of the executed oath or declaration, the
substitute statement, or the assignment filed in connection
with the earlier-filed application be included in the later-
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 meeting the
requirements of 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.--A patent shall not 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.''.
[[Page H4437]]
(3) Requirements for nonprovisional applications.--Section
111(a) of title 35, United States Code, is amended--
(A) in paragraph (2)(C), by striking ``by the applicant''
and inserting ``or declaration'';
(B) in the heading for paragraph (3), by inserting ``or
declaration'' after ``and oath''; and
(C) by inserting ``or declaration'' after ``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.--
(1) In general.--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.''.
(2) Conforming amendment.--Section 251 of title 35, United
States Code, is amended in the third undesignated paragraph
by inserting ``or the application for the original patent was
filed by the assignee of the entire interest'' after ``claims
of the original patent''.
(c) Specification.--Section 112 of title 35, United States
Code, is amended--
(1) in the first undesignated 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'';
(2) in the second undesignated paragraph--
(A) by striking ``The specification'' and inserting ``(b)
Conclusion.--The specification''; and
(B) by striking ``applicant regards as his invention'' and
inserting ``inventor or a joint inventor regards as the
invention'';
(3) in the third undesignated paragraph, by striking ``A
claim'' and inserting ``(c) Form.--A claim'';
(4) in the fourth undesignated paragraph, by striking
``Subject to the following paragraph,'' and inserting ``(d)
Reference in Dependent Forms.--Subject to subsection (e),'';
(5) in the fifth undesignated paragraph, by striking ``A
claim'' and inserting ``(e) Reference in Multiple Dependent
Form.--A claim''; and
(6) in the last undesignated paragraph, by striking ``An
element'' and inserting ``(f) Element in Claim for a
Combination.--An element''.
(d) Conforming Amendments.--
(1) Sections 111(b)(1)(A) of title 35, United States Code,
is amended by striking ``the first paragraph of section 112
of this title'' and inserting ``section 112(a)''.
(2) Section 111(b)(2) of title 35, United States Code, is
amended by striking ``the second through fifth paragraphs of
section 112,'' and inserting ``subsections (b) through (e) of
section 112,''.
(e) Effective Date.--The amendments made by this section
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to any patent application that is filed on or after
that effective date.
SEC. 5. DEFENSE TO INFRINGEMENT BASED ON EARLIER INVENTOR.
Section 273 of title 35, United States Code, is amended as
follows:
(1) Subsection (a) is amended--
(A) in paragraph (1)--
(i) by striking ``use of a method in'' and inserting ``use
of the subject matter of a patent in''; and
(ii) by adding ``and'' after the semicolon;
(B) in paragraph (2), by striking the semicolon at the end
of subparagraph (B) and inserting a period; and
(C) by striking paragraphs (3) and (4).
(2) Subsection (b) is amended--
(A) in paragraph (1)--
(i) by striking ``for a method''; and
(ii) by striking ``at least 1 year'' and all that follows
through the end and inserting ``and commercially used the
subject matter at least 1 year before the effective filing
date of the claimed invention that is the subject matter of
the patent.'';
(B) in paragraph (2), by striking ``patented method'' and
inserting ``patented process'';
(C) in paragraph (3)--
(i) by striking subparagraph (A);
(ii) by striking subparagraph (B) and inserting the
following:
``(A) Derivation and prior disclosure to the public.--A
person may not assert the defense under this section if--
``(i) the subject matter on which the defense is based was
derived from the patentee or persons in privity with the
patentee; or
``(ii) the claimed invention that is the subject of the
defense was disclosed to the public in a manner that
qualified for the exception from the prior art under section
102(b) and the commercialization date relied upon under
paragraph (1) of this subsection for establishing entitlement
to the defense is less than 1 year before the date of such
disclosure to the public;'';
(iii) by redesignating subparagraph (C) as subparagraph
(B); and
(iv) by adding at the end the following:
``(C) Funding.--
``(i) Defense not available in certain cases.--A person may
not assert the defense under this section if the subject
matter of the patent on which the defense is based was
developed pursuant to a funding agreement under chapter 18 or
by a nonprofit institution of higher education, or a
technology transfer organization affiliated with such an
institution, that did not receive funding from a private
business enterprise in support of that development.
``(ii) Definitions.--In this subparagraph--
``(I) the term `institution of higher education' has the
meaning given that term in section 101(a) of the Higher
Education Act of 1965 (20 U.S.C. 1001(a)); and
``(II) the term `technology transfer organization' means an
organization the primary purpose of which is to facilitate
the commercialization of technologies developed by one or
more institutions of higher education.''; and
(D) by amending paragraph (6) to read as follows:
``(6) Personal defense.--
``(A) In general.--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.
``(B) Exception.--Notwithstanding subparagraph (A), any
person may, on the person's own behalf, assert a defense
based on the exhaustion of rights provided under paragraph
(2), including any necessary elements thereof.''.
SEC. 6. POST-GRANT REVIEW PROCEEDINGS.
(a) Inter Partes Review.--Chapter 31 of title 35, United
States Code, is amended to read as follows:
``CHAPTER 31--INTER PARTES REVIEW
``Sec.
``311. Inter partes review.
``312. Petitions.
``313. Preliminary response to petition.
``314. Institution of inter partes review.
``315. Relation to other proceedings or actions.
``316. Conduct of inter partes review.
``317. Settlement.
``318. Decision of the Board.
``319. Appeal.
``Sec. 311. Inter partes review
``(a) In General.--Subject to the provisions of this
chapter, a person who is not the owner of a patent may file
with the Office a petition to institute an inter partes
review of the patent. The Director shall establish, by
regulation, fees to be paid by the person requesting the
review, in such amounts as the Director determines to be
reasonable, considering the aggregate costs of the review.
``(b) Scope.--A petitioner in an inter partes review may
request to cancel as unpatentable 1 or more claims of a
patent only on a ground that could be raised under section
102 or 103 and only on the basis of prior art consisting of
patents or printed publications.
``(c) Filing Deadline.--A petition for inter partes review
shall be filed after the later of either--
``(1) the date that is 1 year after the grant of a patent
or issuance of a reissue of a patent; or
``(2) if a post-grant review is instituted under chapter
32, the date of the termination of such post-grant review.
``Sec. 312. Petitions
``(a) Requirements of Petition.--A petition filed under
section 311 may be considered only if--
``(1) the petition is accompanied by payment of the fee
established by the Director under section 311;
``(2) the petition identifies all real parties in interest;
``(3) the petition identifies, in writing and with
particularity, each claim challenged, the grounds on which
the challenge to each claim is based, and the evidence that
supports the grounds for the challenge to each claim,
including--
``(A) copies of patents and printed publications that the
petitioner relies upon in support of the petition; and
``(B) affidavits or declarations of supporting evidence and
opinions, if the petitioner relies on expert opinions;
``(4) the petition provides such other information as the
Director may require by regulation; and
``(5) the petitioner provides copies of any of the
documents required under paragraphs (2), (3), and (4) to the
patent owner or, if applicable, the designated representative
of the patent owner.
``(b) Public Availability.--As soon as practicable after
the receipt of a petition under section 311, the Director
shall make the petition available to the public.
``Sec. 313. Preliminary response to petition
``If an inter partes review petition is filed under section
311, the patent owner shall have the right to file a
preliminary response to the petition, within a time period
set by the Director, that sets forth reasons why no inter
partes review should be instituted based upon the failure of
the petition to meet any requirement of this chapter.
``Sec. 314. Institution of inter partes review
``(a) Threshold.--The Director may not authorize an inter
partes review to commence unless the Director determines that
the information
[[Page H4438]]
presented in the petition filed under section 311 and any
response filed under section 313 shows that there is a
reasonable likelihood that the petitioner would prevail with
respect to at least 1 of the claims challenged in the
petition.
``(b) Timing.--The Director shall determine whether to
institute an inter partes review under this chapter pursuant
to a petition filed under section 311 within 3 months after--
``(1) receiving a preliminary response to the petition
under section 313; or
``(2) if no such preliminary response is filed, the last
date on which such response may be filed.
``(c) Notice.--The Director shall notify the petitioner and
patent owner, in writing, of the Director's determination
under subsection (a), and shall make such notice available to
the public as soon as is practicable. Such notice shall
include the date on which the review shall commence.
``(d) No Appeal.--The determination by the Director whether
to institute an inter partes review under this section shall
be final and nonappealable.
``Sec. 315. Relation to other proceedings or actions
``(a) Infringer's Civil Action.--
``(1) Inter partes review barred by civil action.--An inter
partes review may not be instituted if, before the date on
which the petition for such a review is filed, the
petitioner, real party in interest, or privy of the
petitioner filed a civil action challenging the validity of a
claim of the patent.
``(2) Stay of civil action.--If the petitioner, real party
in interest, or privy of the petitioner files a civil action
challenging the validity of a claim of the patent on or after
the date on which the petitioner files a petition for inter
partes review of the patent, that civil action shall be
automatically stayed until either--
``(A) the patent owner moves the court to lift the stay;
``(B) the patent owner files a civil action or counterclaim
alleging that the petitioner, real party in interest, or
privy of the petitioner has infringed the patent; or
``(C) the petitioner, real party in interest, or privy of
the petitioner moves the court to dismiss the civil action.
``(3) Treatment of counterclaim.--A counterclaim
challenging the validity of a claim of a patent does not
constitute a civil action challenging the validity of a claim
of a patent for purposes of this subsection.
``(b) Patent Owner's Action.--An inter partes review may
not be instituted if the petition requesting the proceeding
is filed more than 1 year after the date on which the
petitioner, real party in interest, or privy of the
petitioner is served with a complaint alleging infringement
of the patent. The time limitation set forth in the preceding
sentence shall not apply to a request for joinder under
subsection (c).
``(c) Joinder.--If the Director institutes an inter partes
review, the Director, in his or her discretion, may join as a
party to that inter partes review any person who properly
files a petition under section 311 that the Director, after
receiving a preliminary response under section 313 or the
expiration of the time for filing such a response, determines
warrants the institution of an inter partes review under
section 314.
``(d) Multiple Proceedings.--Notwithstanding sections
135(a), 251, and 252, and chapter 30, during the pendency of
an inter partes review, if another proceeding or matter
involving the patent is before the Office, the Director may
determine the manner in which the inter partes review or
other proceeding or matter may proceed, including providing
for stay, transfer, consolidation, or termination of any such
matter or proceeding.
``(e) Estoppel.--
``(1) Proceedings before the office.--The petitioner in an
inter partes review of a claim in a patent under this chapter
that results in a final written decision under section
318(a), or the real party in interest or privy of the
petitioner, may not request or maintain a proceeding before
the Office with respect to that claim on any ground that the
petitioner raised or reasonably could have raised during that
inter partes review.
``(2) Civil actions and other proceedings.--The petitioner
in an inter partes review of a claim in a patent under this
chapter that results in a final written decision under
section 318(a), or the real party in interest or privy of the
petitioner, may not assert either in a civil action arising
in whole or in part under section 1338 of title 28 or in a
proceeding before the International Trade Commission under
section 337 of the Tariff Act of 1930 that the claim is
invalid on any ground that the petitioner raised or
reasonably could have raised during that inter partes review.
``Sec. 316. Conduct of inter partes review
``(a) Regulations.--The Director shall prescribe
regulations--
``(1) providing that the file of any proceeding under this
chapter shall be made available to the public, except that
any petition or document filed with the intent that it be
sealed shall, if accompanied by a motion to seal, be treated
as sealed pending the outcome of the ruling on the motion;
``(2) setting forth the standards for the showing of
sufficient grounds to institute a review under section
314(a);
``(3) establishing procedures for the submission of
supplemental information after the petition is filed;
``(4) establishing and governing inter partes review under
this chapter and the relationship of such review to other
proceedings under this title;
``(5) setting forth standards and procedures for discovery
of relevant evidence, including that such discovery shall be
limited to--
``(A) the deposition of witnesses submitting affidavits or
declarations; and
``(B) what is otherwise necessary in the interest of
justice;
``(6) prescribing 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 an unnecessary
increase in the cost of the proceeding;
``(7) providing for protective orders governing the
exchange and submission of confidential information;
``(8) providing for the filing by the patent owner of a
response to the petition under section 313 after an inter
partes review has been instituted, and requiring that the
patent owner file with such response, through affidavits or
declarations, any additional factual evidence and expert
opinions on which the patent owner relies in support of the
response;
``(9) setting forth standards and procedures for allowing
the patent owner to move to amend the patent under subsection
(d) to cancel a challenged claim or propose a reasonable
number of substitute claims, and ensuring that any
information submitted by the patent owner in support of any
amendment entered under subsection (d) is made available to
the public as part of the prosecution history of the patent;
``(10) providing either party with the right to an oral
hearing as part of the proceeding;
``(11) requiring that the final determination in an inter
partes review be issued not later than 1 year after the date
on which the Director notices the institution of a review
under this chapter, except that the Director may, for good
cause shown, extend the 1-year period by not more than 6
months, and may adjust the time periods in this paragraph in
the case of joinder under section 315(c);
``(12) setting a time period for requesting joinder under
section 315(c); and
``(13) providing the petitioner with at least 1 opportunity
to file written comments within a time period established by
the Director.
``(b) Considerations.--In prescribing regulations under
this section, the Director shall consider the effect of any
such regulation on the economy, the integrity of the patent
system, the efficient administration of the Office, and the
ability of the Office to timely complete proceedings
instituted under this chapter.
``(c) Patent Trial and Appeal Board.--The Patent Trial and
Appeal Board shall, in accordance with section 6, conduct
each inter partes review instituted under this chapter.
``(d) Amendment of the Patent.--
``(1) In general.--During an inter partes review instituted
under this chapter, the patent owner may file 1 motion to
amend the patent in 1 or more of the following ways:
``(A) Cancel any challenged patent claim.
``(B) For each challenged claim, propose a reasonable
number of substitute claims.
``(2) Additional motions.--Additional motions to amend may
be permitted upon the joint request of the petitioner and the
patent owner to materially advance the settlement of a
proceeding under section 317, or as permitted by regulations
prescribed by the Director.
``(3) Scope of claims.--An amendment under this subsection
may not enlarge the scope of the claims of the patent or
introduce new matter.
``(e) Evidentiary Standards.--In an inter partes review
instituted under this chapter, the petitioner shall have the
burden of proving a proposition of unpatentability by a
preponderance of the evidence.
``Sec. 317. Settlement
``(a) In General.--An inter partes review instituted under
this chapter shall be terminated with respect to any
petitioner upon the joint request of the petitioner and the
patent owner, unless the Office has decided the merits of the
proceeding before the request for termination is filed. If
the inter partes review is terminated with respect to a
petitioner under this section, no estoppel under section
315(e) shall attach to the petitioner, or to the real party
in interest or privy of the petitioner, on the basis of that
petitioner's institution of that inter partes review. If no
petitioner remains in the inter partes review, the Office may
terminate the review or proceed to a final written decision
under section 318(a).
``(b) Agreements in Writing.--Any agreement or
understanding between the patent owner and a petitioner,
including any collateral agreements referred to in such
agreement or understanding, made in connection with, or in
contemplation of, the termination of an inter partes review
under this section shall be in writing and a true copy of
such agreement or understanding shall be filed in the Office
before the termination of the inter partes review as between
the parties. 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, and shall be made available
only to Federal Government agencies on written request, or to
any person on a showing of good cause.
``Sec. 318. Decision of the Board
``(a) Final Written Decision.--If an inter partes review is
instituted and not dismissed under this chapter, the Patent
Trial and Appeal Board shall issue a final written decision
with respect to the patentability of any patent claim
challenged by the petitioner and any new claim added under
section 316(d).
``(b) Certificate.--If the Patent Trial and Appeal Board
issues a final written decision under subsection (a) and the
time for appeal has expired or any appeal has terminated, the
Director shall issue and publish a certificate canceling any
claim of the patent finally determined to be unpatentable,
confirming any claim of the patent determined to be
patentable, and incorporating in the patent by operation of
the certificate any new or amended claim determined to be
patentable.
[[Page H4439]]
``(c) Amended or New Claim.--Any proposed amended or new
claim determined to be patentable and incorporated into a
patent following an inter partes review under this chapter
shall have the same effect as that specified in section 252
for reissued patents on the right of any person who made,
purchased, or used within the United States, or imported into
the United States, anything patented by such proposed amended
or new claim, or who made substantial preparation therefor,
before the issuance of a certificate under subsection (b).
``(d) Data on Length of Review.--The Office shall make
available to the public data describing the length of time
between the institution of, and the issuance of a final
written decision under subsection (a) for, each inter partes
review.
``Sec. 319. Appeal
``A party dissatisfied with the final written decision of
the Patent Trial and Appeal Board under section 318(a) may
appeal the decision pursuant to sections 141 through 144. Any
party to the inter partes review shall have the right to be a
party to the appeal.''.
(b) Conforming Amendment.--The table of chapters for part
III of title 35, United States Code, is amended by striking
the item relating to chapter 31 and inserting the following:
``31. Inter Partes Review....................................311''.....
(c) Regulations and Effective Date.--
(1) Regulations.--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 31 of title 35,
United States Code, as amended by subsection (a) of this
section.
(2) Applicability.--
(A) In general.--The amendments made by subsection (a)
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to any patent issued before, on, or after that
effective date.
(B) Graduated implementation.--The Director may impose a
limit on the number of inter partes reviews that may be
instituted under chapter 31 of title 35, United States Code,
during each of the first 4 1-year periods in which the
amendments made by subsection (a) are in effect, if such
number in each year equals or exceeds the number of inter
partes reexaminations that are ordered under chapter 31 of
title 35, United States Code, in the last fiscal year ending
before the effective date of the amendments made by
subsection (a).
(d) Post-Grant Review.--Part III of title 35, United States
Code, is amended by adding at the end the following:
``CHAPTER 32--POST-GRANT REVIEW
``Sec.
``321. Post-grant review.
``322. Petitions.
``323. Preliminary response to petition.
``324. Institution of post-grant review.
``325. Relation to other proceedings or actions.
``326. Conduct of post-grant review.
``327. Settlement.
``328. Decision of the Board.
``329. Appeal.
``Sec. 321. Post-grant review
``(a) In General.--Subject to the provisions of this
chapter, a person who is not the patent owner may file with
the Office a petition to institute a post-grant review of a
patent. The Director shall establish, by regulation, fees to
be paid by the person requesting the review, in such amounts
as the Director determines to be reasonable, considering the
aggregate costs of the post-grant review.
``(b) Scope.--A petitioner in a post-grant review may
request to cancel as unpatentable 1 or more claims 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).
``(c) Filing Deadline.--A petition for a post-grant review
may only be filed not later than the date that is 1 year
after the date of the grant of the patent or of the issuance
of a reissue patent (as the case may be).
``Sec. 322. Petitions
``(a) Requirements of Petition.--A 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 all real parties in interest;
``(3) the petition identifies, in writing and with
particularity, each claim challenged, the grounds on which
the challenge to each claim is based, and the evidence that
supports the grounds for the challenge to each claim,
including--
``(A) copies of patents and printed publications that the
petitioner relies upon in support of the petition; and
``(B) affidavits or declarations of supporting evidence and
opinions, if the petitioner relies on other factual evidence
or on expert opinions;
``(4) the petition provides such other information as the
Director may require by regulation; and
``(5) the petitioner provides copies of any of the
documents required under paragraphs (2), (3), and (4) to the
patent owner or, if applicable, the designated representative
of the patent owner.
``(b) Public Availability.--As soon as practicable after
the receipt of a petition under section 321, the Director
shall make the petition available to the public.
``Sec. 323. Preliminary response to petition
``If a post-grant review petition is filed under section
321, the patent owner shall have the right to file a
preliminary response to the petition, within a time period
set by the Director, that sets forth reasons why no post-
grant review should be instituted based upon the failure of
the petition to meet any requirement of this chapter.
``Sec. 324. Institution of post-grant review
``(a) Threshold.--The Director may not authorize a post-
grant review to commence unless the Director determines that
the information presented in the petition filed under section
321, if such information is not rebutted, would demonstrate
that it is more likely than not that at least 1 of the claims
challenged in the petition is unpatentable.
``(b) Additional Grounds.--The determination required under
subsection (a) may also be satisfied by a showing that the
petition raises a novel or unsettled legal question that is
important to other patents or patent applications.
``(c) Timing.--The Director shall determine whether to
institute a post-grant review under this chapter pursuant to
a petition filed under section 321 within 3 months after--
``(1) receiving a preliminary response to the petition
under section 323; or
``(2) if no such preliminary response is filed, the last
date on which such response may be filed.
``(d) Notice.--The Director shall notify the petitioner and
patent owner, in writing, of the Director's determination
under subsection (a) or (b), and shall make such notice
available to the public as soon as is practicable. The
Director shall make each notice of the institution of a post-
grant review available to the public. Such notice shall
include the date on which the review shall commence.
``(e) No Appeal.--The determination by the Director whether
to institute a post-grant review under this section shall be
final and nonappealable.
``Sec. 325. Relation to other proceedings or actions
``(a) Infringer's Civil Action.--
``(1) Post-grant review barred by civil action.--A post-
grant review may not be instituted under this chapter if,
before the date on which the petition for such a review is
filed, the petitioner, real party in interest, or privy of
the petitioner filed a civil action challenging the validity
of a claim of the patent.
``(2) Stay of civil action.--If the petitioner, real party
in interest, or privy of the petitioner files a civil action
challenging the validity of a claim of the patent on or after
the date on which the petitioner files a petition for post-
grant review of the patent, that civil action shall be
automatically stayed until either--
``(A) the patent owner moves the court to lift the stay;
``(B) the patent owner files a civil action or counterclaim
alleging that the petitioner, real party in interest, or
privy of the petitioner has infringed the patent; or
``(C) the petitioner, real party in interest, or privy of
the petitioner moves the court to dismiss the civil action.
``(3) Treatment of counterclaim.--A counterclaim
challenging the validity of a claim of a patent does not
constitute a civil action challenging the validity of a claim
of a patent for purposes of this subsection.
``(b) Preliminary Injunctions.--If a civil action alleging
infringement of a patent is filed within 3 months after the
date on which the patent is granted, the court may not stay
its consideration of the patent owner's motion for a
preliminary injunction against infringement of the patent on
the basis that a petition for post-grant review has been
filed under this chapter or that such a post-grant review has
been instituted under this chapter.
``(c) Joinder.--If more than 1 petition for a post-grant
review under this chapter is properly filed against the same
patent and the Director determines that more than 1 of these
petitions warrants the institution of a post-grant review
under section 324, the Director may consolidate such reviews
into a single post-grant review.
``(d) Multiple Proceedings.--Notwithstanding sections
135(a), 251, and 252, and chapter 30, during the pendency of
any post-grant review under this chapter, if another
proceeding or matter involving the patent is before the
Office, the Director may determine the manner in which the
post-grant review or other proceeding or matter may proceed,
including providing for the stay, transfer, consolidation, or
termination of any such matter or proceeding. In determining
whether to institute or order a proceeding under this
chapter, chapter 30, or chapter 31, the Director may take
into account whether, and reject the petition or request
because, the same or substantially the same prior art or
arguments previously were presented to the Office.
``(e) Estoppel.--
``(1) Proceedings before the office.--The petitioner in a
post-grant review of a claim in a patent under this chapter
that results in a final written decision under section
328(a), or the real party in interest or privy of the
petitioner, may not request or maintain a proceeding before
the Office with respect to that claim on any ground that the
petitioner raised or reasonably could have raised during that
post-grant review.
``(2) Civil actions and other proceedings.--The petitioner
in a post-grant review of a claim in a patent under this
chapter that results in a final written decision under
section 328(a), or the real party in interest or privy of the
petitioner, may not assert either in a civil action arising
in whole or in part under section 1338 of title 28 or in a
proceeding before the International Trade Commission under
section 337 of the Tariff Act of 1930 that the claim is
invalid on any ground that the petitioner raised or
reasonably could have raised during that post-grant review.
``(f) Reissue Patents.--A post-grant review may not be
instituted under this chapter if the petition requests
cancellation of a claim in a reissue patent that is identical
to or narrower
[[Page H4440]]
than a claim in the original patent from which the reissue
patent was issued, and the time limitations in section 321(c)
would bar filing a petition for a post-grant review for such
original patent.
``Sec. 326. Conduct of post-grant review
``(a) Regulations.--The Director shall prescribe
regulations--
``(1) providing that the file of any proceeding under this
chapter shall be made available to the public, except that
any petition or document filed with the intent that it be
sealed shall, if accompanied by a motion to seal, be treated
as sealed pending the outcome of the ruling on the motion;
``(2) setting forth the standards for the showing of
sufficient grounds to institute a review under subsections
(a) and (b) of section 324;
``(3) establishing procedures for the submission of
supplemental information after the petition is filed;
``(4) establishing and governing a post-grant review under
this chapter and the relationship of such review to other
proceedings under this title;
``(5) setting forth standards and 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;
``(6) prescribing 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 an unnecessary
increase in the cost of the proceeding;
``(7) providing for protective orders governing the
exchange and submission of confidential information;
``(8) providing for the filing by the patent owner of a
response to the petition under section 323 after a post-grant
review has been instituted, and requiring that the patent
owner file with such response, through affidavits or
declarations, any additional factual evidence and expert
opinions on which the patent owner relies in support of the
response;
``(9) setting forth standards and procedures for allowing
the patent owner to move to amend the patent under subsection
(d) to cancel a challenged claim or propose a reasonable
number of substitute claims, and ensuring that any
information submitted by the patent owner in support of any
amendment entered under subsection (d) is made available to
the public as part of the prosecution history of the patent;
``(10) providing either party with the right to an oral
hearing as part of the proceeding; and
``(11) requiring that the final determination in any post-
grant review be issued not later than 1 year after the date
on which the Director notices the institution of a proceeding
under this chapter, except that the Director may, for good
cause shown, extend the 1-year period by not more than 6
months, and may adjust the time periods in this paragraph in
the case of joinder under section 325(c).
``(b) Considerations.--In prescribing regulations under
this section, the Director shall consider the effect of any
such regulation on the economy, the integrity of the patent
system, the efficient administration of the Office, and the
ability of the Office to timely complete proceedings
instituted under this chapter.
``(c) Patent Trial and Appeal Board.--The Patent Trial and
Appeal Board shall, in accordance with section 6, conduct
each post-grant review instituted under this chapter.
``(d) Amendment of the Patent.--
``(1) In general.--During a post-grant review instituted
under this chapter, the patent owner may file 1 motion to
amend the patent in 1 or more of the following ways:
``(A) Cancel any challenged patent claim.
``(B) For each challenged claim, propose a reasonable
number of substitute claims.
``(2) Additional motions.--Additional motions to amend may
be permitted upon the joint request of the petitioner and the
patent owner to materially advance the settlement of a
proceeding under section 327, or upon the request of the
patent owner for good cause shown.
``(3) Scope of claims.--An amendment under this subsection
may not enlarge the scope of the claims of the patent or
introduce new matter.
``(e) Evidentiary Standards.--In a post-grant review
instituted under this chapter, the petitioner shall have the
burden of proving a proposition of unpatentability by a
preponderance of the evidence.
``Sec. 327. Settlement
``(a) In General.--A post-grant review instituted under
this chapter shall be terminated with respect to any
petitioner upon the joint request of the petitioner and the
patent owner, unless the Office has decided the merits of the
proceeding before the request for termination is filed. If
the post-grant review is terminated with respect to a
petitioner under this section, no estoppel under section
325(e) shall attach to the petitioner, or to the real party
in interest or privy of the petitioner, on the basis of that
petitioner's institution of that post-grant review. If no
petitioner remains in the post-grant review, the Office may
terminate the post-grant review or proceed to a final written
decision under section 328(a).
``(b) Agreements in Writing.--Any agreement or
understanding between the patent owner and a petitioner,
including any collateral agreements referred to in such
agreement or understanding, made in connection with, or in
contemplation of, the termination of a post-grant review
under this section shall be in writing, and a true copy of
such agreement or understanding shall be filed in the Office
before the termination of the post-grant review as between
the parties. 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, and shall be made available
only to Federal Government agencies on written request, or to
any person on a showing of good cause.
``Sec. 328. Decision of the Board
``(a) Final Written Decision.--If a post-grant review is
instituted and not dismissed under this chapter, the Patent
Trial and Appeal Board shall issue a final written decision
with respect to the patentability of any patent claim
challenged by the petitioner and any new claim added under
section 326(d).
``(b) Certificate.--If the Patent Trial and Appeal Board
issues a final written decision under subsection (a) and the
time for appeal has expired or any appeal has terminated, the
Director shall issue and publish a certificate canceling any
claim of the patent finally determined to be unpatentable,
confirming any claim of the patent determined to be
patentable, and incorporating in the patent by operation of
the certificate any new or amended claim determined to be
patentable.
``(c) Amended or New Claim.--Any proposed amended or new
claim determined to be patentable and incorporated into a
patent following a post-grant review under this chapter shall
have the same effect as that specified in section 252 of this
title for reissued patents on the right of any person who
made, purchased, or used within the United States, or
imported into the United States, anything patented by such
proposed amended or new claim, or who made substantial
preparation therefor, before the issuance of a certificate
under subsection (b).
``(d) Data on Length of Review.--The Office shall make
available to the public data describing the length of time
between the institution of, and the issuance of a final
written decision under subsection (a) for, each post-grant
review.
``Sec. 329. Appeal
``A party dissatisfied with the final written decision of
the Patent Trial and Appeal Board under section 328(a) may
appeal the decision pursuant to sections 141 through 144. Any
party to the post-grant review shall have the right to be a
party to the appeal.''.
(e) 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......................................321''.....
(f) Regulations and Effective Date.--
(1) Regulations.--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 (d) of this
section.
(2) Applicability.--
(A) In general.--The amendments made by subsection (d)
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and,
except as provided in section 18 and in paragraph (3), shall
apply to any patent that is described in section 3(n)(1).
(B) Limitation.--The Director may impose a limit on the
number of post-grant reviews that may be instituted under
chapter 32 of title 35, United States Code, during each of
the first 4 1-year periods in which the amendments made by
subsection (d) are in effect.
(3) Pending interferences.--
(A) Procedures in general.--The Director shall determine,
and include in the regulations issued under paragraph (1),
the procedures under which an interference commenced before
the effective date set forth in paragraph (2)(A) is to
proceed, including whether such interference--
(i) is to be dismissed without prejudice to the filing of a
petition for a post-grant review under chapter 32 of title
35, United States Code; or
(ii) is to proceed as if this Act had not been enacted.
(B) Proceedings by patent trial and appeal board.--For
purposes of an interference that is commenced before the
effective date set forth in paragraph (2)(A), the Director
may deem the Patent Trial and Appeal Board to be the Board of
Patent Appeals and Interferences, and may allow the Patent
Trial and Appeal Board to conduct any further proceedings in
that interference.
(C) Appeals.--The authorization to appeal or have remedy
from derivation proceedings in sections 141(d) and 146 of
title 35, United States Code, as amended by this Act, and the
jurisdiction to entertain appeals from derivation proceedings
in section 1295(a)(4)(A) of title 28, United States Code, as
amended by this Act, shall be deemed to extend to any final
decision in an interference that is commenced before the
effective date set forth in paragraph (2)(A) of this
subsection and that is not dismissed pursuant to this
paragraph.
(g) Citation of Prior Art and Written Statements.--
(1) In general.--Section 301 of title 35, United States
Code, is amended to read as follows:
``Sec. 301. Citation of prior art and written statements
``(a) In General.--Any person at any time may cite to the
Office in writing--
``(1) prior art consisting of patents or printed
publications which that person believes to have a bearing on
the patentability of any claim of a particular patent; or
``(2) statements of the patent owner filed in a proceeding
before a Federal court or the Office in which the patent
owner took a position on the scope of any claim of a
particular patent.
``(b) Official File.--If the person citing prior art or
written statements pursuant to subsection (a) explains in
writing the pertinence and manner of applying the prior art
or written statements to at least 1 claim of the patent, the
citation of the prior art or written statements and the
explanation thereof shall become a part of the official file
of the patent.
[[Page H4441]]
``(c) Additional Information.--A party that submits a
written statement pursuant to subsection (a)(2) shall include
any other documents, pleadings, or evidence from the
proceeding in which the statement was filed that addresses
the written statement.
``(d) Limitations.--A written statement submitted pursuant
to subsection (a)(2), and additional information submitted
pursuant to subsection (c), shall not be considered by the
Office for any purpose other than to determine the proper
meaning of a patent claim in a proceeding that is ordered or
instituted pursuant to section 304, 314, or 324. If any such
written statement or additional information is subject to an
applicable protective order, such statement or information
shall be redacted to exclude information that is subject to
that order.
``(e) Confidentiality.--Upon the written request of the
person citing prior art or written statements pursuant to
subsection (a), that person's identity shall be excluded from
the patent file and kept confidential.''.
(2) Conforming amendment.--The item relating to section 301
in the table of sections for chapter 30 of title 35, United
States Code, is amended to read as follows:
``301. Citation of prior art and written statements.''.
(3) Effective date.--The amendments made by this subsection
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to any patent issued before, on, or after that
effective date.
(h) Reexamination.--
(1) Determination by director.--
(A) In general.--Section 303(a) of title 35, United States
Code, is amended by striking ``section 301 of this title''
and inserting ``section 301 or 302''.
(B) Effective date.--The amendment made by this paragraph
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to any patent issued before, on, or after that
effective date.
(2) Appeal.--
(A) In general.--Section 306 of title 35, United States
Code, is amended by striking ``145'' and inserting ``144''.
(B) Effective date.--The amendment made by this paragraph
shall take effect on the date of the enactment of this Act
and shall apply to any appeal of a reexamination before the
Board of Patent Appeals and Interferences or the Patent Trial
and Appeal Board that is pending on, or brought on or after,
the date of the enactment of this Act.
SEC. 7. PATENT TRIAL AND APPEAL BOARD.
(a) Composition and Duties.--
(1) In general.--Section 6 of title 35, United States Code,
is amended to read as follows:
``Sec. 6. Patent Trial and Appeal Board
``(a) In General.--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, in consultation with the Director. 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 applications for patents pursuant
to section 134(a);
``(2) review appeals of reexaminations pursuant to section
134(b);
``(3) conduct derivation proceedings pursuant to section
135; and
``(4) conduct inter partes reviews and post-grant reviews
pursuant to chapters 31 and 32.
``(c) 3-Member Panels.--Each appeal, derivation proceeding,
post-grant review, and inter partes review shall be heard by
at least 3 members of the Patent Trial and Appeal Board, who
shall be designated by the Director. Only the Patent Trial
and Appeal Board may grant rehearings.
``(d) Treatment of Prior Appointments.--The Secretary of
Commerce may, in the Secretary's discretion, deem the
appointment of an administrative patent judge who, before the
date of the enactment of this subsection, held office
pursuant to an appointment by the Director to take effect on
the date on which the Director initially appointed the
administrative patent judge. It shall be a defense to a
challenge to the appointment of an administrative patent
judge on the basis of the judge's having been originally
appointed by the Director that the administrative patent
judge so appointed was acting as a de facto officer.''.
(2) Conforming amendment.--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.''.
(b) Administrative Appeals.--Section 134 of title 35,
United States Code, is amended--
(1) in subsection (b), by striking ``any reexamination
proceeding'' and inserting ``a reexamination''; and
(2) by striking subsection (c).
(c) Circuit Appeals.--
(1) In general.--Section 141 of title 35, United States
Code, is amended to read as follows:
``Sec. 141. Appeal to Court of Appeals for the Federal
Circuit
``(a) Examinations.--An applicant who is dissatisfied with
the final decision in an appeal to the Patent Trial and
Appeal Board under section 134(a) may appeal the Board's
decision to the United States Court of Appeals for the
Federal Circuit. By filing such an appeal, the applicant
waives his or her right to proceed under section 145.
``(b) Reexaminations.--A patent owner who is dissatisfied
with the final decision in an appeal of a reexamination to
the Patent Trial and Appeal Board under section 134(b) may
appeal the Board's decision only to the United States Court
of Appeals for the Federal Circuit.
``(c) Post-Grant and Inter Partes Reviews.--A party to an
inter partes review or a post-grant review who is
dissatisfied with the final written decision of the Patent
Trial and Appeal Board under section 318(a) or 328(a) (as the
case may be) may appeal the Board's decision only to the
United States Court of Appeals for the Federal Circuit.
``(d) Derivation Proceedings.--A party to a derivation
proceeding who is dissatisfied with the final decision of the
Patent Trial and Appeal Board in the proceeding may appeal
the decision to the United States Court of Appeals for the
Federal Circuit, but such appeal shall be dismissed if any
adverse party to such derivation proceeding, within 20 days
after the appellant has filed notice of appeal in accordance
with section 142, files notice with the Director that the
party elects to have all further proceedings conducted as
provided in section 146. If the appellant does not, within 30
days after the filing of such notice by the adverse party,
file a civil action under section 146, the Board's decision
shall govern the further proceedings in the case.''.
(2) Jurisdiction.--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 a patent
application, derivation proceeding, reexamination, post-grant
review, or inter partes review under title 35, at the
instance of a party who exercised that party's right to
participate in the applicable proceeding before or appeal to
the Board, except that an applicant or a party to a
derivation proceeding may also have remedy by civil action
pursuant to section 145 or 146 of title 35; an appeal under
this subparagraph of a decision of the Board with respect to
an application or derivation proceeding shall waive the right
of such applicant or party to proceed under section 145 or
146 of title 35;''.
(3) Proceedings on appeal.--Section 143 of title 35, United
States Code, is amended--
(A) by striking the third sentence and inserting the
following: ``In an ex parte case, the Director shall submit
to the court in writing the grounds for the decision of the
Patent and Trademark Office, addressing all of the issues
raised in the appeal. The Director shall have the right to
intervene in an appeal from a decision entered by the Patent
Trial and Appeal Board in a derivation proceeding under
section 135 or in an inter partes or post-grant review under
chapter 31 or 32.''; and
(B) by striking the last sentence.
(d) Effective Date.--The amendments made by this section
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to proceedings commenced on or after that effective
date, except that--
(1) the extension of jurisdiction to the United States
Court of Appeals for the Federal Circuit to entertain appeals
of decisions of the Patent Trial and Appeal Board in
reexaminations under the amendment made by subsection (c)(2)
shall be deemed to take effect on the date of the enactment
of this Act and shall extend to any decision of the Board of
Patent Appeals and Interferences with respect to a
reexamination that is entered before, on, or after the date
of the enactment of this Act;
(2) the provisions of sections 6, 134, and 141 of title 35,
United States Code, as in effect on the day before the
effective date of the amendments made by this section shall
continue to apply to inter partes reexaminations that are
requested under section 311 of such title before such
effective date;
(3) the Patent Trial and Appeal Board may be deemed to be
the Board of Patent Appeals and Interferences for purposes of
appeals of inter partes reexaminations that are requested
under section 311 of title 35, United States Code, before the
effective date of the amendments made by this section; and
(4) the Director's right under the fourth sentence of
section 143 of title 35, United States Code, as amended by
subsection (c)(3) of this section, to intervene in an appeal
from a decision entered by the Patent Trial and Appeal Board
shall be deemed to extend to inter partes reexaminations that
are requested under section 311 of such title before the
effective date of the amendments made by this section.
SEC. 8. PREISSUANCE SUBMISSIONS BY THIRD PARTIES.
(a) In General.--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 third party may submit for
consideration and inclusion in the record of a patent
application, any patent, published patent application, or
other printed 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
given or mailed in the application for patent; or
``(B) the later of--
``(i) 6 months after the date on which the application for
patent is first published under section 122 by the Office, or
[[Page H4442]]
``(ii) the date of the first rejection under section 132 of
any claim by the examiner during the examination of the
application for patent.
``(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.''.
(b) Effective Date.--The amendments made by this section
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to any patent application filed before, on, or after
that effective date.
SEC. 9. VENUE.
(a) 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 Trademark Act of 1946 (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''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act
and shall apply to any civil action commenced on or after
that date.
SEC. 10. FEE SETTING AUTHORITY.
(a) Fee Setting.--
(1) In general.--The Director may set or adjust by rule any
fee established, authorized, or charged under title 35,
United States Code, or the Trademark Act of 1946 (15 U.S.C.
1051 et seq.), for any services performed by or materials
furnished by, the Office, subject to paragraph (2).
(2) Fees to recover costs.--Fees may be set or adjusted
under paragraph (1) only to recover the aggregate estimated
costs to the Office for processing, activities, services, and
materials relating to patents (in the case of patent fees)
and trademarks (in the case of trademark fees), including
administrative costs of the Office with respect to such
patent or trademark fees (as the case may be).
(b) Small and Micro Entities.--The fees set or adjusted
under subsection (a) for filing, searching, examining,
issuing, appealing, and maintaining patent applications and
patents shall be reduced by 50 percent with respect to the
application of such fees to any small entity that qualifies
for reduced fees under section 41(h)(1) of title 35, United
States Code, and shall be reduced by 75 percent with respect
to the application of such fees to any micro entity as
defined in section 123 of that title (as added by subsection
(g) of this section).
(c) Reduction of Fees in Certain Fiscal Years.--In each
fiscal year, the Director--
(1) shall consult with the Patent Public Advisory Committee
and the Trademark Public Advisory Committee on the
advisability of reducing any fees described in subsection
(a); and
(2) after the consultation required under paragraph (1),
may reduce such fees.
(d) Role of the Public Advisory Committee.--The Director
shall--
(1) not less than 45 days before publishing any proposed
fee under subsection (a) in the Federal Register, submit the
proposed fee to the Patent Public Advisory Committee or the
Trademark Public Advisory Committee, or both, as appropriate;
(2)(A) provide the relevant advisory committee described in
paragraph (1) a 30-day period following the submission of any
proposed fee, in which to deliberate, consider, and comment
on such proposal;
(B) require that, during that 30-day period, the relevant
advisory committee hold a public hearing relating to such
proposal; and
(C) assist the relevant advisory committee in carrying out
that public hearing, including by offering the use of the
resources of the Office to notify and promote the hearing to
the public and interested stakeholders;
(3) require the relevant advisory committee to make
available to the public a written report setting forth in
detail the comments, advice, and recommendations of the
committee regarding the proposed fee; and
(4) consider and analyze any comments, advice, or
recommendations received from the relevant advisory committee
before setting or adjusting (as the case may be) the fee.
(e) Publication in the Federal Register.--
(1) Publication and rationale.--The Director shall--
(A) publish any proposed fee change under this section in
the Federal Register;
(B) include, in such publication, the specific rationale
and purpose for the proposal, including the possible
expectations or benefits resulting from the proposed change;
and
(C) notify, through the Chair and Ranking Member of the
Committees on the Judiciary of the Senate and the House of
Representatives, the Congress of the proposed change not
later than the date on which the proposed change is published
under subparagraph (A).
(2) Public comment period.--The Director shall, in the
publication under paragraph (1), provide the public a period
of not less than 45 days in which to submit comments on the
proposed change in fees.
(3) Publication of final rule.--The final rule setting or
adjusting a fee under this section shall be published in the
Federal Register and in the Official Gazette of the Patent
and Trademark Office.
(4) Congressional comment period.--A fee set or adjusted
under subsection (a) may not become effective--
(A) before the end of the 45-day period beginning on the
day after the date on which the Director publishes the final
rule adjusting or setting the fee under paragraph (3); or
(B) if a law is enacted disapproving such fee.
(5) Rule of construction.--Rules prescribed under this
section shall not diminish--
(A) the rights of an applicant for a patent under title 35,
United States Code, or for a mark under the Trademark Act of
1946; or
(B) any rights under a ratified treaty.
(f) Retention of Authority.--The Director retains the
authority under subsection (a) to set or adjust fees only
during such period as the Patent and Trademark Office remains
an agency within the Department of Commerce.
(g) Micro Entity Defined.--
(1) In general.--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
that the applicant--
``(1) qualifies as a small entity, as defined in
regulations issued by the Director;
``(2) has not been named as an inventor on more than 4
previously filed patent applications, other than applications
filed in another country, provisional applications under
section 111(b), or international applications filed under the
treaty defined in section 351(a) for which the basic national
fee under section 41(a) was not paid;
``(3) did not, in the calendar year preceding the calendar
year in which the examination fee for the application is
being paid, have a gross income, as defined in section 61(a)
of the Internal Revenue Code of 1986, exceeding 3 times the
median household income for that preceding calendar year, as
reported by the Bureau of the Census; and
``(4) has not assigned, granted, or conveyed, and is not
under an obligation by contract or law to assign, grant, or
convey, a license or other ownership interest in the
application concerned to an entity that, in the calendar year
preceding the calendar year in which the examination fee for
the application is being paid, had a gross income, as defined
in section 61(a) of the Internal Revenue Code of 1986,
exceeding 3 times the median household income for that
preceding calendar year, as reported by the Bureau of the
Census.
``(b) Applications Resulting From Prior Employment.--An
applicant is not considered to be named on a previously filed
application for purposes of subsection (a)(2) if the
applicant has assigned, or is under an obligation by contract
or law to assign, all ownership rights in the application as
the result of the applicant's previous employment.
``(c) Foreign Currency Exchange Rate.--If an applicant's or
entity's gross income in the preceding calendar year is not
in United States dollars, the average currency exchange rate,
as reported by the Internal Revenue Service, during that
calendar year shall be used to determine whether the
applicant's or entity's gross income exceeds the threshold
specified in paragraphs (3) or (4) of subsection (a).
``(d) Public Institutions of Higher Education.--
``(1) In general.--For purposes of this section, a micro
entity shall include an applicant who certifies that--
``(A) the applicant's employer, from which the applicant
obtains the majority of the applicant's income, is an
institution of higher education, as defined in section 101 of
the Higher Education Act of 1965 (20 U.S.C. 1001), that is a
public institution; or
``(B) the applicant has assigned, granted, conveyed, or is
under an obligation by contract or law to assign, grant, or
convey, a license or other ownership interest in the
particular application to such public institution.
``(2) Director's authority.--The Director may, in the
Director's discretion, impose income limits, annual filing
limits, or other limits on who may qualify as a micro entity
pursuant to this subsection if the Director determines that
such additional limits are reasonably necessary to avoid an
undue impact on other patent applicants or owners or are
otherwise reasonably necessary and appropriate. At least 3
months before any limits proposed to be imposed pursuant to
this paragraph take effect, the Director shall inform the
Committee on the Judiciary of the House of Representatives
and the Committee on the Judiciary of the Senate of any such
proposed limits.''.
(2) Conforming amendment.--Chapter 11 of title 35, United
States Code, is amended by adding at the end the following
new item:
``123. Micro entity defined.''.
(h) Electronic Filing Incentive.--
(1) In general.--Notwithstanding any other provision of
this section, a fee of $400 shall be established for each
application for an original patent, except for a design,
plant, or provisional application, that is not filed by
electronic means as prescribed by the Director. The fee
established by this subsection shall be reduced by 50 percent
for small entities that qualify for reduced fees under
section 41(h)(1) of title 35, United States Code. All fees
paid under this subsection shall be deposited in the Treasury
as an offsetting receipt that shall not be available for
obligation or expenditure.
(2) Effective date.--This subsection shall take effect upon
the expiration of the 60-day period beginning on the date of
the enactment of this Act.
(i) Effective Date; Sunset.--
(1) Effective date.--This section and the amendments made
by this section shall take effect on the date of the
enactment of this Act.
(2) Sunset.--The authority of the Director to set or adjust
any fee under subsection (a) shall terminate upon the
expiration of the 6-year period beginning on the date of the
enactment of this Act.
[[Page H4443]]
SEC. 11. FEES FOR PATENT SERVICES.
(a) General Patent Services.--Subsections (a) and (b) of
section 41 of title 35, United States Code, are amended to
read as follows:
``(a) General Fees.--The Director shall charge the
following fees:
``(1) Filing and basic national fees.--
``(A) On filing each application for an original patent,
except for design, plant, or provisional applications, $330.
``(B) On filing each application for an original design
patent, $220.
``(C) On filing each application for an original plant
patent, $220.
``(D) On filing each provisional application for an
original patent, $220.
``(E) On filing each application for the reissue of a
patent, $330.
``(F) The basic national fee for each international
application filed under the treaty defined in section 351(a)
entering the national stage under section 371, $330.
``(G) In addition, excluding any sequence listing or
computer program listing filed in an electronic medium as
prescribed by the Director, for any application the
specification and drawings of which exceed 100 sheets of
paper (or equivalent as prescribed by the Director if filed
in an electronic medium), $270 for each additional 50 sheets
of paper (or equivalent as prescribed by the Director if
filed in an electronic medium) or fraction thereof.
``(2) Excess claims fees.--
``(A) In general.--In addition to the fee specified in
paragraph (1)--
``(i) on filing or on presentation at any other time, $220
for each claim in independent form in excess of 3;
``(ii) on filing or on presentation at any other time, $52
for each claim (whether dependent or independent) in excess
of 20; and
``(iii) for each application containing a multiple
dependent claim, $390.
``(B) Multiple dependent claims.--For the purpose of
computing fees under subparagraph (A), a multiple dependent
claim referred to in section 112 or any claim depending
therefrom shall be considered as separate dependent claims in
accordance with the number of claims to which reference is
made.
``(C) Refunds; errors in payment.--The Director may by
regulation provide for a refund of any part of the fee
specified in subparagraph (A) for any claim that is canceled
before an examination on the merits, as prescribed by the
Director, has been made of the application under section 131.
Errors in payment of the additional fees under this paragraph
may be rectified in accordance with regulations prescribed by
the Director.
``(3) Examination fees.--
``(A) In general.--
``(i) For examination of each application for an original
patent, except for design, plant, provisional, or
international applications, $220.
``(ii) For examination of each application for an original
design patent, $140.
``(iii) For examination of each application for an original
plant patent, $170.
``(iv) For examination of the national stage of each
international application, $220.
``(v) For examination of each application for the reissue
of a patent, $650.
``(B) Applicability of other fee provisions.--The
provisions of paragraphs (3) and (4) of section 111(a)
relating to the payment of the fee for filing the application
shall apply to the payment of the fee specified in
subparagraph (A) with respect to an application filed under
section 111(a). The provisions of section 371(d) relating to
the payment of the national fee shall apply to the payment of
the fee specified in subparagraph (A) with respect to an
international application.
``(4) Issue fees.--
``(A) For issuing each original patent, except for design
or plant patents, $1,510.
``(B) For issuing each original design patent, $860.
``(C) For issuing each original plant patent, $1,190.
``(D) For issuing each reissue patent, $1,510.
``(5) Disclaimer fee.--On filing each disclaimer, $140.
``(6) Appeal fees.--
``(A) On filing an appeal from the examiner to the Patent
Trial and Appeal Board, $540.
``(B) In addition, on filing a brief in support of the
appeal, $540, and on requesting an oral hearing in the appeal
before the Patent Trial and Appeal Board, $1,080.
``(7) Revival fees.--On filing each petition for the
revival of an unintentionally abandoned application for a
patent, for the unintentionally delayed payment of the fee
for issuing each patent, or for an unintentionally delayed
response by the patent owner in any reexamination proceeding,
$1,620, unless the petition is filed under section 133 or
151, in which case the fee shall be $540.
``(8) Extension fees.--For petitions for 1-month extensions
of time to take actions required by the Director in an
application--
``(A) on filing a first petition, $130;
``(B) on filing a second petition, $360; and
``(C) on filing a third or subsequent petition, $620.
``(b) Maintenance Fees.--
``(1) In general.--The Director shall charge the following
fees for maintaining in force all patents based on
applications filed on or after December 12, 1980:
``(A) Three years and 6 months after grant, $980.
``(B) Seven years and 6 months after grant, $2,480.
``(C) Eleven years and 6 months after grant, $4,110.
``(2) Grace period; surcharge.--Unless payment of the
applicable maintenance fee under paragraph (1) is received in
the Office on or before the date the fee is due or within a
grace period of 6 months thereafter, the patent shall expire
as of the end of such grace period. The Director may require
the payment of a surcharge as a condition of accepting within
such 6-month grace period the payment of an applicable
maintenance fee.
``(3) No maintenance fee for design or plant patent.--No
fee may be established for maintaining a design or plant
patent in force.''.
(b) Delays in Payment.--Subsection (c) of section 41 of
title 35, United States Code, is amended--
(1) by striking ``(c)(1) The Director'' and inserting:
``(c) Delays in Payment of Maintenance Fees.--
``(1) Acceptance.--The Director''; and
(2) by striking ``(2) A patent'' and inserting:
``(2) Effect on rights of others.--A patent''.
(c) Patent Search Fees.--Subsection (d) of section 41 of
title 35, United States Code, is amended to read as follows:
``(d) Patent Search and Other Fees.--
``(1) Patent search fees.--
``(A) In general.--The Director shall charge the fees
specified under subparagraph (B) for the search of each
application for a patent, except for provisional
applications. The Director shall adjust the fees charged
under this paragraph to ensure that the fees recover an
amount not to exceed the estimated average cost to the Office
of searching applications for patent either by acquiring a
search report from a qualified search authority, or by
causing a search by Office personnel to be made, of each
application for patent.
``(B) Specific fees.--The fees referred to in subparagraph
(A) are--
``(i) $540 for each application for an original patent,
except for design, plant, provisional, or international
applications;
``(ii) $100 for each application for an original design
patent;
``(iii) $330 for each application for an original plant
patent;
``(iv) $540 for the national stage of each international
application; and
``(v) $540 for each application for the reissue of a
patent.
``(C) Applicability of other provisions.--The provisions of
paragraphs (3) and (4) of section 111(a) relating to the
payment of the fee for filing the application shall apply to
the payment of the fee specified in this paragraph with
respect to an application filed under section 111(a). The
provisions of section 371(d) relating to the payment of the
national fee shall apply to the payment of the fee specified
in this paragraph with respect to an international
application.
``(D) Refunds.--The Director may by regulation provide for
a refund of any part of the fee specified in this paragraph
for any applicant who files a written declaration of express
abandonment as prescribed by the Director before an
examination has been made of the application under section
131.
``(E) Applications subject to secrecy order.--A search of
an application that is the subject of a secrecy order under
section 181 or otherwise involves classified information may
be conducted only by Office personnel.
``(F) Conflicts of interest.--A qualified search authority
that is a commercial entity may not conduct a search of a
patent application if the entity has any direct or indirect
financial interest in any patent or in any pending or
imminent application for patent filed or to be filed in the
Office.
``(2) Other fees.--
``(A) In general.--The Director shall establish fees for
all other processing, services, or materials relating to
patents not specified in this section to recover the
estimated average cost to the Office of such processing,
services, or materials, except that the Director shall charge
the following fees for the following services:
``(i) For recording a document affecting title, $40 per
property.
``(ii) For each photocopy, $.25 per page.
``(iii) For each black and white copy of a patent, $3.
``(B) Copies for libraries.--The yearly fee for providing a
library specified in section 12 with uncertified printed
copies of the specifications and drawings for all patents in
that year shall be $50.''.
(d) Fees for Small Entities.--Subsection (h) of section 41
of title 35, United States Code, is amended to read as
follows:
``(h) Fees for Small Entities.--
``(1) Reductions in fees.--Subject to paragraph (3), fees
charged under subsections (a), (b), and (d)(1) shall be
reduced by 50 percent with respect to their application to
any small business concern as defined under section 3 of the
Small Business Act, and to any independent inventor or
nonprofit organization as defined in regulations issued by
the Director.
``(2) Surcharges and other fees.--With respect to its
application to any entity described in paragraph (1), any
surcharge or fee charged under subsection (c) or (d) shall
not be higher than the surcharge or fee required of any other
entity under the same or substantially similar circumstances.
``(3) Reduction for electronic filing.--The fee charged
under subsection (a)(1)(A) shall be reduced by 75 percent
with respect to its application to any entity to which
paragraph (1) applies, if the application is filed by
electronic means as prescribed by the Director.''.
(e) Technical Amendments.--Section 41 of title 35, United
States Code, is amended--
(1) in subsection (e), in the first sentence, by striking
``The Director'' and inserting ``Waiver of Fees; Copies
Regarding Notice.--The Director'';
(2) in subsection (f), by striking ``The fees'' and
inserting ``Adjustment of Fees.--The fees'';
(3) by repealing subsection (g); and
(4) in subsection (i)--
[[Page H4444]]
(A) by striking ``(i)(1) The Director'' and inserting the
following:
``(i) Electronic Patent and Trademark Data.--
``(1) Maintenance of collections.--The Director'';
(B) by striking ``(2) The Director'' and inserting the
following:
``(2) Availability of automated search systems.--The
Director'';
(C) by striking ``(3) The Director'' and inserting the
following:
``(3) Access fees.--The Director''; and
(D) by striking ``(4) The Director'' and inserting the
following:
``(4) Annual report to congress.--The Director''.
(f) Adjustment of Trademark Fees.--Section 802(a) of
division B of the Consolidated Appropriations Act, 2005
(Public Law 108-447) is amended--
(1) in the first sentence, by striking ``During fiscal
years 2005, 2006, and 2007,'', and inserting ``Until such
time as the Director sets or adjusts the fees otherwise,'';
and
(2) in the second sentence, by striking ``During fiscal
years 2005, 2006, and 2007, the'' and inserting ``The''.
(g) Effective Date, Applicability, and Transition
Provisions.--Section 803(a) of division B of the Consolidated
Appropriations Act, 2005 (Public Law 108-447) is amended by
striking ``and shall apply only with respect to the remaining
portion of fiscal year 2005 and fiscal year 2006''.
(h) Reduction in Fees for Small Entity Patents.--The
Director shall reduce fees for providing prioritized
examination of utility and plant patent applications by 50
percent for small entities that qualify for reduced fees
under section 41(h)(1) of title 35, United States Code, so
long as the fees of the prioritized examination program are
set to recover the estimated cost of the program.
(i) Effective Date.--Except as provided in subsection (h),
this section and the amendments made by this section shall
take effect on the date of the enactment of this Act.
SEC. 12. SUPPLEMENTAL EXAMINATION.
(a) In General.--Chapter 25 of title 35, United States
Code, is amended by adding at the end the following:
``Sec. 257. Supplemental examinations to consider,
reconsider, or correct information
``(a) Request for Supplemental Examination.--A patent owner
may request supplemental examination of a patent in the
Office to consider, reconsider, or correct information
believed to be relevant to the patent, in accordance with
such requirements as the Director may establish. Within 3
months after the date a request for supplemental examination
meeting the requirements of this section is received, the
Director shall conduct the supplemental examination and shall
conclude such examination by issuing a certificate indicating
whether the information presented in the request raises a
substantial new question of patentability.
``(b) Reexamination Ordered.--If the certificate issued
under subsection (a) indicates that a substantial new
question of patentability is raised by 1 or more items of
information in the request, the Director shall order
reexamination of the patent. The reexamination shall be
conducted according to procedures established by chapter 30,
except that the patent owner shall not have the right to file
a statement pursuant to section 304. During the
reexamination, the Director shall address each substantial
new question of patentability identified during the
supplemental examination, notwithstanding the limitations in
chapter 30 relating to patents and printed publication or any
other provision of such chapter.
``(c) Effect.--
``(1) In general.--A patent shall not be held unenforceable
on the basis of conduct relating to information that had not
been considered, was inadequately considered, or was
incorrect in a prior examination of the patent if the
information was considered, reconsidered, or corrected during
a supplemental examination of the patent. The making of a
request under subsection (a), or the absence thereof, shall
not be relevant to enforceability of the patent under section
282.
``(2) Exceptions.--
``(A) Prior allegations.--Paragraph (1) shall not apply to
an allegation pled with particularity in a civil action, or
set forth with particularity in a notice received by the
patent owner under section 505(j)(2)(B)(iv)(II) of the
Federal Food, Drug, and Cosmetic Act (21 U.S.C.
355(j)(2)(B)(iv)(II)), before the date of a supplemental
examination request under subsection (a) to consider,
reconsider, or correct information forming the basis for the
allegation.
``(B) Patent enforcement actions.--In an action brought
under section 337(a) of the Tariff Act of 1930 (19 U.S.C.
1337(a)), or section 281 of this title, paragraph (1) shall
not apply to any defense raised in the action that is based
upon information that was considered, reconsidered, or
corrected pursuant to a supplemental examination request
under subsection (a), unless the supplemental examination,
and any reexamination ordered pursuant to the request, are
concluded before the date on which the action is brought.
``(C) Fraud.--No supplemental examination may be commenced
by the Director on, and any pending supplemental examination
shall be immediately terminated regarding, an application or
patent in connection with which fraud on the Office was
practiced or attempted. If the Director determines that such
a fraud on the Office was practiced or attempted, the
Director shall also refer the matter to the Attorney General
for such action as the Attorney General may deem appropriate.
``(d) Fees and Regulations.--
``(1) Fees.--The Director shall, by regulation, establish
fees for the submission of a request for supplemental
examination of a patent, and to consider each item of
information submitted in the request. If reexamination is
ordered under subsection (b), fees established and applicable
to ex parte reexamination proceedings under chapter 30 shall
be paid, in addition to fees applicable to supplemental
examination.
``(2) Regulations.--The Director shall issue regulations
governing the form, content, and other requirements of
requests for supplemental examination, and establishing
procedures for reviewing information submitted in such
requests.
``(e) Rule of Construction.--Nothing in this section shall
be construed--
``(1) to preclude the imposition of sanctions based upon
criminal or antitrust laws (including section 1001(a) of
title 18, the first section of the Clayton Act, and section 5
of the Federal Trade Commission Act to the extent that
section relates to unfair methods of competition);
``(2) to limit the authority of the Director to investigate
issues of possible misconduct and impose sanctions for
misconduct in connection with matters or proceedings before
the Office; or
``(3) to limit the authority of the Director to issue
regulations under chapter 3 relating to sanctions for
misconduct by representatives practicing before the
Office.''.
(b) Conforming Amendment.--The table of sections for
chapter 25 of title 35, United States Code, is amended by
adding at the end the following new item:
``257. Supplemental examinations to consider, reconsider, or correct
information.''.
(c) Effective Date.--The amendments made by this section
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to any patent issued before, on, or after that
effective date.
SEC. 13. FUNDING AGREEMENTS.
(a) In General.--Section 202(c)(7)(E)(i) of title 35,
United States Code, is amended--
(1) by striking ``75 percent'' and inserting ``15
percent'';
(2) by striking ``25 percent'' and inserting ``85
percent''; and
(3) by striking ``as described above in this clause (D);''
and inserting ``described above in this clause;''.
(b) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act
and shall apply to any patent issued before, on, or after
that date.
SEC. 14. TAX STRATEGIES DEEMED WITHIN THE PRIOR ART.
(a) In General.--For purposes of evaluating an invention
under section 102 or 103 of title 35, United States Code, any
strategy for reducing, avoiding, or deferring tax liability,
whether known or unknown at the time of the invention or
application for patent, shall be deemed insufficient to
differentiate a claimed invention from the prior art.
(b) Definition.--For purposes of this section, the term
``tax liability'' refers to any liability for a tax under any
Federal, State, or local law, or the law of any foreign
jurisdiction, including any statute, rule, regulation, or
ordinance that levies, imposes, or assesses such tax
liability.
(c) Exclusions.--This section does not apply to that part
of an invention that--
(1) is a method, apparatus, technology, computer program
product, or system, that is used solely for preparing a tax
or information return or other tax filing, including one that
records, transmits, transfers, or organizes data related to
such filing; or
(2) is a method, apparatus, technology, computer program
product, or system used solely for financial management, to
the extent that it is severable from any tax strategy or does
not limit the use of any tax strategy by any taxpayer or tax
advisor.
(d) Rule of Construction.--Nothing in this section shall be
construed to imply that other business methods are patentable
or that other business method patents are valid.
(e) Effective Date; Applicability.--This section shall take
effect on the date of the enactment of this Act and shall
apply to any patent application that is pending on, or filed
on or after, that date, and to any patent that is issued on
or after that date.
SEC. 15. BEST MODE REQUIREMENT.
(a) In General.--Section 282 of title 35, United States
Code, is amended in the second undesignated paragraph by
striking paragraph (3) and inserting the following:
``(3) Invalidity of the patent or any claim in suit for
failure to comply with--
``(A) any requirement of section 112, except that the
failure to disclose the best mode shall not be a basis on
which any claim of a patent may be canceled or held invalid
or otherwise unenforceable; or
``(B) any requirement of section 251.''.
(b) Conforming Amendment.--Sections 119(e)(1) and 120 of
title 35, United States Code, are each amended by striking
``the first paragraph of section 112 of this title'' and
inserting ``section 112(a) (other than the requirement to
disclose the best mode)''.
(c) Effective Date.--The amendments made by this section
shall take effect upon the date of the enactment of this Act
and shall apply to proceedings commenced on or after that
date.
SEC. 16. MARKING.
(a) Virtual Marking.--
(1) In general.--Section 287(a) of title 35, United States
Code, is amended by striking ``or when,'' and inserting ``or
by fixing thereon the word `patent' or the abbreviation
`pat.' together with an address of a posting on the Internet,
accessible to the public without charge for accessing the
address, that associates the patented article with the number
of the patent, or when,''.
[[Page H4445]]
(2) Effective date.--The amendment made by this subsection
shall apply to any case that is pending on, or commenced on
or after, the date of the enactment of this Act.
(3) Report.--Not later than the date that is 3 years after
the date of the enactment of this Act, the Director shall
submit a report to Congress that provides--
(A) an analysis of the effectiveness of ``virtual
marking'', as provided in the amendment made by paragraph (1)
of this subsection, as an alternative to the physical marking
of articles;
(B) an analysis of whether such virtual marking has limited
or improved the ability of the general public to access
information about patents;
(C) an analysis of the legal issues, if any, that arise
from such virtual marking; and
(D) an analysis of the deficiencies, if any, of such
virtual marking.
(b) False Marking.--
(1) Civil penalty.--Section 292(a) of title 35, United
States, Code, is amended by adding at the end the following:
``Only the United States may sue for the penalty authorized
by this subsection.''.
(2) Civil action for damages.--Subsection (b) of section
292 of title 35, United States Code, is amended to read as
follows:
``(b) A person who has suffered a competitive injury as a
result of a violation of this section may file a civil action
in a district court of the United States for recovery of
damages adequate to compensate for the injury.''.
(3) Expired patents.--Section 292 of title 35, United
States Code, is amended by adding at the end the following:
``(c) Whoever engages in an activity under subsection (a)
for which liability would otherwise be imposed shall not be
liable for such activity--
``(1) that is engaged in during the 3-year period beginning
on the date on which the patent at issue expires; or
``(2) that is engaged in after the end of that 3-year
period if the word `expired' is placed before the word
`patent', `patented', the abbreviation `pat', or the patent
number, either on the article or through a posting on the
Internet, as provided in section 287(a).''.
(4) Effective date.--The amendments made by this subsection
shall apply to any case that is pending on, or commenced on
or after, the date of the enactment of this Act.
SEC. 17. ADVICE OF COUNSEL.
(a) In General.--Chapter 29 of title 35, United States
Code, is amended by adding at the end the following:
``Sec. 298. Advice of counsel
``The failure of an infringer to obtain the advice of
counsel with respect to any allegedly infringed patent, or
the failure of the infringer to present such advice to the
court or jury, may not be used to prove that the accused
infringer willfully infringed the patent or that the
infringer intended to induce infringement of the patent.''.
(b) Conforming Amendment.--The table of sections for
chapter 29 of title 35, United States Code, is amended by
adding at the end the following:
``298. Advice of counsel.''.
SEC. 18. TRANSITIONAL PROGRAM FOR COVERED BUSINESS METHOD
PATENTS.
(a) Transitional Program.--
(1) Establishment.--Not later than the date that is 1 year
after the date of the enactment of this Act, the Director
shall issue regulations establishing and implementing a
transitional post-grant review proceeding for review of the
validity of covered business method patents. The transitional
proceeding implemented pursuant to this subsection shall be
regarded as, and shall employ the standards and procedures
of, a post-grant review under chapter 32 of title 35, United
States Code, subject to the following:
(A) Section 321(c) of title 35, United States Code, and
subsections (b), (e)(2), and (f) of section 325 of such title
shall not apply to a transitional proceeding.
(B) A person may not file a petition for a transitional
proceeding with respect to a covered business method patent
unless the person or the person's real party in interest has
been sued for infringement of the patent or has been charged
with infringement under that patent.
(C) A petitioner in a transitional proceeding who
challenges the validity of 1 or more claims in a covered
business method patent on a ground raised under section 102
or 103 of title 35, United States Code, as in effect on the
day before the effective date set forth in section 3(n)(1),
may support such ground only on the basis of--
(i) prior art that is described by section 102(a) of such
title of such title (as in effect on the day before such
effective date); or
(ii) prior art that--
(I) discloses the invention more than 1 year before the
date of the application for patent in the United States; and
(II) would be described by section 102(a) of such title (as
in effect on the day before the effective date set forth in
section 3(n)(1)) if the disclosure had been made by another
before the invention thereof by the applicant for patent.
(D) The petitioner in a transitional proceeding, or the
petitioner's real party in interest, may not assert, either
in a civil action arising in whole or in part under section
1338 of title 28, United States Code, or in a proceeding
before the International Trade Commission under section 337
of the Tariff Act of 1930 (19 U.S.C. 1337), that a claim in a
patent is invalid on any ground that the petitioner raised
during a transitional proceeding that resulted in a final
written decision.
(E) The Director may institute a transitional proceeding
only for a patent that is a covered business method patent.
(2) Effective date.--The regulations issued under paragraph
(1) shall take effect upon the expiration of the 1-year
period beginning on the date of the enactment of this Act and
shall apply to any covered business method patent issued
before, on, or after that effective date, except that the
regulations shall not apply to a patent described in section
6(f)(2)(A) of this Act during the period in which a petition
for post-grant review of that patent would satisfy the
requirements of section 321(c) of title 35, United States
Code.
(3) Sunset.--
(A) In general.--This subsection, and the regulations
issued under this subsection, are repealed effective upon the
expiration of the 10-year period beginning on the date that
the regulations issued under to paragraph (1) take effect.
(B) Applicability.--Notwithstanding subparagraph (A), this
subsection and the regulations issued under this subsection
shall continue to apply, after the date of the repeal under
subparagraph (A), to any petition for a transitional
proceeding that is filed before the date of such repeal.
(b) Request for Stay.--
(1) In general.--If a party seeks a stay of a civil action
alleging infringement of a patent under section 281 of title
35, United States Code, relating to a transitional proceeding
for that patent, the court shall decide whether to enter a
stay based on--
(A) whether a stay, or the denial thereof, will simplify
the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date
has been set;
(C) whether a stay, or the denial thereof, would unduly
prejudice the nonmoving party or present a clear tactical
advantage for the moving party; and
(D) whether a stay, or the denial thereof, will reduce the
burden of litigation on the parties and on the court.
(2) Review.--A party may take an immediate interlocutory
appeal from a district court's decision under paragraph (1).
The United States Court of Appeals for the Federal Circuit
shall review the district court's decision to ensure
consistent application of established precedent, and such
review may be de novo.
(c) ATM Exemption for Venue Purposes.--In an action for
infringement under section 281 of title 35, United States
Code, of a covered business method patent, an automated
teller machine shall not be deemed to be a regular and
established place of business for purposes of section 1400(b)
of title 28, United States Code.
(d) Definition.--
(1) In general.--For purposes of this section, the term
``covered business method patent'' means a patent that claims
a method or corresponding apparatus for performing data
processing or other operations used in the practice,
administration, or management of a financial product or
service, except that the term does not include patents for
technological inventions.
(2) Regulations.--To assist in implementing the
transitional proceeding authorized by this subsection, the
Director shall issue regulations for determining whether a
patent is for a technological invention.
(e) Rule of Construction.--Nothing in this section shall be
construed as amending or interpreting categories of patent-
eligible subject matter set forth under section 101 of title
35, United States Code.
SEC. 19. JURISDICTION AND PROCEDURAL MATTERS.
(a) State Court Jurisdiction.--Section 1338(a) of title 28,
United States Code, is amended by striking the second
sentence and inserting the following: ``No State court shall
have jurisdiction over any claim for relief arising under any
Act of Congress relating to patents, plant variety
protection, or copyrights. For purposes of this subsection,
the term `State' includes any State of the United States, the
District of Columbia, the Commonwealth of Puerto Rico, the
United States Virgin Islands, American Samoa, Guam, and the
Northern Mariana Islands.''.
(b) Court of Appeals for the Federal Circuit.--Section
1295(a)(1) of title 28, United States Code, is amended to
read as follows:
``(1) of an appeal from a final decision of a district
court of the United States, the District Court of Guam, the
District Court of the Virgin Islands, or the District Court
of the Northern Mariana Islands, in any civil action arising
under, or in any civil action in which a party has asserted a
compulsory counterclaim arising under, any Act of Congress
relating to patents or plant variety protection;''.
(c) Removal.--
(1) In general.--Chapter 89 of title 28, United States
Code, is amended by adding at the end the following new
section:
``Sec. 1454. Patent, plant variety protection, and copyright
cases
``(a) In General.--A civil action in which any party
asserts a claim for relief arising under any Act of Congress
relating to patents, plant variety protection, or copyrights
may be removed to the district court of the United States for
the district and division embracing the place where the
action is pending.
``(b) Special Rules.--The removal of an action under this
section shall be made in accordance with section 1446, except
that if the removal is based solely on this section--
``(1) the action may be removed by any party; and
``(2) the time limitations contained in section 1446(b) may
be extended at any time for cause shown.
``(c) Clarification of Jurisdiction in Certain Cases.--The
court to which a civil action is removed under this section
is not precluded from hearing and determining any claim in
the civil action because the State court from which the civil
action is removed did not have jurisdiction over that claim.
``(d) Remand.--If a civil action is removed solely under
this section, the district court--
[[Page H4446]]
``(1) shall remand all claims that are neither a basis for
removal under subsection (a) nor within the original or
supplemental jurisdiction of the district court under any Act
of Congress; and
``(2) may, under the circumstances specified in section
1367(c), remand any claims within the supplemental
jurisdiction of the district court under section 1367.''.
(2) Conforming amendment.--The table of sections for
chapter 89 of title 28, United States Code, is amended by
adding at the end the following new item:
``1454. Patent, plant variety protection, and copyright cases.''.
(d) Transfer by Court of Appeals for the Federal Circuit.--
(1) In general.--Chapter 99 of title 28, United States
Code, is amended by adding at the end the following new
section:
``Sec. 1632. Transfer by the Court of Appeals for the Federal
Circuit
``When a case is appealed to the Court of Appeals for the
Federal Circuit under section 1295(a)(1), and no claim for
relief arising under any Act of Congress relating to patents
or plant variety protection is the subject of the appeal by
any party, the Court of Appeals for the Federal Circuit shall
transfer the appeal to the court of appeals for the regional
circuit embracing the district from which the appeal has been
taken.''.
(2) Conforming amendment.--The table of sections for
chapter 99 of title 28, United States Code, is amended by
adding at the end the following new item:
``1632. Transfer by the Court of Appeals for the Federal Circuit.''.
(e) Procedural Matters in Patent Cases.--
(1) Joinder of parties and stay of actions.--Chapter 29 of
title 35, United States Code, as amended by this Act, is
further amended by adding at the end the following new
section:
``Sec. 299. Joinder of parties
``(a) Joinder of Accused Infringers.--In any civil action
arising under any Act of Congress relating to patents, other
than an action or trial in which an act of infringement under
section 271(e)(2) has been pled, parties that are accused
infringers may be joined in one action as defendants or
counterclaim defendants only if--
``(1) any right to relief is asserted against the parties
jointly, severally, or in the alternative with respect to or
arising out of the same transaction, occurrence, or series of
transactions or occurrences relating to the making, using,
importing into the United States, offering for sale, or
selling of the same accused product or process; and
``(2) questions of fact common to all defendants or
counterclaim defendants will arise in the action.
``(b) Allegations Insufficient for Joinder.--For purposes
of this subsection, accused infringers may not be joined in
one action or trial as defendants or counterclaim defendants
based solely on allegations that they each have infringed the
patent or patents in suit.''.
(2) Conforming amendment.--The table of sections for
chapter 29 of title 35, United States Code, as amended by
this Act, is further amended by adding at the end the
following new item:
``299. Joinder of parties.''.
(e) Effective Date.--The amendments made by this section
shall apply to any civil action commenced on or after the
date of the enactment of this Act.
SEC. 20. TECHNICAL AMENDMENTS.
(a) Joint Inventions.--Section 116 of title 35, United
States Code, is amended--
(1) in the first undesignated paragraph, by striking
``When'' and inserting ``(a) Joint Inventions.--When'';
(2) in the second undesignated paragraph, by striking ``If
a joint inventor'' and inserting ``(b) Omitted Inventor.--If
a joint inventor''; and
(3) in the third undesignated paragraph--
(A) by striking ``Whenever'' and inserting ``(c) Correction
of Errors in Application.--Whenever''; and
(B) by striking ``and such error arose without any
deceptive intention on his part,''.
(b) Filing of Application in Foreign Country.--Section 184
of title 35, United States Code, is amended--
(1) in the first undesignated paragraph--
(A) by striking ``Except when'' and inserting ``(a) Filing
in Foreign Country.--Except when''; and
(B) by striking ``and without deceptive intent'';
(2) in the second undesignated paragraph, by striking ``The
term'' and inserting ``(b) Application.--The term''; and
(3) in the third undesignated paragraph, by striking ``The
scope'' and inserting ``(c) Subsequent Modifications,
Amendments, and Supplements.--The scope''.
(c) Filing Without a License.--Section 185 of title 35,
United States Code, is amended by striking ``and without
deceptive intent''.
(d) Reissue of Defective Patents.--Section 251 of title 35,
United States Code, is amended--
(1) in the first undesignated paragraph--
(A) by striking ``Whenever'' and inserting ``(a) In
General.--Whenever''; and
(B) by striking ``without any deceptive intention'';
(2) in the second undesignated paragraph, by striking ``The
Director'' and inserting ``(b) Multiple Reissued Patents.--
The Director'';
(3) in the third undesignated paragraph, by striking ``The
provisions'' and inserting ``(c) Applicability of This
Title.--The provisions''; and
(4) in the last undesignated paragraph, by striking ``No
reissued patent'' and inserting ``(d) Reissue Patent
Enlarging Scope of Claims.--No reissued patent''.
(e) Effect of Reissue.--Section 253 of title 35, United
States Code, is amended--
(1) in the first undesignated paragraph, by striking
``Whenever, without any deceptive intention,'' and inserting
``(a) In General.--Whenever''; and
(2) in the second undesignated paragraph, by striking ``In
like manner'' and inserting ``(b) Additional Disclaimer or
Dedication.--In the manner set forth in subsection (a),''.
(f) Correction of Named Inventor.--Section 256 of title 35,
United States Code, is amended--
(1) in the first undesignated paragraph--
(A) by striking ``Whenever'' and inserting ``(a)
Correction.--Whenever''; and
(B) by striking ``and such error arose without any
deceptive intention on his part''; and
(2) in the second undesignated paragraph, by striking ``The
error'' and inserting ``(b) Patent Valid if Error
Corrected.--The error''.
(g) Presumption of Validity.--Section 282 of title 35,
United States Code, is amended--
(1) in the first undesignated paragraph--
(A) by striking ``A patent'' and inserting ``(a) In
General.--A patent''; and
(B) by striking the third sentence;
(2) in the second undesignated paragraph--
(A) by striking ``The following'' and inserting ``(b)
Defenses.--The following'';
(B) in paragraph (1), by striking ``uneforceability,'' and
inserting ``unenforceability.''; and
(C) in paragraph (2), by striking ``patentability,'' and
inserting ``patentability.'' ; and
(3) in the third undesignated paragraph--
(A) by striking ``In actions involving the validity or
infringement of a patent'' and inserting ``(c) Notice of
Actions; Actions During Extension of Patent Term.--In an
action involving the validity or infringement of patent, the
party asserting infringement shall identify, in the pleadings
or otherwise in writing to the adverse party, all of its real
parties in interest, and''; and
(B) by striking ``Claims Court'' and inserting ``Court of
Federal Claims''.
(h) Action for Infringement.--Section 288 of title 35,
United States Code, is amended by striking ``, without
deceptive intention,''.
(i) Reviser's Notes.--
(1) Section 3(e)(2) of title 35, United States Code, is
amended by striking ``this Act,'' and inserting ``that
Act,''.
(2) Section 202 of title 35, United States Code, is
amended--
(A) in subsection (b)(3), by striking ``the section
203(b)'' and inserting ``section 203(b)''; and
(B) in subsection (c)(7)(D), by striking ``except where it
proves'' and all that follows through ``small business firms;
and'' and inserting: ``except where it is determined to be
infeasible following a reasonable inquiry, a preference in
the licensing of subject inventions shall be given to small
business firms; and''.
(3) Section 209(d)(1) of title 35, United States Code, is
amended by striking ``nontransferrable'' and inserting
``nontransferable''.
(4) Section 287(c)(2)(G) of title 35, United States Code,
is amended by striking ``any state'' and inserting ``any
State''.
(5) Section 371(b) of title 35, United States Code, is
amended by striking ``of the treaty'' and inserting ``of the
treaty.''.
(j) Unnecessary References.--
(1) In general.--Title 35, United States Code, is amended
by striking ``of this title'' each place that term appears.
(2) Exception.--The amendment made by paragraph (1) shall
not apply to the use of such term in the following sections
of title 35, United States Code:
(A) Section 1(c).
(B) Section 101.
(C) Subsections (a) and (b) of section 105.
(D) The first instance of the use of such term in section
111(b)(8).
(E) Section 161.
(F) Section 164.
(G) Section 171.
(H) Section 251(c), as so designated by this section.
(I) Section 261.
(J) Subsections (g) and (h) of section 271.
(K) Section 287(b)(1).
(L) Section 289.
(M) The first instance of the use of such term in section
375(a).
(k) Effective Date.--The amendments made by this section
shall take effect upon the expiration of the 1-year period
beginning on the date of the enactment of this Act and shall
apply to proceedings commenced on or after that effective
date.
SEC. 21. TRAVEL EXPENSES AND PAYMENT OF ADMINISTRATIVE
JUDGES.
(a) Authority To Cover Certain Travel Related Expenses.--
Section 2(b)(11) of title 35, United States Code, is amended
by inserting ``, and the Office is authorized to expend funds
to cover the subsistence expenses and travel-related
expenses, including per diem, lodging costs, and
transportation costs, of persons attending such programs who
are not Federal employees'' after ``world''.
(b) Payment of Administrative Judges.--Section 3(b) of
title 35, United States Code, is amended by adding at the end
the following:
``(6) Administrative patent judges and administrative
trademark judges.--The Director may fix the rate of basic pay
for the administrative patent judges appointed pursuant to
section 6 and the administrative trademark judges appointed
pursuant to section 17 of the Trademark Act of 1946 (15
U.S.C. 1067) at not greater than the rate of basic pay
payable for level III of the Executive Schedule under section
5314 of title 5. The payment of a rate of basic pay under
this paragraph shall not be subject to the pay limitation
under section 5306(e) or 5373 of title 5.''.
SEC. 22. PATENT AND TRADEMARK OFFICE FUNDING.
(a) Definition.--In this section, the term ``Fund'' means
the United States Patent and
[[Page H4447]]
Trademark Office Public Enterprise Fund established under
subsection (c).
(b) Funding.--
(1) In general.--Section 42 of title 35, United States
Code, is amended--
(A) in subsection (b), by striking ``Patent and Trademark
Office Appropriation Account'' and inserting ``United States
Patent and Trademark Office Public Enterprise Fund''; and
(B) in subsection (c), in the first sentence--
(i) by striking ``To the extent'' and all that follows
through ``fees'' and inserting ``Fees''; and
(ii) by striking ``shall be collected by and shall be
available to the Director'' and inserting ``shall be
collected by the Director and shall be available until
expended''.
(2) Effective date.--The amendments made by paragraph (1)
shall take effect on the later of--
(A) October 1, 2011; or
(B) the first day of the first fiscal year that begins
after the date of the enactment of this Act.
(c) USPTO Revolving Fund.--
(1) Establishment.--There is established in the Treasury of
the United States a revolving fund to be known as the
``United States Patent and Trademark Office Public Enterprise
Fund''. Any amounts in the Fund shall be available for use by
the Director without fiscal year limitation.
(2) Derivation of resources.--There shall be deposited into
the Fund and recorded as offsetting receipts, on and after
the effective date set forth in subsection (b)(2)--
(A) any fees collected under sections 41, 42, and 376 of
title 35, United States Code, except that--
(i) notwithstanding any other provision of law, if such
fees are collected by, and payable to, the Director, the
Director shall transfer such amounts to the Fund; and
(ii) no funds collected pursuant to section 10(h) of this
Act or section 1(a)(2) of Public Law 111-45 shall be
deposited in the Fund; and
(B) any fees collected under section 31 of the Trademark
Act of 1946 (15 U.S.C. 1113).
(3) Expenses.--Amounts deposited into the Fund under
paragraph (2) shall be available, without fiscal year
limitation, to cover--
(A) all expenses to the extent consistent with the
limitation on the use of fees set forth in section 42(c) of
title 35, United States Code, including all administrative
and operating expenses, determined in the discretion of the
Director to be ordinary and reasonable, incurred by the
Director for the continued operation of all services,
programs, activities, and duties of the Office relating to
patents and trademarks, as such services, programs,
activities, and duties are described under--
(i) title 35, United States Code; and
(ii) the Trademark Act of 1946; and
(B) all expenses incurred pursuant to any obligation,
representation, or other commitment of the Office.
(d) Annual Report.--Not later than 60 days after the end of
each fiscal year, the Director shall submit a report to
Congress which shall--
(1) summarize the operations of the Office for the
preceding fiscal year, including financial details and staff
levels broken down by each major activity of the Office;
(2) detail the operating plan of the Office, including
specific expense and staff needs for the upcoming fiscal
year;
(3) describe the long-term modernization plans of the
Office;
(4) set forth details of any progress towards such
modernization plans made in the previous fiscal year; and
(5) include the results of the most recent audit carried
out under subsection (f).
(e) Annual Spending Plan.--
(1) In general.--Not later than 30 days after the beginning
of each fiscal year, the Director shall notify the Committees
on Appropriations of both Houses of Congress of the plan for
the obligation and expenditure of the total amount of the
funds for that fiscal year in accordance with section 605 of
the Science, State, Justice, Commerce, and Related Agencies
Appropriations Act, 2006 (Public Law 109-108; 119 Stat.
2334).
(2) Contents.--Each plan under paragraph (1) shall--
(A) summarize the operations of the Office for the current
fiscal year, including financial details and staff levels
with respect to major activities; and
(B) detail the operating plan of the Office, including
specific expense and staff needs, for the current fiscal
year.
(f) Audit.--The Director shall, on an annual basis, provide
for an independent audit of the financial statements of the
Office. Such audit shall be conducted in accordance with
generally acceptable accounting procedures.
(g) Budget.--The Director shall prepare and submit each
year to the President a business-type budget for the Fund in
a manner, and before a date, as the President prescribes by
regulation for the Federal budget.
SEC. 23. SATELLITE OFFICES.
(a) Establishment.--Subject to available resources, the
Director shall, by not later than the date that is 3 years
after the date of the enactment of this Act, establish 3 or
more satellite offices in the United States to carry out the
responsibilities of the Office.
(b) Purposes.--The purposes of the satellite offices
established under subsection (a) are to--
(1) increase outreach activities to better connect patent
filers and innovators with the Office;
(2) enhance patent examiner retention;
(3) improve recruitment of patent examiners;
(4) decrease the number of patent applications waiting for
examination; and
(5) improve the quality of patent examination.
(c) Required Considerations.--
(1) In general.--In selecting the location of each
satellite office to be established under subsection (a), the
Director--
(A) shall ensure geographic diversity among the offices,
including by ensuring that such offices are established in
different States and regions throughout the Nation;
(B) may rely upon any previous evaluations by the Office of
potential locales for satellite offices, including any
evaluations prepared as part of the Office's Nationwide
Workforce Program that resulted in the 2010 selection of
Detroit, Michigan, as the first satellite office of the
Office.
(2) Open selection process.--Nothing in paragraph (1) shall
constrain the Office to only consider its evaluations in
selecting the Detroit, Michigan, satellite office.
(d) Report to Congress.--Not later than the end of the
third fiscal year that begins after the date of the enactment
of this Act, the Director shall submit a report to Congress
on--
(1) the rationale of the Director in selecting the location
of any satellite office required under subsection (a);
(2) the progress of the Director in establishing all such
satellite offices; and
(3) whether the operation of existing satellite offices is
achieving the purposes under subsection (b).
SEC. 24. DESIGNATION OF DETROIT SATELLITE OFFICE.
(a) Designation.--The satellite office of the United States
Patent and Trademark Office to be located in Detroit,
Michigan, shall be known and designated as the ``Elijah J.
McCoy United States Patent and Trademark Office''.
(b) References.--Any reference in a law, map, regulation,
document, paper, or other record of the United States to the
satellite office of the United States Patent and Trademark
Office to be located in Detroit, Michigan, referred to in
subsection (a) shall be deemed to be a reference to the
``Elijah J. McCoy United States Patent and Trademark
Office''.
SEC. 25. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS
CONCERNS.
Using available resources, the Director shall establish and
maintain in the Office a Patent Ombudsman Program. The duties
of the Program's staff shall include providing support and
services relating to patent filings to small business
concerns.
SEC. 26. PRIORITY EXAMINATION FOR TECHNOLOGIES IMPORTANT TO
AMERICAN COMPETITIVENESS.
Section 2(b)(2) of title 35, United States Code, is
amended--
(1) in subparagraph (E), by striking ``and'' after the
semicolon;
(2) in subparagraph (F), by inserting ``and'' after the
semicolon; and
(3) by adding at the end the following:
``(G) may, subject to any conditions prescribed by the
Director and at the request of the patent applicant, provide
for prioritization of examination of applications for
products, processes, or technologies that are important to
the national economy or national competitiveness without
recovering the aggregate extra cost of providing such
prioritization, notwithstanding section 41 or any other
provision of law;''.
SEC. 27. CALCULATION OF 60-DAY PERIOD FOR APPLICATION OF
PATENT TERM EXTENSION.
(a) In General.--Section 156(d)(1) of title 35, United
States Code, is amended by adding at the end the following
flush sentence:
``For purposes of determining the date on which a product
receives permission under the second sentence of this
paragraph, if such permission is transmitted after 4:30 P.M.,
Eastern Time, on a business day, or is transmitted on a day
that is not a business day, the product shall be deemed to
receive such permission on the next business day. For
purposes of the preceding sentence, the term `business day'
means any Monday, Tuesday, Wednesday, Thursday, or Friday,
excluding any legal holiday under section 6103 of title 5.''.
(b) Applicability.--The amendment made by subsection (a)
shall apply to any application for extension of a patent term
under section 156 of title 35, United States Code, that is
pending on, that is filed after, or as to which a decision
regarding the application is subject to judicial review on,
the date of the enactment of this Act.
SEC. 28. STUDY ON IMPLEMENTATION.
(a) PTO Study.--The Director shall conduct a study on the
manner in which this Act and the amendments made by this Act
are being implemented by the Office, and on such other
aspects of the patent policies and practices of the Federal
Government with respect to patent rights, innovation in the
United States, competitiveness of United States markets,
access by small businesses to capital for investment, and
such other issues, as the Director considers appropriate.
(b) Report to Congress.--The Director shall, not later than
the date that is 4 years after the date of the enactment of
this Act, submit to the Committees on the Judiciary of the
House of Representatives and the Senate a report on the
results of the study conducted under subsection (a),
including recommendations for any changes to laws and
regulations that the Director considers appropriate.
SEC. 29. PRO BONO PROGRAM.
(a) In General.--The Director shall work with and support
intellectual property law associations across the country in
the establishment of pro bono programs designed to assist
financially under-resourced independent inventors and small
businesses.
(b) Effective Date.--This section shall take effect on the
date of the enactment of this Act.
SEC. 30. EFFECTIVE DATE.
Except as otherwise provided in this Act, the provisions of
this Act shall take effect upon the expiration of the 1-year
period beginning on the date of the enactment of this Act and
shall apply to any patent issued on or after that effective
date.
[[Page H4448]]
SEC. 31. BUDGETARY EFFECTS.
The budgetary effects of this Act, for the purpose of
complying with the Statutory Pay-As-You-Go Act of 2010, shall
be determined by reference to the latest statement titled
``Budgetary Effects of PAYGO Legislation'' for this Act,
submitted for printing in the Congressional Record by the
Chairman of the House Budget Committee, provided that such
statement has been submitted prior to the vote on passage.
The Acting CHAIR. No amendment to the committee amendment is in order
except those printed in part B of House Report 112-111. Each such
amendment may be offered only in the order printed in the report, by a
Member designated in the report, shall be considered read, shall be
debatable for the time specified in the report equally divided and
controlled by the proponent and an opponent, shall not be subject to
amendment, and shall not be subject to a demand for division of the
question.
Amendment No. 1 Offered by Mr. Smith of Texas
The Acting CHAIR. It is now in order to consider amendment No. 1
printed in part B of House Report 112-111.
Mr. SMITH of Texas. Madam Chair, I have an amendment at the desk.
The Acting CHAIR. The Clerk will designate the amendment.
The text of the amendment is as follows:
Page 3, line 5, strike ``America Invents Act'' and insert
``Leahy-Smith America Invents Act''.
Page 4, lines 10 and 22, strike ``5(a)(1)'' and insert
``5(a)''.
Page 16, line 1, insert after the period the following:
``In appropriate circumstances, the Patent Trial and Appeal
Board may correct the naming of the inventor in any
application or patent at issue.''.
Page 25, strike line 13 and all that follows through page
27, line 2, and redesignate the succeeding subsections
accordingly.
Page 27, line 4, strike ``registration''.
Page 27, line 5, strike ``inventor to use'' and insert ``to
invent''.
Page 27, line 6, insert ``and the useful arts'' after
``science''.
Page 27, line 9, strike ``granted by the'' and insert
``provided by the grant of''.
Page 27, line 12, strike ``registration''.
Page 27, line 13, strike ``inventor to use'' and insert
``to invent''.
Page 27, lines 14 and 15, strike ``harmonize the United
States patent registration system with the patent
registration systems'' and insert ``improve the United States
patent system and promote harmonization of the United States
patent system with the patent systems''.
Page 27, line 18, strike ``a greater sense of'' and insert
``greater''.
Page 36, strike line 10 and all that follows through page
40, line 5, and insert the following (and conform the table
of contents) accordingly:
SEC. 5. DEFENSE TO INFRINGEMENT BASED ON PRIOR COMMERCIAL
USE.
(a) In General.--Section 273 of title 35, United States
Code, is amended to read as follows:
``Sec. 273. Defense to infringement based on prior commercial
use
``(a) In General.--A person shall be entitled to a defense
under section 282(b) with respect to subject matter
consisting of a process, or consisting of a machine,
manufacture, or composition of matter used in a manufacturing
or other commercial process, that would otherwise infringe a
claimed invention being asserted against the person if--
``(1) such person, acting in good faith, commercially used
the subject matter in the United States, either in connection
with an internal commercial use or an actual arm's length
sale or other arm's length commercial transfer of a useful
end result of such commercial use; and
``(2) such commercial use occurred at least 1 year before
the earlier of either--
``(A) the effective filing date of the claimed invention;
or
``(B) the date on which the claimed invention was disclosed
to the public in a manner that qualified for the exception
from prior art under section 102(b).
``(b) Burden of Proof.--A person asserting a defense under
this section shall have the burden of establishing the
defense by clear and convincing evidence.
``(c) Additional Commercial Uses.--
``(1) Premarketing regulatory review.--Subject matter for
which commercial marketing or use is subject to a
premarketing regulatory review period during which the safety
or efficacy of the subject matter is established, including
any period specified in section 156(g), shall be deemed to be
commercially used for purposes of subsection (a)(1) during
such regulatory review period.
``(2) Nonprofit laboratory use.--A use of subject matter by
a nonprofit research laboratory or other nonprofit entity,
such as a university or hospital, for which the public is the
intended beneficiary, shall be deemed to be a commercial use
for purposes of subsection (a)(1), except that a defense
under this section may be asserted pursuant to this paragraph
only for continued and noncommercial use by and in the
laboratory or other nonprofit entity.
``(d) Exhaustion of Rights.--Notwithstanding subsection
(e)(1), the sale or other disposition of a useful end result
by a person entitled to assert a defense under this section
in connection with a patent with respect to that useful end
result shall exhaust the patent owner's rights under the
patent to the extent that such rights would have been
exhausted had such sale or other disposition been made by the
patent owner.
``(e) Limitations and Exceptions.--
``(1) Personal defense.--
``(A) In general.--A defense under this section may be
asserted only by the person who performed or directed the
performance of the commercial use described in subsection
(a), or by an entity that controls, is controlled by, or is
under common control with such person.
``(B) Transfer of right.--Except for any transfer to the
patent owner, the right to assert a defense under this
section 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.
``(C) Restriction on sites.--A defense under this section,
when acquired by a person as part of an assignment or
transfer described in subparagraph (B), may only be asserted
for uses at sites where the subject matter that would
otherwise infringe a claimed invention is in use before the
later of the effective filing date of the claimed invention
or the date of the assignment or transfer of such enterprise
or line of business.
``(2) Derivation.--A person may not assert a defense under
this section if the subject matter on which the defense is
based was derived from the patentee or persons in privity
with the patentee.
``(3) Not a general license.--The defense asserted by a
person under this section is not a general license under all
claims of the patent at issue, but extends only to the
specific subject matter for which it has been established
that a commercial use that qualifies under this section
occurred, except that the defense shall also extend to
variations in the quantity or volume of use of the claimed
subject matter, and to improvements in the claimed subject
matter that do not infringe additional specifically claimed
subject matter of the patent.
``(4) Abandonment of use.--A person who has abandoned
commercial use (that qualifies under this section) of subject
matter may not rely on activities performed before the date
of such abandonment in establishing a defense under this
section with respect to actions taken on or after the date of
such abandonment.
``(5) University exception.--
``(A) In general.--A person commercially using subject
matter to which subsection (a) applies may not assert a
defense under this section if the claimed invention with
respect to which the defense is asserted was, at the time the
invention was made, owned or subject to an obligation of
assignment to either an institution of higher education (as
defined in section 101(a) of the Higher Education Act of 1965
(20 U.S.C. 1001(a)), or a technology transfer organization
whose primary purpose is to facilitate the commercialization
of technologies developed by one or more such institutions of
higher education.
``(B) Exception.--Subparagraph (A) shall not apply if any
of the activities required to reduce to practice the subject
matter of the claimed invention could not have been
undertaken using funds provided by the Federal Government.
``(f) Unreasonable Assertion of Defense.--If the defense
under this section is pleaded by a person who is found to
infringe the patent and who subsequently fails to demonstrate
a reasonable basis for asserting the defense, the court shall
find the case exceptional for the purpose of awarding
attorney fees under section 285.
``(g) Invalidity.--A patent shall not be deemed to be
invalid under section 102 or 103 solely because a defense is
raised or established under this section.''.
(b) Conforming Amendment.--The item relating to section 273
in the table of sections for chapter 28 of title 35, United
States Code, is amended to read as follows:
``273. Defense to infringement based on prior commercial use.''.
(c) Effective Date.--The amendments made by this section
shall apply to any patent issued on or after the date of the
enactment of this Act.
Page 41, line 5, strike ``1 year'' and insert ``9 months''.
Page 42, line 22, strike ``commence'' and insert ``be
instituted''.
Page 43, line 24, and page 44, line 1, strike ``petitioner,
real party in interest, or privy of the petitioner'' and
insert ``petitioner or real party in interest''.
Page 44, lines 3 and 4, strike ``petitioner, real party in
interest, or privy of the petitioner'' and insert
``petitioner or real party in interest''.
Page 44, lines 13 and 14, strike ``petitioner, real party
in interest, or privy of the petitioner'' and insert
``petitioner or real party in interest''.
Page 44, lines 16 and 17, strike ``petitioner, real party
in interest, or privy of the petitioner'' and insert
``petitioner or real party in interest''.
Page 52, line 10, strike ``Amended or New Claim'' and
insert ``Intervening Rights''.
Page 54, insert the following after line 10:
[[Page H4449]]
(3) Transition.--
(A) In general.--Chapter 31 of title 35, United States
Code, is amended--
(i) in section 312--
(I) in subsection (a)--
(aa) in the first sentence, by striking ``a substantial new
question of patentability affecting any claim of the patent
concerned is raised by the request,'' and inserting ``the
information presented in the request shows that there is a
reasonable likelihood that the requester would prevail with
respect to at least 1 of the claims challenged in the
request,''; and
(bb) in the second sentence, by striking ``The existence of
a substantial new question of patentability'' and inserting
``A showing that there is a reasonable likelihood that the
requester would prevail with respect to at least 1 of the
claims challenged in the request''; and
(II) in subsection (c), in the second sentence, by striking
``no substantial new question of patentability has been
raised,'' and inserting ``the showing required by subsection
(a) has not been made,''; and
(ii) in section 313, by striking ``a substantial new
question of patentability affecting a claim of the patent is
raised'' and inserting ``it has been shown that there is a
reasonable likelihood that the requester would prevail with
respect to at least 1 of the claims challenged in the
request''.
(B) Application.--The amendments made by this paragraph--
(i) shall take effect on the date of the enactment of this
Act; and
(ii) shall apply to requests for inter partes reexamination
that are filed on or after such date of enactment, but before
the effective date set forth in paragraph (2)(A) of this
subsection.
(C) Continued applicability of prior provisions.--The
provisions of chapter 31 of title 35, United States Code, as
amended by this paragraph, shall continue to apply to
requests for inter partes reexamination that are filed before
the effective date set forth in paragraph (2)(A) as if
subsection (a) had not been enacted.
Page 54, line 17, strike ``patent owner'' and insert
``owner of a patent''.
Page 54, line 18, strike ``of a'' and insert ``of the''.
Page 55, line 10, strike ``1 year'' and insert ``9
months''.
Page 57, line 3, strike ``commence'' and insert ``be
instituted''.
Page 57, line 25, strike ``The'' and all that follows
through ``public.'' on page 58, line 1.
Page 58, lines 11 and 12, strike ``petitioner, real party
in interest, or privy of the petitioner'' and insert
``petitioner or real party in interest''.
Page 58, lines 15 and 16, strike ``petitioner, real party
in interest, or privy of the petitioner'' and insert
``petitioner or real party in interest''.
Page 58, line 25 and page 59, line 1, strike ``petitioner,
real party in interest, or privy of the petitioner'' and
insert ``petitioner or real party in interest''.
Page 59, lines 3 and 4, strike ``petitioner, real party in
interest, or privy of the petitioner'' and insert
``petitioner or real party in interest''.
Page 63, line 15, strike ``and''.
Page 63, line 23, strike the period and insert ``; and''.
Page 63, insert the following after line 23:
``(12) providing the petitioner with at least 1 opportunity
to file written comments within a time period established by
the Director.''.
Page 66, line 24, strike ``Amended or New Claim'' and
insert ``Intervening Rights''.
Page 68, line 10, strike ``to any patent that is'' and
insert ``only to patents''.
Page 78, insert the following after line 1 and redesignate
the succeeding subsection accordingly:
(d) Conforming Amendments.--
(1) Atomic energy act of 1954.--Section 152 of the Atomic
Energy Act of 1954 (42 U.S.C. 2182) is amended in the third
undesignated paragraph--
(A) by striking ``Board of Patent Appeals and
Interferences'' each place it appears and inserting ``Patent
Trial and Appeal Board''; and
(B) by inserting ``and derivation'' after ``established for
interference''.
(2) Title 51.--Section 20135 of title 51, United States
Code, is amended--
(A) in subsections (e) and (f), by striking ``Board of
Patent Appeals and Interferences'' each place it appears and
inserting ``Patent Trial and Appeal Board''; and
(B) in subsection (e), by inserting ``and derivation''
after ``established for interference''.
Page 86, lines 11 and 12, strike ``examination fee for the
application'' and insert ``applicable fee''.
Page 86, line 15, insert ``most recently'' after ``as''.
Page 86, line 22, strike ``examination fee for the
application'' and insert ``applicable fee''.
Page 87, line 1, insert ``most recently'' after ``as''.
Page 87, strike line 18 and all that follows through page
88, line 8, and insert the following:
``(d) Institutions of Higher Education.--For purposes of
this section, a micro entity shall include an applicant who
certifies that--
``(1) the applicant's employer, from which the applicant
obtains the majority of the applicant's income, is an
institution of higher education as defined in section 101(a)
of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or
``(2) the applicant has assigned, granted, conveyed, or is
under an obligation by contract or law, to assign, grant, or
convey, a license or other ownership interest in the
particular applications to such an institution of higher
education.
Page 88, line 9, strike ``(2) Director's authority.--The
Director'' and insert ``(e) Director's Authority.--In
addition to the limits imposed by this section, the
Director''.
Page 88, move the text of lines 9 through 21 2 ems to the
left.
Page 88, line 12, strike ``subsection'' and insert
``section''.
Page 88, line 18, strike ``paragraph'' and insert
``subsection''.
Page 89, line 2, strike ``a fee'' and insert ``an
additional fee''.
Page 89, line 17, strike ``This'' and insert ``Except as
provided in subsection (h), this''.
Page 89, line 22, strike ``6-year'' and insert ``7-year''.
Page 89, add the following after line 23:
(3) Prior regulations not affected.--The termination of
authority under this subsection shall not affect any
regulations issued under this section before the effective
date of such termination or any rulemaking proceeding for the
issuance of regulations under this section that is pending on
such date.
Page 96, line 15, strike ``either'' and all that follows
through ``patent'' on line 19 and inserting ``by Office
personnel''.
Page 98, strike lines 3 through 14.
Page 102, insert the following after line 7 and redesignate
the succeeding subsection accordingly:
(i) Appropriation Account Transition Fees.--
(1) Surcharge.--
(A) In general.--There shall be a surcharge of 15 percent,
rounded by standard arithmetic rules, on all fees charged or
authorized by subsections (a), (b), and (d)(1) of section 41,
and section 132(b), of title 35, United States Code. Any
surcharge imposed under this subsection is, and shall be
construed to be, separate from and in addition to any other
surcharge imposed under this Act or any other provision of
law.
(B) Deposit of amounts.--Amounts collected pursuant to the
surcharge imposed under subparagraph (A) shall be credited to
the United States Patent and Trademark Appropriation Account,
shall remain available until expended, and may be used only
for the purposes specified in section 42(c)(3)(A) of title
35, United States Code.
(2) Effective date and termination of surcharge.--The
surcharge provided for in paragraph (1)--
(A) shall take effect on the date that is 10 days after the
date of the enactment of this Act; and
(B) shall terminate, with respect to a fee to which
paragraph (1)(A) applies, on the effective date of the
setting or adjustment of that fee pursuant to the exercise of
the authority under section 10 for the first time with
respect to that fee.
Page 102, strike lines 1 through 7 and insert the
following:
(h) Prioritized Examination Fee.--
(1) In general.--
(A) Fee.--
(i) Prioritized examination fee.--A fee of $4,800 shall be
established for filing a request, pursuant to section
2(b)(2)(G) of title 35, United States Code, for prioritized
examination of a nonprovisional application for an original
utility or plant patent.
(ii) Additional fees.--In addition to the prioritized
examination fee under clause (i), the fees due on an
application for which prioritized examination is being sought
are the filing, search, and examination fees (including any
applicable excess claims and application size fees),
processing fee, and publication fee for that application.
(B) Regulations; limitations.--
(i) Regulations.--The Director may by regulation prescribe
conditions for acceptance of a request under subparagraph (A)
and a limit on the number of filings for prioritized
examination that may be accepted.
(ii) Limitation on claims.-- Until regulations are
prescribed under clause (i), no application for which
prioritized examination is requested may contain or be
amended to contain more than 4 independent claims or more
than 30 total claims.
(iii) Limitation on total number of requests.--The Director
may not accept in any fiscal year more than 10,000 requests
for prioritization until regulations are prescribed under
this subparagraph setting another limit.
(2) Reduction in fees for small entities.--The Director
shall reduce fees for providing prioritized examination of
nonprovisional applications for original utility and plant
patents by 50 percent for small entities that qualify for
reduced fees under section 41(h)(1) of title 35, United
States Code.
(3) Deposit of fees.--All fees paid under this subsection
shall be credited to the United States Patent and Trademark
Office Appropriation Account, shall remain available until
expended, and may be used only for the purposes specified in
section 42(c)(3)(A) of title 35, United States Code.
(4) Effective date and termination.--
(A) Effective date.--This subsection shall take effect on
the date that is 10 days after the date of the enactment of
this Act.
(B) Termination.--The fee imposed under paragraph
(1)(A)(i), and the reduced fee under paragraph (2), shall
terminate on the effective date of the setting or adjustment
of
[[Page H4450]]
the fee under paragraph (1)(A)(i) pursuant to the exercise of
the authority under section 10 for the first time with
respect to that fee.
Page 102, lines 8 and 9, strike ``Except as provided in
subsection (h),'' and insert ``Except as otherwise provided
in this section,''.
Page 105, strike lines 1 through 11.
Page 105, add the following after line 25 and redesignate
the succeeding subsection accordingly:
``(e) Fraud.--If the Director becomes aware, during the
course of a supplemental examination or reexamination
proceeding ordered under this section, that a material fraud
on the Office may have been committed in connection with the
patent that is the subject of the supplemental examination,
then in addition to any other actions the Director is
authorized to take, including the cancellation of any claims
found to be invalid under section 307 as a result of a
reexamination ordered under this section, the Director shall
also refer the matter to the Attorney General for such
further action as the Attorney General may deem appropriate.
Any such referral shall be treated as confidential, shall not
be included in the file of the patent, and shall not be
disclosed to the public unless the United States charges a
person with a criminal offense in connection with such
referral.
Page 111, strike lines 13 through 24 and insert the
following:
``(c) The marking of a product, in a manner described in
subsection (a), with matter relating to a patent that covered
that product but has expired is not a violation of this
section.''.
Page 112, line 2, strike ``any case that is'' and insert
``all cases, without exception, that are''.
Page 113, line 13, insert ``or privy'' after ``interest''.
Page 114, lines 15 and 16, strike ``The petitioner in a
transitional proceeding,'' and insert the following: ``The
petitioner in a transitional proceeding that results in a
final written decision under section 328(a) of title 35,
United States Code, with respect to a claim in a covered
business method patent,''.
Page 114, line 22, strike ``a claim in a patent'' and
insert ``the claim''.
Page 114, lines 23-25, strike ``a transitional proceeding
that resulted in a final decision'' and insert ``that
transitional proceeding''.
Page 115, line 18, strike ``10-'' and insert ``8-''.
Page 120, strike line 17 and all that follows through the
matter following line 10 on page 121 and redesignate
succeeding subsections accordingly.
Page 121, line 17, strike ``In any'' and insert ``With
respect to any''.
Page 121, line 22, insert ``, or have their actions
consolidated for trial,'' after ``defendants''.
Page 122, line 9, strike ``or trial''.
Page 122, line 10, insert ``, or have their actions
consolidated for trial,'' after ``defendants''.
Page 122, line 11, strike the quotation marks and second
period.
Page 122, insert the following after line 11:
``(c) Waiver.--A party that is an accused infringer may
waive the limitations set forth in this section with respect
to that party.''.
Page 126, line 13, strike ``patent,'' and all that follows
through the first appearance of ``and'' on line 17 and insert
``a patent,''.
Page 128, insert the following after line 23 and
redesignate the succeeding subsection accordingly:
(k) Additional Technical Amendments.--Sections 155 and 155A
of title 35, United States Code, and the items relating to
those sections in the table of sections for chapter 14 of
such title, are repealed.
Page 130, strike line 3 and all that follows through page
134, line 17, and insert the following:
SEC. 22. PATENT AND TRADEMARK OFFICE FUNDING.
(a) In General.--Section 42(c) of title 35, United States
Code, is amended--
(1) by striking ``(c)'' and inserting ``(c)(1)'';
(2) in the first sentence, by striking ``shall be
available'' and inserting ``shall, subject to paragraph (3),
be available'';
(3) by striking the second sentence; and
(4) by adding at the end the following:
``(2) There is established in the Treasury a Patent and
Trademark Fee Reserve Fund. If fee collections by the Patent
and Trademark Office for a fiscal year exceed the amount
appropriated to the Office for that fiscal year, fees
collected in excess of the appropriated amount shall be
deposited in the Patent and Trademark Fee Reserve Fund. To
the extent and in the amounts provided in appropriations
Acts, amounts in the Fund shall be made available until
expended only for obligation and expenditure by the Office in
accordance with paragraph (3).
``(3)(A) Any fees that are collected under sections 41, 42,
and 376, and any surcharges on such fees, may only be used
for expenses of the Office relating to the processing of
patent applications and for other activities, services, and
materials relating to patents and to cover a share of the
administrative costs of the Office relating to patents.
``(B) Any fees that are collected under section 31 of the
Trademark Act of 1946, and any surcharges on such fees, may
only be used for expenses of the Office relating to the
processing of trademark registrations and for other
activities, services, and materials relating to trademarks
and to cover a share of the administrative costs of the
Office relating to trademarks.''.
(b) Effective Date.--The amendments made by this section
shall take effect on October 1, 2011.
Page 137, strike lines 1 through 7 and redesignate the
succeeding sections (and conform the table of contents)
accordingly.
Page 137, lines 8 and 9, strike ``TECHNOLOGIES IMPORTANT TO
AMERICAN COMPETITIVENESS'' and insert ``IMPORTANT
TECHNOLOGIES'' (and conform the table of contents
accordingly).
Page 138, strike lines 1 through 21 and redesignate
succeeding sections (and conform the table of contents)
accordingly.
Page 139, insert the following after line 12 and
redesignate the succeeding sections (and conform the table of
contents) accordingly:
SEC. 27. STUDY ON GENETIC TESTING.
(a) In General.--The Director shall conduct a study on
effective ways to provide independent, confirming genetic
diagnostic test activity where gene patents and exclusive
licensing for primary genetic diagnostic tests exist.
(b) Items Included in Study.--The study shall include an
examination of at least the following:
(1) The impact that the current lack of independent second
opinion testing has had on the ability to provide the highest
level of medical care to patients and recipients of genetic
diagnostic testing, and on inhibiting innovation to existing
testing and diagnoses.
(2) The effect that providing independent second opinion
genetic diagnostic testing would have on the existing patent
and license holders of an exclusive genetic test.
(3) The impact that current exclusive licensing and patents
on genetic testing activity has on the practice of medicine,
including but not limited to: the interpretation of testing
results and performance of testing procedures.
(4) The role that cost and insurance coverage have on
access to and provision of genetic diagnostic tests.
(c) Confirming Genetic Diagnostic Test Activity Defined.--
For purposes of this section, the term ``confirming genetic
diagnostic test activity'' means the performance of a genetic
diagnostic test, by a genetic diagnostic test provider, on an
individual solely for the purpose of providing the individual
with an independent confirmation of results obtained from
another test provider's prior performance of the test on the
individual.
(d) Report.--Not later than 9 months 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 on the findings
of the study and provide recommendations for establishing the
availability of such independent confirming genetic
diagnostic test activity.
SEC. 28. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS
CONCERNS.
Using available resources, the Director shall establish and
maintain in the Office a Patent Ombudsman Program. The duties
of the Program's staff shall include providing support and
services relating to patent filings to small business
concerns and independent inventors.
Page 139, insert the following after line 20 and
redesignate the succeeding sections (and conform the table of
contents) accordingly:
SEC. 30. LIMITATION ON ISSUANCE OF PATENTS.
(a) Limitation.--Notwithstanding any other provision of
law, no patent may issue on a claim directed to or
encompassing a human organism.
(b) Effective Date.--
(1) In general.--Subsection (a) shall apply to any
application for patent that is pending on, or filed on or
after, the date of the enactment of this Act.
(2) Prior applications.--Subsection (a) shall not affect
the validity of any patent issued on an application to which
paragraph (1) does not apply.
SEC. 31. STUDY OF PATENT LITIGATION.
(a) GAO Study.--The Comptroller General of the United
States shall conduct a study of the consequences of
litigation by non-practicing entities, or by patent assertion
entities, related to patent claims made under title 35,
United States Code, and regulations authorized by that title.
(b) Contents of Study.--The study conducted under this
section shall include the following:
(1) The annual volume of litigation described in subsection
(a) over the 20-year period ending on the date of the
enactment of this Act.
(2) The volume of cases comprising such litigation that are
found to be without merit after judicial review.
(3) The impacts of such litigation on the time required to
resolve patent claims.
(4) The estimated costs, including the estimated cost of
defense, associated with such litigation for patent holders,
patent licensors, patent licensees, and inventors, and for
users of alternate or competing innovations.
(5) The economic impact of such litigation on the economy
of the United States, including the impact on inventors, job
creation, employers, employees, and consumers.
(6) The benefit to commerce, if any, supplied by non-
practicing entities or patent assertion entities that
prosecute such litigation.
(c) Report to Congress.--The Comptroller General shall, not
later than the date that is 1 year after the date of the
enactment of this Act, submit to the Committee on the
Judiciary of the House of Representatives and the Committee
on the Judiciary of the Senate a report on the results of the
study required under this section, including recommendations
for any changes to laws and regulations that will minimize
any negative impact of patent litigation that was the subject
of such study.
[[Page H4451]]
The Acting CHAIR. Pursuant to House Resolution 316, the gentleman
from Texas (Mr. Smith) and a Member opposed each will control 5
minutes.
The Chair recognizes the gentleman from Texas.
Mr. SMITH of Texas. I yield myself such time as I may consume.
Madam Chair, the manager's amendment consists of numerous technical
edits and other improvements to the bill. Some of the highlights
include the following provisions:
Expansion and clarification of prior-user rights under section 273 of
the Patent Act.
Institutions of higher education qualify for ``micro-entity'' status
when paying fees. In other words, an inventor who works for a
university or who assigns or conveys an invention to a university
qualifies for lower micro-entity fee status.
Consolidation of numerous PTO reporting requirements.
Inclusion of ``Weldon amendment'' language that forbids the patenting
of inventions ``directed to or encompassing a human organism.'' This
language has been part of the CJS appropriations legislation for years.
It's directed as preventing the PTO from approving inventions related
to human cloning.
And deletion of a provision that provides special treatment to one
company that wants to get additional patent term protection from the
PTO.
These and other changes in the manager's amendment smooth out a few
rough edges and improve the overall bill.
I reserve the balance of my time.
Mr. WATT. Madam Chair, I rise in opposition to the amendment.
The Acting CHAIR. The gentleman from North Carolina is recognized for
5 minutes.
Mr. WATT. I yield 2 minutes to the gentleman from Wisconsin (Mr.
Sensenbrenner).
Mr. SENSENBRENNER. Madam Chair, this manager's amendment is
substantive. It contains provisions that should not be buried in a
manager's amendment, and it should be defeated.
First of all, it does maintain the fee diversion. It maintains the
fee diversion because of an alleged lock box. We've heard about this
before, and I have in my hand the Congressional Record of June 23,
2000, where the chairman, at the time, of the State, Justice, Commerce
Subcommittee stated that the fees that are generated by the Patent
Office are not to be used by any other agency or any other purpose.
They remain in that account to be used in succeeding years. We are not
siphoning off Patent Office fees for other expenditures.
Well, guess what? It happened. And it's happened in the last 10 to 12
years to the tune of $1 billion. And this is exactly the same promise
that they're making now. Fool us once, shame on them. Fool us twice,
shame on us.
Now, this change relative to the reported bill to what is in the
manager's amendment is the thing that is subject to the waiver of CutGo
to the tune of $717 million over the next 5 years. The proponents of
this amendment say this is a mere technical waiver of CutGo.
{time} 2110
$717 million is no mere technical waiver of CutGo.
If you believe in CutGo, you've got to vote down the manager's
amendment where this change was protected by the waiver granted for the
Rules Committee. The amendment is substantive, it ought to be defeated.
Mr. SMITH of Texas. Madam Chair, I continue to reserve the balance of
my time.
Mr. WATT. I yield myself the balance of my time.
Let me first say I agree with Mr. Sensenbrenner. The Rules Committee
says that this is a technical amendment, that it would make technical
edits and a few necessary changes to more substantive issues. This is a
very substantive manager's amendment; there is no question about that.
There are many good parts to this bill, and a broad coalition of
people supported the bill which was reported out of committee. But the
one and only necessary part of the bill is the ability to give the
Patent and Trademark Office its full funding. That was the whole
purpose for which we started off this process.
This whole reform process was conceived to address poor-quality
patents and to reduce the backlog of patent applications, which now
exceeds a 700,000 backlog of patent applications. And the reason it
exceeds 700,000 is because the Patent and Trademark Office has not had
the money because their fees that they have been charging have been
diverted to the general fund. Without a clear path to access its own
collection of fees, the PTO cannot properly plan or implement the other
changes in the bill and fulfill its primary function of reducing the
backlog and examining patent applications.
The compromise that this manager's amendment proposes has been
described by a patent news blog as, it says, It's still Lucy--that's
the appropriators--holding the football that it will never let Charlie
Brown have. That's really what we see here.
This is a mirage, a promise that they are going to do something that,
if they just did it in the bill the way we reported the bill out of the
committee, you wouldn't need this subterfuge. There is no reason to be
doing this. The Senate reported it out clean, no diversion, 95-4 they
voted it out of the Senate.
I don't even know why we're here debating this at this point. If we
believe that the one primary purpose of patent reform is to deal with
the fee diversion, then we need to deal with that first, and that's
exactly what we did in the Judiciary Committee.
I don't know why I'm here defending what we, on a broad, bipartisan
basis, reported out of our committee. It ought to be the chairman of
the committee that's defending what we reported out of the committee.
Yet we are here, instead of defending what we reported out of the
committee, the manager's amendment waters it down and makes it
ineffective, and that's not what we should be doing here.
Now they said they got these letters of support, but the letters came
supporting what came out of the committee, not the manager's amendment.
The manager's amendment is going to destroy what came out of the
committee. It is inconsistent with what came out of the committee.
So we've got to defeat the manager's amendment and go back to the
bill that came out of the Judiciary Committee, and that's what I'm
advocating.
Mr. SMITH of Texas. I yield myself the balance of my time.
Madam Chair, let me address some of the criticisms that have been
made about the manager's amendment. There are some who want to make
more changes to the business method patent provision in the bill. This
topic is the primary reason the Judiciary Committee launched patent
reform back in 2005.
In response to a number of poor-quality, business-method patents
issued over the past decade, the bill creates a transitional program
within PTO to evaluate these patents using the best prior art
available. Bad patents will be weeded out, but good ones will become
gold-plated based on their enhanced legal integrity.
There are others who have sought changes to the prior art provisions
in the First-Inventor-to-File section. The language in our bill which
replicates that in the Senate version has drawn support from a large
cross-range of industries and investors.
Some colleagues have complained during this debate about the
treatment of PTO funding in the manager's amendment. The bill that the
House Judiciary Committee reported would allow the PTO to keep all the
revenue it raises without having to request funding through the normal
appropriations process. This is treated as mandatory spending and
scored savings in excess of $700 million.
Because of concerns raised by the Appropriations Committee members,
we worked with them to develop a compromise that eliminates fee
diversion while permitting the appropriators to retain oversight
through the traditional appropriations process. The manager's amendment
accomplishes this goal, but it means that the mandatory spending
provisions of the revolving fund become discretionary spending under
the reserved fund. Because this change is contrary to CutGo
requirements, we need a waiver for consideration of H.R. 1249.
I want to emphasize that the bill includes user fees paid by
inventors and trademark filers to the PTO in return
[[Page H4452]]
for services. This isn't the same thing as using tax revenue from the
general treasury to fund the agency, so I am not sure that the CutGo
rules even apply.
Very importantly, there is no impact on the deficit. The manager's
amendment is constitutionally sound, improves the base text of the
bill, and incorporates a funding agreement approved by the leadership
to get this bill to the floor. It's important to pass it and then move
on to the other amendments.
I urge my colleagues to vote ``aye'' on the amendment.
Mr. RYAN of Wisconsin. Madam Chair, I rise today to provide an
explanation of my support for a waiver of the Cut-go point of order on
the Manager's Amendment to H.R. 1249, the America Invents Act. No
matter how well-crafted a budget enforcement tool may be it can never
be immune from all unintended consequences.
There are two reasons I support this waiver. First, the violation
arises from an anomaly associated with converting this program from
discretionary to mandatory. Second, the Manager's Amendment does not
cause an increase in direct spending relative to current law.
With respect to the first point, CB0 currently records PTO fee
collections on an annual basis with the enactment of the relevant
appropriations bill. As a result, CBO shows no deficit impact from PTO
for fiscal years after FY 2011 if the funding and fee collections
remain subject to the appropriations process--what we call
``discretionary spending.''
The reported bill would have provided permanent authority to the PTO
to collect fees and spend the fee collections. We call spending that is
provided through permanent law ``mandatory spending.'' CBO estimated
this permanent authority for FY 2012-2021 would reduce mandatory
spending by $712 million. The savings, however, are the result of CBO's
estimate that the agency will not be able to spend the fees as quickly
as they are collected, not from spending reduction.
This should be obvious because the whole rationale of this bill was
to ensure the expenditure of all PTO fee collections. If the reported
bill was mandating that all PTO collections be spent, how can it
produce budgetary savings? It doesn't. The only savings are paper
savings, resulting from an accounting change and not an actual
reduction in spending.
The Cut-go rule was designed to prevent the total amount of mandatory
spending in the Federal Budget from increasing by requiring a
corresponding spending reduction for any proposal to increase direct
spending, and not offset with an increase in revenue as was common
practice under Pay-Go.
Ironically, the Manager's Amendment would prevent a discretionary
program from turning into mandatory spending, but because Cut-go is
measured relative to the reported bill and not to the baseline, it
triggers a Cut-go violation. Cut-go was not intended to favor mandatory
spending over discretionary spending.
With respect to the second point, the Manager's Amendment maintains
the same basic fee and spending structure as the underlying legislation
but keeps the program discretionary. CBO estimates the bill, with the
Manager's Amendment, would decrease the deficit by $5 million over ten
years, unrelated to the PTO classification. The Committee could have
avoided a Cut-go point of order if it reported out a separate bill that
reflected the Manager's Amendment.
I do not take waiving budget points of order lightly, but in this
case it is justified.
Mr. SMITH of Texas. Madam Chair, I yield back the balance of my time.
The Acting CHAIR. The question is on the amendment offered by the
gentleman from Texas (Mr. Smith).
The question was taken; and the Acting Chair announced that the noes
appeared to have it.
Mr. SMITH of Texas. Madam Chair, I demand a recorded vote.
The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further
proceedings on the amendment offered by the gentleman from Texas will
be postponed.
Mr. SMITH of Texas. Madam Chair, I move that the Committee do now
rise.
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Goodlatte) having assumed the chair, Ms. Foxx, Acting Chair of the
Committee of the Whole House on the state of the Union, reported that
that Committee, having had under consideration the bill (H.R. 1249) to
amend title 35, United States Code, to provide for patent reform, had
come to no resolution thereon.
____________________