[Congressional Record Volume 157, Number 130 (Tuesday, September 6, 2011)]
[Senate]
[Pages S5319-S5321]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          AMERICA INVENTS ACT

  Mr. KYL. Mr. President, I rise today to urge my colleagues to support 
H.R. 1249, the Leahy-Smith America Invents Act. Some other 
responsibilities may take me from the Senate floor during this coming 
week when we will be debating the act and therefore I wanted to lay out 
my views at this time, strongly urging my colleagues to support the 
bill.
  Although the present bill originates in the House of Representatives, 
it is actually based on and is substantially identical to the bill that 
passed the Senate in March by a vote of 95 to 5. Also, before Chairman 
Smith brought his bill to the House floor, he negotiated final changes 
to the bill with the lead supporters of the measure in the Senate 
Judiciary Committee. The House and Senate have now been working on 
patent reform for 6 years. The present bill is a good bill. It reflects 
a genuine compromise between the House and the Senate. It is a bill 
that will provide substantial benefits to the U.S. economy in the 
coming years, so I hope that, as I said, the Senate will adopt this 
legislation and be able to pass it on directly to the President for his 
signature.
  The overarching purpose and effect of the present bill is to create a 
patent system that is clearer, fairer, more transparent, and more 
objective. It is a system that will ultimately reduce litigation costs 
and reduce the need to hire patent lawyers. The bill will make it 
simpler and easier to obtain valid patents and to enforce those 
patents, and it will cure some very clear litigation abuses that have 
arisen under the current rules, abuses that have done serious harm to 
American businesses.
  By adopting the first-to-file system, for example, the bill creates a 
rule that is clear and easy to comply with and that avoids the need for 
expensive discovery and litigation over what a patent's priority date 
is. By adopting a simple definition of the term ``prior art,'' the bill 
will make it easier to assess whether a patent is valid and cheaper for 
an inventor to enforce his patent. By recognizing a limited prior user 
right, the bill creates a powerful incentive for manufacturers to build 
factories and create jobs in this country. By allowing post-grant 
review of patents, especially low quality, business method patents, the 
bill creates an inexpensive substitute for district court litigation 
and allows key issues to be addressed by experts in the field. By 
eliminating the recent surge of false-marking litigation, the bill 
effectively repeals what amounts to a litigation tax on American 
manufacturing.
  Let me take a few moments to describe how the provisions of this bill 
will provide concrete benefits to American inventors, both large and 
small, and to the American manufacturing economy. First, prior 
commercial use defense.
  A new provision of the present bill that was added by the House of 
Representatives will provide important advantages to U.S. 
manufacturers. Section 5 of the bill creates a new defense to patent 
infringement of prior commercial use. This new defense will ensure that 
the first inventor of a new process, or of a product used in a 
manufacturing process, can continue to use the invention in a 
commercial process even if a subsequent inventor later patents the 
idea. For many manufacturing processes the patent system presents a 
Catch-22. If the manufacturer patents the process, he effectively 
discloses it to the world. But patents for processes that are used in 
closed factories are difficult to police. It is all but impossible to 
know if someone in a factory in China, for example, is infringing such 
a patent. As a result, unscrupulous foreign and domestic inventors will 
simply use the invention in secret without paying licensing fees. 
Patenting such manufacturing processes effectively amounts to giving 
away the invention to foreign manufacturers.
  On the other hand, if the U.S. manufacturer does not patent the 
process, a subsequent party may obtain a patent on it and the U.S. 
manufacturer will be forced to stop using a process that he was the 
first to invent and which he has been using for years.
  The prior commercial use defense provides relief to U.S. 
manufacturers from this Catch-22, allowing them to continue to use a 
manufacturing process without having to give it away to competitors or 
running the risk that it will be patented out from under them. To 
establish a right to this defense, however, the America Invents Act 
requires the manufacturer to use the process in the United States. As a 
result, the AIA creates a powerful incentive for manufacturers to build 
their factories and plants in the United States. Currently, most 
foreign countries recognize some prior user rights that encourage 
manufacturers to build facilities in those countries. This bill 
corrects this imbalance and creates a strong incentive for businesses 
to create manufacturing jobs in this country.
  Second, something called supplemental examination. A provision of 
this bill that will particularly benefit small and startup investors is 
section 12, which authorizes supplemental examination of patents. It is 
one of the reasons the bill has such strong support in the small 
business community. Currently, even minor and inadvertent errors in the 
patent application process can lead to expensive and very unpredictable 
and very inequitable conduct litigation. It is often the case that 
startup companies or university researchers cannot afford to hire the 
very best patent lawyers. Their patents are prosecuted by an in-house 
attorney who does a good enough job but who is unfamiliar with all of 
the sharp corners and pitfalls of the inequitable conduct doctrine, 
such as the need to present cumulative studies and prior art. Later, 
when more legally sophisticated investors evaluate the patent for 
potential investment or purchase, these minor flaws in prosecution can 
deter the investor from purchasing or funding the development of the 
invention. An investor would not risk spending hundreds of millions of 
dollars to develop a product if a potential inequitable conduct attack 
may wipe out the whole investment.

  Parties on both sides of these exchanges report that investors 
routinely walk away from inventions because of their inability under 
current law to resolve uncertainties whether a flaw in prosecution was, 
in fact, inequitable conduct. These decisions not to invest in a new 
invention represent important new cures never tested and brought to 
market and other important inventions that are never developed.
  The America Invents Act provides a solution to this problem by 
authorizing supplemental examination of patents. This new proceeding 
will allow inventors or patent purchasers to return to the Patent 
Office with additional material and have the Patent Office reevaluate 
the patent in light of that material. If the patent is invalid in light 
of the new material, the Patent Office will cancel the claims. But if 
the office finds that the patent is valid, the parties will have a 
patent that they can be legally certain will be upheld and enforced. 
The authorization of supplemental examination will result in path-
breaking inventions being developed and brought to market that 
otherwise would have lingered on the shelf because of legal uncertainty 
over the patent. It will ensure that small and startup companies with 
important and valid patents will not be denied investment capital 
because of legal technicalities.
  Let me talk about what I think is undoubtedly the most important 
among

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the bill's changes to current law, and that is its transition to the 
first-to-file system. This long overdue reform will create a system for 
establishing a patent's priority date that is official, simple, 
transparent, and fair. Priority dates not only establish priorities 
between competing patent applications for the same invention but are 
also used to measure a patent against potentially invalidating prior 
art.
  Currently, establishing a priority date requires expensive litigation 
and discovery into what the inventor's notebooks show and when they 
show it and whether the inventor diligently perfected his invention 
after he conceived of it.
  Also, for businesses seeking legal certainty, our current system can 
be a nightmare. A company hoping to bring a new product to market in a 
particular field of technology has no way of knowing whether a 
competitor that belatedly sought the patent on its new product will 
succeed in securing a valid patent on the product. It all depends on 
the invention date the competitor will be able to prove relative to the 
company that the company developing the product can prove.
  Given that both the product developer and competitor can rely on 
their own secret documents that the other side will not see until 
litigation over the patent commences, neither of these two parties can 
gain a clear picture of whether a patent is valid without years of 
litigation and millions of dollars of discovery and other litigation 
costs. Under first to file, by contrast, inventors will file informal 
and inexpensive provisional applications. These applications need only 
disclose what the invention is and how to make it, information the 
inventor already needs to have in his possession anyway in order to 
establish a priority date under the current system. Under first to 
file, once the inventor files this information with the Patent Office, 
he has a priority date that is both secure and public. The application 
is a government document. There is no need to litigate over its 
priority date. We know that.
  Other industry participants will be able to easily determine the 
patent's priority date, allowing them to measure the patent against 
prior art and determine if it is valid. There will be no opportunity to 
fraudulently backdate the priority date. That date will depend on a 
government document, not privately held files.
  Most U.S. businesses already effectively operate under the first-to-
file system. They file applications promptly because it is difficult 
and risky to rely on proof of invention dates to defeat a competing 
application that was filed earlier. Also, because the rest of the world 
uses first to file, U.S. investors need to secure first-to-file 
priority if they want their patents to be valid anywhere outside of 
this country.
  For many U.S. businesses the America Invents Act does not change the 
system under which they operate. Rather, it simply allows American 
businesses to comply with just one set of rules rather than being 
forced to operate under two different systems.
  Another one of the bill's clear improvements over current law is its 
streamlined definition of the term ``prior art.'' Public uses and sales 
of an invention will remain prior art, but only if they make the 
invention available to the public. An inventor's confidential sale of 
his invention, his demonstration of its use to a private group, or a 
third party's unrestricted but private use of the invention will no 
longer constitute private art. Only the sale or offer for sale of the 
invention to the relevant public or its use in a way that makes it 
publicly accessible will constitute prior art.
  The main benefit of the AIA public availability standard of prior art 
is that it is relatively inexpensive to establish the existence of 
events that make an invention available to the public. Under current 
law, depositions and litigation discovery are required in order to 
identify all of the inventor's private dealings with third parties and 
determine whether those dealings constitute a secret offer for sale or 
third party use that invalidates the patent under the current law's 
forfeiture doctrines. The need for such discovery is eliminated once 
the definition of ``prior art'' is limited to those activities that 
make the intention accessible to the public. This will greatly reduce 
the time and cost of patent litigation and allow the courts and the PTO 
to operate much more efficiently.
  Both of these last two changes--the first to file and the new 
definition of ``prior art''--will also protect American inventors 
against theft of their invention both at home and abroad. Under current 
law, if an American inventor sells or otherwise discloses his 
invention, there is a risk that an unscrupulous third party will steal 
the idea and file a U.S. patent for it. If the thief claims he himself 
made the invention before the U.S. inventor, then the U.S. inventor 
will need to prove the invention was stolen from him. Current law even 
allows activities that occur in a foreign country to establish a 
priority date for a U.S. patent. Thus, if a U.S. inventor who has been 
a victim of theft is unable to prove that activities alleged to have 
occurred in China or India, say, never actually took place, he not only 
loses his patent but the foreign thief can obtain a U.S. patent and 
block the U.S. inventor from practicing his own invention.
  Finally, under current law, even if the U.S. inventor files a patent 
application right away, his rights still are not secure. Under current 
law, an early filing date can be defeated by another applicant's claim 
that he conceived of the invention earlier. Thus a foreign thief can 
claim he came up with the idea in his overseas laboratory, and the U.S. 
inventor would bear the burden of proving that a fraud had been 
perpetrated in a foreign country.
  Under the America Invents Act, by contrast it will be much harder for 
thieves, both foreign and domestic, to steal a U.S. inventor's 
invention. Under this bill, if a U.S. inventor publicly discloses his 
invention, no third party's application filed after that date can be 
valid because the filing date is what will determine priority, not a 
purported date of conception. Nor can a third party easily 
contrive fake prior art to defeat the patent. Under the AIA, only those 
actions that made the invention publicly available will constitute 
prior art, and these are much harder to fake than are claims of having 
secretly made the invention in a private laboratory, again, say, in 
China. Under new section 102(b)(1)(B), once the U.S. inventor discloses 
his invention, no subsequent prior art can defeat the invention. The 
U.S. inventor does not need to prove that the third party disclosures 
following his own disclosures are derived from him. He can thus take 
full advantage of the grace period and disclose his invention in 
academic papers and at trade shows without worrying that such 
disclosures will lead to theft or fraudulent invalidation of his 
patent.

  Similarly, under the America Invents Act, once the U.S. inventor 
files even a provisional application, his rights will be secured. Under 
this bill, no one can file a later application but claim an earlier 
priority date because the priority date is set by the filing date. The 
provisional application also constitutes section 103 prior art as of 
its filing date. As a result, a third party's patent for a trivial or 
obvious variation of the patent will be invalid and will not crowd out 
the original inventor's patent rights.
  Finally, validating prior art will depend on publicly accessible 
information, not private activities that take place, for example, in a 
foreign land. As a result, it will be impossible for a third party who 
derived the invention from a U.S. inventor's public disclosure or 
patent application to steal the invention or sabotage the U.S. 
inventor's patent. The only way to obtain priority or invalidate the 
invention would be to file or publicly disclose the invention before 
the U.S. inventor has done so--something that will obviously be 
impossible for the deriver to do.
  Finally, I would like to talk about false marking for a moment. I 
would like to describe the bill's important reforms to the false 
marking statute. The America Invents Act reins in abuses that are 
reflected in a recent surge in false marking litigation. It allows such 
suits to be brought only by those parties who have actually suffered a 
competitive injury as a result of false marking.
  Currently, such suits are often brought by parties asserting no 
actual competitive injury from the marking--or who do not even patent 
or manufacture anything in a relevant industry. Many cases have been 
brought by patent lawyers themselves claiming the right to enforce a 
fine of $500 for every marked product. One manufacturer of plastic cups 
who stamped his patent number on his cups was recently sued by a lawyer 
for $500 for each disposable

[[Page S5321]]

cup that was sold, for a gargantuan total of $9 trillion.
  In reality, the bulk of these suits settle for their nuisance value, 
the costs of continuing to litigate. They represent a tax that patent 
lawyers are imposing on domestic manufacturing--a shift in wealth to 
lawyers that comes at the expense of manufacturing jobs. Well, this 
bill prevents such abuses by repealing the statute's qui tam action 
while still allowing parties who have separate actual injury from false 
marking to sue and allowing the United States to enforce a $500-per-
product fine where appropriate. Qui tam statues are a relic of the 19th 
century and generally produce far more litigation than is in the public 
interest. Almost all of these statutes have been repealed.
  The America Invents Act continues this trend. By repealing the false 
marking qui tam statute, the AIA will allow American companies to spend 
money hiring new workers rather than fighting off frivolous false 
marking suits.
  In conclusion, the America Invents Act will provide important 
benefits to U.S. inventors of all sizes, to startup companies, to 
domestic manufacturing, and to the U.S. economy generally. I look 
forward to its passage by the Senate and its enactment into law.
  As the majority leader stated in his remarks in leader time, I hope 
those who may have amendments will immediately file those amendments so 
the Senate can take them up in good order, have plenty of time to 
debate them, and dispose of them in the appropriate way. It would be my 
hope the Senate will end up passing the bill adopted by the House of 
Representatives so our action can result in sending the bill directly 
to the President for his signature. That is an accomplishment that 
could be achieved with cooperation between the House and the Senate, 
between Democrats and Republicans, between the legislative and 
executive branches, and I think it would certainly begin to mark the 
time when the American people could see their legislative 
representatives begin to work together on their behalf.
  Mr. President, I note the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Franken). Without objection, it is so 
ordered.

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