[Congressional Record Volume 157, Number 131 (Wednesday, September 7, 2011)]
[Senate]
[Pages S5370-S5378]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
LEAHY-SMITH AMERICA INVENTS ACT
Mr. REID. Mr. President, I ask unanimous consent that the remaining
time postcloture be yielded back, and the motion to proceed to H.R.
1249, the America Invents Act, be agreed to; that there be debate only
on the bill until 5 p.m., and at 5 p.m. the majority leader be
recognized.
The PRESIDING OFFICER. Is there objection?
The Senator from Kentucky.
Mr. PAUL. I ask that the unanimous consent request be modified so
once we are on the bill I can offer an amendment related to the
Secretary of the Treasury and that a vote on that issue be reported.
Mr. REID. Mr. President, I object to my friend's request. I ask that
once we get on the bill that the Senator from Kentucky, Mr. Paul, be
recognized to speak for up to 10 minutes in order to explain the
amendment that he had hoped to offer and will offer at some point in
the future.
The PRESIDING OFFICER. Is there objection to the request as so
modified?
Mr. REID. I modify my request to that effect.
The PRESIDING OFFICER. Is there objection? The Chair hears none, and
it is so ordered.
The clerk will report the bill.
The legislative clerk read as follows:
A bill (H.R. 1249) to amend title 35, United States Code,
to provide for patent reform.
The PRESIDING OFFICER. The Senator from Kentucky.
Mr. PAUL. Mr. President, they say the definition of insanity is doing
the same thing over and over and expecting a different result. We now
have been in 3 years of a policy that is not working. Joblessness is up
and our debt has been downgraded. Our country is on a precipice, and
yet we continue with the same people giving the same ideas that are not
working. It is important to know how we got here.
We are in a great recession, the worst recession since the Great
Depression. How did we get here? We got here through bad economic
policy and bad monetary policy. This policy originated with Timothy
Geithner when he was at the Federal Reserve in New York. It originated
with Ben Bernanke, the head of the Federal Reserve.
What did we do? We reappointed these people to higher office. They
say the definition of insanity is doing the same thing over and over
and expecting a different result.
I would respectfully ask at this point we have a vote in the Senate.
I think the American people have given a vote of no confidence to the
Secretary of the Treasury. I think the American investors and worldwide
investors have given a vote of no confidence to the debt ceiling deal
and to what has been going on.
Over and over we are doing the same policy. We have now appointed as
head of the Council of Economic Advisers someone who brought us Cash
for Clunkers. We spent $1 trillion--money we don't have--trying to
stimulate the economy and unemployment is worse. Gas prices have
doubled. Economic growth is anemic, if at all. We are in the process,
perhaps, of sliding into another recession and something has to be
different. We cannot keep doing the same thing over and over and
expecting a different result.
For the first time in our history our debt has been downgraded. This
came after a policy that came from the Secretary of the Treasury and
from this administration. It came from a deal the American people and
the world public, world class of investors, judged and deemed to be
inadequate.
This country needs a shakeup. We need new ideas. We need different
propositions. The same propositions, the same tired, old proposals are
not working. We are set during this administration to accumulate more
debt than with all 43 previous Presidents combined. We are accumulating
debt at $40,000 a second. We are spending money at $100,000 a second.
When a policy doesn't work, we need new policy leaders. There will
not be a new President until 2012, but this President could choose new
advisers because the advice he has been getting is not working. We are
languishing. We are on the precipice of possibly going into another
recession, and I would suggest at this point we need a new Secretary of
the Treasury.
How did we get into this problem? We got into this problem because we
had a housing boom. This came from bad monetary policy. It came from
the Federal Reserve setting interest rates below the market rate, and
that signal was transmitted out into the economy and we got a housing
boom. Then we had a housing depression. We are still in the midst of a
housing depression.
Where did that policy come from? That policy came from Secretary
Geithner and Ben Bernanke.
What have we done? We have reappointed these people and reapproved
their policies that got us into the problem in the first place. If we
want our country to thrive again, we must diagnose the problem
correctly before we try to fix it. Because they didn't understand how
we got into this recession, they also passed a whole bunch of new
regulations. The Dodd-Frank bill heaps all kinds of new regulations
that make it harder to get a home loan.
In the midst of a housing depression, we have heaped all these new
rules on community banks. You know what? In my State of Kentucky, not
one bank failed. The problem is at the Federal Reserve. The problem is
with the policy. The problem is with the people we still have running
this country and advising the President.
What I am asking for today is a vote of no confidence on Timothy
Geithner. I see no reason and no objective evidence that any of his
policies are succeeding. I have come to the floor today to ask for this
vote, and we will continue to try to get this vote. We have introduced
a resolution in favor of voting a vote of no confidence on Timothy
Geithner, and I hope this body will consider it.
I yield back the remainder of my time and suggest the absence of a
quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. DURBIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
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The PRESIDING OFFICER (Mr. Coons). Without objection, it is so
ordered.
Mr. DURBIN. Mr. President, I ask the Chair what is pending before the
Senate at this moment.
The PRESIDING OFFICER. The bill H.R. 1249 is pending for debate only.
Mr. DURBIN. Mr. President, I yield the floor and suggest the absence
of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. HARKIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER (Mr. Bennet). Without objection, it is so
ordered.
Mr. HARKIN. Mr. President, I ask unanimous consent to speak as in
morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Economy
Mr. HARKIN. Mr. President, on Monday, we observed but did not
celebrate Labor Day. I say ``observed and did not celebrate'' because
we are painfully aware that there are at least 29 million underemployed
and unemployed Americans in our midst. Last Friday, the Department of
Labor sent shock waves through the global economy by reporting that the
U.S. economy created zero net jobs in August. A growing chorus of
economists is warning against the dangers of making immediate draconian
cuts to the Federal budget--something that, by its very nature, will
drain demand, reduce growth, and destroy jobs.
Tragically, too many Members of Congress refuse to listen. Over the
summer, they have insisted on a mindless march to immediate austerity--
an approach that threatens to strangle the weak economy.
Inside the Washington bubble, some of our political leaders continue
to insist that the biggest issue is the budget deficit. Outside the
beltway, ordinary Americans are desperately concerned with a far more
urgent deficit, the job deficit.
I am also concerned about a third deficit, the deficit of vision and
leadership in Washington. I am disturbed by our failure to confront the
current economic crisis with the boldness and vision that earlier
generations of Americans summoned in times of national challenge.
Smart countries, in tough economic times, do not just turn a chainsaw
on themselves. Instead of the current slash-and-burn approach, which is
being sold through fear and fatalism, we need an approach that reflects
the courage and determination of the American people. By all means, we
must agree on necessary spending cuts and revenue increases, but we
also must continue to invest in that which will spur economic growth,
create jobs, and rebuild the middle class.
I cannot emphasize too strongly the importance of restoring the
middle class in America. I have given several floor speeches on this
very subject. In the committee I am privileged to chair, the HELP
Committee, we have had hearings on what has happened to the middle
class. In fact, on September 1, our committee issued this report:
``Saving the American Dream: The Past, Present, and Uncertain Future of
America's Middle Class.'' I commend it to my colleagues.
Restoring the middle class is essential to boosting demand and
revitalizing our economy. It is the only way to restore long-term
fiscal balance at the Federal level.
Economists across the political spectrum, from left to right, agree
that a major cause of our current economic stagnation is a chronic lack
of demand. For nearly three decades, workers' incomes have been
stagnant. Simply put, they lack the purchasing power to drive America's
consumer economy. Without adequate demand, businesses are reluctant to
invest and hire.
Adjusted for inflation, average hourly earnings in 1970 were $18.80
an hour or $39,104 annually. Again, average hourly earnings in 1970
were $39,104. However, by 2009, those inflation-adjusted average hourly
earnings had actually declined to $18.63 an hour or $38,750 a year.
Imagine that. From 1970 to 2009, average hourly earnings went down. One
might say: So what.
This second chart will show what is happening to the middle class.
This chart shows the rising cost of essentials. At the same time
earnings have stagnated or gone down a little bit, the costs that make
up the largest part of a family budget have skyrocketed. Here is the
food budget, up 2 percent; gas, up 18 percent; rent and utilities, up
41 percent; health expenditures, up 50 percent; public colleges, up 80
percent; price of a home, up 97 percent; cost of a private college, up
113 percent. No wonder the middle class is finding it harder and harder
to make ends meet.
However, at the same time, let's look at what is happening at the
higher end of the income spectrum and see what happened to CEO
compensation during this same period of time. Average hourly earnings
have gone down, as I said. The value of the minimum wage--I will talk
about that in a minute--has gone down 19 percent from 1970 to last
year. But the median executive compensation has gone up 430 percent in
the same time. Is there any surprise that people are upset around
America, that middle-class families are kind of edgy today? Sure, they
are edgy. How are they going to send their kids to college or buy a new
home or get out from the ones that are already underwater, provide rent
or buy gasoline for cars in rural areas where they have to drive to go
to work, to school or to go to church?
How do we boost income and restore people's purchasing power? There
are a number of ways we need to do this. I will suggest one to start
with. We need to restore a robust right to organize unions and bargain
collectively. I say that unabashedly. It is no coincidence the decline
of the middle class has coincided with the dramatic decline of union
membership in the United States. Why? Because unions provide workers
with the leverage to ensure that they share in their company's gains
through wages and benefits and are not just providing company CEOs with
even larger pay packages. That is just one step.
Another very practical step we can take to boost purchasing power and
boost the economy is to increase the minimum wage. The minimum wage
today is $7.25. If we raised the minimum wage to make up for what it
has lost to inflation over the last 40 years, it would be $10.39 an
hour. As we saw, the average CEO pay has gone up 430 percent, and the
minimum wage--adjusted for inflation--should be $10.39 an hour today.
But it is only $7.25. So the minimum wage has gone down, and the median
executive compensation has gone up 430 percent. A raise in the minimum
wage puts money in the pockets of low-income consumers who are likely
to spend it at local businesses.
Most important, of course, we have to create more jobs--but not just
any jobs, quality jobs with fair wages and real benefits that can
support a family and help hard-working people build a brighter future.
That is the way we will put demand back in the economy and get the
economy moving again.
Tomorrow evening, the President will present to Congress his plan for
boosting job creation and helping to lift the economy. I urge the
President to point out that there are some things--big national
undertakings--that the private sector simply is not capable of doing.
At critical junctures, going back to the beginning of our Republic, the
Federal Government has stepped up to the plate. Congresses and
Presidents have to act decisively to spur economic growth, foster
innovation, and help create jobs. We need that kind of bold action
today.
The mantra I hear from my friends on the Republican side is that
government can't create jobs. That is nonsense. Smart government can
create jobs. Shortsighted government can destroy jobs. For example, the
brief shutdown of the Federal Aviation Administration this summer put
nearly 70,000 private sector construction employees out of work.
Draconian cuts proposed by House Republicans to the new Transportation
bill would destroy an estimated 490,000 highway construction jobs and
nearly 100,000 transit-related jobs. That is dysfunctional government,
making the problem even worse.
By contrast, across our history, an often visionary and bold Federal
Government has funded and spearheaded initiatives that have expanded
private commerce, given birth to countless inventions and new
industries, and created tens of millions of jobs.
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During the Presidency of Franklin Roosevelt, with the private sector
paralyzed by the Great Depression, the Federal Government responded
with an astonishing array of initiatives to restart the economy,
restore opportunity, and create jobs. I still have on my wall in my
office--and I will bet I am the only Senator on the floor today who can
say this--the actual WPA form of my father when he worked for the Works
Projects Administration. He got a job to help feed his family. Some of
the things my father worked on in the WPA exist today--still used by
the public, still used by kids going to high school. A lot of times
people say: Well, that was all well and good, but that didn't stop the
depression that was World War II. Well, what was World War II but
massive government infusion into the economy?
By the end of the Second World War, wartime investments in plants and
equipment and making tanks and airplanes and all kinds of things, which
we then turned over to the private sector, created an industrial
colossus the likes of which the world had never seen. Franklin
Roosevelt and President Truman were followed by a Republican President,
Dwight Eisenhower. President Eisenhower--I am sure a very proud
Republican--was also determined to move America forward. He championed
one of the greatest public works projects in American history--the
construction of the Interstate Highway System. A 1996 study of that
system concluded:
The interstate highway system is an engine that has driven
40 years of unprecedented prosperity and positioned the
United States to remain the world's preeminent power into the
21st century.
This kind of visionary thinking, by both Democratic Presidents and a
Republican President, is by no means a relick of the distant past. In
more recent times, the Federal Government has funded and spearheaded
scientific discovery and innovation that has had profound impacts on
our economy--spawning scores of new industries and creating millions of
high-value jobs. I will just mention a few.
Specifically, the Defense Advanced Research Projects Agency--called
DARPA--invented the Internet, making possible everything from e-mail to
social networking to the World Wide Web. Federal researchers at that
same agency--DARPA, the Defense Advanced Research Projects Agency--
invented the global positioning satellite system.
I can remember when I first came to the Congress as a House Member on
the House Science and Technology Committee and we first started
authorizing funding for the GPS system. A lot of people at that time
said: Oh no, no. This is not the role for the Federal Government. Only
the private sector can do it. But the private sector could not
undertake that at that point in time. So the Federal Government put up
the satellites and the private sector took over, and now we have Garmin
and TomTom and we have all kinds of things now for airplanes and cars
and boats--all made by the private sector employing people in private-
sector jobs--because the Federal Government put forth the money and the
investment to put that system into place.
Need I mention NASA, and the number of technological breakthroughs
over the years--everything from microchips to CAT scanner technology.
And of course any discussion of the Federal role in promoting our
economy would not be complete without mentioning the National
Institutes of Health. More than 80 Nobel prizes have been awarded for
NIH-supported research.
One might say: Well, how has that benefitted us? Recently, the
Battelle Memorial Institute, a nongovernment research institute,
reported on the Federal Government's $3.8 billion investment in the
Human Genome Project from 1988 to 2003. Battelle estimates this Federal
investment of $3.8 billion in taxpayer money has produced a staggering
$796 billion in economic output. In 2010 alone, this ``genomic
revolution'' generated $67 billion in U.S. economic output and
supported 310,000 jobs.
These are the kinds of investments that are some of the best ways to
reduce budget deficits. They will help many of the 29 million
unemployed and underemployed get jobs and become taxpayers again. With
the private-sector engine again threatening to stall out, there is a
critical role for the Federal Government in creating demand and
preventing a slide back into recession.
The most obvious way forward--with support across the political
spectrum, including the U.S. Chamber of Commerce--is to dramatically
ramp up Federal investments in infrastructure in order to boost U.S.
competitiveness. The American Society of Civil Engineers estimates that
America faces a $2.2 trillion--trillion dollars--infrastructure
backlog. Bringing this U.S. infrastructure into the 21st century would
create millions of private-sector jobs--especially in the hard-hit
construction industry--while modernizing the arteries and veins of
commerce.
As someone once recently said: Think about it this way: We are still
driving on Eisenhower's highways and going to Roosevelt's schools. It
is time to do it for the next century.
There can be no economic recovery, no return to fiscal balance
without the recovery of the middle class. And there will not be a
middle class unless and until we come to grips with the need for
Federal investment in education, innovation, research, and
infrastructure. It means restoring a level playing field with fair
taxation, vibrant unions, a strong ladder of opportunity to give every
American access to the middle class.
I hope President Obama will be bold, as Presidents in the past have
been. I hope he will put forward a very bold, visionary, challenging--
challenging--proposal tomorrow night, to challenge us to the better
side of our human nature and to recapture again what we have done in
the past. In that way, we can rebuild the middle class and put America
back to work. I believe that is the only way we will be able to do
that.
Mr. HARKIN. Mr. President, with that, I yield the floor, and I
suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. LEAHY. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER (Mr. Whitehouse). Without objection, it is so
ordered.
Mr. LEAHY. Mr. President, I ask unanimous consent the period for
debate only on H.R. 1249 be extended to 6:30 p.m. and that at 6:30 p.m.
the majority leader be recognized.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. LEAHY. Mr. President, I have worked on efforts to prevent the
diversion of fees collected by the U.S. Patent and Trademark Office for
years. When the distinguished Senator from Oklahoma, Mr. Coburn, took
on the issue, I urged him to work with me, to withhold the amendment
during the Judiciary Committee's consideration of the bill, and I would
work with him to include improvements on the Senate floor.
I did. I kept my word. In fact, I included language he drafted in the
managers' amendment and worked hard to pass it despite the misgivings
of several Senators on both sides of the aisle.
However, when our bill went over to the House of Representatives,
they preserved the principle against fee diversion but changed the
language. The language of the bill is that which the House devised and
voted to include as worked out by the House Republican leadership to
satisfy House rules. The provisions Senator Coburn had drafted--and I
understand may offer with his amendment--apparently violate House rule
21, which prohibits authorizing legislation from converting
discretionary spending into mandatory spending. So instead of a
revolving fund, the House established a reserve fund.
The America Invents Act, as passed by the House, continues to make
important improvements to ensure that fees collected by the U.S. Patent
and Trademark Office are used for USPTO activities. That office is
entirely fee-funded and does not rely upon taxpayer dollars, but it has
been and continues to be subject to annual appropriations bills. That
allows Congress greater opportunity for oversight.
The legislation that passed the Senate in March would have taken the
Patent and Trademark Office out of the appropriations process by
setting
[[Page S5373]]
up a revolving fund that allowed the PTO to spend all money it collects
without appropriations legislation or congressional oversight. But
instead of a revolving fund the House formulation against fee diversion
establishes a separate account for the funds and directs they be used
for the U.S. Patent and Trademark Office.
The House forged a compromise with its appropriators to reduce any
incentive to divert fees from the PTO and to provide the PTO with
access to all fees that it collects while keeping the PTO within the
normal appropriations process with the oversight that process includes.
The America Invents Act thus creates a new Patent and Trademark fee
reserve fund into which all fees collected by PTO in excess of that
amount appropriated in a fiscal year are to be deposited. Fees in the
reserve fund may only be used for operations of the PTO. In effect,
they are doing what we have asked but staying within the House rules.
In fact, in addition, the House appropriators agreed to carry
language in their appropriations bills that would guarantee that fees
collected by the PTO in excess of the appropriated amounts would remain
available to the PTO until expended and could be accessed by the PTO
through reprogramming procedures without the need for subsequent
legislation.
This may sound kind of convoluted, but what a number of people,
including Senator Coburn, wanted to do was to make sure the fees went
to PTO. I happen to agree with that. What the House did has the effect
of making sure the fees go to the PTO.
What I hope we not do now is try to offer amendments that may change
that and in effect kill the bill. Through the creation of the reserve
fund, as well as the commitment by House appropriators, H.R. 1249 makes
important improvements in ensuring that user fees collected by the PTO
for services are used by the PTO for those services.
So while I oppose fee diversion, I also oppose the Coburn amendment,
and I will tell you why. After 6 years of work getting this bill here,
this may kill the bill over a formality: the difference between a
revolving fund and a reserve fund. One would be hard-pressed to know
what the difference is except it would kill the bill. It would require
the House to consider the whole bill again. They spent days and weeks
in heavy debate working out their compromise in good faith. It was
worked out by the House Republican leadership. There is no reason to
think that having done that, they are going to reconsider and allow the
original Coburn language to violate the rules and avoid oversight.
In fact, I ask that a letter from Congressmen Rogers and Ryan to
Chairman Smith be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Congress of the United States,
Washington, DC, June 6, 2011.
Hon. Lamar Smith,
Chairman, Committee on the Judiciary, House of
Representatives, Washington, DC.
Chairman Smith: It is our understanding that H.R. 1249, the
America Invents Act, is likely to be considered on the House
floor in the upcoming weeks.
As you know, section 22 of H.R. 1249 would strike the
current appropriations account language for the Patent
Trademark Office (PTO), replace it with a ``United States
Patent and Trademark Office Public Enterprise Fund,'' and
permit the PTO to collect and spend authorized fees--all
without requiring action or approval from Congress.
We strongly oppose this proposed shift of billions in
discretionary funding and fee collections to mandatory
spending. Putting PTO funding on auto-pilot is a move in
exactly the wrong direction, given the new Republican
majority's commitment to restraining spending, improving
accountability and transparency, and reducing the nation's
unparalleled deficits and debt.
Placing PTO spending on mandatory auto-pilot as outlined in
H.R. 1249 would also hand the Congressional ``power of the
purse''--bestowed in the Constitution--to the Obama White
House, and essentially eliminate the ability of Congress to
perform substantive oversight of the PTO. We strongly oppose
undermining these critical efforts, particularly when House
Republicans have pledged to strengthen oversight of federal
agencies to ensure resources are being used wisely and
appropriately, and to prevent federal agencies from over-
stepping their authority.
Oversight of the PTO belongs with the Congress, and should
not be abdicated to the Executive Branch of government.
Patent applications are filed by U.S. citizens and companies
from all 50 states and territories, ranging from as many as
66,191 from California, 16,545 from Texas, 15,258 from New
York, 8,128 from Ohio, 3,577 from Virginia, and 600 from
Nebraska in 2010. Virtually every Member of Congress
represents constituents who have a stake in the oversight of
PTO--and often businesses and livelihoods depend on actions
the agency undertakes. It would be both irresponsible and
unwise to allow the PTO to operate solely under the authority
of bureaucrats and White House political appointees--without
being held accountable to the American public through their
elected Representatives in Congress.
Given these concerns, we ask that section 22 be deleted or
otherwise be modified prior to floor consideration in order
to strengthen oversight of this important agency, and to
ensure American citizens are getting the most from every
dollar.
Sincerely,
Harold Rogers,
Chairman, House Committee on Appropriations.
Paul Ryan,
Chairman, House Committee on the Budget.
Mr. LEAHY. I know the members of the Senate Appropriations Committee.
I know them. I trust Senator Inouye, someone awarded the Congressional
Medal of Honor for his bravery and valor in World War II. I trust the
senior Senator from Mississippi and the senior Senator from Alabama
with whom I have served for many years. They will follow the law. They
will abide by the Supreme Court. I was disturbed to read a comment that
this amendment is being brought forward out of distrust of these
Senators. These are Senators I have served with for decades. They can
and should be trusted. We should not kill this bill over this
amendment. Instead, we should reject the amendment and pass the bill.
(Mr. BENNET assumed the Chair.)
Mr. WHITEHOUSE. Mr. President, I rise today to speak in favor of H.R.
1249, the Leahy-Smith America Invents Act. This is a vital piece of
job-creating legislation and I urge my colleagues to support it.
Before I turn to the merits of the bill, let me start by applauding
the long, hard work of Chairman Leahy. He has led the effort on this
legislation for many years, patiently working towards a bill that would
win broad support from the many interested stakeholders while achieving
the crucial goals of spurring innovation, generating jobs, and securing
America's place as the world leader in the intellectual property
economy. It has been a pleasure to work with him on this important
issue. I likewise applaud the hard work of colleagues on both sides of
the aisle who have sought to support continued American leadership in
technology, medicine, and countless other fields.
Our patent system unfortunately has become a drag on that leadership,
largely because it has gone 60 years without improvements. It is long
past time to repair that system and thereby energize our innovation
economy and create jobs.
Our Nation long has led the world in hard work and ingenuity. My home
State of Rhode Island, for example, has a long and proud history of
industry and innovation, from the birth of the American industrial
revolution to the high-tech entrepreneurs leading our State forward
today. An area has developed in Providence, for example, that is
rightfully known by the nickname ``the Knowledge District'' for its
remarkable innovation. Rhode Island likewise is the home of remarkable
research universities, individual inventors, and businesses of all
sizes that have contributed giant leaps forward in the fields of
technology, medicine, and mechanical science.
Innovators like these in Rhode Island, and across America, are the
drivers of our future economic well-being. My conversations with these
Rhode Islanders, however, have made clear to me that the current patent
system is making it unnecessarily difficult for them to innovate.
Innovators who can solve the most complicated problems of medicine,
mechanics, or technology are losing out because of basic problems in
our patent system. We need to fix these problems now. Fail to do so and
we will pay the price in jobs and international competitiveness.
I have heard two complaints over and over back home in Rhode Island.
The first relates to delays in the issuance of patents. Enormous
backlogs persist at the Patent and Trademark Office. As a result, our
innovators have no certainty whether they have successfully
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established intellectual property rights in their inventions. This
dampens and frustrates innovation.
The America Invents Act takes on the backlog in a number of different
ways. It allows the Patent and Trademark Office discretion to set its
own fees and includes a provision that will discourage fee diversion.
While I would have preferred to have seen Senator Coburn's anti-fee-
diversion amendment accepted by the House, I am confident that these
provisions, coupled with exceptions that will ensure low fees for small
businesses, will enable the Patent and Trademark Office to better
manage its resources and reduce examination times.
My conversations with Rhode Island inventors also identified a second
clear problem in our patent system: the threat of protracted
litigation. Unfortunately, numerous poor quality patents have issued in
recent years, resulting in seemingly endless litigation that casts a
cloud over patent ownership. Administrative processes that should serve
as an alternative to litigation also have broken down, resulting in
further delay, cost, and confusion.
The America Invents Act will address these problems by ensuring that
higher quality patents issue in the future. This will produce less
litigation and create greater incentives for innovators to commit the
effort and resources to create the next big idea. Similarly, the bill
will improve administrative processes so that disputes over patents can
be resolved quickly and cheaply without patents being tied up for years
in expensive litigation. The bill also moves America to the simple
First-Inventor-to-File system which will eliminate needless uncertainty
and litigation over patent ownership, and it eliminates so-called ``tax
patents.''
In all, the Leahy-Smith America Invents Act is an important and much-
needed reform of our patent system. True, every intellectual property
stakeholder did not get everything they wanted in this version of the
patent bill. I am sure every participant in this process would like a
few things added to the bill and a few things taken out. That is
inevitable in a bill that has been crafted in a true spirit of
compromise. The result is a bill that may not please everyone in all
respects but that satisfies its core responsibility to remove existing
burdens on American innovation and allow the growth of high quality,
high technology jobs in our country. It is extremely important in this
time of economic hardship that we put people to work. That is exactly
what this bill will do and I believe we should pass it immediately. We
should not amend it further in a manner that will risk the bill's
ultimate defeat. This is a long journey and we are at the finish; let's
get this bill done for American inventors and workers. Let's see this
much-needed piece of patent reform passed into law.
I once again urge my colleagues to vote to pass this important piece
of legislation into law.
Mr. KYL. Mr. President, I rise today to submit for the Record two
letters addressed to the chairman and ranking member of the House
Judiciary Committee. The letters were written by Judge Michael
McConnell, a former member of the U.S. Court of Appeals for the Tenth
Circuit and the current the director of the Constitutional Law Center
at Stanford Law School. Judge McConnell's letters examine the
constitutionality of section 18 of the America Invents Act, a section
of the bill that authorizes a temporary program for administrative
review of business-method patents. The letters thoroughly refute the
arguments being presented by some opponents of section 18 that the
provision either constitutes a taking or runs afoul of the rule of
Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 1995. Because these
letters have circulated widely among members and staff and have played
a substantial role in the debate about section 18, I think that it is
appropriate that they be published in the Record.
I ask unanimous consent that the following materials be printed in
the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Michael W. McConnell,
Stanford, CA, June 16, 2011.
Dear Chairman Smith and Ranking Member Conyers: I am the
Richard and Frances Mallery Professor and Director of the
Constitutional Law Center at Stanford Law School, and a
Senior Fellow of the Hoover Institution at Stanford
University, where I teach and write in the field of
constitutional law. I previously served as a judge on the
United States Court of Appeals for the Tenth Circuit.
Congress is now considering legislation (the ``America
Invents Act'') that would expand the grounds on which patents
may be reexamined by the Patent and Trademark Office
(``PTO''), after their initial issuance. I write to address
the constitutionality of those sections: Section 6 (Post-
grant Review Proceedings) and Section 18 (Transitional
Program for Covered Business Method Patents) of the America
Invents Act. Based on my review, these sections of the
proposed Act are constitutional as drafted.
As you are aware, for the past thirty years, this nation's
patent laws have included procedures for reexamination of
already-issued patents. In two leading cases, parties
challenged the constitutionality of reexamination of patents
in court, raising all the the theories now propounded in
opposition to sections 6 and 18 of the proposed America
Invents Act--takings, due process, retroactivity, and
separation of powers. The court of appeals carefully
considered and rejected those challenges, upholding the
reexamination process in all respects. Sections 6 and 18 of
the proposed Act merely expand the grounds on which
reexamination is available under current law, but do not
change substantive patent law at all, nor the fundamental
procedure of reexamination in any constitutionally
significant way. We may therefore state with confidence that
the proposed legislation is supported by settled precedent.
Moreover, the proposed measure conforms to the purposes of
the Patent Clause of the Constitution, Article I, Section 8,
Clause 8, which grants Congress authority to ``promote the
Progress of Science and the useful Arts.'' By means of this
provision, the Framers sought to balance the goal of
encouraging innovation against the dangers and economic loss
of monopoly. The reexamination process serves to preserve
that balance by adopting a procedure by which the PTO can
identify patents that were issued in error. Challenges to the
reexamination process proceed on the theory that a patent is
a vested right, which once granted may not be taken away, at
least not by the agency that granted it. This is a
fundamental misconception. If a party is issued a patent that
does not comply with the patent laws--and the patent is
therefore invalid--it is not a ``taking'' for either a court
or the PTO to determine that the patent is invalid. Just as
it is not a taking to determine that a person occupying land
has a defective title to it, it is not a taking to determine
that a patent holder never had a right to a patent in the
first place.
Unlike many other familiar forms of property, the validity
of a patent is never determined once and for all; members of
the public with competing or adverse interests have long had
a continuing right to demonstrate, through reexamination
before the PTO, that a patent was invalidly issued. And a
party threatened with a patent infringement action has always
had the right to seek to demonstrate that the patent is
invalid, regardless of whether the same issue has been
previously litigated in a different case. In other words,
there is no such thing as ``adverse possession'' in patent
law. The only change wrought by the proposed Act is to expand
the grounds under which such reexaminations are made by the
PTO in the first instance. As a constitutional matter,
Congress is entitled to allocate the responsibility of
determining whether a patent was properly granted to the
courts or to the expert agency, in its discretion. As long as
interested parties have the ultimate right to challenge the
agency's decisions in court, the administrative nature of the
proceeding has no constitutional significance. Moreover, I
see nothing in sections 6 and 18 of the proposed Act that
would alter or interfere with existing principles of res
judicata or collateral estoppel in the context of a final
judgment, much less allow the PTO to disturb the final
judgment of a court.
I offer no view on the merits or policy of the Act, but
offer my judgment that it is entirely consistent with the
Constitution for Congress to bring to bear the experience and
expertise of the PTO in providing for more robust review of
issued patents.
I. Background Principles
I begin with the basic background principles. The Framers
of the United States Constitution were well aware of the
dangers of monopoly, and sought to ensure that patents could
be granted only when they served an overriding public
interest. An invalidly issued patent does not properly reward
innovation, but instead impedes commerce, hence ``the public
good.'' The Federalist, No. 43 (Madison), at 268 [1788] (C.
Rossiter ed., 1961). The Framers were also painfully aware of
the propensity of governmental agencies and bureaucracies to
err. They would not, therefore, have been surprised by
efforts to ensure that patent rights may be exercised only
when the underlying patent claim is valid and the patent was
properly issued. That is why, from the beginning, patents
have never been regarded as a fully and irrevocably vested
right. As the Supreme Court has explained, the Patent Clause
of the Constitution ``is both a grant of power and a
limitation,'' and Congress' actions
[[Page S5375]]
must be directed to striking the balance between encouraging
innovation and stifling competition through the grant of
patents that do not promote ``the Progress of . . . useful
Arts. This is the standard expressed in the Constitution and
it may not be ignored.'' Graham v. John Deere Co., 383 U.S.
1, 5 (1966) (internal citations and quotation marks omitted);
see also Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489
U.S. 141, 146-47 (1989).
Patents are unquestionably property rights. Consolidated
Fruit Jar Co. v. Wright, 94 U.S. 92, 96 (1876). However,
unlike many property rights, the right to exclude under a
patent ``is a right that can only be conferred by the
government.'' Patlex Corp. v. Mossinghoff, 758 F.2d 594, 604
(Fed. Cir. 1985). A patent is not a natural right, but solely
a product of positive law; its extent, duration, and validity
is a matter that must be determined by the legislative
branch. In contrast with purely private rights, ``the grant
of a valid patent is primarily a public concern.'' Id. In
assessing the validity of a patent, the ``threshold
question usually is whether the PTO, under the authority
assigned to it by Congress, properly granted the patent.''
Id. As the Supreme Court recently reaffirmed, the
statutory presumption of validity found in 35 U.S.C.
Sec. 282, is a reflection of the presumption of
administrative correctness by the PTO. Microsoft Corp. v.
i4i Ltd. P'ship, -- U.S. --, No. 10-290, slip op. 16-17
(2011).
Patents are issued after a limited, ex parte process in
which the public has no opportunity to participate. The PTO
largely only has before it the information provided by the
inventor's attorney. As a result, as courts have recognized,
the PTO may not have all of the material information at the
time it issues a patent. Therefore, although patents are
presumed valid, ``if the PTO did not have all material facts
before it, its considered judgment may lose significant
force.'' i4i, slip op at 17.
The validity of a patent is not a matter that is ever fully
and finally settled. Rather, it remains ``ever-present,''
Patlex Corp., 758 F.2d at 600, because any defendant may
assert an invalidity defense in patent litigation--even if
the same issue has been previously litigated by another
defendant. Prior to 1980, the only means by which a party
could challenge the validity of a patent was through
litigation in court. In 1980, however, Congress created an
administrative reexamination procedure, designed to weed out
patents that are invalid because they did not meet the
requirements for patentability set forth in the Patent Act.
See Public Law No. 96-517. Under these procedures, ``[a]ny
person at any time may file a request for reexamination by
the [PTO] of any claim of a patent on the basis of any prior
art'' that was published. 35 U.S.C. Sec. 302 (emphasis
added).
Since 1980, therefore, the validity of a patent may be
challenged several ways: A party who is sued for patent
infringement may assert a defense of invalidity, which must
be proven by the higher standard of clear and convincing
evidence (in deference to the presumed correctness of the
PTO's decision), or a patent's validity can be reviewed
through a reexamination proceeding. Upon reexamination, the
PTO may confirm any patentable claim or cancel any
unpatentable claim. Reexamination thus provides an
opportunity for the PTO to review and correct its own work
based on fuller information. As the Federal Circuit has
described, ``[t]he innate function of the reexamination
process is to increase the reliability of the PTO's action in
issuing a patent by reexamination of patents thought
`doubtful.' '' In re Etter, 756 F.2d 852, 857 (Fed. Cir.
1985).
The reexamination process created in 1980 endured
constitutional challenges similar to what opponents of the
America Invents Act are marshalling today: the 1980
reexamination procedure was challenged by patent holders as
an unconstitutional taking, as a violation of due process, as
a violation of the Seventh Amendment right to a jury trial,
and as a violation of separation of powers. See Patlex Corp.,
758 F.2d 598-599; Joy Technologies v. Manbeck, 959 F.2d 226
(Fed. Cir. 1992). Each of these challenges was soundly
rejected by the United States Court of Appeals for the
Federal Circuit.
Thus, to be clear, under current law, at the instance of a
party, the PTO may reexamine a patent that has been issued,
and the validity of which has been unsuccessfully challenged
in litigation. With this in mind, I first address the
constitutionality of Sections 6 and 18 of the America Invents
Act.
II. Section 6 of the America Invents Act Is Constitutional
Section 6 of the America Invents Act amends the Patent Act
to create a post-grant review procedure available for a
limited time (one year, in the current America Invents Act
legislation) after the date a patent is granted. Section 6
also amends existing inter partes reexamination procedures to
make them available after the period of time for post-grant
review has passed or, if post-grant review has been
initiated, after that post-grant review is complete. A key
distinction between the post-grant review procedures and the
inter partes reexamination procedures is the grounds and
evidence that can be considered for invalidating a patent: as
with current law, the inter partes reexamination procedure of
Section 6 is limited to considering (1) whether a patent is
invalid for failing to meet the Patent Act's requirements of
novelty and non-obviousness (2) based on patents or printed
publications.
Section 6 is in harmony with the first principles of the
Constitution and with the body of legal precedent addressing
the existing reexamination procedures. The Patent Clause of
the Constitution empowers Congress to ``promote the Progress
of Science and useful Arts'' by granting patents to
inventors, but it correspondingly limits Congress' authority
to grant patents that do not advance ``the Progress of
Science and useful Arts.'' The Supreme Court has recognized
that from the beginning our Founders have sought to strike
that constitutional balance: ``Thus, from the outset, federal
patent law has been about the difficult business of `drawing
a line between the things which are worth to the public the
embarrassment of an exclusive patent, and those which are
not.'' Bonito Boats, 489 U.S. at 148 (quoting 13 Writings of
Thomas Jefferson (Memorial ed. 1904) at 335). One manner in
which Congress has fulfilled this mandate to strike the
proper balance is through the existing reexamination
procedures, which provide a mechanism for removing patents
that should never have been granted by the PTO because they
did not meet the requirements for a valid patent set by
Congress in the Patent Act. As the Federal Circuit has
observed, ``[t]he reexamination statute's purpose is to
correct errors made by the government, to remedy defective
governmental (not private) action, and if need be to remove
patents that should never have been granted.'' Patlex Corp.,
758 F.2d at 604 (emphasis added). A determination that a
patent should never have been granted is no more a ``taking''
than is a determination that a putative landowner suffers a
defect in title.
Accordingly, the revised inter partes reexamination
procedures and the post-grant review procedures of Section 6
are hardly novel but rather are based on longstanding
procedures established by Congress and repeatedly recognized
as constitutional by the Federal Circuit in decisions such as
Patlex Corp., 758 F.2d 594, 607 (Fed. Cir. 1985) (emphasis
added), Joy Technologies, 959 F.2d 226, 228-29 (Fed. Cir.
1992), and In re Swanson, 540 F.3d 1368, 1379 (Fed. Cir.
2008). As such, Section 6 does little more than expand the
grounds for reexamination of patents, something Congress is
plainly entitled to do pursuant to its authority under the
Patent Clause (Article I, Section 8, Clause 8) of the
Constitution.
Nor is there any conflict between Section 6 and other parts
of the Constitution such as Article III and the Seventh
Amendment. The gist of the arguments suggesting a conflict is
that the PTO would be permitted to ``overrule'' final
judicial determinations made by an Article III court and/or
jury of a patent's validity. But these arguments fail to
understand the nature of judicial review of patent
validity and fail to recognize the body of precedent that
has rejected these arguments as applied against the
current legal regime.
To begin, what exactly happens when issues of patent
validity are litigated in district courts should be placed in
proper context. As the Federal Circuit has explained,
``Courts do not find patents `valid,' only that the patent
challenger did not carry the burden of establishing
invalidity in the particular case before the court under 35
U.S.C. 282.'' Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1429 n.3
(Fed. Cir. 1988) (emphasis original and internal quotation
marks omitted). For this reason, ``a prior holding of
validity is not necessarily inconsistent with a subsequent
holding of invalidity and is not binding on subsequent
litigation or PTO reexaminations.'' In re Swanson, 540 F.3d
1368, 1377 (Fed. Cir. 2008) (internal citations and quotation
marks omitted). In other words, a district court decision
that a patent is ``not invalid'' merely means that the
challenger did not carry his burden; it does not mean that
the patent is valid.
The existing reexamination procedures and the new post-
grant review procedures proposed in the America Invents Act
vest authority to determine validity upon reexamination in
the agency entrusted by Congress with making the validity
decision in the first instance--the PTO. It is entirely
proper that this corrective action be taken by the PTO, with
review 67 the Federal Circuit. It need not be limited to an
Article III court in the first instance. ``A defectively
examined and therefore erroneously granted patent must yield
to the reasonable Congressional purpose of facilitating the
correction of governmental mistakes. This Congressional
purpose is presumptively correct, and we find it carries no
insult to the Seventh Amendment and Article III.'' Patlex
Corp., 758 F.2d at 604. In other words, under a well-settled
body of case law, ``the Constitution does not require that
[courts] strike down statutes, otherwise having a reasonable
legislative purpose, that invest administrative agencies with
regulatory functions.'' Id. at 604,305. That holding is just
as applicable to Section 6 of the America Invents Act as it
is to the original reexamination procedures adopted in 1980.
Nor does it matter, for constitutional purposes, that the
PTO may reconsider the validity of patents' that are, or have
been, adjudicated by district courts. In In re Swanson, 540
F.3d 1368 (Fed. Cir. 2008), the Federal Circuit specifically
considered and rejected the argument that Plaut v.
Spendthrift Farm, Inc., 514 U.S. 211 (1995), prohibited
reexamination of a patent by the PTO after that patent had
survived an invalidity challenge in court. See Swanson, 540
F.3d at 1378,79 (``[The patentee] argues that this reading of
the statute--allowing an executive agency to find patent
claims invalid after an Article III court has upheld their
validity--violates the constitutionally mandated separation
of powers, and therefore must be avoided. We disagree.''). As
the Federal Circuit held, ``the
[[Page S5376]]
court's final judgment and the examiner's rejection are not
duplicative--They are differing proceedings with different
evidentiary standards for validity. Accordingly, there is no
Article III issue created when a reexamination considers the
same issue of validity as a prior district court
proceeding.'' In re Swanson, 540 F.3d 1368, 1379 (Fed. Cir.
2008) (citation omitted). Because Section 6 merely broadens
the kinds of invalidity challenges that can be pursued during
reexamination, that holding would apply to the America
Invents Act as well. Plaut simply does not apply.
Relatedly, invalidation of a patent by the PTO (or by a
court, for that matter), after it has been adjudicated ``not
invalid'' in one particular case, does not purport to undo a
court's judgment in an earlier case. The PTO has no authority
to disturb a final judgment of a court, and nothing in the
proposed Act would change that. Rather, it would remain
within the discretion of the district court to determine
whether relief from a final judgment was appropriate under
Rule 60(b) based on changed circumstances. See Amado v.
Microsoft Corp., 517 F.3d 1353, 1363 (Fed. Cir. 2008).
Nothing in Section 6 purports to alter the standards under
which a court determines whether to grant relief from a final
judgment. Accordingly, there is no constitutional problem
under Plaut.
III. Section 18 of the America Invents Act is Constitutional
Section 18 of the America Invents Act is equally
constitutional. As an initial matter, it is important to
recognize that Section 18 does nothing more than apply the
more robust post-grant review provisions of Section 6 to
existing business-method patents. By any measure, this is not
a ``taking'' within the meaning of the constitution (unless
for the past thirty years patent law has been effecting
``takings'' each time a reexamination takes place). The
constitutional arguments that have been marshaled against
Section 18--that it applies ``retroactively'' to existing
patents, that it would change the rules of the game, or that
it would upset settled property rights--were rejected by the
Federal Circuit in Patlex Corp. and again in Joy
Technologies. These are the precedents that would govern any
future challenge to Section 18.
I understand that critics of Section 18 are arguing that it
improperly singles out business-method patents and that it
creates a ``second bite at the apple.'' I find both sets of
arguments to be unpersuasive as a constitutional matter.
First, Congress is well within its authority to determine
that a particular subset of patents warrant closer
administrative review than other patents due to their history
and development. Business-method patents are relatively novel
creatures, and far removed from what the Founders would have
envisioned when they sought to ``promote the Progress of
Science and the useful Arts.'' Prior to the 1990s, business-
method patents were largely unheard of. The surge in the
issuance of such patents followed the 1998 decision of the
Federal Circuit in State Street Bank & Trust Co. v. Signature
Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), which
has been widely viewed as having opened the door to business-
method patenting. The increase in business method patents
does not appear to be abating. According to the PTO, the
number of business-method patent applications that issued as
patents jumped from 494 in 2002 to 3649 in 2010. See http://
www.uspto.gov/patents/resourcesimethods/applicationfiling.jsp
(last visited June 14, 2011). In the intervening 13 years
since State Street, the PTO and the courts have struggled to
determine when such patents should issue. The Supreme Court's
decision last Term in Bilski v. Kappos, 130 S. Ct. 3218
(2010), offered some clarification, reaffirming the basic
minima required to be patent-eligible subject matter under 35
U.S.C. Sec. 101. Nonetheless, in light of the continuing
confusion over such patents, and the paucity of traditional
published prior art at the time such patents were issued, it
is entirely rational--and thus constitutionally appropriate--
for Congress to make the judgment that it wants to provide a
mechanism for ensuring that adequate vigor went into the
PTO's decision to issue a business-method patent, and that
such further review helps to ensure that this category of
patents is subject to the same quality of review as other
patents were. See eBay Inc. v. MercExchange, LLC, 547 U.S.
388, 397 (Kennedy, J., concurring) (noting the ``suspect
validity of some'' business-method patents). Given
Congress's general authority to allow administrative
reexamination, as well as judicial challenge, to an
already-issued patent, there can be no valid objection to
Congress's decision to focus these reexaminations on a
class of patents that, because of their novelty, were
especially prone to improvident grant.
Second, providing a more robust reexamination procedure
does not create a second bite at the apple. By their nature,
patents are continuously subject to challenge, whether in
court or before the PTO. As noted above, patents are
initially issued after an entirely ex parte process in which
no one else is allowed to participate. To the extent a
patent's validity has been challenged in court, the challenge
is only reviewed for clear and convincing evidence that the
PTO erred in granting the patent. That does not answer the
question of whether or not the PTO made a mistake--only
reexamination provides a vehicle for answering that question.
To the extent this is a second bite, it is at a different
apple. Section 18 does not create any more opportunities for
challenge than there are under existing law. It simply allows
reexamination on a broader array of theories than allowed
today.
Moreover, just as a criminal defendant can be acquitted
under a beyond-a-reasonable-doubt standard, but found civilly
liable under a preponderance standard, there is also nothing
unusual about the fact that a patent may be upheld in court
(where a thumb is decidedly on the scale of the patentee),
but subsequently rejected as invalid by the PTO during
reexamination. That is exactly what happened in Translogic
Technology, Inc. v. Hitachi, Ltd, 250 F. App'x 988 (Fed. Cir.
2007), and In re Translogic Tech., Inc., 504 F.3d 1249 (Fed.
Cir. 2007). In the Translogic cases, the district court found
the asserted patent to be infringed and not invalid. While
the case was pending, the PTO reexamined the patent in an
inter partes proceeding and found the patent was improperly
issued and, thus, invalid. The Federal Circuit affirmed, and
thus found that the judgment of infringement in the case
against Hitachi had to be vacated. The only material
difference between the law today and the procedures
contemplated in Section 18, is that Section 18 allows a
broader array of invalidity arguments to be presented to the
PTO. Moreover, nothing in Section 18 purports to alter how
principles of res judicata and collateral estoppel would
apply to a final judgment after all appeals are resolved, or
to change the standard for a district court to determine
whether relief should be granted under Rule 60(b). Thus, as
discussed above, the procedures in Section 18 and Section 6
do not present any of the constitutional concerns identified
in Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995).
Nor is there anything constitutionally suspect about
limiting the review of existing business-method patents to
those that have actually been asserted in court (or
threatened to be asserted, such that a declaratory judgment
action could be brought). Rather, such a decision serves to
limit the burden on the PTO and to focus the use of limited
resources on reexamining patents that, if improperly issued,
are more detrimental to the economy. It is like limiting
challenges to land claims to competing users of the land.
Again, I see nothing in section 18 that purports to alter or
interfere with application of existing principles of res
judicata or collateral estoppel in the context of a final
judgment, or to alter the standard for obtaining relief from
a final judgment.
Finally, Section 18(c) provides that a party that initiates
a PTO reexamination may also seek a stay of ongoing
litigation pending reexamination from the court where ongoing
litigation is pending. It is the court, not the PTO, that
decides whether or not to grant a stay. That is consistent
with existing law. See, e.g., Medichem, S.A. v. Rolabo, S.L.,
353 F.3d 928, 936 (Fed. Cir. 2003) (IA] stay of proceedings
in the district court pending the outcome of the parallel
proceedings in the PTO remains an option within the district
court's discretion.''). Although Section 18(c) provides a
list of factors for a district court should consider, these
factors are quite balanced and provide the district court
with ample discretion. Indeed, these are the factors
currently used by district courts in deciding whether to
grant a stay pending reexamination. See, e.g., Akeena Solar
Inc. v. Zep Solar Inc., 2010 WL 1526388, *1 (N.D. Cal. 2010);
Broadcast Innovation, L.L.C. v. Charter Communications, Inc.,
2006 WL 1897165, *4 (D. Colo. 2006); Mots Fr ove Co., 2005 WL
3465664, *1 (D.N.J. 2005); Tap Pharm. Prods. Inc. v. Atrix
Labs., Inc., 70 U.S.P.Q. 2d 1319, 1320 (N.D. III. 2004).
Moreover, Section 18(c) provides for immediate appellate
review of a decision to grant or deny a stay, ensuring that
this discretion is not abused.
In sum, there is nothing novel or unprecedented, much less
unconstitutional, about the procedures proposed in sections 6
and 18 of the America Invents Act. The proposed procedures
simply expand existing reexamination procedures to a broader
array of invalidity issues. And under settled case law, the
application of these new reexamination procedures to existing
patents is not a taking or otherwise a violation of the
Constitution. Congress's decision, to make these new
reexamination procedures available only to a subset of
existing patents--a category of patents that Congress could
rationally believe were more suspect than other patents--
represents a constitutionally proper decision on how to
expend limited resources.
Sincerely,
Michael W. McConnell.
____
Michael W. McConnell,
Stanford, CA, June 23, 2011.
Dear Chairman Smith and Ranking Member Conyers: I am the
Richard and Frances Mallery Professor and Director of the
Constitutional Law Center at Stanford Law School, and a
Senior Fellow of the Hoover Institution at Stanford
University, where I teach and write in the field of
constitutional law. I previously served as a judge on the
United States Court of Appeals for the Tenth Circuit. On June
16, I wrote to you regarding several constitutional issues
that have arisen regarding proposed changes to patent
reexamination procedures in sections 6 and 18 of the America
Invents Act. Since then, two distinguished constitutional
authorities, my old friends Richard Epstein and Charles
Cooper have written responses to my letter. I thought it
would be helpful for me to address those two responses
directly and to explain why I remain convinced my original
analysis was correct.
[[Page S5377]]
Both responses give far too broad a reading to Plaut v.
Spendthrift Farm, Inc., 514 U.S. 211 (1995), and give short
shrift to binding precedent of the U.S. Court of Appeals for
the Federal Circuit that directly addresses the very kinds of
constitutional objections that are being made with respect to
sections 6 and 18 of the America Invents Act. Indeed
Professor Epstein and Mr. Cooper acknowledge, as they must,
that their position is contradicted by In re Swanson, 540
F.3d 1368 (Fed. Cir. 2008). This shows that their analysis,
whatever its abstract merits, is a departure from actual
judicial precedent governing these questions.
Most fundamentally, the Epstein and Cooper critiques refuse
to accept the importance of the fact that judicial review of
invalidity in the context of a patent infringement suit
applies a different standard than administrative
reexamination. When the PTO (and subsequently the Federal
Circuit) reviews invalidity in the context of a
reexamination, a court is not ``rehearing'' the same issue,
much less ``reopening'' a final judgment (as Professor
Epstein erroneously posits), nor does it somehow render an
earlier decision that an accused infringer had failed to
carry its burden of proving invalidity by clear and
convincing evidence an ``advisory opinion'' (as suggested by
Mr. Cooper). Indeed, this fundamental point was critical to
the holding in Swanson. See 540 F.3d at 1377 (``[A] prior
holding of validity is not necessarily inconsistent with a
subsequent holding of invalidity and is not binding on
subsequent litigation or PTO reexaminations''). Plaut does
not need to be ``overcome''--it is simply inapplicable.
Professor Epstein attempts to distinguish the well-
developed body of case law upholding the constitutionality of
reexamination procedures, on which sections 6 and 18 of the
proposed act are based, by highlighting factual differences
in those cases that are, in my view, simply irrelevant to the
constitutional analysis. For example, he contends Patlex
Corp. v. Mossinghoff, 758 F.2d 594 (Fed. Cir. 1985), is
different because there was no final judgment at the time the
reexamination had begun. However, the Federal Circuit
ascribed no significance to that fact--and with good reason.
The case rests on the necessarily provisional and correctable
nature of patents, not on whether they had previously gone
unchallenged in court. A prior judicial decision that a
patent was not invalid would mean only that the initial PTO
decision was not bereft of substantial support in the
evidence--not that it was correct for all time, under a de
novo standard. The court rejected the notion that there was a
``right to judgment by an Article III court on those issues''
of invalidity. Id. at 600. The court reasoned that ``[t]he
reexamination statute's purpose is to correct errors made by
the government, to remedy defective governmental (not
private) action, and if need be to remove patents that should
never have been granted.'' Id. at 604. That holding and
reasoning would apply equally whether or not the
reexamination was commenced before entry of a final judgment.
Likewise, Professor Epstein attempts to distinguish Joy
Technologies v. Manbeck, 959 F.2d 226 (Fed. Cir. 1992), by
saying it arose in the context of a settlement. But
regardless of the context in which it arose, the court there
considered and rejected the same constitutional objections
being raised by the objectors to sections 6 and 18 in the
context of reexamination. The attempt to distinguish Ethicon,
Inc. v. Quigg, 849 F.2d 1422 (Fed. Cir. 1988), is also
unavailing. That case cogently explains the distinction
between a court considering a challenge to validity under the
clear and convincing standard, and reexamination by the PTO
under the preponderance standard.
In addressing Swanson, Professor Epstein suggests that it
is ``strange'' to ``think that the PTO will help purge the
legal system of weak patents when it allows itself to use a
weaker standard than those involved in litigation.'' But
under the clear-and-convincing evidence standard used for
reviewing the PTO's work in court, an improperly issued
patent will often survive even in the face of significant
evidence that the patent should not have issued. Thus, there
are many mistakes that can be corrected only by the PTO--the
agency that erroneously issued the patent in the first place.
Professor Epstein further suggests that Swanson is of
``dubious validity.'' However, I am not aware of any
subsequent court decision calling Swanson's holding into
question. That Professor Epstein disagrees with Swanson shows
only that his analysis is contrary to precedent, not that the
precedent is ``dubious.'' He also contends that the
reexamination procedures in Swanson are distinguishable
because they were limited to new prior art. However, he
ignores the higher-threshold gatekeeping function required
under sections 6 and 18 of the proposed Act to obtain
reexamination in the first place. In any event, the
distinction is one without constitutional significance: there
is no constitutional basis for confining reexamination to
only one of possible correctable defects in the original
issuance of a patent.
Professor Epstein asserts that I am incorrect in stating
that under current law, at the instance of a party, the PTO
may reexamine a patent that has issued, and the validity of
which has been unsuccessfully challenged in litigation. Yet,
that is essentially what happened in Translogic Technology,
Inc. v. Hitachi, Ltd., 250 F. App'x 988 (Fed. Cir. 2007), and
In re Translogic Technology, Inc., 504 F.3d 1249 (Fed. Cir.
2007)--cases that he simply does not address.
Mr. Cooper barely addresses the above-mentioned precedent
at all, except to assert that the unanimous decision of the
U.S. Court of Appeals for the Federal Circuit in In re
Swanson is inconsistent with his reading of Plaut. In so
doing, Mr. Cooper suggests that there is something unseemly
about the fact that a patent could be found ``not invalid''
in a proceeding against an infringer, but then subsequently
found invalid by the PTO through reexamination at the behest
of the infringer. Yet that is the law today. Sections 6 and
18 do nothing more than expand the types of invalidity
challenges that may be considered by the PTO. Mr. Cooper's
analysis is not really a critique of sections 6 and 18; it is
a critique of patent law as it has existed for thirty years.
By analogy, the fact that a party may be acquitted by one
court under a reasonable doubt standard, but found civilly
liable by another court under a preponderance standard does
not render either decision ``advisory.'' So too here.
Finally, the passage Mr. Cooper cites from Plaut is simply
inapplicable. The standard of patentability is not being
changed, and the use of a clear-and-convincing standard of
review in court is merely an acknowledgement of the
presumption of administrative correctness, which is
inapplicable when the PTO reviews its own work.
At bottom, nothing in sections 6 and 18 of the proposed Act
purports to change the substantive law regarding when a
patent is validly issued. They merely broaden the
availability of one of the preexisting procedural vehicles
(reexamination) for assessing validity. Matters of a
technical nature, such as this, are especially appropriate to
administrative as opposed to judicial redetermination. Courts
have consistently rejected the notion that there is a
property right in having patent validity reviewed only in an
Article III court. And courts have rejected the argument that
the PTO cannot reconsider its own decision to issue a patent
merely because a court has found in a particular proceeding
that an accused infringer failed to carry its burden of
proving the patent invalid by clear and convincing evidence.
Against this backdrop, we may be confident that the
amendments to the reexamination procedure provided by
sections 6 and 18 will be judged to pass constitutional
muster.
Sincerely,
Michael W. McConnell.
Mr. KYL. I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant editor of the Daily Digest 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. Begich.) Without objection, it is so
ordered.
Mr. REID. Mr. President, I ask unanimous consent that on Thursday,
September 8, when the Senate resumes consideration of the America
Invents Act, the following amendments be the only first-degree
amendments in order: Coburn No. 599, Sessions No. 600, Cantwell No.
595; that there be 5 hours of debate on the amendments divided in the
following manner: 75 minutes for Senator Coburn or his designee; 1 hour
for Senator Sessions or his designee; 45 minutes for Senator Cantwell
or her designee; 1 hour for Senator Grassley or his designee; and 1
hour for Senator Leahy or his designee; that upon the use or yielding
back of time, the Senate proceed to votes in relation to the amendments
in the following order: Sessions No. 600; Cantwell No. 595; Coburn No.
599; that no other amendments or points of order be in order to any of
the amendments or the bill prior to the votes; finally, that following
disposition of the amendments, the Senate proceed to vote on passage of
the bill, as amended, if amended.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. REID. Mr. President, with this agreement, there will be up to
four rollcall votes tomorrow afternoon beginning about 4 p.m. Senators
should also expect an additional vote following the President's speech
to the joint session. This vote will be on a motion to proceed to S.J.
Res. 25, which is a joint resolution of disapproval of the President's
exercise of authority to increase the debt limit.
If we proceed to the debt limit; that is, S.J. Res. 25, that means we
will be in session for a long time on Friday--enough to dispose of
that. If we do not move, the motion to proceed is not made
successfully, then we would finish that matter and the week's business,
at least as far as votes. Friday we have some other items we need to be
filing, different motions and things, but the general body would not
have to worry about that.
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