[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.

[[Page S5371]]

  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.

[[Page S5372]]

  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

[[Page S5374]]

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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