[Congressional Record Volume 161, Number 63 (Wednesday, April 29, 2015)]
[Senate]
[Pages S2532-S2539]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mr. GRASSLEY (for himself, Mr. Leahy, Mr. Cornyn, Mr. Schumer,
Mr. Lee, Mr. Hatch, and Ms. Klobuchar):
S. 1137. A bill to amend title 35, United States Code, and the Leahy-
Smith America Invents Act to make improvements and technical
corrections, and for other purposes; to the Committee on the Judiciary.
Mr. GRASSLEY. Mr. President, the U.S. is the world's leader in
innovation. Yet today, our patent system--which has allowed generations
of inventors, innovators, and entrepreneurs to thrive--is under attack
from bad actors, also known as ``patent trolls''.
Abusive patent litigation is stifling the innovation and
entrepreneurship that our patent system has been designed to protect.
Over the last decade, there has been an explosion in the growth of this
type of harmful litigation as those who exploit abusive patent
litigation tactics for financial gain have taken aim at businesses
operating in every sector of our economy.
From Main Street to Wall Street to Silicon Valley, from start-ups to
neighborhood restaurants to major retailers--businesses and consumers
across the country are being harmed. Because of this abuse, innovative
companies spend less time and resources on research and innovation, and
often must have their talented workforce devote many man-hours to
defending against baseless claims. This comes at the expense of
discovering that next medical breakthrough or rolling out new
technologies that will create jobs.
Patent trolls prey on businesses by filing frivolous lawsuits and
employing an array of heavy-handed and deceptive tactics to scare
plaintiffs into settlements. These bad actors send vague and overly
broad demand letters, exploit loose pleading standards that provide
little substance of the alleged infringement claims, hide their
identity behind shell companies, and use the threat of high cost patent
litigation discovery as a weapon. This is a drag on our economy,
costing an estimated $80 billion annually in direct and indirect costs.
This means fewer jobs created, less innovation, and higher costs for
consumers.
To restore integrity to our patent system, today, along with
Judiciary Committee Ranking Member Leahy, and Senators Cornyn, Schumer,
Lee, Hatch and Klobuchar, I am introducing the Protecting American
Talent and Entrepreneurship Act, PATENT Act.
This builds upon the reforms made by the America Invents Act and will
promote the intellectual property rights that our Founding Fathers
recognized are key to American innovation. The provisions of the PATENT
Act will promote more transparency in patent ownership, establish a
clear, uniform standard for pleading in patent cases, and deter abusive
litigation. I would like to note some of the key provisions in the
bill.
The PATENT Act will require plaintiffs in a patent suit to identify
each patent and each claim that is allegedly infringed, which products
are infringing, and include a description of the alleged infringement.
The current requirements for pleading in a patent
[[Page S2533]]
litigation have been subject to scrutiny by the courts and amount to
little more than notice pleading. By providing these congressionally
enacted bright line rules across judicial jurisdictions, defendants
will be able to better respond to claims and courts will be able to
resolve litigation more efficiently.
This legislation will place reasonable limitations on discovery by
requiring courts to stay discovery pending the resolution of specific
preliminary motions, including motions to dismiss and transfer venue.
It also calls on the Judicial Conference to develop rules and
procedures to promote efficient and effective discovery, including
examining to what extent each party is entitled to ``core documentary
evidence''.
While current law allows for fee shifting in patent cases, the
reality is that bad actors are almost never subject to fee shifting,
leading to an explosion in abusive litigation. The PATENT Act provides
that reasonable attorney fees will be awarded if the prevailing party
in litigation makes a showing, and the court finds, that the non-
prevailing party's conduct was not ``objectively reasonable,'' unless
special circumstances make an award unjust. This measure will help to
deter the filing of frivolous claims. The bill also provides a process
for the recovery of fees from an abusive litigant.
Further, the bill will help stop the widespread sending of fraudulent
or materially misleading demand letters by building on existing Federal
Trade Commission authority to go after those who violate Section 5 of
the FTC Act in connection with patent assertion by engaging in
widespread demand letter abuse. This provision has been carefully
constructed so that it will not impinge upon legitimate licensing
activity or expand FTC authority. We worked on the language contained
in this provision with Chairman Thune and his staff, as the Commerce
Committee also has jurisdiction over the FTC, and it was important to
us to get their input.
The bill also will help to protect small businesses, who are being
targeted for doing nothing more than using products which they bought
off-the-shelf, by allowing a suit against an end-user to be stayed
while the manufacturer litigates the alleged infringement.
This bipartisan legislation is the result of a careful and
deliberative process in which we worked with many stakeholders
representing almost every area of the economy, the judiciary, and the
administration. Since the process started in the last Congress, we've
listened and tried to be responsive to all the concerns raised from the
different industries and constituencies. As a result, we have made
great strides in addressing issues that have been raised along the way
and getting stakeholders comfortable with the bill. So I believe the
PATENT Act strikes a good balance. Our intent is to protect the rights
of patent holders while addressing the problem of abusive litigation.
The PATENT Act does that.
As we move forward, we also intend to try to address other concerns
that have been raised more recently by patent holders about the Patent
and Trademark Office's IPR process. We want to make sure that the PTO
processes are not being abused, and instead are being utilized as
envisioned by the America Invents Act.
I would like to especially thank Ranking Member Leahy for being an
outstanding partner on the Judiciary Committee on all things
intellectual property, Senators Cornyn and Schumer for their sustained
leadership on the patent troll issue, Senator Lee for his hard work on
the demand letter provision, Senator Hatch for his valuable work on the
recovery provision, and Senator Klobuchar for her constructive
involvement in moving the bill forward. Because of these efforts, we
have a stronger bill and are closer to restoring the integrity of the
patent system. I am hopeful that we can move in a deliberative and
productive way through Committee so we can get to the floor in a timely
manner.
Mr. President, I ask unanimous consent that the text of the bill be
printed in the Record.
There being no objection, the text of the bill was ordered to be
printed in the Record, as follows:
S. 1137
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Protecting
American Talent and Entrepreneurship Act of 2015'' or the
``PATENT Act''.
(b) Table of Contents.--The table of contents for this Act
is as follows:
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Pleading requirements for patent infringement actions.
Sec. 4. Customer-suit exception.
Sec. 5. Discovery limits.
Sec. 6. Procedures and practices to implement recommendations of the
Judicial Conference.
Sec. 7. Fees and other expenses.
Sec. 8. Requirement of clarity and specificity in demand letters.
Sec. 9. Abusive demand letters.
Sec. 10. Transparency of patent transfer.
Sec. 11. Protection of intellectual property licenses in bankruptcy.
Sec. 12. Small business education, outreach, and information access.
Sec. 13. Studies on patent transactions, quality, and examination.
Sec. 14. Technical corrections to the Leahy-Smith America Invents Act
and other improvements.
Sec. 15. Effective date.
Sec. 16. Severability.
SEC. 2. DEFINITIONS.
(1) Director.--The term ``Director'' means the Under
Secretary of Commerce for Intellectual Property and Director
of the United States Patent and Trademark Office.
(2) Office.--The term ``Office'' means the United States
Patent and Trademark Office.
SEC. 3. PLEADING REQUIREMENTS FOR PATENT INFRINGEMENT
ACTIONS.
(a) Elimination of Form 18.--Not later than 1 month after
the date of enactment of this Act, the Supreme Court, using
existing resources, shall eliminate Form 18 in the Appendix
to the Federal Rules of Civil Procedure (Complaint for Patent
Infringement).
(b) Pleading Requirements.--
(1) Amendment.--Chapter 29 of title 35, United States Code,
is amended by inserting after section 281 the following:
``Sec. 281A. Pleading requirements for patent infringement
actions
``(a) Pleading Requirements.--In a civil action in which a
party asserts a claim for relief arising under any Act of
Congress relating to patents, a party alleging infringement
shall include in a complaint, counterclaim, or cross-claim
for patent infringement, except as provided in subsection
(c), the following:
``(1) An identification of each patent allegedly infringed.
``(2) An identification of each claim of each patent
identified under paragraph (1) that is allegedly infringed.
``(3) For each claim identified under paragraph (2), an
identification of each accused process, machine, manufacture,
or composition of matter (referred to in this section as an
`accused instrumentality') alleged to infringe the claim.
``(4) For each accused instrumentality identified under
paragraph (3), an identification with particularity, if
known, of--
``(A) the name or model number (or a representative model
number) of each accused instrumentality; or
``(B) if there is no name or model number, a description of
each accused instrumentality.
``(5) For each claim identified under paragraph (2), a
description of the elements thereof that are alleged to be
infringed by the accused instrumentality and how the accused
instrumentality is alleged to infringe those elements.
``(6) For each claim of indirect infringement, a
description of the acts of the alleged infringer that are
alleged to contribute to or induce the direct infringement.
``(b) Dismissal for Failure to Meet Pleading
Requirements.--The court shall, on the motion of any party,
dismiss any count or counts of the complaint, counterclaim,
or cross-claim for patent infringement if the requirements of
paragraphs (1) through (6) of subsection (a) are not met with
respect to such count or counts. The fact that a party pleads
in accordance with subsection (c) shall not be a basis for
dismissal if the party nonetheless states a plausible claim
for relief sufficient under the Federal Rules of Civil
Procedure.
``(c) Information Not Accessible.--If some subset of
information required to comply with subsection (a) is not
accessible to a party after an inquiry reasonable under the
circumstances, consistent with rule 11 of the Federal Rules
of Civil Procedure, an allegation requiring that information
may be based upon a general description of that information,
along with a statement as to why the information is not
accessible.
``(d) Amendment of Pleadings.--Nothing in this provision
shall be construed to affect a party's leave to amend
pleadings as specified in the Federal Rules of Civil
Procedure. Amendments permitted by the court are subject to
the pleading requirements set forth in this section.
``(e) Confidential Information.--A party required to
disclose information described under subsection (a) may file
information believed to be confidential under seal, with a
motion setting forth good cause for such sealing. If such
motion is denied by the court, the party may seek to file an
amended pleading.
``(f) Exemption.--Subsection (a) shall not apply to a civil
action that includes a claim for relief arising under section
271(e)(2).
[[Page S2534]]
``Sec. 281B. Early disclosure requirements for patent
infringement actions
``(a) Definitions.--In this section--
``(1) the term `financial interest'--
``(A) means--
``(i) with regard to a patent or patents, the right of a
person to receive proceeds from the assertion of the patent
or patents, including a fixed or variable portion of such
proceeds; and
``(ii) with regard to the patentee, direct or indirect
ownership or control by a person of more than 20 percent of
the patentee; and
``(B) does not mean--
``(i) ownership of shares or other interests in a mutual or
common investment fund, unless the owner of such interest
participates in the management of such fund; or
``(ii) the proprietary interest of a policyholder in a
mutual insurance company or a depositor in a mutual savings
association, or a similar proprietary interest, unless the
outcome of the proceeding could substantially affect the
value of such interest;
``(2) the term `patentee' means a party in a civil action
that files a pleading subject to the requirements of section
281A;
``(3) the term `proceeding' means all stages of a civil
action, including pretrial and trial proceedings and
appellate review; and
``(4) the term `ultimate parent entity' has the meaning
given the term in section 261A.
``(b) Early Disclosure Requirements.--Notwithstanding the
requirements of section 299B, a patentee shall disclose to
the court and each adverse party, not later than 14 days
after the date on which the patentee serves or files the
pleading subject to the requirements of section 281A--
``(1) the identity of each--
``(A) assignee of the patent or patents at issue, and any
ultimate parent entity thereof;
``(B) entity with a right to sublicense to unaffiliated
entities or to enforce the patent or patents at issue, and
any ultimate parent entity thereof; and
``(C) entity, other than an entity the ultimate parent of
which is disclosed under subparagraph (A) or (B), that the
patentee knows to have a financial interest in--
``(i) the patent or patents at issue; or
``(ii) the patentee, and any ultimate parent entity
thereof; and
``(2) for each patent that the patentee alleges to be
infringed--
``(A) a list of each complaint, counterclaim, or cross-
claim filed by the patentee or an affiliate thereof in the
United States during the 3-year period preceding the date of
the filing of the action, and any other complaint,
counterclaim, or cross-claim filed in the United States
during that period of which the patentee has knowledge, that
asserts or asserted such patent, including--
``(i) the caption;
``(ii) civil action number;
``(iii) the court where the action was filed; and
``(iv) if applicable, any court to which the action was
transferred;
``(B) a statement as to whether the patent is subject to an
assurance made by the party to a standards development
organization to license others under such patent if--
``(i) the assurance specifically identifies such patent or
claims therein; and
``(ii) the allegation of infringement relates to such
standard; and
``(C) a statement as to whether the Federal Government has
imposed specific licensing requirements with respect to such
patent.
``(c) Disclosure of Financial Interest.--
``(1) Publicly traded.--For purposes of subsection
(b)(1)(C), if the financial interest is held by a corporation
traded on a public stock exchange, an identification of the
name of the corporation and the public exchange listing shall
satisfy the disclosure requirement.
``(2) Not publicly traded.--For purposes of subsection
(b)(1)(C), if the financial interest is not held by a
publicly traded corporation, the disclosure shall satisfy the
disclosure requirement if the information identifies--
``(A) in the case of a partnership, the name of the
partnership, the address of the principal place of business,
and the name and correspondence address of the registered
agent;
``(B) in the case of a corporation, the name of the
corporation, the location of incorporation, and the address
of the principal place of business; and
``(C) for each individual, the name and correspondence
address of that individual.
``(d) Provision of Information to the United States Patent
and Trademark Office.--Not later than 1 month after the date
on which the disclosures required under subsection (b) are
made, the patentee shall provide to the United States Patent
and Trademark Office a filing containing the information
disclosed pursuant to subsection (b)(1).
``(e) Confidential Information.--
``(1) In general.--A patentee required to disclose
information under subsection (b) may file, under seal,
information believed to be confidential, with a motion
setting forth good cause for such sealing.
``(2) Home address information.--For purposes of this
section, the home address of an individual shall be
considered to be confidential information.''.
(2) Conforming amendment.--The table of sections for
chapter 29 of title 35, United States Code, is amended by
inserting after the item relating to section 281 the
following new items:
``281A. Pleading requirements for patent infringement actions.
``281B. Early disclosure requirements for patent infringement
actions.''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of enactment of this Act and
shall apply to any action for which a complaint is filed on
or after that date.
SEC. 4. CUSTOMER-SUIT EXCEPTION.
(a) In General.--Chapter 29 of title 35, United States
Code, is amended by adding at the end the following:
``Sec. 299A. Customer stay
``(a) Definitions.--In this section--
``(1) the term `covered customer' means a retailer or end
user that is accused of infringing a patent or patents in
dispute based on--
``(A) the sale, or offer for sale, of a covered product or
covered process without material modification of the product
or process in a manner that is alleged to infringe a patent
or patents in dispute; or
``(B) the use by such retailer, the retailer's end user
customer, or an end user of a covered product or covered
process without material modification of the product or
process in a manner that is alleged to infringe a patent or
patents in dispute;
``(2) the term `covered manufacturer' means a person who
manufactures or supplies, or causes the manufacture or supply
of, a covered product or covered process, or a relevant part
thereof;
``(3) the term `covered process' means a process, method,
or a relevant part thereof, that is alleged to infringe the
patent or patents in dispute where such process, method, or
relevant part thereof is implemented by an apparatus,
material, system, software or other instrumentality that is
provided by the covered manufacturer;
``(4) the term `covered product' means a component,
product, system, service, or a relevant part thereof, that--
``(A) is alleged to infringe the patent or patents in
dispute; or
``(B) implements a process alleged to infringe the patent
or patents in dispute;
``(5) for purposes of this section, the term `end user'
shall include an affiliate of such an end user, but shall not
include an entity that manufactures or causes the manufacture
of a covered product or covered process or a relevant part
thereof;
``(6) the term `retailer' means an entity that generates
its revenues predominately through the sale to the public of
consumer goods or services, or an affiliate of such entity,
but shall not include an entity that manufactures or causes
the manufacture of a covered product or covered process or a
relevant part thereof; and
``(7) for purposes of the definitions in subparagraphs (5)
and (6), the terms `use' and `sale' mean the use and the
sale, respectively, within the meanings given those terms
under section 271.
``(b) Motion for Stay.--In a civil action in which a party
asserts a claim for relief arising under any Act of Congress
relating to patents (other than an action that includes a
cause of action described in section 271(e)), the court shall
grant a motion to stay at least the portion of the action
against a covered customer that relates to infringement of a
patent involving a covered product or covered process if--
``(1) the covered manufacturer is a party to the action or
a separate action in a Federal court of the United States
involving the same patent or patents relating to the same
covered product or covered process;
``(2) the covered customer agrees to be bound as to issues
determined in an action described in paragraph (1) without a
full and fair opportunity to separately litigate any such
issue, but only as to those issues for which all other
elements of the common law doctrine of issue preclusion are
met; and
``(3) the motion is filed after the first pleading in the
action but not later than the later of--
``(A) 120 days after service of the first pleading or paper
in the action that specifically identifies the covered
product or covered process as a basis for the alleged
infringement of the patent by the covered customer, and
specifically identifies how the covered product or covered
process is alleged to infringe the patent; or
``(B) the date on which the first scheduling order in the
case is entered.
``(c) Manufacturer Consent in Certain Cases.--If the
covered manufacturer has been made a party to the action on
motion by the covered customer, then a motion under
subsection (b) may only be granted if the covered
manufacturer and the covered customer agree in writing to the
stay.
``(d) Lift of Stay.--
``(1) In general.--A stay entered under this section may be
lifted upon grant of a motion based on a showing that--
``(A) the action involving the covered manufacturer will
not resolve major issues in the suit against the covered
customer, such as that a covered product or covered process
identified in the motion to lift the stay is not a material
part of the claimed invention or inventions in the patent or
patents in dispute; or
``(B) the stay unreasonably prejudices or would be
manifestly unjust to the party seeking to lift the stay.
``(2) Separate actions.--In the case of a stay entered
under this section based on the participation of the covered
manufacturer in a separate action described in subsection
(b)(1), a motion under paragraph (1) may
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only be granted if the court in such separate action
determines that the showing required under paragraph (1) has
been made.
``(e) Waiver of Estoppel Effect.--If, following the grant
of a motion to stay under this section, the covered
manufacturer in an action described in subsection (b)(1)--
``(1) obtains or consents to entry of a consent judgment
involving one or more of the issues that gave rise to the
stay; or
``(2) fails to prosecute to a final, non-appealable
judgment a final decision as to one or more of the issues
that gave rise to the stay,
the court may, upon motion, determine that such consent
judgment or unappealed final decision shall not be binding on
the covered customer with respect to one or more of the
issues that gave rise to the stay based on a showing that
such an outcome would unreasonably prejudice or be manifestly
unjust to the covered customer in light of the circumstances
of the case.
``(f) Rule of Construction.--Nothing in this section shall
be construed to limit the ability of a court to grant any
stay, expand any stay granted pursuant to this section, or
grant any motion to intervene, if otherwise permitted by
law.''.
(b) Conforming Amendment.--The table of sections for
chapter 29 of title 35, United States Code, is amended by
adding at the end the following:
``299A. Customer stay.''.
SEC. 5. DISCOVERY LIMITS.
(a) Amendment.--Chapter 29 of title 35, United States Code,
as amended by section 4, is amended by adding at the end the
following:
``Sec. 299B. Discovery in patent infringement action
``(a) Discovery in Patent Infringement Action.--
``(1) In general.--Except as provided in subsections (b)
and (c), in a civil action arising under any Act of Congress
relating to patents, discovery shall be stayed during the
pendency of 1 or more motions described in paragraph (2) if
the motion or motions were filed prior to the first
responsive pleading.
``(2) Motions described.--The motions described in this
paragraph are--
``(A) a motion to dismiss;
``(B) a motion to transfer venue; and
``(C) a motion to sever accused infringers.
``(b) Discretion to Expand Scope of Discovery.--
``(1) Resolution of motions.--A court may allow limited
discovery necessary to resolve a motion described in
subsection (a) or a motion for preliminary relief properly
raised by a party before or during the pendency of a motion
described in subsection (a).
``(2) Additional discovery.--On motion, a court may allow
additional discovery if the court finds that such discovery
is necessary to preserve evidence or otherwise prevent
specific prejudice to a party.
``(c) Exclusion From Discovery Limitation.--
``(1) Voluntary exclusion.--The parties to an action
described in subsection (a) may voluntarily consent to be
excluded, in whole or in part, from the limitation on
discovery under subsection (a).
``(2) Claims under section 271(e).--This section shall not
apply to a civil action that includes a claim for relief
arising under section 271(e).
``(d) Rules of Construction.--
``(1) Timeline for responsive pleadings.--Nothing in this
section shall be construed to alter the time provided by the
Federal Rules of Civil Procedure for the filing of responsive
pleadings.
``(2) Exchange of contentions.--Nothing in this section
shall prohibit a court from ordering or local rules from
requiring the exchange of contentions regarding infringement,
non-infringement, invalidity or other issues, by
interrogatories or other written initial disclosures, at an
appropriate time determined by the court.''.
(b) Conforming Amendment.--The table of sections for
chapter 29 of title 35, United States Code, as amended by
section 4, is amended by inserting after the item relating to
section 299A the following:
``299B. Discovery in patent infringement action.''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of enactment of this Act and
shall apply to any action for which a complaint is filed on
or after that date.
SEC. 6. PROCEDURES AND PRACTICES TO IMPLEMENT RECOMMENDATIONS
OF THE JUDICIAL CONFERENCE.
(a) Judicial Conference Rules and Procedures on Discovery
Burdens and Costs.--
(1) Rules and procedures.--The Judicial Conference of the
United States, using existing resources, should develop rules
and procedures to implement the discovery proposals described
in paragraph (2) to address concerns regarding the
asymmetries in discovery burdens and costs that may arise in
a civil action arising under any Act of Congress relating to
patents.
(2) Rules and procedures to be considered.--The rules and
procedures to be developed under paragraph (1) should address
each of the following:
(A) Discovery of core documentary evidence.--To what extent
each party to the action is entitled to receive core
documentary evidence and should be responsible for the costs
of producing core documentary evidence within the possession
or control of each such party, and to what extent each party
to the action may seek noncore documentary discovery as
otherwise provided in the Federal Rules of Civil Procedure.
(B) Electronic communication.--If the parties request
discovery of electronic communication, how such discovery
should be phased to occur relative to the exchange of initial
disclosures and core documentary evidence, and appropriate
limitations to apply to such discovery.
(C) Additional document discovery.--The manner and extent
to which the following should apply:
(i) In general.--Each party to the action may seek any
additional document discovery beyond core documentary
evidence as permitted under the Federal Rules of Civil
Procedure, if such party bears the reasonable costs,
including reasonable attorney's fees, of the additional
document discovery.
(ii) Requirements for additional document discovery.--
Unless the parties mutually agree otherwise, no party may be
permitted additional document discovery unless such a party
posts a bond, or provides other security, in an amount
sufficient to cover the expected costs of such additional
document discovery, or makes a showing to the court that such
party has the financial capacity to pay the costs of such
additional document discovery.
(iii) Good cause modification.--A court, upon motion and
for good cause shown, may modify the requirements of
subparagraphs (A) and (B) and any definition under paragraph
(3). Not later than 30 days after the pretrial conference
under rule 16 of the Federal Rules of Civil Procedure, the
parties shall jointly submit any proposed modifications of
the requirements of subparagraphs (A) and (B) and any
definition under paragraph (3), unless the parties do not
agree, in which case each party shall submit any proposed
modification of such party and a summary of the disagreement
over the modification.
(iv) Computer code.--A court, upon motion and for good
cause shown, may determine that computer code should be
included in the discovery of core documentary evidence. The
discovery of computer code shall occur after the parties have
exchanged initial disclosures and other core documentary
evidence.
(D) Discovery sequence and scope.--The manner and extent to
which the parties shall discuss and address in the written
report filed pursuant to rule 26(f) of the Federal Rules of
Civil Procedure the views and proposals of each party on the
following:
(i) When the discovery of core documentary evidence should
be completed.
(ii) Whether additional document discovery will be sought
under subparagraph (C).
(iii) Any issues about infringement, invalidity, or damages
that, if resolved before the additional discovery described
in subparagraph (C) commences, might simplify or streamline
the case.
(3) Scope of documentary evidence.--In developing rules or
procedures under this section, the Judicial Conference should
consider which kinds of evidence constitute ``core
documentary evidence''.
(4) Definitions.--In this subsection the term ``electronic
communication'' means any form of electronic communication,
including email, text message, or instant message.
(b) Judicial Conference Patent Case Management.--The
Judicial Conference of the United States, using existing
resources, should develop case management procedures to be
implemented by the United States district courts and the
United States Court of Federal Claims for any civil action
arising under any Act of Congress relating to patents,
including initial disclosure and early case management
conference practices that--
(1) will identify any potential dispositive issues of the
case; and
(2) focus on early summary judgment motions when resolution
of issues may lead to expedited disposition of the case.
SEC. 7. FEES AND OTHER EXPENSES.
(a) Sense of Congress.--It is the sense of Congress that,
in patent cases, reasonable attorney fees should be paid by a
non-prevailing party whose litigation position or conduct is
not objectively reasonable. As the Supreme Court wrote in
adopting this legal standard in the context of fee shifting
under section 1447 of title 28, United States Code, this
standard is intended to strike a balance; in patent cases, a
more appropriate balance between protecting the right of a
patent holder to enforce its patent on the one hand, and
deterring abuses in patent litigation and threats thereof on
the other.
(b) Amendment.--Section 285 of title 35, United States
Code, is amended to read as follows:
``Sec. 285. Fees and other expenses
``(a) Award.--In connection with a civil action in which
any party asserts a claim for relief arising under any Act of
Congress relating to patents, upon motion by a prevailing
party, the court shall determine whether the position of the
non-prevailing party was objectively reasonable in law and
fact, and whether the conduct of the non-prevailing party was
objectively reasonable. If the court finds that the position
of the non-prevailing party was not objectively reasonable in
law or fact or that the conduct of the non-prevailing party
was not objectively reasonable, the court shall award
reasonable attorney fees to the prevailing party unless
[[Page S2536]]
special circumstances would make an award unjust.
``(b) Covenant Not to Sue.--A party to a civil action who
asserts a claim for relief arising under any Act of Congress
relating to patents against another party, and who
subsequently unilaterally (i) seeks dismissal of the action
without consent of the other party and (ii) extends to such
other party a covenant not to sue for infringement with
respect to the patent or patents at issue, may be the subject
of a motion for attorney fees under subsection (a) as if it
were a non-prevailing party, unless the party asserting such
claim would have been entitled, at the time that such
covenant was extended, to dismiss voluntarily the action
without a court order under rule 41 of the Federal Rules of
Civil Procedure, or the interests of justice require
otherwise.
``(c) Recovery of Award.--
``(1) Certification; disclosure of interested parties.--
``(A) Initial statement.--A party defending against a claim
of infringement may file, not later than 14 days before a
scheduling conference is to be held or a scheduling order is
due under rule 16(b) of the Federal Rules of Civil Procedure,
a statement that such party holds a good faith belief, based
on publicly-available information and any other information
known to such party, that the primary business of the party
alleging infringement is the assertion and enforcement of
patents or the licensing resulting therefrom.
``(B) Certification.--Not later than 45 days after being
served with an initial statement under subparagraph (A), a
party alleging infringement shall file a certification that--
``(i) establishes and certifies to the court, under oath,
that it will have sufficient funds available to satisfy any
award of reasonable attorney fees under this section if an
award is assessed;
``(ii) demonstrates that its primary business is not the
assertion and enforcement of patents or the licensing
resulting therefrom;
``(iii) identifies interested parties, if any, as defined
in paragraph (2) of this subsection; or
``(iv) states that it has no such interested parties.
A party alleging infringement shall have an ongoing
obligation to supplement its certification under this
subparagraph within 30 days after a material change to the
information provided in its certification.
``(C) Notice to interested party.--A party that files a
certification under subparagraph (B)(iii) shall, prior to
filing the certification, provide each identified interested
party actual notice in writing by service of notice in any
district where the interested party may be found, such that
jurisdiction shall be established over each interested party
to the action for purposes of enforcing an award of attorney
fees under this section, consistent with the Constitution of
the United States. The notice shall identify the action, the
parties, the patents at issue, and the interest qualifying
the party to be an interested party. The notice shall inform
the recipient that the recipient may be held accountable
under this subsection for any award of attorney fees, or a
portion thereof, resulting from the action in the event the
party alleging infringement cannot satisfy the full amount of
such an award, unless the recipient renounces its interest
pursuant to subparagraph (E) or is otherwise exempt from the
applicability of this subsection.
``(D) Accountability for interested parties.--Any
interested parties who are timely served with actual notice
pursuant to subparagraph (C) and do not renounce their
interests pursuant to subparagraph (E) or are not otherwise
exempt from the applicability of this subsection may be held
accountable for any fees, or a portion thereof, awarded under
this section in the event that the party alleging
infringement cannot satisfy the full amount of the award. If
a true and correct certification under clause (i) or (ii) of
subparagraph (B) is timely filed with the court, interested
parties shall not be subject to this subparagraph.
``(E) Renunciation of interest.--Any recipient of a notice
under subparagraph (C) may submit a statement of renunciation
of interest in a binding document with notice to the court
and parties in the action not later than 120 days after
receipt of the notice under subparagraph (C). The statement
shall be required to renounce only such interest as would
qualify the recipient as an interested party.
``(F) Institutions of higher education exception.--Any
institution of higher education (as defined in section 101(a)
of the Higher Education Act of 1965 (20 U.S.C. 1001(a)) or
under equivalent laws in foreign jurisdictions), or a non-
profit technology transfer organization whose primary purpose
is to facilitate the commercialization of technologies
developed by 1 or more institutions of higher education, may
exempt itself from the applicability of this subsection by
filing a certification that it qualifies for the exception
provided for in this subparagraph with the court and
providing notice to the parties.
``(G) Interest of justice exception.--Any recipient of a
notice under subparagraph (C) may intervene in the action for
purposes of contesting its identification as an interested
party or its liability under this subsection, and a court may
exempt any party identified as an interested party from the
applicability of this subsection as the interest of justice
requires.
``(2) Interested party.--In this section, the term
`interested party'--
``(A) means a person who has a substantial financial
interest related to the proceeds from any settlement,
license, or damages award resulting from the enforcement of
the patent in the action by the party alleging infringement;
``(B) does not include an attorney or law firm providing
legal representation in the action if the sole basis for the
financial interest of the attorney or law firm in the outcome
of the action arises from the attorney or law firm's receipt
of compensation reasonably related to the provision of the
legal representation;
``(C) does not include a person who has assigned all right,
title, and interest in a patent, except for passive receipt
of income, to an entity described in paragraph (1)(F), or who
has a right to receive any portion of such passive income;
and
``(D) does not include a person who would be an interested
party under subparagraph (A) but whose financial interest is
based solely on an equity or security interest established
when the party alleging infringement's primary business was
not the assertion and enforcement of patents or the licensing
resulting therefrom.
``(d) Claims Under Section 271(e).--
``(1) Applicability.--Subsections (a), (b), and (c) shall
not apply to a civil action that includes a claim for relief
arising under section 271(e).
``(2) Award in certain claims under section 271(e).--In a
civil action that includes a claim for relief arising under
section 271(e), the court may in exceptional cases award
reasonable attorney fees to the prevailing party.''.
(c) Conforming Amendment and Amendment.--
(1) Conforming amendment.--The item relating to section 285
of the table of sections for chapter 29 of title 35, United
States Code, is amended to read as follows:
``285. Fees and other expenses.''.
(2) Amendment.--Section 273 of title 35, United States
Code, is amended by striking subsections (f) and (g).
(d) Effective Date.--The amendments made by this section
shall take effect on the date of enactment of this Act and
shall apply to any action filed on or after such date.
SEC. 8. REQUIREMENT OF CLARITY AND SPECIFICITY IN DEMAND
LETTERS.
(a) In General.--Chapter 29 of title 35, United States
Code, as amended by section 5, is amended by adding at the
end the following:
``Sec. 299C. Pre-suit written notice
``(a) Applicability.--Subsection (b) shall not apply--
``(1) to written communication between parties--
``(A) regarding existing licensing agreements;
``(B) as part of an ongoing licensing negotiation, provided
that the initial written notice complied with the
requirements of subsection (b) of this section; or
``(C) sent after the initial written notice, provided that
the initial written notice complied with the requirements of
subsection (b) of this section; or
``(2) if the court determines it is in the interest of
justice to waive the requirements of subsection (b).
``(b) Written Notification Requirements.--
``(1) In general.--In a civil action alleging infringement
of a patent in which the plaintiff has provided written
notice of the accusation of infringement to the party accused
of infringement prior to filing the action, the initial
written notice shall contain the information required under
paragraph (2) or be subject to paragraph (3).
``(2) Required information provided in initial written
notice.--The initial written notice described in paragraph
(1) shall contain, at a minimum--
``(A) an identification of--
``(i) each patent believed to be infringed, including the
patent number; and
``(ii) at least one claim of each patent that is believed
to be infringed;
``(B) an identification of each product, process,
apparatus, or chemical composition, including any
manufacturer thereof, that is believed to infringe one or
more claims of each patent under subparagraph (A);
``(C) a clear and detailed description of the reasons why
the plaintiff believes each patent identified under
subparagraph (A) is infringed;
``(D) notice to the intended recipient that the intended
recipient may have the right to a stay of any suit in
accordance with section 299A;
``(E) the identity of any person with the right to enforce
each patent under subparagraph (A); and
``(F) if compensation is proposed, a short and plain
statement as to how that proposed compensation was
determined.
``(3) Additional time to respond.--If the initial written
notice provided to the defendant prior to the filing of the
civil action did not contain the information required by
paragraph (2), the defendant's time to respond to the
complaint shall be extended by an additional 30 days.''.
(b) Conforming Amendment.--The table of sections for
chapter 29 of title 35, United States Code, as amended by
section 5, is amended by adding at the end the following:
``299C. Pre-suit written notice.''.
(c) Willful Infringement.--Section 284 of title 35, United
States Code, is amended--
[[Page S2537]]
(1) in the first undesignated paragraph, by striking ``Upon
finding'' and inserting ``(a) In General.--Upon finding'';
(2) in the second undesignated paragraph, by striking
``When the damages'' and inserting ``(b) Assessment by Court;
Treble Damages.--When the damages'';
(3) by inserting after subsection (b), as designated by
subparagraph (B), the following:
``(c) Willful Infringement.--A claimant seeking to
establish willful infringement may not rely on evidence of
pre-suit notification of infringement unless that
notification complies with the standards set out in section
299C(b)(2).''; and
(4) in the last undesignated paragraph, by striking ``The
court'' and inserting ``(d) Expert Testimony.--The court''.
(d) Effective Date.--The amendments made by this section
shall take effect on the date that is 1 year after the date
of enactment of this Act and shall apply to any action for
which a complaint is filed on or after that date.
SEC. 9. ABUSIVE DEMAND LETTERS.
(a) Bad-faith Demand Letters.--Chapter 29 of title 35,
United States Code, as amended by section 8, is amended by
adding at the end the following:
``Sec. 299D. Bad-faith demand letters
``(a) Definition.--In this section, the term `affiliated
person' means a person affiliated with the intended recipient
of a written communication.
``(b) Civil Penalties for Certain Unfair or Deceptive Acts
or Practices in Connection With Abusive Demand Letters.--A
person who commits an unfair or deceptive act or practice
within the meaning of section 5(a)(1) of the Federal Trade
Commission Act (15 U.S.C. 45(a)(1)), in connection with the
assertion of a United States patent, and who engages in the
widespread sending of written communications representing
that the intended recipients, or any persons affiliated with
those recipients, are or may be infringing, or have or may
have infringed, the patent and may bear liability or owe
compensation to another, shall be deemed to have violated a
rule defining an unfair or deceptive act or practice
described under section 18(a)(1)(B) of the Federal Trade
Commission Act (15 U.S.C. 57a(a)(1)(B)) if--
``(1)(A) the communications falsely--
``(i) represent that administrative or judicial relief has
been sought against the recipient or others; or
``(ii) threaten litigation if compensation is not paid, the
infringement issue is not otherwise resolved, or the
communication is not responded to; and
``(B) there is a pattern of false statements or threats
described in subparagraph (A) having been made without
litigation or other relief then having been pursued;
``(2) the assertions contained in the communications lack a
reasonable basis in fact or law, because--
``(A) the person asserting the patent is not a person, or
does not represent a person, with the current right to
license the patent to, or to enforce the patent against, the
intended recipients or any affiliated persons;
``(B) the communications seek compensation on account of
activities undertaken after the patent has expired;
``(C) the communications seek compensation for a patent
that has been held to be invalid or unenforceable in a final
judicial or administrative proceeding that is unappealable or
for which any opportunity for appeal is no longer available;
``(D) the communications seek compensation for activities
by the recipient that the sender knows do not infringe the
patent because such activities are authorized by the
patentee;
``(E) the communications falsely represent that an
investigation of the recipient's alleged infringement has
occurred; or
``(F) the communications falsely state that litigation has
been filed against, or a license has been paid by persons
similarly situated to the recipient; or
``(3) the content of the written communications is likely
to materially mislead a reasonable recipient because the
content fails to include facts reasonably necessary to inform
the recipient--
``(A) of the identity of the person asserting a right to
license the patent to, or enforce the patent against, the
intended recipient or any affiliated person;
``(B) of the patent issued by the United States Patent and
Trademark Office alleged to have been infringed; and
``(C) if infringement or the need to pay compensation for a
license is alleged, of an identification of at least one
product, service, or other activity of the recipient that is
alleged to infringe the identified patent or patents and,
unless the information is not readily accessible, an
explanation of the basis for such allegation.
``(c) Enforcement by Federal Trade Commission.--
``(1) Powers of commission.--The Federal Trade Commission
shall enforce this section in the same manner, by the same
means, and with the same jurisdiction, powers, and duties as
though all applicable terms and provisions of the Federal
Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated
into and made a part of this section.
``(2) Privileges and immunities.--Any person who engages in
an act or practice described in subsection (b) shall be
subject to the penalties and entitled to the privileges and
immunities provided in the Federal Trade Commission Act (15
U.S.C. 41 et seq.).''.
(b) Technical and Conforming Amendment.--The table of
sections for chapter 29 of title 35, United States Code, as
amended by section 8, is amended by inserting after the item
relating to section 299C the following:
``299D. Bad-faith demand letters.''.
SEC. 10. TRANSPARENCY OF PATENT TRANSFER.
(a) Patent and Trademark Office Proceedings.--
(1) In general.--Chapter 26 of title 35, United States
Code, is amended by inserting after section 261 the
following:
``Sec. 261A. Disclosure of information relating to patent
ownership
``(a) Definitions.--In this section:
``(1) Period of noncompliance.--The term `period of
noncompliance' refers to a period of time during which the
assignee or the ultimate parent entity of an assignee of a
patent has not been disclosed to the United States Patent and
Trademark Office in accordance with this section.
``(2) Ultimate patent entity.--
``(A) In general.--Except as provided in subparagraph (B),
the term `ultimate parent entity' has the meaning given such
term in section 801.1(a)(3) of title 16, Code of Federal
Regulations, or any successor regulation.
``(B) Modification of definition.--The Director may by
regulation modify the definition of the term `ultimate parent
entity'.
``(b) Requirement to Disclose Assignment.--An assignment of
all substantial rights in an issued patent shall be recorded
in the Patent and Trademark Office--
``(1) not later than the date on which the patent is
issued; and
``(2) when any subsequent assignment is made that results
in a change to the ultimate parent entity--
``(A) not later than 3 months after the date on which such
assignment is made; or
``(B) in the case of an assignment made as part of a
corporate acquisition that meets the reporting thresholds
under section 7A(a)(2) of the Clayton Act (15 U.S.C.
18a(a)(2)), not later than 6 months after the closing date of
such acquisition.
``(c) Disclosure Requirements.--A disclosure under
subsection (b) shall include the name of the assignee and the
ultimate parent entity of the assignee.
``(d) Failure to Comply.--In a civil action in which a
party asserts a claim for infringement of a patent, if there
was a failure to comply with subsection (b) for the patent--
``(1) the party asserting infringement of the patent may
not recover increased damages under section 284 or attorney
fees under section 285 with respect to infringing activities
taking place during any period of noncompliance, unless the
denial of such damages or fees would be manifestly unjust;
and
``(2) the court shall award to a prevailing accused
infringer reasonable attorney fees and expenses incurred in
discovering the identity of any undisclosed entity required
to be disclosed under subsection (b), unless such sanctions
would be manifestly unjust.''.
(2) Applicability.--The amendment made by paragraph (1)
shall apply to any patent for which a notice of allowance is
issued on or after the date of enactment of this Act.
(3) Conforming amendment.--The table of sections for
chapter 26 of title 35, United States Code, is amended by
adding at the end the following new item:
``261A. Disclosure of information relating to patent ownership.''.
(b) Regulations.--The Director may promulgate such
regulations as are necessary to establish a registration fee
in an amount sufficient to recover the estimated costs of
administering section 261A of title 35, United States Code,
as added by subsection (a), to facilitate the collection and
maintenance of the information required by the amendments
made by this section and section 3(b) of this Act, and to
ensure the timely disclosure of such information to the
public.
SEC. 11. PROTECTION OF INTELLECTUAL PROPERTY LICENSES IN
BANKRUPTCY.
(a) In General.--Section 1522 of title 11, United States
Code, is amended by adding at the end the following:
``(e) Section 365(n) shall apply to cases under this
chapter. If the foreign representative rejects or repudiates
a contract under which the debtor is a licensor of
intellectual property, the licensee under such contract shall
be entitled to make the election and exercise the rights
described in section 365(n).''.
(b) Trademarks.--
(1) Amendment.--Section 101(35A) of title 11, United States
Code, is amended--
(A) in subparagraph (E), by striking ``or'';
(B) in subparagraph (F), by adding ``or'' at the end; and
(C) by adding after subparagraph (F) the following new
subparagraph:
``(G) a trademark, service mark, or trade name, as those
terms are defined in section 45 of the Act of July 5, 1946
(commonly referred to as the `Trademark Act of 1946' (15
U.S.C. 1127);''.
(2) Conforming amendment.--Section 365(n)(2) of title 11,
United States Code, is amended--
(A) in subparagraph (B)--
(i) by striking ``royalty payments'' and inserting
``royalty or other payments''; and
(ii) by striking ``and'' after the semicolon;
(B) in subparagraph (C), by striking the period at the end
of clause (ii) and inserting ``; and''; and
(C) by adding at the end the following new subparagraph:
``(D) in the case of a trademark, service mark, or trade
name, the licensee shall not be relieved of any of its
obligations to maintain the quality of the products and
services
[[Page S2538]]
offered under or in connection with the licensed trademark,
service mark or trade name, and the trustee shall retain the
right to oversee and enforce quality control for said
products and/or services.''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of enactment of this Act and
shall apply to any case that is pending on, or for which a
petition or complaint is filed on or after, such date of
enactment.
SEC. 12. SMALL BUSINESS EDUCATION, OUTREACH, AND INFORMATION
ACCESS.
(a) Small Business Education and Outreach.--
(1) Resources for small business.--Using existing
resources, the Director shall develop educational resources
for small businesses to address concerns arising from patent
infringement.
(2) Small business patent ombudsman.--The existing small
business patent outreach programs of the Office, in
consultation with the relevant offices at the Small Business
Administration and the Minority Business Development Agency,
shall provide education and awareness regarding resources
available for those persons responding to allegations of
patent infringement.
(b) Improving Information Transparency for Small Business
and the United States Patent and Trademark Office Users.--
(1) Web site.--Using existing resources, the Director shall
create a user-friendly section on the official Web site of
the Office to notify the public when a patent case is brought
in Federal court and, with respect to each patent at issue in
such case, the Director shall include--
(A) information disclosed under section 261A of title 35,
United States Code, as added by section 10, and section
281B(b) of title 35, United States Code, as added by section
3; and
(B) any other information the Director determines to be
relevant.
(2) Format.--In order to promote accessibility for the
public, the information described in paragraph (1) shall be
searchable by patent number, patent art area, and entity.
SEC. 13. STUDIES ON PATENT TRANSACTIONS, QUALITY, AND
EXAMINATION.
(a) Study on Secondary Market Oversight for Patent
Transactions To Promote Transparency and Ethical Business
Practices.--
(1) Study required.--The Director, in consultation with the
Secretary of Commerce, the Secretary of the Treasury, the
Chairman of the Securities and Exchange Commission, the heads
of other relevant agencies, and interested parties, shall,
using existing resources of the Office, conduct a study--
(A) to develop legislative recommendations to ensure
greater transparency and accountability in patent
transactions occurring on the secondary market;
(B) to examine the economic impact that the patent
secondary market has on the United States;
(C) to examine licensing and other oversight requirements
that may be placed on the patent secondary market, including
on the participants in such markets, to ensure that the
market is a level playing field and that brokers in the
market have the requisite expertise and adhere to ethical
business practices; and
(D) to examine the requirements placed on other markets.
(2) Report on study.--Not later than 18 months after the
date of enactment of this Act, the Director shall submit a
report to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate on the findings and recommendations of the Director
from the study required under paragraph (1).
(b) Study on Patent Small Claims Procedures.--
(1) Study required.--
(A) In general.--The Director of the Administrative Office
of the United States Courts, in consultation with the
Director of the Federal Judicial Center and the United States
Patent and Trademark Office, shall, using existing resources,
conduct a study to examine the idea of developing a pilot
program for patent small claims procedures in certain
judicial districts within the existing patent pilot program
mandated by Public Law 111-349.
(B) Contents of study.--The study under subparagraph (A)
shall examine--
(i) the necessary criteria for using small claims
procedures;
(ii) the costs that would be incurred for establishing,
maintaining, and operating such a pilot program; and
(iii) the steps that would be taken to ensure that the
procedures used in the pilot program are not misused for
abusive patent litigation.
(2) Report on study.--Not later than 1 year after the date
of enactment of this Act, the Director of the Administrative
Office of the United States Courts shall submit a report to
the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate on the findings and recommendations of the Director of
the Administrative Office from the study required under
paragraph (1).
(c) Study on Business Method Patent Quality.--
(1) GAO study.--The Comptroller General of the United
States shall, using existing resources, conduct a study on
the volume and nature of litigation involving business method
patents.
(2) Contents of study.--The study required under paragraph
(1) shall focus on examining the quality of business method
patents asserted in suits alleging patent infringement, and
may include an examination of any other areas that the
Comptroller General determines to be relevant.
(3) Report to congress.--Not later than 1 year after the
date of enactment of this Act, the Comptroller General shall
submit to the Committee on the Judiciary of the House of
Representatives and the Committee on the Judiciary of the
Senate a report on the findings and recommendations from the
study required by this subsection, including recommendations
for any changes to laws or regulations that the Comptroller
General considers appropriate on the basis of the study.
SEC. 14. TECHNICAL CORRECTIONS TO THE LEAHY-SMITH AMERICA
INVENTS ACT AND OTHER IMPROVEMENTS.
(a) Section 325(e)(2) of title 35, United States Code, is
amended by striking ``or reasonably could have raised''.
(b) PTO Patent Reviews.--
(1) Clarification.--
(A) Scope of prior art.--Section 18(a)(1)(C)(i) of the
Leahy-Smith America Invents Act (35 U.S.C. 321 note) is
amended by striking ``section 102(a)'' and inserting
``subsection (a) or (e) of section 102''.
(B) Effective date.--The amendment made by subparagraph (A)
shall take effect on the date of the enactment of this Act
and shall apply to any proceeding pending on, or filed on or
after, such date of enactment.
(2) Authority to waive fee.--Subject to available
resources, the Director may waive payment of a filing fee for
a transitional proceeding described under section 18(a) of
the Leahy-Smith America Invents Act (35 U.S.C. 321 note).
(c) Technical Corrections.--
(1) Novelty.--
(A) Amendment.--Section 102(b)(1)(A) of title 35, United
States Code, is amended by striking ``the inventor or joint
inventor or by another'' and inserting ``the inventor or a
joint inventor or another''.
(B) Effective date.--The amendment made by subparagraph (A)
shall be effective as if included in the amendment made by
section 3(b)(1) of the Leahy-Smith America Invents Act
(Public Law 112-29).
(2) Inventor's oath or declaration.--
(A) Requirement to execute.--Section 115(a) of title 35,
United States Code, is amended in the second sentence by
striking ``shall execute'' and inserting ``may be required by
the Director to execute''.
(B) Effective date.--The amendment made by subparagraph (A)
shall be effective as if included in the amendment made by
section 4(a)(1) of the Leahy-Smith America Invents Act
(Public Law 112-29).
(3) Assignee filers.--
(A) Benefit of earlier filing date; right of priority.--
Section 119(e)(1) of title 35, United States Code, is
amended, in the first sentence, by striking ``by an inventor
or inventors named'' and inserting ``that names the inventor
or a joint inventor''.
(B) Benefit of earlier filing date in the united states.--
Section 120 of title 35, United States Code, is amended, in
the first sentence, by striking ``names an inventor or joint
inventor'' and inserting ``names the inventor or a joint
inventor''.
(C) Effective date.--The amendments made by this paragraph
shall take effect on the date of the enactment of this Act
and shall apply to any patent application, and any patent
issuing from such application, that is filed on or after
September 16, 2012.
(4) Derived patents.--
(A) Amendment.--Section 291(b) of title 35, United States
Code, is amended by striking ``or joint inventor'' and
inserting ``or a joint inventor''.
(B) Effective date.--The amendment made by subparagraph (A)
shall be effective as if included in the amendment made by
section 3(h)(1) of the Leahy-Smith America Invents Act
(Public Law 112-29).
(5) Specification.--Notwithstanding section 4(e) of the
Leahy-Smith America Invents Act (Public Law 112-29; 125 Stat.
297), the amendments made by subsections (c) and (d) of
section 4 of such Act shall apply to any proceeding or matter
that is pending on, or filed on or after, the date of the
enactment of this Act.
(6) Time limit for commencing misconduct proceedings.--
(A) Amendment.--The fourth sentence of section 32 of title
35, United States Code, is amended by striking ``1 year'' and
inserting ``18 months''.
(B) Effective date.--The amendment made by this paragraph
shall take effect on the date of the enactment of this Act
and shall apply to any action in which the Office files a
complaint on or after such date of enactment.
(7) Patent owner response.--
(A) Conduct of inter partes review.--Paragraph (8) of
section 316(a) of title 35, United States Code, is amended by
striking ``the petition under section 313'' and inserting
``the petition under section 311''.
(B) Conduct of post-grant review.--Paragraph (8) of section
326(a) of title 35, United States Code, is amended by
striking ``the petition under section 323'' and inserting
``the petition under section 321''.
(C) Effective date.--The amendments made by this paragraph
shall take effect on the date of the enactment of this Act.
(d) Management of the United States Patent and Trademark
Office.--
[[Page S2539]]
(1) In general.--Section 3(b)(1) of title 35, United States
Code, is amended in the first sentence--
(A) by striking ``be vested with the authority to act in
the capacity of the'' and inserting ``serve as Acting,''; and
(B) by inserting before the period ``or in the event of a
vacancy in the office of the Director.''.
(2) Effective date.--The amendments made by paragraph (1)
shall take effect on the date of enactment of this Act and
shall apply with respect to appointments and vacancies
occurring before, on, or after the date of enactment of this
Act.
SEC. 15. EFFECTIVE DATE.
Except as otherwise provided in this Act, the provisions of
this Act shall take effect on the date of enactment of this
Act, and shall apply to any patent issued, or any action
filed, on or after that date.
SEC. 16. SEVERABILITY.
If any provision of this Act, or an amendment made by this
Act, or the application of such provision or amendment to any
person or circumstance, is held to be invalid, the remainder
of this Act, or an amendment made by this Act, or the
application of such provision to other persons or
circumstances, shall not be affected.
Mr. LEAHY. Mr. President, I am proud to introduce legislation with
Senators Grassley, Cornyn, Schumer, Lee, Hatch and Klobuchar. As
members of the Senate Judiciary Committee, we have been working for
almost 2 years to address abusive conduct in our patent system. Our
legislation will deter abusive practices while preserving the strength
of America's patent system. After months of negotiations, we have
achieved a strong and fair balance that I strongly support.
America's patent system has fueled our Nation's greatest
technological advances, creating jobs and spurring innovation. By
promoting investment in new products and designs, our patent system
drives developments that benefit us all. In recent years, however, bad
actors have abused the patent system to extract money from unsuspecting
companies through broad threats of patent litigation. Coffee shops have
been threatened with patent suits simply for using a Wi-Fi router they
purchased off the shelf, and website owners have faced costly
litigation for using basic software in e-commerce. Instead of using
patents to drive new creations, some entities are holding up main
street businesses and innovative companies simply to extort financial
settlements.
The PATENT Act addresses this behavior through several important
reforms. It will promote transparency to hold bad actors accountable;
curb misleading demand letters; and empower customers who have been
improperly targeted for simply using a product when the product's
manufacturer should defend the suit instead. I have heard about the
urgent need for these measures from businesses in Vermont and across
the country, which is why I included them in the bipartisan legislation
on patent abuses that Senator Lee and I introduced last Congress. This
provision has earned widespread support and I am glad it is part of the
bill we introduce today.
The legislation also addresses imbalances in patent litigation that
make it unusually difficult and expensive to defend against frivolous
lawsuits. These measures would require detailed allegations in legal
complaints for patent infringement, establish reasonable parameters for
document discovery to save costs, and ensure that litigants can be held
accountable for the other side's attorneys' fees if their conduct or
position is found by a court to be objectively unreasonable.
Drafting legislation that involves the enforcement of patent rights
is a complex problem that requires time and balance. Congress spent
multiple years developing what ultimately became the Leahy-Smith
America Invents Act of 2011, and we were able to come together to find
common ground and enact that major piece of legislation into law.
Throughout our negotiations on this bill, I have emphasized the need to
address concerns from major manufacturers, inventors, universities, and
patent law practitioners who warned that, if taken too far, patent
litigation reform proposals would harm legitimate patent holders'
ability to protect their rights in court. The legislation we have
introduced today is greatly improved as a result of their input.
It is worth highlighting some of the changes that have been made to
the bill to respond to those concerns, changes which were personally
important to me as we negotiated this legislation. The language in the
PATENT Act provides for fee shifting only in cases where the court
finds that the losing party was not ``objectively reasonable.'' This is
an important change from the approach of ``presumptive loser pays''
contained in the House's patent reform bill, the Innovation Act. It
promotes judicial discretion and ensures the burden is on the party
seeking fees to show that fees should be awarded. An additional
exception allows the court to refrain from awarding fees if such an
award would be unjust--for example, because it would cause undue
financial harm to an individual inventor or a public institution of
higher education.
The PATENT Act simplifies the pleading requirements that are
contained in the Innovation Act, and ensures that a plaintiff is not
required to plead information if it is not accessible to them. I am
grateful that the other authors of this bill worked with me to ensure
that the standard of what a plaintiff is required to plead about
infringement of their patent claims tracks Rule 8 of the Federal Rules
of Civil Procedure, without creating a higher standard for plaintiffs
to prove a plausible claim for relief.
I am also grateful for the significant work that was done to
streamline the discovery provisions of the bill, to protect litigants
from costly discovery while ensuring that legitimate plaintiffs are not
prejudiced by unreasonable limitations on their ability to access
information. Under the PATENT Act, discovery is stayed while the court
resolves early, pre-answer motions about whether the case has been
brought in the correct venue, against the correct defendants, and
whether the complaint states a plausible claim for relief. Discovery is
permitted if necessary to resolve those motions, to resolve a motion
for preliminary relief, or if failure to allow discovery would cause
specific prejudice to a party.
Taken together, these provisions will help promote efficiency in
patent suits while ensuring that patent holders can fairly protect
their rights in court. While the provisions are not perfect, they
strike a meaningful balance that I am happy to support given the
unusual complexities of patent litigation.
As this legislation proceeds to markup in the Senate Judiciary
Committee next month, I look forward to considering additional
amendments that will improve this bill. For example, in recent months,
some companies and inventors have raised concerns about unfair
practices that are taking place in the post-grant review proceedings
through which patents can be challenged at the Patent and Trademark
Office. Those proceedings were created by the Leahy-Smith America
Invents Act as an important tool to improve patent quality, but if they
are being misused or creating inaccurate perceptions in the
marketplace, we should address those concerns. I look forward to
working with the stakeholders who have already contributed meaningfully
to this bill.
Abusive practices by bad actors are a discredit to our strong patent
system, and it is in no one's interest that they continue. Businesses,
innovators and customers that are victims of abusive conduct need us to
come together to enact reform. I look forward to this bill's swift
consideration in the Judiciary Committee.
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