[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

[[Page S2535]]

     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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