[Congressional Record (Bound Edition), Volume 157 (2011), Part 3]
[Senate]
[Pages 2977-3003]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       PATENT REFORM ACT OF 2011

  The ACTING PRESIDENT pro tempore. Under the previous order, the 
Senate will resume consideration of S. 23, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (S. 23) to amend title 35, United States Code, to 
     provide for patent reform.

  Pending:

       Leahy amendment No. 114, to improve the bill.
       Bennet amendment No. 116, to reduce the fee amounts paid by 
     small entities requesting prioritized examination under 
     Three-Track Examination.
       Bennet amendment No. 117, to establish additional USPTO 
     satellite offices.
       Lee amendment No. 115, to express the sense of the Senate 
     in support of a balanced budget amendment to the 
     Constitution.
       Kirk-Pryor amendment No. 123, to provide a fast lane for 
     small businesses within the U.S. Patent and Trademark Office 
     to receive information and support regarding patent filing 
     issues.
       Menendez amendment No. 124, to provide for prioritized 
     examination for technologies important to American 
     competitiveness.

  The ACTING PRESIDENT pro tempore. The Senator from Texas.
  (The remarks of Mrs. Hutchison are printed in today's Record under 
``Morning Business.'')
  The ACTING PRESIDENT pro tempore. The Senator from Vermont.
  Mr. LEAHY. Madam President, yesterday, we were finally able to make 
progress when the Senate proceeded to a vote on the managers' 
amendment, the Leahy-Grassley-Kyl amendment, to the America Invents 
Act. That was a very important amendment, with contributions from many 
Senators from both sides of the aisle. It should ensure our moving 
forward to make the changes needed to unleash American innovation and 
create jobs without spending a single dollar of taxpayer money. In 
fact, according to the Congressional Budget Office, enactment of the 
bill will save millions of dollars.
  I also thank those Senators who have stayed focused on our 
legislative effort, and who joined in tabling those amendments that 
have nothing to do with the subject of the America Invents Act. 
Extraneous amendments that have nothing to do with the important issue 
of reforming our out-of-date patent system so that American innovators 
can win the global competition for the future have no place in this 
important bill. They should not be used to slow its consideration and 
passage. If America is to win the global economic competition, we need 
the improvements in our patent system that this bill can bring.
  I continue to believe, as I have said all week, that we can finish 
this bill today, and show the American people that the Senate can 
function in a bipartisan manner. We have not been as efficient as I 
would have liked. We have been delayed for hours at a time, and forced 
into extended quorum calls rather than being allowed to consider 
relevant amendments to this bill. Nonetheless, we are on the brink of 
disposing of the final amendments and passing this important 
legislation.
  Today we should be able to adopt the Bennet amendment on satellite 
offices and the Kirk-Pryor amendment regarding the creation of an 
ombudsman for patents relating to small businesses. I hope that we can 
adopt the Menendez amendment on expediting patents for important areas 
of economic growth, like energy and the environment, as

[[Page 2978]]

well. I am prepared to agree to short time agreements for additional 
debate, if needed, and votes on those amendments.
  The remaining issue for the Senate to decide will be posed by an 
amendment that Senator Feinstein has filed to turn back the advancement 
toward a first-inventor-to-file system.
  I want to take a moment to talk about an important component of the 
America Invents Act, the transition of the American patent system to a 
first-inventor-to-file system. I said yesterday that the administration 
strongly supports this effort. The administration's Statement of 
Administration Policy notes that the reform to a first-inventor-to-file 
system ``simplifies the process of acquiring rights'' and describes it 
as an ``essential provision [to] reduce legal costs, improve fairness 
and support U.S. innovators seeking to market their products and 
services in a global marketplace.'' I agree, and believe it should help 
small and independent inventors.
  This reform has broad support from a diverse set of interests across 
the patent community, from life science and high-tech companies to 
universities and independent inventors. Despite the very recent efforts 
of a vocal minority, there can be no doubt that there is wide-ranging 
support for a move to a first-inventor-to-file patent system. A 
transition to first-inventor-to-file is necessary to fulfill the 
promises of higher quality patents and increased certainty that are the 
goals of the America Invents Act.
  This improvement is backed by broad-based groups such as the National 
Association of Manufacturers, the American Intellectual Property Law 
Association, the Intellectual Property Owners Association, the American 
Bar Association, the Association for Competitive Technology, the 
Business Software Alliance, and the Coalition for 21st Century Patent 
Reform, among others. All of them agree that transitioning our outdated 
patent system to a first-inventor-to-file system is a crucial component 
to modernizing our patent system. I also commend the assistant 
Republican leader for his remarks yesterday strongly in favor of the 
first-inventor-to-file provisions.
  A transition to a first-inventor-to-file system is needed to keep 
America at the pinnacle of innovation by ensuring efficiency and 
certainty in the patent system. This transition is also necessary to 
better equip the Patent and Trademark Office, PTO, to work through its 
current backlog of more than 700,000 unexamined patent applications 
through work-sharing agreements with other patent-granting offices.
  The Director of the PTO often says that the next great invention that 
will drive our economic growth may be sitting in its backlog of 
applications. The time consuming ``interference proceedings'' that are 
commonplace in our current, outdated system are wasting valuable 
resources that contribute to this delay, and unfairly advantage large 
companies with greater resources.
  A transition to a first-inventor-to-file system was recommended in 
the 2004 Report by the National Academy of Sciences. The transition has 
been a part of this bill since its introduction four Congresses ago. 
This legislation is the product of eight Senate hearings and three 
markups spanning weeks of consideration and many amendments. Until very 
recently, first-inventor-to-file had never been the subject of even a 
single amendment in committee.
  Senator Feinstein has worked with me on this bill, has cosponsored it 
in the past and has voted for it.
  I urge Senators who support the goals of the America Invents Act to 
vote against this amendment to strike the bill's important reform 
represented by the first-inventor-to-file provision. Every 
industrialized nation other than the United States uses a patent 
priority system commonly referred to as a ``first-to-file'' system. In 
a first-inventor-to-file system, the priority of a right to a patent is 
based on the earlier filed application. This adds simplicity and 
objectivity into a very complex system. By contrast, our current, 
outdated method for determining the priority right to a patent is 
extraordinarily complex, subjective, time-intensive, and expensive. The 
old system almost always favors the larger corporation and the deep 
pockets over the small, independent inventor.
  The transition to a first-inventor-to-file system will benefit the 
patent community in several ways. It will simplify the patent 
application system and provide increased certainty to businesses that 
they can commercialize a patent that has been granted. Once a patent is 
granted, an inventor can rely on its filing date on the face of the 
patent. This certainty is necessary to raise capital, grow businesses, 
and create jobs.
  The first-inventor-to-file system will also reduce costs to patent 
applicants and the Patent Office. This, too, should help the small, 
independent inventor. In the outdated, current system, when more than 
one application claiming the same invention is filed, the priority of a 
right to a patent is decided through an ``interference'' proceeding to 
determine which applicant can be declared to have invented the claimed 
invention first. This process is lengthy, complex, and can cost 
hundreds of thousands of dollars. Small inventors rarely, if ever, win 
interference proceedings. In a first-inventor-to-file system, however, 
the filing date of the application is objective and easy to determine, 
resulting in a streamlined and less costly process.
  Importantly, a first-inventor-to-file system will increase the global 
competitiveness of American companies and American inventors. As 
business and competition are increasingly global in scope, inventors 
must frequently file patent applications in both the United States and 
other countries for protection of their inventions. Since America's 
current, outdated system differs from the first-inventor-to-file system 
used in other patent-issuing jurisdictions, it causes confusion and 
inefficiencies for American companies and innovators. Harmonization 
will benefit American inventors.
  Finally, the first-inventor-to-file provisions that are included in 
the America Invents Act were drafted with careful attention to needs of 
universities and small inventors. That is why the bill includes a 1-
year grace period to ensure that an inventor's own publication or 
disclosure cannot be used against him as prior art, but will act as 
prior art against another patent application. This will encourage early 
disclosure of new inventions, regardless of whether the inventor ends 
up trying to patent the invention.
  For these reasons among others, the transition is supported by the 
overwhelming majority of the patent community and American industry, as 
well as the administration and the experts at the Patent and Trademark 
Office.
  This past weekend, the Washington Post editorial board endorsed the 
transition, calling the first-inventor-to-file standard a ``bright 
line,'' and stating that it would bring ``certainty to the process.'' 
The editorial also recognizes the ``protections for academics who share 
their ideas with outside colleagues or preview them in public 
seminars'' that are included in the bill.
  The Small Business & Entrepreneurship Council has expressed its 
strong support for the first-inventor-to-file system, writing that 
``small firms will in no way be disadvantaged, while opportunities in 
the international markets will expand.''
  The Intellectual Property Owners Association calls the first-
inventor-to-file system ``central to modernization and simplification 
of patent law'' and ``very widely supported by U.S. companies.''
  Independent inventor Louis Foreman has said the first-inventor-to-
file transition will help ``independent inventors across the country by 
strengthening the current system for entrepreneurs and small 
businesses.''
  And, in urging the transition to the first-to-file system, the 
Association for Competitive Technology, which represents small and mid-
size IT firms, has said the current first-to-invent system ``negatively 
impacts entrepreneurs'' and puts American inventors ``at a disadvantage 
with competitors abroad who can implement first inventor to file 
standards.''
  If we are to maintain our position at the forefront of the world's 
economy, if we are to continue to lead the globe in

[[Page 2979]]

innovation and production, if we are to win the future through American 
ingenuity and innovation, then we must have a patent system that is 
streamlined and efficient. The America Invents Act, and a transition to 
a first-inventor-to-file system in particular, are crucial to 
fulfilling this promise.
  Madam President, in summary, as I said, yesterday we were finally 
able to make progress when the Senate proceeded to a vote on the 
managers' amendment, the Leahy-Grassley-Kyl amendment, to the America 
Invents Act. It was a very important amendment, with contributions from 
many Senators from both sides of the aisle.
  I think it was a little bit frustrating for the public to watch. They 
saw us several hours in quorum calls and then having an amendment that 
passed 97 to 2. I would hope we might, in doing the Nation's business, 
move with a little bit more speed. But I do thank those Senators who 
supported it.
  The Leahy-Grassley-Kyl amendment should ensure our moving forward to 
make the changes needed to unleash American innovation and create jobs 
without spending a single dollar of taxpayer money. In fact, according 
to the Congressional Budget Office, enactment of the bill will save 
millions of dollars. These are not bumper slogan ideas of saving money. 
These are actually doing the hard work necessary to save money.
  I thank those Senators who have stayed focused on our legislative 
effort and who joined in tabling nongermane amendments that had nothing 
to do with the subject of the America Invents Act.
  Extraneous amendments that have nothing to do with the important 
issue of reforming our out-of-date patent system so American innovators 
can win the global competition for the future have no place in this 
important bill.
  We are at a time when China and Europe and the rest of Asia are 
moving ahead of us. We need the tools to keep up. We should not waste 
time with a lot of sloganeering amendments that would stop the bill. 
What we ought to focus on is making America good and making sure we can 
compete with the rest of the world. We should not have amendments used 
to slow this bill's consideration and passage. If America is going to 
win the global economic competition, we need the improvements in our 
patent system this bill can bring.
  I continue to believe, as I have said all week, we can finish the 
bill--we actually could have finished it yesterday, when you consider 
all the time wasted in quorum calls--but I believe we can finish it 
today and show the American people the Senate can function in a 
bipartisan manner.
  We have not been as efficient as I would have liked. We have been 
delayed for hours at a time and forced into extended quorum calls 
rather than being allowed to consider relevant amendments to the bill. 
But we are on the brink of disposing of the final amendments and 
passing this important legislation.
  We should be able to adopt the Bennet amendment on satellite offices 
either by a voice vote or a rollcall, I would hope in the next few 
minutes, and the Kirk-Pryor amendment regarding the creation of an 
ombudsman for patents relating to small businesses.
  I hope we can adopt the Menendez amendment on expediting patents for 
important areas of economic growth, such as energy and the environment, 
as well. I am prepared to agree to very short time agreements for 
additional debate, if needed. If a rollcall is called for, I am happy 
to have those.
  The remaining issue for the Senate to decide will be posed by an 
amendment Senator Feinstein filed to turn back the advancement toward a 
first-inventor-to-file system.
  I wish to take a moment to talk about an important component of the 
America Invents Act, the transition of the American patent system to a 
first-inventor-to-file system. This is strongly supported by the 
administration and by the managers of this package. The 
administration's Statement of Administration Policy notes that the 
reform to a first-inventor-to-file system ``simplifies the process of 
acquiring rights,'' and it describes it as an ``essential provision 
[to] reduce legal costs, improve fairness and support U.S. innovators 
seeking to market their products and services in a global 
marketplace.'' I agree. I also believe it should help small and 
independent inventors.
  This reform has broad support from a diverse set of interests across 
the patent community, from life science and high-tech companies to 
universities and independent inventors. Despite the very recent 
efforts--and they were very recent efforts; after all, we have been 
working on this bill for years--of a vocal minority, there can be no 
doubt that there is wide-ranging support for a move to a first-
inventor-to-file patent system.
  A transition to first-inventor-to-file system is necessary to fulfill 
the promises of higher quality patents and increased certainty that are 
the goals of the America Invents Act. This improvement is backed by 
broad-based groups such as the National Association of Manufacturers, 
the American Intellectual Property Law Association, the Intellectual 
Property Owners Association, the American Bar Association, the 
Association for Competitive Technology, the Business Software Alliance, 
and the Coalition for 21st Century Patent Reform, among others. All of 
them agree that transitioning our outdated patent system to a first-
inventor-to-file system is a crucial component to modernizing our 
patent system.
  I commend the assistant Republican leader for his remarks yesterday 
strongly in favor of the first-inventor-to-file provisions. It actually 
allows us to put America at the pinnacle of innovation by ensuring 
efficiency and certainty in the patent system.
  This transition is also necessary to better equip the Patent and 
Trademark Office to work through its current backlog. That backlog has 
more than 700,000 unexamined patent applications.
  A transition to a first-inventor-to-file system will benefit the 
patent community in several ways. It will simplify the patent 
application system and provide increased certainty to businesses that 
they can commercialize a patent that has been granted.
  The first-inventor-to-file system will also reduce costs to patent 
applicants and the Patent Office. Importantly, a first-inventor-to-file 
system will increase the global competitiveness of American companies 
and American inventors. Also, the first-inventor-to-file provisions 
that are included in the America Invents Act were drafted with careful 
attention to needs of universities and small inventors. For these 
reasons, among others, this transition is supported by the overwhelming 
majority of the patent community and American industry, as well as the 
administration and experts at the Patent and Trademark Office.
  At this time I wish to have printed in the Record a few letters of 
support for the transition to first-to-file.
  The Small Business & Entrepreneurship Council says that ``by moving 
to a first-inventor-to-file system, small firms will in no way be 
disadvantaged, while opportunities in international markets will 
expand.''
  The Intellectual Property Owners Association says the transition to 
first-inventor-to-file ``is central to modernization and simplification 
of patent law and is very widely supported by U.S. companies.''
  BASF says the first-to-file system will ``enhance the patent system 
in ways that would benefit all sectors of the U.S. economy.''
  And the American Bar Association refutes claims that the first-to-
file system would disadvantage small and independent inventors, saying 
that the legislation ``makes it clear that the award goes to the first 
inventor to file and not merely to the first person to file.''
  I ask unanimous consent that copies of these letters be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:


[[Page 2980]]


                                                    Small Business


                                   & Entrepreneurship Council,

                                    Oakton, VA, February 28, 2011.
     Hon. Patrick Leahy,
     U.S. Senate, Russell Senate Bldg.,
     Washington, DC.
       Dear Senator Leahy: The Small Business & Entrepreneurship 
     Council (SBE Council) and its members across the nation have 
     been strong advocates for patent reform. We are pleased that 
     you have introduced the Patent Reform Act (S. 23), and we 
     strongly endorse this important piece of legislation.
       An effective and efficient patent system is critical to 
     small business and our overall economy. After all, the U.S. 
     leads the globe in entrepreneurship, and innovation and 
     invention are central to our entrepreneurial successes. 
     Indeed, intellectual property--most certainly including 
     patents--is a key driver to U.S. economic growth. Patent 
     reform is needed to clarify and simplify the system; to 
     properly protect legitimate patents; and to reduce costs in 
     the system, including when it comes to litigation and the 
     international marketplace.
       Make no mistake, this is especially important for small 
     businesses. As the Congressional Research Service has 
     reported: ``Several studies commissioned by U.S. federal 
     agencies have concluded that individuals and small entities 
     constitute a significant source of innovative products and 
     services. Studies have also indicated that entrepreneurs and 
     small, innovative firms rely more heavily upon the patent 
     system than larger enterprises.''
       The Patent Reform Act works to improve the patent system in 
     key ways, including, for example, by lowering fees for micro-
     entities, and by shortening time periods for patent reviews 
     by making the system more predictable.
       During the debate over this legislation, it is expected 
     that two important areas of reform will come under attack.
       First, the U.S. patent system is out of step with the rest 
     of the world. The U.S. grants patents on a first-to-invent 
     basis, rather than the first-inventor-to-file system that the 
     rest of the world follows. First-to-invent is inherently 
     ambiguous and costly, and that's bad news for small 
     businesses and individual inventors.
       In a 2004 report from the National Research Council of the 
     National Academies (titled ``A Patent System for the 21st 
     Century''), it was pointed out: ``For those subject to 
     challenge under first-to-invent, the proceeding is costly and 
     often very protracted; frequently it moves from a USPTO 
     administrative proceeding to full court litigation. In both 
     venues it is not only evidence of who first reduced the 
     invention to practice that is at issue but also questions of 
     proof of conception, diligence, abandonment, suppression, and 
     concealment, some of them requiring inquiry into what an 
     inventor thought and when the inventor thought it.'' The 
     costs of this entire process fall more heavily on small 
     businesses and individual inventors.
       As for the international marketplace, patent harmonization 
     among nations will make it easier, including less costly, for 
     small firms and inventors to gain patent protection in other 
     nations, which is critical to being able to compete 
     internationally. By moving to a first-inventor-to-file 
     system, small firms will in no way be disadvantaged, while 
     opportunities in international markets will expand.
       Second, as for improving the performance of the USPTO, it 
     is critical that reform protect the office against being a 
     ``profit center'' for the federal budget. That is, the USPTO 
     fees should not be raided to aid Congress in spending more 
     taxpayer dollars or to subsidize nonrelated programs. 
     Instead, those fees should be used to make for a quicker, 
     more predictable patent process.
       Thank you for your leadership Senator Leahy. Please feel 
     free to contact SBE Council if we can be of assistance on 
     this important issue for small businesses.
           Sincerely,
                                                   Karen Kerrigan,
     President & CEO.
                                  ____

                                             Intellectual Property


                                           Owners Association,

                                Washington, DC, February 25, 2011.
     Re Amendments to S. 23, the ``Patent Reform Act of 2011.''

     Honorable __,
     U.S. Senate,
     __ Senate Office Building, Washington, DC.
       Dear Senator __: Intellectual Property Owners Association 
     (IPO) is pleased that the Senate is planning to proceed with 
     consideration of S. 23, the ``Patent Reform Act of 2011.''
       IPO is one of the largest and most diverse trade 
     associations devoted to intellectual property rights. Our 200 
     corporate members cover a broad spectrum of U.S. companies in 
     industries ranging from information technology to consumer 
     products to pharmaceuticals and biotechnology.
       We wish to give you our advice on amendments that we 
     understand might be offered during consideration of S. 23:
       Vote AGAINST any amendment to delete the ``first-inventor-
     to-file'' and related provisions in section 2 of the bill. 
     First-inventor-to-file, explained in a 1-page attachment to 
     this letter, is central to modernization and simplification 
     of patent law and is very widely supported by U.S. companies.
       Vote FOR any amendment guaranteeing the U.S. Patent and 
     Trademark Office access to all user fees paid to the agency 
     by patent and trademark owners and applicants. Current delays 
     in processing patent applications are totally unacceptable 
     and the result of an underfunded Patent and Trademark Office.
       Vote AGAINST any amendment that would interpose substantial 
     barriers to enforcement of validly-granted ``business 
     method'' patents. IPO supports business method patents that 
     were upheld by the U.S. Supreme Court in the recent Bilski 
     decision.
       For more information, please call IPO at 202-507-4500.
           Sincerely,
                                                Douglas K. Norman,
     President.
                                  ____


   First-Inventor-to-File in S. 23, the ``Patent Reform Act of 2011''

       Section 2 of S. 23 simplifies and modernizes U.S. patent 
     law by awarding the patent to the first of two competing 
     inventors to file in the U.S. Patent and Trademark Office 
     (PTO), a change from the traditional system of awarding the 
     patent, in theory, to the first inventor to invent. First-
     inventor-to-file in S. 23 has these advantages:

       Eliminates costly and slow patent interferences proceedings 
     conducted in the PTO and the courts to determine which 
     inventor was the first to invent.
       Creates legal certainty about rights in all patents, the 
     vast majority of which never become entangled in interference 
     proceedings in the first place, but which are still subject 
     to the possibility under current law that another inventor 
     might come forward and seek to invalidate the patent on the 
     ground that this other inventor, who never applied for a 
     patent, was the first to invent.
       Encourages both large and small patent applicants to file 
     more quickly in order to establish an early filing date. 
     Early filing leads to early disclosure of technology to the 
     public, enabling other parties to build on and improve the 
     technology. (Applicants who plan to file afterward in other 
     countries already have the incentive to file quickly in the 
     U.S.)
       Makes feasible the introduction of post-grant opposition 
     proceedings to improve the quality of patents, by reducing 
     the issues that could be raised in a post-grant proceeding, 
     thereby limiting costs and delay.
       Follows up on changes already made by Congress that (1) 
     established inexpensive and easy-to-file provisional patent 
     applications and, (2) in order to comply with treaty 
     obligations, allowed foreign inventors to participate in U.S. 
     patent interference proceedings.
                                  ____



                                                         BASF,

                              Florham Park, NJ, February 28, 2011.
     Hon. Frank Lautenberg,
     Hon. Bob Menendez,
     U.S. Senate,
     Washington, DC.
       Dear Senators Lautenberg and Menendez: On behalf of BASF's 
     North American headquarters located in Florham Park, New 
     Jersey, I am writing to urge your support for S. 23, the 
     Patent Reform Act of 2011.
       At BASF, We Create Chemistry, and we pride ourselves on 
     creating technological advances through innovation. We 
     recognize that America's patent system is crucial to 
     furthering this innovation and that the system is in need of 
     modernization and reform. The United States desperately needs 
     to enhance the efficiency, objectivity, predictability, and 
     transparency of its patent system.
       BASF likes S. 23 because we feel it will preserve the 
     incentives necessary to sustain America's global innovation 
     and spur the creation of high-wage, high-value jobs in our 
     nation's economy. In particular, the shift to a ``first to 
     file'' system, an appropriate role for the court in 
     establishing patent damages, and improved mechanisms for 
     challenging granted patents enhance the patent system in ways 
     that would benefit all sectors of the U.S. economy.
       I want to stress that BASF supports S. 23 in the form 
     recently passed out of the Senate Judiciary Committee via a 
     bipartisan 15-0 vote. This bill represents a great deal of 
     work and hard fought consensus. We ask that you reject 
     amendments on the floor that would substantively alter the 
     bill, including one that would reportedly strike the ``first 
     to file'' provision.
       Please note, however, that BASF does support a planned 
     amendment that would end the practice of diverting funds from 
     the U.S. Patent and Trademark Office to other agencies. This 
     amendment is necessary, since the USPTO is funded entirely by 
     user fees and does not get any taxpayer money.
       Our patent system has helped foster U.S. innovation and 
     protect the intellectual property rights of inventors for 
     more than 200 years, and it can continue to do so if it is 
     updated to make sure it meets the challenges facing today's 
     innovators, investors, and manufacturers. I urge you to work 
     with your colleagues in the Senate to pass S. 23 without 
     substantive amendment to the patent

[[Page 2981]]

     provisions and with language that would prevent diversion of 
     USPTO funds.
           Sincerely,

                                           Steven J. Goldberg,

                                                   Vice President,
     Regulatory Law & Government Affairs
                                  ____



                                     American Bar Association,

                                   Chicago, IL, February 28, 2011.
       Dear Senator: This week the Senate will be considering S. 
     23, the ``Patent Reform Act of 2011.'' I am writing to 
     express the support of the Section of Intellectual Property 
     Law of the American Bar Association for Senate approval of S. 
     23, and our opposition to any amendment that may be offered 
     to strike the ``first-inventor-to-file'' provisions of the 
     bill. These views have not been considered by the American 
     Bar Association's House of Delegates or Board of Governors 
     and should not be considered to be views of the American Bar 
     Association.
       S. 23 is a bi-partisan product of six years of study and 
     development within the Judiciary Committee. By necessity, it 
     contains a number of provisions that are the result of 
     negotiation and compromise and it is unlikely that all of the 
     Judiciary Committee co-sponsors favor each and every 
     provision. We too would have addressed some issues 
     differently. However, the perfect should not be the enemy of 
     the good and we believe that this is a good bill. S. 23 and 
     S. 515, its close predecessor in the 111th Congress, are the 
     only bills that we have endorsed in the six years that we 
     have been following this legislation. The enactment of S. 23 
     would substantially improve the patent system of the United 
     States and we support that enactment.
       At the same time, we want to express our strong opposition 
     to an amendment that may be offered to strike the provisions 
     of S. 23 that would switch the U.S. patent system to one that 
     awards a patent to the first inventor who discloses his 
     invention and applies for a patent (``first-inventor-to-
     file''), rather than awarding a patent based on winning the 
     contest to show the earliest date of conception or reduction 
     to practice of the invention (``first-to-invent'').
       The United States is alone in the world in retaining the 
     first-to-invent system. While a first-inventor-to-file system 
     encourages inventors to file for a patent and disclose their 
     inventions at an early date, the first-to-invent standard 
     increases opportunity for competing claims to the same 
     invention, and facilitates protracted legal battles in 
     administrative and court proceedings, which are extremely 
     costly, in both time and money.
       Some have long thought that small and independent inventors 
     would be disadvantaged in a first-inventor-to-file 
     environment and that competitors with more resources might 
     learn of their inventions and get to the U.S. Patent Office 
     first with an application. This current legislation, however, 
     makes it clear that the award goes to the first inventor to 
     file and not merely to the first person to file.
       Equally important, recent studies show that, under the 
     present U.S. patent system, small and independent inventors 
     who are second to file but who attempt in the U.S. Patent 
     Office and court proceedings to establish that they were the 
     first to invent, actually lose more patents than they would 
     obtain had the United States simply awarded patents to the 
     first inventor to file.
       Moreover, since 1996, an inventor based in the United 
     States faces a much more difficult task of ever obtaining a 
     patent. For inventions made after 1996, the U.S. patent 
     system has been open to proofs of inventions made outside the 
     United States--creating for many U.S.-based inventors a new 
     and potentially even more expensive obstacle to obtaining a 
     patent under the current first-to-invent rule.
       Finally, U.S. inventors more and more are facing the need 
     to file patent applications both at home and abroad to remain 
     competitive in our global economy. Requiring compliance with 
     two fundamentally different systems places undue additional 
     burdens on our U.S. inventors and puts them at a competitive 
     disadvantage in this global economy.
       We urge you to support enactment of S. 23 and to oppose any 
     amendment to strike the ``first-inventor-to-file'' 
     provisions.
           Sincerely,

                                              Marylee Jenkins,

                                                      Chairperson,
                             Section of Intellectual Property Law.

  Mr. LEAHY. Madam President, we are now ready to go forward on the 
Bennet and Kirk-Pryor amendments. I am prepared to call them up for a 
vote in the next few minutes if we could get somebody on the floor.


                     Amendment No. 117, as Modified

  I understand there is a modification at the desk of Bennet amendment 
No. 117.
  The ACTING PRESIDENT pro tempore. Without objection, the amendment is 
so modified.
  The amendment, as modified, is as follows:

       On page 104, between lines 22 and 23, insert the following:

     SEC. 18. SATELLITE OFFICES.

       (a) Establishment.--Subject to available resources, the 
     Director may establish 3 or more satellite offices in the 
     United States to carry out the responsibilities of the Patent 
     and Trademark Office.
       (b) Purpose.--The purpose of the satellite offices 
     established under subsection (a) are to--
       (1) increase outreach activities to better connect patent 
     filers and innovators with the Patent and Trademark Office;
       (2) enhance patent examiner retention;
       (3) improve recruitment of patent examiners; and
       (4) decrease the number of patent applications waiting for 
     examination and improve the quality of patent examination.
       (c) Required Considerations.--In selecting the locale of 
     each satellite office to be established under subsection (a), 
     the Director--
       (1) shall ensure geographic diversity among the offices, 
     including by ensuring that such offices are established in 
     different States and regions throughout the Nation; and
       (2) may rely upon any previous evaluations by the Patent 
     and Trademark Office of potential locales for satellite 
     offices, including any evaluations prepared as part of the 
     Patent and Trademark Office's Nationwide Workforce Program 
     that resulted in the 2010 selection of Detroit, Michigan as 
     the first ever satellite office of the Patent and Trademark 
     Office.
       (3) Nothing in the preceding paragraph shall constrain the 
     Patent and Trademark Office to only consider its prior work 
     from 2010. The process for site selection shall be open.
       (d) Phase-in.--The Director shall satisfy the requirements 
     of subsection (a) over the 3-year period beginning on the 
     date of enactment of this Act.
       (e) Report to Congress.--Not later than the end of the 
     first fiscal year that occurs after the date of the enactment 
     of this Act, and each fiscal year thereafter, the Director 
     shall submit a report to Congress on--
       (1) the rationale of the Director in selecting the locale 
     of any satellite office required under subsection (a);
       (2) the progress of the Director in establishing all such 
     satellite offices; and
       (3) whether the operation of existing satellite offices is 
     achieving the purposes required under subsection (b).
       (f) Definitions.--In this section, the following 
     definitions shall apply:
       (1) Director.--The term ``Director'' means the Director of 
     the United States Patent and Trademark Office.
       (2) Patent and trademark office.--The term ``Patent and 
     Trademark Office'' means the United States Patent and 
     Trademark Office.
       On page 104, line 23, strike ``SEC. 18.'' and insert ``SEC. 
     19.''.


               Amendments Nos. 117, as Modified, and 123

  Mr. LEAHY. Madam President, I ask unanimous consent that the Senate 
resume consideration of Bennet amendment No. 117, as modified, with the 
changes at the desk and Kirk amendment No. 123 en bloc; further, that 
the amendments be agreed to en bloc and the motions to reconsider be 
considered made and laid upon the table, with no intervening action or 
debate.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Mr. GRASSLEY. Madam President, reserving the right to object, and I 
will not object, I wish to say as manager of my side of the aisle that 
we support this. We think both of these amendments are good amendments 
and that we ought to move forward. I appreciate very much the majority 
working with us to accomplish this goal.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. Is there objection?
  Without objection, it is so ordered.
  The amendments, Nos. 117, as modified, and 123, were agreed to en 
bloc.
  Mr. LEAHY. Madam President, I am ready to go to third reading unless 
there are others who are otherwise tied up who knows where, but I wish 
they would take the time to drop by if they have amendments. Senator 
Grassley and I spent hours on the floor yesterday just waiting for 
people to bring up amendments. We went through a number of quorum 
calls. We are talking about something that is going to be a tremendous 
boost to businesses and inventors. Those who are watching are wondering 
probably why we have spent years getting this far. So much time is 
being wasted.
  I just want everybody to know the two of us are ready to vote. 
Yesterday we took hours of delay to vote on the Leahy-Grassley, et al. 
amendment, and then it passed 97 to 2.
  So I would urge Senators who have amendments to come to the floor. As 
the gospel says, ``Many are called, but few are chosen.'' It may be the 
same thing on some of the amendments, but

[[Page 2982]]

ultimately we will conclude. Before my voice is totally gone, unless 
the Senator from Iowa has something to say, I yield to the Senator from 
Iowa.
  Mr. GRASSLEY. Madam President, supporting what the chairman has just 
said, outside of the fact that there might be one or two controversial 
nongermane amendments to this legislation, we have to look at the 
underlying product. The underlying product is very bipartisan. Most 
economic interests within our country are supporting this patent reform 
legislation. Everybody agrees it is something that probably should have 
been passed a Congress ago.
  I join my Democratic manager and the chairman of the committee in 
urging Senators on my side of the aisle who have either germane 
amendments or nongermane amendments to come to the floor and offer them 
so the underlying piece of legislation can be passed and sent on to the 
House of Representatives.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Vermont.
  Mr. LEAHY. Madam President, I also wish to associate myself with the 
distinguished senior Senator from Iowa. He has worked very hard to help 
us get to the floor. Considering the enormous amount of time that has 
been spent by both sides of the aisle on this bill, the amount of time 
that has been spent working out problems, I wish we could complete it. 
I understand there are a couple Senators who may have amendments. I am 
not sure where they are, but I am sure they will show up at some point. 
In the meantime, I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Udall of New Mexico). Without objection, 
it is so ordered.


                           Amendment No. 133

  Mrs. FEINSTEIN. Mr. President, I call up amendment No. 133, and I ask 
unanimous consent to set aside the pending amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from California [Mrs. Feinstein], for herself, 
     Mr. Risch, Mr. Reid, Mr. Crapo, Mrs. Boxer, and Mr. Ensign, 
     proposes an amendment numbered 133.

  The amendment is as follows:

       On page 2, line 1, strike ``FIRST INVENTOR TO FILE.'' and 
     insert ``FALSE MARKING.''
       On page 2, strike line 2 and all that follows through page 
     16, line 4.
       On page 16, line 5, strike ``(1) In general.--'' and insert 
     ``(a) In General.--'' and move 2 ems to the left.
       On page 16, line 7, strike ``(A)'' and insert ``(1)'' and 
     move 2 ems to the left.
       On page 16, line 11, strike ``(B)'' and insert ``(2)'' and 
     move 2 ems to the left.
       On page 16, line 18, strike ``(2) Effective date.--'' and 
     insert ``(b) Effective Date.--'' and move 2 ems to the left.
       On page 16, line 19, strike ``subsection'' and insert 
     ``section''.
       On page 16, strike line 22 and all that follows through 
     page 23, line 2.
       On page 23, strike line 3 and all that follows through page 
     31, line 15, and renumber sections accordingly.
       On page 64, strike line 18 and all that follows through 
     page 65, line 17.
       On page 69, line 10, strike ``derivation'' and insert 
     ``interference''.
       On page 69, line 14, strike ``derivation'' and insert 
     ``interference''.
       On page 71, line 9, strike ``Derivation'' and insert 
     ``Interference''.
       On page 71, lines 9 and 10, strike ``derivation'' and 
     insert ``interference''.
       On page 71, line 14, strike ``derivation'' and insert 
     ``interference''.
       On page 72, line 3, strike ``derivation'' and insert 
     ``interference''.
       On page 72, line 8, strike ``derivation'' and insert 
     ``interference''.
       On page 73, line 1, strike ``derivation'' and insert 
     ``interference''.
       On page 73, between lines 5 and 6, insert the following:
       (d) Conforming Amendments.--Sections 41, 134, 145, 146, 
     154, 305, and 314 of title 35, United States Code, are each 
     amended by striking ``Board of Patent Appeals and 
     Interferences'' each place that term appears and inserting 
     ``Patent Trial and Appeal Board''.
       On page 73, line 6, strike ``(d)'' and insert ``(e)''.
       On page 93, strike lines 6 through 8, and insert the 
     following: by inserting ``(other than the requirement to 
     disclose the best mode)'' after ``section 112 of this 
     title''.
       On page 98, strike lines 20 and 21, and insert the 
     following:

     ``SEC. 17. EFFECTIVE DATE.

       Except as otherwise provided
       On page 99, strike lines 1 through 14.

  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent that at the 
conclusion of my remarks the amendment be set aside and the Senate 
return to the previously pending business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. FEINSTEIN. Thank you very much.
  I rise today to offer an amendment to strike the first-to-file 
provisions of this bill. I am joined in this effort by my cosponsors, 
Senator Risch, Majority Leader Reid, and Senators Crapo and Boxer. I 
also ask unanimous consent that Senator Ensign be added as a cosponsor 
of the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. FEINSTEIN. I know the bill has contained these provisions for 
some time now, and I acknowledge I have voted for different versions of 
it that contain these provisions. However, I have heard more and more 
in the past 2 years from small inventors, startup companies, small 
businesses, venture capitalists, and, yes, even large companies from 
all around our country, but especially in my State of California, that 
this proposed transition from our first-to-invent system to a first-to-
file system would be severely harmful to innovation, and especially 
burdensome on small inventors, startups, and small businesses. And I 
have become convinced it is the wrong thing to do.
  For the benefit of my colleagues who have not been so embroiled in 
this rather technical issue, let me provide a little background. For 
over a century, our country has awarded patents to the first inventor 
to come up with an idea, even if somebody else beat them to the Patent 
Office--a first-to-invent system. And we have done very well under the 
first-to-invent system. This bill would change that, so that the first 
person to file an application for a patent for a particular invention 
would be entitled to that patent, even if another person actually 
created the invention first. This is what is known as the first-to-file 
system.
  Now, the argument that is made for transitioning to first-to-file is 
that the rest of the world follows first-to-file, and that will 
harmonize our system with theirs. This is supported by big companies 
that have already made it, that have an international presence. 
Therefore, I understand their support for first-to-file. But under 
first-to-invent, we have been the world's leader in innovation, and the 
first-to-file countries have been playing catchup with our 
technological advances. So with all due respect, I wouldn't trade 
America's record of innovation for that of virtually any other country 
or certainly any first-to-file country.
  The genius of America is inventions in small garages and labs, in 
great ideas that come from inspiration and perspiration in such 
settings and then take off. So many of America's leading companies--
Hewlett Packard, Apple, Google, even AT&T arising from Alexander Graham 
Bell's lab, for example--started in such settings and grew 
spectacularly, creating jobs for millions of Americans and lifting our 
economy and standard of living.
  A coalition of affected small business groups, including the National 
Small Business Association and others, recently said first-to-file 
``disrupts the unique American start-up ecosystem that has led to 
America's standing as the global innovation leader . . .''
  I believe it is critical that we continue to protect and nurture this 
culture of innovation, and preserving the first-to-invent system that 
has helped foster it is essential to do this.
  Moreover, this bill would not actually harmonize our patent priority 
system with that of the rest of the world. Many first-to-file countries 
allow more extensive use of prior art to defeat a patent application 
and provide for greater prior user rights than this bill would provide. 
Europe does not provide

[[Page 2983]]

even the limited 1-year publication grace period this bill does.
  An important part of this debate is the change the bill makes to the 
so-called grace period that inventors have under U.S. current law. 
Presently, a person's right to their invention is also protected for 1 
year from any of the following: No. 1, describing their invention in a 
printed publication; No. 2, making a public use of the invention; or, 
No. 3, offering the invention for sale. This is called the grace 
period, and it is critical to small inventors.
  Mr. President, 108 startups and small businesses wrote last year 
that:

       U.S. patent law has long allowed inventors a 1-year ``grace 
     period,'' so that they can develop, vet, and perfect their 
     invention, begin commercialization, advance sales, seek 
     inventors and business partners, and obtain sufficient funds 
     to prosecute the patent application. During the grace period, 
     many inventors learn about starting a technology-based 
     business for the first time. They must obtain investment 
     capital and must learn from outside patent counsel (at 
     considerable expense) about patenting and related deadlines 
     and how to set up confidentiality agreements. Many startups 
     or small businesses are in a race against insolvency during 
     this early stage. The grace period protects them during this 
     period from loss of patent rights due to any activities, 
     information leaks or inadvertent unprotected disclosures 
     prior to filing their patent applications.

  S. 23 eliminates this grace period from offering an invention for 
sale or making a public use of it, leaving only a grace period from 
``disclosure'' of the invention.
  There are two problems with this. First, ``disclosure'' is not 
defined in the bill. This will generate litigation while the courts 
flesh out that term's meaning. While this plays out in the courts, 
there will be uncertainty about whether many inventions are patentable. 
This uncertainty will, in turn, chill investment, as venture 
capitalists will be reluctant to invest until they are confident that 
the inventor will be able to patent and own their invention.
  Secondly, because of this lack of definition, some patent lawyers 
interpret ``disclosure'' to mean a disclosure that is sufficiently 
detailed to enable a person of ordinary skill in the particular art to 
make the invented item. In practical terms, this means a patent 
application or a printed publication.
  Now, this does provide some protection to universities, it is true. 
They often publish about their inventions. However, it is scant 
protection for the small inventor. They don't publish about their 
inventions, until they file a patent application. As the 108 small 
businesses put it, ``no business willingly publishes complete technical 
disclosures that will tip-off all competitors to a company's 
technological direction. . . . Confidentiality is crucial to small 
companies.''
  The grace period from offering for sale or public use is critical for 
their protection; eliminating it will have the effect, in the words of 
these small businesses, of ``practically gutting the American 1-year 
grace period.'' The National Small Business Association wrote recently:

       The American first-to-invent grace period patent system has 
     been a major mechanism for the dynamism of small business 
     innovation. . . . It is clear that the weak or (entirely 
     absent) [sic] grace periods used in the rest of the world's 
     first-to-file patent system throttles small-business 
     innovation and job creation.

  Our amendment would preserve America's world-leading system.
  I am also very concerned that first-to-file would proportionately 
disadvantage small companies and startups with limited resources. I 
have become convinced that this change would impede innovation and 
economic growth in our country, particularly harming the small, early-
stage businesses that generate job growth.
  Obviously, the process of innovation starts with the generation of 
ideas. Small California companies and inventors have described to me 
how most of these ideas ultimately do not pan out; either testing or 
development proves they are not feasible technologically, or they prove 
not to be viable economically.
  Unfortunately, first-to-file incentivizes inventors to ``race to the 
Patent Office,'' to protect as many of their ideas as soon as possible 
so they are not beaten to the punch by a rival. Thus, first-to-file 
will likely result in significant overfiling of these ``dead end'' 
inventions, unnecessarily burdening both the Patent and Trademark 
Office and inventors. As Paul Michel, former chief judge of the Court 
of Appeals for the Federal Circuit, and Gregory Junemann, president of 
the International Federation of Professional and Technical Engineers, 
put it in a recent letter to the committee:

       As Canada recently experienced, a shift to a first-to-file 
     system can stimulate mass filing of premature applications as 
     inventors rush to beat the effective date of the shift or 
     later, filings by competitors.

  This presents a particular hardship for independent inventors, for 
startups, and for small businesses, which do not have the resources and 
volume to employ in-house counsel but must instead rely on more-costly 
outside counsel to file their patents. This added cost and time 
directed to filing for ideas that are not productive will drain 
resources away from the viable ideas that can build a patent 
portfolio--and a business.
  At a time when the Patent and Trademark Office has a dramatic backlog 
of over 700,000 patents waiting to be examined and a pendency time of 
some 3 years, Congress should be careful to ensure that any legislative 
changes will not increase patent filings that are unfruitful.
  The counter-argument is made that a small inventor could file a cheap 
``provisional patent application,'' and that is sufficient protection. 
However, patent lawyers who work with small clients have said that they 
advise their clients not to treat a provisional application any less 
seriously than a full patent application. If there is part of an 
invention that is left out of the provisional application, that will 
not be protected. And the parts that are included in the provisional 
application will be vulnerable too, under an attack that the inventor 
failed to disclose the ``best mode'' of the invention by leaving out 
necessary information.
  The argument is made that first to file will establish a simple, 
clear priority of competing patent applications. Proponents of first to 
file argue that it will eliminate costly, burdensome proceedings to 
determine who actually was the first to invent, which are known as 
``interference proceedings.''
  However, the reality is that this is not a significant problem under 
our current system. There are only about 50 ``interference 
proceedings'' a year to resolve who made an invention first. This is 
out of about 480,000 patent applications that are submitted each year--
in other words, one-one hundredth of 1 percent of patent applications.
  Another problem with the bill's first to file system is the 
difficulty of proving that someone copied your invention.
  The bill's proponents assert that it protects against one person 
copying another person's invention by allowing the first inventor to 
prove that ``such other patent was derived from the inventor of the 
invention . . .''.
  Currently, you as a first inventor can prove that you were first by 
presenting evidence that is in your control--your own records 
contemporaneously documenting the development of your invention. But to 
prove that somebody else's patent application came from you under the 
bill, was ``derived'' from you, you would have to submit documents 
showing this copying. Only if there was a direct relationship between 
the two parties will the first inventor have such documents.
  If there was only an indirect relationship, or an intermediary--for 
example, the first inventor described his invention at an angel 
investor presentation where he didn't know the identities of many in 
attendance--the documents that would show ``derivation''--copying--are 
not going to be in the first inventor's possession; they would be in 
the second party's possession. You would have to find out who they 
talked to, e-mailed with, et cetera to trace it back to your original 
disclosure. But the bill doesn't provide for any discovery in these 
``derivation proceedings,'' so the first inventor can't prove their 
claim.
  For these reasons, and many others, the first to invent system, which 
I believe has made our Nation the leader in

[[Page 2984]]

the world, which our amendment would preserve, is supported by numerous 
people and businesses around the country, including the National Small 
Business Association; Coalition for Patent Fairness, a coalition of 
large high-tech companies; IEEE, Institute of Electrical and 
Electronics Engineers, which has 395,000 members; the International 
Federation of Professional and Technological Engineers, AFL-CIO; the 
University of California System; the University of Kentucky; Paul 
Michel--Former Chief Judge of the U.S. Court of Appeals for the Federal 
Circuit, which plays the critical role of hearing appeals in patent 
cases; the U.S. Business and Industry Council; American Innovators for 
Patent Reform; National Association of Patent Practitioners; 
Professional Inventors Alliance USA; CONNECT, a trade association for 
small technology and life science businesses; and many small inventors, 
as represented, for instance, in a letter signed by 108 startups and 
small businesses from all over the country.
  Mr. President, I ask unanimous consent that a copy of this letter be 
printed in the Record following my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mrs. FEINSTEIN. Mr. President, I don't often agree with the 
organization Gun Owners of America, a group that thinks the National 
Rifle Association is too liberal. But I do agree with them on this 
issue. They are part of a coalition of 23 conservative organizations 
that wrote to the leaders about this, arguing: ``Our competitors should 
have to `harmonize up' to our superior intellectual property regime, 
rather than our having to weaken our patent system and `harmonize down' 
to their levels.'' Other signatories on this letter include Phyllis 
Schlafly of the Eagle Forum; Edwin Meese III, former Attorney General 
under President Reagan; the American Conservative Union; and the 
Christian Coalition.
  I think this is really a battle between the small inventors beginning 
in the garage, like those who developed the Apple computer that was 
nowhere, and who, through the first-to-invent system, were able to 
create one of the greatest companies in the world. America's great 
strength is the cutting-edge of innovation. The first-to-invent system 
has served us well. If it is not broke, don't fix it. I don't really 
believe it is broke.
  I am delighted to see that my cosponsor, the distinguished Senator 
from California, is also on the floor on this matter, and I welcome her 
support.
  I yield the floor.

                               Exhibit 1

                                                     June 1, 2010.
     Re Effective repeal of the one-year ``grace period'' under S. 
         515, the Patent Reform Act of 2010.

     Hon. Harry Reid,
     Majority Leader, U.S. Senate,
     Washington, DC.
     Hon. Mitch McConnell,
     Minority Leader, U.S. Senate,
     Washington, DC.
       Dear Senators, on behalf of the undersigned companies and 
     organizations whose survival and new job creations depend on 
     patent protection, we are writing regarding the patent reform 
     legislation, S. 515. We write today to draw renewed attention 
     to a proposed rewrite of 35 U.S.C. Sec. 102, which 
     effectively eliminates the American one-year grace period 
     during which current law permits an inventor to test and vet 
     an invention, publically demonstrate it to obtain advance 
     sales revenue and seek investors before filing the patent 
     application. No representatives of small business were called 
     to testify during five years of Senate hearings on patent 
     legislation. This issue has been overshadowed by the debate 
     on other provisions of S. 515, but it is no less disruptive 
     to the technology investments fostered by the patent system. 
     The proposed sweeping changes in Sec. 102 is another issue 
     where some large, incumbent firms are seeking a change to the 
     detriment of small companies, new entrants, startup 
     innovators, independent inventors, and future businesses.
       U.S. patent law has long allowed inventors a one-year 
     ``grace period,'' so that they can develop, vet, and perfect 
     their invention, begin commercialization, advance sales, seek 
     investors and business partners, and obtain sufficient funds 
     to prosecute the patent application. During the grace period, 
     many inventors learn about starting a technology-based 
     business for the first time. They must obtain investment 
     capital and often must learn from outside patent counsel (at 
     considerable expense) about patenting and related deadlines 
     and how to set up confidentiality agreements. Many startups 
     or small businesses are in a race against insolvency during 
     this early stage. The grace period protects them during this 
     period from loss of patent rights due to any activities, 
     information leaks or inadvertent unprotected disclosures 
     prior to filing their patent applications.
       Small businesses and startups are significantly more 
     exposed than large firms in this regard because they must 
     rely on far greater and earlier private disclosure of the 
     invention to outside parties. This is often required for 
     raising investment capital and for establishing strategic 
     marketing partnerships, licensing and distribution channels. 
     In contrast, large established firms have substantial 
     patenting experience, often have in-house patent attorneys 
     and often use internal R&D investment funds. They can also 
     use their own marketing, sales and distribution chains. 
     Therefore, they seldom need early disclosure of their 
     inventions to outside parties.
       S. 515 amends Sec. 102 to confer the patent right to the 
     first-inventor-to-file as opposed to the first-to-invent as 
     provided under current law. This change is purportedly made 
     for the purpose of eliminating costly contests among near-
     simultaneous inventors claiming the same subject matter, 
     called ``interferences.'' The goal of eliminating 
     interferences is achievable by simple amendment of only 
     Sec. 102(g) to a first-inventor-to-file criterion. However, 
     under the heading of First-Inventor-To-File, S. 515 does far 
     more, it changes all of Sec. 102, redefining the prior art 
     and practically gutting the American one-year grace period.
       Without the grace period, the patent system would become 
     far more expensive and less effective for small companies. It 
     would create the need to ``race to the patent office'' more 
     frequently and at great expense before every new idea is 
     fully developed or vetted. The pressure for more filings will 
     affect all American inventors--not only a few that end up in 
     interferences under current law. Because filing decisions 
     must be made based on information that will be preliminary 
     and immature, the bill forces poor patenting decisions. 
     Applicants will skip patent protection for some ultimately 
     valuable inventions, and will bear great costs for 
     applications for inventions that (with the additional 
     information that is developed during the grace period year of 
     current law) prove to be useless, and subsequently abandoned. 
     The evidence for this high abandonment trend under systems 
     having no grace period is readily available from European 
     application statistics.
       The proponents of S. 515 suggest that the harm of the weak 
     grace period of proposed Sec. 102(b) can be overcome if an 
     inventor publishes a description of the invention, allowing 
     filing within a year following such publication. Underlying 
     this suggestion are two errors. First, no business willingly 
     publishes complete technical disclosures that will tip off 
     all competitors to a company's technological direction. We 
     generally do not, and will not, publish our inventions right 
     when we make them, some 2.5 years before the 18-month 
     publication or 5-7 years before the patent grant. 
     Confidentiality is crucial to small companies.
       Second, even if we were to avail ourselves of such 
     conditional grace period by publishing first before filing, 
     we would instantly forfeit all foreign patent rights because 
     such publication would be deemed prior art under foreign 
     patent law. No patent attorney will advise their client to 
     publish every good idea they conceive in order to gain the 
     grace period of S. 515. The publication-conditioned ``grace 
     period'' in S. 515 is a useless construct proposed by parties 
     intent on compelling American inventors to ``harmonize'' de 
     facto with national patent systems that lack grace periods. 
     S. 515 forces U.S. inventors to make the ``Hobson's Choice'' 
     of losing their foreign patent rights or losing the American 
     grace period. It should be clear that the only way for 
     American inventors to continue to benefit from a grace period 
     and be able to obtain foreign patent rights, is to keep 
     intact the current secret grace period that relies on 
     invention date and a diligent reduction to practice.
       The American grace period of current law ensures that new 
     inventions originating in American small companies and 
     startups--the sector of the economy that creates the largest 
     number of new jobs--receive patent protection essential for 
     survival and that American small businesses' access to 
     foreign markets is not destroyed. We urge you to amend S. 515 
     so that Sec. 102 remains intact in order to preserve the 
     American grace period in its full scope and force.
       Thank you for your consideration of our views and concerns.
           Sincerely,
                                        (Signed by 108 Companies).

  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I ask unanimous consent that the Senator 
from California be permitted to speak,

[[Page 2985]]

and then I ask that the remaining time be granted to me.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. BOXER. Mr. President, will the Chair cut me off at 1 minute?
  The PRESIDING OFFICER. Yes.
  Mrs. BOXER. Mr. President, I thank Senator Hatch so much. I thank my 
friend and colleague, Senator Feinstein, for this critical amendment.
  Mr. President, I rise in support of the amendment offered by my dear 
friend and colleague, Senator Feinstein.
  The amendment would strike the first-to-file provision in the patent 
reform bill.
  I was pleased to work with my colleague, Dr. Coburn, in support of 
his amendment to allow the patent office to keep its user fees, which 
was accepted into the managers' amendment that passed yesterday.
  To me, that was one of the most important reforms we could enact in 
this legislation--giving the PTO the resources it needs to serve the 
public.
  I support efforts to improve our patent system. And there are some 
good things in this bill, including efforts to help small businesses 
navigate the PTO.
  But I strongly disagree with changing the core principle of our 
patent system--awarding a patent to the true inventor--for the sake of 
perceived administrative ease.
  Unlike other countries, our patent system is rooted in our 
Constitution. We are the only country in the world whose Constitution 
specifically mentions ``inventor.''
  Article I, section 8 states ``The Congress shall have the power . . . 
To promote the progress of science and useful arts, by securing for 
limited times to authors and inventors the exclusive right to their 
respective writings and discoveries.''
  Our system recognizes the complete process of invention--from 
conception to completion.
  The United States is still the heart of innovation in the world, and 
its patent system is its soul.
  Despite our rich history, the bill before us today seeks to erase 
over 200 years of invention and achievement, and replace it with a 
weaker system.
  Let's talk about those changes.
  Section 2 of the bill awards a patent to the first person to file, 
regardless of whether that person was the true inventor--the one who 
first conceived and developed the invention to completion.
  That goes directly against the express language of the Constitution, 
which awards patents to the inventor, not the fastest to the PTO.
  Section 2 of the bill also provides a weaker grace period than 
current law. This is a big change that will have a significant economic 
effect on startups, entrepreneurs and individual inventors.
  I believe it is a change that we cannot afford, especially in these 
tough economic times when we need our small businesses to create new 
jobs.
  Current law allows an inventor to obtain a patent if an application 
is filed within a year of a public use, sale or publication of 
information about the invention.
  That year is called the grace period, during which an inventor's 
right to apply is protected from disclosures or applications by others 
related to his invention.
  The grace period is important because it allows smaller entities, 
like startups or individual inventors, time to set up their businesses, 
seek funding, offer their inventions for sale or license, and prepare a 
thorough patent application.
  Put another way, the grace period is an integral part of the 
formation of a small business.
  The grace period has been a part of our patent system since 1839, and 
it was implemented to encourage inventors to engage in commercial 
activity, such as demonstrations and sales negotiations, without fear 
of being beaten to the patent office by someone with more resources.
  The new grace period in the bill, however, would no longer cover 
important commercial activities such as sales or licensing 
negotiations.
  The new provision also contains vague, undefined terms that will 
inject more uncertainty into the system at a time when inventors and 
investors need more certainty.
  Proponents of first-to-file will argue that there have been studies 
or reports that show that a first-to-file system does not harm small 
entities. For example, they often mention the report of the National 
Academies of Science that reached that conclusion.
  However, those studies and reports only analyzed the rare cases where 
two parties claimed to be the first inventor.
  Do you know how rare those cases are? Last year, there were 52 cases 
out of over 450,000 applications filed--.01 percent of all applications 
ended up in a contest.
  I do not think we should change over 170 years of protection for 
small entities based on cases that happen with the frequency of a hole 
in one in golf--1 out of 12,500, or .01 percent.
  Listen to the conclusion of a report analyzing the business effects 
of Canada's switch to a first-to-file system:

       The divergence between small entities and large 
     corporations in patenting after the Reforms supports the idea 
     that a switch to a first-to-file system will result in 
     relatively less inventive activity being carried out by 
     independent inventors as well as small businesses, and more 
     being channeled through large corporations instead.

  In closing, I believe there are things we can do to improve our 
patent system.
  But I also believe that the foundation of our Constitution-based 
system--a patent is awarded to the inventor--has worked well for over 
220 years, and we should not change that core.
  It has produced inventors such as Thomas Edison, the Wright Brothers, 
and George Washington Carver.
  We should not change the core of our system, and I urge my colleagues 
to vote for the Feinstein amendment.
  Mr. President, I will conclude in this way. The Feinstein amendment 
is necessary. It is necessary because the first person to invent should 
get the protection from the Patent Office. We believe that if this 
amendment does not pass, it goes against the express language of the 
Constitution which awards patents to the inventor, not the fastest one 
to run down to the Patent Office. Senator Feinstein has explained why 
this is a matter of fairness and is better for consumers. I am hopeful 
that the amendment passes.
  I thank the Chair.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I have been following the debate on the 
patent bill closely. I wish to again voice my strong support for 
passage of this very important legislation.
  We have been working on this bill for a number of years and it is 
satisfying to finally see the full Senate consider it now. As I have 
said before, the patent reform bill is about moving our Nation toward 
the future. It will equip America's inventors with an improved patent 
system that will enable them to better compete in today's global 
economy. Toward that end, I would like to discuss some of the key 
provisions of this bill and what they will do to improve and modernize 
our patent system.
  There are some misconceptions about the proposed first-inventor-to-
file provision. Some have questioned why we cannot maintain the current 
first-to-invent system, in which priority is established by determining 
which applicant actually invented the claimed invention first. Under 
this system, if there is a dispute, it costs applicants an average of 
$500,000 in legal fees to prove they were the first-to-invent. This 
amount does not include extra expenses that can follow if the decision 
is appealed. Unfortunately, many small businesses and independent 
inventors do not have the resources to engage in the process we have 
now.
  Conversely, moving to a first-inventor-to-file system would provide 
inventors a cost-effective and certain path to protect one's invention 
through the filing of a provisional application, at a much more 
reasonable cost of about $100.
  The purpose of the proposed transition is certainly not to hurt small 
businesses or independent inventors. Quite the contrary. These 
innovators are too important to our Nation's economic health. But let's 
consider some facts:

[[Page 2986]]

in the past 7 years, more than 3,000,000 applications have been filed, 
and only 25 patents were granted to small entities that were the second 
inventor to file, but later proved that they were first to invent. Of 
those 25, only one patent was granted to an individual inventor who was 
the second to file. Thus, in the last 7 years, only one inventor in 
over 3,000,000 patent filings would have gotten a different outcome if 
we, like the rest of world, used a first-inventor-to-file patent 
system. I assure you that I do not want to minimize the reluctance that 
some have with changing to this new system; however, the facts speak 
for themselves. Simply put, moving to a first-inventor-to-file system 
does not appear to have the level of risk some have feared.
  Additionally, the American Bar Association's Section of Intellectual 
Property Law recently confirmed the importance of the proposed 
transition by stating:

       For inventions made after 1996, the U.S. patent system has 
     been open to proofs of inventions made outside the United 
     States--creating for many U.S.-based inventors a new and 
     potentially even more expensive obstacle to obtaining a 
     patent under the current first-to-invent rule. Finally, U.S. 
     inventors more and more are facing the need to file patent 
     applications both at home and abroad to remain competitive in 
     our global economy. Requiring compliance with two 
     fundamentally different systems places undue additional 
     burdens on U.S. inventors and puts them at a competitive 
     disadvantage in this global economy.

  Indeed, the transition to the first-inventor-to-file system is long 
overdue and will help our U.S. companies and inventors out-compete 
their global challengers.
  The proposed legislation would also give the USPTO rulemaking 
authority to set or adjust its own fees, without requiring a statutory 
change every time an adjustment is needed. Providing the USPTO the 
ability to adjust its own fees will give the agency greater flexibility 
and control, which, in the long run, will benefit inventors and 
businesses.
  Speaking of greater fiscal flexibility for the USPTO, let me take a 
moment to discuss the importance of ensuring full access to the fees 
the agency collects.
  American inventors, who create jobs and keep our economic engine 
running, should not have to wait for years after they have paid their 
fees to have their patent applications processed. This is tantamount to 
a tax on innovation and it creates disincentives for inventors and 
entrepreneurs.
  A fully funded USPTO, with fiscal flexibility, would--at the very 
least--mean more and better trained patent examiners, greater 
deployment of modern information technologies to address the agency's 
growing needs, and better access to complete libraries of prior art.
  Over the years, fee diversion has forced a vicious cycle of abrupt 
starts and stops in the hiring, training, and retention of qualified 
office personnel. To make matters worse, under current conditions, 
outdated computer systems are not keeping pace with the volume of work 
before the agency. It is clear to most that the USPTO has yet to 
recover from the negative impact of diverting close to a billion 
dollars from its coffers, for its own use. That has not only been 
wrong, it is obscene.
  I agree with what has been said that there cannot be true patent 
reform without full access to collected fees from the USPTO. We owe it 
to our inventor community to do this. We all have a vested interest in 
ensuring that our country's unique spirit of ingenuity and innovation 
continues to thrive and flourish. Last night, an overwhelming majority 
of the Senate voted to finally put an end to fee diversion from the 
USPTO. It was a historic moment, and I hope our House colleagues will 
maintain this momentum. I understand some people on the Appropriations 
Committee do not like it. They do not like it because they like to be 
able to play with that money. But it is disastrous to not have that 
money stay with the USPTO so we can move forward faster, better and get 
a lot more done and still be the leading innovative nation in the 
world.
  The legislation also enables patentholders to request a supplemental 
examination of a patent if new information arises after the initial 
examination. By establishing this new process, the USPTO would be asked 
to consider, reconsider or correct information believed to be relevant 
to the patent. The request must be made before litigation commences. 
Therefore, supplemental examination cannot be used to remedy flaws 
first brought to light in the course of litigation, nor does it 
interfere with the court's ability to address inequitable conduct. That 
is an important point. Further, this provision does not limit the 
USPTO's authority to investigate misconduct or to sanction bad actors.
  In a nutshell, the supplemental examination provision satisfies a 
long-felt need in the patent community to be able to identify whether a 
patent would be deemed flawed if it ever went to litigation and enables 
patentees to take corrective action. This process enhances the quality 
of patents, thereby promoting greater certainty for patentees and the 
public.
  The America Invents Act also creates a mechanism for third parties to 
submit relevant information during the patent examination process. This 
provision would provide the USPTO with better information about the 
technology and claimed invention by leveraging the knowledge of the 
public. This will also help the agency increase the efficiency of 
examination and the quality of patents.
  The pending legislation also provides a new postgrant review 
opposition proceeding to enable early challenges to the validity of 
patents. This new but time-limited postgrant review procedure will help 
to enhance patent quality and restore confidence in the presumption of 
validity that comes with issued patents.
  Finally, this bipartisan patent bill provides many improvements to 
our patent system which include, among other provisions, just some of 
the following:
  Changes to the best mode disclosure requirement, increased incentives 
for government laboratories to commercialize inventions, restrictions 
on false marking claims, removal of restrictions on the residency of 
Federal circuit judges, clarification of tax strategy patents, 
providing assistance to small businesses through a patent ombudsman 
program, establishing additional USPTO satellite offices, and creation 
of a transitional postgrant proceeding specific to business method 
patents.
  As we can see, this bipartisan bill represents significant changes to 
our patent laws. They will enable our great country to more effectively 
compete in the 21st century global economy. I encourage my colleagues 
to take action and vote in favor of this bill. We cannot afford to 
allow this opportunity to pass us by.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Ms. KLOBUCHAR. Mr. President, I thank the Senator from Utah for his 
strong statement of support for the America Invents Act, a bill that 
is, at its heart, all about moving our economy forward. When we think 
about the brass tacks of our country, we think about ideas, we think 
about inventions. It was our inventors who developed the light bulb, 
the assembly line, the Internet, the iPod, and, of course, my 15-year-
old daughter's favorite invention, Facebook. This all came from our 
great country.
  I wish to comment, briefly--I know Senator Rockefeller has an 
important issue to talk about, the issue we have just been discussing.
  First of all, we have heard from stakeholders from across the 
spectrum--from high tech and life sciences to universities and small 
inventors--in support of the transition to the first-to-file system.
  I ask unanimous consent to have printed in the Record a list of 
supporters of the transition to the first-to-file system that is 
contained in the America Invents Act.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               Supporters of the First-to-File Transition

       AdvaMed; American Bar Association; American Council on 
     Education; American

[[Page 2987]]

     Intellectual Property Law Association; Association of 
     American Medical Colleges; Association for Competitive 
     Technology; Association of American Universities; Association 
     of Public and Land-grant Universities; Association of 
     University Technology Managers; BASF, the Chemical Company; 
     Biotechnology Industry Organization; Business Software 
     Alliance; Caterpillar; Coalition for 21st Century Patent 
     Reform; Council on Governmental Relations; Gary Michelson, 
     Independent Inventor; Genentech; Intellectual Property Owners 
     Association; Louis J. Foreman, Enventys, independent 
     inventor; National Association of Manufacturers; Small 
     Business and Entrepreneurship Council; and Software & 
     Information Industry Association.

  Ms. KLOBUCHAR. Mr. President, we have heard also on the floor that 
there is, as Senator Hatch mentioned, strong support throughout the 
Senate for this change. In fact, Commerce Secretary Locke emphasizes 
that support in a column appearing in the Hill newspaper today. He 
states:

       [P]atent reform adopts the ``first-inventor-to-file'' 
     standard as opposed to the current ``first-to-invent'' 
     standard. First inventor to file is used by the rest of the 
     world 
     and would be good for U.S. businesses, providing a more 
     transparent and cost-effective process that puts them on a 
     level playing field. . . .

  I could not agree more. Small businesses, independent investors, and 
stakeholders across the spectrum support this important transition.
  I wish to mention one other aspect of this system. With the current 
first-to-invent system, when two patents are filed around the same time 
for the same invention, it also creates problems. It means the 
applicants must go through an arduous and expensive process called an 
interference to determine which applicant will be awarded the patent.
  Small inventors rarely, if ever, win interference proceedings because 
the rules for interferences are often stacked in favor of companies 
that can spend more money. We believe this needs to change. There was a 
recent article about this in the Washington Post in which David Kappos, 
the Director of the Patent Office and Under Secretary for Intellectual 
Property, described the current system is similar to parking your car 
in a metered space and having someone else come up and say they had 
priority for that space and then having your car towed. Instead, we 
need a system in which, if you are the first to pull in and pay your 
fee, you can park there and no one else can claim it is their space.
  The America Invents Act would create that system. It transitions our 
patent system from a first-to-invent system to a first-inventor-to-file 
system. By simply using the file date of an application to determine 
the true inventor, the bill increases the speed of a patent application 
process, while also rewarding novel, cutting-edge inventions.
  A first-to-file system creates more certainty for inventors looking 
to see if an idea has already been patented. At the same time, the bill 
still provides a safe harbor of 1 year for inventors to go out and 
market their inventions before having to file for their patent. This 
grace period is one of the reasons our Nation's top research 
universities, such as the University of Minnesota, support the bill. 
The grace period protects professors who discuss their inventions with 
colleagues or publish them in journals before filing their patent 
application.
  Mr. President, I know Senator Rockefeller is here to discuss a very 
important issue.
  The PRESIDING OFFICER. The Senator from West Virginia.
  Mr. ROCKEFELLER. Mr. President, I ask unanimous consent to set aside 
the pending amendment so I may call up amendment No. 134.
  The PRESIDING OFFICER. Is there objection?
  The Senator from Utah.
  Mr. HATCH. Mr. President, I have to object on behalf of the manager 
of the bill who is not here right now. If the Senator can at least wait 
until Senator Grassley returns to make his request.
  Mr. ROCKEFELLER. I know the Senator from Utah, and I remind him he 
was the lead author of the Hatch-Waxman Act, creating the 180-day 
period for generics.
  Mr. HATCH. I object right now, but as soon as Senator Grassley gets 
back----
  Mr. ROCKEFELLER. Will the Senator from Utah object if I talk about 
it?
  Mr. HATCH. No.
  The PRESIDING OFFICER. An objection has been heard.
  The Senator from West Virginia is recognized.


                           Amendment No. 134

  Mr. ROCKEFELLER. Mr. President, my amendment is based on legislation 
I introduced earlier this year, obviously quite recently. The 
cosponsors of that bill, which is called the Fair Prescription Drug 
Competition Act, are Senator Shaheen, Senator Leahy, who chairs the 
Judiciary Committee, Senator Inouye, Senator Stabenow, and Senator 
Schumer, who is on the Judiciary Committee.
  I wish to acknowledge that the managers of this bill, Chairman Leahy 
and Senator Grassley, have been steadfast partners in pushing the 
Federal Trade Commission to investigate further consumer access to 
generic drugs, which is a huge problem. We do a lot of talking about 
the health care bill and a lot of other things about saving money and 
saving consumers money. This is a bill which would do this, if I were 
allowed to actually proceed to it.
  This amendment eliminates one of the most widely abused loopholes 
that brand-name drug companies use to extend their shelf life, their 
monopoly, and limit consumer access to lower cost generic drugs which 
are just as good and just the same, but they have a system to work on 
that. It ends the marketing of so-called authorized generic drugs 
during the 180-day marketing exclusivity period that Congress designed 
to give real low-cost generics a major incentive to enter the market.
  What was happening was the brand-name drug companies had their 18 
years of exclusivity. That is a monopoly time unrivaled. Then somebody 
else would come in with a cheaper way of doing the same thing, an FDA-
approved drug, but it would be a generic drug. It would be the same 
drug, have the same effect, but it would be much cheaper. Since 
millions of people buy these drugs, that would seem to be a good thing 
in a budget-conscious era for American families, as well as for the 
government.
  As I say, this amendment ends the so-called authorized generic drugs 
during the 180-day marketing exclusivity period Congress designated to 
give real low-cost generics a major incentive to enter the market. You 
have to be able to enter the market to compete and to get your lower 
priced, equally good drugs out there. They do that by challenging a 
brand-name patent. That is the only way they can do it.
  An authorized generic drug is a brand-name prescription drug produced 
by the same brand manufacturer yet repackaged as a generic. That is 
clever, but it is also a little devious. Many brand-name drug 
manufacturers are repackaging their drugs as generics for the purpose 
of extending their market shares after their patents expire. They have 
a little subsidiary which produces something which they shift over to 
them.
  Unfortunately, this often eliminates the incentive for an independent 
generic to enter the marketplace. Therefore, the price of drugs remains 
much higher, and that would seem to be not in the interest of the 
American people.
  In 1984, Congress passed the Hatch-Waxman Act to provide consumer 
access to lower cost generic drugs. Under the law which the Senator 
from Utah led, if a true generic firm successfully challenges a brand-
name patent, the generic firm is provided a 180-day period for that 
drug to exclusively enter the market. This is a crucial incentive for 
generic drug companies to enter that market and make prescription drugs 
more affordable for consumers. It would seem to me this would be a very 
laudable pursuit.
  Every American agrees on the need to reduce health care costs. 
Generic drugs save consumers an estimated total of $8 billion to $10 
billion a year--$8 billion to $10 billion-a-year savings for the same 
quality of drug. Of course, they get that at the retail pharmacies 
where the prescription is handed out.

[[Page 2988]]

For working families, these savings can make a huge difference, 
particularly during very tough economic times, which we are going 
through.
  This amendment would restore the main incentive generic drug 
companies have to challenge a brand-name patent and enter the market. 
We give them the incentive to challenge the brand-name prescriber.
  That is what this amendment is about. It is profoundly important. It 
has been before this body many times. I guess it is a question of do we 
want to help people who have to take a lot of prescriptions and older 
people--any kind of people. Do we want to help them pay less? I guess 
it divides into if you do or if you don't. I am in the camp of, yes, I 
want to have people pay less. So I would just say that.
  Mr. President, I yield the floor for the time being.
  The PRESIDING OFFICER. The Senator from Kansas.
  Mr. ROBERTS. Mr. President, I ask unanimous consent to speak as in 
morning business for approximately 20 minutes, and I probably will not 
use all of that time and will yield back.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator is recognized.
  Mr. ROBERTS. I thank the Chair.


                     Executive Order on Regulations

  Mr. President, I rise today to speak again about President Obama's 
January 18 Executive order that directed all Federal agencies within 
the administration to review or repeal those significant regulatory 
actions that are duplicative, overly burdensome, or would have a 
significant economic impact on ordinary Americans.
  The President went on to say--I am paraphrasing from his words--they 
are costly, they are duplicative, in many cases they aren't necessary, 
we need to review them, and in some cases, actually, they are stupid. 
That is a direct quote from the President. I am paraphrasing, but he 
did say the word ``stupid.''
  Probably ``stupid'' would be the word, or maybe ``egregious'' or 
``fed up'' that almost any group or any organization back home would 
use when you visit with them. I know Senators, on their past break or 
our work period, if you will, probably spoke to a lot of groups. I will 
tell you what happened to me.
  I would walk into a group--any organization, be it farmers, ranchers, 
educators, health care, whatever--and they would say: Pat, what on 
Earth are you doing back there, passing all these regulations, a wave 
of regulations that do not make common sense and do not fit the 
yardstick, if you will, of cost and benefit? We can't even wake up any 
morning without some new regulation popping up across the desk, and we 
just don't have the people to do this. You are about to put us out of 
business.
  The first thing I say is, I am not a ``you guy,'' I am an ``us guy.'' 
And I am very much aware of these regulations. We have to do something 
about it. I brought up the fact the President himself recognized these 
problems.
  But I have to say that while I applauded this decision by the 
President, I noted there were some loopholes in his Executive order, 
and they are roughly these--if I could sort of summarize them: No. 1, 
if you are doing something for the public good--and, obviously, the 
secretary of any agency is going to say: Sure, we are doing something 
for the public good--well, then, you are exempt. That is a pretty big 
loophole to drive the truck through.
  Secondly, it was if you are an independent agency. Well, let's try 
the IRS. I think more people than most would say: Yes, we have some 
regulatory problems with the IRS.
  Several more, and I won't go into those. Then you have this 
paragraph, which I am going to read, that agencies can apply to their 
decision as to whether they are going to review the regulations they 
have on the books and regulations coming down the pike. They can apply 
this to see if they are exempt, and this is within the Executive order.

       In applying these principles, each agency is directed to 
     use the best available techniques to quantify anticipated 
     present and future benefits and costs as accurately as 
     possible.

  I can't imagine anybody being opposed to that.

       Where appropriate and permitted by law, each agency may 
     consider and discuss qualitatively values that are difficult 
     or impossible to quantify--

  I don't know how you do that--

     including equity, human dignity, fairness and distributive 
     impacts.

  That is about as amorphous as any language that I could possibly put 
together. If any secretary, or anybody in any agency who promulgates 
all the regulations they think they are forced to under some 
congressional act or perhaps an Executive order they are trying to 
issue applies this language, of course, they are exempt.
  So there are loopholes, again, that you can drive trucks through in 
regards to the fact that this Executive order is basically not going to 
be adhered to because everybody will stand up and say: We are exempt. 
We are doing public good. We are doing this language--whatever that 
means.
  So while I applaud the decision by the President, I decided last week 
I would introduce legislation to strengthen and codify his Executive 
order. All that means is, when I say we codify it, we say: OK, the 
Executive order stands but, sorry, no exemptions.
  What a day that would bring to Washington, with all the Federal 
agencies saying: Whoa, stop. We are going to take a look at all the 
regulations we have out there now, and we are going to take a look at 
all the ones we are promulgating--which are hundreds of them. And, I 
might just note, there were 44 major regulatory decisions that cost the 
American business community $27 billion just last year, according to 
one study. We are finding more and more people coming to Washington who 
have an agenda in regards to these regulations, but the folks out there 
who are being impacted seem to be overlooked.
  I have 30, 32, 35 cosponsors on this bill. I asked on both sides of 
the aisle for cosponsors. I think it is a good bill. It would be a 
brandnew day in Washington if every Federal agency had to stop and say: 
Whoa, wait a minute. Let's apply a cost-benefit yardstick. The 
Executive order sort of goes into what that would mean. They have one 
individual who is supposed to be doing all of this, so they could 
report to him, although that would be quite a load. My goodness, if all 
the Federal agencies stopped their regulatory process, there would be a 
cheer out in the hinterland in regards to every business I can think 
of.
  Well, as the administration moves forward with this review, I am 
going to have something to say in several areas: health care, energy, 
and financing, to people who are lending agencies and the effect of the 
regulatory reform. But today I want to talk about agriculture. Today I 
want to talk about the EPA and what is going on in regards to what I 
think is regulatory overkill for sure.
  I am privileged to be the ranking Republican and to serve with the 
Senator from Michigan, our chairwoman of the committee, Senator 
Stabenow. Basically, as the administration moves forward with its 
review, I recommend the President and his advisers pay particularly 
close attention to the activities of three specific agencies when they 
are determining which proposed regulations will place the greatest 
burden on agriculture--a key component of our Nation's economy and the 
ability to feed this country and a troubled and hungry world--the 
Environmental Protection Agency, the Department of Agriculture, and the 
Commodity Futures Trading Commission.
  Since fiscal year 2010, 10 new regulations promulgated--that is a 
fancy word in Washington which means issued--by the EPA have accounted 
for over $23 billion in new cost to the American taxpayer. Now, that is 
outrageous, and they are just getting started. The EPA has several new 
proposals, many of which will have immediate negative impacts on the 
ability of America's farmers and ranchers to continue to produce enough 
food to feed our communities, our States, our country, and, yes, the 
world. Think of how valuable that is as we look down the road with 
about a 9.3 billion increase in population compared to 6 billion today. 
We are going to have to

[[Page 2989]]

double agriculture production, and I will talk about that a little 
later.
  Why on Earth would we want to do anything to the farmer and rancher 
whose job it is to do that? That is beyond me. I will highlight two 
such proposals that many producers have brought to my attention. I just 
addressed the Commodity Classic in Kansas, in Great Bend, of about 200 
farmers. Guess what their No. 1 concern was. Overregulation, regulation 
that could put them out of business. They are concerned about the farm 
bill and they are concerned about lending and they are concerned about 
debt. But first, in only 7 short weeks, the EPA will require farmers--
who are applying pesticide to kill pests so they can save the crop--to 
obtain a permit under the Clean Water Act, even though that activity is 
already highly regulated under the Federal pesticide law. The President 
said we don't need regulations that are duplicative. We don't need two 
agencies having a different agreement on one regulation. We probably 
don't even need that regulation because we have very strong regulations 
under the FIFRA act that we have right now.
  Farmers and other pesticide applicators, under this regulatory 
impact, would not be facing these requirements if the administration 
had chosen to vigorously defend its longstanding policy that 
protections under the Federal pesticide law were sufficient to protect 
the environment.
  Excuse me, Mr. President. That was probably a phone call from some 
farmer listening to this and saying: Go ahead and give them you know 
what, Pat.
  Unfortunately, the administration chose a different path and now 
estimates suggest this duplicative regulation will require 365,000 
individuals to get a Clean Water Act permit--365,000 individuals--a 
requirement that will cost $50 million and require 1 million hours per 
year to implement. Bottom line, it will not add any environmental 
protection.
  This layer of redtape will place a huge financial burden on the 
shoulders of farm families all across the country, as well as State 
governments responsible for enforcement while at the same time facing 
dire budget situations. Last month, John Salazar, a former Member of 
the House of Representatives and newly appointed Colorado Commissioner 
of Agriculture stated in his testimony before the House:

       It is no secret that States across the country face dire 
     budget situations and many have had to close State parks, 
     cancel transportation projects and cut funding to higher 
     education. It is very difficult to justify diverting even 
     more resources to manage paperwork for a permit that is 
     duplicative of other regulatory programs and has no 
     appreciable environmental benefits. However, if Colorado's 
     estimates are reflective of the situation in other States, 
     the true cost to States will quickly outstrip EPA's 
     estimates. More than 365,000 individuals, $50 million, and 1 
     million hours per year to implement on the backs of our 
     farmers and ranchers.

  Mr. President, these expenses are not just limited to the cost of 
compliance and enforcement. The April 9 effective date is near. There 
is still significant confusion and uncertainty about what pesticide 
applications will fall under these new regulations. This means farmers 
and other pesticide applicators may very well find themselves subject 
to massive penalties. On top of the fact that they shouldn't be filling 
out the paperwork in the first place, if they do not, they could be 
held responsible for massive penalties for minor paperwork violations 
to the tune of--get this--$37,500 per day per violation. Unbelievable.
  Beyond agency enforcement, they will also now be exposed to the 
threat of litigation under the clean water law's citizen suit 
provisions. With the volatile nature of agricultural markets and 
increased demand, these sort of risks and resulting costs are something 
that producers and the hungry mouths who depend on them simply cannot 
afford.
  Next, EPA is undertaking an effort to control particulate matter--
this is a favorite of mine--otherwise known as dust. They call it rural 
fugitive dust. This is a dust-off of the old 1970s effort to control 
rural fugitive dust. I remember that. Somebody must have pulled it from 
the file. This is part of the EPA's review of the PM standard under the 
Clean Air Act.
  The agency is currently considering the most stringent regulations on 
farm dust that have ever been proposed. I finally reached the person 
who, when they first proposed this, was in charge of promoting it, or 
she was going to promulgate these regulations on rural fugitive dust. 
Before I could get a word in--I finally reached the person in charge; 
it took me 3 days--finally, before I could get a word in, she said: Did 
you realize--at that point I was a Congressman, and she said: Do you 
realize, Mr. Roberts, you have a lot of dust in your part of the 
country?
  I said: I think I know that. That is why we had the Great Plains 
Conservation Program. Each farmer has to have a conservation program if 
they are going to apply or for it to be applicable to the farm bill. We 
have a Conservation Reserve Program. We are doing everything we can to 
control dust, rest assured. Nobody likes that.
  I said: What would you have us do to comply with rural fugitive dust 
rules?
  She said: You know the grain trucks at harvest go up and down gravel 
roads, and they cause a lot of dust.
  No kidding.
  I said: What would you have us do?
  She said: Why don't you send out water trucks at 10 o'clock in the 
morning and 2 in the afternoon to every community in Kansas that has 
those gravel roads where you harvest wheat.
  I said: Great idea. That would be marvelous. Maybe we could get a 
grant. Today, that would be a stimulus grant to small communities in 
regard to rural areas where we are doing the wheat harvest to, No. 1, 
buy the trucks and, No. 2, find the water.
  That is just how ridiculous this is with rural fugitive dust. To put 
it simply, this defies common sense, whether it is cattle kicking up 
dust in a feedlot in Dodge City, KS, or Larned, KS, or anywhere in 
Kansas during harvest on a hot afternoon on the high plains in June. 
Dust is a naturally occurring event. Standards beyond the current limit 
would be impossible to meet, particularly in the western portion of the 
Nation where rainfall is often scarce. I don't even know why I am 
taking this seriously in regard to that kind of regulation.
  In a bipartisan June letter, 23 Members of this body wrote a letter 
to express these concerns to Administrator Jackson stating:

       Considering the Administration's focus on rural America and 
     rural economic development, a proposal such as this could 
     have a negative effect on those very goals . . . Common sense 
     requires the EPA to acknowledge that the wind blows and so 
     does dust.

  As we think about EPA's actions impacting agriculture, it is critical 
to recognize that no one cares more about maintaining a clean 
environment than the American farmer and rancher. Producers across the 
country manage their operations responsibly because of their desire to 
keep farming and to one day pass along that ranch or field to their 
sons, daughters and grandchildren if they can. They know firsthand that 
clean air and water and healthy soil go hand-in-hand with a healthy 
economy. Our producers deserve respect and appreciation from the EPA, 
not costly and redundant and yes, even ridiculous regulation.
  Shifting departments now, the Department of Agriculture's Grain 
Inspection, Packers and Stockyards Administration--GIPSA--released a 
proposed rule that would dramatically increase the redtape governing 
the business relationships surrounding production and marketing of 
livestock in the United States. The rule was initially proposed last 
summer without the benefit of a meaningful cost-benefit analysis--
something we have been trying to get and something the administration 
should have included.
  However, the proposal has since received significant criticism from 
ranchers, industry and members of Congress alike and is now being 
further evaluated by USDA officials.
  As written, the proposal would dramatically reduce consumer choice 
and increase costs. The proposal exposes packers to liability for use 
of alternative marketing arrangements and

[[Page 2990]]

other innovative procurement methods, thereby ultimately depressing the 
prices received for America's most efficient and successful producers 
while potentially reducing the quality available to consumers.
  Further, the proposed rule would actually increase concentration in 
the sector as businesses are forced to change their current 
organizational structure--exacerbating the very issue the rule is 
allegedly designed to address. For example, in Kansas, we have a highly 
successful rancher-owned company made up of individual producers who 
own both cattle and shares in the company's processing infrastructure. 
Under this proposal, many of the individual members of the company may 
now be prohibited from selling cattle directly to other processors, 
creating the need for a middleman that would then lower the price the 
producer actually receives.
  If implemented, the GIPSA rule poses a substantial threat to the 
continued viability of the domestic livestock sector. In Kansas, this 
industry contributes over $9.5 billion to our economy. With an economic 
footprint of this magnitude, the GIPSA regulation is a burden that 
Kansas and many other rural States and many of the livestock producers 
simply cannot afford.
  Another agency falling through the President's Executive order 
loophole is the Commodity Futures Trading Commission. As a result of 
the Dodd-Frank Act, the CFTC is charged with developing dozens of new 
regulations impacting participants up and down the swaps and futures 
chain.
  Shouldn't these regulations be held to the same standard of cost-
effectiveness and undue burden as others? Yes--but no. I talked to 
Chairman Gensler in my office just a couple of days ago. He is a very 
nice man, very pleasant. He believes very strongly that the CFTC is 
exempt from the President's Executive order because the President said 
it was exempt. I indicated that I didn't think so, especially since the 
CFTC is presently pushing 40-plus rules out the door in 1 year with 
little or no priority.
  We were told the intent of Dodd-Frank was to reduce systemic risk in 
the financial marketplace. However, several of CFTC's proposals appear 
to increase risk management costs on those who do not pose a systemic 
threat. The CFTC must be mindful that increased costs through high 
margin and capital requirements on certain segments of the marketplace 
may decrease a user's ability to use appropriate risk management tools.
  A rigorous cost-benefit analysis is tailor-made for the CFTC's 
current situation: dozens of economically significant rules; the 
potential to negatively impact risk management costs of American 
businesses; and a simple question needing to be answered--do the 
benefits of this proposed regulation--we are talking about anywhere 
from 40 to 60 now--in the form of lower systemic risk in our financial 
system outweigh the increased costs on businesses?
  Let me say something. In talking with Chairman Gensler--again, I 
really appreciate him coming by the office and talking. It became 
obvious to me that with all these regulations, maybe the first one 
ought to be a definition regulation. What is a swap? Who is a dealer? 
It has not been done yet. So we are going to propose 39 more 
regulations and we have not even defined whom the regulations will 
affect and what the subject matter is that they are going to regulate. 
That is really unbelievable.
  We are going to have a hearing tomorrow in the Senate Agriculture 
Committee. Chairman Gensler will attend and give his testimony. We are 
going to be very welcoming to him in regard to the committee, but that 
is something I am going to ask him. Why on Earth are you going ahead 
with 40 regulations and you can't even define whom you are going to 
regulate or what you are going to regulate? There is no definition. 
That, to me, is pretty bad. You have the cart before the horse there.
  In closing, I wish to make two points. First, in many rural areas of 
Kansas and the rest of the country, agriculture is the cornerstone of 
the economy. Second, in the coming decades we will be even more reliant 
on America's farmers and ranchers to feed an ever-growing world 
population. I said that before.
  We must truly commit to a real and robust--here is a good Senate 
word--robust review and revocation of any and all unduly burdensome 
regulations that could inhibit American agriculture's ability to 
produce the safest, most abundant, and affordable food, feed, and fiber 
supply in the world. What are we talking about? We are talking about 
9.3 billion people. What are we talking about? The ability for our 
agriculture--for everybody in agriculture to double our production, all 
the farmers and ranchers. Why on Earth would we want this whole 
business of regulatory impact--most of which is highly questionable, 
none of which fits the President's Executive order to take a look at 
the cost-benefit--why on Earth would we do this to the very person 
whose job it is to feed this country and the hungry world?
  Look at the Mideast--in turmoil. I remember one interview on TV where 
somebody stuck a microphone in and asked one of the protesters in 
Libya: What are you protesting for? Democracy?
  He said: No, a loaf of bread.
  Where people are hungry and malnourished, you have no economic 
opportunity. Where you have people who are hungry, they will go and 
join extremist groups, even on over into terrorism groups.
  I had the privilege of being the chairman of the Intelligence 
Committee here in the Senate. That was one of the big considerations we 
had in whole areas of the world where people do not have the ability to 
feed themselves, where they are in a food-deficient area. It really 
poses problems for the future of that part of the world. Yet here we 
ask our farmers and ranchers to double our ag production in a couple of 
decades. I don't know how we are going to do this with this regulatory 
nightmare.
  Let's hope we wake up soon. I hope everybody will take a look at my 
bill to codify the President's Executive order--I give him credit for 
doing that--but not with all these loopholes that are going to drive us 
nuts out there in rural, smalltown America.
  I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. BARRASSO. I ask unanimous consent that the order for the quorum 
call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. BARRASSO. I ask unanimous consent to speak as in morning 
business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                             Second Opinion

  Mr. BARRASSO. Mr. President, I come to the floor today as someone who 
has practiced medicine in Wyoming, taken care of families there for a 
quarter of a century, working with people all across our great State, 
as a physician who has also served in our State senate.
  Both in my practice, as well as in my service in the State senate, I 
have dealt with the issue of Medicaid, a program that was set up to 
help low-income Americans obtain health care. So I came today with a 
doctor's second opinion about recent developments and findings with 
regard to the health care law because, day after day, we see news 
reports showing States all across the country facing extreme financial 
budget pressures, even bankruptcy. One of the key factors exacerbating 
State fiscal troubles is the Medicaid Program. Over the next 10 years, 
Washington will spend about $4.4 trillion on Medicaid. At the State 
level, Medicaid spending now consumes roughly one-quarter of the 
budgets of each of the States.
  Increases in Medicaid costs often force Governors and State 
legislators to make drastic cuts to local priorities, such as 
education, law enforcement, public safety. As I mentioned, I did serve 
in the Wyoming State Legislature--5 years in the Wyoming State Senate--
and was there last week to address the legislatures, the Wyoming

[[Page 2991]]

State Senate and House, to talk with them, listen to them about their 
concerns.
  In the State of Wyoming, we are required, on an annual basis, to 
balance our budget. We do it every year. So I know from a firsthand 
experience that tough choices need to be made. That is why I can tell 
you this current health care law, President Obama's health care law, is 
not going to make it any easier for our States to close the budget gaps 
they are facing, and, as a matter of fact, it is going to make the 
situation worse.
  The President's health care law created the biggest Medicaid 
expansion in history. The law says every State must provide Medicaid 
for every one of their citizens who earns up to 133 percent of the 
Federal poverty limit. This does not work for the States, and it does 
not work for the people who will be forced onto Medicaid.
  The health care law does not provide additional resources to States 
that are already strapped for cash in order to try to deal with paying 
for this incredible expansion of Medicaid, and it certainly does not 
give States additional financial help so they can pay health care 
providers enough to participate in Medicaid--because about 40 percent 
of physicians across the country refuse to see Medicaid patients. My 
partners and I took care of everyone in Wyoming who would call or come 
to our office, regardless of ability to pay, but across the country 
about 40 percent of physicians refuse to see Medicaid patients.
  So I have said, over and over throughout this health care reform 
debate over the last year or so, that having a health care government 
insurance card does not mean someone will automatically have access to 
medical care. The President frequently talks about making sure people 
have coverage, but that does not necessarily mean they will have access 
to care.
  So I wish to be very clear. The States, especially my home State of 
Wyoming, do an incredible job of running the Medicaid programs. They do 
it with limited resources. But a weak economy, combined with a high 
unemployment rate, drove Medicaid enrollment to record levels. So it is 
not a surprise that Medicaid is quickly consuming greater and greater 
portions of State budgets, cutting into money that is being used to pay 
for teachers, for police, and for firefighters.
  Former Governor Phil Bredesen of Tennessee, a Democrat, said it best 
when he called the health care law's Medicaid expansion ``the mother of 
all unfunded mandates.'' Governor Bredesen went on to say that 
``Medicaid is a poor vehicle for expanding coverage.'' Let me repeat 
that. Medicaid, which the President has used as the approach to expand 
coverage, the Governor, the Democratic Governor, says Medicaid is a 
poor vehicle for expanding coverage. He want to say:

       It's a 45-year-old system originally designed for poor 
     women and their children. It's not health care reform to dump 
     more money into Medicaid.

  Well, the former Governor of Tennessee is not alone. On November 9, 
2010, Governor Brian Schweitzer, of my neighboring State of Montana, 
also a Democrat, met with his State's health industry leaders to talk 
about Medicaid, the challenges they are facing.
  What he said was: ``As the manager of Montana's budget, I am worried 
because there are only three states that will increase the number of 
people on Medicaid at a faster rate than Montana, thanks to the new 
health care bill.''
  He said: ``My job is to try and find ways to go forward that Montana 
can continue to fund Medicaid and not be like 48 other States . . . 
broke.''
  So, in January, 33 Governors and Governors-elect sent a letter to 
President Obama, to Congressional leadership, and to Health and Human 
Services Secretary Sebelius. What did they say? Well, the letter asks 
Federal lawmakers to lift the constraints placed on them by the health 
care law's mandates. The Governors are begging Congress for help.
  They each have very unique Medicaid Programs across the country, the 
different States, and they want, they asked, they need the flexibility 
to manage their programs, their individual programs as effectively and 
efficiently as possible.
  Well, they all need to make tough but necessary budget decisions, and 
they cannot do it when Washington bureaucrats and the enduring wisdom 
of those in Washington will not allow it. You want to add insult to 
injury? This week, the President claimed, as he was addressing 
Governors at the National Governors Association, that the health care 
law offers States flexibility to create their own health care plans.
  This was Monday in an address to the National Governors Association. 
The President made an announcement. He announced: ``If your state can 
create a plan that covers as many people as affordably and 
comprehensively as the Affordable Care Act does--without increasing the 
deficit--you can implement that plan.''
  Well, that is quite a tall and almost impossible order. The American 
people and certainly the Governors who were listening to him in the 
audience on Monday saw right through the President's PR stunt. The 
President's plan requires States to create health care plans that 
imitate his health care law, rather than actually offering States true 
freedom to innovate better solutions. There are better solutions out 
there than what this body and the House of Representatives passed and 
the President signed into law almost 1 year ago.
  It seems to me the President wants to have his cake and eat it too. 
He tells the States they already have the ability to craft a different 
health care plan, but, of course, there is a catch. What the President 
does not say, what he would not tell the Governors, is that States can 
only design different health care plans if--if, and only if--they meet 
the health care law's litany of Washington mandates.
  States still must pass legislation mandating all its citizens buy 
health insurance. States must still provide Washington-approved 
insurance coverage--Washington levels, Washington approved--limiting 
use of innovative health care products such as health savings accounts. 
Oh, no, that is not allowed by the President. States are still locked 
into the law's Medicaid expansion spending requirements. During these 
tough economic times, the States need certainty, they need consistency, 
not more Washington doublespeak.
  Last month, I introduced, along with Senator Lindsey Graham, a bill 
giving the States exactly what they need: flexibility, freedom, and 
choice. The bill is called the State Health Care Choice Act. This 
legislation is simple, it is straightforward, and it protects States 
rights by allowing them to voluntarily opt out of portions of the 
health care law.
  Specifically, our bill offers States the chance to opt out of the 
law's individual mandate, to opt out of the law's employer mandate and 
penalties, to opt out of the Medicaid expansion, and to opt out of the 
insurance benefit mandates.
  Why should the Federal Government, why should Washington, force the 
States to adopt a one-size-fits-all health care plan? States can decide 
what works best for them. They need to be able to act on those 
decisions. They do not need Washington to tell them what to do.
  Well, some of the most innovative health care policy ideas truly do 
originate at the State and local levels. Governors, State legislators, 
State insurance commissioners, each have much greater insight into what 
works for their citizens and what does not. States are feeling trapped 
by the new health care law's mandates.
  My bill, the one along with Senator Graham, gives the States the 
sovereignty to pursue their own reform ideas and approaches. Each State 
deserves the right--let me repeat that: each State deserves the right--
to pursue health care reforms they think actually help the citizens of 
their State.
  The States have always been the laboratories of democracy, the 
laboratories to test good ideas. Unfortunately, this health care law 
locks them into a one-size-fits-all approach. The States want their 
freedom. The States deserve their freedom. Our bill gives it to them, 
offering the flexibility needed to generate better health care reform 
solutions, solutions that do not require

[[Page 2992]]

the States to follow a Washington plan that may ultimately leave them 
broke.
  In writing the State Health Care Choice Act, I started with the 
assumption that people generally can be trusted to do the right thing, 
and society prospers when government has less to say about how people 
run their lives. Others, many in this body, start by assuming 
Washington knows best and should take more authority over everyone 
else.
  Well, the States, the American people are telling us they want health 
care reform. But they are telling us loudly and clearly that they do 
not want this health care law. So it is time to give the States the 
autonomy to create health care systems that work best for them, and we 
do not have to dismantle the Nation's current health care system, build 
it up in the image of big government, shift costs to the States, add 
billions to our national debt, and then try to sell it as reform.
  There are better ideas, and I have put forward mine. I ask all 
Senators to join me in cosponsoring the State Health Care Choice Act.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Merkley). The Senator from Maryland.
  Mr. CARDIN. Mr. President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.


            Commission on Security and Cooperation in Europe

  Mr. CARDIN. Mr. President, we have all watched in awe during the past 
weeks as the unquenchable desire for liberty and human dignity has 
inspired the people of the Middle East to lift themselves from 
oppression and move their country toward a new dawn.
  Sadly, we now also watch in horror the brutality of Colonel Qadhafi, 
who murders his own people as he clings to power. I join President 
Obama in calling for Colonel Qadhafi to leave Libya immediately and 
support our efforts, in concert with the international community, to 
help the Libyan people.
  What happens next? No one knows. I certainly do not have the answer. 
I pray that peace and stability comes quickly to Libya and hope the 
people of Egypt and Tunisia make a swift and concrete progress in 
establishing democratic institutions and the rule of law.
  While each country in the region must find its own path in this 
journey, I would suggest the international community currently has a 
process in place that can serve as a way forward for the countries in 
the Middle East and North Africa in establishing a more democratic 
process, that guarantees free elections and free speech.
  I am referring to the Organization for Security and Cooperation in 
Europe, the OSCE. The OSCE traces its origins to the signing of the 
Helsinki Accords in 1975, and for more than 35 years has helped bridge 
the chasm between Eastern and Western Europe and Central Asia, by 
ensuring both military security for member countries and the 
inalienable human rights of its citizens.
  There are three baskets in OSCE. One basket deals with human rights 
because it is critically important that the countries respect the 
rights of their citizens. Another basket deals with security because 
you cannot have human rights unless you have a secured country that 
protects the security of its people. The third basket deals with 
economics and environment because you cannot have a secure country and 
you cannot have human rights unless there is economic opportunity for 
your citizens and you respect the environment in which we live. The 
three baskets are brought together.
  In the United States, the Congress passed the U.S. Helsinki 
Commission that monitors and encourages compliance by the member states 
in the OSCE.
  I am privileged to serve as the Senate chairman of the U.S. Helsinki 
Commission, and I represent our Commission on most, on these issues. 
Today Egypt and Tunisia, along with Algeria, Israel, Jordan, and 
Morocco, are active Mediterranean partners within the OSCE and have 
made a commitment to work toward the principles of the organization.
  In 1975, the Helsinki Final Act recognized that security in Europe is 
closely linked with security in the Mediterranean and created this 
special partnership between the signatory states and the countries in 
the Mediterranean as a way to improve relations and work toward peace 
in the region. Libya was an original partner in this endeavor but, 
regrettably--and, in my view, to its detriment--ultimately, turned its 
back on the organization.
  More recently, the U.S. Helsinki Commission has made the 
Mediterranean partnership a priority on our agenda. Parliamentary 
assembly meetings have taken place in which all of the member states 
were present, including our partners, and we have had sidebar events to 
encourage the strengthening of the relationship between our 
Mediterranean partners for more cooperation to deal with human rights 
issues, to deal with free and fair elections, to deal with their 
economic and environmental needs, including trade among the 
Mediterranean partners and, yes, to deal with security issues to make 
sure the countries and the people who live there are safe.
  A Helsinki-like process for the Middle East could provide a pathway 
for establishing human rights, peace, and stability in Egypt, Tunisia, 
and other countries in the Middle East. As a member of the Helsinki 
Commission since 1993, I have discussed the possibility of a Helsinki-
like process for the region with Middle Eastern leaders, a process that 
could result in a more open, democratic society with a free press and 
fair elections. The Helsinki process, now embodied in the Organization 
for Security and Cooperation in Europe, bases relations between 
countries on the core principles of security, cooperation, and respect 
for human rights. These principles are implemented by procedures that 
establish equality among all the member states through a consensus-
based decisionmaking process, open dialog, regular review of 
commitments, and engagement with civil society.
  We have seen the Helsinki process work before in a region that has 
gone through generations without personal freedom or human rights. 
Countries that had been repressed under the totalitarian regime of the 
Soviet Union are now global leaders in democracy, human rights, and 
freedom. One need only look as far as the thriving Baltic countries to 
see what the Middle East could aspire to. Lithuania now chairs both the 
OSCE and the Community of Democracies. Estonia has just joined the 
Unified European common currency, and Latvia has shown a commitment to 
shared values as a strong new member of the NATO alliance.
  Enshrined among the Helskini Accord's 10 guiding principles is a 
commitment to respect human rights and fundamental freedoms, including 
free speech and peaceful assembly. The Helsinki process is committed to 
the full participation of civil society. These aspects of the Helsinki 
process--political dialog and public participation--are critical in the 
Middle East, and we have watched these principles in action today in 
Egypt and Tunisia.
  The principles contained in the Helsinki Accords have proven their 
worth over three decades. These principles take on increasing 
importance as the people of the Middle East demand accountability from 
their leaders. Whether the countries of the region choose to create 
their own conference for security and cooperation or, as some have 
suggested, the current OSCE Mediterranean partners and their neighbors 
seek full membership in the OSCE, I believe such an endeavor could 
offer a path for governments in the region to establish human rights, 
establish a free press, and institute fair elections.
  Finally, as the citizens of both Tunisia and Egypt demand more 
freedom, I urge both countries to permit domestic and international 
observers to participate in any electoral process. The OSCE and its 
parliamentary assembly have extensive experience in assessing and 
monitoring elections and could serve as an impartial observer as both 
countries work to meet the demands of openness and freedom of their 
citizens.
  The election monitoring which takes place within the OSCE states is a 
common occurrence. During our midterm

[[Page 2993]]

elections, there were OSCE observers in the United States. So they are 
present in most of the OSCE states because we find this a helpful way 
to make sure we are doing everything we can to have an open and fair 
election system. Free and fair elections are critical, but they must be 
built upon the strengthening of democratic institutions and the rule of 
law. I believe the principles contained in the Helsinki Accords have a 
proven track record and could help guide this process.
  With that, I yield the floor.
  The PRESIDING OFFICER. The Senator from Arizona.


                           Amendment No. 133

  Mr. KYL. Mr. President, I wish to get back to the underlying patent 
legislation to talk on a particular amendment. I am talking about the 
America Invents Act, legislation that would modernize our patent laws, 
legislation which I believe will have very strong support as soon as we 
are able to bring our debate to a close and have a vote.
  There is one amendment that would be very troublesome if adopted. It 
is offered by my friend from California, Senator Feinstein. It would 
strike the bill's first-to-file provisions. This would not be a good 
idea. In fact, it would be a very bad idea. I wish to describe why.
  First-to-file, which is just a concept, the filing date of the patent 
dates to the time one files it, is not new. The question is whether we 
would codify that. It has been a subject of debate now for about 20 
years. But at this point it has been thoroughly explored by hearings 
before the House and Senate Judiciary Committees. We considered this at 
the outset of the drafting of our patent reform legislation, and it has 
been in every version of the bill since 2005.
  Importantly, this provision we have in the bill that would be taken 
out by the Feinstein amendment is supported by all three of the major 
patent law organizations that represent all industries across the 
board. It has the support of the American Bar Association's 
Intellectual Property Law section. It is supported by Intellectual 
Property Owners, which is a trade group or association of companies 
which own patents and cuts across all industrial sectors. And, very 
importantly, our language also has the support of independent 
inventors, many of whom have signed letters to the Senate in support of 
the codification of the first-to-file rule embedded in the Leahy bill.
  The bottom line is there is a strong consensus to finally codify what 
is the practice everywhere else in the world; namely, that patents are 
dated by when they were filed, which obviously makes sense.
  Let me respond to a couple arguments raised in favor of the Feinstein 
amendment. One argument is that the current first-to-invent system is 
better for the little guy, the small independent inventor. It turns out 
that is actually not only not true but the opposite is the case.
  Under the first-to-invent system, if the big company tries to claim 
the same innovation that a small innovator made, that innovator would 
prevail if he could prove that he actually invented first, even if he 
filed last. But to prove he invented first, the independent inventor 
would need to prevail in what is called an interference proceeding. 
These are proceedings before the Patent and Trade Office in which there 
is a determination by the PTO of who actually invented first. The PTO 
looks at all the parties' notebooks and other documents to determine 
issues such as conception of the idea and reduction to practice, the 
elements of a workable patent.
  Yesterday I quoted from commentary published on Sunday, February 27, 
by Mr. Gene Quinn, a patent lawyer who writes for the IP Watchdog Web 
site. I quoted his commentary noting that only one independent inventor 
has actually prevailed in an interference proceeding in the last 7 
years. In other words, if the idea is that we need to preserve 
something that is used by small inventors, by independent inventors, it 
just isn't the case that first-to-invent actually does that.
  In his column, Mr. Quinn does a very good job of explaining why the 
interference proceeding is largely an illusory remedy for small or 
independent inventors. I will quote from what he said:

       [T]he independent inventors and small entities, those 
     typically viewed as benefiting from the current first to 
     invent system, realistically could never benefit from such a 
     system. To prevail as the first to invent and second to file, 
     you must prevail in an Interference proceeding, and according 
     to 2005 data from the AIPLA, the average cost through an 
     interference is over $600,000. So let's not kid ourselves, 
     the first to invent system cannot be used by independent 
     inventors in any real, logical or intellectually honest way, 
     as supported by the reality of the numbers above. . . . 
     [F]irst to invent is largely a ``feel good'' approach to 
     patents where the underdog at least has a chance, if they 
     happen to have $600,000 in disposable income to invest on the 
     crap-shoot that is an Interference proceeding.

  Obviously, the parties that are likely to take advantage of a system 
that costs more than $\1/2\ million to utilize are not likely to be 
small and independent inventors. Indeed, it is typically major 
corporations that invoke and prevail in interference proceedings. The 
very cost of the proceeding alone effectively ensures that it is these 
larger parties that can benefit from this system. In many cases, small 
inventors such as startups and universities simply cannot afford to 
participate in an interference, and they surrender their rights once a 
well-funded party starts such a proceeding.
  I think that first argument is unassailable. Since only one small 
inventor in the last 7 years has prevailed in such a proceeding, it 
doesn't seem it is something that favors the small or independent 
inventor.
  Mr. Quinn's article also responded to critics who allege that the 
present bill eliminates the grace period for patent applications. The 
grace period is the 1-year period prior to filing when the inventor may 
disclose his invention without giving up his right to patent. Mr. Quinn 
quotes the very language of the bill and draws the obvious conclusion:

       Regardless of the disinformation that is widespread, the 
     currently proposed S. 23 does, in fact, have a grace period. 
     The grace period would be quite different than what we have 
     now and would not extend to all third party activities, but 
     many of the horror stories say that if someone learns of your 
     invention from you and beats you to the Patent Office, they 
     will get the patent. That is simply flat wrong.

  He, of course, is referring to the bill's proposed section 102(b). 
Under paragraph (1)(A) of that section, disclosures made by the 
inventor or someone who got the information from the inventor less than 
one year before the application is filed do not count as prior art. 
Under paragraph (1)(B), during the 1-year period before the application 
is filed, if the inventor publicly discloses his invention, no 
subsequently disclosed prior art, regardless of whether it is derived 
from the inventor, can count as prior art and invalidate the patent.
  This effectively creates a first-to-publish rule that protects those 
inventors who choose to disclose their invention. An inventor who 
publishes his invention or discloses it at a trade show or academic 
conference, for example, or otherwise makes it publicly available has 
an absolute right to priority if he files an application within 1 year 
of his disclosure. No application effectively filed after his 
disclosure and no prior art disclosed after his disclosure can defeat 
his application for the patent.
  These rules are highly protective of inventors, especially those who 
share their inventions with the interested public but still file a 
patent application within 1 year.
  These rules are also clear, objective, and transparent. That is what 
we are trying to achieve with this legislation, so that there is 
uniformity, clarity, and it is much easier to defend what one has done. 
In effect, the rules under the legislation create unambiguous 
guidelines for inventors. A return to the proposal of Senator Feinstein 
would create the ambiguity we are trying to get away from.
  The bottom line is, an inventor who wishes to keep his invention 
secret must file an application promptly before another person 
discloses the invention to the public or files a patent for it. An 
inventor can also share his invention with others. If his activities

[[Page 2994]]

make the invention publicly available, he must file an application 
within a year, but his disclosure also prevents any subsequently 
disclosed prior art from taking away his right to patent.
  The bill's proposed section 102 also creates clear guidelines for 
those who practice in a technology. To figure out if a patent is valid 
against prior art, all a manufacturer needs to do is look at the 
patent's filing date and figure out whether the inventor publicly 
disclosed the invention. If prior art disclosed the invention to the 
public before the filing date, or if the inventor disclosed the 
invention within a year of filing but the prior art predates that 
disclosure, then the invention is invalid. If not, then the patent is 
valid against a prior art challenge.
  Some critics of the first-to-file system also argue that it will be 
expensive for inventors because they will be forced to rush to file a 
completed application rather than being able to rely on their invention 
date and take their time to complete an application. But these critics 
ignore the possibility of filing a provisional application which 
requires only a written description of the invention and how to make 
it.
  Once a provisional application is filed, the inventor has a year to 
file the completed application. Currently, filing a provisional 
application only costs $220 for a large entity and $110 for a small 
entity.
  So this is easily accomplished and quite affordable.
  In fact, one of Mr. Quinn's earlier columns, on November 7, 2009, 
effectively rebuts the notion that relying on invention dates offers 
inventors any substantial advantage over simply filing a provisional 
application. Here is what he says:

       If you rely on first to invent and are operating at all 
     responsibly you are keeping an invention notebook that will 
     meet evidentiary burdens if and when it is necessary to 
     demonstrate conception prior to the conception of the party 
     who was first to file . . .
       [Y]our invention notebook or invention record will detail, 
     describe, identify and date conception so that others skilled 
     in the art will be able to look at the notebook/record and 
     understand what you did, what you knew, and come to believe 
     that you did in fact appreciate what you had. If you have 
     this, you have provable conception. If you have provable and 
     identifiable conception, you also have a disclosure that 
     informs and supports the invention. . . . [And] [i]f the 
     notebook provably demonstrates conception, then it can be 
     filed as a provisional patent application. . . .

  In other words, what you would ordinarily have in any event can be 
used as the provisional application.
  In other words, the showing that an inventor must make in a 
provisional application is effectively the same showing that he would 
have to make to prove his invention date under the first-to-invent 
system. A small inventor operating under the first-to-invent rules 
already must keep independently validated notebooks that show when he 
conceived of his invention. Under first-to-file rules, the only 
additional steps the same inventor must take are writing down the same 
things his notebooks are supposed to prove, filing that writing with 
the Patent Office, and paying a $110 fee.
  Once the possibility of filing a provisional application is 
considered, along with the bill's enhanced grace period, it should be 
clear that the first-to-file system will not be at all onerous for 
small inventors. Once one considers the bill's clean, clear rules for 
prior art and priority dates, its elimination of subjective elements in 
patent law, its new proceeding to correct patents, and its elimination 
of current patent-forfeiture pitfalls that trap legally unweary 
inventors, it is clear this bill will benefit inventors both large and 
small.
  So because this issue has been considered from the inception of the 
debate about the legislation, in all of the testimony and markups in 
every version of the bill since 2005, is supported by all the industry 
groups who believe patent reform is necessary, conforms to the rules of 
all other countries in the world, and provides clear and easily 
demonstrable evidence of your patent, we believe the first-to-file rule 
is the best rule--date it from the date you filed your patent rather 
than this rather confusing notion of first-to-invent, which has not 
worked especially well, and certainly has not worked well for the small 
inventor, which is the point, I gather, of the amendment proposed by 
Senator Feinstein.
  I urge my colleagues, if there are questions or confusion about this, 
those of us who have been involved in this will be happy to try to 
answer them. I will be happy to be on the Senate floor to discuss it 
further. But at such time as we have a vote, I hope my colleagues would 
go along with what the committee did and what all of the versions of 
the bill have written in the past and support the bill as written and 
not approve this amendment.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Ms. KLOBUCHAR. Mr. President, I thank the Senator from Arizona for 
his very strong comments and also for his support for this important 
bill. As you know, this has come through the Judiciary Committee. 
Senator Kyl is a member of that committee, as I am, as well. We 
appreciate Senator Leahy's leadership on this bill, as well as all the 
other Senators who have worked so hard on a difficult bill where there 
are so many interests. But in the end, what guided us to get this 
America Invents Act on this floor was the fact that innovation is so 
important to our economy, that the protection of ideas in America is 
what built our economy over the years. So I want to thank Senator Kyl.
  Before we hear from Senator Bingaman, who is here on another matter, 
I just want to support Senator Kyl's statements about the need to 
transition to the first-inventor-to-file system. As I noted before, we 
have heard from many small inventors and entrepreneurs who support this 
transition. Independent inventor Louis Foreman has said the first-to-
file system will strengthen the current system for entrepreneurs and 
small businesses. We have heard from nearly 50 small inventors in more 
than 20 States who share Mr. Foreman's view.
  I ask unanimous consent that a list of those supporters, as well as 
Mr. Foreman's letter to the Judiciary Committee in support of the 
America Invents Act, be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

       The following independent inventors posted support for S. 
     23 on EdisonNation.com:
       Krissie Shields, Palm Coast, Florida 32164; Sarkis 
     Derbedrosian, Glendale, CA 91206; Frank White, Randleman, 
     North Carolina; Ken Joyner, Pasadena, CA 91109; Charlie 
     Lumsden, Kula, HI 96790; Timothy J. Montgomery, Altoona, PA 
     16601; Katherine Hardt, Escanaba, MI 49829; Toni Rey, 
     Houston, TX 77095; Shawn Head, Delaware, OH 43015; Emily 
     Minix, Niceville, Florida; Betsy Kaufman, Houston, Texas; 
     Eric Huber, San Juan Capistrano, CA 92675; Perry Watkins, 
     Dunedin, FL; Jim Hacsi, Pueblo, Colorado; Brian Neil Smith, 
     Orlando, FL; Clint Baldwin, Roseburg, Oregon 97471; Paul 
     Wightman, Cedar City, Utah 84721; Shalon Cox, Beverly Hills, 
     CA 90209; Darwin Roth, Jacksonville, Florida 32256; Dorinda 
     Splant, Eatonton, GA 31024.
       Don Francis, Vista, CA 92083; Greg Bruce, Galveston, Texas; 
     Sandra McCoy, Longwood, FL 32750; Jerry Bradley, Joliet, IL 
     60435; Phillip L. Avery, Bethlehem, PA 18015; Julie Brown, 
     Yuma, AZ 85367; Eduardo Negron, Beach Park, IL 60083; Betty 
     Stamps, Greensboro, NC 27407; Victor Hall, Compton, CA; Todd 
     Bouton, Janesville, WI 53548; Denise Sees, Canal Fulton, OH; 
     Kevin McCarty, Antioch, IL 60002; Jerry Vanderheiden, Aurora 
     NE 68818; Sherri English, Savannah, TX; Amy Oh, Portland, OR; 
     Mark Stark, St. Louis, MO 63123; Toni LaCava, Melbourne, 
     Florida 32935; Luis J. Rodriguez, South Orange, NJ 07079; 
     Michael Pierre, Newark, New Jersey; Patricia Herzog-
     Mesrobian, Milwaukee, Wisconsin.
       Derrick L. James, Beloit, WI 53511; Richard J. Yost, Newman 
     Lake, Washington; Ken Espenschied, Cleveland, OH; Roger 
     Brown, North Augusta, SC 29861; Jared Joyce, Bozeman, MT; 
     Jane Jenkins, Clayton, Ohio; Tammy Turner, McDonough, GA; 
     Diane Desilets, North Attleboro, MA; John Nauman, Hollywood, 
     Florida 33020.
                                  ____

                                                February 14, 2011.
     Hon. Patrick J. Leahy,
     Chairman,
     Hon. Chuck Grassley,
     Ranking Member, U.S. Senate, Committee on the Judiciary, 
         Dirksen Senate Office Building, Washington, DC.
       Dear Chairman Leahy and Ranking Member Grassley: First, 
     please accept my congratulations on the overwhelming, 
     bipartisan Judiciary Committee vote on compromise patent 
     reform legislation. I strongly

[[Page 2995]]

     urge you to continue your efforts toward comprehensive reform 
     by pushing for a vote on the Senate floor at the first 
     available opportunity.
       Your bill will make independent inventors, such as myself, 
     more competitive in today's global marketplace. America's 
     economic future rests on our ability to innovate new 
     technologies that change the way people work, live and play. 
     Yet, as you know, today's patent system hinders this process, 
     rather than cultivating entrepreneurship and the new ideas 
     needed to create more jobs and foster economic growth.
       As executive producer of the Emmy Award-winning series, 
     ``Everyday Edisons,'' and publisher of Inventors Digest, a 
     long-standing publication serving the independent-inventor 
     community, I am continually in contact with individuals 
     across the country dedicating their lives in search of the 
     next big idea. Some of these efforts bear fruit, while others 
     falter. However, what ensures the continuity of their 
     efforts, are the legal protections afforded under U.S. patent 
     law.
       I started my first business as a sophomore in college and 
     twenty years later, I can point to 8 successful start-ups, 
     along with being an integral part of twenty additional 
     ventures. As a result, I have registered ten U.S. patents and 
     my firm has helped develop and file another 400 patents. 
     These experiences have shaped my views on how the current 
     system functions at a practical level for those attempting to 
     translate their inventions into a profitable business 
     endeavor. Let me begin by commending the USPTO for its 
     tireless efforts to make the current system work in an 
     efficient manner. Unfortunately, the USPTO is hampered by a 
     system that is in dire need of reform.
       From my perspective, the Judiciary Committee-passed bill 
     helps independent inventors across the country by 
     strengthening the current system for entrepreneurs and small 
     businesses by including the following:
       Lower fees for micro-entities;
       Shorter times for patent prosecution creating a more 
     predictable system;
       First-Inventor-to-File protections to harmonize U.S. law 
     with our competitors abroad while providing independent 
     inventors with certainty;
       Stronger patent quality and reliability by incorporating 
     ``best practices'' into patent application examination and 
     review, making it easier for independent inventors to attract 
     start-up capital; and
       Resources for the USPTO to reduce the current patent 
     backlog of 700,000 patents.
       Your efforts in the Committee represent a critical 
     milestone for passage of comprehensive reform and highlight 
     an opportunity for progress. I also hope that Committee 
     action paves the way for vigorous bicameral discussions on 
     enacting legislation in the near future.
       We cannot afford to wait. The need for these types of 
     common sense reforms dates back to 1966 when the President's 
     Commission to the Patent System issued thirty-five 
     recommendations to improve the system. Some of these measures 
     have been enacted over the years, but the economic challenges 
     inherent in today's global market necessitate a broader 
     modernization of the patent system. The 2004 National 
     Research Council of the National Academy of Sciences report 
     echoed this sentiment pointing to how economic and legal 
     changes were putting new strains on the system.
       America's economic strength has always rested on our 
     ability to innovate. While a number of positive economic 
     indicators provide hope for the future, the environment for 
     small businesses remains mixed. Patent modernization is a 
     tangible way to help America's small entrepreneurs in a 
     fledgling economy. Not only will these reforms help create 
     new jobs and industries, but they will help ensure our 
     economic leadership for years to come.
       Please do not hesitate to contact me if I can be of any 
     assistance in helping expedite passage of this critical 
     legislation.
           Sincerely,
                                                 Louis J. Foreman,
                                          Chief Executive Officer.

  Ms. KLOBUCHAR. Mr. President, I know Senator Bingaman is here to 
speak.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. BINGAMAN. I appreciate the chance to speak as in morning 
business.


                           World Oil Supplies

  Mr. President, I want to take a few minutes to discuss the increasing 
oil prices that we are observing each day and the evolving situation in 
the Middle East and North Africa.
  From an oil market perspective, the turmoil in the Middle East 
changed course just over a week ago, and it changed course when Libya 
joined the group of countries that are witnessing historic popular 
uprisings. Libya is the first major energy exporter in the region to 
experience such an uprising.
  At the moment, as much as 1 million barrels per day of Libya's total 
1.8 million barrels per day of oil production is offline, with 
continued political turbulence threatening to take even more oil 
offline before order is restored.
  It appears that international oil companies, which are responsible 
for over 40 percent of Libyan oil production, have removed their 
personnel from the country, and that has led to shutdowns of most 
fields operated by those international companies.
  For the moment, it appears that the Libyan national oil companies 
themselves are mostly continuing to produce and export oil, although 
there might be some limited production losses in national oil company 
production as well.
  There is reason to be concerned that the situation in Libya and 
throughout the region could become worse before it improves. I do not 
know that it is useful to try to predict the most likely outcome for 
what is occurring in the country, but the reality is that many of the 
potential scenarios that have been thought of are not good for the 
stability of world oil flows.
  Fortunately, Saudi Arabia is widely believed to have enough spare oil 
production capacity to offset any losses in Libyan oil production. The 
Saudis have already publicly committed to compensating for any Libyan 
shortfall and very likely have already ramped up production to make 
good on that promise.
  However, the additional Saudi crude oil will not be of the same 
quality as the lost Libyan barrels of oil, which are light sweet crude. 
About three-quarters of Libyan exports go to Western Europe, and the 
refineries in Western Europe generally cannot manage the heavier and 
sour crudes that come out of the Persian Gulf region. There will be 
some crude oil dislocation, as higher quality crudes are rerouted to 
Europe, and incremental Saudi barrels of oil head for refineries that 
are able to handle the lower grade oil they produce.
  Between the lost production in Libya, the crude oil dislocation 
associated with additional Saudi production, and the prospect of 
further turmoil in the region, we are now unquestionably facing a 
physical oil supply disruption that is at risk of getting worse before 
it gets better.
  For this reason, I believe it would be appropriate for the President 
to be ready to consider a release of oil from our Strategic Petroleum 
Reserve if the situation in Libya deteriorates further. Any additional 
oil market disturbance--such as turmoil spreading from Libya to 
Algeria, or from Bahrain to Saudi Arabia--would clearly put us into a 
situation where there would be a very strong argument in favor of a 
sale from the Strategic Petroleum Reserve.
  While I do not think high oil prices alone are sufficient 
justification for tapping the Strategic Petroleum Reserve, I do believe 
the announcement of a Strategic Petroleum Reserve sale would help to 
moderate escalating prices.
  My recommendation that we stand ready to release oil from the SPR is 
squarely in the traditional policy we have had in our government for 
SPR use, going back to the Reagan administration in the 1980s. In 
testimony before the Committee on Energy and Natural Resources on 
January 30, 1984, President Reagan's Secretary of Energy Donald Hodel 
stated that the administration's SPR policy in the event of an oil 
supply disruption was to ``go for an early and immediate drawdown.'' 
The SPR would be used to send a signal, a strong signal, to oil markets 
that the United States would not allow a physical oil shortage to 
develop.
  The SPR policy carried out during the 1990-1991 Desert Storm 
operation offers an example of this ``early and in large volumes'' 
policy in action.
  On January 16, 1991, President George H.W. Bush announced that the 
allied military attack against Iraq had begun. Simultaneously, he 
announced that the United States would begin releasing SPR stocks as 
part of an international effort to minimize world oil market 
disruptions. Less than 12 hours after President Bush's authorization, 
the Department of Energy released an SPR crude oil sales notice, and on 
January 28, 1991, 26 companies submitted offers.
  Then-Secretary of Energy Watkins noted:


[[Page 2996]]

       We have sent an important message to the American people 
     that their $20 billion investment in an emergency supply of 
     crude oil has produced a system that can respond rapidly and 
     effectively to the threat of an energy disruption.

  According to an analysis posted on the Department of Energy's Web 
site during the George W. Bush administration:

       The rapid decision to release crude oil from government-
     controlled stocks in the United States and other OECD 
     countries helped calm the global oil market, and prices began 
     to moderate. . . . World oil markets remained remarkably calm 
     throughout most of the war, due largely to the swift release 
     of the Strategic Petroleum Reserve oil.

  In recent years, the policy signals surrounding SPR use have not been 
as clear. Some SPR sales were criticized as efforts to manipulate oil 
prices. The SPR was then ignored during other oil supply disruptions--
including simultaneous oil supply disruptions due to a strike in 
Venezuela, political turmoil in Nigeria, and the initiation of the 
current war in Iraq.
  I believe the Reagan administration set the correct course for SPR 
decisionmaking. The current administration would be well served in 
considering that example and should be ready, in my view, to make a 
decision to calm world oil markets should the threat to world oil 
supplies increase in the coming days and weeks.
  Mr. President, I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent to address the 
Senate as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Iowa is recognized.
  Mr. GRASSLEY. I thank the Chair.
  (The remarks of Mr. Grassley pertaining to the introduction of S. 454 
are printed in today's Record under ``Statements on Introduced Bills 
and Joint Resolutions.'')
  Mr. LEE. Madam President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mrs. Hagan). Without objection, it is so 
ordered.


                           Amendment No. 115

  Mr. LEE. Madam President, I am on the floor to speak again in support 
of amendment No. 115, which I propose in connection with the patent 
reform bill, a bill I support and a bill I intend to vote for and a 
bill that is going to be used as a vehicle for this amendment that 
calls for the sense of the Senate on support for the need of a balanced 
budget amendment. I am grateful to have the support of my good friend, 
the former Governor of West Virginia, now the junior Senator from West 
Virginia, Joe Manchin, who is cosponsoring this amendment with me.
  Here is what it does. It calls on us as Senators to come forward and 
vote on whether we think we should amend the Constitution and submit 
that to the States for ratification to restrict our power to engage in 
perpetual deficit spending.
  We, as Members of Congress, are authorized, pursuant to article I, 
section 8, clause 2 to incur debt in the name of the United States. 
This power has been abused over time to such a degree that we are now 
almost $15 trillion in debt. By the end of the decade, we will have 
amassed annual interest payments that will be approaching $1 trillion. 
This threatens every government program under the Sun. Whether you most 
want to protect Social Security or national defense or any other 
government program, you should be concerned about this practice that 
will threaten the livelihood of so many Americans who depend on these 
programs one way or another, whether it is to fund their day-to-day 
existence or fund programs that provide for our safety and security as 
a nation.
  We do have an increased reason to be optimistic about this for a few 
reasons. First, we have recent polling data showing Americans 
overwhelmingly support the idea of a balanced budget amendment. 
Secondly, a recent GAO report shows we could find at least $100 billion 
annually in wasteful government spending. This is the type of wasteful 
Washington spending we ought to have eliminated a long time ago, that 
we could eliminate and would be forced to eliminate if we, in fact, had 
a balanced budget amendment.
  It would also require us to address issues that will confront our 
children and grandchildren. As a proud and happy father of three, I can 
tell you, as difficult as the choices we will have to make may be, I am 
unwilling, as a father, to pass these problems on to my children and my 
grandchildren who are yet unborn. I am unwilling to pass along to them 
a system that mortgages the future of coming generations for the simple 
purpose of perpetuating government largess and wasteful Washington 
spending.
  All this amendment does is call on Members of the Senate to come 
forward and say they support the idea. By voting in favor of this 
amendment, they do not have to embrace any particular balanced budget 
amendment proposal. But what they do say is that they want the wasteful 
Washington spending to stop, they want the perpetual deficit spending 
practice to stop, and they want us to stop the practice of mortgaging 
the future of coming generations. This is immoral, it is unwise, and it 
ought to be illegal. Soon it will be. With this amendment, we will set 
in motion a sequence of events that will lead to just that.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. TOOMEY. Madam President, I rise this afternoon to express my very 
strong support for Senator Lee's amendment and the underlying 
constitutional amendment I hope this body will take up at some point 
soon. I commend Senator Lee for his leadership on this issue, for 
offering this amendment now.
  I feel a tremendous sense of urgency. I do not think we have time to 
waste, time to wait, time to kick this can down the road anymore. We 
have done that too long.
  The fact is, a balanced budget amendment to our Constitution would 
provide the kind of fiscal straitjacket this government clearly needs. 
If we operated the way many States did, if we operated the way all 
businesses did, if we operated the way families did and we lived within 
our means, then maybe this would not be necessary. But it has become 
obvious to anybody that we are not living within our means--not even 
close.
  We are running a budget deficit this year of $1.6 trillion. That is 
10 percent of the size of our entire economy--just this year alone. 
Last year, it was $1.5 trillion. If we do not do something very serious 
about this now--not soon, not in the next few years but now--if we do 
not do something about this now, this is already at unsustainable 
levels.
  In 1988, the total debt as a percentage of our economy was about 40 
percent. In 2008, the total debt as a percentage of our economy was 
about 40 percent. Today it is at about 63 percent, and by October it 
will be 72 percent. These numbers are staggering, and they are not 
sustainable. It is already costing us jobs because this huge level of 
debt and the ever-increasing debt from the ongoing deficits raise real 
doubts in the minds of investors and entrepreneurs and small business 
owners what kind of financial future is in store for us. The threat of 
serious inflation, high interest rates, even a financial disruption 
grows dramatically as we keep piling on this debt. This is not just 
speculation or theory. We have seen this with other countries that have 
gone down this road.
  The good news is it is not quite too late; we can do this; we can get 
our spending under control. And I am absolutely convinced we can have 
tremendous prosperity and a tremendously robust recovery and the job 
creation we need if we follow some basic fundamental principles that 
have always led to prosperity wherever they have been tried.
  There are several--I will not go through all of them--but one of the

[[Page 2997]]

fundamental ones is a government that lives within its means. I would 
define ``means'' as keeping a budget that is balanced. This amendment 
today, of course, only expresses the will of the Senate that we ought 
to do this. I strongly hope all our colleagues will join Senator Lee in 
this very constructive amendment.
  I yield the floor.
  Mr. GRASSLEY. Madam President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. DURBIN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DURBIN. Madam President, I know personally the extraordinary 
efforts made by the chairman of the Senate Judiciary Committee to bring 
this patent reform bill to the floor. I have worked with him in the 
past, and it has not been an easy task. I know that many times he felt 
he was close to having the right bill at the right moment, and then it 
slipped away. But his determination and his capacity to bring people 
together has resulted in this moment where the bill is before us. And 
it is important that it is, not just because of his hard work but 
because of what it means for this country.
  I don't know whether it has formally been done, but this bill is 
being recharacterized as the America Invents Act instead of the Patent 
Reform Act because those few words tell a much bigger story. We are 
talking about the kind of innovation and research in America that will 
create successful companies and good American jobs, and that is why 
this bill is important.
  It has been a long time--going back to our origins as a nation--since 
we recognized the right for those who invent things to have some 
proprietary personal interest in those inventions, and we set up the 
Patent and Trademark Office for that purpose. Unfortunately, that 
office of the Federal Government isn't keeping pace with the creativity 
of our country, and that is why Senator Leahy has brought this bill to 
the floor.
  This is bipartisan legislation. I commend him for his work on it, and 
I commend my Republican colleagues for joining him. Senators Grassley, 
Kyl, Sessions, and Hatch have also worked diligently on this.
  This may not be the simplest area of the law. I can remember that 
when I was in law school here in town, there was one student--he was 
the only African-American student in my class, and that goes back to 
the days of Georgetown Law, Senator Leahy, when there were few 
minorities and few women. He was African American. He wore a white 
shirt and tie to class every day.
  I went up to him one day and said: So tell me your background.
  He said: Well, I am an engineer, and I want to be a patent lawyer.
  And I quickly moved to another table because I realized there wasn't 
anything we could talk about. I knew nothing about his world. But it is 
a specialized world, and one in which I am sure he was very successful. 
Patent law is something that is very hard to explain, and I think that 
is part of the reason this bill has taken some time to come here.
  But economic growth is driven by innovation, and if you have a good 
idea for a new product in America, you can get a patent and turn that 
idea into a business. Millions of good American jobs are created this 
way. The list is endless.
  Patents have been the source of great American stories. Joseph 
Glidden, a farmer from DeKalb, IL, patented barbed wire fence in 1874. 
It dramatically changed the way ranchers and cattlemen and others were 
able to do their business as they settled the frontier in America. I 
might add that the DeKalb High School nickname is ``The Barbs'' as a 
consequence of this one discovery. Glidden's invention made him a 
wealthy man, but his legacy included granting the land for what became 
Northern Illinois University in DeKalb. Ives McGaffey of Chicago 
invented and patented one of the first vacuum cleaners in 1869. 
Josephine Cochran of Shelbyville, IL, once said, ``If nobody else is 
going to invent a dishwashing machine, I'll do it myself.'' In 1886, 
she did it and got a patent for it. The company she created is now 
known as Whirlpool.
  Our patent laws set the rules of the road for American innovation. By 
giving inventors exclusive rights over their inventions for a term of 
20 years, patents provide great incentive for investment. Patents 
enable inventions to be shared with the public so new innovations can 
be based upon them.
  It has been a long time since we have looked at our patent laws and 
really updated them. Just think about this, putting it into 
perspective. It has been over 50 years. And I commend Senator Leahy for 
tackling this. It has not been easy. The pace and volume of innovation 
has quickened a great deal since we looked at this law over 50 years 
ago, and the Patent and Trademark Office has struggled to keep up.
  Over the last few years, Congress has debated how best to modernize 
our patent law. It has been a tough issue. We have one set of patent 
laws governing the incredibly diverse range of inventions and 
industries. In trying to update our laws, we have to be careful not to 
make changes that benefit some industries but undermine innovation in 
others. The bill before us strikes the right balance. That is why I 
voted for it in Committee and support it. It is a product of years of 
bipartisan negotiation. It is a good compromise. It is consensus 
legislation passed out of the Judiciary Committee a few weeks ago with 
a unanimous 15-to-0 vote.
  The bill is supported by the Obama administration and his Cabinet 
officers and a broad and diverse group of stakeholders, all the way 
from the American Bar Association, to the AFL-CIO, to the Biotechnology 
Industry Organization. The list is very long.
  In my own home State, I went to the major manufacturing companies and 
said: You look at it because these inventions are your future. You have 
to be confident that what we do to the law is consistent with new 
inventions, new innovations, and new jobs not just at your company but 
at other places.
  I am happy to say that those supporting it include the Illinois Tool 
Works, Caterpillar--the largest manufacturer in my State--Motorola, 
Monsanto, Abbott, IBM, and PepsiCo.
  The bill will improve the ability of the Patent and Trademark Office 
to award high-quality patents. Right now, there is a backlog of over 
700,000 patent applications, which they are struggling to clear. Think 
about that--700,000 inventions and ideas that are waiting to be legally 
recognized so that they can go forward in production. This bill will 
streamline the operations and adjust the user fees to make sure the 
agency clears the backlog.
  The bill takes steps to improve submission of information to the PTO 
about pending patent applications. I would note that it keeps user fees 
low for small startups and individual investors.
  In past years, there were some parts of the bill that generated 
controversy, including provisions relating to damages and venue in 
patent infringement lawsuits. The good efforts in this bill that have 
been negotiated have resulted in these provisions no longer being a 
subject of controversy.
  I know we will have some amendments offered on the bill, and I expect 
we will have a good debate on them. At the end of the day, I expect we 
will have a strong bipartisan vote in passing this bill. Senator Leahy 
is now trying to get this train into the station. There are a lot of 
people bringing cars here who want to hook on because they know this is 
an important bill and likely to pass.
  There are some areas, I might add, which we did not discuss in 
committee and which I considered raising in an amendment on the floor 
but held back. One of them relates to the controversial issue of gene 
patenting, which I have been learning about recently. It is my 
considered opinion this is now working its way through the courts and 
to try to intervene on the floor here would be premature. The courts 
have to decide whether people can patent genes.

[[Page 2998]]

  There was a recent story I saw on ``60 Minutes'' where a company 
known as Myriad had patented the gene for breast cancer. They have now 
created a test, incidentally, to determine whether a woman has this 
gene. The test is in the range of $4,000 to $5,000. The actual cost of 
the test should be much lower, and the obvious question the courts are 
deciding is, How can you claim ownership of a gene that occurs in 
nature in human bodies you didn't create? That is the question before 
the courts. We could have debated it here for a long time and maybe 
never resolved it, but depending on how the courts come out on the 
issue, we may visit it again.
  I hope the House will take this bill up quickly. I know they want to 
look it over from their perspective, but we need to pass this. If we 
are talking about creating jobs in successful, thriving businesses in 
America, this bill needs to pass.
  I thank Chairman Leahy for his leadership and for his hard work on 
this issue. I am honored to serve with him on the Senate Judiciary 
Committee.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. I thank the distinguished senior Senator from Illinois, 
who has been an invaluable member of the Judiciary Committee all the 
time I have been there. This has been very helpful. I appreciate what 
he said. I found interesting the list of patents from his home State of 
Illinois, and I think each one of us can point to some of those with 
pride. If we are going to stay competitive with the rest of the world, 
we have to get this bill passed. It has been more than 60 years since 
we updated our patent law. We are way behind the rest of the world. We 
have to be able to compete, so I thank the Senator.


           Further Modification to Amendment 121, as Modified

  Madam President, I have cleared this with the Senator from Iowa. 
Notwithstanding the adoption of the Leahy-Grassley amendment No. 121, 
as modified, I ask unanimous consent the amendment be modified further 
with the changes that are at the desk.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The further modification is as follows:
       On page 3 of the amendment, delete lines 8 through 17.

  Mr. LEAHY. Madam President, we are down to very few things. I hate to 
put in another quorum call and then hear from Senators calling they 
want some time to speak about amendments. I know sometimes we follow 
the ``Dracula'' rule, being that we do not legislate until it is dark 
and Dracula comes out. Maybe, since the days are getting longer, we 
could do some things during daytime hours. I send out a call, a 
pleading call: If people want their amendments, come forward, let's 
have a vote up or down on them and be done with it.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. VITTER. Madam President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 115

  Mr. VITTER. Madam President, I rise in strong support of the Lee 
amendment, which is a sense of the Senate that this body and the House 
should pass a constitutional amendment requiring a balanced budget. 
Clearly, I think in the mind of every American, our top domestic 
challenge is to get hold of our fiscal situation to move us to a 
sustainable path, to tighten the belt of the Federal Government just 
like every American family has been doing for many years in this 
recession.
  We are making a start, a real but modest start, in terms of this 
year's budget. I was happy the Senate followed the lead of the House 
and passed a 2-week CR today that has substantial cuts, the exact level 
of cuts as the House passed for the rest of the fiscal year. I support 
that important start in terms of this year's budget. Of course, we need 
to finish the job by passing a spending bill for the entire rest of the 
fiscal year with that level of cuts or more.
  That is a start, but it is only a start. The other thing I think we 
need to do is create reform, a structure that demands that Congress 
stay on that path to a balanced budget until we get there. I believe 
the most important thing we can create to demand that is a straitjacket 
for Congress, if you will, a balanced budget constitutional amendment. 
Unfortunately, I think Congress, time and time again over years and 
decades, has proved we need to put Congress in that straitjacket if we 
are ever going to get to a sustainable fiscal situation, a balanced 
budget.
  This is not some academic debate. This is about the future of our 
kids, our grandkids, and our immediate future because we could be put 
into economic chaos at any time because of our untenable fiscal 
situation. Forty cents of every $1 the Federal Government is spending 
is borrowed money--so much of that money borrowed from the Chinese. 
This is about whether we are going to remain the most free, most 
prosperous country in human history. This is about if we are going to 
remain our own masters or if we are going to have to look to the folks 
who are lending us all this money, including the Chinese, for consent 
in terms of how we map our future.
  Is that the future we want to hand to our kids? It is certainly not 
the future I want to hand to my kids. That is what it is all about. 
Again, it is not far off in the distance. This is an immediate 
challenge.
  This could lead to an immediate economic crisis unless we get 
ourselves on the path to a balanced budget quickly. Again, step 1 is 
cuts this year, a budget that is going back to 2008 levels, 
prestimulus, pre-Obama budget, this year. That is step 1.
  But step 2 is some sort of important structural reform such as a 
balanced budget constitutional amendment that puts a straitjacket on 
Congress, that demands that we get there in a reasonable period of 
time.
  The huge majority of States operate under exactly this type of 
constitutional amendment. The huge majority of municipalities, towns, 
cities, other jurisdictions, operate under this sort of constraint. It 
is hard sometimes. It demands tough choices. In times such as these, in 
a recession, it demands real cuts.
  But guess what. Just like a family does sitting around their kitchen 
table making their family budget fit reality, States do that, cities do 
that, towns do that, and Congress should have to do that for the 
Federal Government. Congress should have to tighten its belt, like 
families do reacting to their budget reality sitting around the kitchen 
table.
  I think it is perfectly clear we are not going to get there, unless 
and until we are made to through some sort of mechanism such as the 
balanced budget constitutional amendment.
  Even beyond the deadline imposed by the expiration of the current or 
any other CR spending bill, we have another looming deadline, which is, 
whenever the United States Federal Government hits up on the current 
debt ceiling. That is going to happen sometime between late March and 
May is the projection.
  I firmly believe it would be enormously irresponsible to address that 
issue until and unless we put ourselves on this road to reform, until 
and unless we pass something like a meaningful balanced budget 
constitutional amendment. So this sense of the Senate is meant as a 
first step. I applaud Senator Lee for putting it before us as that 
first step. Let's say yes. Let's say we are going to do it.
  Then, of course, most important, let's do it. Let's do it now. The 
clock is ticking. Let's do it now, well before we reach any crisis 
point such as coming up on the debt limit I spoke about.
  Let's act responsibly, which means acting now. Let's take up the 
Nation's important business, which is spending and debt. Let's avoid 
the economic calamity that is threatened if we stay on the current 
path, which is completely, utterly unsustainable. It is not just me 
saying that, it is everybody knowing it, including Ben Bernanke, 
Chairman

[[Page 2999]]

of the Federal Reserve Board. He testified before us at the Banking 
Committee yesterday and said exactly the same thing.
  Ben Bernanke is not some ideologue. He is not some tea party 
conservative. But he said yesterday, very clearly, three important 
things. First of all, the greatest medium and long-term challenge we 
face as a country is our fiscal posture. Secondly, the fiscal path we 
are on is completely and utterly unsustainable. Third, while that is a 
long-term challenge, it poses short-term, immediate consequences.
  If we do not get on a sustainable path now, immediately in the short 
term, we could have immediate short-term consequences, even economic 
crisis. Let's avoid that. Let's do right by our children. Let's tighten 
our belt, as American families have been for several years in this 
recession, and let's demand that we keep on that path with a balanced 
budget constitutional amendment.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Whitehouse.) The Senator from Vermont.
  Mr. LEAHY. I ask unanimous consent that an article written for The 
Hill by the distinguished Secretary of Commerce Gary Locke, dated March 
2 of this year, be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. LEAHY. Mr. President, it is interesting, I do not want to 
embarrass the person whom I wanted to speak about at all, but I was 
interested in listening to my dear friend, Senator Durbin, speak about 
his time at Georgetown Law School. Both he and I graduated from the 
Georgetown Law School. He talked about a classmate of his who was in 
patent law, and he realized this was a complex subject, one that is not 
the sort of law that he, Senator Durbin, was going to go into, any more 
than I would have.
  But I also think of another graduate of Georgetown Law Center who was 
an engineer, had a degree in engineering, studied patent law, and 
became one of the most distinguished patent lawyers, litigators in this 
country, and is now a member of the Federal circuit court of appeals 
and that is Judge Richard Linn.
  It was interesting hearing the Senator from Illinois, himself one of 
the finest lawyers in this body. My wife Marcella and I had the honor 
of being out in Chicago with Judge Linn and his wife Patty for a 
meeting of the Richard Linn American Inn of Court in Chicago. He serves 
with great distinction. In fact, a major part of this legislation 
reflects an opinion he wrote.
  But I digress. I ask unanimous consent the Senate resume 
consideration of the Lee amendment No. 115, with the time until 5:15 
equally divided between the two leaders or their designees; that upon 
the use or yielding back of time, the Senate proceed to vote in 
relation to the Lee amendment No. 115; that the Lee amendment be 
subject to a 60-vote threshold; that upon disposition of the Lee 
amendment, the Senate resume consideration of the Menendez amendment 
No. 124; that Senator Menendez be recognized to modify his amendment 
with the changes at the desk and the amendment, as modified, be agreed 
to; that the motions to reconsider be considered made and laid upon the 
table, with no intervening action or debate; and there be no amendments 
in order to the amendments prior to the vote.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. LEAHY. I thank the superb staff for writing that out because I am 
not quite sure I could have done that on my own.
  I had hoped as we began debate on this important bill to modernize 
America's patent system that the Senate would focus specifically on 
this measure designed to help create jobs, energize the economy and 
encourage innovation.
  I had hoped that we would consider relevant amendments, and pass the 
bill. The America Invents Act is a key part of any jobs agenda. We can 
help unleash innovation and promote American invention, all without 
adding a penny to the deficit.
  This is commonsense, bipartisan legislation. I said at the outset 
that I hoped the Senate would come together to pass this needed 
legislation and do so in the finest tradition of the Senate. I thank 
the Republican manager of the bill and the assistant Republican leader 
for their support and efforts on this bill.
  Unfortunately, we have become bogged down with nongermane, 
nonrelevant, extraneous discussions and amendments.
  Earlier this week, Senators who were focused on our legislative 
effort and responsibilities joined in tabling an amendment that has 
nothing to do with the subject matter of the America Invents Act.
  Extraneous amendments that have nothing to do with the important 
issues of reforming our out-of-date patent system so that American 
innovators can win the global competition for the future have no place 
on this important bill. They should not be slowing its consideration 
and passage.
  If America is to win the global economic competition, we need the 
improvements in our patent system that this bill can bring.
  We must now dispose of another such amendment so that we may proceed 
to final passage of the America Invents Act and help inventors, 
American businesses and our economic recovery.
  I take proposals to amend the Constitution of the United States 
seriously. I take seriously my oath as a Senator to support and defend 
the Constitution and to bear true faith and allegiance to it.
  Over the years I have become more and more skeptical of recent 
efforts to amend the design that established the fundamental liberties 
and protections for all Americans. I believe the Founders did a pretty 
good job designing our fundamental charter.
  I likewise take seriously the standard set in article V of the 
Constitution that the Congress propose amendments only when a 
supermajority of the Congress deem it ``necessary.'' While there have 
been hundreds of constitutional amendments proposed during my service 
in the Senate, and a number voted upon during the last 20 years, I have 
been steadfast in my defense of the Constitution.
  The matter of a so-called balanced budget amendment to the 
Constitution is not new to the Senate. Indeed, I believe the first 
matter Senator Hatch moved through the Judiciary Committee when he 
chaired it and I served as the ranking member was his proposed 
constitutional amendment to balance the budget.
  I strongly opposed it, but I cooperated with him in his effort to 
have the committee consider it promptly and vote.
  I wish others would show the managers of this bill that courtesy and 
cooperation and not seek to use this bill as a vehicle for messages on 
other matters.
  The Judiciary Committee has considered so-called balanced budget 
amendments to the Constitution at least nine times over the last 20 
years. The Senate has been called upon to debate those amendments 
several times, as well, in 1982, 1986, 1992, 1994, 1995 and 1997. 
Despite the persistent and extraordinary efforts of the senior Senator 
from Utah, they have not been adopted by the Congress.
  The only time the Senate agreed to the proposed constitutional 
amendment was in 1982. On that occasion, the House of Representatives 
thought the better of it. On the subsequent five occasions, as Senators 
came to understand how the proposed amendment undercut the 
Constitution, it was defeated.
  Now another Senator has adopted this cause.
  He has proposed a different, even more complicated proposed 
constitutional amendment. That will require study in order to be 
understood. It will require working with the chairman of the Judiciary 
Committee Subcommittee on the Constitution, Civil Rights and Human 
Rights.
  While the new Senator from Utah is a member of the Judiciary 
Committee and a member of the Constitution subcommittee, he has not 
consulted with me about his proposal, nor, as far as I

[[Page 3000]]

know, with the chairman of the subcommittee, the senior Senator from 
Illinois.
  Instead, he preemptively seeks to raise the matter on this important 
bill, which is designed to create jobs, encourage American innovation 
and strengthen our economy.
  For the last 20 years, the so-called balanced budget amendment has 
been a favorite slogan for some. For some others of us, we have done 
the hard work to actually produce a balanced budget and, indeed, a 
surplus.
  Rather than defile the Constitution, we have worked and voted to 
create a balanced budget and a budget surplus. In 1993, without a 
single Republican vote to help us, Democrats in the Congress passed a 
budget that led to a balanced budget and, indeed, to a budget surplus 
of billions of dollars by the end of the Clinton administration.
  That surplus was squandered by the next administration on tax breaks 
for the wealthy and an unnecessary war that cost trillions but went 
unpaid for. Those misjudgments were compounded by financial fraud and 
greed that led to the worst economic recession since the Great 
Depression. That is what we have been seeking to dig out from under 
since 2008.
  At this time, I ask unanimous consent to have printed in the Record a 
letter received from American Federation of State, County and Municipal 
Employees, AFSCME, in opposition to the Lee amendment.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                       AFSCME,

                                    Washington, DC, March 2, 2011.
       Dear Senator: On behalf of the 1.6 million members of the 
     American Federation of State, County and Municipal Employees, 
     I am writing to urge you to oppose Senator Lee's amendment to 
     S. 23, providing that it is the sense of the Senate that 
     Congress should pass and the states should agree to an 
     amendment to the Constitution requiring a Federal balanced 
     budget.
       A constitutional balanced budget amendment is a simplistic 
     answer to a complicated issue and would serve only to further 
     weaken our economy and move us away from fiscal 
     responsibility at a time of much economic uncertainty. It 
     would require large, indiscriminate spending cuts during 
     economic downturns, precisely the opposite of what is needed 
     to stabilize the economy and avert recessions.
       The immediate result of a balanced budget amendment would 
     be devastating cuts in education, homeland security, public 
     safety, health care and research, transportation and other 
     vital services. Any cuts made to accommodate a mandated 
     balanced budget would fall most heavily on domestic 
     discretionary programs, but ultimately, there would be no way 
     to achieve a balanced budget without cuts in Social Security 
     and other entitlement programs as well. A balanced budget 
     amendment would likely disproportionately affect unemployed 
     and low-income Americans.
       There are also serious concerns about the implementation of 
     such an amendment and how it would involve the courts in 
     matters more appropriately resolved by the legislative and 
     executive branches of government. Budgetary decisions should 
     be made by officials elected by the people, not by unelected 
     court officials with no economic or budget expertise.
       I urge you to oppose the Lee amendment and to oppose any 
     effort to adopt an amendment to the Constitution requiring a 
     balanced budget.
           Sincerely,
                                              Charles M. Loveless,
                                          Director of Legislation.

  Mr. LEAHY. We have stabilized the economic freefall and begun to 
revive the economy.
  Everyone knows that economic growth is the path toward budget 
balance. Economic growth and winning the future through American 
innovation is what the bipartisan American Invents Act is all about.
  Accordingly, for all these reasons as well as the reasons for which I 
opposed the efforts to amend the Constitution in 1982, 1986, 1992, 
1994, 1995 and 1997, I oppose amendment No. 115.

                               Exhibit 1

                     [From the Hill, Mar. 2, 2011]

          Delivering Innovation and Jobs Through Patent Reform

                  (By Commerce Secretary, Gary Locke)

       Today, there are more than 700,000 unexamined patent 
     applications log-jammed at the U.S. Patent and Trademark 
     Office (USPTO).Many of them represent inventions that will 
     come to market and launch new businesses and create new, 
     high-paying jobs.
       But without a patent, securing the funds needed to get a 
     business or innovation off the ground is nearly impossible, 
     for both small and large inventors alike.
       Patent reform legislation the Senate is considering this 
     week can change that.
       And it can build on the progress USPTO Director David 
     Kappos has already made in reducing the time it takes to 
     process the average patent--currently nearly 3 years.
       New programs have been introduced to fast-track promising 
     technologies, reforms have been made to help examiners more 
     quickly process applications, and the Patent Office recently 
     announced a plan to give inventors more control over when 
     their patent is examined.
       The result? The backlog of patents is decreasing for the 
     first time in years, even as new applications have actually 
     increased 7 percent.
       But if the USPTO is to speed the movement of job-creating 
     ideas to the marketplace, it will take more than internal, 
     administrative reforms alone. That's where the patent reform 
     legislation comes in.
       Here's what it promises to do: First, it allows the USPTO 
     to set its own fees--a major part of ensuring that the agency 
     has reliable funding. This will enable the USPTO to hire more 
     examiners and bring its IT system into the 21st century so it 
     can process applications more quickly and produce better 
     patents that are less likely to be subject to a court 
     challenge.
       Second, it decreases the likelihood of expensive litigation 
     because it creates a less costly, in-house administrative 
     alternative to review patent validity claims.
       Also, the pending legislation would add certainty to court 
     damages awards, helping to avoid excessive awards in minor 
     infringement cases, a phenomenon that essentially serves as a 
     tax on innovation and an impediment to business development.
       Finally, patent reform adopts the ``first-inventor-to-
     file'' standard as opposed to the current ``first-to-invent'' 
     standard. First inventor to file is used by the rest of the 
     world, and would be good for U.S. businesses, providing a 
     more transparent and cost-effective process that puts them on 
     a level playing field with their competitors around the 
     world.
       There is some concern among some small, independent 
     inventors, who feel like the current system is better for 
     them, but it's our strong opinion that the opposite is true.
       Here's why: The cost of proving that one was first to 
     invent is prohibitive and requires detailed and complex 
     documentation of the invention process. In cases where 
     there's a dispute about who the actual inventor is, it 
     typically costs at least $400,000 in legal fees, and even 
     more if the case is appealed. By comparison, establishing a 
     filing date through a provisional application and 
     establishing priority of invention costs just $110. The 
     125,000 provisional applications currently filed each year 
     prove that early filing dates protect the rights of small 
     inventors.
       In the past seven years, of almost 3 million applications 
     filed, only 2 patents were granted to small entities that 
     were the second inventor to file but were able to prove they 
     were first to invent. Of those 25, only one patent was 
     granted to an individual inventor who was the second to file. 
     Thus, in the last seven years, only one independent inventor 
     in nearly 3 million patent filings would have gotten a 
     different outcome under the ``first-inventor-to-file'' 
     system.
       Many proposals in this legislation have been debated for a 
     decade, but we now have core provisions with broad support 
     that will undoubtedly add more certainty around the validity 
     of patents; enable greater work sharing between the USPTO and 
     other countries; and help the agency continue with 
     operational changes needed to accelerate innovation, support 
     entrepreneurship and business development, and drive job 
     creation and economic prosperity.
       And thanks to the leadership of Senate and House Judiciary 
     Committee Chairmen, Patrick Leahy1 and Lamar Smith, getting 
     this bipartisan jobs legislation passed is a top priority.
       There's a clear case for it. As President Obama said in his 
     State of the Union address, ``The first step in winning the 
     future is encouraging American innovation.''
       Reforming our patent system is a critical part of that 
     first step.
       Speeding the transformation of an idea into a market-making 
     product will drive the jobs and industries of the future and 
     strengthen America's economic competitiveness.

  The PRESIDING OFFICER. Under the previous order, all time has now 
expired.
  The question is on agreeing to the Lee amendment No. 115.
  Mr. LEAHY. Mr. President, even though I oppose this amendment and 
would simply allow it to go for a voice vote because the proponent of 
the amendment is not even on the floor, I will, to protect his right 
and notwithstanding his not following the normal policy, ask for the 
yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?

[[Page 3001]]

  There appears to be a sufficient second.
  The question is on agreeing to the amendment.
  The clerk will call the roll.
  The assistant legislative clerk called the roll.
  Mr. DURBIN. I announce that the Senator from North Dakota (Mr. 
Conrad), and the Senator from Louisiana (Ms. Landrieu) are necessarily 
absent.
  I further announce that, if present and voting, the Senator from 
Louisiana (Ms. Landrieu) would vote ``no.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 58, nays 40, as follows:

                      [Rollcall Vote No. 30 Leg.]

                                YEAS--58

     Alexander
     Ayotte
     Barrasso
     Begich
     Bennet
     Blunt
     Boozman
     Brown (MA)
     Brown (OH)
     Burr
     Carper
     Chambliss
     Coats
     Coburn
     Cochran
     Collins
     Corker
     Cornyn
     Crapo
     DeMint
     Ensign
     Enzi
     Graham
     Grassley
     Hatch
     Hoeven
     Hutchison
     Inhofe
     Isakson
     Johanns
     Johnson (WI)
     Kirk
     Kohl
     Kyl
     Lee
     Lieberman
     Lugar
     Manchin
     McCain
     McCaskill
     McConnell
     Moran
     Murkowski
     Nelson (NE)
     Nelson (FL)
     Paul
     Portman
     Risch
     Roberts
     Rubio
     Sessions
     Shelby
     Snowe
     Thune
     Toomey
     Udall (CO)
     Vitter
     Wicker

                                NAYS--40

     Akaka
     Baucus
     Bingaman
     Blumenthal
     Boxer
     Cantwell
     Cardin
     Casey
     Coons
     Durbin
     Feinstein
     Franken
     Gillibrand
     Hagan
     Harkin
     Inouye
     Johnson (SD)
     Kerry
     Klobuchar
     Lautenberg
     Leahy
     Levin
     Menendez
     Merkley
     Mikulski
     Murray
     Pryor
     Reed
     Reid
     Rockefeller
     Sanders
     Schumer
     Shaheen
     Stabenow
     Tester
     Udall (NM)
     Warner
     Webb
     Whitehouse
     Wyden

                             NOT VOTING--2

     Conrad
     Landrieu
  The PRESIDING OFFICER. On this vote, the yeas are 58, the nays are 
40. Under the previous order requiring 60 votes for the adoption of 
this amendment, the amendment is rejected.
  Under the previous order, the Senator from New Jersey is recognized.


                     Amendment No. 124, as Modified

  Mr. MENENDEZ. Mr. President, pursuant to the previous order, I ask 
that my amendment be modified with the changes that are at the desk.
  The PRESIDING OFFICER. Under the previous order, the amendment is so 
modified.
  The amendment, as modified, is as follows:

       On page 104, strike line 23, and insert the following:

     SEC. 18. PRIORITY EXAMINATION FOR TECHNOLOGIES IMPORTANT TO 
                   AMERICAN COMPETITIVENESS.

       Section 2(b)(2) of title 35, United States Code, is 
     amended--
       (1) in subparagraph (E), by striking ``; and'' and 
     inserting a semicolon;
       (2) in subparagraph (F), by striking the semicolon and 
     inserting ``; and''; and
       (3) by adding at the end the following:
       ``(G) may, subject to any conditions prescribed by the 
     Director and at the request of the patent applicant, provide 
     for prioritization of examination of applications for 
     products, processes, or technologies that are important to 
     the national economy or national competitiveness without 
     recovering the aggregate extra cost of providing such 
     prioritization, notwithstanding section 41 or any other 
     provision of law;''.

     SEC. 19. EFFECTIVE DATE.

  Mr. MENENDEZ. Mr. President, this modified amendment, cosponsored by 
Senator Bennet, would allow the Patent Office Director to prioritize 
patents that are important to the national economy or national 
competitiveness. The amendment will ensure that patents that are vital 
to our national interests do not languish in any backlog at the Patent 
Office and that they ultimately promote the national economy and 
national competitiveness.
  My understanding is that by previous agreement the amendment, as 
modified, is agreed to.
  The PRESIDING OFFICER. That is correct. Under the previous order, the 
amendment, as modified, is agreed to.
  Mr. MENENDEZ. Thank you, Mr. President.
  With that, I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant editor of the Daily Digest proceeded to call the roll.
  The PRESIDING OFFICER. The Senator from Colorado.
  Mr. BENNET. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Without objection, the motions to reconsider on the two previous 
amendments are laid upon the table.
  Ms. MIKULSKI. Mr. President, I rise to explain my vote against the 
managers' amendment to S. 23, the America Invents Act.
  I agree wholeheartedly with the chairman of the Judiciary Committee 
that we must enable our inventors to out innovate and produce the 
products and jobs of the future.
  However, a provision in the managers' amendment would take the Patent 
and Trademark Office, PTO, off-budget. I cannot support this provision 
for three reasons.
  First, the provision is unnecessary. Proponents argue that it will 
prevent the diversion of PTO's fees. However, since fiscal year 2005, 
the Appropriations Committee has rejected the practice of diverting PTO 
fees for other purposes and instead has consistently recommended that 
PTO retain every dollar it collects from inventors. In fact, the 
Appropriations Committee has on several occasions approved bills to 
allow PTO to spend up to $100 million in excess of PTO's appropriation 
if fee revenue is higher than the appropriations level.
  Second, the amendment would reduce oversight. Rather than being 
subject to the annual appropriations process, this agency--with a 
budget of more than $2 billion--would be on autopilot. The underlying 
bill seeks to reduce the backlog of pending patent applications. 
Currently, it takes PTO nearly 3 years to process a patent application. 
The backlog of applications stands at over 700,000. Some progress has 
been made in this area, thanks to the annual oversight provided in 
appropriations bills which has succeeded in forcing management reforms 
that have slowed the growth of PTO's backlog.
  The amendment requires PTO to submit annual budget requests and 
spending plans to Congress. However, this approach eliminates the 
requirement for an annual legislative vehicle to closely examine and 
approve expenditures of taxpayer dollars and fee revenue. Instead the 
amendment would restrict accountability for an agency that struggles to 
keep up. While our inventors are standing in line for patents, their 
ideas can be stolen to fuel another country's economy. I am very 
encouraged by Director Kappos' new leadership at PTO, but much more 
progress and greater management oversight are still necessary to give 
American inventors the protections they deserve.
  Finally, the amendment may hamper PTO operations in the future. PTO 
has adequate fee revenue now, but that has not always been the case. As 
recently as fiscal year 2009, PTO experienced a revenue shortfall due 
to lower than expected fee collections. To keep PTO's operations whole 
and to help tackle the patent backlog, we gave PTO a direct 
appropriation to bridge their financial gap when fees weren't enough. 
In fact, PTO fee collections have fallen short of appropriations levels 
by more than $250 million since fiscal year 2005. Unfortunately, should 
such a gap occur in future years, the Appropriations Committee would 
not be poised to step in if PTO's fee collections are not adequate to 
cover operations.
  Again, I applaud the Judiciary Committee, under Chairman Leahy's 
leadership, for pushing PTO to continue its progress as part of our 
Nation's innovation engine. Unfortunately, this amendment will only 
send PTO drifting on autopilot with little congressional 
accountability.


                           Amendment no. 133

  Mr. REID. Mr. President, I support Senator Feinstein's amendment to 
restore the grace period under current law and eliminate the so-called 
first-inventor-to-file provisions of the legislation. This is the No. 1 
outstanding issue of concern my constituents have raised with me, 
particularly small and

[[Page 3002]]

independent inventors. It is a technical and complex issue, one about 
which experts in patent law have strong disagreements. But I think the 
bill would be much better without these provisions.
  For shorthand, a lot of people talk about this issue as first-
inventor-to-file versus ``first-to-invent.'' But, in my view, this 
terminology just confuses the issue. My constituents are most concerned 
about the loss of the unconditional 1-year grace period under current 
law. Both a first-to-invent and a first-inventor-to-file system could 
have the grace period; there is no inherent inconsistency. I am not 
sure why the two issues have been merged. Frankly, people who talk 
about priority fights and interferences are completely missing the 
point. The concerns are all about the grace period.
  My constituents tell me that the current law grace period is crucial 
to small and independent inventors, for numerous reasons. First, it 
comports with the reality of the inventive process. An idea goes 
through many trials, errors, and iterations before it becomes a patent-
worthy invention. Small inventors in Nevada tell me that sometimes they 
may have conceived an idea as an improvement to the apple; and it turns 
out to be a new type of orange. The grace period allows inventors the 
time to refine their inventions, test them, talk issues through with 
others, all without worry of losing their rights if these activities 
result in an accidental disclosure or the development of new ``prior 
art.''
  Second, the grace period comports with the reality of small entity 
financing through friends, family, possible patent licensees, and 
venture capitalists. The grace period allows small inventors to have 
conversations about their invention and to line up funding, before 
going to the considerable expense of filing a patent application.
  In fact, in many ways, the 1-year grace period helps improve patent 
quality--inventors find out which ideas can attract capital, and focus 
their efforts on those ideas, dropping along the way other ideas and 
inventions that don't attract similar interest and may not therefore be 
commercially meaningful.
  These inventors therefore believe that the effective elimination of 
the grace period in the law is therefore a serious blow. They tell me 
that now they will have to try to file many more applications, earlier 
in the process. They tell me that the balm of ``cheap provisionals'' is 
snake oil, because a provisional still has to meet certain legal 
standards, meaning that you still have to spend a lot for patent 
counsel, which is the biggest single expense of filing an application. 
Because they can't afford to file that many applications, regular or 
provisional, they will have to give up on some inventions altogether. 
If that is so, it wouldn't just be bad for them, it would be bad for 
the creation of innovation in America.
  They also are concerned that it will be harder to get VC funding 
because they will have filed applications on inventions that weren't 
quite the right ones. The added risk about whether they can ensure that 
the provisional application will be adequate to provide protection to 
this slightly modified but commercially more meaningful invention will 
be enough to scare off already difficult to obtain venture capital 
funding.
  The legislation doesn't turn a blind eye to these problems. It 
provides a type of grace period, triggered by inventor disclosures. 
Will this new, significantly more scaled back grace period work? Maybe. 
I don't know. I can tell you that the independent inventors in Nevada 
swear by a code of secrecy and nondisclosure until they are far enough 
along to get patent protection. It would require a sea change in 
culture to be able to benefit from this very limited inventor's 
disclosure-triggered grace period.
  Further, there are legitimate questions about how this new disclosure 
provision would work--for instance, what happens when an invention that 
is disclosed leads to other, different ideas and disclosures that 
update the state of the art before the application has been filed? How 
is an inventor going to be able to prove that changes in an ``ecosystem 
of technology'' were necessarily derived from her disclosure?
  I would also note that I appreciate that PTO Director Kappos has been 
doing great work in terms of reaching out to small inventors, trying to 
make things cheaper and more efficient for them; trying to demystify 
the PTO for them. If any PTO Director could make this work, I feel 
confident he is the one who can do it.
  But, you know what, if it ain't broke, don't fix it. Our current 
system has helped make America the most innovative country in the 
world; I will venture to say the most innovative society in world 
history. Our innovation system is the envy of the world. We don't need 
to harmonize with them; they are trying to figure out how we do it. 
This is one area where nothing is broken, and I am very worried about 
unintended consequence, especially when a lot of the folks arguing 
about this issue are not even talking about the thing that matters--the 
grace period.
  Accordingly, I support the Feinstein amendment. And I encourage my 
colleagues to support it too. I am not making this argument as the 
Senate majority leader, but as the Senator from Nevada--if the current 
grace period isn't broke, then we absolutely shouldn't fix it with 
something that my constituents tell me, with alarm, may make it harder 
for them to patent their innovations.
  Mr. ISAKSON. Mr. President, I ask unanimous consent to be recognized 
as in morning business.
  The PRESIDING OFFICER (Mr. Bennet). Without objection, it is so 
ordered.


                             Risk Retention

  Mr. ISAKSON. Mr. President, I come at the end of a long day for all 
of us to talk about a subject that is off the subject from the bill on 
the floor but is one of tremendous importance to the United States and 
the recovery of our economy.
  I want to also point out for the record--and hopefully also for the 
right people--that we are at a critical point in terms of housing in 
America, with Dodd-Frank having been passed and newly promulgated 
rules. It is essential that we don't make the mistakes that led us to 
the last collapse that caused the tragedy in the housing market in 
2007, 2008, and 2009.
  In the Dodd-Frank bill, there was an amendment called the qualified 
residential mortgage, which was offered by Senators Landrieu, Hagan, 
and myself to ensure that the risk retention provisions of Dodd-Frank 
would not apply to a well-underwritten, well-qualified loan. Risk 
retention, as the Chair remembers, is the 5-percent retention 
requirement of any lender who made a residential mortgage that was not 
qualified, but they were not specific in their definition of what a 
qualified mortgage would be. So we took the point to take the 
historical underwriting standards that have proven to work so well in 
this country and write them into the Dodd-Frank bill, which were that a 
mortgage that may be exempted from a risk retention would have to have 
20 percent down, and if there was more than 80 percent loan to value, 
that amount above 80 percent would have to be covered by private 
mortgage insurance. We required third-party verification of bank 
deposits, third-party verification of employment, third-party 
verification of an individual's ability to make the payments and 
service the debt, credit records, and all the underwriting standards. 
As the Chair remembers, what got us into so much trouble from 2000 to 
2007 is that we made subprime loans, used stated income, didn't do debt 
checks or anything else we should have done. We made bad mortgages.
  My point is this. There is a committee that has been formed--made up 
of very distinguished Americans--that is promulgating the rules to 
carry out the intent of Dodd-Frank. That committee includes Sean 
Donovan from HUD; Ben Bernanke; Edward DeMarco, Acting Director of the 
Federal Housing Finance Agency; John Walsh, Acting Comptroller of the 
Currency; Mary Shapiro, head of the SEC; and Sheila Bair, head of FDIC. 
That is a very august group. They are in the process of

[[Page 3003]]

promulgating rules to carry out the intent of Dodd-Frank. The rumors 
coming out of those negotiations--and I say rumors because I cannot 
verify it because I am not there. But I know the articles I have read 
in the papers in the last couple of days send a troubling signal to me.
  Just for a few minutes, I wish to make the points that I think are so 
critical.
  No. 1, it is my understanding they are considering memorializing 80 
percent as the maximum amount of loan to value for a loan that would 
fall as a qualified residential mortgage and do not address private 
mortgage insurance for coverage above 80 percent.
  Without getting technical, what that would mean is the only qualified 
residential mortgage that could be made and not require risk retention 
would have to have a minimum of a 20-percent downpayment. In the olden 
days of standard lending in the eighties, seventies, and sixties, when 
you borrowed more than 80 percent but not over 95 percent, you had 
private mortgage insurance to insure the top 30 percent of the loan 
made so the investors had the insurance of knowing, if there was a 
default, the top portion of that loan, which was the most in terms of 
loan to value, would be insured and would be paid.
  If it is, in fact, correct that this committee is going to recommend 
a qualified residential mortgage require a 20-percent downpayment and 
not make provisions for PMI, we will be making a serious mistake 
because two things will happen. One, very few people will be able to 
get a home loan in the entry-level market or even in the move-up market 
because a 20-percent downpayment is significant. Second, by not 
utilizing PMI, we will be turning our back on 50 years of history in 
America, where PMI has been used to satisfactorily insure risk and 
insure qualified lending.
  We must remember what happened in terms of the collapse of Freddie 
Mac and Fannie Mae. What happened was Congress directed they buy a 
certain percentage of their portfolio in what were called affordable 
loans, which became subprime securities, which became 13 percent of 
their portfolio, which brought them down when subprime securities 
collapsed. If we all of a sudden, through fiat, decide to pass 
regulations to define a qualified residential mortgage that is so 
prohibitive we run everybody to FHA, which is exempt, then we will be 
putting a burden on FHA that is unsustainable and create a situation of 
another collapse or another inability of the United States to meet 
housing needs through the private sector and through well underwritten 
loans.
  My reason for coming to the floor tonight is, hopefully, to send a 
message, before the decisions are made, to be thoughtful in determining 
what the parameters will be on a qualified residential mortgage. Yes, I 
do think an 80-percent or less loan should be qualified and avoid risk 
retention. But a well-paid, well-verified, well-credit-evaluated 
individual who borrows more than 80 percent but less than 75 should be 
able to do so and be excluded from the risk retention as long as they 
have private mortgage insurance covering that top 30 percent of the 
debt created by that loan.
  If you do that, you protect the equity provisions, you protect the 
investor, you make the qualified loan, you do not put the country at 
risk, but most important of all, you do not force everybody to FHA. 
That is what we are about to do because FHA is, by definition under 
Dodd-Frank, exempt from risk retention. All other loans are not, except 
those that will fall under the QRM, qualified residential mortgage. It 
would be a disaster for the recovery of American housing to force 
Americans to only one source of money to finance their home and put so 
much stress on the Federal Housing Administration that it collapses 
under the burden.
  We need to be pragmatic when we look at issues facing housing. We 
need to be practical in taking Dodd-Frank and making it work for the 
American people. We need to recognize the value of private mortgage 
insurance, the value of good, solid underwriting and not put a risk 
retention in that is so high that we take most American mortgage 
lenders out of the business, isolated only for a few who dictate and 
write the parameters they want to write for housing. We are at a 
critical time in our recovery. Housing has hit the bottom, and it has 
bounced along the bottom, but it is showing some signs of coming back. 
Now would be the worst time to send a signal that mortgage money is 
going to be harder to get, the banks are going to have to hold 5 
percent risk retention on even the best of loans and, worst of all, it 
would give the American people only one alternative for lending; that 
is, the Federal Housing Administration which, in and of itself, is 
already under a burden and stressed.
  I appreciate the time tonight to bring this message to the floor that 
as we write the rules to promulgate the intent of the Dodd-Frank bill 
in terms of residential housing and finance, we be sure we do so in 
such a way that we meet the demands of a vibrant marketplace rather 
than restricting it, putting a burden on FHA, and protracting what has 
already been a long and difficult housing recession.
  I yield the floor and suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________