[Congressional Record (Bound Edition), Volume 157 (2011), Part 7]
[House]
[Pages 9773-9814]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          AMERICA INVENTS ACT

  The SPEAKER pro tempore. Pursuant to House Resolution 316 and rule 
XVIII, the Chair declares the House in the Committee of the Whole House 
on the state of the Union for the consideration of the bill, H.R. 1249.

                              {time}  1933


                     In the Committee of the Whole

  Accordingly, the House resolved itself into the Committee of the 
Whole House on the state of the Union for the consideration of the bill 
(H.R. 1249) to amend title 35, United States Code, to provide for 
patent reform, with Mr. Graves of Georgia in the chair.
  The Clerk read the title of the bill.
  The CHAIR. Pursuant to the rule, the bill is considered read the 
first time.
  An initial period of general debate shall be confined to the question 
of the constitutionality of the bill and shall not exceed 20 minutes 
equally divided and controlled by the gentleman from Texas (Mr. Smith) 
and the gentlewoman from Ohio (Ms. Kaptur) or their designees.
  The Chair recognizes the gentleman from Texas.
  Mr. SMITH of Texas. I yield myself such time as I may consume.
  Mr. Chairman, individuals who raise questions about the 
constitutionality of this legislation perhaps should review the 
Constitution itself. The Constitution expressly grants Congress the 
authority to ``promote the progress of science and useful arts.'' That 
is precisely what this bill does. H.R. 1249 improves the patent system, 
ensuring the protection and promotion of intellectual property that 
spurs economic growth and generates jobs.
  The bill's inclusion of a move to a first-inventor-to-file system is 
absolutely consistent with the Constitution's requirement that patents 
be awarded to the ``inventor.''
  A recent letter by professors of law from across the country--from 
universities including Emory, Indiana, Washington University in St. 
Louis, Missouri, NYU, New Hampshire, Wisconsin, Albany, Stanford, 
Chicago, Georgia, Richmond, Vanderbilt, and Washington--states that 
claims of unconstitutionality ``cannot be squared with well-accepted 
and longstanding rules of current patent law.'' And former Attorney 
General Michael B. Mukasey has said that the provision is both 
``constitutional and wise.''
  In a letter to PTO Director David Kappos, General Mukasey stated that 
the bill's constitutionality is assured because it ``leaves unchanged 
the existing requirement that a patent issue only to one who `invents 
or discovers.'''
  Also, this provision actually returns us to a system that our 
Founders created and used themselves. Early American patent law, that 
of our Founders' generation, did not concern itself with who was the 
first-to-invent. The U.S. operated under a first-inventor-to-register, 
which is a system very similar to the first-inventor-to-file.
  It wasn't until the 1870s, when the courts created interference 
proceedings, that our patent system began to consider who was the 
first-to-invent an invention. These interference proceedings 
disadvantaged independent inventors and small businesses. Over time, 
interference proceedings have become a costly litigation tactic that 
has forced some manufacturers to take the path of least resistance and 
move operations and jobs overseas rather than risk millions or billions 
of dollars in capital investment. The America Invents Act does away 
with interference proceedings and includes a provision to address prior 
user rights without jeopardizing American businesses and jobs.
  Opponents of the first-inventor-to-file system claim that it may 
disadvantage independent inventors who cannot file quickly enough. But 
the current system lulls inventors into a false sense of security based 
on the belief that they can readily and easily rely on being the first-
to-invent. Inventors forget that, to have any hope of winning an 
interference proceeding, they must comply with complex legal procedures 
and then spend over $500,000 to try to prove that they were the first-
to-invent.
  In the last 7 years, under the current system of interference 
proceedings, only one independent inventor out of 3 million patent 
applications has proved an earlier date of invention over the inventor 
who filed first, one out of 3 million. In fact, the current patent 
system's costly and complex legal environment is what truly 
disadvantages independent inventors, who often lose their patent rights 
because they can't afford the legal battle over ownership.
  The America Invents Act reduces frivolous litigation over weak or 
overbroad patents by establishing a pilot program to review a limited 
group of business method patents that never should have been awarded in 
the first place. Section 18 deals with mistakes that occurred following 
an activist judicial decision that created a new class of patents 
called business method patents in the late 1990s. The PTO was ill 
equipped to handle the flood of business method patent applications.
  Few examiners had the necessary background and education to 
understand the inventions, and the PTO lacked information regarding 
prior art. As a result, the PTO issued some weak patents that have lead 
to frivolous lawsuits. The pilot program allows the PTO to reexamine a 
limited group of questionable business method patents, and it is 
supported by the PTO.
  Former 10th Circuit Federal Appeals Court Judge Michael McConnell 
sent me a constitutional analysis of the bill's reexamination 
proceedings. He stated that ``there is nothing novel or unprecedented, 
much less unconstitutional, about the procedures proposed in sections 6 
and 18. The application of these new reexamination procedures to 
existing patents is not a taking or otherwise a violation of the 
Constitution.''
  Supporters of this bill understand that if America's inventors are 
forced to waste time with frivolous litigation, they won't have time 
for innovation. That's why the U.S. Chamber of Commerce, National 
Association of Manufacturers, PhRMA, BIO, the Information Technology 
Industry Council, American Bar Association, Small Business & 
Entrepreneurship Council, Independent Community Bankers of America, 
Credit Union National Association, Financial Services Roundtable, 
American Insurance Association, Property

[[Page 9774]]

Casualty Insurers Association of America, the Securities Industry and 
Financial Markets Association, the American Institute of CPAs, industry 
leaders, the Coalition for 21st Century Patent Reform, the Coalition 
for Patent Fairness, independent inventors, and all six major 
university associations all support H.R. 1249.
  To quote the Chamber of Commerce: ``This legislation is crucial for 
American economic growth, jobs, and the future of U.S. 
competitiveness.''
  We can no longer allow our economy and job creators to be held 
hostage to legal maneuvers and the judicial lottery.

                              {time}  1940

  American inventors have led the world for centuries in new 
innovations, from Benjamin Franklin and Thomas Edison to the Wright 
Brothers and Henry Ford. But if we want to continue as leaders in the 
global economy, we must encourage the innovators of today to develop 
the technologies of tomorrow.
  This bill holds true to the Constitution, our Founders and our 
promise to future generations that America will continue to lead the 
world as a fountain for discovery, innovation and economic growth.
  Mr. Chairman, I reserve the balance of my time.
  Ms. KAPTUR. I yield myself such time as I may consume.
  Mr. Chairman, if this bill is passed into law, it will violate the 
first right explicitly named in our Constitution, the intellectual 
property clause. This bill makes a total mockery of article 1, section 
8, clause 8, which requires Congress to secure for inventors the 
exclusive right to their respective writings and discovery.
  Supporters of this bill say it is an attempt to modernize our patent 
system. What they really mean is that this bill Europeanizes our patent 
system by granting the rights to an invention to whoever wins the race 
to the Patent Office.
  The Supreme Court has been consistent on this issue throughout our 
history. First inventors have the exclusive constitutional right to 
their inventions. This right extends to every citizen, not just those 
with deep pockets and large legal teams. A politicized patent system 
will further entrench those very powerful interests with deep pockets 
and lots of lobbying offices over on K Street.
  Claiming to be an inventor is not the same thing as being that 
inventor, the person who actually made the discovery. A patent should 
be challenged in court, not in the U.S. Patent Office.
  Since the first Congress, which included 55 delegates to the 
Constitutional Convention, our nation has recognized that you are the 
owner of your own ideas and innovations. This bill throws that out the 
window and replaces it with a system that legalizes a rather clever 
form of intellectual property theft.
  I assure you of one thing: If this bill mistakenly passes, this 
debate will not be over. We will see it head straight to the courts 
with extended litigation for years to come, along with complete 
uncertainty to our markets, killing jobs and killing innovation.
  I urge my colleagues to vote ``no'' on H.R. 1249.
  I yield 3 minutes to the former chairman of the Judiciary Committee, 
our esteemed colleague from Wisconsin (Mr. Sensenbrenner).
  Mr. SENSENBRENNER. Mr. Chairman, in the first day of this session we 
all took an oath to preserve and protect and defend the Constitution of 
the United States against all enemies, foreign and domestic. And a day 
or two later, for the first time in history, we read the Constitution 
on the floor from beginning to end.
  We changed the rules to have a constitutional debate when the 
constitutionality of legislation before us was in question. And this is 
the first time in the history of the United States House of 
Representatives when a question serious enough to have a constitutional 
debate is being debated on the floor for 20 minutes.
  Unlike what my friend from Texas (Mr. Smith) has said, this bill is 
unconstitutional, and voting for this bill will violate one's oath of 
office. And here is why.
  The intellectual property clause of the Constitution gives the 
protection to the first-to-invent, and what happens later in the Patent 
Office only protects that right. It doesn't denigrate the right, and 
the right is given to the person who is first-to-invent. If someone who 
was the first-to-invent ends up losing the race to the Patent Office, 
this bill takes away a property right, and that violates the Fifth 
Amendment.
  Now, inventor means first inventor in the Constitution. And earlier 
this month, in Stanford University v. Roche, the Chief Justice has 
said, since 1790 the patent law has operated on the premise that in an 
invention, the rights belong to the inventor. And since the founding of 
our Republic, that has been the law.
  Even in the beginning of our Republic, the 1793 act created an 
interference provision and set up an administrative procedure to 
resolve competing claims for the same invention. The Patent Board 
rejected the proposal that the patent should be awarded to the first 
person to file an application. And Thomas Jefferson served on that 
Patent Board that rejected first-to-file.
  Secondly, early Supreme Court decisions confirm that patents must be 
granted to inventors, not when they file, but when they invent it. And 
that began in 1813 with Chief Justice Marshall, reaffirmed in 1829, and 
last month in Stanford v. Roche in the Supreme Court of the United 
States.
  I think it is clear from all of the precedents that a first-to-invent 
and a first-to-file provision is unconstitutional because it adds a 
layer of compliance in winning the race to the Patent Office for 
someone who already has that right.
  Let's vote ``no'' to uphold our oaths of office under the 
Constitution of the United States.
  Mr. SMITH of Texas. Mr. Chairman, I reserve the balance of my time.
  Ms. KAPTUR. I yield 1 minute to the gentleman from Nebraska (Mr. 
Terry).
  Mr. TERRY. Mr. Chairman, since the founding of the Republic, our 
patent system has been based on the premise that an inventor is 
entitled to a patent for their work, and not simply the first person to 
file a patent application. Indeed, article 1, section 8, clause 8 of 
the Constitution specifically states that to promote the progress of 
science and useful arts, Congress shall have the power to secure to 
authors and inventors the exclusive right to their respective writings 
and discoveries. Nowhere does it say filers have that right. Under no 
rule of construction or interpretation can this clause mean anything 
other than what it says.
  And Mr. Chairman, I find it comforting to know that certainly I'm not 
alone in my concern over the constitutionality over first-to-file. None 
other than Chief Justice of the United States Supreme Court John 
Roberts recently wrote in an opinion, joined by six of his fellow 
Supreme Court justices that, ``Since 1790, the patent law has operated 
on the premise that rights in an invention belong to the inventor.''
  Mr. SMITH of Texas. It is nice to be able to yield 1 minute to the 
gentleman from New York (Mr. Nadler), who is the ranking member of the 
Constitution Subcommittee of the Judiciary Committee.
  Mr. NADLER. Mr. Chairman, some have argued that the first-to-file 
provision in this bill violates the constitutional provision giving 
Congress the power to promote the progress of science and useful arts 
by securing for limited times for authors and inventors the exclusive 
rights to their respective writings and discoveries.
  The first key point to note is that the text does not define 
inventor. Under H.R. 1249, one still has to be an inventor to be 
awarded the patent, as the Constitution requires. Indeed, former Bush 
administration Attorney General Michael Mukasey noted in a May 2011 
letter to Patent Office Director David Kappos that ``the second 
inventor is no less an inventor for having invented second.'' And 
former Attorney General Mukasey correctly points out that the 
Constitution grants Congress the power to ``promote the progress of

[[Page 9775]]

the science and useful arts'' but does not say how it can or should do 
so. Congress deciding that awarding patents to inventors who are the 
first-to-file is consistent with that constitutional power.
  The Patent Act of 1793 makes no mention of needing to be the first-
to-invent. A patent was valid as long as the invention was not an 
invention already in the public domain or derived from another person. 
It was not until 1870 that there was a specific process put in place to 
even determine who the first-to-invent was.
  The bottom line is that this bill is a clear exercise of Congress' 
constitutional power to secure patent rights to inventors.

                              {time}  1950

  Ms. KAPTUR. Mr. Chairman, may I inquire as to my remaining time, 
please.
  The CHAIR. The gentlewoman from Ohio has 4 minutes remaining.
  Ms. KAPTUR. I yield 1 minute to the gentleman from New Jersey (Mr. 
Garrett).
  Mr. GARRETT. Mr. Chairman, as founder and chairman of the 
Constitution Caucus, I applaud the opportunity to debate the 
constitutionality of this bill. This is the first of what I hope will 
be many more instances to discuss the constitutionality of legislation 
considered on this floor.
  What this bill does is change the U.S. patent system from one which 
allows the moment of invention to determine who is entitled to a patent 
to one which confers this power to a government agency. Such a change 
would violate the intellectual property clause of the Constitution. Why 
is that? Because the Founders rejected the idea that rights are 
bestowed to the people by the government in favor of the revolutionary 
principle that men are born with natural rights.
  Our Constitution instituted a government that secures only these 
natural and preexisting rights. So inventions created by the fruits of 
intellectual labor are the property of the inventor. These and only 
these first and true inventors then are entitled to public protection 
of their rightful property. To remain true to the principles of 
liberty, we must preserve a system that protects the true and first 
inventor.
  Mr. SMITH of Texas. Mr. Chairman, may I inquire as to how much time 
remains on each side.
  The CHAIR. The gentleman from Texas has 2\1/2\ minutes remaining, and 
the gentlewoman from Ohio has 3 minutes remaining.
  Mr. SMITH of Texas. I yield 2 minutes to the gentleman from Virginia 
(Mr. Goodlatte), who is the chairman of the Intellectual Property 
Subcommittee of the Judiciary Committee.
  Mr. GOODLATTE. I also very much appreciate this debate on the 
constitutionality of this issue. I had the honor of leading the reading 
of the Constitution on the second day of this new Congress.
  I want to make it very clear because there's a lot of confusion on 
the part of a lot of people who think this is a first-to-file--even if 
you're not the inventor--gets the patent. That is most assuredly not 
the case. This is first-inventor-to-file. You must be a bona fide 
inventor to qualify for this.
  Our Constitution grants exclusive rights to inventors. Now, in point 
of fact, when our Constitution was first adopted and our Patent Office 
was established, there was no interference provision, and it was 80 
years later before that took place. In fact, in at least one case 
patents were granted to more than one inventor. So the issue here I 
think is not at all well-founded.
  This is clearly constitutional. We have submitted and we will make 
part of the Record writings by 20 constitutional law professors--
Attorney General Mukasey who has noted this as well. The Constitution 
grants Congress the authority to award inventors the exclusive rights 
to their inventions; however, the Constitution leaves to Congress how 
to settle disputes between two individuals who claim to have invented a 
certain idea.
  Article I, section 8, of the Constitution declares that patent rights 
are to be granted in order to ``promote the progress of science and 
useful arts.'' A first-inventor-to-file system ensures this by awarding 
patent protections to the first actual inventor to disclose and make 
productive use of its patent.
  Our Nation has adopted different standards for settling these issues 
in the past. Currently, we have a first-to-invent standard. The reality 
is that a first-to-invent standard subjects small businesses and 
individual inventors who have filed for patent protection to surprise 
and costly litigation in what are called interference actions to 
determine who invented the idea first. This is a better idea, and this 
is a constitutional idea.
  We can make this process much easier by awarding a patent to the 
first inventor to make use of his invention by seeking patent 
protection. This will reward the inventor who is making productive use 
of his patent and will discourage individuals from sitting idly on 
their ideas.
  Let us make clear--switching to First-Inventor-to-File does not allow 
a subsequent party to steal an invention. It requires that a subsequent 
inventor had to have come up with the idea independently and 
separately.
  Switching to a First-Inventor-to-File system fits squarely within the 
plain meaning of the Constitution and will reward inventors who are 
working to launch our nation into the next level of innovation and job 
creation.
  Ms. KAPTUR. I yield 1 minute to my distinguished colleague and 
cosponsor in opposition to this bill, the gentleman from California 
(Mr. Rohrabacher).
  Mr. ROHRABACHER. Mr. Chairman, our Constitution was designed and 
written to protect inventors, not filers. The words are very clear. 
``Inventor'' is in the Constitution, ``filers'' is not in the 
Constitution. So why are we having this dispute about the 
constitutionality of this provision which is very clearly in the 
Constitution?
  Are there all sorts of problems that we have people fighting as to 
who really invented something? No, we don't have a lot of problems. The 
reason why we have to change this is to harmonize our law, American 
patent law, with Europe. There are opponents that stated this over and 
over again in the early part of this debate, that the purpose was 
harmonizing American law with the rest of the world. Well, American law 
has always been stronger; we've had the strongest patent protection in 
the world. So what does harmonize mean? It means weakening our 
constitutionally protected patent rights.
  The purpose of the bill is to weaken a constitutionally protected 
right that has been in place since the founding of our country. It 
should be rejected.
  Ms. KAPTUR. I would like to inquire as to the remaining time on both 
sides, please.
  The CHAIR. The gentlewoman from Ohio has 2 minutes remaining; the 
gentleman from Texas has 30 seconds remaining.
  Ms. KAPTUR. Mr. Chairman, this bill is unconstitutional. It will 
stifle American job creation, cripple American innovation. It throws 
out over 220 years of patent protections for individual inventors and 
violates the CutGo rules, increasing our deficit by over $1 billion by 
2021.
  The proponents claim that the bill is constitutional because it 
contains the word ``inventor'' and leaves in place the existing 
statutory language awarding patents to those who invent or discover. 
But adding a word to the title of a bill cannot paper over its 
constitutional flaws. The bill denies a patent to the actual inventor 
simply because he or she files second, and therefore it is 
unconstitutional.
  Earlier this month, in a decision issued on June 6, the Supreme Court 
reaffirmed that since 1790, the patent law has operated on the premise 
that the rights in an invention belong to the inventor. Chief Justice 
John Marshall explained in 1813 that the Constitution and law, taken 
together, give to the inventor from the moment of invention an inchoate 
property therein which is completed by suing out a patent. And in 1829, 
the Supreme Court held that under the Constitution the right is created 
by the invention and not by the patent. And a New York district judge 
stated in 1826 that it is very true that the right to a patent belongs 
to him who is the first inventor.
  If this very flawed bill passes, I guarantee you it is going to be 
tied up in

[[Page 9776]]

litigation for years to come. With the job situation being what it is, 
with our need for innovation in this economy, the last thing we should 
do is try to undermine a system that works. More patents are filed in 
this country than anyplace else in the world. It is dependable. And it 
is the first right, even before the Bill of Rights, contained in our 
Constitution.
  We should stand for what is in the Constitution and not try to 
undermine it for any interest that comes before the Members of this 
Congress.
  Mr. Chairman, I yield back the balance of my time and I ask my 
colleagues to vote against this bill. Support our own Constitution and 
the very successful record we've had of American innovation.
  Mr. SMITH of Texas. I yield myself the balance of my time.
  Mr. Chairman, I know my colleagues know a lot about this subject, but 
I don't think they know more than the Founders themselves. The 
Founders, including those who wrote the Constitution, operated under a 
first-to-register patent system starting in 1790. This is a very 
similar system to the first-inventor-to-file provision in the bill. So 
if the Founders liked the concept and thought it was constitutional, so 
should Members of Congress.
  Mr. Chairman, I yield back the balance of my time.
  The CHAIR. All time for debate on the question of the 
constitutionality of the bill has expired.
  A subsequent period of general debate shall be confined to the bill 
and shall not exceed 1 hour equally divided and controlled by the chair 
and ranking minority member of the Committee on the Judiciary.
  The gentleman from Texas (Mr. Smith) and the gentlewoman from 
California (Ms. Zoe Lofgren) each will control 30 minutes.
  The Chair recognizes the gentleman from Texas.
  Mr. SMITH of Texas. I yield myself such time as I may consume.
  Mr. Chairman, the foresight of the Founders in creating an 
intellectual property system in the Constitution demonstrates their 
understanding of how patent rights benefit the American people. 
Technological innovation from our intellectual property is linked to 
three-quarters of America's economic growth, and American IP industries 
account for over one-half of all of our exports. These industries also 
provide millions of Americans with well-paying jobs.

                              {time}  2000

  Our patent laws, which provide a time-limited monopoly to inventors 
in exchange for their creative talent, helped create this prosperity.
  The last major patent reform was nearly 60 years ago. During this 
time we have seen tremendous technological advancements, going from 
computers the size of a closet to the use of wireless technology in the 
palm of your hand. But we cannot protect the technologies of today with 
the tools of the past.
  The current patent system is outdated and dragged down by frivolous 
lawsuits and uncertainty regarding patent ownership. Unwarranted 
lawsuits that typically cost $5 million to defend prevent legitimate 
inventors and industrious companies from creating products and 
generating jobs. And while America's innovators are forced to spend 
time and resources defending their patents, our competitors are busy 
developing new products that expand their businesses and their 
economies.
  According to a recent media report, China is expected to surpass the 
United States for the first time this year as the world's leading 
patent publisher. The more time we waste on frivolous litigation, the 
less time we have for innovation.
  Another problem with the patent system is the lack of resources 
available to the PTO. The average wait time for a patent approval is 3 
years or more. These are products and innovations that will create jobs 
and save lives. Inadequately funding the PTO harms inventors and small 
businesses.
  The bill allows the Director to adjust the fee schedule with 
appropriate congressional oversight and prevents Congress from spending 
agency funds on unrelated programs. This will enable the PTO to become 
more efficient and productive, reducing the wait time for patent 
approval. Patent quality will improve on the front end, which will 
reduce litigation on the back end.
  The patent system envisioned by our Founders focused on granting a 
patent to the first inventor who registered their invention. This is 
similar to the first-inventor-to-file provision in H.R. 1249. This 
improvement makes our system similar to the international standard that 
other countries use, only it is better. We retain both a 1-year grace 
period that protects universities and small inventors before they file, 
as well as the CREATE Act, which ensures collaborative research does 
not constitute prior art that defeats patentability.
  There are some who think this bill hurts small businesses and 
independent inventors, but they are wrong. It ensures that independent 
inventors are able to compete with larger companies, both here and 
abroad. American inventors seeking protection here in the United States 
will have taken the first step toward protecting their patent rights 
around the world.
  The bill also makes the small business ombudsman at the PTO 
permanent. That means that small businesses will always have a champion 
at the PTO looking out for their interests and helping them as they 
secure patents for their inventions. This bill protects small 
businesses and independent inventors by reducing fees for both.
  This bill represents a fair compromise and creates a better patent 
system than exists today for inventors and innovative industries.
  Patents are important to the United States and the world. For 
example, during the War of 1812, American troops burned the Canadian 
town of York, known today as Toronto. In retaliation, the British 
marched on Washington in the summer of 1814 to put the capital city to 
the torch.
  Dr. William Thorton, the Superintendent of the Patent Office, 
delivered an impassioned speech to the British officer commanding 150 
Redcoats who were tasked to burn Blodgett's Hotel, where the Patent 
Office was located. Thorton argued that the patent models stored in the 
building were valuable to all mankind and could never be replaced. He 
declared that anyone who destroyed them would be condemned by future 
generations, as were the Turks who burned the library in Alexandria. 
The British officer relented and Blodgett's Hotel was spared, making it 
the only major public building in Washington not burned that day.
  American inventors have led the world in innovation and new 
technologies for centuries, from Benjamin Franklin and Thomas Edison to 
the Wright Brothers and Henry Ford. But if we want to foster future 
creativity, we must do more to encourage today's inventors. Now is the 
time to act.
  I urge the House to support the America Invents Act.
  Mr. Chairman, I reserve the balance of my time.
  Ms. ZOE LOFGREN of California. I yield myself such time as I may 
consume to oppose H.R. 1249.
  I have worked on the patent reform effort since 1997 and am 
disappointed that here today I am unable to support the bill as it 
exists. I did vote to report this bill out of our Judiciary Committee, 
but since that time we have seen two unfortunate things occur that have 
made this bill simply not viable. The first, and exceedingly important, 
is the protections for patent fees, so that all the fees would stay in 
the office, have been removed. The regular appropriations process will 
allow for fee diversions in the future.
  It has been the policy of the House, for example, not to divert fees 
from the Office. However, fees continue to be diverted. In fact, in the 
CR approved by the House this year, we diverted between $85 million and 
$100 million in fees from the Patent Office, and that is under the 
existing prohibition. So that is a major reason why the bill is 
defective.
  I would note also that if we are moving to a first-to-file system, 
there has to be robust protection for prior user rights, including 
prior user rights in

[[Page 9777]]

the grace period that exists under current law. Sadly, those 
protections are missing in this bill. The manager's amendment talks 
about disclosures only. It is a shame that other prior art, such as 
trade secrets and the like, would not receive the same protection.
  So I would urge that the bill, unfortunately, cannot be supported. I 
intend to oppose it, as well as the manager's amendment.
  I yield such time as he may consume to the honorable gentleman from 
North Carolina (Mr. Watt), the distinguished ranking member of the 
Intellectual Property Subcommittee.
  Mr. WATT. I thank the gentlewoman for yielding time.
  As the gentlewoman has indicated, I am the ranking member of the 
Subcommittee on Intellectual Property of Judiciary, and I too supported 
reporting the bill favorably to the House floor. The problem is that 
the bill we may end up debating is not the bill that we reported 
favorably from the Judiciary Committee, and there are reasons for that. 
I understand what those reasons are, but if the amendment that is being 
offered as the manager's amendment passes, it will put us in a position 
where substantial people who supported the bill will be unable to do 
so.
  Here is the equation. One of the primary purposes for which there was 
a strong alliance of people and groups and interests supporting patent 
reform was that in the past fees that have been paid to the Patent and 
Trademark Office have gone through the appropriations process, and over 
the last 10 years almost $800,000 of those fees have been diverted to 
other purposes, other than the use of the Patent and Trademark Office. 
The effect of that is that there has been a hidden tax on innovation in 
our country.
  The United States Senate passed a bill that would end that diversion. 
They passed it by a vote of 85-4. We passed a bill out of our Judiciary 
Committee that would end that diversion, and all of a sudden we come to 
the floor and a manager's amendment is being offered that, if it is not 
defeated, will undermine that unifying thing that has held the groups 
together and allowed people to support the bill. So I have to be in a 
position where I am strongly opposing the manager's amendment to this 
bill.
  I don't think the groups out there support it. It is not often that I 
come to the floor and say I am speaking for the U.S. Chamber of 
Commerce. The Chamber of Commerce would like for the diversion of fees 
to stop.

                              {time}  2010

  It's not often that I come to the floor and say that I'm speaking, I 
think, for the United States Senate. They've already passed a bill that 
would stop the diversion of fees. It's not often that I come to the 
floor standing up for the bill that came out of our committee against 
forces that have taken it over and are putting forward a manager's 
amendment that we simply cannot support.
  Now, I understand how we got here. The appropriators would like to 
continue to control the process. They said, Well, we are going to 
object to this, and we will raise a point of order. And they came up 
with language that professes to solve the problem. The problem is that 
that raised another point of order because the Congressional Budget 
Office said, Well, if you do it that way, you are going to put yourself 
in a situation where we have to score this bill in a different way. So 
then the leadership on the chairman's side said, Okay, well, we can 
waive that rule. And I'm saying, Well, if you can waive the rule, you 
are the people who have been so much worried about the deficit, if you 
can waive the rule that gets around worrying about the deficit, why 
couldn't you waive the rule that allows us to take up the bill that we 
passed out of committee?
  So I need to be addressing my Republican colleagues here. If they 
want to start this process over, the way to start the process over is 
to vote against the manager's amendment. That's the simple way to do 
it. At that point we can get back, hopefully, to a bill that does 
clearly not divert fees and that the whole population of supporters has 
said we would support.
  That's where I am, Mr. Chairman. I don't want to belabor this. I 
don't want to take away time from other people who want to speak. But 
it's not the bill itself that came out of committee that's the problem. 
If we pass the manager's amendment, we've got a problem here. We could 
tinker around the edges of the bill that came out of the committee, and 
we could solve the minor concerns that we've got there. But there's no 
way to tinker around the edges of this diversion issue. Either you 
support diversion of money, or you don't support diversion of money.
  I think it's time for us to stop this hidden tax that we have imposed 
on innovation in this country. The only way to do that is to defeat the 
manager's amendment.
  Mr. SMITH of Texas. Madam Chair, I yield 3 minutes to the gentleman 
from North Carolina (Mr. Coble), the chairman of the Courts, 
Commercial, and Administrative Law Enforcement Subcommittee of the 
Judiciary Committee.
  Mr. COBLE. I thank the gentleman from Texas. And I say to my friend 
from North Carolina, it was my belief that diversion had ended. But let 
me make my statement, and maybe we can get to this subsequently.
  A robust patent system, Madam Chairman, is critical to a strong, 
developed economy. And H.R. 1249, in my opinion, serves that goal by 
ending diversion of user fees to other agencies. Ending diversion is 
essential to a robust and strong patent system, it seems to me. This is 
not a new concept. It's been a controversial issue for many years; but 
we're at a point where if something isn't done, the office is going to 
be overwhelmed.
  When someone asks why I support patent reform, I respond, The answer 
is simple, two words: backlog and pendency. The number of pending 
applications, I am told, is around 700,000, and the average time for an 
application to be reviewed is 30 months. This is unacceptable. The 
number of pending claims should be approximately 300,000 and the 
pendency time period should be approximately 20 months, or 10 months 
less than what it is now. Patents provide innovative and economic 
incentives for creators. If our patent system loses its efficacy, those 
incentives will become diluted. The dilution begins very simply when 
inventors decide to find other forms of protection for their ideas or 
begin marketing their ideas independently to avoid the cost and 
sometimes hassle of filing for patent protection.
  Reducing the backlog and pendency rate depends on the office's 
ability to improve the performance of examiners and to provide 
additional examiners. Enacting H.R. 1249, in my opinion, Mr. Chairman, 
and ending diversion will provide that needed certainty for the office 
to begin making the changes to meet these goals.
  I urge Members to vote in favor of the bill.
  Ms. ZOE LOFGREN of California. Madam Chairman, I yield 30 seconds to 
the gentlewoman from Ohio (Ms. Kaptur).
  Ms. KAPTUR. I thank the gentlelady for yielding to me. I will place 
in the Record dozens and dozens of organizations that oppose this bill. 
They oppose the manager's amendment. And what is amazing about these 
groups is they range the vast ideological spectrum from liberal to 
conservative to moderate. And they all represent people--thousands and 
thousands of people--such as the American Bar Association, the Eagle 
Forum, the American Civil Rights Union, the Christian Coalition, the 
Family Research Council Action, Friends of the Earth, National 
Association of Realtors, Innovation Alliance. If one looks across this 
list, they have deep concerns about this bill and oppose it.

       The following groups oppose H.R. 1249 or specific 
     provisions of it or the Manager's Amendment: U.S. Business 
     and Industry Council; National Association of Realtors; 
     Innovation Alliance, American Bar Association; American 
     Medical Association; ACLU; Breast Cancer Action; US-Israel 
     Science & Technology Foundation (Sections 3 and 5); Public 
     Citizen (Section 16); American Association for Justice 
     (Section 16); Joan Claybrook, President Emeritus, Public 
     Citizen; National Consumers League; Trading

[[Page 9778]]

     Technologies; Patent Office Professional Association (POPA); 
     Generic Pharmaceutical Association (Section 12); Eagle Forum; 
     Intellectual Ventures (Section 18); Data Treasury (Section 
     18).
       Angel Venture Forum; BlueTree Allied Angels; Huntsville 
     Angel Network; Private Investors in Entrepreneurial 
     Endeavors; Institute of Electrical and Electronic Engineers 
     (IEEE-USA); Wisconsin Alumni Research Foundation; Brigham 
     Young University; University of Kentucky; Hispanic Leadership 
     Fund; American Innovators for Patent Reform; National 
     Association of Patent Practitioners (NAPP); National Small 
     Business Association; IPAdvocate.org; National Association of 
     Seed & Venture Funds; National Congress of Inventor 
     Organizations; Inventors Network of the Capital Area; 
     Professional Inventors Alliance USA; Public Patent 
     Foundation; Edwin Meese, III, Former Attorney General of the 
     United States; Let Freedom Ring.
       American Conservative Union; Southern Baptist Ethics and 
     Religious Liberty Convention; 60 Plus; Tradition, Family, 
     Property; Gun Owners of America; Council for America; 
     American Civil Rights Union; Christian Coalition; Patriotic 
     Veterans, Inc.; Center for Security Policy; Family PAC 
     Federal; Liberty Central; Americans for Sovereignty; 
     Association of Christian Schools International; Conservative 
     Inclusion Coalition; Oregon Health & Science University; 
     North Dakota State University; South Dakota University; 
     University of Akron Research Foundation; University of New 
     Hampshire.
       University of New Mexico; University of Utah; University of 
     Wyoming; Utah Valley University; Weber State University; 
     WeReadTheConstitution.com; Family Research Council Action; 
     Friends of the Earth; National Women's Health Network; Our 
     Bodies Ourselves; Center for Genetics and Society; 
     International Center for Technology Assessment; Southern 
     Baptist Ethics & Religious Liberty Commission; United 
     Methodist Church--General Board of Church and Society; 
     American Society for Clinical Pathology; American Society for 
     Investigational Pathology; Association for Molecular 
     Pathology; College of American Pathologists; Association of 
     Pathology Chairs.

  Mr. SMITH of Texas. Madam Chair, I yield 5 minutes to the gentleman 
from Virginia (Mr. Goodlatte), who is the chairman of the Intellectual 
Property Subcommittee of the Judiciary Committee.
  Mr. GOODLATTE. I thank the chairman for yielding and for his 
leadership on this issue, and I rise in strong support of H.R. 1249.
  For the better part of the past decade, Congress has been working to 
update our patent laws to ensure that the incentives our Framers 
envisioned when they wrote article I, section 8, of our Constitution 
remain meaningful and effective. The U.S. patent system must work 
efficiently if America is to remain the world leader in innovation. It 
is only right that as more and more inventions with increasing 
complexity emerge, we examine our Nation's patent laws to ensure that 
they still work efficiently and that they still encourage and not 
discourage innovation.
  The core principles that have guided our efforts have been to ensure 
that quality patents are issued by the PTO in the first place and to 
ensure that our patent enforcement laws and procedures do not create 
incentives for opportunists with invalid claims to exploit while 
maintaining strong laws that allow legitimate patent owners to enforce 
their patents effectively. H.R. 1249 addresses these principles.
  With regard to ensuring the issuance of quality patents, this 
legislation allows third parties to submit evidence of prior art during 
the examination process, which will help ensure examiners have the full 
record before them when making decisions. In addition, after the PTO 
issues a patent, this legislation creates a new post-grant opposition 
system in which third parties can raise objections to a patent 
immediately after its issuance, which will both help screen out bad 
patents while bolstering valid ones.

                              {time}  2020

  Furthermore, the bill contains a provision on fee diversion where any 
fees that are collected but not appropriated to the PTO will be placed 
in a special fund to be used only by the PTO for operations. This 
solves the fee diversion issue, and it assures that the problem that we 
have had in the past will not take place in the future; but at the same 
time it also assures that the Congress will continue its oversight 
authority because the Patent Office will have to come to the Congress, 
to the Appropriations Committee, to justify those expenditures. They 
can't be spent on anything else, but they have to be justified to the 
Congress before the funds are appropriated. These funds will still be 
subject to appropriation but will be set aside to only fund the PTO. 
With a backlog of almost a million patent applications and many waiting 
3 years to get an initial action on their patent applications, this 
agreement could not come at a more crucial time. We have been trying 
for 10 years, by the way, and this is the closest we have ever come.
  In addition to these patent quality improvements, H.R. 1249 also 
includes provisions to ensure that patent litigation benefits those 
with valid claims but not those opportunists who seek to abuse the 
litigation process. Many innovative companies, including those in the 
technology and other sectors, have been forced to defend against patent 
infringement lawsuits of questionable legitimacy. When such a defendant 
company truly believes that the patent being asserted is invalid, it is 
important for it to have an avenue to request the PTO to take another 
look at the patent in order to better inform the district court of the 
patent's validity. This legislation retains an inter partes re-exam 
process, which allows innovators to challenge the validity of a patent 
when they are sued for patent infringement.
  In addition, the bill allows the Patent and Trademark Office to 
reexamine some of the most questionable business method patents, which 
opportunists have used for years to extort money from legitimate 
businesses. By allowing the PTO to take another look at these patents, 
we help ensure that invalid patents will not be used by aggressive 
trial lawyers to game the system.
  The bill also ensures that abusive false markings litigation is put 
to an end. Current law allows private individuals to sue companies on 
behalf of the government to recover statutory damages in false markings 
cases. After a court decision 2 years ago that liberalized the false 
markings damages awards, a cottage industry has sprung up, and false 
markings claims have risen exponentially. H.R. 1249 maintains the 
government's ability to bring these actions but limits private lawsuits 
to those who have actually suffered competitive harm. This will 
discourage opportunistic lawyers from pursuing these cases.
  The bill also restricts joinder rules for patent litigation. 
Specifically, it restricts joinder of defendants to cases arising out 
of the same facts and transactions, which ends the abusive practice of 
treating as codefendants parties who make completely different products 
and have no relation to each other.
  Furthermore, the bill addresses the problem of tax strategy patents. 
Unbelievably, tax strategy patents grant monopolies on particular ways 
that individual taxpayers can comply with the Tax Code.
  The Acting CHAIR (Ms. Foxx). The time of the gentleman has expired.
  Mr. SMITH of Texas. I yield the gentleman an additional 30 seconds.
  Mr. GOODLATTE. Over 140 tax strategy patents have already been 
issued, and more applications are pending. Tax strategy patents have 
the potential to affect tens of millions of everyday taxpayers, many 
who do not even realize that these patents exist. The Tax Code is 
already complicated enough without also expecting taxpayers and their 
advisers to become ongoing experts in patent law.
  Scores, hundreds of organizations in fact, support these reforms. It 
is important that this House supports the manager's amendment; and by 
the way, the United States Chamber of Commerce supports the manager's 
amendment and the bill.
  That is why I worked to include in H.R. 1249 a provision to ban tax 
strategy patents. H.R. 1249 contains such a provision which deems tax 
strategies insufficient to differentiate a claimed invention from the 
prior art. This will help ensure that no more tax strategy patents are 
granted by the PTO.
  Importantly, the House worked hard to find a compromise that will 
ensure

[[Page 9779]]

Americans have equal access to the best methods of complying with the 
Tax Code while also preserving the ability of U.S. technology companies 
to develop innovative tax preparation and financial management software 
solutions. I believe the language in H.R. 1249 strikes the right 
balance.
  By giving the necessary tools to the Patent Office to issue strong 
patents and by enacting litigation reforms, we will help to inject 
certainty about the patents that emerge from this process--patents 
rights that are more certain to attract more investment capital. This 
will allow independent inventors, as well as small, medium and large-
sized enterprises to grow our economy and create jobs.
  Ms. ZOE LOFGREN of California. Madam Chair, may I inquire as to how 
much time remains?
  The Acting CHAIR. The gentlewoman from California has 20 minutes 
remaining, and the gentleman from Texas has 17\1/2\ minutes remaining.
  Ms. ZOE LOFGREN of California. At this point, I would be honored to 
yield 3 minutes to the gentlelady from Texas, a member of the Judiciary 
Committee, Ms. Sheila Jackson Lee.
  Ms. JACKSON LEE of Texas. I thank the distinguished Member from 
California.
  To my colleagues on the floor, this has to be, could have been or 
hopefully can be one of the greatest opportunities for bipartisanship 
that we have seen in any number of years. That was the process that was 
proceeded under on the Judiciary Committee, though obviously there are 
always disagreements; but the whole idea of our debate and the support 
of the present underlying legislation without the manager's amendment 
was to, in fact, create jobs.
  In the committee, a number of my amendments were accepted, but in 
particular, the focus of converting from a first-inventor-to-use system 
to a first-inventor-to-file was thought to promote the progress of 
science by securing for a limited time to inventors the exclusive right 
for their discoveries and to provide inventors with greater certainty 
regarding the scope of protections granted by these exclusive rights.
  Further, this new system was to be, or should be, able to harmonize 
the United States patent registration system with similar systems used 
by nearly all other countries with whom the United States conducts 
trade. This was to shine the light and open the door on American 
genius.
  In addition, so many of us have waited so long to be able to give the 
resources to the PTO in order for it to do its job. We were aghast in 
hearings to hear that there is a 7,000-application backlog, so I rise 
as well to express enormous concern with the manager's amendment, 
which, as the PTO director has indicated, Dave Kappos, every time we do 
not process a PTO, or a patent, for some genius here in the United 
States, for some hardworking inventor, every patent that sits on the 
shelf at the PTO office is taking away an American job, and that job is 
not being created. As well, it is denying a product from going to the 
market, and it is someone's life that is not being saved, and our 
country ceases to grow.
  We need jobs in this country. We need a Patent Office that is going 
to expedite and move forward. We don't need discussions about lawyers 
fighting lawyers or trial lawyers. This is not a case of anti-lawyer 
legislation. We hope that some of the small businesses and large 
companies have their lawyers fighting to preserve and protect their 
patents. This bill will give them the opportunity to have that 
protection, but I am disappointed that all of a sudden the manager's 
amendment changed around and took an enormous amount of those fees and 
invested them elsewhere instead of helping our small businesses. I am 
also disappointed that we don't recognize that a bill that helps big 
businesses can help small businesses as well, so I had offered an 
amendment that would extend the grace period while the small business 
is working to fund its patent.
  The Acting CHAIR. The time of the gentlewoman has expired.
  Ms. ZOE LOFGREN of California. I yield the gentlewoman an additional 
15 seconds.
  Ms. JACKSON LEE of Texas. The period is now a year--I'd indicated 18 
months--because small businesses have to reach to others to help fund 
their inventions, and they let their secrets out of the bag. Eighteen 
months protects their disclosures for a period of time for them to be 
able to move forward.
  Lastly, I had a sunset provision that would help small businesses as 
well as relates to the sunset of the business method patents review.
  This could be a good bill. I hope that we can correct it, and I ask 
my colleagues to consider correcting this bill.
  Madam Chair, I rise in support of H.R. 1249, ``America Invents Act.'' 
However I am concerned over the drastic fee charges that were made in 
the new Manager's Amendment completely contrary to our agreement in the 
House Judiciary markup--it takes enormous amounts of money from the 
work of the PTO. As a Senior member of the Judiciary Committee and a 
member of the Subcommittee on Intellectual Property, Competition and 
the Internet, I am proud to support this legislation because in many 
ways the current patent system is flawed, outdated, and in need of 
modernization.
  The Judiciary Committee labored long and hard to produce legislation 
that reforms the American patent system so that it continues to foster 
innovation and be the jet fuel of the American economy and remains the 
envy of the world. This legislation incorporates amendments that I 
offered during the full committee markup as it recognizes the 
importance of converting from a first-inventor-to-use system to a 
first-inventor-to file will promote the progress of science by securing 
for a limited time to inventors the exclusive rights to their 
discoveries and provide inventors with greater certainty regarding the 
scope of protections granted by these exclusive rights. Further, this 
new system will harmonize the United States patent registration system 
with similar systems used by nearly all other countries with whom the 
United States conducts trade. This legislation will continue to ensure 
that the United States is at the helm of innovation.
  Our Nation's Founders recognized the integral role the patent system 
would play in the growth of our nation. Within our Constitution, they 
explicitly granted Congress with the power to issue patents. The 
Founders were supporting a fundamental part of the American dream which 
is to live in a free land where ideas can be shared thereby leading to 
the individual ingenuity, invention, and innovation.
  Madam Chair, Article I, Section 8, clause 8 of the Constitution 
confers upon the Congress 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.

  In order to fulfill the Constitution's mandate, we must examine the 
patent system periodically. The legislation before us represents the 
first comprehensive review of the patent system in more than a 
generation. It is right and good and necessary that the Congress now 
reexamine the patent system to determine whether there may be flaws in 
its operation that may hamper innovation, including the problems 
described as decreased patent quality, prevalence of subjective 
elements in patent practice, patent abuse, and lack of meaningful 
alternatives to the patent litigation process.
  On the other hand, we must always be mindful of the importance of 
ensuring that small companies have the same opportunities to innovate 
and have their inventions patented and that the laws will continue to 
protect their valuable intellectual property.
  The role of venture capital is very important in the patent debate, 
as is preserving the collaboration that now occurs between small firms 
and universities. We must ensure that whatever improvements we make to 
the patent laws are not done so at the expense of innovators and to 
innovation. The legislation before us, while not perfect, does a 
surprisingly good job at striking the right balance.
  From small towns to big cities, our country is filled with talent and 
genius. As it stands, the United States has four times as many patent 
applications filed here per year than in Europe. The United States 
Patent and Trademark office must have the tools to meet this demand. 
Failing to change the patent system as we know it will deny the men and 
women from around our nation fair and equal access to a streamlined and 
effective patent system.
  The current system has a backlog of hundreds of thousands of patents, 
nearly 700,000 applications are waiting to be reviewed. The USPTO is 
currently reviewing applications from 2007/2008, and using the fees 
received from the most recent patent applications to do

[[Page 9780]]

so due to limitations in the current system under which the USPTO is 
funded. This has caused inventors and business creators to wait on 
average three years prior to receiving a determination on whether or 
not their patents are valid.
  Without that determination it is nearly impossible for a small 
business to receive the necessary venture capital. That's a three-year 
waiting period for struggling small businesses; this is a three-year 
gap filled with financial uncertainty which leads to a three-year delay 
in job creation. Only 4 out of ten applications, or 42 percent, of 
patent applications are approved. It is vital to have approval prior to 
attaining financing because there is a 58 percent chance that a patent 
will not be approved. Given our current economic environment, a three 
year backlog is too long for any individual to wait to build a business 
which will create new jobs, especially at a time when jobs are sourly 
needed by many right now. Patent reform is the key to economic change 
that could lead to untapped job growth.
  Since the creation of the USPTO in 1790 it has issued 7,752,677 
patents and many of those patents have resulted in the creation of new 
jobs. In 2010, 121,179 patents granted by the USPTO originated in the 
United States of those granted 8,027 went to applicants in Texas. 
Imagine how many jobs could be created if there were not a 700,000 
patent application backlog.
  Our current system is outdated and the backlog makes it evident that 
our system is in serious need of change. Patent reform must reflect the 
major advances in our society over the last 50 years. Since the last 
major patent reform how we live has been transformed by a variety of 
inventions such as the home computer, ATM, video games, cellular phones 
and mobile devices, and life saving technologies like the artificial 
heart, all of which have been invented since any major reform of our 
patent system.
  Madam Chair, patent reform is a complex issue but one thing is clear 
the innovation ecosystem we create and sustain today will produce 
tomorrow's technological breakthroughs. That ecosystem is comprised of 
many different operating models. It is for that reason that we 
evaluated competing patent reform proposals thoroughly to ensure that 
sweeping changes in one part of the system do not result in unintended 
consequences to other important parts.
  Let me discuss briefly some of the more significant features of this 
legislation, which I will urge all members to support. H.R. 1249 
converts the U.S. patent system from a first-to-invent system to a 
first inventor-to-file system. The U.S. is alone in granting priority 
to the first inventor as opposed to the first inventor to file a 
patent. H.R. 1249 will inject needed clarity and certainty into the 
system. While cognizant of the enormity of the change that a ``first 
inventor-to-file'' system may have on many small inventors and 
universities, a study regarding first-to-file will be conducted by the 
Small Business Administration and the United States Patent Office to 
identify any negative impact this change may have on these inventors.
  Furthermore, H.R. 1249 adjusts the fee structure which funds the 
USPTO, giving them greater control over the fees they collect for 
patent services and enabling the USPTO to improve its efficiency and 
review more patents at a greater speed. Currently, the USPTO is funded 
solely by the fees its receives from it's users. However, not all the 
fees collected are available for use by the USPTO because Congress 
appropriates a specific amount, and any fees above the appropriated 
amount are used for other non-USPTO purposes. Under H.R. 1249, the 
USPTO will have greater control over the use of the fees it receives, 
giving them greater flexibility to make necessary improvements to the 
patent system.


                          SMALL BUSINESS FACTS

  Several studies, including those by the National Academy of Sciences 
and the Federal Trade Commission, recommended reform of the patent 
system to address what they thought were deficiencies in how patents 
are currently issued.
  The U.S Department of Commerce defines small businesses as businesses 
which employ less than 500 employees. According to the Department of 
Commerce in 2006 there were 6 million small employers representing 
around 99.7% of the nation's employers and 50.2% of its private-sector 
employment. In 2002 the percentage of women who owned their business 
was 28% while black owned was around 5%. Between 2007 and 2008 the 
percent change for black females who were self employed went down 2.5% 
while the number for men went down 1.5%.
  There were 386,422 small employers in Texas in 2006, accounting for 
98.7% of the state's employers and 46.8% of its private-sector 
employment. Since small businesses make up such a large portion of our 
employer network, it is important to understand how they will be 
impacted as a result of patent reform.
  In 2009, there were about 468,000 small women-owned small businesses 
compared to over 1 million owned by men
  The number of small employers in Texas was 386,422 in 2006, 
accounting for 98.7% of the state's employers and 46.8% of its private-
sector employment, 88,000 small business owners are black, 77,000 are 
Asian, 319,000 are Hispanic, 16,000 are Native Americans.


                   SMALL BUSINESSES AND JOB CREATION

  Small Businesses:
  Represent 99.7 percent of all employer firms.
  Employ just over half of all private sector employees.
  Generated 64 percent of net new jobs over the past 15 years.
  Create more than half of the nonfarm private gross domestic product 
(GDP).
  Hire 40 percent of high tech workers (such as scientists, engineers, 
and computer programmers).
  Made up 97.3 percent of all identified exporters and produced 30.2 
percent of the known export value in FY 2007.
  Produce 13 times more patents per employee than large patenting 
firms; these patents are twice as likely as large firm patents to be 
among the one percent most cited.
  Creativity and technological change are the engines for our economic 
growth. In our current economic climate, patents spur innovation and 
lay the foundation for future growth, by assuring inventors that they 
will receive the rewards for their effort. I urge all members to join 
me in supporting passage of this landmark legislation.
  Mr. SMITH of Texas. Madam Chair, I yield 3 minutes to the gentleman 
from Ohio (Mr. Chabot), who is the senior member of the Constitution 
Subcommittee and a senior member of the Intellectual Property 
Subcommittee of the Judiciary Committee.
  Mr. CHABOT. I first want to thank Chairman Smith and Chairman 
Goodlatte for their leadership in getting us to the point that we are 
on this important legislation here this evening.
  Section 8, clause 8 of the Constitution states that the Congress 
shall have 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.'' The Constitution 
clearly grants Congress the authority to grant patent rights to 
inventors, and it defers to the discretion of Congress how best to 
procedurally award these rights to the inventor.
  I rise in support of H.R. 1249, the America Invents Act. The first-
inventor-to-file provision shifts us to a system used by all other 
modern, industrial nations. This system would end the need for 
expensive discovery and litigation over priority dates and would put an 
end to expensive interference proceedings that small entities 
overwhelmingly lose.
  This provision also ensures that inventors can establish priority 
dates by filing simple and inexpensive provisional applications. This 
is a much needed change, which former U.S. Attorney General Michael 
Mukasey indicated would be both constitutional and wise. Congress has 
the right, in fact the duty, to protect those who invent or discover.

                              {time}  2030

  Through in-depth studies conducted by former U.S. PTO commissioners, 
the first-to-file system has been found to be faster and cheaper in 
resolving disputes among inventors. The current system creates an 
environment for exorbitantly expensive litigation. It has also become 
cost prohibitive for small businesses and independent inventors to 
fight the claims filed by larger corporations which can cost over half 
a million dollars just to litigate.
  In the past 7 years, only one independent inventor out of 3 million 
patent applications filed has successfully proved an earlier date of 
invention over the inventor who filed first. However, with the new 
first-inventor-to-file system, a bold timeline of filing dates will 
allow these small businesses and independent inventors to more easily 
defend and settle their disputes over the rightful patent holder.
  Lastly, the Supreme Court has never held that first-to-file is an 
unconstitutional procedure. We are now simply

[[Page 9781]]

returning to the system that our Founders originally established. It is 
a commonsense procedure that will spur more rapid innovation, yield new 
jobs, and stimulate the economy; and I think as we all know if we ever 
needed to get this economy moving and get America back to work, we're 
in that time right now.
  Ms. ZOE LOFGREN of California. I yield 2 minutes to the gentleman 
from Illinois (Mr. Manzullo).
  Mr. MANZULLO. Madam Chair, in my office there are two photographs, 
one with me and Edwards Deming and the other of Dr. Ray Damadian, who 
is the inventor of the MRI. Dr. Damadian visited our office, and I 
said, What's wrong with this bill? He said, Everything. He said, If 
this bill were law when I invented the MRI, today we would not have the 
MRI.
  There are a lot of problems with this bill. This is my fourth patent 
fight with my esteemed colleague from Texas, but we do agree on most 
issues; but now we have two persons who simply disagree on policy.
  Back in 2004 when I chaired the Small Business Committee, I was 
instrumental in putting in a fixed-fee structure for small businesses; 
and to do that, I had stricken from the bill the authority of the PTO 
Director to set fees. This new bill gives to the PTO Director the 
ability to set fees, even though the initial filing fees for small 
businesses have been lowered. The problem is that the PTO can come in 
and simply raise fees to so-call ``manage their operations.''
  In fact, two reports, ``The 21st Century Strategic Plan'' filed in 
June of 2002 by the U.S. PTO, said fees were based upon a highly 
progressive system aimed at strictly limiting applications containing 
very high numbers of claims and also the same thing in 2007. Their idea 
of decreasing claims in the patent office is to raise fees. Obviously, 
who's that going to hurt? It's going to be the little guy, and that's 
why it's one of many reasons I oppose this bill. But we should not 
delegate the authority that Congress has to set fees in one of the few 
constitutional functions that we have in this body over to somebody who 
has already stated that he's going to raise fees.
  You raise fees, guess who gets hurt--the future Ray Damadian, the 
little inventor, the people who invent things in this country, the true 
creators of jobs.
  Madam Chair, I rise in strong opposition to this anti-innovation 
bill. I believe this bill will stifle job creation and is 
unconstitutional.
  Over the past 40 years, the value of corporations has shifted from 
tangible assets, such as real estate and machinery, to intellectual 
property. During this same time period, the primary source of all net 
new job creation has come from start-up small companies.
  However, since the first major change to our patent system in 1994 
that altered the length of the patent from 17 years from award to 20 
years from filing, the number of patent awards from start-ups and 
small, individual inventors has dropped dramatically. Patents awarded 
to start-up firms decreased from 30 percent of all awards in 1993 to 18 
percent in 2009. Patents awarded to small inventors dropped from 12 
percent in 1993 to 5 percent in 2009.
  Why? America has slowly shifted towards a European-style patent 
system, which gives more opportunities to challenge a patent, resulting 
in delays in receiving approval for granting a patent, thus shortening 
the length of the exclusive use of the patent. Now, the average wait is 
three years. This bill would finalize the shift towards a European-
style patent system through changing from a ``first-to-invent'' to 
``first-to-file'' system; establishing a new set of ``prior use'' 
rights; and adopting a third European-style ``post-grant'' challenge.
  This bill would prompt a litigation boom, primarily inside the 
administrative review processes at the U.S. Patent and Trademark 
Office. In Europe, five percent of patents are challenged. In the 
United States, only 1.5 percent of patents are challenged in court, 
contrary to the misinformation from the other side of this debate that 
there is a litigation boom in patent cases. Japan dropped post-grant 
review in 2004 because it consumed 20 percent of their patent office 
resources. Canada saw a one-third increase in patent applications and 
clogged up its system when it shifted to ``first-to-file.'' Commenting 
on similar legislation in 2007, a former senior judge and Deputy 
Director of the IP Division of the Beijing High People's Court said the 
bill ``will weaken the right of patentees greatly, increase their 
burden, and reduce the remedies for infringement . . . the bill favors 
infringers and burdens patentees . . . It is not bad news for 
developing countries which have lower technological development and 
relatively fewer patents.'' That is why entrepreneurial organizations 
such as the National Small Business Association (NSBA) and the Angel 
Venture Forum oppose H.R. 1249.
  Second, I believe the bill is unconstitutional on several grounds. 
First, H.R. 1249 shifts from a ``first-to-invent'' system to ``first-
to-file.'' However, Article 1, Section 8 states that the Congress shall 
have power ``to promote the progress of science . . . by securing for 
limited times to . . . inventors the exclusive rights to their 
respective . . . discoveries.''
  The First Congress included 23 of the 55 delegates to the 
Constitutional Convention. Three other delegates served in the 
Executive Branch, including President George Washington. When examining 
the 1790 Patent Act, we know the intent of the Founding Fathers in 
patent law--the legislation clearly states that the patent goes to the 
``first and true'' inventor.
  This was recently reaffirmed in a June 6, 2011, Supreme Court 
decision written by Chief Justice John Roberts in Stanford v. Roche, in 
which he said that ``(s)ince 1790, the patent law has operated on the 
premise that rights in an invention belong to the inventor . . . 
Although much in intellectual property has changed in the 220 years 
since the first Patent Act, the basic idea that inventors have the 
right to patent their inventions has not.''
  In addition, two constitutional scholars specializing in patent law 
ranging the political spectrum agree that moving to a first to file 
system is unconstitutional. Jonathan Massey, former law clerk to 
Supreme Court Justice William Brennan and who represented former Vice 
President Al Gore in Bush v. Gore said, ``Our nation's founders 
understood that technological progress depends on securing patent 
rights to genuine inventors, to enable them to profit from their 
talents, investment, and effort . . . If the bill's provisions had been 
law in the 20th Century, the Wright Brothers would have been denied a 
patent for the airplane.''
  Adam Mossoff, Professor of Law at George Mason University and 
Chairman of the Intellectual Property Committee of the conservative 
Federalist Society said, ``In shifting from a first-to-invent to a 
first-to-file system, the America Invents Act contradicts both the text 
and the historical understanding of the Copyright and Patent Clause in 
the Constitution.'' But more importantly, of the only nine peer-
reviewed law journal articles on the subject of patent reform, all have 
concluded that adopting a ``first-to-file'' system is unconstitutional. 
So, if this bill becomes law, it will be tied up in litigation, further 
delaying innovation, until the Supreme Court rules on its 
constitutionality.
  Section 18 of H.R. 1249 also creates a special class of patents in 
the financial services sector subject to their own distinctive post-
grant administrative review and would apply retroactively to already 
existing patents. Governmental abrogation of patent rights represents a 
``taking'' of property and therefore triggers Fifth Amendment 
obligations to pay ``just compensation.'' Section 18 would shift the 
cost of patent infringement from financial services firms to the U.S. 
Treasury. Finally, the ``prior use'' provision in H.R. 1249 violates 
the ``exclusive'' use provision guaranteed to inventors under the 
Constitution.
  Thus, because this bill will hurt jobs and is unconstitutional, I 
urge my colleagues to oppose the bill. The manager's amendment does not 
fix any of the problems with the bill; in fact, it further compounds 
the problems with the bill. The first step to fixing our patent system 
is to fix the PTO. This manager's amendment would still allow patent 
fee diversion to take despite promises made in recent days. Permitting 
the PTO to retain its fees will allow the agency to hire more examiners 
and modernize its information technology infrastructure to reduce the 
massive backlog of pending patent applications. That's real patent 
reform; not this bill.
  Mr. SMITH of Texas. Madam Chair, I yield 1 minute to the gentleman 
from New Hampshire (Mr. Bass) for purposes of a colloquy.
  Mr. BASS of New Hampshire. I thank the chairman.
  I want to discuss some important legislative history of a critical 
piece of this bill, in particular, sections 102(a) and (b) and how 
those two sections will work together. I think we can agree that it is 
important that we set down a definitive legislative history of those 
sections to ensure clarity in our meaning.
  Mr. SMITH of Texas. I want to respond to the gentleman from New 
Hampshire and say that one key issue for clarification is the interplay 
between actions under section 102(a) and

[[Page 9782]]

actions under section 102(b). We intend for there to be an identity 
between 102(a) and 102(b). If an inventor's action is such that it 
triggers one of the bars under 102(a), then it inherently triggers the 
grace period subsection 102(b).
  Mr. BASS of New Hampshire. I believe that the chairman is correct. 
The legislation intends parallelism between the treatment of an 
inventor's actions under 102(a) and 102(b). In this way, small 
inventors and others will not accidentally stumble into a bar by their 
pre-filing actions. Such inventors will still have to be diligent and 
file within the grace period if they trigger 102(a); but if an inventor 
triggers 102(a) with respect to an invention, then he or she has 
inherently also triggered the grace period under 102(b).
  The Acting CHAIR. The time of the gentleman has expired.
  Mr. SMITH of Texas. I yield myself 30 seconds.
  Madam Chair, contrary to current precedent, in order to trigger the 
bar in the new 102(a) in our legislation, an action must make the 
patented subject matter ``available to the public'' before the 
effective filing date. Additionally, subsection 102(b)(1)(B) is 
designed to make a very strong grace period for inventors that have 
made a disclosure that satisfies 102(b). Inventors who have made such 
disclosures are protected during the grace period not only from their 
own disclosure but from other prior art from anyone that follows their 
disclosure. This is an important protection we offer in our bill.
  Ms. ZOE LOFGREN of California. Madam Chairwoman, I yield 2 minutes to 
my colleague from California (Mr. Rohrabacher).
  Mr. ROHRABACHER. Thank you very much, and I hope everyone is paying 
attention to what this is all about tonight.
  First of all, we have Dan Lungren, one of our Members who is a former 
Attorney General of California, along with Jim Sensenbrenner and John 
Conyers both the former chairmen of the Judiciary Committees, all of 
them adamant that this bill is unconstitutional. And now we have a 
discussion and we have a lot of people talking about backlogs and 
what's wrong with the efficiency of the patent system or the patent 
office as if that's what this is all about.
  It is not what this is all about. This, again, has been designed, 
this is a patent fight that's been going on 20 years. Basically, you 
have some very large multinational corporations who are trying to 
harmonize American patent law with the rest of the world, even though 
American patent law has been stronger than the rest of the world 
throughout our Republic's history. You weaken the patent protection of 
the American people; you are weakening their constitutional protections 
in the name of harmonizing it with Europe. Is that what we want to do? 
I don't think so. That will have dramatic impact on our country.
  Hoover Institution, one of the most highly respected think-tanks in 
the United States, had four of their scholars go after this bill; and 
here's three of the points they've made, through the many points, that 
said thumbs down on this America Invents Act. It is better called the 
patent rip-off bill. Here's what Hoover Institution said: the America 
Invents Act will protect large, entrenched companies at the expense of 
market challenging competitors. Read that: overseas multinational 
corporations. They also said, The bill wreaks havoc on property rights, 
and predictable property rights are essential for economic growth.
  This bill is a job killer, and the jobs that will be killed are in 
the United States of America, not the multinational corporation.
  The Acting CHAIR. The time of the gentleman has expired.
  Ms. ZOE LOFGREN of California. I yield the gentleman an additional 30 
seconds.
  Mr. ROHRABACHER. These multinational corporations, they're creating 
jobs overseas. They don't care if the jobs are lost here. The America 
Invents Act--here's Hoover Institution again--the America Invents Act 
would inject massive uncertainty into the patent system.
  We have had the strongest patent system in the world, and it has 
yielded us prosperity and security as a people. We do not need to 
change the fundamentals of this system and to harmonize with weaker 
systems throughout the world.
  I call for the people to vote against this patent rip-off bill.
  Mr. SMITH of Texas. Madam Chair, I yield 2 minutes to the gentleman 
from Arizona (Mr. Quayle), who is also the vice chairman of the 
Intellectual Property Subcommittee of the Judiciary Committee.
  Mr. QUAYLE. I thank the gentleman for yielding.
  Madam Chair, I rise in support of H.R. 1249, and one of the reasons I 
do is because it encourages innovation and entrepreneurship by reducing 
costly litigation within our patent system. Innovation is the key to 
America's immediate and future economic growth; and right now, many 
American innovators are being held back by an onerous and backlogged 
patent system. In order to unleash their job-creating potential, we 
must reform this system which hasn't been reformed in almost 60 years.

                              {time}  2040

  One way this bill tackles patent reform is by creating a business 
method patent pilot program in which administrative patent judges will 
review the validity of these patents if a challenger presents evidence 
showing that a patent is more likely than not invalid.
  Business method patents were not patentable until the late 1990s and 
have resulted in frivolous lawsuits which have cost between $5 million 
to $10 million per patent.
  These types of patents cover a ``method of doing or conducting 
business'' which includes printing ads at the bottom of a billing 
statement, ordering something online but picking it up in person, tax 
strategies, or getting a text when your credit card gets swiped.
  The tort abuse created by these patents has become legendary. Section 
18 of this bill has broad bipartisan support in the Senate and is an 
alternative to costly litigation that will save 90 percent of the costs 
incurred in civil litigation.
  I support Chairman Smith's work in creating a less costly, more 
efficient alternative to this abusive litigation and oppose any effort 
to strike section 18. As part of the Republican Conference's overall 
effort to spur job creation and economic growth, I urge passage of this 
important legislation.
  Ms. ZOE LOFGREN of California. Madam Chairman, I yield myself such 
time as I may consume.
  I want to talk a little bit about the manager's amendment under this 
general debate time because there is a very constrained amount of time 
for that discussion.
  I want to touch on two things in particular. First is the fee issue. 
I know that there's been discussion that somehow the fees won't be 
diverted under the manager's amendment, and I just think that is not a 
credible argument.
  I remember back in the year 2000 when we were promised that the fees 
would not be diverted by the appropriators, but then subsequent to 
that, there was diversion. And the truth is that so long as this is 
part of the appropriations process, the fees can, and I predict will 
be, diverted just as they were diverted during the adoption of the CR 
this year. The PTO estimates an $85 million to $100 million diversion 
of fees in the CR that was adopted earlier this year. That conceptually 
is really just a special tax on innovators. If you raise the fees and 
you divert it for general purposes, that's just a special tax on 
inventors, and I just think it's wrong and I cannot support it.
  I want to talk also, my colleague, Mr. Watt, said that other than the 
fee bill, we could resolve the issues, and I think we could have but 
we're not. There are two issues that I want to address and they are 
really closely related, and they're complicated but they're important.
  Under our laws, an idea must be new, useful, and nonobvious in order 
to receive patent protection, and this is evaluated in comparison to 
what's known as prior art. That's the state of

[[Page 9783]]

knowledge that exists prior to an invention. If an idea already exists 
in the prior art, you can't get a patent. Under current law, a variety 
of different things create prior art, such as descriptions of an idea 
in previous patents, printed publications, as well as public uses or 
sales. But current law has what's known as the grace period, which 
provides 1 year for an inventor to file a patent application after 
certain activities that would otherwise create patent-defeating prior 
art.
  So, for example, if an inventor published an article announcing a new 
invention, he or she would have a year under this grace period to file 
a patent application for it, and this is a very important provision of 
patent law. It's pretty unique, actually, to the United States. The PTO 
director, David Kappos, referred to this grace period as ``the gold 
standard of best practices.''
  As we move into the first-to-file system as is proposed in this bill, 
it is absolutely essential that the revised grace period extend to 
everything that is prior art under today's rules. Unfortunately, that 
is not the case in the manager's amendment. The grace period would 
protect, and this is a direct quote, ``only disclosures.'' Well, what 
would that not protect? Trade secrets. Offers for sale that are not 
public. You could have entrepreneurs who start an invention and start a 
small business who won't be able to get a patent for their invention 
under the grace period, and entrepreneurs might then be forced to delay 
bringing their products to market, which would slow growth. This needs 
to be addressed, not in a colloquy but in language, and we agreed in 
the committee when we stripped out language that didn't fix this that 
we would fix the 102(a) and (b) problem in legislation. There was a 
colloquy on the Senate floor similar to one that has just taken place, 
but we know that the language of the bill needs to reflect the intent. 
Judges look to the statute first and foremost to determine its meaning, 
and the legislative history is not always included.
  So the ambiguity that's in the measure is troublesome. And although 
we prepared an amendment to delineate it, it has not been put in order, 
and, therefore, this remedy cannot be brought forth, and small 
inventors and even big ones may have a problem.
  We now have our iPads on the floor, and while I was sitting here, I 
got an email from the general counsel of a technology company. I won't 
read the whole thing, but here is what this general counsel said:
  ``The prior use rights clause as written will be a direct giveaway to 
foreign competitors, especially those from countries where trade secret 
test is rampant.''
  What we're saying to American companies is that if you have a trade 
secret that you want to protect under the grace period prior art rules, 
you're out of luck. You are quite potentially out of luck. You'll 
either have to disclose that trade secret, and we know that there are 
serious concerns in doing that. We don't want to get into maligning 
countries around the world, but there are some that do not have the 
respect for intellectual property that we have. Or else we will say to 
that inventor or company that you can't use your own invention that you 
have devised without being held up for licensing fees with somebody who 
got to the office before you did.
  This is a big problem that is not resolved. Even if the manager's 
amendment is defeated, this problem will remain in the bill. It is an 
impediment to innovation and an impediment to making first-to-file 
work. If we're going to have first-to-file, and I can accept that, it 
must have robust, broad, rigorous protection under the grace period 
with a broad definition of a prior art that is protected. That is just 
deficient in this bill.
  This is, I know, down in the weeds. It's a little bit nerdy. We've 
spent many years talking about this in the Judiciary Committee. I'm 
just so regretful that this bill after so many years has gone sideways 
in the last 2 days and is something that we cannot embrace and 
celebrate.
  I reserve the balance of my time.
  Mr. SMITH of Texas. Madam Chair, I yield 2 minutes to the gentleman 
from Arkansas (Mr. Griffin), who is also a member of the Intellectual 
Property Subcommittee of the Judiciary Committee.
  Mr. GRIFFIN of Arkansas. Thank you, Mr. Chairman.
  Madam Chairman, I rise today in strong support of H.R. 1249, the 
America Invents Act, and I urge my colleagues to support it.
  Make no mistake, the America Invents Act is a jobs bill. At no cost 
to taxpayers, this legislation builds on what we as Americans do best: 
We innovate. Bolstering American innovation will create jobs at a time 
when we need it most.
  The America Invents Act ends fee diversion and switches the U.S. to a 
first-inventor-to-file system. These changes will streamline the patent 
application process to help American innovators bring their inventions 
to market. Each new commercialized invention has the potential to 
create American jobs. This is a jobs bill.
  A provision that I worked on included in the bill would make 
permanent the Patent and Trademark Office's ombudsman program for small 
business concerns. This program will provide support and services for 
independent inventors who may not have the resources to obtain legal 
counsel for guidance on obtaining a patent. This provision ensures that 
the small guys will always have a champion at the PTO to help them 
navigate the process.

                              {time}  2050

  In addition, the America Invents Act finally puts an end to fee 
diversion, a practice that has siphoned almost $1 billion in fees from 
the PTO over the past 20 years. Too many patent applications have sat 
untouched for years because the PTO does not have the resources it 
needs to review them in a timely manner. Ending fee diversion will 
expedite the review and unleash their potential to create American 
jobs.
  This bill is endorsed by the U.S. Chamber of Commerce, the National 
Association of Manufacturers, and the Small Business & Entrepreneurship 
Council. I urge my colleagues to support this jobs bill.
  Ms. ZOE LOFGREN of California. I continue to reserve the balance of 
my time.
  Mr. SMITH of Texas. Madam Chair, I yield 3 minutes to the gentleman 
from Virginia (Mr. Goodlatte), as I mentioned awhile ago, the chairman 
of the Intellectual Property Subcommittee of the Judiciary.
  Mr. GOODLATTE. Madam Chairman, it was mentioned earlier by one of 
those speaking in opposition to the bill that the National Association 
of Realtors was opposed to this legislation. And we will make available 
for the Record a letter that we received, dated 2 days ago, from the 
National Association of Realtors: ``On behalf of the 1.1 million 
members of the National Association of Realtors, we are pleased to 
support H.R. 1249, the America Invents Act.'' It goes on to explain in 
great detail why they, along with literally hundreds of other 
organizations, support this legislation. That includes the United 
States Chamber of Commerce, the National Association of Manufacturers, 
and the Retail Federation of America. There is a whole host of 
organizations and individual companies, both large and small, who 
support the legislation because they know that this is what is vital 
for job creation in this country.
  We need to have reform of our patent laws because, unfortunately in 
recent years, countries like China have overtaken us in the 
productivity of their patent office. And the fact of the matter is, 
unless we change our patent laws, we are going to continue to be at a 
disadvantage. And the advantages that we've had in the past are no 
longer available to us because, quite frankly, the complexity of 
inventions has increased; and more and more, we find ourselves in a 
situation where the laws that we operate under today, which were last 
updated in 1952, need to be updated to address a lot of the abuses that 
you've heard described here this evening.
  We also need to pass this legislation to make sure that the fee 
diversion,

[[Page 9784]]

that, as has been noted, has kept nearly $1 billion from going to the 
operation of the Patent Office to work down the 3-year 1 million patent 
backlog, also can be addressed. And we also need to recognize that this 
legislation, in addition to being a jobs bill, as recognized by all of 
these many, many, many companies and associations of various trade 
groups, it is also major litigation reform.
  It cuts out the abuses with tax strategy patents and other business 
method types of patents, where individuals do not produce anything 
other than lie in wait for somebody else to come up with a similar idea 
and then come forward and say, Hey, that was really my idea, and now 
you pay me a lot of money. They aren't creating jobs. They, in fact, 
are causing jobs to leave this country.
  So there are many reasons to support this legislation, and I would 
urge my colleagues to do so. We have not yet come to the manager's 
amendment, but it provides a critical component to making sure that fee 
diversion does not occur.
                                              National Association


                                                  of Realtors,

                                    Washington, DC, June 20, 2011.
     House of Representatives,
     Washington, DC.
       Dear Representative: On behalf of the 1.1 million members 
     of the National Association of REALTORS (NAR), we are 
     pleased to support H.R. 1249, the America Invents Act. NAR's 
     support, however, is predicated upon the retention of 
     important anti-fee diversion provisions contained in section 
     22 of the bill. NAR believes it is critically important that 
     the U.S. Patent Trademark Office have access to all user fees 
     paid to the agency by patent and trademark applicants. 
     Without this reform, delays in processing patent applications 
     will continue to undermine American innovation and stymie the 
     nation's economy.
       NAR, whose members identify themselves as REALTORS, 
     represents a wide variety of real estate industry 
     professionals. REALTORS have been early adopters of 
     technology and are industry innovators who understand that 
     consumers today are seeking real estate information and 
     services that are fast, convenient and comprehensive. 
     Increasingly, technology innovations are driving the delivery 
     of real estate services and the future of REALTORS' 
     businesses.
       The nation's patent law system faces many of the same 
     issues but has not kept pace. It has been more than 50 years 
     since the patent system's last major overhaul. Modernization 
     is critically needed to improve the quality of issued 
     patents, reduce the burden of unnecessary litigation on 
     businesses and refocus the nation's efforts on innovation and 
     job creation.
       As technology users, NAR and several of its members 
     currently find themselves facing onerous patent infringement 
     litigation over questionable patents launched by patent 
     holding companies and other non-practicing entities. Without 
     needed reforms that assure that asserted patent rights are 
     legitimate, the ability of businesses owned by REALTORS, 
     many of which are small businesses, to grow, innovate and 
     better serve modern consumers will be put at risk. For this 
     reason, NAR supports reforms such as expanded post-grant 
     review and prior user rights.
       The America Invents Act contains needed reforms geared 
     towards improving patent quality. NAR supports greater 
     transparency in the patent application process including 
     creating a mechanism to allow practitioners with the 
     expertise and knowledge to review and comment on the 
     appropriateness of a patent application prior to the issuance 
     of the patent and the creation of a streamlined and more 
     effective process for challenging a patent outside of the 
     judicial system. Finally, it is critically important that the 
     U.S. Patent Trademark Office have access to all user fees 
     paid to the agency by patent and trademark applicants. 
     Without this reform, delays in processing patent applications 
     will continue to undermine American innovation.
       The National Association of REALTORS supports H.R. 1249 
     with the section 22 anti-fee diversion provisions. We urge 
     the House to pass this much needed legislation with these 
     critical provisions.
           Sincerely,
                                                       Ron Phipps,
                                                   2011 President.

  Ms. ZOE LOFGREN of California. I yield myself such time as I may 
consume.
  I want to get back to the original reason why we've worked so hard on 
this bill, only to be here at the end of this process with a bill that 
we can't support. We started with hearings in the 1990s with the 
Federal Trade Commission and the National Academy of Science. And one 
of the things they pointed out was that there are more patents than 
there are inventions. We started focusing in on the abuse of litigation 
that occurred as well as the needs of the office.
  My colleague is correct: The Patent Office has a tremendous backlog, 
and that is a serious concern for inventors and really for the country. 
The examiners have such an enormous backlog, they can't spend 
sufficient time reviewing the applicants. This has led to a flood of 
poor-quality patents that were issued over the last decade and a half 
that I think--and most believe--should have been denied by the office. 
These dubious patents do significant damage to particular industries, 
like the information technology industry, as they can be used by 
nonpracticing entities to demand rents from legitimate businesses and 
to interfere with the development of legitimate products. Now, I don't 
blame the examiners at the PTO. They are working hard, but they don't 
have enough time to give each application the consideration it 
deserves.
  A bill, as approved by the Judiciary Committee, would have helped 
remedy this problem by making sure--a lot of people don't realize that 
the Patent Office doesn't get any taxpayer money. The Patent Office is 
entirely supported by fees submitted by inventors. So keeping all of 
those fees that the inventors are paying in the office so that the 
patents can properly be dealt with in a timely fashion was a key 
component of this measure. Unfortunately, under the manager's 
amendment, that strong protection is simply gone.
  And I know, as I said in the past, we've had unanimous votes in the 
Judiciary Committee. We've had promises never to do it again; but the 
diversions have continued, and it is clear that they will continue 
under the manager's amendment provision because it allows the regular 
process to continue as it has in the past.
  I have not submitted lists of letters of who's in favor, who's 
opposed to this bill. It's my understanding that the Realtors 
Association is, in fact, opposed to the manager's amendment; but we're 
not going to vote on these amendments tonight. We're rolling these 
votes until tomorrow. So we will research that, and we will find the 
truth of where they are and make that information available to the 
Members because certainly Realtors are a very valuable part of our 
Nation's economy.
  I want to talk a little bit as well about whether we can fix the 
defect on prior art by an amendment that will be offered later in the 
week by the gentleman from Michigan (Mr. Conyers) and the gentleman 
from California (Mr. Rohrabacher). They propose that the first-to-file 
patent system that is being promoted to harmonize our system with other 
countries would not go into effect until the grace period, which is the 
critical part of the patent system, actually is fixed and harmonized.
  If the manager's amendment is passed, the fatal defect of defining 
the prior art is disclosures, I don't believe can be fully remedied by 
this amendment, although I think that this amendment is a good one, and 
I intend to support it. So I think it's very important that the 
manager's amendment be defeated. I would hope that if that happens, 
that we might have a chance to step back and to fully examine where we 
are in terms of the prior user rights and the grace period because, as 
the patent commissioner had said, this is the gold standard, the United 
States has had the gold standard in patents with this grace period. It 
would be a shame not just for the Congress but for our country and our 
future as innovators to lose this genius part of our patent system.
  I reserve the balance of my time.

                              {time}  2100

  Mr. SMITH of Texas. Madam Chair, I yield 2\1/2\ minutes to the 
gentleman from Virginia (Mr. Goodlatte).
  Mr. GOODLATTE. Madam Chairman, the gentlewoman has expressed concern 
about the fee diversion provision in the manager's amendment. I think 
it is actually a very good provision; and it will, for the first time, 
end fee diversion at the Patent and Trademark Office by statute. It 
accomplishes both our overarching policy goals and maintains 
congressional oversight.
  For the first time, we are establishing an exclusive PTO reserve fund

[[Page 9785]]

that will collect all excess PTO fees and bring an end to fee 
diversion. It's been expressed on the other side of the aisle that 
maybe with the authority to set fees that is granted for a limited 
period of time in this bill, there will be an abuse in the Patent 
Office. But it can't be abused very much because the fees will still be 
subject to appropriations here in the Congress. They can't spend them 
on other things. They can't divert them, but they can put them in 
escrow, and they can require the PTO to come in and justify those fees 
before they're authorized. There will be no incentive to have excess 
fees if there can't be excess expenditures because of congressional 
oversight.
  Patent reform has been a long road; and with the inclusion of this 
provision, we have ensured that all funds collected by the PTO will 
remain available to them and may not be diverted to any other use.
  Ending fee diversion has been an important goal for all of us; and as 
we crafted legislation, our ultimate policy goal was to ensure that PTO 
funds are not diverted for other uses, such as earmarks or for other 
agencies.
  Working with leadership and the Appropriations Committee, we 
developed a compromise provision that accomplishes our shared policy 
goal through a statutorily created PTO reserve fund.
  This compromise was carefully brokered by leadership to ensure that 
it aligned with House rules and did not include mandatory spending that 
would have resulted in a score. Just a few months ago, including a 
provision like this one would have been unheard of, and no such 
provision has been included in patent bills considered by previous 
Congresses.
  All excess fees that the PTO collects will be deposited into the PTO 
reserve fund and amounts in the fund ``shall be made available until 
expended only for obligation and expenditure by the Office.''
  This compromise provision also ensures that the Appropriations and 
Judiciary Committees will continue to have oversight over the PTO. 
Though PTO remains within the appropriations process, the appropriators 
no longer have an incentive to divert fees. In other words, because 
excess fees are made available to the PTO, there will be no scoring 
advantage to the Appropriations Committee to decrease the 
appropriations, and this will not impact their 302(b) allocation for 
Commerce, Justice, State appropriations.
  I urge my colleagues to support the manager's amendment.
  By creating the Reserve Fund, we have walled-off PTO funds from 
diversion. All the excess fees are collected and deposited into the 
Fund and are made available in Appropriations Acts and cannot be 
``diverted'' to other non-PTO purposes.
  PTO funding would still be provided in Appropriations Acts, but the 
language carried in those Acts will appropriate excess fee collections 
and provide a clear and easy mechanism for PTO to request access to 
those funds.
  By giving USPTO access to all its funds, the Manager's Amendment 
supports the USPTO's efforts to improve patent quality and reduce the 
backlog of patent applications. To carry out the new mandates of the 
legislation and reduce delays in the patent application process, the 
USPTO must be able to use all the fees it collects.
  The language in the Manager's Amendment reflects the intent of the 
Judiciary Committee, the Appropriations Committee and House leadership 
to end fee diversion. USPTO is 100% funded by fees paid by inventors 
and trademark filers who are entitled to receive the services they are 
paying for. The language makes clear the intention not only to 
appropriate to the USPTO at least the level requested for the fiscal 
year but also to appropriate to the USPTO any fees collected in excess 
of such appropriation.
  Providing USPTO access to all fees collected means providing access 
at all points during that year, including in case of a continuing 
resolution. Access also means that reprogramming requests will be acted 
on within a reasonable time period and on a reasonable basis. It means 
that future appropriations will continue to use language that 
guarantees USPTO access to all of its fee collections.
  Appropriations Chairman Rogers is committed to this agreement and to 
ending fee diversion at the PTO, and I appreciate his efforts.
  This provision represents a sea change of improvement over the 
current system and I urge all Members to strongly support this end to 
fee diversion at the PTO. This amendment, including the commitment from 
Chairman Rogers to Leadership ensures that all the user fees that the 
PTO collects will be available to the PTO so that they can get to work 
to reduce patent pendency and the backlog, and issue strong patents.
  Ms. ZOE LOFGREN of California. May I inquire how much time remains.
  The Acting CHAIR. The gentlewoman from California has 15 seconds 
remaining.
  Ms. ZOE LOFGREN of California. Well, I will use those 15 seconds, 
Madam Chair, by saying just a few things. First, the litigation reform 
mentioned is really to retroactively undo a case that was fairly and 
squarely won in the courts.
  Number two, that section 18 is basically just a giveaway to the 
banks. There's some good things in this bill. The post-grant review, 
overall it does more harm than good.
  I yield back the balance of my time.
  Mr. SMITH of Texas. I yield myself the balance of the time.
  Madam Chair, in closing, I want to thank the patent principles who 
devoted so much time, energy and intellect to this project. We've 
worked together for the common goal of comprehensive patent reform for 
the better part of 6 years.
  While some of us still have differences over individual items, I want 
these Members to know that I appreciate their contributions to the 
project. This includes, among many others, Mr. Goodlatte, Mr. Watt, Mr. 
Issa, and Mr. Berman.
  In the Senate we've worked closely with Senators Leahy, Grassley, 
Kyl, Hatch and others; and I want to thank them as well.
  Also, we would not be at this point tonight without the support of 
Commerce Secretary Locke and PTO Director Kappos.
  Our country needs this bill. We can't thrive in the 21st century 
using a 20th-century patent system. At a time when the economy remains 
fragile and unemployment is unacceptably high, we must include the 
patent system and the PTO, an agency that has been called an essential 
driver of a pro-growth job-creating agenda.
  This bill will catapult us into a new era of innovation and enhanced 
consumer choice. I urge my colleagues to support H.R. 1249.
  Mrs. CHRISTENSEN. Madam Chair, I rise today to express my strong 
support for H.R. 1249--a smart bill that fixes an anomaly in the patent 
law by addressing the confusion around the deadline for filing patent 
term extensions. This bill--which has broad bipartisan support in both 
chambers--will ensure that if the FDA notifies a company after normal 
business hours that its drug has been approved, then the time that the 
company has to file a patent term extension application does not begin 
to run until the next business day.
  I support this bill not only because it protects the rights of patent 
holders, but also because it will help inspire greater investments in 
the development of new drugs that not only could save millions of 
lives, but also could play a pivotal role in reducing racial and ethnic 
health disparities. Take, for example, a blood thinning drug that was 
proven very effective in treating and preventing stroke--the third 
leading cause of death in the nation, and a cause of death from which 
African American men are 52% more likely to die than white men, and 
African American women are 36% more likely to die than white women.
  But for an unintentional one-day filing delay, the developer of this 
drug would have been entitled to secure a patent term restoration. And, 
with that term restoration, the company would have been positioned to 
invest the additional resources to qualify the drug for the treatment 
and prevention of stroke and for expanded use in heart surgeries. This 
medical advancement would undoubtedly have saved countless lives and 
improved the health and wellbeing of tens of thousands of Americans.
  Absent the correction provided by this bill, however, none of what 
could have--and should have--happened ever did happen, and, as a 
result, a great medical advancement never came to fruition. This bill 
would ensure that the situation that occurred with the promising blood 
thinning drug does not happen again. And, this bill fixes an anomaly 
that not only jeopardizes the development of life-saving drugs, but 
also jeopardizes the health and wellness of innocent, hardworking 
Americans. I urge all of my colleagues to be a key part of

[[Page 9786]]

the solution to this problem by supporting this bill.
  Ms. PELOSI. Madam Chair, I rise in opposition to this patent reform 
bill, misnamed the America Invents Act.
  It had been our hope that we would be voting on a patent bill that 
encourages entrepreneurship, protects intellectual property rights, and 
sends a message abroad that strengthens patent rights at home. The bill 
before us fails on all these scores.
  Instead, by favoring large international companies, we have before us 
a missed opportunity to encourage entrepreneurship. It is a missed 
opportunity to strengthen intellectual property rights here at home.
  For these and other reasons, I urge my colleagues to vote no on the 
Manager's amendment, yes on the Boren-Sensenbrenner-Waters-Schock 
amendment, and no on the final passage of this disappointing bill. 
Let's go back to the drawing board for a real bill to keep America 
number one.
  Ms. WASSERMAN SCHULTZ. Madam Chair, today I rise in support of H.R. 
1249, the America Invents Act.
  This vital reform to our nation's patent system would help spur 
innovation, foster competition, and create and support American jobs.
  Democrats in Congress have urged our colleagues across the aisle to 
bring legislation to the Floor and today we have an opportunity to 
support legislation to create jobs and support our recovering economy.
  That is why this legislation is a priority of the Obama 
Administration--the bill represents a significant step in the right 
direction toward American job growth and is crucial to winning the 
future through innovation.
  I urge my colleagues to support this bill's benefits for American 
inventors, manufacturers, and jobs.
  I also urge my colleagues to support this bill because it includes a 
provision that will help engender much-needed patient protection and 
choice for patients undergoing genetic diagnostic tests.
  As many, of you know, several years ago, I was diagnosed with breast 
cancer.
  Through genetic testing, I discovered that I am a carrier of the 
BRCA-2 gene mutation, which drastically increased my lifetime risk of 
ovarian cancer and recurring breast cancer.
  As a result, I made the life-altering decision to have seven major 
surgeries--a double mastectomy and an oophorectomy--from a single 
administration of a single test.
  You see, there is only one test on the market for this mutation.
  The maker of this test not only has a patent on the gene itself; they 
also have an exclusive license for limited laboratories to administer 
the test.
  Like genetic tests for colon cancer, Parkinson's disease, Alzheimer's 
disease, stroke, and many other genetic disorders, there is no way to 
get a truly independent second opinion.
  In approximately 20 percent of all genetic tests, only one laboratory 
can perform the test due to patent exclusivity for the diagnostic 
testing, and often the actual human gene being tested.
  Just imagine: Your genes hold the key to your survival; having major, 
body-altering surgery or treatment could save you life; but the test 
results fail to give you certainty.
  The America Invents Act begins to address this problem.
  A provision in the Manager's amendment simply directs a study by the 
U.S. Patent and Trademark Office on ways to remove barriers for patient 
access to second opinions on genetic testing on patented genes.
  Such a study would address questions about the current effects such 
patents have on patient outcomes and how best to provide truly 
independent, confirmatory tests.
  Given ongoing court cases on the issue of gene patents, let me be 
clear: the study's focus on second opinion genetic testing is not 
intended to express any opinion by Congress regarding the validity of 
gene patents.
  By allowing clinical laboratories to confirm the presence or absence 
of a gene mutation found in a diagnostic test, we can help Americans 
access the second opinions they truly deserve.
  I know first-hand the stress of wanting a second opinion--but being 
unable to get it.
  With so much at stake, it is incredibly important that we give 
everyone in this situation as much certainty as we possibly can.
  We owe that much to those whose lives are in the balance.
  Mr. GALLEGLY. Madam Chair, I rise in strong support of this bill. 
First, I would like to recognize Chairman Smith's extraordinary work on 
behalf of American inventors. This bill is a well-crafted compromise 
that will streamline the patent process, while improving the quality of 
patents.
  Although I do not support every single provision of this legislation, 
it is critical that the House of Representatives pass H.R. 1249.
  I am especially pleased that Chairman Smith included a provision that 
helps many businesses in the United States, including several in my 
district, who have been forced to spend time and money to defend 
themselves against so-called ``false marking'' lawsuits.
  By law, patent holders are required to place the patent number on 
their products. The problem is that after the patent expires, it may be 
very costly for a business to recall their products to change the 
label. Unfortunately, several law firms have discovered that suing 
these manufacturers can be lucrative, and we have seen a sharp increase 
in the number of these nuisance lawsuits.
  This bill includes a commonsense solution that will stop these 
lawsuits and allow employers to devote resources to developing new 
products and creating jobs.
  I urge my colleagues to support this important legislation.
  Mr. PENCE. Madam Chair, I rise in support of H.R. 1249, the America 
Invents Act, which is a carefully-crafted compromise that will 
modernize our nation's patent laws to allow for greater innovation, 
economic growth and job creation.
  Years of hard work have gone into this bill. I would like to 
congratulate and thank Chairman Smith and Rep. Goodlatte for their 
leadership and diligence.
  The Constitution vests in Article I, Section 8, clause 8, the power 
to Congress to ``promote the Progress of Science and useful Arts, by 
securing for limited Times to . . . Inventors the exclusive Right to 
their . . . Discoveries.''
  Our patent laws were written nearly sixty years ago, and it is time 
to update them to account for changes in our modern economy. It is 
Congress's power and responsibility to do so, especially with the 
problems that are evident with the patent system today.
  And not doing so will cost our country even more jobs. Patent reform 
is about jobs because intellectual property, like other forms of 
private property, is a pillar of economic prosperity. Part of creating 
a pro-growth environment in this country includes modernizing our 
patent laws.
  I have heard about the need for modernization from countless Hoosier 
business leaders, patent holders and entrepreneurs. Indiana has a long 
tradition of leadership in the life sciences and medical industry. 
Indiana also has a robust university research system, growing tech 
industry and, of course, a manufacturing industry that grows more high-
tech with each passing year.
  These and many other sectors of the Hoosier economy will benefit from 
the reforms in this bill. When inventors and entrepreneurs are able to 
protect their inventions and speed them to market, it creates jobs not 
only for researchers and inventors, but also for factory workers, 
distributors, sales associates, and marketing teams to name a few.
  This bill will ensure that newly-issued patents will be strong, high-
quality patents that have gone through rigorous review. It will 
modernize the U.S. Patent and Trademark Office to reduce the current 
backlog of more than 700,000 patent applications, and it will ensure 
that the PTO, with proper congressional oversight, is able to retain 
the fees it collects to fund its operations. Finally, this patent 
reform bill will go a long way towards eliminating the lawsuit abuse 
that has become so prevalent in recent years.
  Of personal interest to me, I am pleased that the bill before us 
incorporates the changes to best mode that I obtained during the 2007 
patent reform debate and floor vote.
  American patent law currently requires that a patent application 
``set forth the best mode contemplated by the inventor of carrying out 
his invention'' at the time the application is filed. But providing the 
best mode is not a requirement in Europe, Japan or the rest of the 
world and it has become a vehicle for lawsuit abuse.
  In my view, the best mode requirement of American law imposes 
extraordinary and unnecessary costs on inventors. I have maintained 
since 2007 that best mode should be repealed in full, and I would 
continue to support a full repeal if possible today.
  But, at the very least, I am pleased that the bill before us, like my 
amendments from 2007, only retains best mode as a specifications 
requirement for obtaining a patent. Once the examiner is satisfied that 
the best mode has been disclosed, the issue is settled forever. Going 
forward, best mode cannot be used as a legal defense to infringement in 
patent litigation or a basis for a post-grant review proceeding.
  The America Invents Act will enable America to continue to be the 
world's leader in innovation. It will lay the groundwork for 
intellectual property protection that will help grow our economy and 
create jobs both in the Hoosier state and across the nation.

[[Page 9787]]

  After so many years, I am encouraged that we are on the cusp of 
passing this bill out of the Congress and sending it to the president. 
I urge my colleagues to support the America Invents Act today.
  Mr. SMITH of New Jersey. Madam Chair, for over two decades, USPTO has 
had an internal policy that human beings at any stage of development 
are not patentable subject matter under 35 U.S.C. Section 101. I 
commend Chairman Lamar Smith for including in the manager's amendment 
to H.R. 1249, the America Invents Act, a provision that will codify an 
existing pro-life policy rider included in the CJS Appropriations bill 
since FY2004. This amendment, commonly known as the Weldon amendment, 
ensures the U.S. Patent and Trade Office, USPTO, does not issue patents 
that are directed to or encompassing a human organism.
  Codifying the Weldon amendment simply continues to put the weight of 
law behind the USPTO policy.
  This amendment and USPTO policy reflect a commonsense understanding 
that no member of the human species is an ``invention,'' or property to 
be licensed for financial gain. Patents on human organisms commodify 
life and allow profiteers to financially gain from the biology and life 
of another human person.
  Codifying a ban on patenting of humans would not violate 
international obligations under the TRIPs agreement with the WTO, in 
which member countries can exclude from patentability subject matter to 
prevent commercial exploitation which is ``necessary to protect ordre 
public or morality, [and] to protect human, animal or plant life.'' 
(The Agreement on Trade-Related Aspects of Intellectual Property 
Rights, Article 27, Section 5).
  Even the European Union prevents patents on human embryos on the 
basis of morality and public order without conflicting with the TRIPs 
agreement. (See Guidelines for Substantive Examination. European Patent 
Office. Part C, Chapter IV, Section 4.5, iii (Rule 28c))

                    4.5 Biotechnological inventions

       In the area of biotechnological inventions, the following 
     list of exceptions to patentability under Art. 53(a) is laid 
     down in Rule 28. The list is illustrative and non-exhaustive 
     and is to be seen as giving concrete form to the concept of 
     ``ordre public'' and ``morality'' in this technical field. 
     Under Art. 53(a), in conjunction with Rule 28, European 
     patents are not to be granted in respect of biotechnological 
     inventions which concern:
       (iii) uses of human embryos for industrial or commercial 
     purposes; The exclusion of the uses of human embryos for 
     industrial or commercial purposes does not affect inventions 
     for therapeutic or diagnostic purposes which are applied to 
     the human embryo and are useful to it (EU Dir.98/44/EC, rec. 
     42).

  I also submit into the Record items from previous debate on the 
Weldon amendment that will add further clarification to the intent of 
this important provision.

Speech of Hon. Dave Weldon of Florida in the House of Representatives, 
                             July 22, 2003

                              H. Admt. 286

       Departments of Commerce, Justice, and State, the Judiciary, 
     and Related Agencies Appropriations Act, 2004--(House of 
     Representatives--July 22, 2003)


               Amendment Offered by Mr. Weldon of Florida

       Mr. WELDON of Florida. Mr. Chairman, I offer an amendment.
       The CHAIRMAN pro tempore. The Clerk will designate the 
     amendment.
       The text of the amendment is as follows:
       Amendment offered by Mr. Weldon of Florida:
       None of the funds appropriated or otherwise made available 
     under by the act may be used to issue patents on claims 
     directed to or encompassing a human organism.
       Mr. WELDON of Florida. Mr. Chairman, technology proceeds at 
     a rapid rate, bringing great benefits to humankind from 
     treatments of disease to greater wealth and greater knowledge 
     of our world. However, sometimes technology can be used to 
     undermine what is meant to be human, including the 
     exploitation of human nature for the purpose of financial 
     gain.
       Several weeks ago, at a meeting of the European Society of 
     Human Reproduction and Embryology in Madrid, Spain, it was 
     reported that scientists had created the first male-female 
     hybrid human embryos. The researchers transplanted cells from 
     male embryos into female embryos and allowed them to grow for 
     6 days. This research was universally condemned as 
     unnecessary and unethical.
       Reuters reported that one member of the European Society 
     condemned this research, saying there are very good reasons 
     why this type of research is generally rejected by the 
     international research community. Furthermore, the scientists 
     who created these she-male embryos reportedly want to patent 
     this research.
       It is important that we, as a civilized society, draw the 
     line where some rogue scientists fail to exercise restraint. 
     Just because something can be done does not mean that it 
     should be done. A patent on such human organisms would last 
     for 20 years. We should not allow such researchers to gain 
     financially by granting them an exclusive right to practice 
     such ghoulish research.
       Long-standing American patent and trademark policy states 
     that human beings at any stage of development are not 
     patentable, subject to matters under 35 U.S.C. section 101. 
     Though current policy would not issue patents on human 
     embryos, Congress has remained silent on this subject. Though 
     this amendment would not actually ban this practice, it is 
     about time that Congress should simply reaffirm current U.S. 
     patent policy and ensure there is not financial gain or 
     ownership of human beings by those who engage in these 
     activities.
       This amendment simply mirrors the current patent policy 
     concerning patenting humans. The Patent Office has, since 
     1980, issued hundreds of patents on living subject matter, 
     from microorganisms to nonhuman animals. It does not issue 
     patents on human beings nor should it. Congress should 
     reaffirm this policy, and this amendment simply accomplishes 
     this by restricting funds for issuing patents on human 
     embryos, human organisms.
       Congress should speak out, and I encourage my colleagues to 
     support this amendment.
       I would like to add, Mr. Chairman, that this has no bearing 
     on stem cell research or patenting genes, it only affects 
     patenting human organisms, human embryos, human fetuses or 
     human beings.
       Mr. OBEY. Mr. Chairman, will the gentleman yield?
       Mr. WELDON of Florida. I yield to the gentleman from 
     Wisconsin.
       Mr. OBEY. Mr. Chairman, I thank the gentleman for yielding 
     to me.
       I think I heard the gentleman say this, but I want it 
     repeated again so it is clear. Is the gentleman saying that 
     this amendment would not interfere in any way with any 
     existing patents with respect to stem cells?
       Mr. WELDON of Florida. Reclaiming my time, Mr. Chairman, I 
     would respond that, no, it would not. And I recognize that 
     there are many institutions, particularly in Wisconsin, that 
     have extensive patents on human genes, human stem cells. This 
     would not affect any of those current existing patents.
       The Patent Office policy is not to issue these patents, and 
     there never has been one. The Congress has been silent on 
     this issue. I am trying to put us on record that we support 
     the Patent Office in this position that human life in any 
     form should not be patentable.
       Mr. OBEY. I appreciate the gentleman's clarification.
       Mr. WELDON of Florida. Mr. Chairman, I yield back the 
     balance of my time.
       The CHAIRMAN pro tempore (Mr. Terry). The question is on 
     the amendment offered by the gentleman from Florida (Mr. 
     Weldon). The amendment was agreed to.
                                  ____


 Speech of Hon. Dave Weldon of Florida in the House of Representatives 
                      Wednesday, November 5, 2003

       Mr. WELDON of Florida. Mr. Speaker, this summer I 
     introduced an amendment that provides congressional support 
     for the current federal policy against patenting humans. It 
     was approved by the House of Representatives without 
     objection on July 22, 2003 as Sec. 801 of the Commerce/
     Justice/State appropriations bill.
       Since that time, the Biotechnology Industry Organization 
     (BIO) has launched a lobbying campaign against the amendment, 
     and has now enlisted the political aid of the broader 
     ``Coalition for the Advancement of Medical Research'' (CAMR), 
     an umbrella organization of groups supporting human cloning 
     for research purposes.
       BIO and CAMR claim to support the current policy of the 
     U.S. Patent and Trademark Office (USPTO) against patenting 
     human beings. However, they oppose this amendment, saying it 
     would have a far broader scope--potentially prohibiting 
     patents on stem cell lines, procedures for creating human 
     embryos, prosthetic devices, and in short almost any drug or 
     product that might be used in or for human beings.
       The absurdity of these claims is apparent when one compares 
     the language of the amendment with the language of the 
     current USPTO policy that these groups claim to support.
       The House-approved amendment reads:
       ``None of the funds appropriated or otherwise made 
     available under this Act may be used to issue patents on 
     claims directed to or encompassing a human organism.''
       The current USPTO policy is set forth in two internal 
     documents:
       U.S. Patent and Trademark Office, ``Notice: Animals--
     Patentability,'' 1077 Official Gazette U.S. Pat. and 
     Trademark Off. 8 (April 21, 1987):
       ``The Patent and Trademark Office now considers non-
     naturally occurring non-human multicellular living organisms, 
     including animals, to be patentable subject matter within the 
     scope of 35 U.S.C. 101. . . . A claim directed to or 
     including within its scope a human being will not be 
     considered patentable subject matter under 35 U.S.C.

[[Page 9788]]

     101. The grant of a limited, but exclusive property right in 
     a human being is prohibited by the Constitution. Accordingly, 
     it is suggested that any claim directed to a non-plant 
     multicellular organism which would include a human being 
     within its scope include the limitation `non-human' to avoid 
     this ground of rejection.''
       (This notice responded to the Supreme Court's 1980 decision 
     in Chakrabarty concluding that a modified ``microorganism,'' 
     a bacterium, could be patented, and a subsequent decision by 
     the USPTO's own Board of Appeals in Ex parte Allen that a 
     multicellular organism such as a modified oyster is therefore 
     patentable as well. The USPTO sought to ensure that these 
     policy conclusions would not be misconstrued as allowing a 
     patent on a human organism.)
       U.S. Patent and Trademark Office, Manual of Patent 
     Examining Procedure (Revised February 2003), Sec. 2105: 
     ``Patentable Subject Matter--Living Subject Matter'':
       ``If the broadest reasonable interpretation of the claimed 
     invention as a whole encompasses a human being, then a 
     rejection under 35 U.S.C. 101 must be made indicating that 
     the claimed invention is directed to nonstatutory subject 
     matter.''
       In other words, the USPTO clearly distinguishes between 
     organisms that are nonhuman and therefore are patentable and 
     those organisms that are human and therefore not patentable 
     subject matter.
       As a USPTO official testified recently to the President's 
     Council on Bioethics:
       ``When a patent claim includes or covers a human being, the 
     USPTO rejects the claim on the grounds that it is directed to 
     non-statutory subject matter. When examining a patent 
     application, a patent examiner must construe the claim 
     presented as broadly as is reasonable in light of the 
     application's specification. If the examiner determines that 
     a claim is directed to a human being at any stage of 
     development as a product, the examiner rejects the claims on 
     the grounds that it includes non-statutory subject matter and 
     provides the applicant with an explanation. The examiner will 
     typically advise the applicant that a claim amendment adding 
     the qualifier, nonhuman, is needed, pursuant to the 
     instructions of MPEP 2105. The MPEP does not expressly 
     address claims directed to a human embryo. In practice, 
     examiners treat such claims as directed to a human being and 
     reject the claims as directed to non-statutory subject 
     matter.'' (Testimony of Karen Hauda on behalf of USPTO to the 
     President's Council on Bioethics, June 20, 2002, http://
bioethicsprint.bioethics.gov/transcripts/jun02/june2I 
     session5.html)
       Current USTPO policy, then, is that any claim that can 
     reasonably be interpreted as ``directed to'' or 
     ``encompassing'' a human being, and any claim reaching beyond 
     ``nonhuman'' organisms to cover human organisms (including 
     human embryos), must be rejected. My amendment simply 
     restates this policy, providing congressional support so that 
     federal courts will not invalidate the USPTO policy as going 
     beyond the policy of Congress (as they invalidated the 
     earlier USPTO policy against patenting living organisms in 
     general). Literally the only difference between my amendment 
     and some of these USPTO documents is that the amendment uses 
     the term ``human organism,'' while the USPTO usually speaks 
     of the non-patentability of (anything that can be broadly 
     construed as) a ``human being.'' But ``human organism'' is 
     more politically neutral and more precise, having a long 
     history of clear interpretation in federal law.
       Since 1996, Congress has annually approved a rider to the 
     Labor/HHS appropriations bill that prohibits federal funding 
     of research in which human embryos are created or destroyed--
     and this rider defines a human embryo as a ``human organism'' 
     not already protected by older federal regulations on fetal 
     research. In December 1998 testimony before the Senate 
     Appropriations Subcommittee on Labor/HHS/Education, a wide 
     array of expert witnesses--including NIH Director Harold 
     Varmus and the head of a leading company in BIO--testified 
     that this rider does not forbid funding research on embryonic 
     stem cells, because a human embryo is an ``organism'' but a 
     stem cell clearly is not (see S. Hrg. 105-939, December 2, 
     1998). That same conclusion was later reached by HHS general 
     counsel Harriet Rabb, in arguing that the Clinton 
     administration's guidelines on stem cell research were in 
     accord with statutory law; this same legal opinion was 
     accepted by the Bush administration when it issued its more 
     limited guidelines for funding stem cell research (Legal 
     memorandum of HHS general counsel Harriet S. Rabb, ``Federal 
     Funding for Research Involving Human Pluripotent Stem 
     Cells,'' January 15, 1999). To argue now that a ban on 
     patenting ``human organisms'' somehow bans patenting of stem 
     cells or stem cell lines would run counter to five years of 
     legal history, and would undermine the legal validity of any 
     federal funding for embryonic stem cell research.
       BIO also claims that the amendment raises new and difficult 
     questions about ``mixing'' animal and human species. What 
     about an animal that is modified to include a few human genes 
     so it can produce a human protein or antibody? What about a 
     human/animal ``chimera'' (an embryo that is half human, half 
     animal)? The fact is, these questions are not new. The USPTO 
     has already granted patents on the former (see U.S. patent 
     nos. 5,625,126 and 5,602,306). It has also thus far rejected 
     patents on the latter, the half-human embryo (see 
     Biotechnology Law Report, July-August 1998, p. 256), because 
     the latter can broadly but reasonably be construed as a human 
     organism. The Weldon amendment does nothing to change this, 
     but leaves the USPTO free to address new or borderline issues 
     on the same case-by-case basis as it already does.
       In short, my amendment has exactly the same scope as the 
     current USPTO policy, and cannot be charged with the radical 
     expansions of policy that BIO and its allies claim. In 
     reality, BIO opposes this amendment because it opposes the 
     current USPTO policy as well, and has a better chance of 
     nullifying this policy in court (or having courts reinterpret 
     it into uselessness) if it lacks explicit support in 
     statutory law.
       This goal is apparent from BIO's own ``fact sheet'' 
     opposing the amendment (see www.bio.org/ip/
cloningfactsheet.asp). There BIO argues that human beings 
     should be patentable, if they arise from anything other than 
     ``conventional reproduction'' or have any ``physical 
     characteristics resulting from human intervention.'' In other 
     words, humans should be seen as ``inventions'' and thus be 
     patentable on exactly the same grounds as animals are now.
       The logic of this argument reaches beyond the human embryo, 
     because an embryo who resulted from reproductive technology 
     or received any physical or genetic modification presumably 
     remains just as invented throughout his or her existence, no 
     matter what stage of development he or she reaches.
       BIO's stated support for reducing members of the human 
     species to patentable commodities makes the passage of my 
     amendment more urgently necessary than ever.
                                  ____


 Speech of Hon. Dave Weldon of Florida in the House of Representatives 
                       Friday, November 21, 2003


 Amendment to Support Current U.S. Patent and Trademark Office Policy 
Against Patenting Human Organisms--(Extensions of Remarks--November 22, 
                                 2003).

       Mr. WELDON of Florida. Mr. Speaker, this summer I 
     introduced an amendment that provides congressional support 
     for the current U.S. Patent and Trademark Office policy 
     against patenting human organisms, including human embryos 
     and fetuses. This amendment was approved by the House of 
     Representatives with bipartisan support on July 22, 2003, as 
     Sec. 801 of the Commerce/Justice/State appropriations bill.
       On November 5th of this year, I submitted to the 
     Congressional Record an analysis of my amendment that offers 
     a more complete elaboration of what I stated on July 22nd, 
     namely, that this amendment ``has no bearing on stem cell 
     research or patenting genes, it only affects patenting human 
     organisms, human embryos, human fetuses or human beings.''
       However, some have continued to misrepresent my amendment 
     by claiming it would also prohibit patent claims directed to 
     methods to produce human organisms. Moreover, some 
     incorrectly claim that my amendment would prohibit patents on 
     claims directed to subject matter other than human organisms. 
     This is simply untrue.
       What I want to point out is that the U.S. Patent Office has 
     already issued patents on genes, stem cells, animals with 
     human genes, and a host of non-biologic products used by 
     humans, but it has not issued patents on claims directed to 
     human organisms, including human embryos and fetuses. My 
     amendment would not affect the former, but would simply 
     affirm the latter. This position is reaffirmed in the 
     following U.S. Patent Office letter of November 20, 2003.
       I submit to the Record a letter from James Rogan, 
     Undersecretary and Director of the U.S. Patent office, that 
     supports the enactment of my amendment because it ``is fully 
     consistent with our policy.''

                             U.S. Patent and Trademark Office,

                                                November 20, 2003.
     Hon. Ted Stevens,
     Chairman, Committee on Appropriations, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: Thank you for the opportunity to present 
     the Administration's position on the Weldon amendment adopted 
     by the House during consideration of H.R. 2799, the Commerce-
     Justice-State Appropriations bill FY 2004, and the effect it 
     would have on the United States Patent and Trademark Office 
     (USPTO) policy on patenting living subject matter. For the 
     reasons outlined below, we view the Weldon amendment as fully 
     consistent with USPTO's policy on the non-patentability of 
     human life-forms.
       The Weldon Amendment would prohibit the U.S. Patent and 
     Trademark Office from issuing any patent ``on claims directed 
     to or encompassing a human organism.'' The USPTO understands 
     the Weldon Amendment to provide unequivocal congressional 
     backing for the long-standing USPTO policy of refusing to 
     grant any patent containing a claim that encompasses any 
     member of the species Homo sapiens at any stage of 
     development. It has long been USPTO practice to reject any 
     claim in a patent application that encompasses a human life-
     form at any stage of development, including a human embryo

[[Page 9789]]

     or human fetus; hence claims directed to living ``organisms'' 
     are to be rejected unless they include the adjective 
     ``nonhuman.''
       The USPTO's policy of rejecting patent application claims 
     that encompass human lifeforms, which the Weldon Amendment 
     elevates to an unequivocal congressional prohibition, applies 
     regardless of the manner and mechanism used to bring a human 
     organism into existence (e.g., somatic cell nuclear transfer, 
     in vitro fertilization, parthenogenesis). If a patent 
     examiner determines that a claim is directed to a human life-
     form at any stage of development, the claim is rejected as 
     non-statutory subject matter and will not be issued in a 
     patent as such.
       As indicated in Representative Weldon's remarks in the 
     Congressional Record of November 5, 2003 the referenced 
     language precludes the patenting of human organisms, 
     including human embryos. He further indicated that the 
     amendment has ``exactly the same scope as the current USPTO 
     policy,'' which assures that any claim that can be broadly 
     construed as a human being, including a human embryo or 
     fetus, is not patentable subject matter. Therefore, our 
     understanding of the plain language of the Weldon Amendment 
     is fully consistent with the detailed statements that the 
     author of the amendment, Representative Weldon, has made in 
     the Congressional Record regarding the meaning and intent of 
     his amendment.
       Given that the scope of Representative Weldon's amendment 
     does not alter the USPTO policy on the non-patentability of 
     human life-forms at any stage of development and is fully 
     consistent with our policy, we support its enactment.
       With best personal regards, I remain
           Sincerely,
                                                   James E. Rogan,
     Under Secretary and Director.
                                  ____


 Speech of Hon. Dave Weldon of Florida in the House of Representatives 
                        Monday, December 8, 2003


Conference Report on H.R. 2673, Consolidated Appropriations Act, 2004--
              (House of Representatives--December 8, 2003)

       Mr. WELDON of Florida. Mr. Speaker, on July 22, 2003, I 
     introduced an amendment to provide congressional support for 
     the current U.S. Patent and Trademark Office (USPTO) policy 
     and practice against approving patent claims directed to 
     human organisms, including human embryos and human fetuses. 
     The House of Representatives approved the amendment without 
     objection on July 22, 2003, as section 801 of the Fiscal Year 
     2004 Commerce/Justice/State Appropriations Bill. The 
     amendment, now included in the Omnibus appropriations bill as 
     section 634 of H.R. 2673, reads as follows: ``None of the 
     funds appropriated or otherwise made available under this Act 
     may be used to issue patents on claims directed to or 
     encompassing a human organism.''
       The current Patent Office policy is that ``non-human 
     organisms, including animals'' are patentable subject matter 
     under 35 U.S.C. 101, but that human organisms, including 
     human embryos and human fetuses, are not patentable. 
     Therefore, any claim directed to a living organism must 
     include the qualification ``non-human'' to avoid rejection. 
     This amendment provides unequivocal congressional support for 
     this current practice of the U.S. patent office.
       House and Senate appropriators agreed on report language in 
     the manager's statement on section 634. The statement reads: 
     ``The conferees have included a provision prohibiting funds 
     to process patents of human organisms. The conferees concur 
     with the intent of this provision as expressed in the 
     colloquy between the provision's sponsor in the House and the 
     ranking minority member of the House Committee on 
     Appropriations as occurred on July 22, 2003, with respect to 
     any existing patents on stem cells.''
       The manager's statement refers to my discussion with 
     Chairman David Obey, when I explained that the amendment 
     ``only affects patenting human organisms, human embryos, 
     human fetuses or human beings.'' In response to Chairman 
     Obey's inquiry, I pointed out that there are existing patents 
     on stem cells, and that this amendment would not affect such 
     patents.
       Here I wish to elaborate further on the exact scope of this 
     amendment. The amendment applies to patents on claims 
     directed to or encompassing a human organism at any stage of 
     development, including a human embryo, fetus, infant, child, 
     adolescent, or adult, regardless of whether the organism was 
     produced by technological methods (including, but not limited 
     to, in vitro fertilization, somatic cell nuclear transfer, or 
     parthenogenesis). This amendment applies to patents on human 
     organisms regardless of where the organism is located, 
     including, but not limited to, a laboratory or a human, 
     animal, or artificial uterus.
       Some have questioned whether the term ``organism'' could 
     include ``stem cells''. The answer is no. While stem cells 
     can be found in human organisms (at every stage of 
     development), they are not themselves human organisms. This 
     was considered the ``key question'' by Senator Harkin at a 
     December 2, 1998 hearing before the Senate Appropriations 
     Subcommittee on Labor, Health and Human Services and 
     Education regarding embryonic stem cell research. Dr. Harold 
     Varmus, then director of the NIH testified ``that pulripotent 
     stem cells are not organisms and are not embryos. . . . 
     ``Senator Harkin noted: ``I asked all of the scientists who 
     were here before the question of whether or not these stem 
     cells are organisms. And I believe the record will show they 
     all said no, it is not an organism.'' Dr. Thomas Okarma of 
     the Geron Corporation stated: ``My view is that these cells 
     are clearly not organisms . . . in fact as we have said, are 
     not the cellular equivalent of an embryo.'' Dr. Arthur Caplan 
     agreed with this distinction, saying that a stem cell is 
     ``absolutely not an organism.'' There was a unanimous 
     consensus on this point at the 1998 hearing, among witnesses 
     who disagreed on many other moral and policy issues related 
     to stem cell research.
       The term ``human organism'' includes an organism of the 
     human species that incorporates one or more genes taken from 
     a nonhuman organism. It includes a human-animal hybrid 
     organism (such as a human-animal hybrid organism formed by 
     fertilizing a nonhuman egg with human sperm or a human egg 
     with non-human sperm, or by combining a comparable number of 
     cells taken respectively from human and non-human embryos). 
     However, it does not include a non-human organism 
     incorporating one or more genes taken from a human organism 
     (such as a transgenic plant or animal). In this respect, as 
     well, my amendment simply provides congressional support for 
     the Patent Office's current policy and practice.
       This amendment should not be construed to affect claims 
     directed to or encompassing subject matter other than human 
     organisms, including but not limited to claims directed to or 
     encompassing the following: cells, tissues, organs, or other 
     bodily components that are not themselves human organisms 
     (including, but not limited to, stem cells, stem cell lines, 
     genes, and living or synthetic organs); hormones, proteins or 
     other substances produced by human organisms; methods for 
     creating, modifying, or treating human organisms, including 
     but not limited to methods for creating human embryos through 
     in vitro fertilization, somatic cell nuclear transfer, or 
     parthenogensis; drugs or devices (including prosthetic 
     devices) which may be used in or on human organisms.
       Jamed Rogan, undersecretary of the U.S. Patent and 
     Trademark Office, has stated in a November 20, 2003, letter 
     to Senate appropriators: ``The USPTO understands the Weldon 
     Amendment to provide unequivocal congressional backing for 
     the long-standing USPTO policy of refusing to grant any 
     patent containing a claim that encompasses any member of the 
     species Homo sapiens at any stage of development . . . 
     including a human embryo or human fetus. . . . The USPTO's 
     policy of rejecting patent application claims that encompass 
     human lifeforms, which the Weldon Amendment elevates to an 
     unequivocal congressional prohibition, applies regardless of 
     the manner and mechanism used to bring a human organism into 
     existence (e.g., somatic cell nuclear transfer, in vitro 
     fertilization, parthenogenesis).'' Undersecretary Rogan 
     concludes: ``Given that the scope of Representative Weldon's 
     amendment . . . is full consistent with our policy, we 
     support its enactment.''
       The advance of biotechnology provides enormous potential 
     for developing innovative science and therapies for a host of 
     medical needs. However, it is inappropriate to turn nascent 
     individuals of the human species into profitable commodities 
     to be owned, licensed, marketed and sold.
       Congressional action is needed not to change the Patent 
     Office's current policy and practice, but precisely to uphold 
     it against any threat of legal challenge. A previous Patent 
     Office policy against patenting living organisms in general 
     was invalidated by the U.S. Supreme Court in 1980, on the 
     grounds that the policy has no explicit support from 
     Congress. In an age when the irresponsible use of 
     biotechnology threatens to make humans themselves into items 
     of property, of manufacture and commerce, Congress cannot let 
     this happen again in the case of human organisms.
       I urge my colleagues to support this Omnibus in defense of 
     this important provision against human patenting.

  Mr. SMITH of Texas. Madam Chair, I submit: (1) Manager's Statement on 
Supplemental Examination; (2) Manager's Statement on Genetic Test Study 
proposed in the Managers; (3) Statement on the codification of the 
Weldon amendment; (4) Statement on the business method patent 
transitional program; (5) Statement on the PTO fee compromise provision 
in the Manager's amendment; (6) November 2003 letter on the Weldon 
amendment from PTO Director James Rogan; (7) Information on the Weldon 
amendment from the Family Research Council.

Chairman's Floor Remarks/Manager's Statement: Supplemental Examination 
                              in H.R. 1249

       Mr. Speaker, this bill also contains a very important new 
     administrative proceeding available to patent owners, to help 
     improve the quality of issued patents. This new 
     ``Supplemental Examination'' procedure encourages the 
     voluntary and proactive disclosure

[[Page 9790]]

     of information that may be relevant to patent prosecution for 
     the Office to consider, reconsider, or correct. The voluntary 
     disclosure by patentees serves to strengthen valid patents, 
     while narrowing or eliminating patents or claims that should 
     not have been issued. Both of these outcomes promote 
     investment in innovation by removing uncertainty about the 
     scope, validity or enforceability of patents, and thus the 
     use of this new proceeding by patent owners is to be 
     encouraged.
       Subparagraph (C) relating to Supplemental Examination is 
     intended to address the circumstance where, during the course 
     of a supplemental examination or reexamination proceeding 
     ordered under this section, a court or administrative agency 
     advises the PTO that it has made a determination that a fraud 
     on the Office may have been committed in connection with the 
     patent that is the subject of the supplemental examination. 
     In such a circumstance, subparagraph (C) provides that, in 
     addition to any other actions the Director is authorized to 
     take, including the cancellation of any claims found to be 
     invalid under section 307 as a result of the reexamination 
     ordered under this section, the Director shall also refer the 
     matter to the Attorney General. As such, this provision is 
     not intended to impose any obligation on the PTO beyond those 
     it already undertakes, or require it to investigate or 
     prosecute any such potential fraud. Subparagraph (C) is 
     neither an investigative nor an adjudicative provision, and, 
     as such, is not intended to expand the authority or 
     obligation of the PTO to investigate or adjudicate 
     allegations of fraud lodged by private parties.
       Further, any referral under this subjection is not meant to 
     relieve the Director from his obligation to conclude the 
     supplemental examination or reexamination proceeding ordered 
     under this section. It is important for the process to 
     proceed through conclusion of reexamination, so that any 
     claims that are invalid can be properly cancelled.
       The decision to make referrals under subsection (c) is not 
     meant to be delegated to examiners or other agents of the 
     PTO, but rather is a determination that should only be made 
     by the Director himself or herself.
       Supplemental Examination has the potential to play a 
     powerful role in improving patent quality and boosting 
     investment in innovation, economic growth, and job creation. 
     The Director should implement this new authority in a way 
     that maximizes this potential.
                                  ____


            Genetic Test Study in Manager's Amendment (DWS)

       Mr. Speaker, Section 27 of H.R. 1249 requires the Director 
     of the U.S. Patent and Trademark Office to conduct a study on 
     the availability of confirmatory genetic diagnostic testing 
     services in the domestic market, and whether changes to 
     existing patent law are necessary to promote such 
     availability more effectively. Consistent with current law, 
     the genetic inventions that form the basis for such 
     diagnostic tests are eligible for patenting, and may be 
     exclusively licensed by such patent holders for genetic 
     diagnostic purposes.
       This study is intended to provide unbiased, reliable, and 
     empirical information about the existing availability of 
     independent confirmatory genetic diagnostic testing services, 
     as well as patient demand for such testing services, in 
     situations where genetic diagnostic tests are indeed patented 
     and exclusively licensed. Nothing in this section shall be 
     construed as undermining existing patent law in this regard.
       This study is intended to include, but is not limited to, 
     several specific aspects of this issue. Paragraph (1) of 
     subsection (b) requires an assessment of whether the existing 
     level of availability of confirmatory genetic diagnostic 
     testing has an impact on the ability of medical professionals 
     to provide the appropriate standard of medical care to 
     recipients of genetic diagnostic testing, and includes an 
     assessment of the role that patents play in innovation, 
     quality of services, and investment in the genetic diagnostic 
     marketplace. The assessment required by this paragraph also 
     should include empirical information about the extent to 
     which patents have actually been enforced or asserted against 
     the unauthorized practice of confirmatory genetic diagnostic 
     tests, and a comparison of the availability of and demand for 
     confirmatory testing in situations where genetic tests are 
     not patented or are non-exclusively licensed. Paragraph (2) 
     requires the Director to assess the effects of independent, 
     unauthorized confirmatory genetic testing on patent holders 
     or exclusively licensed test providers. The Committee urges 
     the Director to include in this assessment the possible 
     effects of allowing confirmatory testing on authorized 
     providers of non-exclusively licensed genetic diagnostic 
     tests as well, given that such authorized providers may 
     already provide confirmatory testing services. Paragraph (3) 
     requires an evaluation of the impact of patents and exclusive 
     licensing of genetic diagnostic tests on the practice of 
     medicine, including, but not limited to, the ability of 
     medical professionals to interpret test results, and the 
     ability of licensed or unlicensed test providers to provide 
     confirmatory genetic diagnostic tests. The Director's 
     assessment should also include information on the frequency 
     at which confirmatory genetic diagnostic testing currently is 
     performed by medical professionals in instances where an 
     absence of patent protection or non-exclusive licensing 
     permits multiple independent test providers. Paragraph (4) 
     requires an assessment of the role that cost and insurance 
     coverage have on access to and provision of confirmatory 
     genetic diagnostic tests today, whether patented or not or 
     exclusively licensed or not, and should include an assessment 
     of whether private and public payors cover such costs and are 
     likely to cover the costs of any expansion of confirmatory 
     testing.''
       Additional Legislative History for the Second Opinion 
     Confirmation Test Study in Managers (H.R. 1249): Additional 
     Information for the Record:
       ``Section 27 requires USPTO to conduct a study on the 
     impact that a lack of independent second opinion testing has 
     on providing medical care to patients and recipients of 
     genetic diagnostic testing, the effect that providing such 
     tests would have on patent holders of exclusive genetic 
     tests, the impact the current exclusive licensing and patents 
     on genetic testing activity has on the practice of medicine, 
     and the role that cost and insurance coverage have on access 
     to genetic diagnostic tests. Nothing in Section 27 shall be 
     construed to reflect any expression by the Congress with 
     respect to the patentability or non-patentability of genetic 
     material or with respect to the validity or invalidity of 
     patents on genetic material.''
                                  ____


                          The Weldon Amendment

       ``None of the funds appropriated or otherwise made 
     available by this act may be used to issue patents on claims 
     directed to or encompassing a human organism.''
       Legislative History:
       The legislation prohibits the use of appropriated funds by 
     the Patent and Trademark Office to issue certain types of 
     claims presented in patent applications. The types of patent 
     claims subject to the prohibition are limited precisely to 
     those that the Patent and Trademark Office, pursuant to its 
     policies, has indicated may not be granted (see M.P.E.P 1st 
     rev. 2105). Specifically, this section operates to prohibit 
     the use of appropriated funds to issue a patent containing 
     claim that encompasses a human individual.
       The Committee recognizes that the economic viability of the 
     biotechnology industry requires that patents be available for 
     the full spectrum of innovation that may be subject to 
     commercialization. The legislation, accordingly does not 
     limit patent eligibility for any type of biotechnology 
     invention that may be commercialized in the United States. 
     The Committee also recognizes that continued innovation in 
     the biomedical and biotechnological fields will lead to new 
     kinds of inventions, and it expects that the overwhelming 
     majority of such inventions will not raise any of the 
     concerns that the present legislation addresses. In 
     particular, nothing in this section should be construed to 
     limit the ability of the PTO to issue a patent containing 
     claims directed to or encompassing:
       1. any chemical compound or composition, whether obtained 
     from animals or human beings or produced synthetically, and 
     whether identical to or distinct from a chemical structure as 
     found in an animal or human being, including but not limited 
     to nucleic acids, polypeptides, proteins, antibodies and 
     hormones;
       2. cells, tissue, organs or other bodily components 
     produced through human intervention, whether obtained from 
     animals, human beings, or other sources; including but not 
     limited to stem cells, stem cell derived tissues, stem cell 
     lines, and viable synthetic organs;
       3. methods for creating, modifying, or treating human 
     organisms, including but not limited to methods for creating 
     embryos through in vitro fertilization, methods of somatic 
     cell nuclear transfer, medical or genetic therapies, methods 
     for enhancing fertility, and methods for implanting embryos;
       4. a nonhuman organism incorporating one or more genes 
     taken from a human organism, including but not limited to a 
     transgenic plant or animal, or animal models used for 
     scientific research.
       As the legislation addresses only the authority of the PTO 
     to expend funds appropriated by this Act, it concerns patents 
     that may issue on applications filed on or after the date of 
     the legislation. The legislation does not create a claim or 
     give rise to any cause of action to limit the rights 
     associated with, or the enforceability of any patent duly 
     granted by the PTO.
                                  ____


  Section 18 (H.R. 1249)--Business Method Patent Transitional Program

       The proceeding would create a cheap and speedy alternative 
     to litigation--allowing parties to resolve these disputes 
     rather than spend millions of dollars that litigation now 
     costs. In the process, the proceeding would also prevent 
     nuisance or extortion litigation settlements.
       Business methods were generally not patentable in the 
     United States before the late 1990s, and generally are not 
     patentable elsewhere in the world, but the Federal Circuit

[[Page 9791]]

     (in what was an activist decision) created a new class of 
     patents in its 1998 State Street decision.
       In its 2010 decision in Bilski v. Kapoos, the U.S. Supreme 
     Court clamped down on the patenting of business methods and 
     other patents of poor quality.
       It is likely that most if not all the business method 
     patents that were issued after State Street are now invalid 
     under Bilski. There is no sense in allowing expensive 
     litigation over patents that are no longer valid.
       This provision is strongly supported by community banks, 
     credit unions and other institutions that are an important 
     source of lending to homeowners and small businesses. Money 
     spent litigating over invalid business-method patents, or 
     paying nuisance settlements, cannot be loaned to Americans to 
     purchase new homes and start new businesses.
       Resolving the validity of these patents in civil litigation 
     typically costs about $5-to-$10 million per patent. Resolving 
     the validity of these patents through the bill's 
     administrative proceeding costs much less.
       Moreover, the proceeding allows business-method patents to 
     be reviewed by the experts at the Patent Office under the 
     correct (Bilski) standard.
       To use this proceeding, a challenger must make an up-front 
     showing to the PTO of evidence that the business-method 
     patent is more likely than not invalid. This is a high 
     standard. Only the worst patents, which probably never should 
     have been issued, will be eligible for review in this 
     proceeding.
       Additionally any argument about this provision and 
     Constitutionality is simply a red herring. Congress has the 
     authority to create administrative proceedings to review the 
     validity of existing patents. We have done it before and we 
     will be doing it in the future.
       This issue has been litigated and rejected by the courts, 
     when Congress created ex parte reexam in 1980. Ex parte 
     reexam was applied to all existing patents when that system 
     was created. In Patlex Corp. v. Mossinghoff, the Federal 
     Circuit rejected the argument that applying a new system of 
     administrative review to existing patents is a taking. The 
     same logic applies to this provision.
       Never in the history of U.S. patent law has it been held, 
     after a patent claim was determined to be invalid because it 
     covered unprotectable subject matter, that the owner of the 
     patent was nevertheless entitled to compensation on the basis 
     of that invalid claim.
       This section only creates a new mechanism for reviewing the 
     validity of business-method patents. It does not alter the 
     substantive law governing the validity of those patents. 
     Under settled precedent, the transitional review program is 
     absolutely constitutional.
       It is wrong and offensive for this provision to be referred 
     to as a bail-out. The program does not give one cent to any 
     private party and the costs of the proceeding are required to 
     be fully recouped through the fee charged for initiating the 
     proceeding. It is a necessary program to allow the PTO to fix 
     mistakes that occurred in light of an activist judicial 
     decision in the 1998 State Street decision that created this 
     new patentable subject matter without Congress' approval.
       This bill will provide the patent office with a fast, 
     precise vehicle to review low quality business method 
     patents, which the Supreme Court has acknowledged are often 
     abstract and overly broad.
       And it bears repeating that defendants cannot even start 
     this program unless they can persuade a panel of judges at 
     the outset of the proceeding that it is more likely than not 
     that the patent is invalid. This is a high threshold, which 
     requires the challenger to present his best evidence and 
     arguments at the outset. Very few patents that undergo this 
     review are likely to be valid patents.
       Specifically, the bill's provision applies to patents that 
     describe a series of steps used to conduct every day business 
     applications in the financial products and retail service 
     space. These are patents that can be and have been asserted 
     against all types of businesses--from community banks and 
     credit unions to retailers like Walmart, Bed Bath & Beyond, 
     Best Buy, J.C. Penney, Staples and Office Max to other 
     companies like Dr. Pepper Snapple Group, UPS, Hilton, AT&T, 
     Facebook, Frito-Lay, Google, Marriott, Walt Disney, Delta 
     Airlines and YouTube.
       This provision is not tied to one industry or sector of the 
     economy--it affects everyone. For example, this program would 
     allow the Patent Office to decide whether to review patents 
     for business methods related to:
       Printing ads at the bottom of billing statements
       Buying something online and picking it up in the store
       Re-ordering checks online
       Converting a IRA to a Roth IRA
       Getting a text message when you use your credit card
       Those who argue that this provision is a Wall Street 
     bailout are just plain wrong. This is about questionable 
     patents and the frivolous litigation that results from them. 
     This provision is important legal reform, supported by the 
     U.S. Chamber of Commerce and is important for American job 
     creators.
                                  ____


           PTO Fee Diversion Compromise (H.R. 1249 Managers)

       By giving USPTO access to all its funds, the Manager's 
     Amendment supports the USPTO's efforts to improve patent 
     quality and reduce the backlog of patent applications. To 
     carry out the new mandates of the legislation and reduce 
     delays in the patent application process, the USPTO must be 
     able to use all the fees it collects.
       The language in the Manager's Amendment reflects the intent 
     of the Judiciary Committee, the Appropriations Committee, and 
     House leadership to end fee diversion. USPTO is 100% funded 
     by fees paid by inventors and trademark filers who are 
     entitled to receive the services they are paying for. The 
     language makes clear the intention not only to appropriate to 
     the USPTO at least the level requested for the fiscal year 
     but also to appropriate to the USPTO any fees collected in 
     excess of such appropriation.
       Providing USPTO access to all fees collected means 
     providing access at all points during that year, including in 
     case of a continuing resolution. Access also means that 
     reprogramming requests will be acted on within a reasonable 
     time period and on a reasonable basis. It means that future 
     appropriations will continue to use language that guarantees 
     USPTO access to all of its fee collections.
                                  ____

         United States Patent and Trademark Office, Under 
           Secretary of Commerce for Intellectual Property and 
           Director of the U.S. Patent and Trademark office,
                                                   Alexandria, VA.
     Hon. Ted Stevens,
     Chairman, Committee on Appropriations, U.S. Senate, 
         Washington, DC.
       Dear Mr. Chairman: Thank you for the opportunity to present 
     the Administration's position on the Weldon amendment adopted 
     by the House during consideration of H.R. 2799, the Commerce-
     Justice-State Appropriations bill FY 2004, and the effect it 
     would have on the United States Patent and Trademark Office 
     (USPTO) policy on patenting living subject matter. For the 
     reasons outlined below, we view the Weldon amendment as fully 
     consistent with USPTO's policy on the non-patentability of 
     human life-forms.
       The Weldon Amendment would prohibit the U.S. Patent and 
     Trademark Office from issuing any patent ``on claims directed 
     to or encompassing a human organism.'' The USPTO understands 
     the Weldon Amendment to provide unequivocal congressional 
     backing for the long-standing USPTO policy of refusing to 
     grant any patent containing a claim that encompasses any 
     member of the species Homo sapiens at any stage of 
     development. It has long been USPTO practice to reject any 
     claim in a patent application that encompasses a human life-
     form at any stage of development, including a human embryo or 
     human fetus; hence claims directed to living ``organisms'' 
     are to be rejected unless they include the adjective 
     ``nonhuman.''
       The USPTO's policy of rejecting patent application claims 
     that encompass human life- forms, which the Weldon Amendment 
     elevates to an unequivocal congressional prohibition, applies 
     regardless of the manner and mechanism used to bring a human 
     organism into existence (e.g., somatic cell nuclear transfer. 
     in vitro fertilization, parthenogenesis). If a patent 
     examiner determines that a claim is directed to a human life-
     form at any stage of development, the claim is rejected as 
     non-statutory subject matter and will not be issued in a 
     patent as such.
       As indicated in Representative Weldon's remarks in the 
     Congressional Record of November 5, 2003, the referenced 
     language precludes the patenting of human organisms, 
     including human embryos. He further indicated that the 
     amendment has ``exactly the same scope as the current USPTO 
     policy.'' which assures that any claim that can be broadly 
     construed as a human being, including a human embryo or 
     fetus, is not patentable subject matter. Therefore, our 
     understanding of the plain language of the Weldon Amendment 
     is fully consistent with the detailed statements that the 
     author of the amendment, Representative Weldon, has made in 
     the Congressional Record regarding the meaning and intent of 
     his amendment.
       Given that the scope of Representative Weldon's amendment 
     does not alter the USPTO policy on the non-patentability of 
     human life-forms at any stage of development and is fully 
     consistent with our policy, we support its enactment.
       With best personal regards, I remain
           Sincerely,
                                                   James E. Rogan,
     Under Secretary and Director.
                                  ____

                                                        FRCAction,


                                      Family Research Council.

               Codify the Weldon Ban on Patenting Humans


                  Current Weldon Patent Ban on Humans

       The Weldon Amendment is contained in the annual Commerce, 
     Justice and Science Appropriations bills (CJS) and prevents 
     the patenting of humans. Congress has passed it each year 
     since 2004, and it was included most recently as part of the 
     FY2010 Omnibus (Section 518, Title V, Division B, of the 
     FY2010 Consolidated Appropriations Act, 2010 (H.R. 3288, P.L. 
     111-117)) and extended by the FY2011 Omnibus spending bill 
     (Department of Defense and Full-Year Continuing 
     Appropriations Act, 2011 (H.R. 1473, P.L. 112-10)).

[[Page 9792]]

       Weldon Amendment, Section 518: ``None of the friends 
     appropriated or otherwise made available under this Act may 
     be used to issue patents on claims directed to or 
     encompassing a human organism.''


    Codify the Weldon Amendment--Add it to Patent Reform Legislation

       Congress has each year since 2004 passed the Weldon 
     Amendment to prevent any profiting from patents on humans. 
     The Weldon Amendment restricts funds under the Commerce, 
     Justice, Science Appropriations bill from being used by the 
     U.S. Patent and Trademark Office (USPTO) to issue patents 
     directed to ``human organisms.''
       The America Invents Act (H.R. 1249) may authorize the USPTO 
     to pay for the issuance of patents with ``user fees'' instead 
     of with Congressionally appropriated funds. If this funding 
     mechanism becomes law, the Weldon Amendment restriction would 
     not apply since it only covers funds appropriated under the 
     CJS bill. The USPTO could, thereby, issue patents directed to 
     human beings with non-appropriated funds.
       Patenting human beings at any stage of development would 
     overturn the long-standing USPTO policy against issuing such 
     patents. As the Quigg Memo stated in 1987 (see below) a grant 
     of a property right in a human being is unconstitutional, and 
     patents on humans are grounds for rejection.
       The Weldon restriction can be codified by adding a 
     provision to the America Invents Act to ensure that human 
     beings are not patentable subject matter.
       Codifying a ban on patenting of humans would not violate 
     international obligations under the TRIPs agreement with the 
     WTO. The European Union prevents patents on human embryos on 
     the ground that doing so would violate the public order and 
     morality, an exception the TRIPs agreement specifically 
     allows under Article 27, Section 5.


       What the Weldon Patent Amendment Does and Does Not Affect

       The Weldon Amendment does prevent the USPTO from patenting 
     humans at any stage of development, including embryos or 
     fetuses, by preventing patents on claims directed to ``human 
     organisms.''
       The Weldon Amendment's use of the term ``human organism'' 
     does include human embryos, human fetuses, human-animal 
     chimeras, ``she-male'' human embryos, or human embryos 
     created with genetic material from more than one embryo.
       The Weldon Amendment's use of ``human organism'' does not 
     include the process of creating human embryos, such as human 
     cloning, nor does it include non-human organisms, e.g., 
     animals.
       Then Undersecretary James Rogan wrote to Senate 
     Appropriators on November 20, 2003 stating that the Weldon 
     Amendment gave congressional backing to long-standing USPTO 
     policy against patenting humans stating:
       ``The Weldon Amendment would prohibit the U.S. Patent and 
     Trademark Office from issuing any patent ``on claims directed 
     to or encompassing a human organism.'' The USPTO understands 
     the Weldon Amendment to provide unequivocal congressional 
     backing for the long-standing USPTO policy of refusing to 
     grant any patent containing a claim that encompasses any 
     member of the species Homo sapiens at any stage of 
     development. It has long been USPTO practice to reject any 
     claim in a patent application that encompasses a human life-
     form at any stage of development, including a human embryo or 
     human fetus; hence claims directed to living ``organisms'' 
     are to be rejected unless they include the adjective 
     'nonhuman.''
       Secretary Rogan concluded: ``The USPTO's policy of 
     rejecting patent application claims that encompass human 
     life-forms, which the Weldon Amendment elevates to an 
     unequivocal congressional prohibition, applies regardless of 
     the manner and mechanism used to bring a human organism into 
     existence (e.g., somatic cell nuclear transfer, in vitro 
     fertilization, parthenogenesis). If a patent examiner 
     determines that a claim is directed to a human life-form at 
     any stage of development, the claim is rejected as non-
     statutory subject matter and will not be issued in a patent 
     as such.''
       The Weldon Amendment does not prevent patents on human 
     cells, genes, or other tissues obtained from human embryos or 
     human bodies.
       Rep. Dave Weldon submitted a statement to the Congressional 
     Record on December 8, 2003 clarifying that the Weldon 
     Amendment would not prevent patents for non-human organisms 
     even with some human genes. Nor would it affect patents for 
     human cells, tissues or body parts, or for methods of 
     creating human embryos.
       Rep. Weldon stated: ``This amendment should not be 
     construed to affect claims directed to or encompassing 
     subject matter other than human organisms, including but not 
     limited to claims directed to or encompassing the following: 
     cells, tissues, organs, or other bodily components that are 
     not themselves human organisms (including, but not limited 
     to, stem cells, stem cell lines, genes, and living or 
     synthetic organs); hormones, proteins or other substances 
     produced by human organisms; methods for creating, modifying, 
     or treating human organisms, including but not limited to 
     methods for creating human embryos through in vitro 
     fertilization, somatic cell nuclear transfer, or 
     parthenogensis; drugs or devices (including prosthetic 
     devices) which may be used in or on human organisms.''
       The Weldon amendment does not ban human stem cell patents, 
     including patents on human embryonic stem cells. ``Stem 
     cells'' are not ``organisms.''
       On December 2, 1998, several scientists supportive of 
     federal funding of human embryonic stem cell research 
     testified before the Senate Subcommittee on Labor, Health and 
     Human Services, and Education Committee on Appropriations 
     that ``stem cells'' are not ``human organisms.'' When asked, 
     Dr. James Thomson who first obtained human embryonic stem 
     cells, and has patents on those stem cell lines, responded: 
     ``They am not organisms and they are not embryos.''
       Despite claims in 2003 that the Weldon amendment in 2003 
     would ban stem cell patents, the USPTO has maintained several 
     embryonic stem cell patents issued previously. The USPTO has 
     also issued several new patents on human embryonic stem cells 
     since 2003, and has issued roughly 300 new patents on 
     pluripotent stout cells. The Weldon amendment only affects 
     patents on human organisms. (Note, the EU recently reaffirmed 
     its rejection of patents on embryonic stem cells, yet, the 
     Weldon amendment does not follow suit).


                         History and Background

       Longstanding United States Patent and Trademark Office 
     (USPTO) policy states that human beings at any stage of 
     development are not patentable subject matter under 35 U.S.C. 
     Section 101. In 1980, the U.S. Supreme Court in Diamond v 
     Chakrabarty expanded the scope of patentable subject matter 
     claiming Congress intended statutory subject matter to 
     ``include anything under the sun that is made by man.'' The 
     USPTO eventually issued patents directed to non-human 
     organisms, including animals. However, the USPTO rejected 
     patents on humans (see below).
       However, as early as 2003 U.S. researchers announced that 
     they created human male-female embryos and reportedly wanted 
     to patent this research (http://www.thenewatlantis.com/
publications/my-mother-the-embryo). The researchers 
     transplanted cells from male embryos into female embryos and 
     allowed them to grow for six days.
       Because of the possibility of court challenges to USPTO 
     policy, Rep. Dave Weldon offered an amendment on July 22, 
     2003 to the CJS Appropriations bill to prevent funding for 
     patents directed to ``human organisms.''
       The Weldon amendment was adopted by voice vote, and was 
     included as Section 634, Title VI of Division B, in the 
     Consolidated Appropriations Act, 2004 (P.L. 108-199). The 
     accompanying report language clarified its scope: ``The 
     conferees have included a provision prohibiting funds to 
     process patents of human organisms. The conferees concur with 
     the intent of this provision as expressed in the colloquy 
     between the provisions sponsor in the House and the ranking 
     minority member of the House Committee on Appropriations as 
     occurred on July 22, 2003, with respect to any existing 
     patents on stem cells.'' (Conference Report 108-401).
       The Weldon amendment has been included each year in the CJS 
     appropriations bill since 2004 and reflected the USPTO policy 
     against patenting humans as outlined in 3 USPTO official 
     documents.
       First, the USPTO published the ``Quigg memo'' in its 
     Official Gazette on January 5, 1993, which was written in 
     1917 stating: ``The Patent and Trademark Office now considers 
     nonnaturally occurring non-human multicellular living 
     organisms, including animals, to be patentable subject matter 
     within the scope of 35 U.S.C. 101. . . . A claim directed to 
     or including within its scope a human being will not be 
     considered patentable subject matter under 35 U.S.C. 101.'' 
     Furthermore, it ``suggests'' that that any claim directed to 
     ``a non-plant multicellular organism which would include a 
     human being within its scope include the limitation `non-
     human' to avoid this ground of rejection.''
       Second, the USPTO policy is also contained in an official 
     media advisory issued on April 2, 1998 in response to news 
     about s patent application directed to a human/non-human 
     chimera. USPTO claimed that patents ``inventions directed to 
     human/non-human chimera could, under certain circumstances, 
     not be patentable because, among other things, they would 
     fail to meet the public policy and morality aspects of the 
     utility requirement.''
       Third, the USPTO policy is contained in the Manual of 
     Patent Examining Procedure (MPEP) section 2105 under 
     ``Patentable Subject Matter.'' The MPEP states that the USPTO 
     ``would now consider nonnaturally occurring, nonhuman 
     multicellular living organisms, including animals, to be 
     patentable subject matter within the scope of 35 U.S.C. 101. 
     If the broadest reasonable interpretation of the claimed 
     invention as a whole encompasses a human being, then a 
     rejection under 35 U.S.C. 101 must be made indicating that 
     the claimed invention is directed to nonstatutory subject 
     matter.''

  Ms. HIRONO. Madam Chair, I rise today in reluctant opposition to H.R. 
1249, the America Invents Act.

[[Page 9793]]

  In Hawaii, independent inventors and small businesses are at the 
forefront of the innovation that we need to strengthen our state's 
economic future. Year after year, small businesses have been 
responsible for the majority of net job growth nationwide. Congress 
must modernize and fully fund the U.S. Patent and Trademark Office 
(PTO) to address the massive application backlog that stifles 
innovation and job creation.
  However, I have heard from independent inventors and small businesses 
in Hawaii who express grave concerns about H.R. 1249. This bill's shift 
to a ``first inventor to file'' system could create a ``race to file,'' 
allowing large corporations to use early and repeat filings to threaten 
independent inventors' and small businesses' rights.
  Further, to speed up patent processing and job creation, the PTO must 
be able to use inventors' application fees for their intended use: 
processing patents. The PTO receives no taxpayer money, and is funded 
entirely by fees. I voted against the manager's amendment that diverts 
these user fees to the vagaries of the annual congressional budget 
process.
  I also have concerns about Section 18 of the bill. This section 
establishes an administrative review process for financially related 
business method patents whose validity has been questioned. This review 
process is retroactive, and even previously awarded patents whose 
validity had been upheld by federal courts would be subject to 
challenge. This is unfair to inventors, who would have to defend 
themselves again for patents they have already been awarded and already 
defended in court.
  Innovation and technology development is essential to growing 
Hawaii's economy of the future. For this reason, I support patent 
reform but cannot support the bill before us today.
  Mr. WEST. Madam Chair, the most sweeping patent reform legislation 
that has come before the House of Representatives in over half a 
century, the America Invents Act, H.R. 1249, makes significant 
substantive, procedural, and technical changes to current United States 
patent law.
  Article I, Section 8 gives the United States Congress 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.''
  Congress passed the first patent law just one year after ratifying 
the Constitution when it enacted the Patent Act of 1790. The law 
granted patent applicants the ``sole and exclusive right and liberty of 
making, constructing, using and vending to others to be used'' of his 
or her invention, clearly maintaining the intentions of patent 
protections the Framers had when they drafted Article I, Section 8, 
Clause 8 of the Constitution, commonly referred to as the Intellectual 
Property Clause.
  Before discussing the ramifications of the America Invents Act, it is 
important for the American people to understand the reasoning behind 
the Intellectual Property Clause of the Constitution. The Framers 
recognized that a crucial component for success of the newly formed 
United States was economic strength and security, and they knew that 
American ingenuity and innovation was key to economic success.
  Thus, for more than 200 years, American patent law has used a first 
to invent system that addresses the circumstances when two or more 
persons independently develop identical or similar inventions at 
approximately the same time. When more than one patent application is 
filed at the Patent and Trademark Office (PTO) claiming the same 
invention, the patent is awarded to the applicant who was the first 
inventor, even if the inventor was not the first person to file a 
patent application at the PTO.
  Section 3 of H.R. 1249 would change this established system for 
determining which inventor obtains patent protection to a ``first 
inventor to file'' system. Under this new ``first inventor to file'' 
system, the law would not recognize the patent of an individual who did 
not file an invention first even if he or she was the first to complete 
an invention.
  Proponents of Section 3 will argue that the United States is the only 
patent-issuing nation that does not employ a ``first inventor to file'' 
system, and that making this change will simplify the process for 
acquiring patent rights.
  However, I believe that Section 3 on its face is unconstitutional. 
Over 200 years of evidenced-based, legal determination as to who is the 
true inventor of an invention should not be overturned because the rest 
of the world does it, or to make it easier for government bureaucrats 
to resolve patent disputes.
  The United States is the greatest Nation on the face of the earth not 
because we conform our ways to the rest of the world, but instead 
because we operate in a way that makes the rest of the world want to 
follow our example.
  Finally, and most importantly, I believe that awarding a patent to an 
individual who simply files before the inventor, violates the Framers' 
intent laid out in the Intellectual Property Clause. There can be no 
such thing as a ``first inventor to file'' since there can only be one 
inventor. Small inventors--the backbone of the American spirit of 
innovation--who do not have the funding or the legal staff to race to 
the PTO to file a patent will without question lose inventions to well-
funded and well-staffed corporations.
  I also have constitutional concerns with Section 18 of H.R. 1249. 
Section 18 of the America Invents Act would create a new Transitional 
Review proceeding at the Patent and Trademark Office that would only 
apply to ``business method patents'' dealing with data processing in 
the financial services industry. The Transitional Review would be 
available only to banks sued for patent infringement--even if the 
patent has already been upheld as valid by the PTO in a reexamination, 
or upheld by a federal court jury and/or judge in a trial. This new 
review process would ultimately lead to a delay, via a stay, of court 
proceedings that would interrupt inventors from capitalizing on their 
patents.
  Constitutional scholars Richard Epstein and Jonathan Massey have 
concluded that Section 18 language constitutes a government taking by 
allowing banks to challenge all business method patents--even those 
that have been reexamined and affirmed by the PTO and upheld by a jury 
in federal court.
  The House Judiciary Committee's consideration of H.R. 1249 proceeded 
rapidly. The committee held a hearing focused primarily on the broader 
patent provisions of the bill, and only the banking industry was 
invited to testify with regard to Section 18. Furthermore, there have 
been no hearings specifically relating to the implications of Section 
18.
  I have met with and spoken to a number of individuals representing 
both sides of this issue in order to fully understand the intent of 
H.R. 1249, as well as both its intended and unintended consequences. I 
have spoken to Director Kappos of the Patent and Trademark Office, and 
more importantly I have spoken with constituents in the 22nd 
Congressional District of Florida who are inventors that have received 
patents who would be adversely affected by certain provisions of this 
bill.
  Madam Chair, I voted against H.R. 1249 because I believe that the 
major sections I have outlined raise serious Constitutional questions. 
Section 3 clearly violates the intent of our Framers when they drafted 
the Intellectual Property Clause. Section 18 opens the door for the 
Executive Branch to overturn the Judicial Branch, a clear violation of 
the separation of powers laid out by the United States Constitution.
  As a 22-year Army combat veteran, and now as a Member of the House of 
Representatives, I swore an oath to protect and defend the 
Constitution. Voting in favor of passage of H.R. 1249 I believe goes 
against this very sacred oath I took, both as a young Second Lieutenant 
over 25 years ago, and as a Congressman in this body earlier this year.
  Mr. BLUMENAUER. Madam Chair, I rise in support of H.R. 1249, which 
will help America maintain its distinction as the most innovative 
country in the world. For too long, independent inventors, small 
businesses, and America's leading universities and technology companies 
have been mired in a convoluted patent process that has stifled 
innovation and job creation. H.R. 1249 streamlines and clarifies the 
patent process, giving inventors and investors the certainty they need 
to expand their businesses and grow the economy.
  This legislation also gives the United States Patent and Trademark 
Office the tools it needs to process the hundreds of thousands of 
applications it receives every year, increasing their ability to adjust 
its fees to reflect the actual costs of the services it provides, to 
fast-track patent applications, and to expand opportunities for post-
grant review of patents. I remain deeply concerned that, under the 
manager's amendment, the Patent and Trademark Office will have fewer 
resources to pursue these objectives, a change which risks squandering 
the very opportunities created by the remainder of the legislation.
  Innovative stakeholders in my district have voiced concerns that the 
legislation's expansion of the defense of ``prior user rights'' will 
weaken their ability to protect their patentable innovations and give 
rise to widespread trade secret litigation, particularly for those 
areas of research the blend federal investment and private investment. 
I look forward to working with my colleagues to ensure these concerns 
are addressed, so that America's finest universities and research 
centers can continue their role as global leaders of innovation.
  H.R. 1249 is a strong step toward protecting the administration of 
our system of intellectual property rights. This is a worthy bipartisan 
accomplishment. I am concerned that some of

[[Page 9794]]

my colleagues have championed this bill as the ultimate job-creator and 
that once it passes, they will forget about the millions of Americans 
that are still struggling to find work. Patent reform is important, but 
what out-of-work Americans need most are jobs. I urge my colleagues to 
build on this bipartisan momentum and work together to rebuild and 
renew America's infrastructure, the most efficient way to create jobs 
and strengthen our economy.
  Mr. HOYER. Madam Chair, I rise in support of this legislation. I am a 
strong supporter, as many of you know, of what we call our Make It In 
America agenda. Make It In America simply means we are going to provide 
jobs, we are going to provide opportunities, and we are going to build 
the manufacturing sector of our economy. In order to do that we also 
need to enhance the inventive, innovative, and development phases of 
our economy. This bill, I think, will facilitate this.
  I congratulate the gentlelady from California for this amendment as 
well, which I think improves this bill. I rise in strong support and 
urge my colleagues to support this piece of legislation. I congratulate 
all of those who have worked on this legislation. It is obviously not 
perfect, but then again, no piece of legislation that we adopt is 
perfect. It is, however, a significant step forward to make sure that 
America remains the inventive, innovative development capital of the 
world. In order to do that we need to manufacture goods here in 
America--manufacture the goods that we invent, innovate, and develop 
here, because if we continue to take them to scale overseas, then the 
inventors, innovators, and developers will themselves move overseas.
  So I thank Mr. Smith, Mr. Watt, Ms. Lofgren, and the others who have 
worked so hard on this legislation, who have dedicated themselves to 
trying to make sure that we have a context and environment in America 
which will facilitate the innovative sector of our economy.
  Mr. VAN HOLLEN. Madam Chair, America's patent system and the 
protection of intellectual property is an important source of 
innovation and national strength for our country. For that reason, any 
patent reform proposal must be judged based on its ability to improve 
patent quality, reduce the current backlog and provide patent holders 
greater certainty with respect to their patent rights. On that score, I 
believe the America Invents Act, on balance, achieves that objective.
  In particular, our office received a number of calls regarding the 
proposed change to a first-inventor-to-file system. A variety of 
stakeholders--from the U.S. Patent Office to large multinational 
companies to biotech firms and angel investors in my district to the 
academic research community to independent inventors on both sides of 
this issue--weighed in with their respective points of view. In the 
final analysis, I concluded that the first-inventor-to-file standard in 
today's legislation will provide greater certainty for innovators, 
produce stronger patents and enhance our nation's economic 
competitiveness.
  Mr. WAXMAN. Madam Chair, it is with great frustration that I rise in 
opposition to H.R. 1249, the America Invents Act.
  Our nation's patent system is the backbone of our knowledge-based 
economy and the well-spring of our most competitive industries. Since 
the era of the Founding Fathers, the patent system has evolved on the 
principle that individuals are entitled and encouraged to claim 
ownership of their thoughts and discoveries. For this reason we 
continue to be a world leader in innovation, producing some of the 
greatest scientific advances of the modern era and serving as a robust 
market for all around in the world who want to invest in or introduce 
the next ``big idea.''
  The objective of patent reform is to improve patent quality, reduce 
uncertainty and modernize a Patent and Trademark Office (PTO) mired in 
inefficiencies and delays. Regrettably, this bill as amended fails to 
achieve these critical goals.
  On the issue of patent quality, I am deeply disappointed that Section 
12 of the bill introduces a new supplemental examination procedure 
permitting patent holders a second chance to correct or revise 
information that was inaccurate or omitted at the time the patent was 
filed. The provision also prohibits any information provided in a 
reexamination proceeding from being used as evidence that a patent 
holder committed inequitable conduct and deliberately filed a patent 
application that was misleading or deceptive.
  Effectively, this amounts to a ``get out of jail free card'' for any 
company fearful of having their patent invalidated because they 
deceived the PTO. Furthermore, nothing in the bill would stop a patent 
holder from seeking a supplemental examination with information that 
wasn't even available at the time the patent was originally filed. What 
is to stop a drug company from submitting new clinical studies 
conducted after the patent was filed to shore up questionable claims in 
an original application? And what is to stop a company from cutting 
corners on a patent application when they know they can just fix it 
later?
  If this bill is enacted into law, I am hopeful that the PTO will, at 
a minimum, adopt reasonable limitations on this procedure such as 
prohibiting reexamination of information that didn't exist at the time 
of the original filing. It is essential that the agency carefully 
police what stands to be an abusive practice.
  On the issue of certainty, I am concerned that this bill fails to 
offer greater clarity of the protection available to inventors during 
the ``grace period,'' or the one year period an inventor has to file a 
patent application after disclosing or publishing information about the 
invention. This time is critical for small inventors to conduct market 
research, pitch their ideas to investors, and raise sufficient capital 
to file a quality patent application. As our system shifts from a 
first-inventor-to-file to a first-to-file paradigm, small inventors 
face an increased risk that someone will hear their idea and race ahead 
of them to file a patent or use their own pitch materials against them 
to claim there is prior art undermining the patent application.
  Which brings me to the issue of modernization. This legislation is a 
leap of faith. It represents a dramatic transformation of the patent 
system and introduces a host of new mechanisms for pre-grant 
submissions, post-grant challenges, and revamped derivation proceedings 
at an agency already mired in backlogs. Rather than giving the PTO the 
resources it needs to implement these sweeping changes, the Republican 
leadership has refused to let the agency collect and allocate the fees 
paid by patent filers. Instead, the agency must remain at the mercy of 
the appropriations committee for annual allocations.
  It's one thing to ask inventors to take a leap of faith on the bold 
restructuring of our patent system. But now they are being asked to 
take another leap of faith that appropriators won't fall back on their 
long history of poaching patent fee revenues for other uses.
  Congress can do better and inventors deserve better. If this 
legislation passes the House, I am hopeful we will have an opportunity 
to fix these problems in negotiations with the Senate.
  Mr. SMITH of Texas. Madam Chair, H.R. 1249 makes a significant change 
to the system by which patents are filed and granted in the United 
States. Moving to a first-inventor-to-file system will modernize and 
harmonize our patent system with our international trading partners. In 
so doing, we recognize that we are also modifying other parts of our 
patent system as part of this change.
  One key part of the transition that has already been recognized by 
the House Judiciary Committee is the necessary inclusion of prior user 
rights under the new first-inventor-to-file system. The inclusion of 
prior user rights is essential to ensure that those who have invented 
and used a technology but choose not to disclose that technology--
generally to ensure that they not disclose their trade secrets to 
foreign competitors--are provided a defense against someone who later 
patents the technology. Even as we make this make this change, we 
recognize that uncertainty remains as to the appropriate scope of the 
prior-user-rights defense and how best to provide protections for 
America's most innovative companies.
  H.R. 1249 takes steps to explore these issues, including requiring an 
important PTO study of prior user rights and whether we should expand 
the defense created by the America Invents Act. One important area of 
focus will be how we protect those who make substantial investments in 
the development and preparation of proprietary technologies. For 
example, in the semiconductor industry, the design of a state of the 
art processor takes roughly three years from the high-level 
specification to the production of the first silicon, at a cost of 
billions of dollars. Inventions such as these, which are present 
throughout our economy, should be protected. I should also note that 
parties who commercialize a product will still be able to assert a 
defense of prior art invalidation. Upon release of the forthcoming PTO 
report, we may introduce legislation that implements its conclusions 
and refines the nature and scope of the prior-user rights defense. This 
will ensure that our most innovative companies who hold many of the 
keys to U.S. economic competitiveness are provided sufficient prior 
user right protections to put them on an even competitive field 
internationally.
  Mr. SMITH of Texas. Madam Chair, I yield back the balance of my time.
  The Acting CHAIR. All time for general debate has expired.
  Pursuant to the rule, the amendment in the nature of a substitute 
printed in

[[Page 9795]]

the bill shall be considered as an original bill for the purpose of 
amendment under the 5-minute rule and shall be considered read.
  The text of the amendment in the nature of a substitute is as 
follows:

                               H.R. 1249

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``America 
     Invents Act''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. First inventor to file.
Sec. 4. Inventor's oath or declaration.
Sec. 5. Defense to infringement based on earlier inventor.
Sec. 6. Post-grant review proceedings.
Sec. 7. Patent Trial and Appeal Board.
Sec. 8. Preissuance submissions by third parties.
Sec. 9. Venue.
Sec. 10. Fee setting authority.
Sec. 11. Fees for patent services.
Sec. 12. Supplemental examination.
Sec. 13. Funding agreements.
Sec. 14. Tax strategies deemed within the prior art.
Sec. 15. Best mode requirement.
Sec. 16. Marking.
Sec. 17. Advice of counsel.
Sec. 18. Transitional program for covered business method patents.
Sec. 19. Jurisdiction and procedural matters.
Sec. 20. Technical amendments.
Sec. 21. Travel expenses and payment of administrative judges.
Sec. 22. Patent and Trademark Office funding.
Sec. 23. Satellite offices.
Sec. 24. Designation of Detroit satellite office.
Sec. 25. Patent Ombudsman Program for small business concerns.
Sec. 26. Priority examination for technologies important to American 
              competitiveness.
Sec. 27. Calculation of 60-day period for application of patent term 
              extension.
Sec. 28. Study on implementation.
Sec. 29. Pro bono program.
Sec. 30. Effective date.
Sec. 31. Budgetary effects.

     SEC. 2. DEFINITIONS.

       In this Act:
       (1) Director.--The term ``Director'' means the Under 
     Secretary of Commerce for Intellectual Property and Director 
     of the United States Patent and Trademark Office.
       (2) Office.--The term ``Office'' means the United States 
     Patent and Trademark Office.
       (3) Patent public advisory committee.--The term ``Patent 
     Public Advisory Committee'' means the Patent Public Advisory 
     Committee established under section 5(a)(1) of title 35, 
     United States Code.
       (4) Trademark act of 1946.--The term ``Trademark Act of 
     1946'' means the Act entitled ``An Act to provide for the 
     registration and protection of trademarks used in commerce, 
     to carry out the provisions of certain international 
     conventions, and for other purposes'', approved July 5, 1946 
     (15 U.S.C. 1051 et seq.) (commonly referred to as the 
     ``Trademark Act of 1946'' or the ``Lanham Act'').
       (5) Trademark public advisory committee.--The term 
     ``Trademark Public Advisory Committee'' means the Trademark 
     Public Advisory Committee established under section 5(a)(1) 
     of title 35, United States Code.

     SEC. 3. FIRST INVENTOR TO FILE.

       (a) Definitions.--Section 100 of title 35, United States 
     Code, is amended--
       (1) in subsection (e), by striking ``or inter partes 
     reexamination under section 311''; and
       (2) by adding at the end the following:
       ``(f) The term `inventor' means the individual or, if a 
     joint invention, the individuals collectively who invented or 
     discovered the subject matter of the invention.
       ``(g) The terms `joint inventor' and `coinventor' mean any 
     1 of the individuals who invented or discovered the subject 
     matter of a joint invention.
       ``(h) The term `joint research agreement' means a written 
     contract, grant, or cooperative agreement entered into by 2 
     or more persons or entities for the performance of 
     experimental, developmental, or research work in the field of 
     the claimed invention.
       ``(i)(1) The term `effective filing date' for a claimed 
     invention in a patent or application for patent means--
       ``(A) if subparagraph (B) does not apply, the actual filing 
     date of the patent or the application for the patent 
     containing a claim to the invention; or
       ``(B) the filing date of the earliest application for which 
     the patent or application is entitled, as to such invention, 
     to a right of priority under section 119, 365(a), or 365(b) 
     or to the benefit of an earlier filing date under section 
     120, 121, or 365(c).
       ``(2) The effective filing date for a claimed invention in 
     an application for reissue or reissued patent shall be 
     determined by deeming the claim to the invention to have been 
     contained in the patent for which reissue was sought.
       ``(j) The term `claimed invention' means the subject matter 
     defined by a claim in a patent or an application for a 
     patent.''.
       (b) Conditions for Patentability.--
       (1) In general.--Section 102 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 102. Conditions for patentability; novelty

       ``(a) Novelty; Prior Art.--A person shall be entitled to a 
     patent unless--
       ``(1) the claimed invention was patented, described in a 
     printed publication, or in public use, on sale, or otherwise 
     available to the public before the effective filing date of 
     the claimed invention; or
       ``(2) the claimed invention was described in a patent 
     issued under section 151, or in an application for patent 
     published or deemed published under section 122(b), in which 
     the patent or application, as the case may be, names another 
     inventor and was effectively filed before the effective 
     filing date of the claimed invention.
       ``(b) Exceptions.--
       ``(1) Disclosures made 1 year or less before the effective 
     filing date of the claimed invention.--A disclosure made 1 
     year or less before the effective filing date of a claimed 
     invention shall not be prior art to the claimed invention 
     under subsection (a)(1) if--
       ``(A) the disclosure was made by the inventor or joint 
     inventor or by another who obtained the subject matter 
     disclosed directly or indirectly from the inventor or a joint 
     inventor; or
       ``(B) the subject matter disclosed had, before such 
     disclosure, been publicly disclosed by the inventor or a 
     joint inventor or another who obtained the subject matter 
     disclosed directly or indirectly from the inventor or a joint 
     inventor.
       ``(2) Disclosures appearing in applications and patents.--A 
     disclosure shall not be prior art to a claimed invention 
     under subsection (a)(2) if--
       ``(A) the subject matter disclosed was obtained directly or 
     indirectly from the inventor or a joint inventor;
       ``(B) the subject matter disclosed had, before such subject 
     matter was effectively filed under subsection (a)(2), been 
     publicly disclosed by the inventor or a joint inventor or 
     another who obtained the subject matter disclosed directly or 
     indirectly from the inventor or a joint inventor; or
       ``(C) the subject matter disclosed and the claimed 
     invention, not later than the effective filing date of the 
     claimed invention, were owned by the same person or subject 
     to an obligation of assignment to the same person.
       ``(c) Common Ownership Under Joint Research Agreements.--
     Subject matter disclosed and a claimed invention shall be 
     deemed to have been owned by the same person or subject to an 
     obligation of assignment to the same person in applying the 
     provisions of subsection (b)(2)(C) if--
       ``(1) the subject matter disclosed was developed and the 
     claimed invention was made by, or on behalf of, 1 or more 
     parties to a joint research agreement that was in effect on 
     or before the effective filing date of the claimed invention;
       ``(2) the claimed invention was made as a result of 
     activities undertaken within the scope of the joint research 
     agreement; and
       ``(3) the application for patent for the claimed invention 
     discloses or is amended to disclose the names of the parties 
     to the joint research agreement.
       ``(d) Patents and Published Applications Effective as Prior 
     Art.--For purposes of determining whether a patent or 
     application for patent is prior art to a claimed invention 
     under subsection (a)(2), such patent or application shall be 
     considered to have been effectively filed, with respect to 
     any subject matter described in the patent or application--
       ``(1) if paragraph (2) does not apply, as of the actual 
     filing date of the patent or the application for patent; or
       ``(2) if the patent or application for patent is entitled 
     to claim a right of priority under section 119, 365(a), or 
     365(b), or to claim the benefit of an earlier filing date 
     under section 120, 121, or 365(c), based upon 1 or more prior 
     filed applications for patent, as of the filing date of the 
     earliest such application that describes the subject 
     matter.''.
       (2) Continuity of intent under the create act.--The 
     enactment of section 102(c) of title 35, United States Code, 
     under paragraph (1) of this subsection is done with the same 
     intent to promote joint research activities that was 
     expressed, including in the legislative history, through the 
     enactment of the Cooperative Research and Technology 
     Enhancement Act of 2004 (Public Law 108-453; the ``CREATE 
     Act''), the amendments of which are stricken by subsection 
     (c) of this section. The United States Patent and Trademark 
     Office shall administer section 102(c) of title 35, United 
     States Code, in a manner consistent with the legislative 
     history of the CREATE Act that was relevant to its 
     administration by the United States Patent and Trademark 
     Office.
       (3) Conforming amendment.--The item relating to section 102 
     in the table of sections for chapter 10 of title 35, United 
     States Code, is amended to read as follows:

``102. Conditions for patentability; novelty.''.

       (c) Conditions for Patentability; Nonobvious Subject 
     Matter.--Section 103 of title 35, United States Code, is 
     amended to read as follows:

     ``Sec. 103. Conditions for patentability; non-obvious subject 
       matter

       ``A patent for a claimed invention may not be obtained, 
     notwithstanding that the claimed invention is not identically 
     disclosed as set forth in section 102, if the differences 
     between the claimed invention and the prior art are such that 
     the claimed invention as a whole would have been obvious 
     before the effective filing date

[[Page 9796]]

     of the claimed invention to a person having ordinary skill in 
     the art to which the claimed invention pertains. 
     Patentability shall not be negated by the manner in which the 
     invention was made.''.
       (d) Repeal of Requirements for Inventions Made Abroad.--
     Section 104 of title 35, United States Code, and the item 
     relating to that section in the table of sections for chapter 
     10 of title 35, United States Code, are repealed.
       (e) Repeal of Statutory Invention Registration.--
       (1) In general.--Section 157 of title 35, United States 
     Code, and the item relating to that section in the table of 
     sections for chapter 14 of title 35, United States Code, are 
     repealed.
       (2) Removal of cross references.--Section 111(b)(8) of 
     title 35, United States Code, is amended by striking 
     ``sections 115, 131, 135, and 157'' and inserting ``sections 
     131 and 135''.
       (3) Effective date.--The amendments made by this subsection 
     shall take effect upon the expiration of the 18-month period 
     beginning on the date of the enactment of this Act, and shall 
     apply to any request for a statutory invention registration 
     filed on or after that effective date.
       (f) Earlier Filing Date for Inventor and Joint Inventor.--
     Section 120 of title 35, United States Code, is amended by 
     striking ``which is filed by an inventor or inventors named'' 
     and inserting ``which names an inventor or joint inventor''.
       (g) Conforming Amendments.--
       (1) Right of priority.--Section 172 of title 35, United 
     States Code, is amended by striking ``and the time specified 
     in section 102(d)''.
       (2) Limitation on remedies.--Section 287(c)(4) of title 35, 
     United States Code, is amended by striking ``the earliest 
     effective filing date of which is prior to'' and inserting 
     ``which has an effective filing date before''.
       (3) International application designating the united 
     states: effect.--Section 363 of title 35, United States Code, 
     is amended by striking ``except as otherwise provided in 
     section 102(e) of this title''.
       (4) Publication of international application: effect.--
     Section 374 of title 35, United States Code, is amended by 
     striking ``sections 102(e) and 154(d)'' and inserting 
     ``section 154(d)''.
       (5) Patent issued on international application: effect.--
     The second sentence of section 375(a) of title 35, United 
     States Code, is amended by striking ``Subject to section 
     102(e) of this title, such'' and inserting ``Such''.
       (6) Limit on right of priority.--Section 119(a) of title 
     35, United States Code, is amended by striking ``; but no 
     patent shall be granted'' and all that follows through ``one 
     year prior to such filing''.
       (7) Inventions made with federal assistance.--Section 
     202(c) of title 35, United States Code, is amended--
       (A) in paragraph (2)--
       (i) by striking ``publication, on sale, or public use,'' 
     and all that follows through ``obtained in the United 
     States'' and inserting ``the 1-year period referred to in 
     section 102(b) would end before the end of that 2-year 
     period''; and
       (ii) by striking ``prior to the end of the statutory'' and 
     inserting ``before the end of that 1-year''; and
       (B) in paragraph (3), by striking ``any statutory bar date 
     that may occur under this title due to publication, on sale, 
     or public use'' and inserting ``the expiration of the 1-year 
     period referred to in section 102(b)''.
       (h) Derived Patents.--
       (1) In general.--Section 291 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 291. Derived Patents

       ``(a) In General.--The owner of a patent may have relief by 
     civil action against the owner of another patent that claims 
     the same invention and has an earlier effective filing date, 
     if the invention claimed in such other patent was derived 
     from the inventor of the invention claimed in the patent 
     owned by the person seeking relief under this section.
       ``(b) Filing Limitation.--An action under this section may 
     be filed only before the end of the 1-year period beginning 
     on the date of the issuance of the first patent containing a 
     claim to the allegedly derived invention and naming an 
     individual alleged to have derived such invention as the 
     inventor or joint inventor.''.
       (2) Conforming amendment.--The item relating to section 291 
     in the table of sections for chapter 29 of title 35, United 
     States Code, is amended to read as follows:

``291. Derived patents.''.

       (i) Derivation Proceedings.--Section 135 of title 35, 
     United States Code, is amended to read as follows:

     ``Sec. 135. Derivation proceedings

       ``(a) Institution of Proceeding.--An applicant for patent 
     may file a petition to institute a derivation proceeding in 
     the Office. The petition shall set forth with particularity 
     the basis for finding that an inventor named in an earlier 
     application derived the claimed invention from an inventor 
     named in the petitioner's application and, without 
     authorization, the earlier application claiming such 
     invention was filed. Any such petition may be filed only 
     within the 1-year period beginning on the date of the first 
     publication of a claim to an invention that is the same or 
     substantially the same as the earlier application's claim to 
     the invention, shall be made under oath, and shall be 
     supported by substantial evidence. Whenever the Director 
     determines that a petition filed under this subsection 
     demonstrates that the standards for instituting a derivation 
     proceeding are met, the Director may institute a derivation 
     proceeding. The determination by the Director whether to 
     institute a derivation proceeding shall be final and 
     nonappealable.
       ``(b) Determination by Patent Trial and Appeal Board.--In a 
     derivation proceeding instituted under subsection (a), the 
     Patent Trial and Appeal Board shall determine whether an 
     inventor named in the earlier application derived the claimed 
     invention from an inventor named in the petitioner's 
     application and, without authorization, the earlier 
     application claiming such invention was filed. The Director 
     shall prescribe regulations setting forth standards for the 
     conduct of derivation proceedings.
       ``(c) Deferral of Decision.--The Patent Trial and Appeal 
     Board may defer action on a petition for a derivation 
     proceeding until the expiration of the 3-month period 
     beginning on the date on which the Director issues a patent 
     that includes the claimed invention that is the subject of 
     the petition. The Patent Trial and Appeal Board also may 
     defer action on a petition for a derivation proceeding, or 
     stay the proceeding after it has been instituted, until the 
     termination of a proceeding under chapter 30, 31, or 32 
     involving the patent of the earlier applicant.
       ``(d) Effect of Final Decision.--The final decision of the 
     Patent Trial and Appeal Board, if adverse to claims in an 
     application for patent, shall constitute the final refusal by 
     the Office on those claims. The final decision of the Patent 
     Trial and Appeal Board, if adverse to claims in a patent, 
     shall, if no appeal or other review of the decision has been 
     or can be taken or had, constitute cancellation of those 
     claims, and notice of such cancellation shall be endorsed on 
     copies of the patent distributed after such cancellation.
       ``(e) Settlement.--Parties to a proceeding instituted under 
     subsection (a) may terminate the proceeding by filing a 
     written statement reflecting the agreement of the parties as 
     to the correct inventors of the claimed invention in dispute. 
     Unless the Patent Trial and Appeal Board finds the agreement 
     to be inconsistent with the evidence of record, if any, it 
     shall take action consistent with the agreement. Any written 
     settlement or understanding of the parties shall be filed 
     with the Director. At the request of a party to the 
     proceeding, the agreement or understanding shall be treated 
     as business confidential information, shall be kept separate 
     from the file of the involved patents or applications, and 
     shall be made available only to Government agencies on 
     written request, or to any person on a showing of good cause.
       ``(f) Arbitration.--Parties to a proceeding instituted 
     under subsection (a) may, within such time as may be 
     specified by the Director by regulation, determine such 
     contest or any aspect thereof by arbitration. Such 
     arbitration shall be governed by the provisions of title 9, 
     to the extent such title is not inconsistent with this 
     section. The parties shall give notice of any arbitration 
     award to the Director, and such award shall, as between the 
     parties to the arbitration, be dispositive of the issues to 
     which it relates. The arbitration award shall be 
     unenforceable until such notice is given. Nothing in this 
     subsection shall preclude the Director from determining the 
     patentability of the claimed inventions involved in the 
     proceeding.''.
       (j) Elimination of References to Interferences.--(1) 
     Sections 134, 145, 146, 154, and 305 of title 35, United 
     States Code, are each amended by striking ``Board of Patent 
     Appeals and Interferences'' each place it appears and 
     inserting ``Patent Trial and Appeal Board''.
       (2)(A) Section 146 of title 35, United States Code, is 
     amended--
       (i) by striking ``an interference'' and inserting ``a 
     derivation proceeding''; and
       (ii) by striking ``the interference'' and inserting ``the 
     derivation proceeding''.
       (B) The subparagraph heading for section 154(b)(1)(C) of 
     title 35, United States Code, is amended to read as follows:
       ``(C) Guarantee of adjustments for delays due to derivation 
     proceedings, secrecy orders, and appeals.--''.
       (3) The section heading for section 134 of title 35, United 
     States Code, is amended to read as follows:

     ``Sec. 134. Appeal to the Patent Trial and Appeal Board''.

       (4) The section heading for section 146 of title 35, United 
     States Code, is amended to read as follows:

     ``Sec. 146. Civil action in case of derivation proceeding''.

       (5) The items relating to sections 134 and 135 in the table 
     of sections for chapter 12 of title 35, United States Code, 
     are amended to read as follows:

``134. Appeal to the Patent Trial and Appeal Board.
``135. Derivation proceedings.''.

       (6) The item relating to section 146 in the table of 
     sections for chapter 13 of title 35, United States Code, is 
     amended to read as follows:

``146. Civil action in case of derivation proceeding.''.

       (k) Statute of Limitations.--
       (1) In general.--Section 32 of title 35, United States 
     Code, is amended by inserting between the third and fourth 
     sentences the following: ``A proceeding under this section 
     shall be commenced not later than the earlier of either the 
     date that is 10 years after the date on which the misconduct 
     forming the basis for the proceeding occurred, or 1 year 
     after the date on which the misconduct forming the basis for 
     the proceeding

[[Page 9797]]

     is made known to an officer or employee of the Office as 
     prescribed in the regulations established under section 
     2(b)(2)(D).''.
       (2) Report to congress.--The Director shall provide on a 
     biennial basis to the Judiciary Committees of the Senate and 
     House of Representatives a report providing a short 
     description of incidents made known to an officer or employee 
     of the Office as prescribed in the regulations established 
     under section 2(b)(2)(D) of title 35, United States Code, 
     that reflect substantial evidence of misconduct before the 
     Office but for which the Office was barred from commencing a 
     proceeding under section 32 of title 35, United States Code, 
     by the time limitation established by the fourth sentence of 
     that section.
       (3) Effective date.--The amendment made by paragraph (1) 
     shall apply in any case in which the time period for 
     instituting a proceeding under section 32 of title 35, United 
     States Code, had not lapsed before the date of the enactment 
     of this Act.
       (l) Small Business Study.--
       (1) Definitions.--In this subsection--
       (A) the term ``Chief Counsel'' means the Chief Counsel for 
     Advocacy of the Small Business Administration;
       (B) the term ``General Counsel'' means the General Counsel 
     of the United States Patent and Trademark Office; and
       (C) the term ``small business concern'' has the meaning 
     given that term under section 3 of the Small Business Act (15 
     U.S.C. 632).
       (2) Study.--
       (A) In general.--The Chief Counsel, in consultation with 
     the General Counsel, shall conduct a study of the effects of 
     eliminating the use of dates of invention in determining 
     whether an applicant is entitled to a patent under title 35, 
     United States Code.
       (B) Areas of study.--The study conducted under subparagraph 
     (A) shall include examination of the effects of eliminating 
     the use of invention dates, including examining--
       (i) how the change would affect the ability of small 
     business concerns to obtain patents and their costs of 
     obtaining patents;
       (ii) whether the change would create, mitigate, or 
     exacerbate any disadvantages for applicants for patents that 
     are small business concerns relative to applicants for 
     patents that are not small business concerns, and whether the 
     change would create any advantages for applicants for patents 
     that are small business concerns relative to applicants for 
     patents that are not small business concerns;
       (iii) the cost savings and other potential benefits to 
     small business concerns of the change; and
       (iv) the feasibility and costs and benefits to small 
     business concerns of alternative means of determining whether 
     an applicant is entitled to a patent under title 35, United 
     States Code.
       (3) Report.--Not later than the date that is 1 year after 
     the date of the enactment of this Act, the Chief Counsel 
     shall submit to the Committee on Small Business and 
     Entrepreneurship and the Committee on the Judiciary of the 
     Senate and the Committee on Small Business and the Committee 
     on the Judiciary of the House of Representatives a report on 
     the results of the study under paragraph (2).
       (m) Report on Prior User Rights.--
       (1) In general.--Not later than the end of the 4-month 
     period beginning on the date of the enactment of this Act, 
     the Director shall report, to the Committee on the Judiciary 
     of the Senate and the Committee on the Judiciary of the House 
     of Representatives, the findings and recommendations of the 
     Director on the operation of prior user rights in selected 
     countries in the industrialized world. The report shall 
     include the following:
       (A) A comparison between patent laws of the United States 
     and the laws of other industrialized countries, including 
     members of the European Union and Japan, Canada, and 
     Australia.
       (B) An analysis of the effect of prior user rights on 
     innovation rates in the selected countries.
       (C) An analysis of the correlation, if any, between prior 
     user rights and start-up enterprises and the ability to 
     attract venture capital to start new companies.
       (D) An analysis of the effect of prior user rights, if any, 
     on small businesses, universities, and individual inventors.
       (E) An analysis of legal and constitutional issues, if any, 
     that arise from placing trade secret law in patent law.
       (F) An analysis of whether the change to a first-to-file 
     patent system creates a particular need for prior user 
     rights.
       (2) Consultation with other agencies.--In preparing the 
     report required under paragraph (1), the Director shall 
     consult with the United States Trade Representative, the 
     Secretary of State, and the Attorney General.
       (n) Effective Date.--
       (1) In general.--Except as otherwise provided in this 
     section, the amendments made by this section shall take 
     effect upon the expiration of the 18-month period beginning 
     on the date of the enactment of this Act, and shall apply to 
     any application for patent, and to any patent issuing 
     thereon, that contains or contained at any time--
       (A) a claim to a claimed invention that has an effective 
     filing date as defined in section 100(i) of title 35, United 
     States Code, that is on or after the effective date described 
     in this paragraph; or
       (B) a specific reference under section 120, 121, or 365(c) 
     of title 35, United States Code, to any patent or application 
     that contains or contained at any time such a claim.
       (2) Interfering patents.--The provisions of sections 
     102(g), 135, and 291 of title 35, United States Code, as in 
     effect on the day before the effective date set forth in 
     paragraph (1) of this subsection, shall apply to each claim 
     of an application for patent, and any patent issued thereon, 
     for which the amendments made by this section also apply, if 
     such application or patent contains or contained at any 
     time--
       (A) a claim to an invention having an effective filing date 
     as defined in section 100(i) of title 35, United States Code, 
     that occurs before the effective date set forth in paragraph 
     (1) of this subsection; or
       (B) a specific reference under section 120, 121, or 365(c) 
     of title 35, United States Code, to any patent or application 
     that contains or contained at any time such a claim.
       (o) Study of Patent Litigation.--
       (1) GAO study.--The Comptroller General of the United 
     States shall conduct a study of the consequences of 
     litigation by non-practicing entities, or by patent assertion 
     entities, related to patent claims made under title 35, 
     United States Code, and regulations authorized by that title.
       (2) Contents of study.--The study conducted under this 
     subsection shall include the following:
       (A) The annual volume of litigation described in paragraph 
     (1) over the 20-year period ending on the date of the 
     enactment of this Act.
       (B) The volume of cases comprising such litigation that are 
     found to be without merit after judicial review.
       (C) The impacts of such litigation on the time required to 
     resolve patent claims.
       (D) The estimated costs, including the estimated cost of 
     defense, associated with such litigation for patent holders, 
     patent licensors, patent licensees, and inventors, and for 
     users of alternate or competing innovations.
       (E) The economic impact of such litigation on the economy 
     of the United States, including the impact on inventors, job 
     creation, employers, employees, and consumers.
       (F) The benefit to commerce, if any, supplied by non-
     practicing entities or patent assertion entities that 
     prosecute such litigation.
       (3) Report to congress.--The Comptroller General shall, not 
     later than the date that is 1 year after the date of the 
     enactment of this Act, submit to the Committee on the 
     Judiciary of the House of Representatives and the Committee 
     on the Judiciary of the Senate a report on the results of the 
     study required under this subsection, including 
     recommendations for any changes to laws and regulations that 
     will minimize any negative impact of patent litigation that 
     was the subject of such study.
       (p) Sense of Congress.--It is the sense of the Congress 
     that converting the United States patent registration system 
     from ``first inventor to use'' to a system of ``first 
     inventor to file'' will promote the progress of science by 
     securing for limited times to inventors the exclusive rights 
     to their discoveries and provide inventors with greater 
     certainty regarding the scope of protection granted by the 
     exclusive rights to their discoveries.
       (q) Sense of Congress.--It is the sense of the Congress 
     that converting the United States patent registration system 
     from ``first inventor to use'' to a system of ``first 
     inventor to file'' will harmonize the United States patent 
     registration system with the patent registration systems 
     commonly used in nearly all other countries throughout the 
     world with whom the United States conducts trade and thereby 
     promote a greater sense of international uniformity and 
     certainty in the procedures used for securing the exclusive 
     rights of inventors to their discoveries.

     SEC. 4. INVENTOR'S OATH OR DECLARATION.

       (a) Inventor's Oath or Declaration.--
       (1) In general.--Section 115 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 115. Inventor's oath or declaration

       ``(a) Naming the Inventor; Inventor's Oath or 
     Declaration.--An application for patent that is filed under 
     section 111(a) or commences the national stage under section 
     371 shall include, or be amended to include, the name of the 
     inventor for any invention claimed in the application. Except 
     as otherwise provided in this section, each individual who is 
     the inventor or a joint inventor of a claimed invention in an 
     application for patent shall execute an oath or declaration 
     in connection with the application.
       ``(b) Required Statements.--An oath or declaration under 
     subsection (a) shall contain statements that--
       ``(1) the application was made or was authorized to be made 
     by the affiant or declarant; and
       ``(2) such individual believes himself or herself to be the 
     original inventor or an original joint inventor of a claimed 
     invention in the application.
       ``(c) Additional Requirements.--The Director may specify 
     additional information relating to the inventor and the 
     invention that is required to be included in an oath or 
     declaration under subsection (a).
       ``(d) Substitute Statement.--
       ``(1) In general.--In lieu of executing an oath or 
     declaration under subsection (a), the applicant for patent 
     may provide a substitute statement under the circumstances 
     described in paragraph (2) and such additional circumstances 
     that the Director may specify by regulation.
       ``(2) Permitted circumstances.--A substitute statement 
     under paragraph (1) is permitted with respect to any 
     individual who--
       ``(A) is unable to file the oath or declaration under 
     subsection (a) because the individual--
       ``(i) is deceased;
       ``(ii) is under legal incapacity; or
       ``(iii) cannot be found or reached after diligent effort; 
     or

[[Page 9798]]

       ``(B) is under an obligation to assign the invention but 
     has refused to make the oath or declaration required under 
     subsection (a).
       ``(3) Contents.--A substitute statement under this 
     subsection shall--
       ``(A) identify the individual with respect to whom the 
     statement applies;
       ``(B) set forth the circumstances representing the 
     permitted basis for the filing of the substitute statement in 
     lieu of the oath or declaration under subsection (a); and
       ``(C) contain any additional information, including any 
     showing, required by the Director.
       ``(e) Making Required Statements in Assignment of Record.--
     An individual who is under an obligation of assignment of an 
     application for patent may include the required statements 
     under subsections (b) and (c) in the assignment executed by 
     the individual, in lieu of filing such statements separately.
       ``(f) Time for Filing.--A notice of allowance under section 
     151 may be provided to an applicant for patent only if the 
     applicant for patent has filed each required oath or 
     declaration under subsection (a) or has filed a substitute 
     statement under subsection (d) or recorded an assignment 
     meeting the requirements of subsection (e).
       ``(g) Earlier-Filed Application Containing Required 
     Statements or Substitute Statement.--
       ``(1) Exception.--The requirements under this section shall 
     not apply to an individual with respect to an application for 
     patent in which the individual is named as the inventor or a 
     joint inventor and who claims the benefit under section 120, 
     121, or 365(c) of the filing of an earlier-filed application, 
     if--
       ``(A) an oath or declaration meeting the requirements of 
     subsection (a) was executed by the individual and was filed 
     in connection with the earlier-filed application;
       ``(B) a substitute statement meeting the requirements of 
     subsection (d) was filed in connection with the earlier filed 
     application with respect to the individual; or
       ``(C) an assignment meeting the requirements of subsection 
     (e) was executed with respect to the earlier-filed 
     application by the individual and was recorded in connection 
     with the earlier-filed application.
       ``(2) Copies of oaths, declarations, statements, or 
     assignments.--Notwithstanding paragraph (1), the Director may 
     require that a copy of the executed oath or declaration, the 
     substitute statement, or the assignment filed in connection 
     with the earlier-filed application be included in the later-
     filed application.
       ``(h) Supplemental and Corrected Statements; Filing 
     Additional Statements.--
       ``(1) In general.--Any person making a statement required 
     under this section may withdraw, replace, or otherwise 
     correct the statement at any time. If a change is made in the 
     naming of the inventor requiring the filing of 1 or more 
     additional statements under this section, the Director shall 
     establish regulations under which such additional statements 
     may be filed.
       ``(2) Supplemental statements not required.--If an 
     individual has executed an oath or declaration meeting the 
     requirements of subsection (a) or an assignment meeting the 
     requirements of subsection (e) with respect to an application 
     for patent, the Director may not thereafter require that 
     individual to make any additional oath, declaration, or other 
     statement equivalent to those required by this section in 
     connection with the application for patent or any patent 
     issuing thereon.
       ``(3) Savings clause.--A patent shall not be invalid or 
     unenforceable based upon the failure to comply with a 
     requirement under this section if the failure is remedied as 
     provided under paragraph (1).
       ``(i) Acknowledgment of Penalties.--Any declaration or 
     statement filed pursuant to this section shall contain an 
     acknowledgment that any willful false statement made in such 
     declaration or statement is punishable under section 1001 of 
     title 18 by fine or imprisonment of not more than 5 years, or 
     both.''.
       (2) Relationship to divisional applications.--Section 121 
     of title 35, United States Code, is amended by striking ``If 
     a divisional application'' and all that follows through 
     ``inventor.''.
       (3) Requirements for nonprovisional applications.--Section 
     111(a) of title 35, United States Code, is amended--
       (A) in paragraph (2)(C), by striking ``by the applicant'' 
     and inserting ``or declaration'';
       (B) in the heading for paragraph (3), by inserting ``or 
     declaration'' after ``and oath''; and
       (C) by inserting ``or declaration'' after ``and oath'' each 
     place it appears.
       (4) Conforming amendment.--The item relating to section 115 
     in the table of sections for chapter 11 of title 35, United 
     States Code, is amended to read as follows:

``115. Inventor's oath or declaration.''.

       (b) Filing by Other Than Inventor.--
       (1) In general.--Section 118 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 118. Filing by other than inventor

       ``A person to whom the inventor has assigned or is under an 
     obligation to assign the invention may make an application 
     for patent. A person who otherwise shows sufficient 
     proprietary interest in the matter may make an application 
     for patent on behalf of and as agent for the inventor on 
     proof of the pertinent facts and a showing that such action 
     is appropriate to preserve the rights of the parties. If the 
     Director grants a patent on an application filed under this 
     section by a person other than the inventor, the patent shall 
     be granted to the real party in interest and upon such notice 
     to the inventor as the Director considers to be 
     sufficient.''.
       (2) Conforming amendment.--Section 251 of title 35, United 
     States Code, is amended in the third undesignated paragraph 
     by inserting ``or the application for the original patent was 
     filed by the assignee of the entire interest'' after ``claims 
     of the original patent''.
       (c) Specification.--Section 112 of title 35, United States 
     Code, is amended--
       (1) in the first undesignated paragraph--
       (A) by striking ``The specification'' and inserting ``(a) 
     In General.--The specification''; and
       (B) by striking ``of carrying out his invention'' and 
     inserting ``or joint inventor of carrying out the 
     invention'';
       (2) in the second undesignated paragraph--
       (A) by striking ``The specification'' and inserting ``(b) 
     Conclusion.--The specification''; and
       (B) by striking ``applicant regards as his invention'' and 
     inserting ``inventor or a joint inventor regards as the 
     invention'';
       (3) in the third undesignated paragraph, by striking ``A 
     claim'' and inserting ``(c) Form.--A claim'';
       (4) in the fourth undesignated paragraph, by striking 
     ``Subject to the following paragraph,'' and inserting ``(d) 
     Reference in Dependent Forms.--Subject to subsection (e),'';
       (5) in the fifth undesignated paragraph, by striking ``A 
     claim'' and inserting ``(e) Reference in Multiple Dependent 
     Form.--A claim''; and
       (6) in the last undesignated paragraph, by striking ``An 
     element'' and inserting ``(f) Element in Claim for a 
     Combination.--An element''.
       (d) Conforming Amendments.--
       (1) Sections 111(b)(1)(A) of title 35, United States Code, 
     is amended by striking ``the first paragraph of section 112 
     of this title'' and inserting ``section 112(a)''.
       (2) Section 111(b)(2) of title 35, United States Code, is 
     amended by striking ``the second through fifth paragraphs of 
     section 112,'' and inserting ``subsections (b) through (e) of 
     section 112,''.
       (e) Effective Date.--The amendments made by this section 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to any patent application that is filed on or after 
     that effective date.

     SEC. 5. DEFENSE TO INFRINGEMENT BASED ON EARLIER INVENTOR.

       Section 273 of title 35, United States Code, is amended as 
     follows:
       (1) Subsection (a) is amended--
       (A) in paragraph (1)--
       (i) by striking ``use of a method in'' and inserting ``use 
     of the subject matter of a patent in''; and
       (ii) by adding ``and'' after the semicolon;
       (B) in paragraph (2), by striking the semicolon at the end 
     of subparagraph (B) and inserting a period; and
       (C) by striking paragraphs (3) and (4).
       (2) Subsection (b) is amended--
       (A) in paragraph (1)--
       (i) by striking ``for a method''; and
       (ii) by striking ``at least 1 year'' and all that follows 
     through the end and inserting ``and commercially used the 
     subject matter at least 1 year before the effective filing 
     date of the claimed invention that is the subject matter of 
     the patent.'';
       (B) in paragraph (2), by striking ``patented method'' and 
     inserting ``patented process'';
       (C) in paragraph (3)--
       (i) by striking subparagraph (A);
       (ii) by striking subparagraph (B) and inserting the 
     following:
       ``(A) Derivation and prior disclosure to the public.--A 
     person may not assert the defense under this section if--
       ``(i) the subject matter on which the defense is based was 
     derived from the patentee or persons in privity with the 
     patentee; or
       ``(ii) the claimed invention that is the subject of the 
     defense was disclosed to the public in a manner that 
     qualified for the exception from the prior art under section 
     102(b) and the commercialization date relied upon under 
     paragraph (1) of this subsection for establishing entitlement 
     to the defense is less than 1 year before the date of such 
     disclosure to the public;'';
       (iii) by redesignating subparagraph (C) as subparagraph 
     (B); and
       (iv) by adding at the end the following:
       ``(C) Funding.--
       ``(i) Defense not available in certain cases.--A person may 
     not assert the defense under this section if the subject 
     matter of the patent on which the defense is based was 
     developed pursuant to a funding agreement under chapter 18 or 
     by a nonprofit institution of higher education, or a 
     technology transfer organization affiliated with such an 
     institution, that did not receive funding from a private 
     business enterprise in support of that development.
       ``(ii) Definitions.--In this subparagraph--

       ``(I) the term `institution of higher education' has the 
     meaning given that term in section 101(a) of the Higher 
     Education Act of 1965 (20 U.S.C. 1001(a)); and
       ``(II) the term `technology transfer organization' means an 
     organization the primary purpose of which is to facilitate 
     the commercialization of technologies developed by one or 
     more institutions of higher education.''; and

       (D) by amending paragraph (6) to read as follows:

[[Page 9799]]

       ``(6) Personal defense.--
       ``(A) In general.--The defense under this section may be 
     asserted only by the person who performed or caused the 
     performance of the acts necessary to establish the defense, 
     as well as any other entity that controls, is controlled by, 
     or is under common control with such person, and, except for 
     any transfer to the patent owner, the right to assert the 
     defense shall not be licensed or assigned or transferred to 
     another person except as an ancillary and subordinate part of 
     a good faith assignment or transfer for other reasons of the 
     entire enterprise or line of business to which the defense 
     relates.
       ``(B) Exception.--Notwithstanding subparagraph (A), any 
     person may, on the person's own behalf, assert a defense 
     based on the exhaustion of rights provided under paragraph 
     (2), including any necessary elements thereof.''.

     SEC. 6. POST-GRANT REVIEW PROCEEDINGS.

       (a) Inter Partes Review.--Chapter 31 of title 35, United 
     States Code, is amended to read as follows:

                   ``CHAPTER 31--INTER PARTES REVIEW

``Sec.
``311. Inter partes review.
``312. Petitions.
``313. Preliminary response to petition.
``314. Institution of inter partes review.
``315. Relation to other proceedings or actions.
``316. Conduct of inter partes review.
``317. Settlement.
``318. Decision of the Board.
``319. Appeal.

     ``Sec. 311. Inter partes review

       ``(a) In General.--Subject to the provisions of this 
     chapter, a person who is not the owner of a patent may file 
     with the Office a petition to institute an inter partes 
     review of the patent. The Director shall establish, by 
     regulation, fees to be paid by the person requesting the 
     review, in such amounts as the Director determines to be 
     reasonable, considering the aggregate costs of the review.
       ``(b) Scope.--A petitioner in an inter partes review may 
     request to cancel as unpatentable 1 or more claims of a 
     patent only on a ground that could be raised under section 
     102 or 103 and only on the basis of prior art consisting of 
     patents or printed publications.
       ``(c) Filing Deadline.--A petition for inter partes review 
     shall be filed after the later of either--
       ``(1) the date that is 1 year after the grant of a patent 
     or issuance of a reissue of a patent; or
       ``(2) if a post-grant review is instituted under chapter 
     32, the date of the termination of such post-grant review.

     ``Sec. 312. Petitions

       ``(a) Requirements of Petition.--A petition filed under 
     section 311 may be considered only if--
       ``(1) the petition is accompanied by payment of the fee 
     established by the Director under section 311;
       ``(2) the petition identifies all real parties in interest;
       ``(3) the petition identifies, in writing and with 
     particularity, each claim challenged, the grounds on which 
     the challenge to each claim is based, and the evidence that 
     supports the grounds for the challenge to each claim, 
     including--
       ``(A) copies of patents and printed publications that the 
     petitioner relies upon in support of the petition; and
       ``(B) affidavits or declarations of supporting evidence and 
     opinions, if the petitioner relies on expert opinions;
       ``(4) the petition provides such other information as the 
     Director may require by regulation; and
       ``(5) the petitioner provides copies of any of the 
     documents required under paragraphs (2), (3), and (4) to the 
     patent owner or, if applicable, the designated representative 
     of the patent owner.
       ``(b) Public Availability.--As soon as practicable after 
     the receipt of a petition under section 311, the Director 
     shall make the petition available to the public.

     ``Sec. 313. Preliminary response to petition

       ``If an inter partes review petition is filed under section 
     311, the patent owner shall have the right to file a 
     preliminary response to the petition, within a time period 
     set by the Director, that sets forth reasons why no inter 
     partes review should be instituted based upon the failure of 
     the petition to meet any requirement of this chapter.

     ``Sec. 314. Institution of inter partes review

       ``(a) Threshold.--The Director may not authorize an inter 
     partes review to commence unless the Director determines that 
     the information presented in the petition filed under section 
     311 and any response filed under section 313 shows that there 
     is a reasonable likelihood that the petitioner would prevail 
     with respect to at least 1 of the claims challenged in the 
     petition.
       ``(b) Timing.--The Director shall determine whether to 
     institute an inter partes review under this chapter pursuant 
     to a petition filed under section 311 within 3 months after--
       ``(1) receiving a preliminary response to the petition 
     under section 313; or
       ``(2) if no such preliminary response is filed, the last 
     date on which such response may be filed.
       ``(c) Notice.--The Director shall notify the petitioner and 
     patent owner, in writing, of the Director's determination 
     under subsection (a), and shall make such notice available to 
     the public as soon as is practicable. Such notice shall 
     include the date on which the review shall commence.
       ``(d) No Appeal.--The determination by the Director whether 
     to institute an inter partes review under this section shall 
     be final and nonappealable.

     ``Sec. 315. Relation to other proceedings or actions

       ``(a) Infringer's Civil Action.--
       ``(1) Inter partes review barred by civil action.--An inter 
     partes review may not be instituted if, before the date on 
     which the petition for such a review is filed, the 
     petitioner, real party in interest, or privy of the 
     petitioner filed a civil action challenging the validity of a 
     claim of the patent.
       ``(2) Stay of civil action.--If the petitioner, real party 
     in interest, or privy of the petitioner files a civil action 
     challenging the validity of a claim of the patent on or after 
     the date on which the petitioner files a petition for inter 
     partes review of the patent, that civil action shall be 
     automatically stayed until either--
       ``(A) the patent owner moves the court to lift the stay;
       ``(B) the patent owner files a civil action or counterclaim 
     alleging that the petitioner, real party in interest, or 
     privy of the petitioner has infringed the patent; or
       ``(C) the petitioner, real party in interest, or privy of 
     the petitioner moves the court to dismiss the civil action.
       ``(3) Treatment of counterclaim.--A counterclaim 
     challenging the validity of a claim of a patent does not 
     constitute a civil action challenging the validity of a claim 
     of a patent for purposes of this subsection.
       ``(b) Patent Owner's Action.--An inter partes review may 
     not be instituted if the petition requesting the proceeding 
     is filed more than 1 year after the date on which the 
     petitioner, real party in interest, or privy of the 
     petitioner is served with a complaint alleging infringement 
     of the patent. The time limitation set forth in the preceding 
     sentence shall not apply to a request for joinder under 
     subsection (c).
       ``(c) Joinder.--If the Director institutes an inter partes 
     review, the Director, in his or her discretion, may join as a 
     party to that inter partes review any person who properly 
     files a petition under section 311 that the Director, after 
     receiving a preliminary response under section 313 or the 
     expiration of the time for filing such a response, determines 
     warrants the institution of an inter partes review under 
     section 314.
       ``(d) Multiple Proceedings.--Notwithstanding sections 
     135(a), 251, and 252, and chapter 30, during the pendency of 
     an inter partes review, if another proceeding or matter 
     involving the patent is before the Office, the Director may 
     determine the manner in which the inter partes review or 
     other proceeding or matter may proceed, including providing 
     for stay, transfer, consolidation, or termination of any such 
     matter or proceeding.
       ``(e) Estoppel.--
       ``(1) Proceedings before the office.--The petitioner in an 
     inter partes review of a claim in a patent under this chapter 
     that results in a final written decision under section 
     318(a), or the real party in interest or privy of the 
     petitioner, may not request or maintain a proceeding before 
     the Office with respect to that claim on any ground that the 
     petitioner raised or reasonably could have raised during that 
     inter partes review.
       ``(2) Civil actions and other proceedings.--The petitioner 
     in an inter partes review of a claim in a patent under this 
     chapter that results in a final written decision under 
     section 318(a), or the real party in interest or privy of the 
     petitioner, may not assert either in a civil action arising 
     in whole or in part under section 1338 of title 28 or in a 
     proceeding before the International Trade Commission under 
     section 337 of the Tariff Act of 1930 that the claim is 
     invalid on any ground that the petitioner raised or 
     reasonably could have raised during that inter partes review.

     ``Sec. 316. Conduct of inter partes review

       ``(a) Regulations.--The Director shall prescribe 
     regulations--
       ``(1) providing that the file of any proceeding under this 
     chapter shall be made available to the public, except that 
     any petition or document filed with the intent that it be 
     sealed shall, if accompanied by a motion to seal, be treated 
     as sealed pending the outcome of the ruling on the motion;
       ``(2) setting forth the standards for the showing of 
     sufficient grounds to institute a review under section 
     314(a);
       ``(3) establishing procedures for the submission of 
     supplemental information after the petition is filed;
       ``(4) establishing and governing inter partes review under 
     this chapter and the relationship of such review to other 
     proceedings under this title;
       ``(5) setting forth standards and procedures for discovery 
     of relevant evidence, including that such discovery shall be 
     limited to--
       ``(A) the deposition of witnesses submitting affidavits or 
     declarations; and
       ``(B) what is otherwise necessary in the interest of 
     justice;
       ``(6) prescribing sanctions for abuse of discovery, abuse 
     of process, or any other improper use of the proceeding, such 
     as to harass or to cause unnecessary delay or an unnecessary 
     increase in the cost of the proceeding;
       ``(7) providing for protective orders governing the 
     exchange and submission of confidential information;
       ``(8) providing for the filing by the patent owner of a 
     response to the petition under section 313 after an inter 
     partes review has been instituted, and requiring that the 
     patent owner

[[Page 9800]]

     file with such response, through affidavits or declarations, 
     any additional factual evidence and expert opinions on which 
     the patent owner relies in support of the response;
       ``(9) setting forth standards and procedures for allowing 
     the patent owner to move to amend the patent under subsection 
     (d) to cancel a challenged claim or propose a reasonable 
     number of substitute claims, and ensuring that any 
     information submitted by the patent owner in support of any 
     amendment entered under subsection (d) is made available to 
     the public as part of the prosecution history of the patent;
       ``(10) providing either party with the right to an oral 
     hearing as part of the proceeding;
       ``(11) requiring that the final determination in an inter 
     partes review be issued not later than 1 year after the date 
     on which the Director notices the institution of a review 
     under this chapter, except that the Director may, for good 
     cause shown, extend the 1-year period by not more than 6 
     months, and may adjust the time periods in this paragraph in 
     the case of joinder under section 315(c);
       ``(12) setting a time period for requesting joinder under 
     section 315(c); and
       ``(13) providing the petitioner with at least 1 opportunity 
     to file written comments within a time period established by 
     the Director.
       ``(b) Considerations.--In prescribing regulations under 
     this section, the Director shall consider the effect of any 
     such regulation on the economy, the integrity of the patent 
     system, the efficient administration of the Office, and the 
     ability of the Office to timely complete proceedings 
     instituted under this chapter.
       ``(c) Patent Trial and Appeal Board.--The Patent Trial and 
     Appeal Board shall, in accordance with section 6, conduct 
     each inter partes review instituted under this chapter.
       ``(d) Amendment of the Patent.--
       ``(1) In general.--During an inter partes review instituted 
     under this chapter, the patent owner may file 1 motion to 
     amend the patent in 1 or more of the following ways:
       ``(A) Cancel any challenged patent claim.
       ``(B) For each challenged claim, propose a reasonable 
     number of substitute claims.
       ``(2) Additional motions.--Additional motions to amend may 
     be permitted upon the joint request of the petitioner and the 
     patent owner to materially advance the settlement of a 
     proceeding under section 317, or as permitted by regulations 
     prescribed by the Director.
       ``(3) Scope of claims.--An amendment under this subsection 
     may not enlarge the scope of the claims of the patent or 
     introduce new matter.
       ``(e) Evidentiary Standards.--In an inter partes review 
     instituted under this chapter, the petitioner shall have the 
     burden of proving a proposition of unpatentability by a 
     preponderance of the evidence.

     ``Sec. 317. Settlement

       ``(a) In General.--An inter partes review instituted under 
     this chapter shall be terminated with respect to any 
     petitioner upon the joint request of the petitioner and the 
     patent owner, unless the Office has decided the merits of the 
     proceeding before the request for termination is filed. If 
     the inter partes review is terminated with respect to a 
     petitioner under this section, no estoppel under section 
     315(e) shall attach to the petitioner, or to the real party 
     in interest or privy of the petitioner, on the basis of that 
     petitioner's institution of that inter partes review. If no 
     petitioner remains in the inter partes review, the Office may 
     terminate the review or proceed to a final written decision 
     under section 318(a).
       ``(b) Agreements in Writing.--Any agreement or 
     understanding between the patent owner and a petitioner, 
     including any collateral agreements referred to in such 
     agreement or understanding, made in connection with, or in 
     contemplation of, the termination of an inter partes review 
     under this section shall be in writing and a true copy of 
     such agreement or understanding shall be filed in the Office 
     before the termination of the inter partes review as between 
     the parties. At the request of a party to the proceeding, the 
     agreement or understanding shall be treated as business 
     confidential information, shall be kept separate from the 
     file of the involved patents, and shall be made available 
     only to Federal Government agencies on written request, or to 
     any person on a showing of good cause.

     ``Sec. 318. Decision of the Board

       ``(a) Final Written Decision.--If an inter partes review is 
     instituted and not dismissed under this chapter, the Patent 
     Trial and Appeal Board shall issue a final written decision 
     with respect to the patentability of any patent claim 
     challenged by the petitioner and any new claim added under 
     section 316(d).
       ``(b) Certificate.--If the Patent Trial and Appeal Board 
     issues a final written decision under subsection (a) and the 
     time for appeal has expired or any appeal has terminated, the 
     Director shall issue and publish a certificate canceling any 
     claim of the patent finally determined to be unpatentable, 
     confirming any claim of the patent determined to be 
     patentable, and incorporating in the patent by operation of 
     the certificate any new or amended claim determined to be 
     patentable.
       ``(c) Amended or New Claim.--Any proposed amended or new 
     claim determined to be patentable and incorporated into a 
     patent following an inter partes review under this chapter 
     shall have the same effect as that specified in section 252 
     for reissued patents on the right of any person who made, 
     purchased, or used within the United States, or imported into 
     the United States, anything patented by such proposed amended 
     or new claim, or who made substantial preparation therefor, 
     before the issuance of a certificate under subsection (b).
       ``(d) Data on Length of Review.--The Office shall make 
     available to the public data describing the length of time 
     between the institution of, and the issuance of a final 
     written decision under subsection (a) for, each inter partes 
     review.

     ``Sec. 319. Appeal

       ``A party dissatisfied with the final written decision of 
     the Patent Trial and Appeal Board under section 318(a) may 
     appeal the decision pursuant to sections 141 through 144. Any 
     party to the inter partes review shall have the right to be a 
     party to the appeal.''.
       (b) Conforming Amendment.--The table of chapters for part 
     III of title 35, United States Code, is amended by striking 
     the item relating to chapter 31 and inserting the following:

``31. Inter Partes Review....................................311''.....

       (c) Regulations and Effective Date.--
       (1) Regulations.--The Director shall, not later than the 
     date that is 1 year after the date of the enactment of this 
     Act, issue regulations to carry out chapter 31 of title 35, 
     United States Code, as amended by subsection (a) of this 
     section.
       (2) Applicability.--
       (A) In general.--The amendments made by subsection (a) 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to any patent issued before, on, or after that 
     effective date.
       (B) Graduated implementation.--The Director may impose a 
     limit on the number of inter partes reviews that may be 
     instituted under chapter 31 of title 35, United States Code, 
     during each of the first 4 1-year periods in which the 
     amendments made by subsection (a) are in effect, if such 
     number in each year equals or exceeds the number of inter 
     partes reexaminations that are ordered under chapter 31 of 
     title 35, United States Code, in the last fiscal year ending 
     before the effective date of the amendments made by 
     subsection (a).
       (d) Post-Grant Review.--Part III of title 35, United States 
     Code, is amended by adding at the end the following:

                    ``CHAPTER 32--POST-GRANT REVIEW

``Sec.
``321. Post-grant review.
``322. Petitions.
``323. Preliminary response to petition.
``324. Institution of post-grant review.
``325. Relation to other proceedings or actions.
``326. Conduct of post-grant review.
``327. Settlement.
``328. Decision of the Board.
``329. Appeal.

     ``Sec. 321. Post-grant review

       ``(a) In General.--Subject to the provisions of this 
     chapter, a person who is not the patent owner may file with 
     the Office a petition to institute a post-grant review of a 
     patent. The Director shall establish, by regulation, fees to 
     be paid by the person requesting the review, in such amounts 
     as the Director determines to be reasonable, considering the 
     aggregate costs of the post-grant review.
       ``(b) Scope.--A petitioner in a post-grant review may 
     request to cancel as unpatentable 1 or more claims of a 
     patent on any ground that could be raised under paragraph (2) 
     or (3) of section 282(b) (relating to invalidity of the 
     patent or any claim).
       ``(c) Filing Deadline.--A petition for a post-grant review 
     may only be filed not later than the date that is 1 year 
     after the date of the grant of the patent or of the issuance 
     of a reissue patent (as the case may be).

     ``Sec. 322. Petitions

       ``(a) Requirements of Petition.--A petition filed under 
     section 321 may be considered only if--
       ``(1) the petition is accompanied by payment of the fee 
     established by the Director under section 321;
       ``(2) the petition identifies all real parties in interest;
       ``(3) the petition identifies, in writing and with 
     particularity, each claim challenged, the grounds on which 
     the challenge to each claim is based, and the evidence that 
     supports the grounds for the challenge to each claim, 
     including--
       ``(A) copies of patents and printed publications that the 
     petitioner relies upon in support of the petition; and
       ``(B) affidavits or declarations of supporting evidence and 
     opinions, if the petitioner relies on other factual evidence 
     or on expert opinions;
       ``(4) the petition provides such other information as the 
     Director may require by regulation; and
       ``(5) the petitioner provides copies of any of the 
     documents required under paragraphs (2), (3), and (4) to the 
     patent owner or, if applicable, the designated representative 
     of the patent owner.
       ``(b) Public Availability.--As soon as practicable after 
     the receipt of a petition under section 321, the Director 
     shall make the petition available to the public.

     ``Sec. 323. Preliminary response to petition

       ``If a post-grant review petition is filed under section 
     321, the patent owner shall have the right to file a 
     preliminary response to the petition, within a time period 
     set by the Director, that sets forth reasons why no post-
     grant review should be instituted based upon the failure of 
     the petition to meet any requirement of this chapter.

     ``Sec. 324. Institution of post-grant review

       ``(a) Threshold.--The Director may not authorize a post-
     grant review to commence unless

[[Page 9801]]

     the Director determines that the information presented in the 
     petition filed under section 321, if such information is not 
     rebutted, would demonstrate that it is more likely than not 
     that at least 1 of the claims challenged in the petition is 
     unpatentable.
       ``(b) Additional Grounds.--The determination required under 
     subsection (a) may also be satisfied by a showing that the 
     petition raises a novel or unsettled legal question that is 
     important to other patents or patent applications.
       ``(c) Timing.--The Director shall determine whether to 
     institute a post-grant review under this chapter pursuant to 
     a petition filed under section 321 within 3 months after--
       ``(1) receiving a preliminary response to the petition 
     under section 323; or
       ``(2) if no such preliminary response is filed, the last 
     date on which such response may be filed.
       ``(d) Notice.--The Director shall notify the petitioner and 
     patent owner, in writing, of the Director's determination 
     under subsection (a) or (b), and shall make such notice 
     available to the public as soon as is practicable. The 
     Director shall make each notice of the institution of a post-
     grant review available to the public. Such notice shall 
     include the date on which the review shall commence.
       ``(e) No Appeal.--The determination by the Director whether 
     to institute a post-grant review under this section shall be 
     final and nonappealable.

     ``Sec. 325. Relation to other proceedings or actions

       ``(a) Infringer's Civil Action.--
       ``(1) Post-grant review barred by civil action.--A post-
     grant review may not be instituted under this chapter if, 
     before the date on which the petition for such a review is 
     filed, the petitioner, real party in interest, or privy of 
     the petitioner filed a civil action challenging the validity 
     of a claim of the patent.
       ``(2) Stay of civil action.--If the petitioner, real party 
     in interest, or privy of the petitioner files a civil action 
     challenging the validity of a claim of the patent on or after 
     the date on which the petitioner files a petition for post-
     grant review of the patent, that civil action shall be 
     automatically stayed until either--
       ``(A) the patent owner moves the court to lift the stay;
       ``(B) the patent owner files a civil action or counterclaim 
     alleging that the petitioner, real party in interest, or 
     privy of the petitioner has infringed the patent; or
       ``(C) the petitioner, real party in interest, or privy of 
     the petitioner moves the court to dismiss the civil action.
       ``(3) Treatment of counterclaim.--A counterclaim 
     challenging the validity of a claim of a patent does not 
     constitute a civil action challenging the validity of a claim 
     of a patent for purposes of this subsection.
       ``(b) Preliminary Injunctions.--If a civil action alleging 
     infringement of a patent is filed within 3 months after the 
     date on which the patent is granted, the court may not stay 
     its consideration of the patent owner's motion for a 
     preliminary injunction against infringement of the patent on 
     the basis that a petition for post-grant review has been 
     filed under this chapter or that such a post-grant review has 
     been instituted under this chapter.
       ``(c) Joinder.--If more than 1 petition for a post-grant 
     review under this chapter is properly filed against the same 
     patent and the Director determines that more than 1 of these 
     petitions warrants the institution of a post-grant review 
     under section 324, the Director may consolidate such reviews 
     into a single post-grant review.
       ``(d) Multiple Proceedings.--Notwithstanding sections 
     135(a), 251, and 252, and chapter 30, during the pendency of 
     any post-grant review under this chapter, if another 
     proceeding or matter involving the patent is before the 
     Office, the Director may determine the manner in which the 
     post-grant review or other proceeding or matter may proceed, 
     including providing for the stay, transfer, consolidation, or 
     termination of any such matter or proceeding. In determining 
     whether to institute or order a proceeding under this 
     chapter, chapter 30, or chapter 31, the Director may take 
     into account whether, and reject the petition or request 
     because, the same or substantially the same prior art or 
     arguments previously were presented to the Office.
       ``(e) Estoppel.--
       ``(1) Proceedings before the office.--The petitioner in a 
     post-grant review of a claim in a patent under this chapter 
     that results in a final written decision under section 
     328(a), or the real party in interest or privy of the 
     petitioner, may not request or maintain a proceeding before 
     the Office with respect to that claim on any ground that the 
     petitioner raised or reasonably could have raised during that 
     post-grant review.
       ``(2) Civil actions and other proceedings.--The petitioner 
     in a post-grant review of a claim in a patent under this 
     chapter that results in a final written decision under 
     section 328(a), or the real party in interest or privy of the 
     petitioner, may not assert either in a civil action arising 
     in whole or in part under section 1338 of title 28 or in a 
     proceeding before the International Trade Commission under 
     section 337 of the Tariff Act of 1930 that the claim is 
     invalid on any ground that the petitioner raised or 
     reasonably could have raised during that post-grant review.
       ``(f) Reissue Patents.--A post-grant review may not be 
     instituted under this chapter if the petition requests 
     cancellation of a claim in a reissue patent that is identical 
     to or narrower than a claim in the original patent from which 
     the reissue patent was issued, and the time limitations in 
     section 321(c) would bar filing a petition for a post-grant 
     review for such original patent.

     ``Sec. 326. Conduct of post-grant review

       ``(a) Regulations.--The Director shall prescribe 
     regulations--
       ``(1) providing that the file of any proceeding under this 
     chapter shall be made available to the public, except that 
     any petition or document filed with the intent that it be 
     sealed shall, if accompanied by a motion to seal, be treated 
     as sealed pending the outcome of the ruling on the motion;
       ``(2) setting forth the standards for the showing of 
     sufficient grounds to institute a review under subsections 
     (a) and (b) of section 324;
       ``(3) establishing procedures for the submission of 
     supplemental information after the petition is filed;
       ``(4) establishing and governing a post-grant review under 
     this chapter and the relationship of such review to other 
     proceedings under this title;
       ``(5) setting forth standards and procedures for discovery 
     of relevant evidence, including that such discovery shall be 
     limited to evidence directly related to factual assertions 
     advanced by either party in the proceeding;
       ``(6) prescribing sanctions for abuse of discovery, abuse 
     of process, or any other improper use of the proceeding, such 
     as to harass or to cause unnecessary delay or an unnecessary 
     increase in the cost of the proceeding;
       ``(7) providing for protective orders governing the 
     exchange and submission of confidential information;
       ``(8) providing for the filing by the patent owner of a 
     response to the petition under section 323 after a post-grant 
     review has been instituted, and requiring that the patent 
     owner file with such response, through affidavits or 
     declarations, any additional factual evidence and expert 
     opinions on which the patent owner relies in support of the 
     response;
       ``(9) setting forth standards and procedures for allowing 
     the patent owner to move to amend the patent under subsection 
     (d) to cancel a challenged claim or propose a reasonable 
     number of substitute claims, and ensuring that any 
     information submitted by the patent owner in support of any 
     amendment entered under subsection (d) is made available to 
     the public as part of the prosecution history of the patent;
       ``(10) providing either party with the right to an oral 
     hearing as part of the proceeding; and
       ``(11) requiring that the final determination in any post-
     grant review be issued not later than 1 year after the date 
     on which the Director notices the institution of a proceeding 
     under this chapter, except that the Director may, for good 
     cause shown, extend the 1-year period by not more than 6 
     months, and may adjust the time periods in this paragraph in 
     the case of joinder under section 325(c).
       ``(b) Considerations.--In prescribing regulations under 
     this section, the Director shall consider the effect of any 
     such regulation on the economy, the integrity of the patent 
     system, the efficient administration of the Office, and the 
     ability of the Office to timely complete proceedings 
     instituted under this chapter.
       ``(c) Patent Trial and Appeal Board.--The Patent Trial and 
     Appeal Board shall, in accordance with section 6, conduct 
     each post-grant review instituted under this chapter.
       ``(d) Amendment of the Patent.--
       ``(1) In general.--During a post-grant review instituted 
     under this chapter, the patent owner may file 1 motion to 
     amend the patent in 1 or more of the following ways:
       ``(A) Cancel any challenged patent claim.
       ``(B) For each challenged claim, propose a reasonable 
     number of substitute claims.
       ``(2) Additional motions.--Additional motions to amend may 
     be permitted upon the joint request of the petitioner and the 
     patent owner to materially advance the settlement of a 
     proceeding under section 327, or upon the request of the 
     patent owner for good cause shown.
       ``(3) Scope of claims.--An amendment under this subsection 
     may not enlarge the scope of the claims of the patent or 
     introduce new matter.
       ``(e) Evidentiary Standards.--In a post-grant review 
     instituted under this chapter, the petitioner shall have the 
     burden of proving a proposition of unpatentability by a 
     preponderance of the evidence.

     ``Sec. 327. Settlement

       ``(a) In General.--A post-grant review instituted under 
     this chapter shall be terminated with respect to any 
     petitioner upon the joint request of the petitioner and the 
     patent owner, unless the Office has decided the merits of the 
     proceeding before the request for termination is filed. If 
     the post-grant review is terminated with respect to a 
     petitioner under this section, no estoppel under section 
     325(e) shall attach to the petitioner, or to the real party 
     in interest or privy of the petitioner, on the basis of that 
     petitioner's institution of that post-grant review. If no 
     petitioner remains in the post-grant review, the Office may 
     terminate the post-grant review or proceed to a final written 
     decision under section 328(a).
       ``(b) Agreements in Writing.--Any agreement or 
     understanding between the patent owner and a petitioner, 
     including any collateral agreements referred to in such 
     agreement or understanding, made in connection with, or in 
     contemplation of, the termination of a post-grant review 
     under this section shall be in writing, and a true copy of 
     such agreement or understanding shall be filed in the Office 
     before the termination of the post-grant review as between 
     the parties. At the request of a party to

[[Page 9802]]

     the proceeding, the agreement or understanding shall be 
     treated as business confidential information, shall be kept 
     separate from the file of the involved patents, and shall be 
     made available only to Federal Government agencies on written 
     request, or to any person on a showing of good cause.

     ``Sec. 328. Decision of the Board

       ``(a) Final Written Decision.--If a post-grant review is 
     instituted and not dismissed under this chapter, the Patent 
     Trial and Appeal Board shall issue a final written decision 
     with respect to the patentability of any patent claim 
     challenged by the petitioner and any new claim added under 
     section 326(d).
       ``(b) Certificate.--If the Patent Trial and Appeal Board 
     issues a final written decision under subsection (a) and the 
     time for appeal has expired or any appeal has terminated, the 
     Director shall issue and publish a certificate canceling any 
     claim of the patent finally determined to be unpatentable, 
     confirming any claim of the patent determined to be 
     patentable, and incorporating in the patent by operation of 
     the certificate any new or amended claim determined to be 
     patentable.
       ``(c) Amended or New Claim.--Any proposed amended or new 
     claim determined to be patentable and incorporated into a 
     patent following a post-grant review under this chapter shall 
     have the same effect as that specified in section 252 of this 
     title for reissued patents on the right of any person who 
     made, purchased, or used within the United States, or 
     imported into the United States, anything patented by such 
     proposed amended or new claim, or who made substantial 
     preparation therefor, before the issuance of a certificate 
     under subsection (b).
       ``(d) Data on Length of Review.--The Office shall make 
     available to the public data describing the length of time 
     between the institution of, and the issuance of a final 
     written decision under subsection (a) for, each post-grant 
     review.

     ``Sec. 329. Appeal

       ``A party dissatisfied with the final written decision of 
     the Patent Trial and Appeal Board under section 328(a) may 
     appeal the decision pursuant to sections 141 through 144. Any 
     party to the post-grant review shall have the right to be a 
     party to the appeal.''.
       (e) Conforming Amendment.--The table of chapters for part 
     III of title 35, United States Code, is amended by adding at 
     the end the following:

``32. Post-Grant Review......................................321''.....

       (f) Regulations and Effective Date.--
       (1) Regulations.--The Director shall, not later than the 
     date that is 1 year after the date of the enactment of this 
     Act, issue regulations to carry out chapter 32 of title 35, 
     United States Code, as added by subsection (d) of this 
     section.
       (2) Applicability.--
       (A) In general.--The amendments made by subsection (d) 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and, 
     except as provided in section 18 and in paragraph (3), shall 
     apply to any patent that is described in section 3(n)(1).
       (B) Limitation.--The Director may impose a limit on the 
     number of post-grant reviews that may be instituted under 
     chapter 32 of title 35, United States Code, during each of 
     the first 4 1-year periods in which the amendments made by 
     subsection (d) are in effect.
       (3) Pending interferences.--
       (A) Procedures in general.--The Director shall determine, 
     and include in the regulations issued under paragraph (1), 
     the procedures under which an interference commenced before 
     the effective date set forth in paragraph (2)(A) is to 
     proceed, including whether such interference--
       (i) is to be dismissed without prejudice to the filing of a 
     petition for a post-grant review under chapter 32 of title 
     35, United States Code; or
       (ii) is to proceed as if this Act had not been enacted.
       (B) Proceedings by patent trial and appeal board.--For 
     purposes of an interference that is commenced before the 
     effective date set forth in paragraph (2)(A), the Director 
     may deem the Patent Trial and Appeal Board to be the Board of 
     Patent Appeals and Interferences, and may allow the Patent 
     Trial and Appeal Board to conduct any further proceedings in 
     that interference.
       (C) Appeals.--The authorization to appeal or have remedy 
     from derivation proceedings in sections 141(d) and 146 of 
     title 35, United States Code, as amended by this Act, and the 
     jurisdiction to entertain appeals from derivation proceedings 
     in section 1295(a)(4)(A) of title 28, United States Code, as 
     amended by this Act, shall be deemed to extend to any final 
     decision in an interference that is commenced before the 
     effective date set forth in paragraph (2)(A) of this 
     subsection and that is not dismissed pursuant to this 
     paragraph.
       (g) Citation of Prior Art and Written Statements.--
       (1) In general.--Section 301 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 301. Citation of prior art and written statements

       ``(a) In General.--Any person at any time may cite to the 
     Office in writing--
       ``(1) prior art consisting of patents or printed 
     publications which that person believes to have a bearing on 
     the patentability of any claim of a particular patent; or
       ``(2) statements of the patent owner filed in a proceeding 
     before a Federal court or the Office in which the patent 
     owner took a position on the scope of any claim of a 
     particular patent.
       ``(b) Official File.--If the person citing prior art or 
     written statements pursuant to subsection (a) explains in 
     writing the pertinence and manner of applying the prior art 
     or written statements to at least 1 claim of the patent, the 
     citation of the prior art or written statements and the 
     explanation thereof shall become a part of the official file 
     of the patent.
       ``(c) Additional Information.--A party that submits a 
     written statement pursuant to subsection (a)(2) shall include 
     any other documents, pleadings, or evidence from the 
     proceeding in which the statement was filed that addresses 
     the written statement.
       ``(d) Limitations.--A written statement submitted pursuant 
     to subsection (a)(2), and additional information submitted 
     pursuant to subsection (c), shall not be considered by the 
     Office for any purpose other than to determine the proper 
     meaning of a patent claim in a proceeding that is ordered or 
     instituted pursuant to section 304, 314, or 324. If any such 
     written statement or additional information is subject to an 
     applicable protective order, such statement or information 
     shall be redacted to exclude information that is subject to 
     that order.
       ``(e) Confidentiality.--Upon the written request of the 
     person citing prior art or written statements pursuant to 
     subsection (a), that person's identity shall be excluded from 
     the patent file and kept confidential.''.
       (2) Conforming amendment.--The item relating to section 301 
     in the table of sections for chapter 30 of title 35, United 
     States Code, is amended to read as follows:

``301. Citation of prior art and written statements.''.

       (3) Effective date.--The amendments made by this subsection 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to any patent issued before, on, or after that 
     effective date.
       (h) Reexamination.--
       (1) Determination by director.--
       (A) In general.--Section 303(a) of title 35, United States 
     Code, is amended by striking ``section 301 of this title'' 
     and inserting ``section 301 or 302''.
       (B) Effective date.--The amendment made by this paragraph 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to any patent issued before, on, or after that 
     effective date.
       (2) Appeal.--
       (A) In general.--Section 306 of title 35, United States 
     Code, is amended by striking ``145'' and inserting ``144''.
       (B) Effective date.--The amendment made by this paragraph 
     shall take effect on the date of the enactment of this Act 
     and shall apply to any appeal of a reexamination before the 
     Board of Patent Appeals and Interferences or the Patent Trial 
     and Appeal Board that is pending on, or brought on or after, 
     the date of the enactment of this Act.

     SEC. 7. PATENT TRIAL AND APPEAL BOARD.

       (a) Composition and Duties.--
       (1) In general.--Section 6 of title 35, United States Code, 
     is amended to read as follows:

     ``Sec. 6. Patent Trial and Appeal Board

       ``(a) In General.--There shall be in the Office a Patent 
     Trial and Appeal Board. The Director, the Deputy Director, 
     the Commissioner for Patents, the Commissioner for 
     Trademarks, and the administrative patent judges shall 
     constitute the Patent Trial and Appeal Board. The 
     administrative patent judges shall be persons of competent 
     legal knowledge and scientific ability who are appointed by 
     the Secretary, in consultation with the Director. Any 
     reference in any Federal law, Executive order, rule, 
     regulation, or delegation of authority, or any document of or 
     pertaining to the Board of Patent Appeals and Interferences 
     is deemed to refer to the Patent Trial and Appeal Board.
       ``(b) Duties.--The Patent Trial and Appeal Board shall--
       ``(1) on written appeal of an applicant, review adverse 
     decisions of examiners upon applications for patents pursuant 
     to section 134(a);
       ``(2) review appeals of reexaminations pursuant to section 
     134(b);
       ``(3) conduct derivation proceedings pursuant to section 
     135; and
       ``(4) conduct inter partes reviews and post-grant reviews 
     pursuant to chapters 31 and 32.
       ``(c) 3-Member Panels.--Each appeal, derivation proceeding, 
     post-grant review, and inter partes review shall be heard by 
     at least 3 members of the Patent Trial and Appeal Board, who 
     shall be designated by the Director. Only the Patent Trial 
     and Appeal Board may grant rehearings.
       ``(d) Treatment of Prior Appointments.--The Secretary of 
     Commerce may, in the Secretary's discretion, deem the 
     appointment of an administrative patent judge who, before the 
     date of the enactment of this subsection, held office 
     pursuant to an appointment by the Director to take effect on 
     the date on which the Director initially appointed the 
     administrative patent judge. It shall be a defense to a 
     challenge to the appointment of an administrative patent 
     judge on the basis of the judge's having been originally 
     appointed by the Director that the administrative patent 
     judge so appointed was acting as a de facto officer.''.
       (2) Conforming amendment.--The item relating to section 6 
     in the table of sections for chapter 1 of title 35, United 
     States Code, is amended to read as follows:

``6. Patent Trial and Appeal Board.''.


[[Page 9803]]


       (b) Administrative Appeals.--Section 134 of title 35, 
     United States Code, is amended--
       (1) in subsection (b), by striking ``any reexamination 
     proceeding'' and inserting ``a reexamination''; and
       (2) by striking subsection (c).
       (c) Circuit Appeals.--
       (1) In general.--Section 141 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 141. Appeal to Court of Appeals for the Federal 
       Circuit

       ``(a) Examinations.--An applicant who is dissatisfied with 
     the final decision in an appeal to the Patent Trial and 
     Appeal Board under section 134(a) may appeal the Board's 
     decision to the United States Court of Appeals for the 
     Federal Circuit. By filing such an appeal, the applicant 
     waives his or her right to proceed under section 145.
       ``(b) Reexaminations.--A patent owner who is dissatisfied 
     with the final decision in an appeal of a reexamination to 
     the Patent Trial and Appeal Board under section 134(b) may 
     appeal the Board's decision only to the United States Court 
     of Appeals for the Federal Circuit.
       ``(c) Post-Grant and Inter Partes Reviews.--A party to an 
     inter partes review or a post-grant review who is 
     dissatisfied with the final written decision of the Patent 
     Trial and Appeal Board under section 318(a) or 328(a) (as the 
     case may be) may appeal the Board's decision only to the 
     United States Court of Appeals for the Federal Circuit.
       ``(d) Derivation Proceedings.--A party to a derivation 
     proceeding who is dissatisfied with the final decision of the 
     Patent Trial and Appeal Board in the proceeding may appeal 
     the decision to the United States Court of Appeals for the 
     Federal Circuit, but such appeal shall be dismissed if any 
     adverse party to such derivation proceeding, within 20 days 
     after the appellant has filed notice of appeal in accordance 
     with section 142, files notice with the Director that the 
     party elects to have all further proceedings conducted as 
     provided in section 146. If the appellant does not, within 30 
     days after the filing of such notice by the adverse party, 
     file a civil action under section 146, the Board's decision 
     shall govern the further proceedings in the case.''.
       (2) Jurisdiction.--Section 1295(a)(4)(A) of title 28, 
     United States Code, is amended to read as follows:
       ``(A) the Patent Trial and Appeal Board of the United 
     States Patent and Trademark Office with respect to a patent 
     application, derivation proceeding, reexamination, post-grant 
     review, or inter partes review under title 35, at the 
     instance of a party who exercised that party's right to 
     participate in the applicable proceeding before or appeal to 
     the Board, except that an applicant or a party to a 
     derivation proceeding may also have remedy by civil action 
     pursuant to section 145 or 146 of title 35; an appeal under 
     this subparagraph of a decision of the Board with respect to 
     an application or derivation proceeding shall waive the right 
     of such applicant or party to proceed under section 145 or 
     146 of title 35;''.
       (3) Proceedings on appeal.--Section 143 of title 35, United 
     States Code, is amended--
       (A) by striking the third sentence and inserting the 
     following: ``In an ex parte case, the Director shall submit 
     to the court in writing the grounds for the decision of the 
     Patent and Trademark Office, addressing all of the issues 
     raised in the appeal. The Director shall have the right to 
     intervene in an appeal from a decision entered by the Patent 
     Trial and Appeal Board in a derivation proceeding under 
     section 135 or in an inter partes or post-grant review under 
     chapter 31 or 32.''; and
       (B) by striking the last sentence.
       (d) Effective Date.--The amendments made by this section 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to proceedings commenced on or after that effective 
     date, except that--
       (1) the extension of jurisdiction to the United States 
     Court of Appeals for the Federal Circuit to entertain appeals 
     of decisions of the Patent Trial and Appeal Board in 
     reexaminations under the amendment made by subsection (c)(2) 
     shall be deemed to take effect on the date of the enactment 
     of this Act and shall extend to any decision of the Board of 
     Patent Appeals and Interferences with respect to a 
     reexamination that is entered before, on, or after the date 
     of the enactment of this Act;
       (2) the provisions of sections 6, 134, and 141 of title 35, 
     United States Code, as in effect on the day before the 
     effective date of the amendments made by this section shall 
     continue to apply to inter partes reexaminations that are 
     requested under section 311 of such title before such 
     effective date;
       (3) the Patent Trial and Appeal Board may be deemed to be 
     the Board of Patent Appeals and Interferences for purposes of 
     appeals of inter partes reexaminations that are requested 
     under section 311 of title 35, United States Code, before the 
     effective date of the amendments made by this section; and
       (4) the Director's right under the fourth sentence of 
     section 143 of title 35, United States Code, as amended by 
     subsection (c)(3) of this section, to intervene in an appeal 
     from a decision entered by the Patent Trial and Appeal Board 
     shall be deemed to extend to inter partes reexaminations that 
     are requested under section 311 of such title before the 
     effective date of the amendments made by this section.

     SEC. 8. PREISSUANCE SUBMISSIONS BY THIRD PARTIES.

       (a) In General.--Section 122 of title 35, United States 
     Code, is amended by adding at the end the following:
       ``(e) Preissuance Submissions by Third Parties.--
       ``(1) In general.--Any third party may submit for 
     consideration and inclusion in the record of a patent 
     application, any patent, published patent application, or 
     other printed publication of potential relevance to the 
     examination of the application, if such submission is made in 
     writing before the earlier of--
       ``(A) the date a notice of allowance under section 151 is 
     given or mailed in the application for patent; or
       ``(B) the later of--
       ``(i) 6 months after the date on which the application for 
     patent is first published under section 122 by the Office, or
       ``(ii) the date of the first rejection under section 132 of 
     any claim by the examiner during the examination of the 
     application for patent.
       ``(2) Other requirements.--Any submission under paragraph 
     (1) shall--
       ``(A) set forth a concise description of the asserted 
     relevance of each submitted document;
       ``(B) be accompanied by such fee as the Director may 
     prescribe; and
       ``(C) include a statement by the person making such 
     submission affirming that the submission was made in 
     compliance with this section.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to any patent application filed before, on, or after 
     that effective date.

     SEC. 9. VENUE.

       (a) Technical Amendments Relating to Venue.--Sections 32, 
     145, 146, 154(b)(4)(A), and 293 of title 35, United States 
     Code, and section 21(b)(4) of the Trademark Act of 1946 (15 
     U.S.C. 1071(b)(4)), are each amended by striking ``United 
     States District Court for the District of Columbia'' each 
     place that term appears and inserting ``United States 
     District Court for the Eastern District of Virginia''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     and shall apply to any civil action commenced on or after 
     that date.

     SEC. 10. FEE SETTING AUTHORITY.

       (a) Fee Setting.--
       (1) In general.--The Director may set or adjust by rule any 
     fee established, authorized, or charged under title 35, 
     United States Code, or the Trademark Act of 1946 (15 U.S.C. 
     1051 et seq.), for any services performed by or materials 
     furnished by, the Office, subject to paragraph (2).
       (2) Fees to recover costs.--Fees may be set or adjusted 
     under paragraph (1) only to recover the aggregate estimated 
     costs to the Office for processing, activities, services, and 
     materials relating to patents (in the case of patent fees) 
     and trademarks (in the case of trademark fees), including 
     administrative costs of the Office with respect to such 
     patent or trademark fees (as the case may be).
       (b) Small and Micro Entities.--The fees set or adjusted 
     under subsection (a) for filing, searching, examining, 
     issuing, appealing, and maintaining patent applications and 
     patents shall be reduced by 50 percent with respect to the 
     application of such fees to any small entity that qualifies 
     for reduced fees under section 41(h)(1) of title 35, United 
     States Code, and shall be reduced by 75 percent with respect 
     to the application of such fees to any micro entity as 
     defined in section 123 of that title (as added by subsection 
     (g) of this section).
       (c) Reduction of Fees in Certain Fiscal Years.--In each 
     fiscal year, the Director--
       (1) shall consult with the Patent Public Advisory Committee 
     and the Trademark Public Advisory Committee on the 
     advisability of reducing any fees described in subsection 
     (a); and
       (2) after the consultation required under paragraph (1), 
     may reduce such fees.
       (d) Role of the Public Advisory Committee.--The Director 
     shall--
       (1) not less than 45 days before publishing any proposed 
     fee under subsection (a) in the Federal Register, submit the 
     proposed fee to the Patent Public Advisory Committee or the 
     Trademark Public Advisory Committee, or both, as appropriate;
       (2)(A) provide the relevant advisory committee described in 
     paragraph (1) a 30-day period following the submission of any 
     proposed fee, in which to deliberate, consider, and comment 
     on such proposal;
       (B) require that, during that 30-day period, the relevant 
     advisory committee hold a public hearing relating to such 
     proposal; and
       (C) assist the relevant advisory committee in carrying out 
     that public hearing, including by offering the use of the 
     resources of the Office to notify and promote the hearing to 
     the public and interested stakeholders;
       (3) require the relevant advisory committee to make 
     available to the public a written report setting forth in 
     detail the comments, advice, and recommendations of the 
     committee regarding the proposed fee; and
       (4) consider and analyze any comments, advice, or 
     recommendations received from the relevant advisory committee 
     before setting or adjusting (as the case may be) the fee.
       (e) Publication in the Federal Register.--
       (1) Publication and rationale.--The Director shall--
       (A) publish any proposed fee change under this section in 
     the Federal Register;
       (B) include, in such publication, the specific rationale 
     and purpose for the proposal, including the possible 
     expectations or benefits resulting from the proposed change; 
     and

[[Page 9804]]

       (C) notify, through the Chair and Ranking Member of the 
     Committees on the Judiciary of the Senate and the House of 
     Representatives, the Congress of the proposed change not 
     later than the date on which the proposed change is published 
     under subparagraph (A).
       (2) Public comment period.--The Director shall, in the 
     publication under paragraph (1), provide the public a period 
     of not less than 45 days in which to submit comments on the 
     proposed change in fees.
       (3) Publication of final rule.--The final rule setting or 
     adjusting a fee under this section shall be published in the 
     Federal Register and in the Official Gazette of the Patent 
     and Trademark Office.
       (4) Congressional comment period.--A fee set or adjusted 
     under subsection (a) may not become effective--
       (A) before the end of the 45-day period beginning on the 
     day after the date on which the Director publishes the final 
     rule adjusting or setting the fee under paragraph (3); or
       (B) if a law is enacted disapproving such fee.
       (5) Rule of construction.--Rules prescribed under this 
     section shall not diminish--
       (A) the rights of an applicant for a patent under title 35, 
     United States Code, or for a mark under the Trademark Act of 
     1946; or
       (B) any rights under a ratified treaty.
       (f) Retention of Authority.--The Director retains the 
     authority under subsection (a) to set or adjust fees only 
     during such period as the Patent and Trademark Office remains 
     an agency within the Department of Commerce.
       (g) Micro Entity Defined.--
       (1) In general.--Chapter 11 of title 35, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 123. Micro entity defined

       ``(a) In General.--For purposes of this title, the term 
     `micro entity' means an applicant who makes a certification 
     that the applicant--
       ``(1) qualifies as a small entity, as defined in 
     regulations issued by the Director;
       ``(2) has not been named as an inventor on more than 4 
     previously filed patent applications, other than applications 
     filed in another country, provisional applications under 
     section 111(b), or international applications filed under the 
     treaty defined in section 351(a) for which the basic national 
     fee under section 41(a) was not paid;
       ``(3) did not, in the calendar year preceding the calendar 
     year in which the examination fee for the application is 
     being paid, have a gross income, as defined in section 61(a) 
     of the Internal Revenue Code of 1986, exceeding 3 times the 
     median household income for that preceding calendar year, as 
     reported by the Bureau of the Census; and
       ``(4) has not assigned, granted, or conveyed, and is not 
     under an obligation by contract or law to assign, grant, or 
     convey, a license or other ownership interest in the 
     application concerned to an entity that, in the calendar year 
     preceding the calendar year in which the examination fee for 
     the application is being paid, had a gross income, as defined 
     in section 61(a) of the Internal Revenue Code of 1986, 
     exceeding 3 times the median household income for that 
     preceding calendar year, as reported by the Bureau of the 
     Census.
       ``(b) Applications Resulting From Prior Employment.--An 
     applicant is not considered to be named on a previously filed 
     application for purposes of subsection (a)(2) if the 
     applicant has assigned, or is under an obligation by contract 
     or law to assign, all ownership rights in the application as 
     the result of the applicant's previous employment.
       ``(c) Foreign Currency Exchange Rate.--If an applicant's or 
     entity's gross income in the preceding calendar year is not 
     in United States dollars, the average currency exchange rate, 
     as reported by the Internal Revenue Service, during that 
     calendar year shall be used to determine whether the 
     applicant's or entity's gross income exceeds the threshold 
     specified in paragraphs (3) or (4) of subsection (a).
       ``(d) Public Institutions of Higher Education.--
       ``(1) In general.--For purposes of this section, a micro 
     entity shall include an applicant who certifies that--
       ``(A) the applicant's employer, from which the applicant 
     obtains the majority of the applicant's income, is an 
     institution of higher education, as defined in section 101 of 
     the Higher Education Act of 1965 (20 U.S.C. 1001), that is a 
     public institution; or
       ``(B) the applicant has assigned, granted, conveyed, or is 
     under an obligation by contract or law to assign, grant, or 
     convey, a license or other ownership interest in the 
     particular application to such public institution.
       ``(2) Director's authority.--The Director may, in the 
     Director's discretion, impose income limits, annual filing 
     limits, or other limits on who may qualify as a micro entity 
     pursuant to this subsection if the Director determines that 
     such additional limits are reasonably necessary to avoid an 
     undue impact on other patent applicants or owners or are 
     otherwise reasonably necessary and appropriate. At least 3 
     months before any limits proposed to be imposed pursuant to 
     this paragraph take effect, the Director shall inform the 
     Committee on the Judiciary of the House of Representatives 
     and the Committee on the Judiciary of the Senate of any such 
     proposed limits.''.
       (2) Conforming amendment.--Chapter 11 of title 35, United 
     States Code, is amended by adding at the end the following 
     new item:

``123. Micro entity defined.''.

       (h) Electronic Filing Incentive.--
       (1) In general.--Notwithstanding any other provision of 
     this section, a fee of $400 shall be established for each 
     application for an original patent, except for a design, 
     plant, or provisional application, that is not filed by 
     electronic means as prescribed by the Director. The fee 
     established by this subsection shall be reduced by 50 percent 
     for small entities that qualify for reduced fees under 
     section 41(h)(1) of title 35, United States Code. All fees 
     paid under this subsection shall be deposited in the Treasury 
     as an offsetting receipt that shall not be available for 
     obligation or expenditure.
       (2) Effective date.--This subsection shall take effect upon 
     the expiration of the 60-day period beginning on the date of 
     the enactment of this Act.
       (i) Effective Date; Sunset.--
       (1) Effective date.--This section and the amendments made 
     by this section shall take effect on the date of the 
     enactment of this Act.
       (2) Sunset.--The authority of the Director to set or adjust 
     any fee under subsection (a) shall terminate upon the 
     expiration of the 6-year period beginning on the date of the 
     enactment of this Act.

     SEC. 11. FEES FOR PATENT SERVICES.

       (a) General Patent Services.--Subsections (a) and (b) of 
     section 41 of title 35, United States Code, are amended to 
     read as follows:
       ``(a) General Fees.--The Director shall charge the 
     following fees:
       ``(1) Filing and basic national fees.--
       ``(A) On filing each application for an original patent, 
     except for design, plant, or provisional applications, $330.
       ``(B) On filing each application for an original design 
     patent, $220.
       ``(C) On filing each application for an original plant 
     patent, $220.
       ``(D) On filing each provisional application for an 
     original patent, $220.
       ``(E) On filing each application for the reissue of a 
     patent, $330.
       ``(F) The basic national fee for each international 
     application filed under the treaty defined in section 351(a) 
     entering the national stage under section 371, $330.
       ``(G) In addition, excluding any sequence listing or 
     computer program listing filed in an electronic medium as 
     prescribed by the Director, for any application the 
     specification and drawings of which exceed 100 sheets of 
     paper (or equivalent as prescribed by the Director if filed 
     in an electronic medium), $270 for each additional 50 sheets 
     of paper (or equivalent as prescribed by the Director if 
     filed in an electronic medium) or fraction thereof.
       ``(2) Excess claims fees.--
       ``(A) In general.--In addition to the fee specified in 
     paragraph (1)--
       ``(i) on filing or on presentation at any other time, $220 
     for each claim in independent form in excess of 3;
       ``(ii) on filing or on presentation at any other time, $52 
     for each claim (whether dependent or independent) in excess 
     of 20; and
       ``(iii) for each application containing a multiple 
     dependent claim, $390.
       ``(B) Multiple dependent claims.--For the purpose of 
     computing fees under subparagraph (A), a multiple dependent 
     claim referred to in section 112 or any claim depending 
     therefrom shall be considered as separate dependent claims in 
     accordance with the number of claims to which reference is 
     made.
       ``(C) Refunds; errors in payment.--The Director may by 
     regulation provide for a refund of any part of the fee 
     specified in subparagraph (A) for any claim that is canceled 
     before an examination on the merits, as prescribed by the 
     Director, has been made of the application under section 131. 
     Errors in payment of the additional fees under this paragraph 
     may be rectified in accordance with regulations prescribed by 
     the Director.
       ``(3) Examination fees.--
       ``(A) In general.--
       ``(i) For examination of each application for an original 
     patent, except for design, plant, provisional, or 
     international applications, $220.
       ``(ii) For examination of each application for an original 
     design patent, $140.
       ``(iii) For examination of each application for an original 
     plant patent, $170.
       ``(iv) For examination of the national stage of each 
     international application, $220.
       ``(v) For examination of each application for the reissue 
     of a patent, $650.
       ``(B) Applicability of other fee provisions.--The 
     provisions of paragraphs (3) and (4) of section 111(a) 
     relating to the payment of the fee for filing the application 
     shall apply to the payment of the fee specified in 
     subparagraph (A) with respect to an application filed under 
     section 111(a). The provisions of section 371(d) relating to 
     the payment of the national fee shall apply to the payment of 
     the fee specified in subparagraph (A) with respect to an 
     international application.
       ``(4) Issue fees.--
       ``(A) For issuing each original patent, except for design 
     or plant patents, $1,510.
       ``(B) For issuing each original design patent, $860.
       ``(C) For issuing each original plant patent, $1,190.
       ``(D) For issuing each reissue patent, $1,510.
       ``(5) Disclaimer fee.--On filing each disclaimer, $140.
       ``(6) Appeal fees.--
       ``(A) On filing an appeal from the examiner to the Patent 
     Trial and Appeal Board, $540.
       ``(B) In addition, on filing a brief in support of the 
     appeal, $540, and on requesting an oral hearing in the appeal 
     before the Patent Trial and Appeal Board, $1,080.

[[Page 9805]]

       ``(7) Revival fees.--On filing each petition for the 
     revival of an unintentionally abandoned application for a 
     patent, for the unintentionally delayed payment of the fee 
     for issuing each patent, or for an unintentionally delayed 
     response by the patent owner in any reexamination proceeding, 
     $1,620, unless the petition is filed under section 133 or 
     151, in which case the fee shall be $540.
       ``(8) Extension fees.--For petitions for 1-month extensions 
     of time to take actions required by the Director in an 
     application--
       ``(A) on filing a first petition, $130;
       ``(B) on filing a second petition, $360; and
       ``(C) on filing a third or subsequent petition, $620.
       ``(b) Maintenance Fees.--
       ``(1) In general.--The Director shall charge the following 
     fees for maintaining in force all patents based on 
     applications filed on or after December 12, 1980:
       ``(A) Three years and 6 months after grant, $980.
       ``(B) Seven years and 6 months after grant, $2,480.
       ``(C) Eleven years and 6 months after grant, $4,110.
       ``(2) Grace period; surcharge.--Unless payment of the 
     applicable maintenance fee under paragraph (1) is received in 
     the Office on or before the date the fee is due or within a 
     grace period of 6 months thereafter, the patent shall expire 
     as of the end of such grace period. The Director may require 
     the payment of a surcharge as a condition of accepting within 
     such 6-month grace period the payment of an applicable 
     maintenance fee.
       ``(3) No maintenance fee for design or plant patent.--No 
     fee may be established for maintaining a design or plant 
     patent in force.''.
       (b) Delays in Payment.--Subsection (c) of section 41 of 
     title 35, United States Code, is amended--
       (1) by striking ``(c)(1) The Director'' and inserting:
       ``(c) Delays in Payment of Maintenance Fees.--
       ``(1) Acceptance.--The Director''; and
       (2) by striking ``(2) A patent'' and inserting:
       ``(2) Effect on rights of others.--A patent''.
       (c) Patent Search Fees.--Subsection (d) of section 41 of 
     title 35, United States Code, is amended to read as follows:
       ``(d) Patent Search and Other Fees.--
       ``(1) Patent search fees.--
       ``(A) In general.--The Director shall charge the fees 
     specified under subparagraph (B) for the search of each 
     application for a patent, except for provisional 
     applications. The Director shall adjust the fees charged 
     under this paragraph to ensure that the fees recover an 
     amount not to exceed the estimated average cost to the Office 
     of searching applications for patent either by acquiring a 
     search report from a qualified search authority, or by 
     causing a search by Office personnel to be made, of each 
     application for patent.
       ``(B) Specific fees.--The fees referred to in subparagraph 
     (A) are--
       ``(i) $540 for each application for an original patent, 
     except for design, plant, provisional, or international 
     applications;
       ``(ii) $100 for each application for an original design 
     patent;
       ``(iii) $330 for each application for an original plant 
     patent;
       ``(iv) $540 for the national stage of each international 
     application; and
       ``(v) $540 for each application for the reissue of a 
     patent.
       ``(C) Applicability of other provisions.--The provisions of 
     paragraphs (3) and (4) of section 111(a) relating to the 
     payment of the fee for filing the application shall apply to 
     the payment of the fee specified in this paragraph with 
     respect to an application filed under section 111(a). The 
     provisions of section 371(d) relating to the payment of the 
     national fee shall apply to the payment of the fee specified 
     in this paragraph with respect to an international 
     application.
       ``(D) Refunds.--The Director may by regulation provide for 
     a refund of any part of the fee specified in this paragraph 
     for any applicant who files a written declaration of express 
     abandonment as prescribed by the Director before an 
     examination has been made of the application under section 
     131.
       ``(E) Applications subject to secrecy order.--A search of 
     an application that is the subject of a secrecy order under 
     section 181 or otherwise involves classified information may 
     be conducted only by Office personnel.
       ``(F) Conflicts of interest.--A qualified search authority 
     that is a commercial entity may not conduct a search of a 
     patent application if the entity has any direct or indirect 
     financial interest in any patent or in any pending or 
     imminent application for patent filed or to be filed in the 
     Office.
       ``(2) Other fees.--
       ``(A) In general.--The Director shall establish fees for 
     all other processing, services, or materials relating to 
     patents not specified in this section to recover the 
     estimated average cost to the Office of such processing, 
     services, or materials, except that the Director shall charge 
     the following fees for the following services:
       ``(i) For recording a document affecting title, $40 per 
     property.
       ``(ii) For each photocopy, $.25 per page.
       ``(iii) For each black and white copy of a patent, $3.
       ``(B) Copies for libraries.--The yearly fee for providing a 
     library specified in section 12 with uncertified printed 
     copies of the specifications and drawings for all patents in 
     that year shall be $50.''.
       (d) Fees for Small Entities.--Subsection (h) of section 41 
     of title 35, United States Code, is amended to read as 
     follows:
       ``(h) Fees for Small Entities.--
       ``(1) Reductions in fees.--Subject to paragraph (3), fees 
     charged under subsections (a), (b), and (d)(1) shall be 
     reduced by 50 percent with respect to their application to 
     any small business concern as defined under section 3 of the 
     Small Business Act, and to any independent inventor or 
     nonprofit organization as defined in regulations issued by 
     the Director.
       ``(2) Surcharges and other fees.--With respect to its 
     application to any entity described in paragraph (1), any 
     surcharge or fee charged under subsection (c) or (d) shall 
     not be higher than the surcharge or fee required of any other 
     entity under the same or substantially similar circumstances.
       ``(3) Reduction for electronic filing.--The fee charged 
     under subsection (a)(1)(A) shall be reduced by 75 percent 
     with respect to its application to any entity to which 
     paragraph (1) applies, if the application is filed by 
     electronic means as prescribed by the Director.''.
       (e) Technical Amendments.--Section 41 of title 35, United 
     States Code, is amended--
       (1) in subsection (e), in the first sentence, by striking 
     ``The Director'' and inserting ``Waiver of Fees; Copies 
     Regarding Notice.--The Director'';
       (2) in subsection (f), by striking ``The fees'' and 
     inserting ``Adjustment of Fees.--The fees'';
       (3) by repealing subsection (g); and
       (4) in subsection (i)--
       (A) by striking ``(i)(1) The Director'' and inserting the 
     following:
       ``(i) Electronic Patent and Trademark Data.--
       ``(1) Maintenance of collections.--The Director'';
       (B) by striking ``(2) The Director'' and inserting the 
     following:
       ``(2) Availability of automated search systems.--The 
     Director'';
       (C) by striking ``(3) The Director'' and inserting the 
     following:
       ``(3) Access fees.--The Director''; and
       (D) by striking ``(4) The Director'' and inserting the 
     following:
       ``(4) Annual report to congress.--The Director''.
       (f) Adjustment of Trademark Fees.--Section 802(a) of 
     division B of the Consolidated Appropriations Act, 2005 
     (Public Law 108-447) is amended--
       (1) in the first sentence, by striking ``During fiscal 
     years 2005, 2006, and 2007,'', and inserting ``Until such 
     time as the Director sets or adjusts the fees otherwise,''; 
     and
       (2) in the second sentence, by striking ``During fiscal 
     years 2005, 2006, and 2007, the'' and inserting ``The''.
       (g) Effective Date, Applicability, and Transition 
     Provisions.--Section 803(a) of division B of the Consolidated 
     Appropriations Act, 2005 (Public Law 108-447) is amended by 
     striking ``and shall apply only with respect to the remaining 
     portion of fiscal year 2005 and fiscal year 2006''.
       (h) Reduction in Fees for Small Entity Patents.--The 
     Director shall reduce fees for providing prioritized 
     examination of utility and plant patent applications by 50 
     percent for small entities that qualify for reduced fees 
     under section 41(h)(1) of title 35, United States Code, so 
     long as the fees of the prioritized examination program are 
     set to recover the estimated cost of the program.
       (i) Effective Date.--Except as provided in subsection (h), 
     this section and the amendments made by this section shall 
     take effect on the date of the enactment of this Act.

     SEC. 12. SUPPLEMENTAL EXAMINATION.

       (a) In General.--Chapter 25 of title 35, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 257. Supplemental examinations to consider, 
       reconsider, or correct information

       ``(a) Request for Supplemental Examination.--A patent owner 
     may request supplemental examination of a patent in the 
     Office to consider, reconsider, or correct information 
     believed to be relevant to the patent, in accordance with 
     such requirements as the Director may establish. Within 3 
     months after the date a request for supplemental examination 
     meeting the requirements of this section is received, the 
     Director shall conduct the supplemental examination and shall 
     conclude such examination by issuing a certificate indicating 
     whether the information presented in the request raises a 
     substantial new question of patentability.
       ``(b) Reexamination Ordered.--If the certificate issued 
     under subsection (a) indicates that a substantial new 
     question of patentability is raised by 1 or more items of 
     information in the request, the Director shall order 
     reexamination of the patent. The reexamination shall be 
     conducted according to procedures established by chapter 30, 
     except that the patent owner shall not have the right to file 
     a statement pursuant to section 304. During the 
     reexamination, the Director shall address each substantial 
     new question of patentability identified during the 
     supplemental examination, notwithstanding the limitations in 
     chapter 30 relating to patents and printed publication or any 
     other provision of such chapter.
       ``(c) Effect.--
       ``(1) In general.--A patent shall not be held unenforceable 
     on the basis of conduct relating to information that had not 
     been considered,

[[Page 9806]]

     was inadequately considered, or was incorrect in a prior 
     examination of the patent if the information was considered, 
     reconsidered, or corrected during a supplemental examination 
     of the patent. The making of a request under subsection (a), 
     or the absence thereof, shall not be relevant to 
     enforceability of the patent under section 282.
       ``(2) Exceptions.--
       ``(A) Prior allegations.--Paragraph (1) shall not apply to 
     an allegation pled with particularity in a civil action, or 
     set forth with particularity in a notice received by the 
     patent owner under section 505(j)(2)(B)(iv)(II) of the 
     Federal Food, Drug, and Cosmetic Act (21 U.S.C. 
     355(j)(2)(B)(iv)(II)), before the date of a supplemental 
     examination request under subsection (a) to consider, 
     reconsider, or correct information forming the basis for the 
     allegation.
       ``(B) Patent enforcement actions.--In an action brought 
     under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 
     1337(a)), or section 281 of this title, paragraph (1) shall 
     not apply to any defense raised in the action that is based 
     upon information that was considered, reconsidered, or 
     corrected pursuant to a supplemental examination request 
     under subsection (a), unless the supplemental examination, 
     and any reexamination ordered pursuant to the request, are 
     concluded before the date on which the action is brought.
       ``(C) Fraud.--No supplemental examination may be commenced 
     by the Director on, and any pending supplemental examination 
     shall be immediately terminated regarding, an application or 
     patent in connection with which fraud on the Office was 
     practiced or attempted. If the Director determines that such 
     a fraud on the Office was practiced or attempted, the 
     Director shall also refer the matter to the Attorney General 
     for such action as the Attorney General may deem appropriate.
       ``(d) Fees and Regulations.--
       ``(1) Fees.--The Director shall, by regulation, establish 
     fees for the submission of a request for supplemental 
     examination of a patent, and to consider each item of 
     information submitted in the request. If reexamination is 
     ordered under subsection (b), fees established and applicable 
     to ex parte reexamination proceedings under chapter 30 shall 
     be paid, in addition to fees applicable to supplemental 
     examination.
       ``(2) Regulations.--The Director shall issue regulations 
     governing the form, content, and other requirements of 
     requests for supplemental examination, and establishing 
     procedures for reviewing information submitted in such 
     requests.
       ``(e) Rule of Construction.--Nothing in this section shall 
     be construed--
       ``(1) to preclude the imposition of sanctions based upon 
     criminal or antitrust laws (including section 1001(a) of 
     title 18, the first section of the Clayton Act, and section 5 
     of the Federal Trade Commission Act to the extent that 
     section relates to unfair methods of competition);
       ``(2) to limit the authority of the Director to investigate 
     issues of possible misconduct and impose sanctions for 
     misconduct in connection with matters or proceedings before 
     the Office; or
       ``(3) to limit the authority of the Director to issue 
     regulations under chapter 3 relating to sanctions for 
     misconduct by representatives practicing before the 
     Office.''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 25 of title 35, United States Code, is amended by 
     adding at the end the following new item:

``257. Supplemental examinations to consider, reconsider, or correct 
              information.''.

       (c) Effective Date.--The amendments made by this section 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to any patent issued before, on, or after that 
     effective date.

     SEC. 13. FUNDING AGREEMENTS.

       (a) In General.--Section 202(c)(7)(E)(i) of title 35, 
     United States Code, is amended--
       (1) by striking ``75 percent'' and inserting ``15 
     percent'';
       (2) by striking ``25 percent'' and inserting ``85 
     percent''; and
       (3) by striking ``as described above in this clause (D);'' 
     and inserting ``described above in this clause;''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act 
     and shall apply to any patent issued before, on, or after 
     that date.

     SEC. 14. TAX STRATEGIES DEEMED WITHIN THE PRIOR ART.

       (a) In General.--For purposes of evaluating an invention 
     under section 102 or 103 of title 35, United States Code, any 
     strategy for reducing, avoiding, or deferring tax liability, 
     whether known or unknown at the time of the invention or 
     application for patent, shall be deemed insufficient to 
     differentiate a claimed invention from the prior art.
       (b) Definition.--For purposes of this section, the term 
     ``tax liability'' refers to any liability for a tax under any 
     Federal, State, or local law, or the law of any foreign 
     jurisdiction, including any statute, rule, regulation, or 
     ordinance that levies, imposes, or assesses such tax 
     liability.
       (c) Exclusions.--This section does not apply to that part 
     of an invention that--
       (1) is a method, apparatus, technology, computer program 
     product, or system, that is used solely for preparing a tax 
     or information return or other tax filing, including one that 
     records, transmits, transfers, or organizes data related to 
     such filing; or
       (2) is a method, apparatus, technology, computer program 
     product, or system used solely for financial management, to 
     the extent that it is severable from any tax strategy or does 
     not limit the use of any tax strategy by any taxpayer or tax 
     advisor.
       (d) Rule of Construction.--Nothing in this section shall be 
     construed to imply that other business methods are patentable 
     or that other business method patents are valid.
       (e) Effective Date; Applicability.--This section shall take 
     effect on the date of the enactment of this Act and shall 
     apply to any patent application that is pending on, or filed 
     on or after, that date, and to any patent that is issued on 
     or after that date.

     SEC. 15. BEST MODE REQUIREMENT.

       (a) In General.--Section 282 of title 35, United States 
     Code, is amended in the second undesignated paragraph by 
     striking paragraph (3) and inserting the following:
       ``(3) Invalidity of the patent or any claim in suit for 
     failure to comply with--
       ``(A) any requirement of section 112, except that the 
     failure to disclose the best mode shall not be a basis on 
     which any claim of a patent may be canceled or held invalid 
     or otherwise unenforceable; or
       ``(B) any requirement of section 251.''.
       (b) Conforming Amendment.--Sections 119(e)(1) and 120 of 
     title 35, United States Code, are each amended by striking 
     ``the first paragraph of section 112 of this title'' and 
     inserting ``section 112(a) (other than the requirement to 
     disclose the best mode)''.
       (c) Effective Date.--The amendments made by this section 
     shall take effect upon the date of the enactment of this Act 
     and shall apply to proceedings commenced on or after that 
     date.

     SEC. 16. MARKING.

       (a) Virtual Marking.--
       (1) In general.--Section 287(a) of title 35, United States 
     Code, is amended by striking ``or when,'' and inserting ``or 
     by fixing thereon the word `patent' or the abbreviation 
     `pat.' together with an address of a posting on the Internet, 
     accessible to the public without charge for accessing the 
     address, that associates the patented article with the number 
     of the patent, or when,''.
       (2) Effective date.--The amendment made by this subsection 
     shall apply to any case that is pending on, or commenced on 
     or after, the date of the enactment of this Act.
       (3) Report.--Not later than the date that is 3 years after 
     the date of the enactment of this Act, the Director shall 
     submit a report to Congress that provides--
       (A) an analysis of the effectiveness of ``virtual 
     marking'', as provided in the amendment made by paragraph (1) 
     of this subsection, as an alternative to the physical marking 
     of articles;
       (B) an analysis of whether such virtual marking has limited 
     or improved the ability of the general public to access 
     information about patents;
       (C) an analysis of the legal issues, if any, that arise 
     from such virtual marking; and
       (D) an analysis of the deficiencies, if any, of such 
     virtual marking.
       (b) False Marking.--
       (1) Civil penalty.--Section 292(a) of title 35, United 
     States, Code, is amended by adding at the end the following: 
     ``Only the United States may sue for the penalty authorized 
     by this subsection.''.
       (2) Civil action for damages.--Subsection (b) of section 
     292 of title 35, United States Code, is amended to read as 
     follows:
       ``(b) A person who has suffered a competitive injury as a 
     result of a violation of this section may file a civil action 
     in a district court of the United States for recovery of 
     damages adequate to compensate for the injury.''.
       (3) Expired patents.--Section 292 of title 35, United 
     States Code, is amended by adding at the end the following:
       ``(c) Whoever engages in an activity under subsection (a) 
     for which liability would otherwise be imposed shall not be 
     liable for such activity--
       ``(1) that is engaged in during the 3-year period beginning 
     on the date on which the patent at issue expires; or
       ``(2) that is engaged in after the end of that 3-year 
     period if the word `expired' is placed before the word 
     `patent', `patented', the abbreviation `pat', or the patent 
     number, either on the article or through a posting on the 
     Internet, as provided in section 287(a).''.
       (4) Effective date.--The amendments made by this subsection 
     shall apply to any case that is pending on, or commenced on 
     or after, the date of the enactment of this Act.

     SEC. 17. ADVICE OF COUNSEL.

       (a) In General.--Chapter 29 of title 35, United States 
     Code, is amended by adding at the end the following:

     ``Sec. 298. Advice of counsel

       ``The failure of an infringer to obtain the advice of 
     counsel with respect to any allegedly infringed patent, or 
     the failure of the infringer to present such advice to the 
     court or jury, may not be used to prove that the accused 
     infringer willfully infringed the patent or that the 
     infringer intended to induce infringement of the patent.''.
       (b) Conforming Amendment.--The table of sections for 
     chapter 29 of title 35, United States Code, is amended by 
     adding at the end the following:

``298. Advice of counsel.''.

     SEC. 18. TRANSITIONAL PROGRAM FOR COVERED BUSINESS METHOD 
                   PATENTS.

       (a) Transitional Program.--
       (1) Establishment.--Not later than the date that is 1 year 
     after the date of the enactment of this Act, the Director 
     shall issue regulations establishing and implementing a 
     transitional post-

[[Page 9807]]

     grant review proceeding for review of the validity of covered 
     business method patents. The transitional proceeding 
     implemented pursuant to this subsection shall be regarded as, 
     and shall employ the standards and procedures of, a post-
     grant review under chapter 32 of title 35, United States 
     Code, subject to the following:
       (A) Section 321(c) of title 35, United States Code, and 
     subsections (b), (e)(2), and (f) of section 325 of such title 
     shall not apply to a transitional proceeding.
       (B) A person may not file a petition for a transitional 
     proceeding with respect to a covered business method patent 
     unless the person or the person's real party in interest has 
     been sued for infringement of the patent or has been charged 
     with infringement under that patent.
       (C) A petitioner in a transitional proceeding who 
     challenges the validity of 1 or more claims in a covered 
     business method patent on a ground raised under section 102 
     or 103 of title 35, United States Code, as in effect on the 
     day before the effective date set forth in section 3(n)(1), 
     may support such ground only on the basis of--
       (i) prior art that is described by section 102(a) of such 
     title of such title (as in effect on the day before such 
     effective date); or
       (ii) prior art that--

       (I) discloses the invention more than 1 year before the 
     date of the application for patent in the United States; and
       (II) would be described by section 102(a) of such title (as 
     in effect on the day before the effective date set forth in 
     section 3(n)(1)) if the disclosure had been made by another 
     before the invention thereof by the applicant for patent.

       (D) The petitioner in a transitional proceeding, or the 
     petitioner's real party in interest, may not assert, either 
     in a civil action arising in whole or in part under section 
     1338 of title 28, United States Code, or in a proceeding 
     before the International Trade Commission under section 337 
     of the Tariff Act of 1930 (19 U.S.C. 1337), that a claim in a 
     patent is invalid on any ground that the petitioner raised 
     during a transitional proceeding that resulted in a final 
     written decision.
       (E) The Director may institute a transitional proceeding 
     only for a patent that is a covered business method patent.
       (2) Effective date.--The regulations issued under paragraph 
     (1) shall take effect upon the expiration of the 1-year 
     period beginning on the date of the enactment of this Act and 
     shall apply to any covered business method patent issued 
     before, on, or after that effective date, except that the 
     regulations shall not apply to a patent described in section 
     6(f)(2)(A) of this Act during the period in which a petition 
     for post-grant review of that patent would satisfy the 
     requirements of section 321(c) of title 35, United States 
     Code.
       (3) Sunset.--
       (A) In general.--This subsection, and the regulations 
     issued under this subsection, are repealed effective upon the 
     expiration of the 10-year period beginning on the date that 
     the regulations issued under to paragraph (1) take effect.
       (B) Applicability.--Notwithstanding subparagraph (A), this 
     subsection and the regulations issued under this subsection 
     shall continue to apply, after the date of the repeal under 
     subparagraph (A), to any petition for a transitional 
     proceeding that is filed before the date of such repeal.
       (b) Request for Stay.--
       (1) In general.--If a party seeks a stay of a civil action 
     alleging infringement of a patent under section 281 of title 
     35, United States Code, relating to a transitional proceeding 
     for that patent, the court shall decide whether to enter a 
     stay based on--
       (A) whether a stay, or the denial thereof, will simplify 
     the issues in question and streamline the trial;
       (B) whether discovery is complete and whether a trial date 
     has been set;
       (C) whether a stay, or the denial thereof, would unduly 
     prejudice the nonmoving party or present a clear tactical 
     advantage for the moving party; and
       (D) whether a stay, or the denial thereof, will reduce the 
     burden of litigation on the parties and on the court.
       (2) Review.--A party may take an immediate interlocutory 
     appeal from a district court's decision under paragraph (1). 
     The United States Court of Appeals for the Federal Circuit 
     shall review the district court's decision to ensure 
     consistent application of established precedent, and such 
     review may be de novo.
       (c) ATM Exemption for Venue Purposes.--In an action for 
     infringement under section 281 of title 35, United States 
     Code, of a covered business method patent, an automated 
     teller machine shall not be deemed to be a regular and 
     established place of business for purposes of section 1400(b) 
     of title 28, United States Code.
       (d) Definition.--
       (1) In general.--For purposes of this section, the term 
     ``covered business method patent'' means a patent that claims 
     a method or corresponding apparatus for performing data 
     processing or other operations used in the practice, 
     administration, or management of a financial product or 
     service, except that the term does not include patents for 
     technological inventions.
       (2) Regulations.--To assist in implementing the 
     transitional proceeding authorized by this subsection, the 
     Director shall issue regulations for determining whether a 
     patent is for a technological invention.
       (e) Rule of Construction.--Nothing in this section shall be 
     construed as amending or interpreting categories of patent-
     eligible subject matter set forth under section 101 of title 
     35, United States Code.

     SEC. 19. JURISDICTION AND PROCEDURAL MATTERS.

       (a) State Court Jurisdiction.--Section 1338(a) of title 28, 
     United States Code, is amended by striking the second 
     sentence and inserting the following: ``No State court shall 
     have jurisdiction over any claim for relief arising under any 
     Act of Congress relating to patents, plant variety 
     protection, or copyrights. For purposes of this subsection, 
     the term `State' includes any State of the United States, the 
     District of Columbia, the Commonwealth of Puerto Rico, the 
     United States Virgin Islands, American Samoa, Guam, and the 
     Northern Mariana Islands.''.
       (b) Court of Appeals for the Federal Circuit.--Section 
     1295(a)(1) of title 28, United States Code, is amended to 
     read as follows:
       ``(1) of an appeal from a final decision of a district 
     court of the United States, the District Court of Guam, the 
     District Court of the Virgin Islands, or the District Court 
     of the Northern Mariana Islands, in any civil action arising 
     under, or in any civil action in which a party has asserted a 
     compulsory counterclaim arising under, any Act of Congress 
     relating to patents or plant variety protection;''.
       (c) Removal.--
       (1) In general.--Chapter 89 of title 28, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 1454. Patent, plant variety protection, and copyright 
       cases

       ``(a) In General.--A civil action in which any party 
     asserts a claim for relief arising under any Act of Congress 
     relating to patents, plant variety protection, or copyrights 
     may be removed to the district court of the United States for 
     the district and division embracing the place where the 
     action is pending.
       ``(b) Special Rules.--The removal of an action under this 
     section shall be made in accordance with section 1446, except 
     that if the removal is based solely on this section--
       ``(1) the action may be removed by any party; and
       ``(2) the time limitations contained in section 1446(b) may 
     be extended at any time for cause shown.
       ``(c) Clarification of Jurisdiction in Certain Cases.--The 
     court to which a civil action is removed under this section 
     is not precluded from hearing and determining any claim in 
     the civil action because the State court from which the civil 
     action is removed did not have jurisdiction over that claim.
       ``(d) Remand.--If a civil action is removed solely under 
     this section, the district court--
       ``(1) shall remand all claims that are neither a basis for 
     removal under subsection (a) nor within the original or 
     supplemental jurisdiction of the district court under any Act 
     of Congress; and
       ``(2) may, under the circumstances specified in section 
     1367(c), remand any claims within the supplemental 
     jurisdiction of the district court under section 1367.''.
       (2) Conforming amendment.--The table of sections for 
     chapter 89 of title 28, United States Code, is amended by 
     adding at the end the following new item:

``1454. Patent, plant variety protection, and copyright cases.''.

       (d) Transfer by Court of Appeals for the Federal Circuit.--
       (1) In general.--Chapter 99 of title 28, United States 
     Code, is amended by adding at the end the following new 
     section:

     ``Sec. 1632. Transfer by the Court of Appeals for the Federal 
       Circuit

       ``When a case is appealed to the Court of Appeals for the 
     Federal Circuit under section 1295(a)(1), and no claim for 
     relief arising under any Act of Congress relating to patents 
     or plant variety protection is the subject of the appeal by 
     any party, the Court of Appeals for the Federal Circuit shall 
     transfer the appeal to the court of appeals for the regional 
     circuit embracing the district from which the appeal has been 
     taken.''.
       (2) Conforming amendment.--The table of sections for 
     chapter 99 of title 28, United States Code, is amended by 
     adding at the end the following new item:

``1632. Transfer by the Court of Appeals for the Federal Circuit.''.

       (e) Procedural Matters in Patent Cases.--
       (1) Joinder of parties and stay of actions.--Chapter 29 of 
     title 35, United States Code, as amended by this Act, is 
     further amended by adding at the end the following new 
     section:

     ``Sec. 299. Joinder of parties

       ``(a) Joinder of Accused Infringers.--In any civil action 
     arising under any Act of Congress relating to patents, other 
     than an action or trial in which an act of infringement under 
     section 271(e)(2) has been pled, parties that are accused 
     infringers may be joined in one action as defendants or 
     counterclaim defendants only if--
       ``(1) any right to relief is asserted against the parties 
     jointly, severally, or in the alternative with respect to or 
     arising out of the same transaction, occurrence, or series of 
     transactions or occurrences relating to the making, using, 
     importing into the United States, offering for sale, or 
     selling of the same accused product or process; and
       ``(2) questions of fact common to all defendants or 
     counterclaim defendants will arise in the action.
       ``(b) Allegations Insufficient for Joinder.--For purposes 
     of this subsection, accused

[[Page 9808]]

     infringers may not be joined in one action or trial as 
     defendants or counterclaim defendants based solely on 
     allegations that they each have infringed the patent or 
     patents in suit.''.
       (2) Conforming amendment.--The table of sections for 
     chapter 29 of title 35, United States Code, as amended by 
     this Act, is further amended by adding at the end the 
     following new item:

``299. Joinder of parties.''.

       (e) Effective Date.--The amendments made by this section 
     shall apply to any civil action commenced on or after the 
     date of the enactment of this Act.

     SEC. 20. TECHNICAL AMENDMENTS.

       (a) Joint Inventions.--Section 116 of title 35, United 
     States Code, is amended--
       (1) in the first undesignated paragraph, by striking 
     ``When'' and inserting ``(a) Joint Inventions.--When'';
       (2) in the second undesignated paragraph, by striking ``If 
     a joint inventor'' and inserting ``(b) Omitted Inventor.--If 
     a joint inventor''; and
       (3) in the third undesignated paragraph--
       (A) by striking ``Whenever'' and inserting ``(c) Correction 
     of Errors in Application.--Whenever''; and
       (B) by striking ``and such error arose without any 
     deceptive intention on his part,''.
       (b) Filing of Application in Foreign Country.--Section 184 
     of title 35, United States Code, is amended--
       (1) in the first undesignated paragraph--
       (A) by striking ``Except when'' and inserting ``(a) Filing 
     in Foreign Country.--Except when''; and
       (B) by striking ``and without deceptive intent'';
       (2) in the second undesignated paragraph, by striking ``The 
     term'' and inserting ``(b) Application.--The term''; and
       (3) in the third undesignated paragraph, by striking ``The 
     scope'' and inserting ``(c) Subsequent Modifications, 
     Amendments, and Supplements.--The scope''.
       (c) Filing Without a License.--Section 185 of title 35, 
     United States Code, is amended by striking ``and without 
     deceptive intent''.
       (d) Reissue of Defective Patents.--Section 251 of title 35, 
     United States Code, is amended--
       (1) in the first undesignated paragraph--
       (A) by striking ``Whenever'' and inserting ``(a) In 
     General.--Whenever''; and
       (B) by striking ``without any deceptive intention'';
       (2) in the second undesignated paragraph, by striking ``The 
     Director'' and inserting ``(b) Multiple Reissued Patents.--
     The Director'';
       (3) in the third undesignated paragraph, by striking ``The 
     provisions'' and inserting ``(c) Applicability of This 
     Title.--The provisions''; and
       (4) in the last undesignated paragraph, by striking ``No 
     reissued patent'' and inserting ``(d) Reissue Patent 
     Enlarging Scope of Claims.--No reissued patent''.
       (e) Effect of Reissue.--Section 253 of title 35, United 
     States Code, is amended--
       (1) in the first undesignated paragraph, by striking 
     ``Whenever, without any deceptive intention,'' and inserting 
     ``(a) In General.--Whenever''; and
       (2) in the second undesignated paragraph, by striking ``In 
     like manner'' and inserting ``(b) Additional Disclaimer or 
     Dedication.--In the manner set forth in subsection (a),''.
       (f) Correction of Named Inventor.--Section 256 of title 35, 
     United States Code, is amended--
       (1) in the first undesignated paragraph--
       (A) by striking ``Whenever'' and inserting ``(a) 
     Correction.--Whenever''; and
       (B) by striking ``and such error arose without any 
     deceptive intention on his part''; and
       (2) in the second undesignated paragraph, by striking ``The 
     error'' and inserting ``(b) Patent Valid if Error 
     Corrected.--The error''.
       (g) Presumption of Validity.--Section 282 of title 35, 
     United States Code, is amended--
       (1) in the first undesignated paragraph--
       (A) by striking ``A patent'' and inserting ``(a) In 
     General.--A patent''; and
       (B) by striking the third sentence;
       (2) in the second undesignated paragraph--
       (A) by striking ``The following'' and inserting ``(b) 
     Defenses.--The following'';
       (B) in paragraph (1), by striking ``uneforceability,'' and 
     inserting ``unenforceability.''; and
       (C) in paragraph (2), by striking ``patentability,'' and 
     inserting ``patentability.'' ; and
       (3) in the third undesignated paragraph--
       (A) by striking ``In actions involving the validity or 
     infringement of a patent'' and inserting ``(c) Notice of 
     Actions; Actions During Extension of Patent Term.--In an 
     action involving the validity or infringement of patent, the 
     party asserting infringement shall identify, in the pleadings 
     or otherwise in writing to the adverse party, all of its real 
     parties in interest, and''; and
       (B) by striking ``Claims Court'' and inserting ``Court of 
     Federal Claims''.
       (h) Action for Infringement.--Section 288 of title 35, 
     United States Code, is amended by striking ``, without 
     deceptive intention,''.
       (i) Reviser's Notes.--
       (1) Section 3(e)(2) of title 35, United States Code, is 
     amended by striking ``this Act,'' and inserting ``that 
     Act,''.
       (2) Section 202 of title 35, United States Code, is 
     amended--
       (A) in subsection (b)(3), by striking ``the section 
     203(b)'' and inserting ``section 203(b)''; and
       (B) in subsection (c)(7)(D), by striking ``except where it 
     proves'' and all that follows through ``small business firms; 
     and'' and inserting: ``except where it is determined to be 
     infeasible following a reasonable inquiry, a preference in 
     the licensing of subject inventions shall be given to small 
     business firms; and''.
       (3) Section 209(d)(1) of title 35, United States Code, is 
     amended by striking ``nontransferrable'' and inserting 
     ``nontransferable''.
       (4) Section 287(c)(2)(G) of title 35, United States Code, 
     is amended by striking ``any state'' and inserting ``any 
     State''.
       (5) Section 371(b) of title 35, United States Code, is 
     amended by striking ``of the treaty'' and inserting ``of the 
     treaty.''.
       (j) Unnecessary References.--
       (1) In general.--Title 35, United States Code, is amended 
     by striking ``of this title'' each place that term appears.
       (2) Exception.--The amendment made by paragraph (1) shall 
     not apply to the use of such term in the following sections 
     of title 35, United States Code:
       (A) Section 1(c).
       (B) Section 101.
       (C) Subsections (a) and (b) of section 105.
       (D) The first instance of the use of such term in section 
     111(b)(8).
       (E) Section 161.
       (F) Section 164.
       (G) Section 171.
       (H) Section 251(c), as so designated by this section.
       (I) Section 261.
       (J) Subsections (g) and (h) of section 271.
       (K) Section 287(b)(1).
       (L) Section 289.
       (M) The first instance of the use of such term in section 
     375(a).
       (k) Effective Date.--The amendments made by this section 
     shall take effect upon the expiration of the 1-year period 
     beginning on the date of the enactment of this Act and shall 
     apply to proceedings commenced on or after that effective 
     date.

     SEC. 21. TRAVEL EXPENSES AND PAYMENT OF ADMINISTRATIVE 
                   JUDGES.

       (a) Authority To Cover Certain Travel Related Expenses.--
     Section 2(b)(11) of title 35, United States Code, is amended 
     by inserting ``, and the Office is authorized to expend funds 
     to cover the subsistence expenses and travel-related 
     expenses, including per diem, lodging costs, and 
     transportation costs, of persons attending such programs who 
     are not Federal employees'' after ``world''.
       (b) Payment of Administrative Judges.--Section 3(b) of 
     title 35, United States Code, is amended by adding at the end 
     the following:
       ``(6) Administrative patent judges and administrative 
     trademark judges.--The Director may fix the rate of basic pay 
     for the administrative patent judges appointed pursuant to 
     section 6 and the administrative trademark judges appointed 
     pursuant to section 17 of the Trademark Act of 1946 (15 
     U.S.C. 1067) at not greater than the rate of basic pay 
     payable for level III of the Executive Schedule under section 
     5314 of title 5. The payment of a rate of basic pay under 
     this paragraph shall not be subject to the pay limitation 
     under section 5306(e) or 5373 of title 5.''.

     SEC. 22. PATENT AND TRADEMARK OFFICE FUNDING.

       (a) Definition.--In this section, the term ``Fund'' means 
     the United States Patent and Trademark Office Public 
     Enterprise Fund established under subsection (c).
       (b) Funding.--
       (1) In general.--Section 42 of title 35, United States 
     Code, is amended--
       (A) in subsection (b), by striking ``Patent and Trademark 
     Office Appropriation Account'' and inserting ``United States 
     Patent and Trademark Office Public Enterprise Fund''; and
       (B) in subsection (c), in the first sentence--
       (i) by striking ``To the extent'' and all that follows 
     through ``fees'' and inserting ``Fees''; and
       (ii) by striking ``shall be collected by and shall be 
     available to the Director'' and inserting ``shall be 
     collected by the Director and shall be available until 
     expended''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect on the later of--
       (A) October 1, 2011; or
       (B) the first day of the first fiscal year that begins 
     after the date of the enactment of this Act.
       (c) USPTO Revolving Fund.--
       (1) Establishment.--There is established in the Treasury of 
     the United States a revolving fund to be known as the 
     ``United States Patent and Trademark Office Public Enterprise 
     Fund''. Any amounts in the Fund shall be available for use by 
     the Director without fiscal year limitation.
       (2) Derivation of resources.--There shall be deposited into 
     the Fund and recorded as offsetting receipts, on and after 
     the effective date set forth in subsection (b)(2)--
       (A) any fees collected under sections 41, 42, and 376 of 
     title 35, United States Code, except that--
       (i) notwithstanding any other provision of law, if such 
     fees are collected by, and payable to, the Director, the 
     Director shall transfer such amounts to the Fund; and
       (ii) no funds collected pursuant to section 10(h) of this 
     Act or section 1(a)(2) of Public Law 111-45 shall be 
     deposited in the Fund; and
       (B) any fees collected under section 31 of the Trademark 
     Act of 1946 (15 U.S.C. 1113).
       (3) Expenses.--Amounts deposited into the Fund under 
     paragraph (2) shall be available, without fiscal year 
     limitation, to cover--
       (A) all expenses to the extent consistent with the 
     limitation on the use of fees set forth in section 42(c) of 
     title 35, United States Code, including all administrative 
     and operating expenses,

[[Page 9809]]

     determined in the discretion of the Director to be ordinary 
     and reasonable, incurred by the Director for the continued 
     operation of all services, programs, activities, and duties 
     of the Office relating to patents and trademarks, as such 
     services, programs, activities, and duties are described 
     under--
       (i) title 35, United States Code; and
       (ii) the Trademark Act of 1946; and
       (B) all expenses incurred pursuant to any obligation, 
     representation, or other commitment of the Office.
       (d) Annual Report.--Not later than 60 days after the end of 
     each fiscal year, the Director shall submit a report to 
     Congress which shall--
       (1) summarize the operations of the Office for the 
     preceding fiscal year, including financial details and staff 
     levels broken down by each major activity of the Office;
       (2) detail the operating plan of the Office, including 
     specific expense and staff needs for the upcoming fiscal 
     year;
       (3) describe the long-term modernization plans of the 
     Office;
       (4) set forth details of any progress towards such 
     modernization plans made in the previous fiscal year; and
       (5) include the results of the most recent audit carried 
     out under subsection (f).
       (e) Annual Spending Plan.--
       (1) In general.--Not later than 30 days after the beginning 
     of each fiscal year, the Director shall notify the Committees 
     on Appropriations of both Houses of Congress of the plan for 
     the obligation and expenditure of the total amount of the 
     funds for that fiscal year in accordance with section 605 of 
     the Science, State, Justice, Commerce, and Related Agencies 
     Appropriations Act, 2006 (Public Law 109-108; 119 Stat. 
     2334).
       (2) Contents.--Each plan under paragraph (1) shall--
       (A) summarize the operations of the Office for the current 
     fiscal year, including financial details and staff levels 
     with respect to major activities; and
       (B) detail the operating plan of the Office, including 
     specific expense and staff needs, for the current fiscal 
     year.
       (f) Audit.--The Director shall, on an annual basis, provide 
     for an independent audit of the financial statements of the 
     Office. Such audit shall be conducted in accordance with 
     generally acceptable accounting procedures.
       (g) Budget.--The Director shall prepare and submit each 
     year to the President a business-type budget for the Fund in 
     a manner, and before a date, as the President prescribes by 
     regulation for the Federal budget.

     SEC. 23. SATELLITE OFFICES.

       (a) Establishment.--Subject to available resources, the 
     Director shall, by not later than the date that is 3 years 
     after the date of the enactment of this Act, establish 3 or 
     more satellite offices in the United States to carry out the 
     responsibilities of the Office.
       (b) Purposes.--The purposes of the satellite offices 
     established under subsection (a) are to--
       (1) increase outreach activities to better connect patent 
     filers and innovators with the Office;
       (2) enhance patent examiner retention;
       (3) improve recruitment of patent examiners;
       (4) decrease the number of patent applications waiting for 
     examination; and
       (5) improve the quality of patent examination.
       (c) Required Considerations.--
       (1) In general.--In selecting the location of each 
     satellite office to be established under subsection (a), the 
     Director--
       (A) shall ensure geographic diversity among the offices, 
     including by ensuring that such offices are established in 
     different States and regions throughout the Nation;
       (B) may rely upon any previous evaluations by the Office of 
     potential locales for satellite offices, including any 
     evaluations prepared as part of the Office's Nationwide 
     Workforce Program that resulted in the 2010 selection of 
     Detroit, Michigan, as the first satellite office of the 
     Office.
       (2) Open selection process.--Nothing in paragraph (1) shall 
     constrain the Office to only consider its evaluations in 
     selecting the Detroit, Michigan, satellite office.
       (d) Report to Congress.--Not later than the end of the 
     third fiscal year that begins after the date of the enactment 
     of this Act, the Director shall submit a report to Congress 
     on--
       (1) the rationale of the Director in selecting the location 
     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 under subsection (b).

     SEC. 24. DESIGNATION OF DETROIT SATELLITE OFFICE.

       (a) Designation.--The satellite office of the United States 
     Patent and Trademark Office to be located in Detroit, 
     Michigan, shall be known and designated as the ``Elijah J. 
     McCoy United States Patent and Trademark Office''.
       (b) References.--Any reference in a law, map, regulation, 
     document, paper, or other record of the United States to the 
     satellite office of the United States Patent and Trademark 
     Office to be located in Detroit, Michigan, referred to in 
     subsection (a) shall be deemed to be a reference to the 
     ``Elijah J. McCoy United States Patent and Trademark 
     Office''.

     SEC. 25. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS 
                   CONCERNS.

       Using available resources, the Director shall establish and 
     maintain in the Office a Patent Ombudsman Program. The duties 
     of the Program's staff shall include providing support and 
     services relating to patent filings to small business 
     concerns.

     SEC. 26. 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'' after the 
     semicolon;
       (2) in subparagraph (F), by inserting ``and'' after the 
     semicolon; 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. 27. CALCULATION OF 60-DAY PERIOD FOR APPLICATION OF 
                   PATENT TERM EXTENSION.

       (a) In General.--Section 156(d)(1) of title 35, United 
     States Code, is amended by adding at the end the following 
     flush sentence:
     ``For purposes of determining the date on which a product 
     receives permission under the second sentence of this 
     paragraph, if such permission is transmitted after 4:30 P.M., 
     Eastern Time, on a business day, or is transmitted on a day 
     that is not a business day, the product shall be deemed to 
     receive such permission on the next business day. For 
     purposes of the preceding sentence, the term `business day' 
     means any Monday, Tuesday, Wednesday, Thursday, or Friday, 
     excluding any legal holiday under section 6103 of title 5.''.
       (b) Applicability.--The amendment made by subsection (a) 
     shall apply to any application for extension of a patent term 
     under section 156 of title 35, United States Code, that is 
     pending on, that is filed after, or as to which a decision 
     regarding the application is subject to judicial review on, 
     the date of the enactment of this Act.

     SEC. 28. STUDY ON IMPLEMENTATION.

       (a) PTO Study.--The Director shall conduct a study on the 
     manner in which this Act and the amendments made by this Act 
     are being implemented by the Office, and on such other 
     aspects of the patent policies and practices of the Federal 
     Government with respect to patent rights, innovation in the 
     United States, competitiveness of United States markets, 
     access by small businesses to capital for investment, and 
     such other issues, as the Director considers appropriate.
       (b) Report to Congress.--The Director shall, not later than 
     the date that is 4 years after the date of the enactment of 
     this Act, submit to the Committees on the Judiciary of the 
     House of Representatives and the Senate a report on the 
     results of the study conducted under subsection (a), 
     including recommendations for any changes to laws and 
     regulations that the Director considers appropriate.

     SEC. 29. PRO BONO PROGRAM.

       (a) In General.--The Director shall work with and support 
     intellectual property law associations across the country in 
     the establishment of pro bono programs designed to assist 
     financially under-resourced independent inventors and small 
     businesses.
       (b) Effective Date.--This section shall take effect on the 
     date of the enactment of this Act.

     SEC. 30. EFFECTIVE DATE.

       Except as otherwise provided in this Act, the provisions of 
     this Act shall take effect upon the expiration of the 1-year 
     period beginning on the date of the enactment of this Act and 
     shall apply to any patent issued on or after that effective 
     date.

     SEC. 31. BUDGETARY EFFECTS.

       The budgetary effects of this Act, for the purpose of 
     complying with the Statutory Pay-As-You-Go Act of 2010, shall 
     be determined by reference to the latest statement titled 
     ``Budgetary Effects of PAYGO Legislation'' for this Act, 
     submitted for printing in the Congressional Record by the 
     Chairman of the House Budget Committee, provided that such 
     statement has been submitted prior to the vote on passage.

  The Acting CHAIR. No amendment to the committee amendment is in order 
except those printed in part B of House Report 112-111. Each such 
amendment may be offered only in the order printed in the report, by a 
Member designated in the report, shall be considered read, shall be 
debatable for the time specified in the report equally divided and 
controlled by the proponent and an opponent, shall not be subject to 
amendment, and shall not be subject to a demand for division of the 
question.


             Amendment No. 1 Offered by Mr. Smith of Texas

  The Acting CHAIR. It is now in order to consider amendment No. 1 
printed in part B of House Report 112-111.
  Mr. SMITH of Texas. Madam Chair, I have an amendment at the desk.
  The Acting CHAIR. The Clerk will designate the amendment.
  The text of the amendment is as follows:

       Page 3, line 5, strike ``America Invents Act'' and insert 
     ``Leahy-Smith America Invents Act''.
       Page 4, lines 10 and 22, strike ``5(a)(1)'' and insert 
     ``5(a)''.

[[Page 9810]]

       Page 16, line 1, insert after the period the following: 
     ``In appropriate circumstances, the Patent Trial and Appeal 
     Board may correct the naming of the inventor in any 
     application or patent at issue.''.
       Page 25, strike line 13 and all that follows through page 
     27, line 2, and redesignate the succeeding subsections 
     accordingly.
       Page 27, line 4, strike ``registration''.
       Page 27, line 5, strike ``inventor to use'' and insert ``to 
     invent''.
       Page 27, line 6, insert ``and the useful arts'' after 
     ``science''.
       Page 27, line 9, strike ``granted by the'' and insert 
     ``provided by the grant of''.
       Page 27, line 12, strike ``registration''.
       Page 27, line 13, strike ``inventor to use'' and insert 
     ``to invent''.
       Page 27, lines 14 and 15, strike ``harmonize the United 
     States patent registration system with the patent 
     registration systems'' and insert ``improve the United States 
     patent system and promote harmonization of the United States 
     patent system with the patent systems''.
       Page 27, line 18, strike ``a greater sense of'' and insert 
     ``greater''.
       Page 36, strike line 10 and all that follows through page 
     40, line 5, and insert the following (and conform the table 
     of contents) accordingly:

     SEC. 5. DEFENSE TO INFRINGEMENT BASED ON PRIOR COMMERCIAL 
                   USE.

       (a) In General.--Section 273 of title 35, United States 
     Code, is amended to read as follows:

     ``Sec. 273. Defense to infringement based on prior commercial 
       use

       ``(a) In General.--A person shall be entitled to a defense 
     under section 282(b) with respect to subject matter 
     consisting of a process, or consisting of a machine, 
     manufacture, or composition of matter used in a manufacturing 
     or other commercial process, that would otherwise infringe a 
     claimed invention being asserted against the person if--
       ``(1) such person, acting in good faith, commercially used 
     the subject matter in the United States, either in connection 
     with an internal commercial use or an actual arm's length 
     sale or other arm's length commercial transfer of a useful 
     end result of such commercial use; and
       ``(2) such commercial use occurred at least 1 year before 
     the earlier of either--
       ``(A) the effective filing date of the claimed invention; 
     or
       ``(B) the date on which the claimed invention was disclosed 
     to the public in a manner that qualified for the exception 
     from prior art under section 102(b).
       ``(b) Burden of Proof.--A person asserting a defense under 
     this section shall have the burden of establishing the 
     defense by clear and convincing evidence.
       ``(c) Additional Commercial Uses.--
       ``(1) Premarketing regulatory review.--Subject matter for 
     which commercial marketing or use is subject to a 
     premarketing regulatory review period during which the safety 
     or efficacy of the subject matter is established, including 
     any period specified in section 156(g), shall be deemed to be 
     commercially used for purposes of subsection (a)(1) during 
     such regulatory review period.
       ``(2) Nonprofit laboratory use.--A use of subject matter by 
     a nonprofit research laboratory or other nonprofit entity, 
     such as a university or hospital, for which the public is the 
     intended beneficiary, shall be deemed to be a commercial use 
     for purposes of subsection (a)(1), except that a defense 
     under this section may be asserted pursuant to this paragraph 
     only for continued and noncommercial use by and in the 
     laboratory or other nonprofit entity.
       ``(d) Exhaustion of Rights.--Notwithstanding subsection 
     (e)(1), the sale or other disposition of a useful end result 
     by a person entitled to assert a defense under this section 
     in connection with a patent with respect to that useful end 
     result shall exhaust the patent owner's rights under the 
     patent to the extent that such rights would have been 
     exhausted had such sale or other disposition been made by the 
     patent owner.
       ``(e) Limitations and Exceptions.--
       ``(1) Personal defense.--
       ``(A) In general.--A defense under this section may be 
     asserted only by the person who performed or directed the 
     performance of the commercial use described in subsection 
     (a), or by an entity that controls, is controlled by, or is 
     under common control with such person.
       ``(B) Transfer of right.--Except for any transfer to the 
     patent owner, the right to assert a defense under this 
     section shall not be licensed or assigned or transferred to 
     another person except as an ancillary and subordinate part of 
     a good-faith assignment or transfer for other reasons of the 
     entire enterprise or line of business to which the defense 
     relates.
       ``(C) Restriction on sites.--A defense under this section, 
     when acquired by a person as part of an assignment or 
     transfer described in subparagraph (B), may only be asserted 
     for uses at sites where the subject matter that would 
     otherwise infringe a claimed invention is in use before the 
     later of the effective filing date of the claimed invention 
     or the date of the assignment or transfer of such enterprise 
     or line of business.
       ``(2) Derivation.--A person may not assert a defense under 
     this section if the subject matter on which the defense is 
     based was derived from the patentee or persons in privity 
     with the patentee.
       ``(3) Not a general license.--The defense asserted by a 
     person under this section is not a general license under all 
     claims of the patent at issue, but extends only to the 
     specific subject matter for which it has been established 
     that a commercial use that qualifies under this section 
     occurred, except that the defense shall also extend to 
     variations in the quantity or volume of use of the claimed 
     subject matter, and to improvements in the claimed subject 
     matter that do not infringe additional specifically claimed 
     subject matter of the patent.
       ``(4) Abandonment of use.--A person who has abandoned 
     commercial use (that qualifies under this section) of subject 
     matter may not rely on activities performed before the date 
     of such abandonment in establishing a defense under this 
     section with respect to actions taken on or after the date of 
     such abandonment.
       ``(5) University exception.--
       ``(A) In general.--A person commercially using subject 
     matter to which subsection (a) applies may not assert a 
     defense under this section if the claimed invention with 
     respect to which the defense is asserted was, at the time the 
     invention was made, owned or subject to an obligation of 
     assignment to either an institution of higher education (as 
     defined in section 101(a) of the Higher Education Act of 1965 
     (20 U.S.C. 1001(a)), or a technology transfer organization 
     whose primary purpose is to facilitate the commercialization 
     of technologies developed by one or more such institutions of 
     higher education.
       ``(B) Exception.--Subparagraph (A) shall not apply if any 
     of the activities required to reduce to practice the subject 
     matter of the claimed invention could not have been 
     undertaken using funds provided by the Federal Government.
       ``(f) Unreasonable Assertion of Defense.--If the defense 
     under this section is pleaded by a person who is found to 
     infringe the patent and who subsequently fails to demonstrate 
     a reasonable basis for asserting the defense, the court shall 
     find the case exceptional for the purpose of awarding 
     attorney fees under section 285.
       ``(g) Invalidity.--A patent shall not be deemed to be 
     invalid under section 102 or 103 solely because a defense is 
     raised or established under this section.''.
       (b) Conforming Amendment.--The item relating to section 273 
     in the table of sections for chapter 28 of title 35, United 
     States Code, is amended to read as follows:

``273. Defense to infringement based on prior commercial use.''.

       (c) Effective Date.--The amendments made by this section 
     shall apply to any patent issued on or after the date of the 
     enactment of this Act.
       Page 41, line 5, strike ``1 year'' and insert ``9 months''.
       Page 42, line 22, strike ``commence'' and insert ``be 
     instituted''.
       Page 43, line 24, and page 44, line 1, strike ``petitioner, 
     real party in interest, or privy of the petitioner'' and 
     insert ``petitioner or real party in interest''.
       Page 44, lines 3 and 4, strike ``petitioner, real party in 
     interest, or privy of the petitioner'' and insert 
     ``petitioner or real party in interest''.
       Page 44, lines 13 and 14, strike ``petitioner, real party 
     in interest, or privy of the petitioner'' and insert 
     ``petitioner or real party in interest''.
       Page 44, lines 16 and 17, strike ``petitioner, real party 
     in interest, or privy of the petitioner'' and insert 
     ``petitioner or real party in interest''.
       Page 52, line 10, strike ``Amended or New Claim'' and 
     insert ``Intervening Rights''.
       Page 54, insert the following after line 10:
       (3) Transition.--
       (A) In general.--Chapter 31 of title 35, United States 
     Code, is amended--
       (i) in section 312--

       (I) in subsection (a)--

       (aa) in the first sentence, by striking ``a substantial new 
     question of patentability affecting any claim of the patent 
     concerned is raised by the request,'' and inserting ``the 
     information presented in the request shows that there is a 
     reasonable likelihood that the requester would prevail with 
     respect to at least 1 of the claims challenged in the 
     request,''; and
       (bb) in the second sentence, by striking ``The existence of 
     a substantial new question of patentability'' and inserting 
     ``A showing that there is a reasonable likelihood that the 
     requester would prevail with respect to at least 1 of the 
     claims challenged in the request''; and

       (II) in subsection (c), in the second sentence, by striking 
     ``no substantial new question of patentability has been 
     raised,'' and inserting ``the showing required by subsection 
     (a) has not been made,''; and

       (ii) in section 313, by striking ``a substantial new 
     question of patentability affecting a claim of the patent is 
     raised'' and inserting ``it has been shown that there is a 
     reasonable likelihood that the requester would prevail with 
     respect to at least 1 of the claims challenged in the 
     request''.
       (B) Application.--The amendments made by this paragraph--

[[Page 9811]]

       (i) shall take effect on the date of the enactment of this 
     Act; and
       (ii) shall apply to requests for inter partes reexamination 
     that are filed on or after such date of enactment, but before 
     the effective date set forth in paragraph (2)(A) of this 
     subsection.
       (C) Continued applicability of prior provisions.--The 
     provisions of chapter 31 of title 35, United States Code, as 
     amended by this paragraph, shall continue to apply to 
     requests for inter partes reexamination that are filed before 
     the effective date set forth in paragraph (2)(A) as if 
     subsection (a) had not been enacted.
       Page 54, line 17, strike ``patent owner'' and insert 
     ``owner of a patent''.
       Page 54, line 18, strike ``of a'' and insert ``of the''.
       Page 55, line 10, strike ``1 year'' and insert ``9 
     months''.
       Page 57, line 3, strike ``commence'' and insert ``be 
     instituted''.
       Page 57, line 25, strike ``The'' and all that follows 
     through ``public.'' on page 58, line 1.
       Page 58, lines 11 and 12, strike ``petitioner, real party 
     in interest, or privy of the petitioner'' and insert 
     ``petitioner or real party in interest''.
       Page 58, lines 15 and 16, strike ``petitioner, real party 
     in interest, or privy of the petitioner'' and insert 
     ``petitioner or real party in interest''.
       Page 58, line 25 and page 59, line 1, strike ``petitioner, 
     real party in interest, or privy of the petitioner'' and 
     insert ``petitioner or real party in interest''.
       Page 59, lines 3 and 4, strike ``petitioner, real party in 
     interest, or privy of the petitioner'' and insert 
     ``petitioner or real party in interest''.
       Page 63, line 15, strike ``and''.
       Page 63, line 23, strike the period and insert ``; and''.
       Page 63, insert the following after line 23:
       ``(12) providing the petitioner with at least 1 opportunity 
     to file written comments within a time period established by 
     the Director.''.
       Page 66, line 24, strike ``Amended or New Claim'' and 
     insert ``Intervening Rights''.
       Page 68, line 10, strike ``to any patent that is'' and 
     insert ``only to patents''.
       Page 78, insert the following after line 1 and redesignate 
     the succeeding subsection accordingly:
       (d) Conforming Amendments.--
       (1) Atomic energy act of 1954.--Section 152 of the Atomic 
     Energy Act of 1954 (42 U.S.C. 2182) is amended in the third 
     undesignated paragraph--
       (A) by striking ``Board of Patent Appeals and 
     Interferences'' each place it appears and inserting ``Patent 
     Trial and Appeal Board''; and
       (B) by inserting ``and derivation'' after ``established for 
     interference''.
       (2) Title 51.--Section 20135 of title 51, United States 
     Code, is amended--
       (A) in subsections (e) and (f), by striking ``Board of 
     Patent Appeals and Interferences'' each place it appears and 
     inserting ``Patent Trial and Appeal Board''; and
       (B) in subsection (e), by inserting ``and derivation'' 
     after ``established for interference''.
       Page 86, lines 11 and 12, strike ``examination fee for the 
     application'' and insert ``applicable fee''.
       Page 86, line 15, insert ``most recently'' after ``as''.
       Page 86, line 22, strike ``examination fee for the 
     application'' and insert ``applicable fee''.
       Page 87, line 1, insert ``most recently'' after ``as''.
       Page 87, strike line 18 and all that follows through page 
     88, line 8, and insert the following:
       ``(d) Institutions of Higher Education.--For purposes of 
     this section, a micro entity shall include an applicant who 
     certifies that--
       ``(1) the applicant's employer, from which the applicant 
     obtains the majority of the applicant's income, is an 
     institution of higher education as defined in section 101(a) 
     of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or
       ``(2) the applicant has assigned, granted, conveyed, or is 
     under an obligation by contract or law, to assign, grant, or 
     convey, a license or other ownership interest in the 
     particular applications to such an institution of higher 
     education.
       Page 88, line 9, strike ``(2) Director's authority.--The 
     Director'' and insert ``(e) Director's Authority.--In 
     addition to the limits imposed by this section, the 
     Director''.
       Page 88, move the text of lines 9 through 21 2 ems to the 
     left.
       Page 88, line 12, strike ``subsection'' and insert 
     ``section''.
       Page 88, line 18, strike ``paragraph'' and insert 
     ``subsection''.
       Page 89, line 2, strike ``a fee'' and insert ``an 
     additional fee''.
       Page 89, line 17, strike ``This'' and insert ``Except as 
     provided in subsection (h), this''.
       Page 89, line 22, strike ``6-year'' and insert ``7-year''.
       Page 89, add the following after line 23:
       (3) Prior regulations not affected.--The termination of 
     authority under this subsection shall not affect any 
     regulations issued under this section before the effective 
     date of such termination or any rulemaking proceeding for the 
     issuance of regulations under this section that is pending on 
     such date.
       Page 96, line 15, strike ``either'' and all that follows 
     through ``patent'' on line 19 and inserting ``by Office 
     personnel''.
       Page 98, strike lines 3 through 14.
       Page 102, insert the following after line 7 and redesignate 
     the succeeding subsection accordingly:
       (i) Appropriation Account Transition Fees.--
       (1) Surcharge.--
       (A) In general.--There shall be a surcharge of 15 percent, 
     rounded by standard arithmetic rules, on all fees charged or 
     authorized by subsections (a), (b), and (d)(1) of section 41, 
     and section 132(b), of title 35, United States Code. Any 
     surcharge imposed under this subsection is, and shall be 
     construed to be, separate from and in addition to any other 
     surcharge imposed under this Act or any other provision of 
     law.
       (B) Deposit of amounts.--Amounts collected pursuant to the 
     surcharge imposed under subparagraph (A) shall be credited to 
     the United States Patent and Trademark Appropriation Account, 
     shall remain available until expended, and may be used only 
     for the purposes specified in section 42(c)(3)(A) of title 
     35, United States Code.
       (2) Effective date and termination of surcharge.--The 
     surcharge provided for in paragraph (1)--
       (A) shall take effect on the date that is 10 days after the 
     date of the enactment of this Act; and
       (B) shall terminate, with respect to a fee to which 
     paragraph (1)(A) applies, on the effective date of the 
     setting or adjustment of that fee pursuant to the exercise of 
     the authority under section 10 for the first time with 
     respect to that fee.
       Page 102, strike lines 1 through 7 and insert the 
     following:
       (h) Prioritized Examination Fee.--
       (1) In general.--
       (A) Fee.--
       (i) Prioritized examination fee.--A fee of $4,800 shall be 
     established for filing a request, pursuant to section 
     2(b)(2)(G) of title 35, United States Code, for prioritized 
     examination of a nonprovisional application for an original 
     utility or plant patent.
       (ii) Additional fees.--In addition to the prioritized 
     examination fee under clause (i), the fees due on an 
     application for which prioritized examination is being sought 
     are the filing, search, and examination fees (including any 
     applicable excess claims and application size fees), 
     processing fee, and publication fee for that application.
       (B) Regulations; limitations.--
       (i) Regulations.--The Director may by regulation prescribe 
     conditions for acceptance of a request under subparagraph (A) 
     and a limit on the number of filings for prioritized 
     examination that may be accepted.
       (ii) Limitation on claims.-- Until regulations are 
     prescribed under clause (i), no application for which 
     prioritized examination is requested may contain or be 
     amended to contain more than 4 independent claims or more 
     than 30 total claims.
       (iii) Limitation on total number of requests.--The Director 
     may not accept in any fiscal year more than 10,000 requests 
     for prioritization until regulations are prescribed under 
     this subparagraph setting another limit.
       (2) Reduction in fees for small entities.--The Director 
     shall reduce fees for providing prioritized examination of 
     nonprovisional applications for original utility and plant 
     patents by 50 percent for small entities that qualify for 
     reduced fees under section 41(h)(1) of title 35, United 
     States Code.
       (3) Deposit of fees.--All fees paid under this subsection 
     shall be credited to the United States Patent and Trademark 
     Office Appropriation Account, shall remain available until 
     expended, and may be used only for the purposes specified in 
     section 42(c)(3)(A) of title 35, United States Code.
       (4) Effective date and termination.--
       (A) Effective date.--This subsection shall take effect on 
     the date that is 10 days after the date of the enactment of 
     this Act.
       (B) Termination.--The fee imposed under paragraph 
     (1)(A)(i), and the reduced fee under paragraph (2), shall 
     terminate on the effective date of the setting or adjustment 
     of the fee under paragraph (1)(A)(i) pursuant to the exercise 
     of the authority under section 10 for the first time with 
     respect to that fee.
       Page 102, lines 8 and 9, strike ``Except as provided in 
     subsection (h),'' and insert ``Except as otherwise provided 
     in this section,''.
       Page 105, strike lines 1 through 11.
       Page 105, add the following after line 25 and redesignate 
     the succeeding subsection accordingly:
       ``(e) Fraud.--If the Director becomes aware, during the 
     course of a supplemental examination or reexamination 
     proceeding ordered under this section, that a material fraud 
     on the Office may have been committed in connection with the 
     patent that is the subject of the supplemental examination, 
     then in addition to any other actions the Director is 
     authorized to take, including the cancellation of any claims 
     found to be invalid under section 307 as a result of a 
     reexamination ordered under this section, the Director shall 
     also refer the matter to the Attorney General for such 
     further action as

[[Page 9812]]

     the Attorney General may deem appropriate. Any such referral 
     shall be treated as confidential, shall not be included in 
     the file of the patent, and shall not be disclosed to the 
     public unless the United States charges a person with a 
     criminal offense in connection with such referral.
       Page 111, strike lines 13 through 24 and insert the 
     following:
       ``(c) The marking of a product, in a manner described in 
     subsection (a), with matter relating to a patent that covered 
     that product but has expired is not a violation of this 
     section.''.
       Page 112, line 2, strike ``any case that is'' and insert 
     ``all cases, without exception, that are''.
       Page 113, line 13, insert ``or privy'' after ``interest''.
       Page 114, lines 15 and 16, strike ``The petitioner in a 
     transitional proceeding,'' and insert the following: ``The 
     petitioner in a transitional proceeding that results in a 
     final written decision under section 328(a) of title 35, 
     United States Code, with respect to a claim in a covered 
     business method patent,''.
       Page 114, line 22, strike ``a claim in a patent'' and 
     insert ``the claim''.
       Page 114, lines 23-25, strike ``a transitional proceeding 
     that resulted in a final decision'' and insert ``that 
     transitional proceeding''.
       Page 115, line 18, strike ``10-'' and insert ``8-''.
       Page 120, strike line 17 and all that follows through the 
     matter following line 10 on page 121 and redesignate 
     succeeding subsections accordingly.
       Page 121, line 17, strike ``In any'' and insert ``With 
     respect to any''.
       Page 121, line 22, insert ``, or have their actions 
     consolidated for trial,'' after ``defendants''.
       Page 122, line 9, strike ``or trial''.
       Page 122, line 10, insert ``, or have their actions 
     consolidated for trial,'' after ``defendants''.
       Page 122, line 11, strike the quotation marks and second 
     period.
       Page 122, insert the following after line 11:
       ``(c) Waiver.--A party that is an accused infringer may 
     waive the limitations set forth in this section with respect 
     to that party.''.
       Page 126, line 13, strike ``patent,'' and all that follows 
     through the first appearance of ``and'' on line 17 and insert 
     ``a patent,''.
       Page 128, insert the following after line 23 and 
     redesignate the succeeding subsection accordingly:
       (k) Additional Technical Amendments.--Sections 155 and 155A 
     of title 35, United States Code, and the items relating to 
     those sections in the table of sections for chapter 14 of 
     such title, are repealed.
       Page 130, strike line 3 and all that follows through page 
     134, line 17, and insert the following:

     SEC. 22. PATENT AND TRADEMARK OFFICE FUNDING.

       (a) In General.--Section 42(c) of title 35, United States 
     Code, is amended--
       (1) by striking ``(c)'' and inserting ``(c)(1)'';
       (2) in the first sentence, by striking ``shall be 
     available'' and inserting ``shall, subject to paragraph (3), 
     be available'';
       (3) by striking the second sentence; and
       (4) by adding at the end the following:
       ``(2) There is established in the Treasury a Patent and 
     Trademark Fee Reserve Fund. If fee collections by the Patent 
     and Trademark Office for a fiscal year exceed the amount 
     appropriated to the Office for that fiscal year, fees 
     collected in excess of the appropriated amount shall be 
     deposited in the Patent and Trademark Fee Reserve Fund. To 
     the extent and in the amounts provided in appropriations 
     Acts, amounts in the Fund shall be made available until 
     expended only for obligation and expenditure by the Office in 
     accordance with paragraph (3).
       ``(3)(A) Any fees that are collected under sections 41, 42, 
     and 376, and any surcharges on such fees, may only be used 
     for expenses of the Office relating to the processing of 
     patent applications and for other activities, services, and 
     materials relating to patents and to cover a share of the 
     administrative costs of the Office relating to patents.
       ``(B) Any fees that are collected under section 31 of the 
     Trademark Act of 1946, and any surcharges on such fees, may 
     only be used for expenses of the Office relating to the 
     processing of trademark registrations and for other 
     activities, services, and materials relating to trademarks 
     and to cover a share of the administrative costs of the 
     Office relating to trademarks.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on October 1, 2011.
       Page 137, strike lines 1 through 7 and redesignate the 
     succeeding sections (and conform the table of contents) 
     accordingly.
       Page 137, lines 8 and 9, strike ``TECHNOLOGIES IMPORTANT TO 
     AMERICAN COMPETITIVENESS'' and insert ``IMPORTANT 
     TECHNOLOGIES'' (and conform the table of contents 
     accordingly).
       Page 138, strike lines 1 through 21 and redesignate 
     succeeding sections (and conform the table of contents) 
     accordingly.
       Page 139, insert the following after line 12 and 
     redesignate the succeeding sections (and conform the table of 
     contents) accordingly:

     SEC. 27. STUDY ON GENETIC TESTING.

       (a) In General.--The Director shall conduct a study on 
     effective ways to provide independent, confirming genetic 
     diagnostic test activity where gene patents and exclusive 
     licensing for primary genetic diagnostic tests exist.
       (b) Items Included in Study.--The study shall include an 
     examination of at least the following:
       (1) The impact that the current lack of independent second 
     opinion testing has had on the ability to provide the highest 
     level of medical care to patients and recipients of genetic 
     diagnostic testing, and on inhibiting innovation to existing 
     testing and diagnoses.
       (2) The effect that providing independent second opinion 
     genetic diagnostic testing would have on the existing patent 
     and license holders of an exclusive genetic test.
       (3) The impact that current exclusive licensing and patents 
     on genetic testing activity has on the practice of medicine, 
     including but not limited to: the interpretation of testing 
     results and performance of testing procedures.
       (4) The role that cost and insurance coverage have on 
     access to and provision of genetic diagnostic tests.
       (c) Confirming Genetic Diagnostic Test Activity Defined.--
     For purposes of this section, the term ``confirming genetic 
     diagnostic test activity'' means the performance of a genetic 
     diagnostic test, by a genetic diagnostic test provider, on an 
     individual solely for the purpose of providing the individual 
     with an independent confirmation of results obtained from 
     another test provider's prior performance of the test on the 
     individual.
       (d) Report.--Not later than 9 months after the date of 
     enactment of this Act, the Director shall report to the 
     Committee on the Judiciary of the Senate and the Committee on 
     the Judiciary of the House of Representatives on the findings 
     of the study and provide recommendations for establishing the 
     availability of such independent confirming genetic 
     diagnostic test activity.

     SEC. 28. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS 
                   CONCERNS.

       Using available resources, the Director shall establish and 
     maintain in the Office a Patent Ombudsman Program. The duties 
     of the Program's staff shall include providing support and 
     services relating to patent filings to small business 
     concerns and independent inventors.
       Page 139, insert the following after line 20 and 
     redesignate the succeeding sections (and conform the table of 
     contents) accordingly:

     SEC. 30. LIMITATION ON ISSUANCE OF PATENTS.

       (a) Limitation.--Notwithstanding any other provision of 
     law, no patent may issue on a claim directed to or 
     encompassing a human organism.
       (b) Effective Date.--
       (1) In general.--Subsection (a) shall apply to any 
     application for patent that is pending on, or filed on or 
     after, the date of the enactment of this Act.
       (2) Prior applications.--Subsection (a) shall not affect 
     the validity of any patent issued on an application to which 
     paragraph (1) does not apply.

     SEC. 31. STUDY OF PATENT LITIGATION.

       (a) GAO Study.--The Comptroller General of the United 
     States shall conduct a study of the consequences of 
     litigation by non-practicing entities, or by patent assertion 
     entities, related to patent claims made under title 35, 
     United States Code, and regulations authorized by that title.
       (b) Contents of Study.--The study conducted under this 
     section shall include the following:
       (1) The annual volume of litigation described in subsection 
     (a) over the 20-year period ending on the date of the 
     enactment of this Act.
       (2) The volume of cases comprising such litigation that are 
     found to be without merit after judicial review.
       (3) The impacts of such litigation on the time required to 
     resolve patent claims.
       (4) The estimated costs, including the estimated cost of 
     defense, associated with such litigation for patent holders, 
     patent licensors, patent licensees, and inventors, and for 
     users of alternate or competing innovations.
       (5) The economic impact of such litigation on the economy 
     of the United States, including the impact on inventors, job 
     creation, employers, employees, and consumers.
       (6) The benefit to commerce, if any, supplied by non-
     practicing entities or patent assertion entities that 
     prosecute such litigation.
       (c) Report to Congress.--The Comptroller General shall, not 
     later than the date that is 1 year after the date of the 
     enactment of this Act, submit to the Committee on the 
     Judiciary of the House of Representatives and the Committee 
     on the Judiciary of the Senate a report on the results of the 
     study required under this section, including recommendations 
     for any changes to laws and regulations that will minimize 
     any negative impact of patent litigation that was the subject 
     of such study.

  The Acting CHAIR. Pursuant to House Resolution 316, the gentleman 
from Texas (Mr. Smith) and a Member opposed each will control 5 
minutes.
  The Chair recognizes the gentleman from Texas.
  Mr. SMITH of Texas. I yield myself such time as I may consume.

[[Page 9813]]

  Madam Chair, the manager's amendment consists of numerous technical 
edits and other improvements to the bill. Some of the highlights 
include the following provisions:
  Expansion and clarification of prior-user rights under section 273 of 
the Patent Act.
  Institutions of higher education qualify for ``micro-entity'' status 
when paying fees. In other words, an inventor who works for a 
university or who assigns or conveys an invention to a university 
qualifies for lower micro-entity fee status.
  Consolidation of numerous PTO reporting requirements.
  Inclusion of ``Weldon amendment'' language that forbids the patenting 
of inventions ``directed to or encompassing a human organism.'' This 
language has been part of the CJS appropriations legislation for years. 
It's directed as preventing the PTO from approving inventions related 
to human cloning.
  And deletion of a provision that provides special treatment to one 
company that wants to get additional patent term protection from the 
PTO.
  These and other changes in the manager's amendment smooth out a few 
rough edges and improve the overall bill.
  I reserve the balance of my time.
  Mr. WATT. Madam Chair, I rise in opposition to the amendment.
  The Acting CHAIR. The gentleman from North Carolina is recognized for 
5 minutes.
  Mr. WATT. I yield 2 minutes to the gentleman from Wisconsin (Mr. 
Sensenbrenner).
  Mr. SENSENBRENNER. Madam Chair, this manager's amendment is 
substantive. It contains provisions that should not be buried in a 
manager's amendment, and it should be defeated.
  First of all, it does maintain the fee diversion. It maintains the 
fee diversion because of an alleged lock box. We've heard about this 
before, and I have in my hand the Congressional Record of June 23, 
2000, where the chairman, at the time, of the State, Justice, Commerce 
Subcommittee stated that the fees that are generated by the Patent 
Office are not to be used by any other agency or any other purpose. 
They remain in that account to be used in succeeding years. We are not 
siphoning off Patent Office fees for other expenditures.
  Well, guess what? It happened. And it's happened in the last 10 to 12 
years to the tune of $1 billion. And this is exactly the same promise 
that they're making now. Fool us once, shame on them. Fool us twice, 
shame on us.
  Now, this change relative to the reported bill to what is in the 
manager's amendment is the thing that is subject to the waiver of CutGo 
to the tune of $717 million over the next 5 years. The proponents of 
this amendment say this is a mere technical waiver of CutGo.

                              {time}  2110

  $717 million is no mere technical waiver of CutGo.
  If you believe in CutGo, you've got to vote down the manager's 
amendment where this change was protected by the waiver granted for the 
Rules Committee. The amendment is substantive, it ought to be defeated.
  Mr. SMITH of Texas. Madam Chair, I continue to reserve the balance of 
my time.
  Mr. WATT. I yield myself the balance of my time.
  Let me first say I agree with Mr. Sensenbrenner. The Rules Committee 
says that this is a technical amendment, that it would make technical 
edits and a few necessary changes to more substantive issues. This is a 
very substantive manager's amendment; there is no question about that.
  There are many good parts to this bill, and a broad coalition of 
people supported the bill which was reported out of committee. But the 
one and only necessary part of the bill is the ability to give the 
Patent and Trademark Office its full funding. That was the whole 
purpose for which we started off this process.
  This whole reform process was conceived to address poor-quality 
patents and to reduce the backlog of patent applications, which now 
exceeds a 700,000 backlog of patent applications. And the reason it 
exceeds 700,000 is because the Patent and Trademark Office has not had 
the money because their fees that they have been charging have been 
diverted to the general fund. Without a clear path to access its own 
collection of fees, the PTO cannot properly plan or implement the other 
changes in the bill and fulfill its primary function of reducing the 
backlog and examining patent applications.
  The compromise that this manager's amendment proposes has been 
described by a patent news blog as, it says, It's still Lucy--that's 
the appropriators--holding the football that it will never let Charlie 
Brown have. That's really what we see here.
  This is a mirage, a promise that they are going to do something that, 
if they just did it in the bill the way we reported the bill out of the 
committee, you wouldn't need this subterfuge. There is no reason to be 
doing this. The Senate reported it out clean, no diversion, 95-4 they 
voted it out of the Senate.
  I don't even know why we're here debating this at this point. If we 
believe that the one primary purpose of patent reform is to deal with 
the fee diversion, then we need to deal with that first, and that's 
exactly what we did in the Judiciary Committee.
  I don't know why I'm here defending what we, on a broad, bipartisan 
basis, reported out of our committee. It ought to be the chairman of 
the committee that's defending what we reported out of the committee. 
Yet we are here, instead of defending what we reported out of the 
committee, the manager's amendment waters it down and makes it 
ineffective, and that's not what we should be doing here.
  Now they said they got these letters of support, but the letters came 
supporting what came out of the committee, not the manager's amendment. 
The manager's amendment is going to destroy what came out of the 
committee. It is inconsistent with what came out of the committee.
  So we've got to defeat the manager's amendment and go back to the 
bill that came out of the Judiciary Committee, and that's what I'm 
advocating.
  Mr. SMITH of Texas. I yield myself the balance of my time.
  Madam Chair, let me address some of the criticisms that have been 
made about the manager's amendment. There are some who want to make 
more changes to the business method patent provision in the bill. This 
topic is the primary reason the Judiciary Committee launched patent 
reform back in 2005.
  In response to a number of poor-quality, business-method patents 
issued over the past decade, the bill creates a transitional program 
within PTO to evaluate these patents using the best prior art 
available. Bad patents will be weeded out, but good ones will become 
gold-plated based on their enhanced legal integrity.
  There are others who have sought changes to the prior art provisions 
in the First-Inventor-to-File section. The language in our bill which 
replicates that in the Senate version has drawn support from a large 
cross-range of industries and investors.
  Some colleagues have complained during this debate about the 
treatment of PTO funding in the manager's amendment. The bill that the 
House Judiciary Committee reported would allow the PTO to keep all the 
revenue it raises without having to request funding through the normal 
appropriations process. This is treated as mandatory spending and 
scored savings in excess of $700 million.
  Because of concerns raised by the Appropriations Committee members, 
we worked with them to develop a compromise that eliminates fee 
diversion while permitting the appropriators to retain oversight 
through the traditional appropriations process. The manager's amendment 
accomplishes this goal, but it means that the mandatory spending 
provisions of the revolving fund become discretionary spending under 
the reserved fund. Because this change is contrary to CutGo 
requirements, we need a waiver for consideration of H.R. 1249.
  I want to emphasize that the bill includes user fees paid by 
inventors and trademark filers to the PTO in return

[[Page 9814]]

 for services. This isn't the same thing as using tax revenue from the 
general treasury to fund the agency, so I am not sure that the CutGo 
rules even apply.
  Very importantly, there is no impact on the deficit. The manager's 
amendment is constitutionally sound, improves the base text of the 
bill, and incorporates a funding agreement approved by the leadership 
to get this bill to the floor. It's important to pass it and then move 
on to the other amendments.
  I urge my colleagues to vote ``aye'' on the amendment.
  Mr. RYAN of Wisconsin. Madam Chair, I rise today to provide an 
explanation of my support for a waiver of the Cut-go point of order on 
the Manager's Amendment to H.R. 1249, the America Invents Act. No 
matter how well-crafted a budget enforcement tool may be it can never 
be immune from all unintended consequences.
  There are two reasons I support this waiver. First, the violation 
arises from an anomaly associated with converting this program from 
discretionary to mandatory. Second, the Manager's Amendment does not 
cause an increase in direct spending relative to current law.
  With respect to the first point, CB0 currently records PTO fee 
collections on an annual basis with the enactment of the relevant 
appropriations bill. As a result, CBO shows no deficit impact from PTO 
for fiscal years after FY 2011 if the funding and fee collections 
remain subject to the appropriations process--what we call 
``discretionary spending.''
  The reported bill would have provided permanent authority to the PTO 
to collect fees and spend the fee collections. We call spending that is 
provided through permanent law ``mandatory spending.'' CBO estimated 
this permanent authority for FY 2012-2021 would reduce mandatory 
spending by $712 million. The savings, however, are the result of CBO's 
estimate that the agency will not be able to spend the fees as quickly 
as they are collected, not from spending reduction.
  This should be obvious because the whole rationale of this bill was 
to ensure the expenditure of all PTO fee collections. If the reported 
bill was mandating that all PTO collections be spent, how can it 
produce budgetary savings? It doesn't. The only savings are paper 
savings, resulting from an accounting change and not an actual 
reduction in spending.
  The Cut-go rule was designed to prevent the total amount of mandatory 
spending in the Federal Budget from increasing by requiring a 
corresponding spending reduction for any proposal to increase direct 
spending, and not offset with an increase in revenue as was common 
practice under Pay-Go.
  Ironically, the Manager's Amendment would prevent a discretionary 
program from turning into mandatory spending, but because Cut-go is 
measured relative to the reported bill and not to the baseline, it 
triggers a Cut-go violation. Cut-go was not intended to favor mandatory 
spending over discretionary spending.
  With respect to the second point, the Manager's Amendment maintains 
the same basic fee and spending structure as the underlying legislation 
but keeps the program discretionary. CBO estimates the bill, with the 
Manager's Amendment, would decrease the deficit by $5 million over ten 
years, unrelated to the PTO classification. The Committee could have 
avoided a Cut-go point of order if it reported out a separate bill that 
reflected the Manager's Amendment.
  I do not take waiving budget points of order lightly, but in this 
case it is justified.
  Mr. MORAN. Madam Chair, I rise today to express my concerns about the 
Manager's Amendment to the America Invents Act, H.R. 1249.
  Specifically, I am troubled by language in the amendment that would 
weaken the ability of the U.S. Patent and Trademark Office to retain 
the fees it collects from inventors for use in improving the patent 
application process.
  As reported by the Judiciary Committee, Section 22 of the underlying 
bill would establish a revolving fund at Treasury to collect all user 
fees from USPTO and restrict their use to only funding USPTO 
activities.
  This section was necessary because Congress has habitually 
underfunded the Patent Office, siphoning more than $875 million over 
the past two decades from fees collected from inventors to fund other 
discretionary programs.
  This fee diversion has severely hampered the ability of USPTO to 
promptly process patent applications, leading to a current backlog of 
1.2 million applications and an average pendency time of 3 years.
  This is entirely unacceptable and a direct result of our decision not 
to provide full funding to the USPTO. Delays in processing patent 
applications drive up the costs and risks for inventors, harm our 
nation's global competitiveness, and literally stall the creation of 
jobs.
  While I appreciate the efforts of Director Kappos over the past two 
years to reduce this backlog, USPTO will not be fully successful in 
this goal unless they are provided with the proper 
resources...resources, remember, they collect from the users of Patent 
Office services.
  That is why I have concerns about a provision in the manager's 
amendment that would undermine this dedicated funding source, instead 
leaving USPTO funding up to annual appropriations.
  While the amendment creates a specific fund for USPTO fees and 
contains promises that this funding will be made available only for 
activities at the patent office, there is no guarantee this pledge will 
be honored in subsequent Congresses.
  I am concerned this modified language does not give USPTO the 
predictability in funding and access to fees that are necessary to 
ensure it best serves the innovation community.
  Now, I understand USPTO has reluctantly agreed to support this 
compromise language, and I therefore plan to support the Manager's 
Amendment.
  But we cannot let jurisdictional concerns here in Congress undermine 
the efficient functioning of the patent process.
  I encourage my colleagues to support the Manager's Amendment as a 
necessary compromise to move this legislation forward, but I plan to 
remain vigilant on this matter to ensure the promises made in this 
Manager's Amendment are kept and that USPTO has ready access to the 
fees it collects.
  Mr. SMITH of Texas. Madam Chair, I yield back the balance of my time.
  The Acting CHAIR. The question is on the amendment offered by the 
gentleman from Texas (Mr. Smith).
  The question was taken; and the Acting Chair announced that the noes 
appeared to have it.
  Mr. SMITH of Texas. Madam Chair, I demand a recorded vote.
  The Acting CHAIR. Pursuant to clause 6 of rule XVIII, further 
proceedings on the amendment offered by the gentleman from Texas will 
be postponed.
  Mr. SMITH of Texas. Madam Chair, I move that the Committee do now 
rise.
  The motion was agreed to.
  Accordingly, the Committee rose; and the Speaker pro tempore (Mr. 
Goodlatte) having assumed the chair, Ms. Foxx, Acting Chair of the 
Committee of the Whole House on the state of the Union, reported that 
that Committee, having had under consideration the bill (H.R. 1249) to 
amend title 35, United States Code, to provide for patent reform, had 
come to no resolution thereon.

                          ____________________