[Senate Report 110-259]
[From the U.S. Government Publishing Office]
Calendar No. 563
110th Congress Report
SENATE
2d Session 110-259
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THE PATENT REFORM ACT OF 2007
_______
January 24, 2008.--Ordered to be printed
_______
Mr. Leahy, from the Committee on the Judiciary, submitted the following
R E P O R T
together with
ADDITIONAL AND MINORITY VIEWS
[To accompany S. 1145]
The Committee on the Judiciary, to which was referred the
bill (S. 1145), to amend title 35, United States Code, to
provide for patent reform, having considered the same, reports
favorably thereon with an amendment and recommends that the
bill (as amended) do pass.
CONTENTS
Page
I. Background and Purpose of S. 1145, the Patent Reform Act of 2007.1
II. History of the Bill and Committee Consideration.................35
III. Section-by-Section Summary of the Bill..........................41
IV. Congressional Budget Office Cost Estimate.......................52
V. Regulatory Impact Evaluation....................................52
VI. Conclusion.....................................................52
VII. Additional and Minority Views...................................53
VIII.Changes to Existing Law Made by the Bill, as Reported...........78
I. Background and Purpose of the Patent Reform Act of 2007
PURPOSE AND SUMMARY OF LEGISLATION
Purpose
The Constitution explicitly grants Congress the power to
``promote the progress of science and useful arts, by securing
for limited times to . . . inventors the exclusive right to
their respective . . . discoveries.''\1\ Congress has responded
by authorizing patents to issue to inventors of new and useful
inventions or improvements on inventions.\2\ The patent law
thus accomplishes two objectives, consistent with the
authorization granted by the Constitution: first, it encourages
inventors by granting them limited, but exclusive rights to
their inventions; second, in exchange for the grant of those
exclusive rights, the patent law requires disclosure of the
invention and terminates the monopoly after a period of
years.\3\ This disclosure and limited time benefits both
society and future inventors by making the details of the
invention available to the public immediately, and the right to
work that invention available to the public after the
expiration of 20 years from the date the patent application was
filed.
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\1\U.S. Const. art. 1, Sec. 8.
\2\See 35 U.S.C. Sec. 101.
\3\See Perspectives on Patents: Post-Grant Review Procedures and
Other Litigation Reforms: Hearing Before the Subcomm. on Intellectual
Prop. of the Senate Comm. on the Judiciary, 109th Cong. 68-97 (2006)
(statement of Nathan P. Myhrvold, Chief Executive Officer, Intellectual
Ventures); Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
112-114 (2005) (statement of Dean Kamen, President, DEKA Research and
Development Corp.).
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Congress has not enacted comprehensive patent law reform in
more than 50 years.\4\ The object of the patent law today must
remain true to the constitutional command, but its form needs
to change, both to correct flaws in the system that have become
unbearable, and to accommodate changes in the economy and the
litigation practices in the patent realm. The need to update
our patent laws has been meticulously documented in six
hearings before the Senate Judiciary Committee, in addition to
reports written by the Federal Trade Commission and the
National Academy of Sciences,\5\ hearings before the House of
Representatives Judiciary Committee's Subcommittee on the
Internet, Intellectual Property, and the Courts, and a plethora
of academic commentary.\6\
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\4\The last major revision of the patent laws was the Patent Act of
1952, P.L. 82-593.
\5\The National Academy of Science (NAS) and the Federal Trade
Commission (FTC) conducted multi-year studies on the patent system and
its need for reform. See Committee on Intellectual Prop. Rights,
National Research Council, A Patent System for the 21st Century (2004)
(hereinafter ``NAS Report''); and Federal Trade Comm'n, To Promote
Innovation: The Proper Balance of Competition and Patent Law and Policy
(2003) (hereinafter ``FTC Report'').
\6\See, e.g., Mark A. Lemley & Carl Shapiro, Patent Holdup and
Royalty Stacking, 85 Tex. L. Rev. 1991 (2007); Donald S. Chisum,
Reforming Patent Law Reform, 4 J. Marshall Rev. Intell. Prop. L. 336
(2005); Gerald J. Mossinghoff, The First-to-Invent Rule in the U.S.
Patent System Has Provided No Advantage to Small Entities, 87 JPTOS 514
(2005); Joseph Farrell & Robert P. Merges, Incentives to Challenge and
Defend Patents: Why Litigation Won't Reliably Fix Patent Office Errors
and Why Administrative Patent Review Might Help, 19 Berkeley Tech. L.J.
943, 958 (2004); see also Adam B. Jaffe & Josh Lerner, Innovation and
Its Discontents: How Our Broken Patent System is Endangering Innovation
and Progress, and What to Do About It (2004); Kevin G. Rivette & David
Kline, Rembrandts in the Attic, Unlocking the Hidden Value of Patents
(2000).
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The growing impetus towards modernizing and improving the
patent system has found expression not only in Congress, but in
the other branches of government as well, with the Supreme
Court taking up an ever-increasing number of patent cases,\7\
and the United States Patent and Trademark Office (USPTO)
addressing itself to regulatory changes through rulemaking.\8\
The voices heard in this debate are too numerous to list, but
include representatives from all those who use, administer,
study, teach, benefit from, report on, or are affected by the
patent system: small inventors, academics, universities,
government agencies, corporations, non-profit organizations,
industry organizations, bar associations, and members of the
general public. The proposed changes have been far-reaching and
hardly uniform, but they have focused Congressional attention
on three major areas of concern: (i) appropriate procedures for
prosecuting, and standards for allowing, patents; (ii)
increasing rates, costs, and uncertainty in patent
litigation,\9\ and (iii) inconsistencies between the U.S.
patent system and the other major patent systems throughout the
industrialized world which disadvantage U.S. patent holders.
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\7\See Microsoft Corp. v. AT&T Corp., 127 S. Ct. 1746 (2007)
(holding copying computer software overseas does not constitute
infringement under 35 U.S.C. Sec. 271(f)); KSR Int'l Co. v. Teleflex,
Inc., 127 S. Ct. 1727 (2007) (rejecting the United States Court of
Appeals for the Federal Circuit's ``teaching-suggestion-motivation''
test for obviousness, and reaffirming that the four factor inquiry set
forth in Graham v. John Deere applied); eBay, Inc. v. MercExchange,
L.L.C., 126 S. Ct. 1837 (2006) (rejecting the Federal Circuit's test
for determining permanent injunctions in patent cases, and explaining
the traditional four part equitable test applied). In each of these
cases, the Supreme Court reversed the Federal Circuit and changed the
legal standard that the Federal Circuit had been applying. In addition,
while the Committee Report was being prepared, the Federal Circuit
decided two cases rejecting claims as unpatentable under Sec. 101 of
title 35. See In re Comiskey, 499 F.3d 1365 (Fed. Cir. 2007) and In re
Nuijten, 500 F.3d 1346 (Fed. Cir. 2007). In Comiskey, the Federal
Circuit significantly restricted the patentability of business methods,
severely narrowing the Federal Circuit's controversial 1998 decision in
State Street Bank. See State Street Bank & Trust Co. v. Signature Fin.
Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), cert denied, 525 U.S. 1093
(1999).
\8\Changes to Practice for Continuing Applications, Patent
Applications Containing Patentably Indistinct Claims, and Examination
of Claims in Patent Applications; Final Rule, 72 Fed. Reg. 46716 (Aug.
21, 2007).
\9\The NAS reported that the number of patent litigations doubled
between 1988 and 2001, from 1200 to nearly 2400. See NAS Report at 32.
See also PricewaterhouseCoopers, 2006 Patent and Trademark Damages
Study (2006) at 3 (``[I]n the past 15 years, the number of patent
infringement cases filed increased every year, from 1,171 in 1991 to
3,075 in 2004.'')
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First, questions have been raised regarding whether the
current scope of what is patentable is too broad, and whether
the current standard for obtaining a patent is too low in
practice. Many have questioned whether the current USPTO patent
examination system is capable of handling the growing
number,\10\ and increased complexity, of patent applications.
In particular, questions have been repeatedly raised about
how--and how much--the USPTO is funded, and about whether
patent fees reflect the work necessary to ensure the issuance
of high quality patents. A related concern focuses on whether
patent applicants are bearing their burden of responsibility in
searching the current state of the art and preparing and filing
high quality applications.
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\10\USPTO annual reports indicate that in fiscal year 1952 (when
the current patent statute was enacted), the USPTO received
approximately 60,000 patent applications. In stark contrast, last year
(FY 2006) the USPTO received over 440,000 applications, more than seven
times the number in 1952. In addition, the 2006 filings increased 8%
from the prior year. Although these numbers are a testament to the
tremendous innovation in our country, they also raise the question of
whether the USPTO is equipped to handle such large numbers of
applications.
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Second, in recent years the cost and uncertainty of patent
litigation has escalated, leading many to believe that it is an
unbearable drag on the innovation that the patent system is
supposed to foster. Patent holders can often sue an alleged
infringer anywhere they wish in the United States. They may
allege damages that are not always commensurate with the value
of their inventions, and then often argue that these sums
should be tripled based on alleged acts of willful infringement
by the accused infringer. There are also troubling, plaintiff-
focused litigation concerns, including that the doctrine of
inequitable conduct needs improvements and codification.\11\
Patent litigations typically take several years to complete, if
appealed may be remanded more than once, and can cost several
million dollars.\12\ In addition, litigation concerns can
encourage unreasonable posturing during licensing negotiations,
as well as premature settlements simply to avoid the high cost
and uncertainty of patent litigation. Moreover, currently,
there is no viable, inexpensive, quick administrative
alternative for resolving patent validity issues.
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\11\See, e.g., Perspectives on Patents: Post-Grant Review
Procedures and Other Litigation Reforms: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 63
(2006) (statement of Philip S. Johnson, Chief Patent Counsel, Johnson &
Johnson); Perspectives on Patents: Harmonization and Other Matters:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 30 (2005) (statement of David Beier,
Senior Vice President of Global Government Affairs, Amgen);
Perspectives on Patents: Hearing Before the Subcomm. on Intellectual
Prop. of the Senate Comm. on the Judiciary, 109th Cong. 45-71 (2005)
(statement of Robert A. Armitage, Senior Vice President and General
Patent Counsel, Eli Lilly and Company); Perspectives on Patents:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 137-145 (2005) (statement of Richard C.
Levin, President, Yale University). However, the testimony was not
uniform as to whether inequitable conduct needed to be reformed, and if
so how to do so. See, e.g., Perspectives on Patents: Harmonization and
Other Matters: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 86-102 (2005) (statement of
Christine Siwik, Partner, Rakoczy Molino Mazzochi Siwik LLP, on behalf
of Barr Laboratories, Inc.); Patent Law Reform: Injunctions and
Damages: Hearing Before the Subcomm. on Intellectual Property of the
Senate Comm. on the Judiciary, 109th Cong. 157-170 (2005) (statement of
Mark Lemley, Professor, Stanford Law School).
\12\Where more than $25 million is at stake, the median litigation
cost is $4 million for each party. See NAS Report at 38 (citing
American Intellectual Property Law Association survey results). See
also AIPLA Report of the Economic Survey 2007 at 25-26 (noting that the
figure is now $5 million for such cases).
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Third, because business and competition are increasingly
global, many patent applicants filing in the United States
often seek patents in other countries for their inventions as
well. Yet the United States' patent system differs from every
other patent system in the world in one major respect--it
awards patents to the ``first to invent,'' while every other
patent system uses a ``first to file'' rule.\13\ As a result,
U.S. patent applicants who also file abroad are forced to
navigate through two different patent filing systems, adding
cost and uncertainty to their package of patent rights.
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\13\See R. Carl Moy, 2 Moy's Walker on Patents Sec. 8:36 (4th ed.
2007); Gerald J. Mossinghoff, The U.S. First-to-Invent System Has
Provided No Advantages to Small Entities, 84 JPTOS 425 (2002).
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The purpose of the Patent Reform Act of 2007, as reported
by the Senate Judiciary Committee, is to ensure that the patent
system in the 21st century accurately reflects the 18th century
Constitutional imperative while ensuring that it does not
unduly hinder innovation. Congress must promote innovation
through the enticement to inventors of temporally limited
monopolies on their inventions, and it must do so for the
ultimate benefit of the public. The legislation is designed to
establish a more efficient and streamlined patent system that
will improve patent quality and limit unnecessary and
counterproductive litigation costs. If the United States is to
maintain its competitive edge in the global economy, it needs a
system that will support and reward all innovators with high
quality patents. The time has come for Congress to reconsider
the 50 year old patent statute and how it is currently being
applied. The Committee has heard from numerous interested
parties and, given the complex nature of patent law as well as
the often conflicting interests involved, has tried to consider
all of those concerns and produce a balanced set of changes
that will move the patent system into the 21st century.
Moreover, and in response to various concerns raised before the
Committee, the bill as originally introduced has been
significantly modified to reflect a more balanced, modest
approach.
Summary of Changes
The Patent Reform Act of 2007 has three primary goals: (i)
to improve patent quality and the patent application process;
(ii) to improve and clarify several aspects of patent
litigation, including the creation of a less expensive, more
expeditious administrative alternative to litigating patent
validity issues; and (iii) to make the United States' patent
system, where it is useful to do so, more consistent with
patent systems throughout the rest of the industrialized world.
In general, the numbered sections of the Act do the
following:
(1) title the Act the Patent Reform Act of 2007;
(2) change the system to a ``first-inventor-to-file''
system;
(3) make it simpler for patent applicants to file and
prosecute their applications;
(4) codify and clarify the standard for calculating
reasonable royalty damage awards, as well as awards for willful
infringement;
(5) create a relatively efficient and inexpensive
administrative system for resolution of patent validity issues
before the USPTO;
(6) establish the Patent Trial and Appeal Board;
(7) provide for eventual publication of all applications
and enhance the utility of third parties' submissions of
relevant information regarding filed applications;
(8) improve venue in patent cases and provide for appeals
of claim construction orders when warranted;
(9) give the USPTO the ability to set its fees;
(10) remove the residency restriction for judges on the
United States Court of Appeals for the Federal Circuit;
(11) authorize USPTO to require patent searches with
explanations when a patent application is filed;
(12) codify and improve the doctrine of inequitable
conduct;
(13) give the Director of the USPTO discretion to accept
late filings in certain instances;
(14) limit patent liability for institutions implementing
the ``Check 21'' program;
(15) end USPTO ``fee diversion'';
(16) make necessary technical amendments; and
(17) set the effective date of the Act.
SECTION 1: SHORT TITLE; TABLE OF CONTENTS
This section provides that the Act may be cited as the
``Patent Reform Act of 2007.'' It also provides a table of
contents for the Act.
SECTION 2: RIGHT OF THE FIRST INVENTOR TO FILE
First inventor to file; grace period; and prior art
Background
Every industrialized nation other than the United States
uses a patent priority system commonly referred to as ``first-
to-file.'' In a first-to-file system, when more than one
application claiming the same invention is filed, the priority
of a right to a patent is given to the earlier-filed
application. The United States, by contrast, currently uses a
``first-to-invent'' system, in which priority is established
through a proceeding to determine which applicant actually
invented the claimed invention first. Differences between the
two systems arise in large part from the date that is most
relevant to each respective system. In a first-to-file system,
the filing date of the application is most relevant;\14\ the
filing date of an application is an objective date, simple to
determine, for it is listed on the face of the patent. In
contrast, in a first-to-invent system, the date the invention
claimed in the application was actually invented is the
determinative date. Unlike the objective date of filing, the
date someone invents something is often uncertain, and, when
disputed, typically requires corroborating evidence as part of
an adjudication.
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\14\Wherever the term ``filing date'' is used herein, it is meant
to also include, where appropriate, the effective filing date, i.e.,
the earliest date the claim in an application claims priority.
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There are three significant, practical differences between
the two systems. The first concerns the rare instance in which
two different people file patent applications for the same
invention. In a first-to-file system, the application with the
earlier filing date prevails and will be awarded the patent, if
one issues. In the first-to-invent system, a lengthy, complex
and costly administrative proceeding (called an ``interference
proceeding'') must be conducted to determine who actually
invented first.\15\ Interference proceedings can take years to
complete (even if there is no appeal to the United States Court
of Appeals for the Federal Circuit), cost hundreds of thousands
of dollars, and require extensive discovery.\16\ In addition,
since it is always possible an applicant could be involved in
an interference proceeding, U.S. patent holders must maintain
extensive recording and document retention systems in case they
are later required to prove the very day they invented the
claimed invention.
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\15\See 35 U.S.C. Sec. 135.
\16\See, e.g., Robert W. Pritchard, The Future is Now--The Case for
Patent Harmonization, 20 N.C. J. Int'l L. & Com. Reg. 291, 313 (1995).
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The second difference involves prior art. A patent will not
issue if the invention is not new,\17\ or if it would have been
obvious to someone in the relevant area of technology (commonly
referred to as ``a person of ordinary skill in the art'').\18\
A patent issuing office will examine all prior art--that is,
all relevant information that existed before the patented
invention--to determine whether an invention is indeed new and
not obvious. Traditionally, the most common form of prior art
has been other patents and printed publications. In the first-
to-file system, prior art includes all art that exists prior to
the filing date--again, an objective inquiry. In contrast, in a
first-to-invent system, prior art is measured from the more
uncertain date of invention.\19\
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\17\35 U.S.C. Sec. 102.
\18\35 U.S.C. Sec. 103.
\19\Even in the first-to-invent system, the filing date is
significant. See, e.g., 35 U.S.C. Sec. 102(b). In addition, the filing
date is often the date used until it becomes necessary to prove an
earlier date of invention. However, in a first-to-invent system, the
date of invention may ultimately be relied on by the patentee in his
attempt to prove he is entitled to a patent. See, e.g., 35 U.S.C.
Sec. 102 (a) and (g).
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Third, in some first-to-file systems, prior art can include
the inventor's own disclosure of his invention prior to the
filing date of his application. Such systems typically do not
provide the inventor any grace period during which time he is
allowed to publish his invention without fear of it later being
used against him as prior art. That is, if an inventor
publishes the invention in an academic journal, that
publication may act as prior art and bar the inventor's own
later-filed application. Thus, inventors in first-to-file
systems must generally keep their inventions secret prior to
filing applications for them, thereby sacrificing a significant
part of one of the benefits of the patent system--disclosure of
inventions. Although some first-to-file systems do provide the
inventor some sort of grace period, others do not.\20\ In
contrast, the United States' first-to-invent system provides
the inventor a grace period of one year, during which an
inventor's prior disclosure of the invention cannot be used as
prior art against the inventor's application.\21\
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\20\Countries with first-to-file systems that also provide for some
form of grace period include Japan (6 months), Canada (1 year) and
Australia (1 year). In contrast, the European Patent Office (EPO) has a
first-to-file system with no grace period (sometimes referred to as an
``absolute novelty'' requirement). See John A. O'Brien & Carl B.
Wischhusen, Fundamentals of Patent Prosecution 2007: A Boot Camp for
Claim Drafting & Amendment Writing, Taking Invention Disclosures, 906
PLI/Pat 9, 37 (2007); Michael S. Mireles, Jr., States As Innovation
System Laboratories: California, Patents, And Stem Cell Technology, 28
Cardozo L. Rev. 1133, 1174 (2006).
\21\See 35 U.S.C. 102(b); see also R. Carl Moy, 2 Moy's Walker on
Patents Sec. 8:199 (4th ed. 2007).
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The Committee heard from universities and small inventors,
in particular, about the importance of maintaining that grace
period in our system.\22\ They argued that the grace period
affords the necessary time to prepare and file applications,
and in some instances, to obtain the necessary funding that
enables the inventor to prepare adequately the application. In
addition, the grace period benefits the public by encouraging
early disclosure of new inventions, regardless of whether an
application may later be filed for a patent on it.
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\22\See, e.g., Perspectives on Patents: Harmonization and Other
Matters: Hearing Before the Subcomm. on Intellectual Property of the
Senate Comm. on the Judiciary, 109th Cong. 74-75 (2005) (statement of
Charles E. Phelps, Provost, University of Rochester, on behalf of the
Association of American Universities); Patent Law Reform: Injunctions
and Damages: Hearing Before the Subcomm. on Intellectual Property of
the Senate Comm. on the Judiciary, 109th Cong. 89-105 (2005) (statement
of Carl Gulbrandsen, Managing Director, Wisconsin Alumni Research
Foundation (WARF)); Perspectives on Patents: Hearing Before the
Subcomm. on Intellectual Property of the Senate Comm. on the Judiciary,
109th Cong. 146-155 (2005) (statement of William Parker, Diffraction,
Ltd.).
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The first-to-file system is used in every patent system,
other than the United States,\23\ because it has the advantages
of simplicity, efficiency and predictability. A first-to-file
system avoids costly interference proceedings, provides better
notice to the public, simplifies the prior art scheme that may
preclude a patent from issuing, and provides more certainty to
the patent system. In addition, a first-to-file system
encourages the prompt filing of patent applications.
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\23\The Philippines, which was the only other country in the world
to have a first-to-invent system, switched to a first-to-file system
almost ten years ago. See Gerald J. Mossinghoff, The U.S. First-to-
Invent System Has Provided No Advantages to Small Entities, 84 JPTOS
425 n.1 (2002).
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Numerous organizations, institutions, and companies have
advocated the U.S. adopt a first-to-file system similar to
those used in the rest of the world.\24\ The NAS made a similar
recommendation after an extensive study of the patent
system.\25\ When the United States' patent system was first
adopted, inventors did not typically file in other countries.
It is now common for inventors and companies to file for
protection in several countries at the same time.\26\ Thus
United States applicants, who also want to file abroad, are
forced to follow and comply with two different filing systems.
Maintaining a filing system so different from the rest of the
world disadvantages United States' applicants, the majority of
which also file in other countries.\27\ A change is long
overdue.\28\
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\24\See, e.g., Perspectives on Patents: Harmonization and Other
Matters: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 64 (2005) (statement of
Gerald J. Mossinghoff, Former Assistant Secretary of Commerce and
Commissioner of Patents and Trademarks); Perspectives on Patents:
Harmonization and Other Matters: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
45-47 (2005) (statement of Q. Todd Dickinson, Former Under Secretary of
Commerce for Intellectual Property and Director of the United States
Patent and Trademark Office); Patent Law Reform: Injunctions and
Damages: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 132-153 (2005) (statement of
Jeffrey P. Kushan, Partner, Sidley Austin Brown & Wood, LLP); Patent
Law Reform: Injunctions and Damages: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
157-170 (2005) (statement of Mark A. Lemley, Professor, Stanford Law
School); Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
45-71 (2005) (statement of Robert A. Armitage, Senior Vice President
and General Patent Counsel, Eli Lilly and Company); Perspectives on
Patents: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 115-134 (2005) (statement of
Michael K. Kirk, Executive Director, American Intellectual Property Law
Association).
\25\See NAS Report at 124; see also Perspectives on Patents:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 137-145 (2005) (statement of Richard C.
Levin, President, Yale University).
\26\See Perspectives on Patents: Harmonization and Other Matters:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 61 (2005) (statement of Gerald J.
Monssinghoff, Former Assistant Secretary of Commerce and Commissioner
of Patents and Trademarks).
\27\See Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
137-145 (2005) (statement of Richard C. Levin, President, Yale
University, and Mark B. Meyers, Visiting Executive Professor,
Management Department at the Wharton Business School), estimating that
it costs as much as $750,000 to $1 million to obtain worldwide patent
protection on an important invention, and that the lack of
harmonization regarding filing systems adds unnecessary cost and delay.
\28\The NAS recommended changing the U.S. to a first-to-file
system, while maintaining a grace period. See NAS Report at 124-27.
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Discussion of changes
Section 2 of the Patent Reform Act of 2007, drawing on the
best aspects of the two existing systems, creates a new
``first-inventor-to-file'' system. This new system provides
patent applicants in the United States the efficiency benefits
of the first-to-file systems used in the rest of the world. The
new system continues, however, to provide inventors the benefit
of the one-year grace period. As part of the transition to a
simpler, more efficient first-inventor-to-file system, this
section eliminates costly, complex interference proceedings,
because priority will be based on the first application. A new
administrative proceeding--called a ``derivation'' proceeding--
is created to ensure that the first person to file the
application is actually a true inventor. Section 2 also
simplifies how prior art is determined, provides more
certainty, and reduces the cost associated with filing and
litigating patents.
More specifically, Section 2 makes the following
improvements. First, Section 2 moves the U.S. system much
closer to a first-to-file system by making the filing date that
which is most relevant in determining whether an application is
patentable. In addition, Section 2 eliminates costly, complex
interference proceedings since priority fights--who invented
first--are no longer relevant. However, the new USPTO
derivation proceeding is created to ensure that the first
person to file the application is also actually a true
inventor; someone who has not invented something will not be
able to file a patent for the invention. If a dispute arises as
to which of two applicants is a true inventor (as opposed to
who invented it first), it will be resolved through an
administrative proceeding by the Patent Board.
Second, Section 2 maintains a one-year grace period for
U.S. applicants. Applicants' own publication or disclosure that
occurs within one year prior to filing will not act as prior
art against their applications. Similarly, disclosure by others
during that time based on information obtained (directly or
indirectly) from the inventor will not constitute prior art.
This one-year grace period should continue to give U.S.
applicants the time they need to prepare and file their
applications.
Third, this section also, and necessarily, modifies the
prior art sections of the patent law. Prior art will be
measured from the filing date of the application and will
typically include all art that publicly exists prior to the
filing date, other than disclosures by the inventor within one
year of filing. Prior art also will no longer have any
geographic limitations; thus in section 102 the ``in this
country'' limitation as applied to ``public use'' and ``on
sale'' is removed, and the phrase ``available to the public''
is added to clarify the broad scope of relevant prior art, as
well as to emphasize the fact that it must be publicly
available. Prior art based on earlier-filed United States
applications is maintained.\29\
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\29\Compare current 35 U.S.C. Sec. 102(e) with new 35 U.S.C.
Sec. 102(a)(2).
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Sections (and subsections) of the existing statute are
renumbered, modified, or deleted consistent with converting to
a first-inventor-to-file system. Finally, the intent behind the
CREATE Act\30\ to promote joint research activities is
preserved by including a prior art exception for subject matter
invented by parties to a joint research agreement.
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\30\The CREATE Act refers to the Cooperative Research and
Technology Enhancement Act of 2004 (P.L. 108-453), passed by the 108th
Congress. The relevant section is moved from Sec. 103 to Sec. 102 of
title 35 and shall be administered in a manner consistent with the
CREATE Act.
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SECTION 3: INVENTOR'S OATH OR DECLARATION
Background
The U.S. patent system, when first adopted in 1790,
contemplated that individual inventors would file their own
patent applications, or would have a patent practitioner do so
on their own behalf. It has become increasingly common for
patent applications to be assigned to corporate entities, most
commonly the employer of the inventor.\31\ In fact, many
employment contracts require employees to assign their
inventions to their employer.\32\
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\31\See John R. Allison & Mark A. Lemley, The Growing Complexity of
the United States Patent System, 82 B.U.L. Rev. 77, 97 (2002) (study
showing that approximately 85% of the patents issued between 1996-98
were assigned by inventors to corporations, an increase from 79% during
the period between 1976-78).
\32\See Jerry C. Liu, Overview of Patent Ownership Considerations
in Joint Technology Development, 2005 Syracuse Sci. & Tech. L. Rep. 1
(2005).
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Current law still reflects the antiquated notion that it is
the inventor who files the application, not the company-
assignee. For example, every inventor must sign an oath as part
of the patent application stating that the inventor believes he
or she is the true inventor of the invention claimed in the
application.\33\ By the time an application is eventually
filed, however, the applicant filing as an assignee may have
difficulty locating and obtaining every inventor's signature
for the statutorily required oath. Although the USPTO has
adopted certain regulations to allow filing of an application
when the inventor's signature is unobtainable,\34\ many have
advocated that the statute be modernized to facilitate the
filing of applications by assignees.\35\
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\33\35 U.S.C. Sec. 115.
\34\See 37 C.F.R. Sec. 1.47 (permits an applicant to petition the
Director of the USPTO to have the application accepted without every
inventor's signature in limited circumstances, e.g., where the inventor
cannot be found or refuses to participate in the application).
\35\See Perspectives on Patents: Harmonization and Other Matters:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 31 (2005) (statement of David Beier,
Senior Vice President of Global Government Affairs, Amgen).
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Discussion of changes
Section 3 of the Act updates the patent system by
facilitating the process by which an assignee may file and
prosecute patent applications. It provides similar flexibility
for a person to whom the inventor is obligated to assign, but
has not assigned, rights to the invention (the ``obligated
assignee'').
Section 115 of title 35 is amended to allow a substitute
statement to be submitted in lieu of an inventor's oath where
either the inventor is (i) unable to do so, or (ii) is both
unwilling to do so and under an obligation to assign the
invention. If an error is discovered, the statement may be
later corrected. A savings clause is included to prevent an
invalidity or unenforceability challenge to the patent based on
failure to comply with these requirements, provided any error
has been remedied. Willful false statements may be punishable,
however, under federal criminal laws.\36\
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\36\See 18 U.S.C. Sec. 1001.
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Section 118 is also amended to make it easier for an
assignee to file a patent application. The amendment now allows
obligated assignees--entities to which the inventor is
obligated to assign the application--to file applications as
well. It also allows a person who has a sufficient proprietary
interest in the invention to file an application to preserve
the person's rights and those of the inventor.
SECTION. 4: RIGHT OF THE INVENTOR TO OBTAIN DAMAGES
Reasonable Royalty
Background
Patent holders are granted the right to exclude others from
making, using, selling and importing their patented
inventions.\37\ When another party, without the inventor's
permission, commits one of these acts, or actively induces such
act, that party infringes the patent.\38\ The remedies for
infringement include an injunction\39\ and damages. Damages are
intended to compensate the patent holder for the infringement
of patent rights; absent some egregious circumstances, damages
are not meant to be punitive or excessive in nature.\40\
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\37\35 U.S.C. Sec. 271(a) provides: ``Except as otherwise provided
in this title, whoever without authority makes, uses, offers to sell,
or sells any patented invention, within the United States, or imports
into the United States any patented invention during the term of the
patent therefore, infringes the patent.''
\38\See 35 U.S.C. Sec. 271.
\39\While this legislation was pending, the Supreme Court addressed
the proper standard to be applied in determining whether an injunction
should issue when patent infringement is found. eBay, Inc. v.
MercExchange, L.L.C., 126 S. Ct. 1837 (2006). Therefore, the Committee
refrained from addressing this issue in this Act at this time.
\40\See Donald S. Chisum, Chisum on Patents Sec. 20.01, at 20-7
(2002); Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 507 (1963);
Riles v. Shell Exploration and Prod. Co., 298 F.3d 1302, 1312-13 (Fed.
Cir. 2002).
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The measure for damages for infringement can be either (i)
profits lost by the patent holder because of the infringement
(``lost profits''), or (ii) ``not less than a reasonable
royalty.''\41\ Patent holders typically opt for a ``lost
profits'' award when the infringers are selling competing
products, so that sales of infringing products result in fewer
sales of the patent holder's competing product, and hence lost
profits on those lost sales. The Committee has heard no
concerns expressed with current determinations of lost profits,
and therefore the Act does not alter the relevant law.
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\41\See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed.
Cir. 1995) (en banc).
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Historically, the considerable majority of infringement
cases were lost profits cases.\42\ However, in recent years it
has become more common that the patent holder does not produce
a competing product, either because the patent holder is
focused on research and development rather than production
(which is the case for many small inventors and universities),
or because the patent at issue had been purchased, not for the
purpose of manufacture, but for the purpose of licensing (or
litigation),\43\ or because the infringed patent is so new to
the marketplace that there has yet to be any real competition
to it.\44\ Thus, an increasing number of cases require the
calculation of an appropriate reasonable royalty.\45\
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\42\A recent study has shown that reasonable royalties have
overtaken lost profits as a measure of damages in patent cases. ``Since
2000, reasonable royalties have overtaken lost profits as the most
frequent basis of damage awards in patent cases . . . Since 2000, 65
percent of awarded damages have been based on reasonable royalties and
32 percent have reflected lost profits. This is quite different than in
the 1990s, when 24 percent of damage awards were based on reasonable
royalties and 73 percent were based on lost profits.'' See
PricewaterhouseCoopers, 2007 Patent and Trademark Damages Study (2007)
at 22.
\43\See Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
156-166 (2005) (statement of Joel Poppen, Deputy General Counsel,
Micron Technologies, Inc.).
\44\See PricewaterhouseCoopers, 2007 Patent and Trademark Damages
Study (2007) at 24 (explaining that the one reason royalty awards have
overtaken lost profits as a measure of damages is because more patent
suits are being brought by entities that own patent rights but that do
not have any manufacturing or distribution capabilities).
\45\Although damage awards based on a reasonable royalty are
requested more often, the total number of such awards is still fairly
low in number. A recent study found that there were only 58 reported
cases over a 20 year period (1984-2005) where the decision clearly
reflected an award based on a reasonable royalty. See Mark A. Lemley
and Carl Shapiro, Patent Holdup and Royalty Stacking, 85 Tex. L. Rev.
1991, 2031 (2007).
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Juries are given little useful guidance in calculating that
reasonable royalty, which provides the floor for a damages
award; often, the jurors are presented with the fifteen
``Georgia-Pacific'' factors\46\ and some version of the
``entire market value'' rule, and then left to divine an
appropriate award.\47\ The Committee has no intention to
degrade the utility of these factors when they are applied
appropriately, but they do not represent the entire universe of
useful instructions, nor have they been presented to juries
with sufficient guidance to ensure appropriate damages awards.
Juries (and perhaps judges) that lack adequate legal guidance
to assess the harm to the patent holder caused by patent
infringement are the focus of the problem the Committee seeks
to address.
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\46\George-Pacific was a 1970 district court case, decided by a
judge rather than a jury, which was reversed on appeal. The 15 Georgia-
Pacific ``factors'' are: 1. Royalties received by patentee for the
licensing of patent in suit, proving or tending to prove an established
royalty; 2. Rates paid by licensee for use of other patents comparable
to patent in suit; 3. Nature and scope of license, as exclusive or non-
exclusive; or as restricted or non-restricted in terms of territory or
with respect to whom manufactured product may be sold; 4. Licensor's
established policy and marketing program to maintain patent monopoly by
not licensing others to use invention or by granting licenses under
special conditions designed to preserve monopoly; 5. Commercial
relationship between licensor and licensee, such as, whether they
compete in same territory in same line of business; or whether they are
inventor and promoter; 6. Effect of selling patented specialty in
promoting sales of other products of licensee; existing value of
invention to licensor as generator of sales of non-patented items; and
extent of such derivative or convoyed sales; 7. Duration of patent and
term of license; 8. Established profitability of product made under
patent; its commercial success; and its current popularity; 9. Utility
and advantages of patent property over old modes or devices, if any,
that had been used for working out similar results; 10. Nature of
patented invention; character of commercial embodiment of it as owned
and produced by licensor; and benefits to those who have used
invention; 11. Extent to which infringer has made use of invention; and
any evidence probative of value of that use; 12. Portion of profit or
of selling price that may be customary in particular business or in
comparable businesses to allow for use of invention or analogous
invention; 13. Portion of realized profit that should be credited to
invention as distinguished from non-patented elements, manufacturing
process, business risks, or significant features or improvements added
by infringer; 14. Opinion testimony of qualified experts; and 15.
Amount that a licensor (such as patentee) and a licensee (such as
infringer) would have agreed upon (at time infringement began) if both
had been reasonably and voluntarily trying to reach agreement. See
Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116
(S.D.N.Y. 1970).
\47\A recent study has shown that, since 1980, there has been a
steady shift from bench trials to jury trials in patent cases, and that
juries typically award more than five times the damages awarded in
bench trials. See PricewaterhouseCoopers, 2007 Patent and Trademark
Damages Study (2007) at 14.
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No doubt several alarming cases, which have captured the
attention of the public and the Congress, represent the tip of
the iceberg; these, not surprisingly, involve out-sized damages
awards.\48\ Leaving aside the ultimate, and appropriate,
results in these cases, the purpose of this legislation is not
to rectify judicial errors, nor is it to alter dramatically the
substance of the standards by which a reasonable royalty may be
calculated, but rather to bring clarity and guidance to the
application of the law of damages.
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\48\See The Patent Reform Act of 2007: Hearing Before the Subcomm.
on the Courts, the Internet, and Intellectual Prop. of the House Comm.
on the Judiciary, 110th Cong. (2007) (statement of John R. Thomas,
Professor, Georgetown University Law Center).
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Long past is the day in which the typical invention is a
sui generis creation; today's patents are often combinations,
and many products comprise dozens, if not hundreds or even
thousands of patents, and the infringed patent may well be one
smaller part of a much larger whole. Once infringement is
proven, the patent holder is entitled to compensation for the
use of the invention.\49\ But if juries award damages based on
the value of the entire product, and not simply on the
infringement--a danger exacerbated in some cases by overly
expansive claim drafting--then damages awards will be
disproportionate to the harm.
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\49\See 35 U.S.C. Sec. 284.
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The current damage statute is vague and provides little
guidance to judges or juries determining the proper damage
award, particularly when the award is based on the reasonable
royalty standard.\50\ Given that damages are typically just one
of many issues in a patent trial, and given that the jury
typically has 15 different factors to consider just to
determine a reasonable royalty, commentators have correctly
questioned whether juries are being properly advised on the
evidence and factors to consider when determining damages.\51\
The time has come to give judges, and juries, better guidance
on the proper way to calculate a reasonable royalty.
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\50\35 U.S.C. Sec. 284 provides in full:
Upon finding for the claimant the court shall award the claimant
damages adequate to compensate for the infringement but in no event
less than a reasonable royalty for the use made of the invention by the
infringer, together with interest and costs as fixed by the court.
When the damages are not found by a jury, the court shall assess
them. In either event the court may increase the damages up to three
times the amount found or assessed. Increased damages under this
paragraph shall not apply to provisional rights under section 154(d) of
this title.
The court may receive expert testimony as an aid to the
determination of damages or of what royalty would be reasonable under
the circumstances.
\51\Given the significant reliance by litigants and courts on the
15 Georgia-Pacific factors, several points are worth noting. First, it
is difficult for the Committee (let along a lay juror) to recite all 15
of the factors without reading them in print. Second, although there
are 15 factors, they tend to fall into only three categories: (i) the
royalty rates people have been wiling to pay for this or other similar
inventions in the industry; (ii) the significance of the patented
invention to the product and to market demand; and (iii) expert
testimony as to the value of the patent. See Patent Holdup, 85 Tex. L.
Rev. at 2018-19. Third, the district court in Georgia-Pacific explained
that the 15 factors were meant to be non-exclusive, and were set out
because they were relevant to the facts of that case. Fourth, the
damage award in Georgia-Pacific was decided by a judge as part of a
bench trial in a lengthy opinion, not by a jury. And finally, despite
the valiant (and what appeared to be thorough) analysis by the district
court judge, his royalty determination using these factors was reduced
on appeal by approximately 30% (i.e., from $50 to $36.65 per thousand
square feet of wood). See Georgia-Pacific Corp. v. U.S. Plywood Corp,
446 F.2d at 298-300.
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Discussion of changes
This section codifies the analysis the judge and jury
should perform in determining an appropriate reasonable
royalty. The judge is required to determine, from the liability
phase of the trial and from any additional necessary hearings,
whether the case is one that falls within the ``entire market
value'' domain, the ``marketplace licensing'' domain, or
outside both those realms. The judge must also identify for the
jury all, and only, the relevant factors in determining a
reasonable royalty. The Committee envisions a more active, and
better documented, role for district courts (with the aid of
the parties) in giving their juries guidance on the appropriate
law for calculating reasonable royalties.
In new subparagraph (c)(1)(A) of section 284, the entire
market value rule may be applied if the patented invention's
contribution over the prior art is the predominant basis, and
not just one of several bases, for the market demand of the
infringing product or process. The Committee intends this
section to be a codification of the existing law regarding the
entire market value rule.\52\
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\52\See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir.
1995) (en banc).
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New subparagraph (c)(1)(B) provides that the royalty may be
based on other comparable, nonexclusive licenses of the
patented invention if there has been a sufficient number of
licenses to indicate a general marketplace recognition of the
reasonableness of the licensing terms. The Committee heard that
in many instances existing licenses of the patent can be one of
the better indicators in determining an appropriate royalty to
compensate for infringement.\53\
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\53\See, e.g., Nickson Industries, Inc. v. Rol Mfg. Co., 847 F.2d
795, 798 (Fed. Cir. 1988).
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New subparagraph (c)(1)(C) requires that if neither (A) nor
(B) is applicable, the trier of fact ensures that the damages
award accurately reflects the harm caused by the infringement;
no methodology is prescribed for this determination, but the
jury is simply admonished to apply the reasonable royalty
calculation only to the portion of the economic value of the
infringing product or process properly attributable to the
claimed invention's specific contribution over the prior art.
The Committee intends ``specific contribution over the prior
art'' to mean the reason the patent was allowed in view of the
existing information at the time of the invention.\54\ The
Committee also intends that the damages be calculated in the
context of the infringement. In the case of a combination
invention whose elements are present individually in the prior
art, the contribution over the prior art may include the value
of the additional function and enhanced value resulting from
the combination, if any, if the patent holder demonstrates that
value.
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\54\Concerns expressed about the introduced bill's mandate of
``apportionment'' (closely associated with the 13th Georgia-Pacific
factor) inspired an amendment in the Committee mark-up process to
remove the mandate of apportionment (or any other methodology): ``[t]he
court shall exclude from the analysis the economic value properly
attributable to the prior art, and other features or improvements,
whether or not themselves patented, that contribute economic value to
the infringing product or process.'' The term ``specific contribution
over the prior art'' is meant simply to capture what has been variously
described as ``the actual invention,'' ``the gist of the patent,''
``the reason a patent issued''--there is a certain ``I know it when I
see it'' (Jacobellis v. Ohio, 378 U.S. 184, 197 (1964) (Steward J.
concurring)) quality to the concept, but it is indisputable that a
valid patent would not have issued if the inventor had not brought
something novel and non-obvious to the world. The Committee recognizes
the likelihood that calming fears in some of the patent-using
communities requires amendment of this language yet again, but without
compromising the basic principle that the damages awarded for an
infringement must reflect the harm from the infringement, and that it
is infringement of the actual invention upon which the jury should
focus.
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New paragraph (c)(2) preserves the court's authority to
consider, or direct a jury to consider, other relevant factors
in calculating the reasonable royalty, no matter which
subparagraph is otherwise applicable. These include
consideration of any of the 15 Georgia-Pacific factors that may
be relevant to a given damage calculation, as well as any other
factors courts determine relevant.
Subsection (d) clarifies that these changes have no effect
on damage awards not based on reasonable royalty calculations.
The Committee intends that this subsection will ensure the
changes made to section 284 of title 35 will not have any
effect on damage calculations when, for example, the lost
profit calculation is the appropriate damage remedy.
Willfulness
Background
Current law allows for up to the trebling of damages when
it is determined the infringement was ``willful.''\55\ The
statute, however, provides no guidance regarding what
activities constitute willful infringement. The Committee has
heard that this lack of clarity has resulted in excessive
pleading,\56\ and inappropriate findings, of willfulness which,
in turn, have inflated litigation and transaction costs as well
as damage awards.
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\55\See Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp.,
383 F.3d 1337, 1342 (Fed. Cir. 2004) (en banc).
\56\See Kimberly A. Moore, Empirical Statistics on Willful Patent
Infringement, 14 Fed. Cir. B.J. 227, 232 (2004) (reporting that willful
infringement is pled in over 90% of all patent cases).
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Lacking statutory guidance, courts have established the
principle that an infringement will not be found willful unless
the infringer was put on notice that it was infringing;
unfortunately, courts have set that notice threshold quite low.
The patent holder may simply send a conclusory letter
suggesting the alleged infringer may be infringing one or more
of its patents, without providing any specifics stating which
activities allegedly infringe which patents.\57\ Companies can
receive several such letters a week, potentially making them
liable for treble damages based on willfulness if they are
later found to have infringed a patent that was asserted in the
conclusory letter.\58\
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\57\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 251-
252 (2007) (statement of Mary E. Doyle, Senior Vice President and
General Counsel, Palm, Inc.); Patent Reform: The Future of American
Innovation: Hearing on S. 1145 Before the Senate Comm. on the
Judiciary, 110th Cong. 293 (2007) (statement of John A. Squires, Esq.,
Chief Intellectual Property Counsel, Goldman, Sachs & Co); Perspectives
on Patents: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 156-166 (2005) (statement of
Joel Poppen, Deputy General Counsel, Micron Technologies, Inc.).
\58\See Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
156-166 (2005) (statement of Joel Poppen, Deputy General Counsel,
Micron Technologies, Inc.).
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Courts have held that companies can also put themselves on
sufficient notice by becoming aware of the patent by a means
other than notice from the patentee.\59\ As a result, some
companies instruct their employees not to conduct patent
searches out of fear their actions may later be used against
them in a patentee's attempt to prove willful infringement.\60\
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\59\See Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
167-179 (2005) (statement of David Simon, Chief Patent Counsel, Intel
Corporation).
\60\See FTC Report at 28-31; see also Patent Reform: The Future of
American Innovation: Hearing on S. 1145 Before the Senate Comm. on the
Judiciary, 110th Cong. 262 (2007) (statement of Mary E. Doyle, Senior
Vice President and General Counsel, Palm, Inc.); Patent Reform: The
Future of American Innovation: Hearing on S. 1145 Before the Senate
Comm. on the Judiciary, 110th Cong. 294 (2007) (statement of John A.
Squires, Esq., Chief Intellectual Property Counsel, Goldman, Sachs &
Co); Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
167-179 (2005) (statement of David Simon, Chief Patent Counsel, Intel
Corporation). If the doctrine of willful infringement as currently
applied discourages companies from searching relevant patents, this is
clearly an unintended, and harmful, consequence of this doctrine. The
patent system should encourage the discovery and sharing of
information, not discourage it as the current system may be doing.
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Notice may be easy to provide in the willfulness context,
but defense against such an allegation is difficult. The
question of whether a patent is valid or infringed can often be
a close question with colorable arguments on both sides. This
is especially true given the Federal Circuit precedent that
claim construction is a question of law, which they review de
novo.\61\ Despite this uncertainty, a good faith belief by a
party that a patent is invalid or that it is not infringing,
based on advice of counsel, may still not be sufficient to
defend against a charge of willful infringement.\62\ In
addition, simply pleading willfulness\63\ can gain the patent
holder significant litigation advantages, including breaching
the attorney client privilege, necessitating different trial
counsel, and resulting in costly additional discovery.\64\
Excessive royalty awards, combined with the possibility that
they will be trebled due to willfulness, can lead to
unreasonable posturing during licensing and settlement
negotiations that is not reflective of the compensation owed
the patentee due to the alleged infringement.\65\
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\61\Various commentators have discussed the unpredictability and
high reversal rate of the Federal Circuit when it comes to deciding
patent issues, and in particular those involving claim construction.
See, e.g., Paul M. Schoenhard, Reversing the Reversal Rate: Using Real
Property Principles to Guide Federal Circuit Patent Jurisprudence, 17
Fordham Intel. Prop. Media & Ent. L.J. 299, 301-304 (2007); Paul M.
Janicke, On the Causes of Unpredictability of Federal Circuit Decisions
in Patent Cases, 3 Nw. J. of Tech. & Intell. Prop. 93 at 93-94 (2004);
R. Polk Wagner & Lee Petherbridge, Is the Federal Circuit Succeeding?
An Empirical Assessment of Judicial Performance, 152 U. Pa. L. Rev.
1105 (2004). Without endorsing these studies, at a minimum they
illustrate that there can be genuine and colorable disagreements
regarding the scope and validity of a patent not just between the
parties, but between judges as well.
\62\See Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182,
1191 (Fed. Cir. 1998).
\63\A recent empirical study showed that willfulness was alleged in
over 92% of patent cases. See Empirical Statistics on Willful Patent
Infringement, 15 Fed. Cir. B. J. 227 (2004); see also Perspectives on
Patents: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 115-134 (2005) (statement of
Michael K. Kirk, Executive Director, American Intellectual Property Law
Association).
\64\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 262
(2007) (statement of Mary E. Doyle, Senior Vice President and General
Counsel, Palm, Inc.); Patent Law Reform: Injunctions and Damages:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 79-88 (2005) (statement of Chuck Fish,
Vice President and Chief Patent Counsel, Time Warner, Inc.); Patent Law
Reform: Injunctions and Damages: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
68-78 (2005) (statement of Jonathan Band, Counsel, on behalf of Visa
and the Financial Services Roundtable).
\65\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 262-
263 (2007) (statement of Mary E. Doyle, Senior Vice President and
General Counsel, Palm, Inc.); Patent Law Reform: Injunctions and
Damages: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 79-88 (2005) (statement of
Chuck Fish, Vice President and Chief Patent Counsel, Time Warner,
Inc.); Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
156-166 (2005) (statement of Joel Poppen, Deputy General Counsel,
Micron Technologies, Inc.).
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Discussion of changes
Section 4 improves the doctrine of willful infringement in
both procedural and substantive respects. These changes should
greatly reduce unwarranted allegations of willfulness, as well
as unnecessary costly discovery.
Unlike the current practice, where willfulness can be
pleaded at the outset and is decided by a jury, willfulness
will now be decided by the judge and only after finding that
the patent was valid and infringed. Pursuant to new paragraph
(e)(2) of section 284, willfulness must also be demonstrated by
clear and convincing evidence. Moreover, conclusory allegations
no longer suffice for notice of infringement; under
subparagraph (e)(2)(A), the patent holder must allege acts of
infringement sufficient to give the alleged infringer an
objectively reasonable apprehension of suit, and the patent
holder must also plead with particularity which products or
processes allegedly infringe which claims of the patent, as
well as the basis for such a belief. Subparagraph (e)(2)(B)
permits a finding of willfulness if the infringer intentionally
copied the patented invention with knowledge it was patented.
Subparagraph (e)(2)(C) permits such a finding if the infringer
continued to engage in infringing conduct after a court already
found the party to be infringing the patent.
Paragraph (e)(3) provides a meaningful good faith defense
to willfulness. An infringer can establish a good faith defense
through reasonable reliance on the advice of counsel; evidence
that the infringer sought to modify its conduct to avoid
infringement once it had discovered the patent; or other
evidence a court may find sufficient. The decision of the
alleged infringer not to present evidence of advice of counsel
is not relevant to a determination of willful infringement.\66\
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\66\After this bill emerged from Committee, the Federal Circuit
raised the standard for willful infringement in In re Seagate
Technology, 497 F.3d 1360 (in banc) (Fed. Cir. 2007), overruling its
prior duty of care standard, see id. at 1371, reversing Underwater
Devices v. Morrison-Knudsen Co., 717 F.2d 1380 (Fed. Cir. 1983)
(``[W]illful infringement permitting enhanced damages requires at least
a showing of objective recklessness'' by the infringer.).
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Prior User Rights
Background
Under current law, ``prior user rights'' may offer a
defense to patent infringement in certain limited
circumstances, including when the patent in question is a
``business method patent''\67\ and its inventor uses the
invention, but never files a patent application for it.\68\ If
the same invention is later patented by another party, the
prior user may not be liable for infringement to the new patent
holder, although all others will be.
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\67\35 U.S.C. Sec. 273(a)(3) states: ``The term `method' means a
method of doing or conducting business.''
\68\See 35 USC Sec. 273.
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Discussion of Changes
The bill, as introduced, would have extended prior user
rights to all kinds of patents--not just business method
patents--but the persuasive outcry from university and tech
transfer advocates\69\ limited the amendment of the prior user
right defense to one that simply alters paragraph (b)(6) of
section 273 to clarify that ``affiliates'' of the user may also
assert the defense.\70\ Affiliates include those who caused or
controlled the acts that were performed that give rise to the
defense. Additionally, Section 4 of the Act instructs the
Director of the USPTO to conduct, and provide to Congress, a
study with recommendations on prior user rights (both in the
United States and abroad) within two years of enactment of the
Act, in order to determine whether further Congressional
attention is warranted.
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\69\See, e.g., Patent Law Reform: Injunctions and Damages: Hearing
Before the Subcomm. on Intellectual Property of the Senate Comm. on the
Judiciary, 109th Cong. 89-105 (2005) (statement of Carl Gulbrandsen,
Managing Director, Wisconsin Alumni Research Foundation (WARF)).
\70\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 292
(2007) (statement of John A. Squires, Esq., Chief Intellectual Property
Counsel, Goldman, Sachs & Co.).
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Notice and marking
Background
In general, for patented ``articles,'' a patent holder must
give an alleged infringer notice of the claimed infringement,
and the infringer must continue to infringe, before the patent
holder may succeed in a suit for damages.\71\ Actual notice
requires the affirmative communication of infringement to the
defendant, which may include the filing of a lawsuit.
Constructive notice is possible by ``marking'' any patented
article that the patent holder (or its licensee) makes, uses,
sells or imports.\72\ Failure to appropriately mark an article
can preclude the recovery of damages until notice is effective.
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\71\See 35 U.S.C. Sec. 287.
\72\See id.
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However, neither marking nor actual notice is required to
begin the accrual of damages if the patented invention is not
made or sold by the patentee or someone acting under its
authority.\73\ In addition, the courts have determined that
patents on methods or processes\74\--which are not ``articles''
and cannot be marked--are exempt from these notice and marking
requirements.\75\ Thus, business methods patents are exempt. A
patent holder of such a patent may recover up to six years\76\
of past damages if infringement is proven for that period,
despite the lack of notice to the alleged infringer. This
creates a disparity in potential damage awards between
different types of patents, and between patent holders that
make and sell patented articles and those that do not. Neither
disparity seems justified, and certainly poses a danger to the
unknowing--and un-notified--infringer of an unmarkable patent.
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\73\See Texas Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193
at 1219 (Fed. Cir. 2002), citing Wine Railway Appliance Co. v.
Enterprise Railway Equipment Co., 297 U.S. 387 (1936).
\74\Section 100(b) of title 35 defines ``process'' as ``process,
art, or method, and includes a new use of a known process, machine,
manufacture, composition of matter, or material.''
\75\See American Medical Sys. Inc. v. Medical Eng'g Corp., 6 F.3d
1523, 1538 (Fed. Cir. 1993) (``The law is clear that the notice
provisions of section 287 do not apply where the patent is directed to
a process or method.); Bandag, Inc. v. Gerrard Tire Co., 704 F.2d 1578,
1581 (Fed. Cir. 1983) (``In addition to the clear language of the
statute, it is * * * also settled in the case law that the notice
requirement of this statute does not apply where the patent is directed
to a process or method.'').
\76\The maximum recovery for past infringement of any patent is six
years. See 35 U.S.C. Sec. 286 (``Except as otherwise provided by law,
no recovery shall be had for any infringement committed more than six
years prior to the filing of the complaint or counterclaim for
infringement in the action.'').
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The Committee agrees that, after adequate notice is given,
damages should begin to accrue if conduct continues that is
later found to infringe, but was concerned that an infringer,
who has not received notice and is genuinely unaware of the
infringement, should not be treated identically with someone
who was notified, or aware, or both.
Discussion of changes
The Committee considered extreme recommendations to improve
this disparity, including eliminating the current marking
statute and requiring actual notice before damages could begin
to accrue for all patents, or requiring actual notice before
damages could accrue for patents that cannot be marked. The
Committee chose a more modest approach, however, and the
changes in Section 4 only apply to patents that are not covered
by the marking requirements of section 287(a). The change
reduces the maximum period for which damages can be recovered
for infringing such patents from 6 years to 2 years from the
date of actual notice, if infringement is proven during that
period.
Effective Date
The amendments in Section 4 of the Act shall apply to any
civil action commenced on or after the date of enactment of the
Act.
SECTION 5: POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS
Background
More than 25 years ago, Congress created the administrative
``reexamination'' process, through which the USPTO could review
the validity of already-issued patents on the request of either
the patent holder or a third party,\77\ in the expectation that
it would serve as an effective and efficient alternative to
often costly and protracted district court litigation.\78\
Reexamination requires the USPTO to review the patent in light
of a substantial new question of patentability not presented
during the original examination.\79\ The initial reexamination
statute had several limitations that later proved to make it a
less viable alternative to litigation for evaluating patent
validity than Congress intended. First, a reexamination request
can only be based on documentary prior art, and cannot be based
on prior use or prior sales. Moreover, the requestor may not
raise any challenge based on Sec. 101 (utility, eligibility),
Sec. 112 (indefiniteness, enablement, written description, best
mode) or inequitable conduct. A third party alleging a patent
is invalid, therefore, has fewer challenges it can raise in the
proceeding and therefore may instead opt to risk infringement
and litigate the validity of the patent in court. Second, in
the original reexamination system, the third party challenger
had no role once the proceeding was initiated while the patent
holder had significant input throughout the entire process.
Third, a challenger that lost at the USPTO under reexamination
had no right to appeal an examiner's, or the Patent Board's,
decision either administratively or in court. Restrictions such
as these made reexamination a much less favored avenue to
challenge questionable patents than litigation. Reexamination
proceedings are also often costly, take several years to
complete,\80\ and are first conducted by examiners, and if the
patent is rejected, then by Patent Board Judges. Thus many
patents must go through two rounds of administrative review
(one by the examiner, and a second by the Patent Board) adding
to the length of the proceeding.\81\
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\77\See 35 U.S.C. Sec. Sec. 301-307. A patent holder will typically
request reexamination to bolster the patent in view of new prior art. A
third party may request reexamination to challenge, and ultimately
invalidate, the patent.
\78\``Reexamination will permit efficient resolution of questions
about the validity of issued patents without recourse to expensive and
lengthy infringement litigation . . . . The reexamination of issued
patents could be conducted with a fraction of the time and cost of
formal legal proceedings and would help restore confidence in the
effectiveness of our patent system . . .. It is anticipated that these
measures provide a useful and necessary alternative for challengers and
for patent owners to test the validity of United States patents in an
efficient and relatively inexpensive manner.'' See H.R. Rep. No. 96-
1307(I) at 3 (1980), reprinted in 1980 U.S.C.C.A.N. 6460, 6462-63.
\79\See 35 U.S.C. Sec. 303.
\80\Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
93-105 (2005) (statement of Jon W. Dudas, Undersecretary of Commerce
for Intellectual Property, Director of the U.S. Patent and Trademark
Office), explaining that ``a large number of reexamination proceedings
have been pending before the USPTO for more than four years'', and
questioning whether this amount of time is consistent with the
statutory requirement that ``[a]ll reexamination proceedings * * * will
be conducted with special dispatch within the Office.'' See 35 U.S.C.
Sec. 305.
\81\For several years, the standard practice at the USPTO was to
assign the reexamination to the patent examiner who had originally
examined that patent. In addition, the same third party requester could
file multiple, serial, reexaminations, based on the same ``substantial
new question of patentability,'' so long as the initial reexamination
was not completed. More recently, the USPTO ended some of these
procedures, and now reexaminations are handled by a Central
Reexamination Unit (CRU), and subsequent serial reexamination, based on
the same ``substantial new question of patentability,'' are no longer
permitted. See, e.g., Manual of Patent Examining Procedure (MPEP)
Sec. Sec. 2236 and 2240 (August 2006).
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Congress has responded several times to criticisms of the
reexamination system by making amendments to the process.\82\
In 1999, Congress created a second reexamination procedure--
called inter partes reexamination--that gave third party
challengers greater input throughout the proceeding by
permitting them to respond to every pleading submitted by the
patent holder.\83\ At the same time, Congress imposed severe
estoppel provisions that preclude a later court challenge based
on issues not even raised during an inter partes reexamination
proceeding.\84\ Congress also eventually gave third party
challengers the right to appeal adverse decisions.\85\
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\82\See, e.g., 21st Century Dep't of Justice Appropriations
Authorization Act, Pub. L. No. 107-273, Sec. Sec. 13105-06, 13202, 116
Stat. 1758, 1761 (2002) (effective Nov. 2, 2002); American Inventors
Protection Act, Pub.L. 106-113, 113 Stat. 1536, 1501A et seq. (1999)
(creating inter partes reexamination) (hereafter referred to as the
``AIPA'').
\83\See 35 U.S.C. Sec. Sec. 311-318.
\84\See 35 U.S.C. Sec. 317(b).
\85\See 35 U.S.C. Sec. 315(b)
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Despite Congress's attempts to improve the reexamination
system, it remains troublesomely inefficient and ineffective as
a truly viable alternative for resolving questions of patent
validity.\86\ The inefficiency is due, in part, to a
reexamination first being conducted by a patent examiner (which
can take two years or more); then, if the patent is rejected,
there will have to be an appeal to the Patent Board (which can
take another year or more to complete).\87\ Inter partes
reexamination has also proven ineffective because a challenger
may still only raise a limited number of basis to challenge the
patent, and may not assert all of the challenges available
under the patent statute. As a result, patents that should not
have issued must often be challenged in district court after
the challenger has taken the risk of infringement, defeating
the efficiency purpose of reexamination.
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\86\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 288
(2007) (statement of John A. Squires, Esq., Chief Intellectual Property
Counsel, Goldman, Sachs & Co.), characterizing reexamination as
ineffective and not widely used, and inter partes reexamination as a
failure.
\87\Reexaminations of patents that are simultaneously involved in
district court litigation can take even longer, and as much as seven or
eight years to complete measured from the petition to final resolution
by the Federal Circuit. See, e.g., In re Translogic Tech., Inc., 504
F.3d 1249 (Fed. Cir. 2007) (over eight years); In re Trans Texas
Holdings Corp., 498 F.3d 1290 (Fed. Cir. 2007) (approximately seven
years); In re Curtis, 354 F.3d 1347 (Fed. Cir. 2004) (approximately
eight years); In re Inland Steel, 265 F.3d 1354 (Fed. Cir. 2001)
(approximately eight years).
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Given the numerous problems and limitations with the
reexamination system, and the chorus of concerns heard by the
Committee about that process,\88\ the Committee determined not
to try to adopt another, and necessarily massive, set of
amendments to the current system.\89\ Rather, the Committee
determined that it would be simpler, and ultimately better, to
make a clean start. The time has come to eliminate the inter
partes reexamination system and replace it with a new post-
grant review system at the USPTO that will give third parties a
quick, inexpensive, and reliable alternative to district court
litigation to resolve questions of patent validity.
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\88\See, e.g., Perspectives on Patents: Post-Grant Review
Procedures and Other Litigation Reforms: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 44
(2006) (statement of Mark Chandler, Senior Vice President and General
Counsel, Cisco Systems, Inc.); Patent Law Reform: Injunctions and
Damages: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 132-153 (2005) (statement of
Jeffrey P. Kushan, Partner, Sidley Austin Brown & Wood, LLP); Patent
Law Reform: Injunctions and Damages: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
111-131 (2005) (statement of J. Jeffrey Hawley, President, Intellectual
Property Owners Association, Legal Division Vice President, Eastman
Kodak Co.).
\89\The NAS came to a similar conclusion after its thorough study
of the issue. See NAS Report at 96.
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Discussion of changes
Section 5 of the Act creates a new post-grant review (PGR)
system for United States patents, replacing and eliminating
inter partes reexamination, in a new chapter 32 in title
35.\90\
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\90\Ex-parte reexamination, based on a request by the patentee, is
retained. See new Section 303(a) of the Act. However, third parties may
no longer request an ex-parte reexamination. Thus, third parties
wishing to challenge the patent will use the new post grant review
system; patentees wishing to have additional art considered will use
the old ex-parte reexamination system.
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There are three ways to initiate a PGR proceeding.\91\ They
are often referred to as ``windows'' (first window and second
window) in which a third party petitions the Director of the
USPTO to initiate a PGR proceeding.\92\ These windows differ
procedurally and substantively, as described below. The third
means of initiating a PGR proceeding is based on the patentee's
consent.\93\
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\91\See new Sec. 322 as added by S. 1145.
\92\See new Sec. 322(1) and (2) as added by S. 1145.
\93\The post grant review system created by this Section adopts
several of the recommendations, in whole or in part, made by the NAS
Report. See NAS Report at 95-103. In addition, the post grant review
system adopted by the Committee is similar in several respects to the
post grant review system proposed by the USPTO. See Patent Reform: The
Future of American Innovation: Hearing on S. 1145 Before the Senate
Comm. on the Judiciary, 110th Cong. 273 (2007) (statement of Jon W.
Dudas, Under Secretary of Commerce for Intellectual Property and
Director of the USPTO). Moreover, changes were made by the Committee in
direct response to concerns raised by the USPTO, including (i) raising
the standing requirement for post grant review second window, and (ii)
reducing the number of existing patents eligible for second window post
grant review.
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In a first window PGR, the petition must be filed within 12
months of the patent's issuing. The presumption of validity for
the patent does not apply, but the petitioner has the burden of
proving invalidity by a preponderance of the evidence. This
window is designed as an extension of the examination process.
The expectation is that those who are interested in certain
technology fields--or in certain patent holders--will
assiduously follow the issuance of the patents that interest
them, and be ready to bring to the USPTO's attention any
immediate concerns.
But not all issues of validity are obvious immediately upon
issuance,\94\ and indeed the Committee assumes that the patents
issued by the USPTO will generally lack any such blatant flaws.
The Committee is aware, however, that patents may be asserted
as covering uses and products that were not originally
envisioned, or that an alleged infringer may well not have
imagined possible, simply from the reading of the patent
claims.\95\ With calculated infringement at one end of the
spectrum, and devious claiming at the other end, the
possibilities for mischief and disagreement are
considerable.\96\ Especially given that the current inter
partes reexamination process already permits a challenge to a
patent's validity throughout the life of the patent,\97\ the
Committee has retained that time frame for second window
challenges. No patent holder has a right to an invalid patent,
however long that patent holder may have enjoyed that right
inappropriately. At the same time, the values of certainty (and
the consequent business decisions based on that certainty) are
not insubstantial, and the Committee is not willing to assume
that a patent is invalid simply because a third party has filed
an administrative action to endeavor to prove invalidity. The
provisions that now form this section of the Act underwent
substantial change in the process of the Committee mark-up, and
all those changes were in the direction of limiting the use and
scope of the post-grant review process. Having begun with a
significantly broader process, the Committee is confident that
these changes have addressed the concerns in a prudent and
balanced manner.
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\94\See Patent Law Reform: Injunctions and Damages: Hearing Before
the Subcomm. on Intellectual Prop. of the Senate Comm. on the
Judiciary, 109th Cong. 68-78 (2005) (statement of Jonathan Band,
Counsel, on behalf of Visa and the Financial Services Roundtable),
explaining that without a 2nd window, post grant review would be
``seldom used'' in his industry.
\95\See Perspectives on Patents: Post-Grant Review Procedures and
Other Litigation Reforms: Hearing Before the Subcomm. on Intellectual
Prop. of the Senate Comm. on the Judiciary, 109th Cong. 45 (2006)
(statement of Mark Chandler, Senior Vice President and General Counsel,
Cisco Systems, Inc.); Perspectives on Patents: Post-Grant Review
Procedures and Other Litigation Reforms: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 33
(2006) (statement of Andrew Cadel, Managing Director and Chief
Intellectual Property Counsel, JP Morgan Chase); Perspectives on
Patents: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 167-179 (2005) (statement of
David Simon, Chief Patent Counsel, Intel Corporation).
\96\See Perspectives on Patents: Post-Grant Review Procedures and
Other Litigation Reforms: Hearing Before the Subcomm. on Intellectual
Prop. of the Senate Comm. on the Judiciary, 109th Cong. 45 (2006)
(statement of Mark Chandler, Senior Vice President and General Counsel,
Cisco Systems, Inc.); Perspectives on Patents: Hearing Before the
Subcomm. on Intellectual Prop. of the Senate Comm. on the Judiciary,
109th Cong. 167-179 (2005) (statement of David Simon, Chief Patent
Counsel, Intel Corporation).
\97\See 35 U.S.C. Sec. 311 (``Any third party at any time may file
a request for inter partes reexamination by the Office * * *'').
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As a result, in the second window, significant limitations
are placed on such challenges, while preserving the core intent
of the old reexamination process: creating an efficient and
effective process for challenging the validity of a patent.\98\
A PGR petition may be filed throughout the life of the patent
in this second window, but only if (i) the continued existence
of the challenged patent claim is likely to cause the
petitioner significant economic harm, and (ii) the petitioner
files the petition within 12 months after receiving notice of
infringement.\99\ Thus, only a PGR petitioner who has a good
deal at stake may bring such a challenge, and may do so only if
the patent holder has already, on its own volition, placed the
issue in play.
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\98\The Committee heard from a number of witnesses that the second
window of post grant review was vital to patent reform, and that merely
having the first window alone would be insufficient. They explained
that given (i) the large number of potentially patented components that
could make up any one product (e.g., a computer), (ii) the cost
required to challenge every one, and (iii) the uncertainty as to what
any one patent may cover (due to the uncertain doctrine of claim
construction), it would be impractical or impossible to challenge every
questionable patent within the 1-year first window time frame. The
witnesses explained that they typically only learn of such allegations
by way of a threat letter from, or lawsuit by, the patentee. See, e.g.,
Patent Reform: The Future of American Innovation: Hearing on S. 1145
Before the Senate Comm. on the Judiciary, 110th Cong. 288-289 (2007)
(statement of John A. Squires, Esq., Chief Intellectual Property
Counsel, Goldman, Sachs & Co); Perspectives on Patents: Post-Grant
Review Procedures and Other Litigation Reforms: Hearing Before the
Subcomm. on Intellectual Prop. of the Senate Comm. on the Judiciary,
109th Cong. 45 (2006) (statement of Mark Chandler, Senior Vice
President and General Counsel, Cisco Systems, Inc.); Perspectives on
Patents: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 167-179 (2005) (statement of
David Simon, Chief Patent Counsel, Intel Corporation).
\99\See new Sec. 322(2) as added by S. 1145.
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The presumption of validity for the patent does apply in
the second window.\100\ The petitioner may challenge a patent
based on any defense the challenger could raise in district
court litigation, but the existence, authentication,
availability, and scope of any evidence offered to establish
invalidity must be established by clear and convincing
evidence. If such predicate facts are established, invalidity
shall be proven only if the persuasive force of such facts
demonstrates invalidity by a preponderance of the evidence. The
PGR petition must specify in detail the claims of the patent
being challenged and the basis for the challenge, with any
necessary supporting documentation. PGR proceedings are open to
the public unless determined otherwise by the Patent Board.
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\100\See new Sec. 331(a) as added by S. 1145.
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After a PGR proceeding is initiated, the patent holder will
have an opportunity to file a response. During the proceeding,
the patent holder has one opportunity as a matter of right to
amend the claims, and may only amend the claims subsequently on
motion and a showing of good cause. No amendment during a PGR
proceeding may enlarge the scope of a claim or add new matter.
Various safeguards and estoppels have also been included to
prevent the use of PGR for harassment. Every petition to
institute a PGR must raise a substantial new question of
patentability\101\; this standard was elevated at mark-up to
encourage only the most meaningful challenges.\102\ In
addition, the same party who has once filed a PGR petition,
whether in the first or the second window, regarding any claim
in a patent, may not file another PGR on the same patent,
regardless of the issues raised in the first PGR.\103\ This
``one bite at the apple'' provision was included in Committee
to quell concerns that a party bent on harassing a patent
holder might file serial PGR petitions.\104\ Moreover, once a
petitioner has challenged the validity of a patent through a
PGR, that party may not challenge validity in a court
proceeding based on any ground it raised during the PGR.\105\
Additionally, a party who has challenged the validity of a
patent in court may not file a PGR petition on any grounds they
raised, or could have raised, in the district court.\106\
Because the district court action allows the challenger the
full panoply of discovery (unlike the restricted discovery
appropriate to the more limited PGR proceeding), the Committee
believes that it is only reasonable to apply estoppel to claims
the challenger was, or should have been, in a position to
raise, whether or not it did so.
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\101\New Sec. 329 as added by S. 1145 states that the Director
shall prescribe regulations regarding PGR, including the standard
necessary to show that a ``substantial new question of patentability''
exists to initiate a PGR. The ``substantial new question of
patentability'' standard to initiate a PGR is the same standard
required to initiate a reexamination proceeding under current law. See
35 U.S.C. Sec. 303(a).
\102\See Transcript of Proceedings of Business Meeting of the
Senate Committee on the Judiciary, 110th Cong., 1st Sess. 4 (June 21,
2007).
\103\See new Sec. 325(a) as added by S. 1145.
\104\See Transcript of Proceedings of Business Meeting of the
Senate Committee on the Judiciary, 110th Cong., 1st Sess. 4 (June 21,
2007).
\105\See new Sec. 338(a)(2) as added by S. 1145.
\106\See new Sec. 337 as added by S. 1145.
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The USPTO must complete its work on a PGR within one year
in most cases, and 18 months in only those cases where the
additional time is justified. The PGR proceedings are conducted
in the first instance by three Patent Board judges, and not
first by an examiner, thus reducing the pendency compared to
reexamination proceedings. Any party dissatisfied with a Board
PGR decision, may appeal to the Federal Circuit, and all
parties to the PGR proceeding may participate in such an
appeal.
The Director is instructed to issue regulations that will
more fully develop the rules and procedures governing PGR
proceedings.\107\ The Committee intends that such rules will
provide an efficient, streamlined, transparent proceeding that
is trusted by the public. The goal is to encourage PGR
challenges when warranted, not discourage them in view of
complicated, expensive, and arcane procedures. The Director is
admonished, among other regulatory tasks, to ensure that
regulations forbidding and penalizing harassment are enacted
and enforced.
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\107\See Sec. 329 as added by S. 1145.
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The PGR process shall take effect on the date that is one
year after the date of the enactment of the Act. After that
time, first window PGR petitions may be filed against any
patent, so long as the other provisions of the Act are
satisfied. Second window PGR petitions (as well as consented
petitions), however, may only be filed on patents that issue
based on applications filed after November 29, 1999. That date
was chosen by the Committee because it is the date used to
determine whether a patent could be eligible for inter partes
reexaminations (which are eliminated under the Act). Thus,
patents that were eligible for inter partes reexamination, are
now eligible for second window PGRs.\108\
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\108\The initial legislation contemplated that all patents in
existence would be eligible for PGR second window. See Sec. 321 as
proposed to be added by S. 1145 as introduced.
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SECTION 6: DEFINITIONS; PATENT TRIAL AND APPEAL BOARD
This Section renames the Patent Board as the ``Patent Trial
and Appeal Board'' and sets forth its duties, which are
expanded to include jurisdiction over the new post grant review
and derivation proceedings. This section strikes references to
proceedings eliminated by the Act, including interference
proceedings and review of inter partes decisions.
SECTION 7: SUBMISSIONS BY THIRD PARTIES AND OTHER QUALITY ENHANCEMENTS
18 month publication
Background
Most countries publish all patent applications filed in
their jurisdictions within 18 months after filing. In 1999,
Congress mandated this publication for most, but not all
applications filed with the USPTO.\109\ Applications that
contain certifications stating a related application has not
been and will not be filed in a foreign country are exempt from
this publication.\110\
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\109\See 35 U.S.C. Sec. 122.
\110\See 35 U.S.C. Sec. 122(b)(2)(B).
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Discussion of changes
The publication of patent applications is beneficial to
both the patent community and the general public, since it
promotes the disclosure benefit of the patent system\111\ and
allows the public (including competitors) to learn for which
inventions patents are being sought.\112\ Therefore, Section 7
of the Act eliminates the previous exemptions. All applications
filed at the USPTO will be published within 18 months of
filing.\113\
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\111\See Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 30 (2005) (statement of
David Beier, Senior Vice President of Global Government Affairs,
Amgen).
\112\Prior to requiring the publication of applications, the public
would not learn of a patent until after it issued, which is often
several years after the application was filed. Some patentees took
advantage of this practice to the extreme (with ``submarine'' patents),
and intentionally delayed their patents issuance, and thus publication,
of the patent for several years to allow potentially infringing
industries to develop and expand, having no way to learn of the pending
application. See Mark A. Lemley and Kimberly A. Moore, Ending Abuse Of
Patent Continuations, 84 B.U. L. Rev. 63, 79-81 (2004). In contrast,
publication of the application allows for the earlier dissemination of
the information contained therein, as well as allowing competitors to
make decisions based on what is attempting to be patented.
\113\Both the NAS and the FTC advocated for the publication of all
applications and the elimination of the exception. See NAS Report at
128 (explaining that publication of all applications would promote the
disclosure purpose of the patent system and minimize the uncertainty
associated with submarine patents); FTC Report at 15-16
``Recommendation 7: Enact Legislation to Require Publication of All
Patent Applications 18 Months After Filing,'' (explaining that
publication of domestically filed applications will increase business
certainty, promote rational planning, and reduce the problem of
unanticipated ``submarine patents'' used to hold up competitors for
unanticipated royalties); see also Perspectives on Patents: Hearing
Before the Subcomm. on Intellectual Prop. of the Senate Comm. on the
Judiciary, 109th Cong. 137-145 (2005) (statement of Richard C. Levin,
President, Yale University).
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Third party submissions
Background
After an application is published, members of the public--
most likely, a competitor or someone else familiar with the
patented invention's field--may realize they have information
relevant to a pending application. The relevant information may
include prior art that would prohibit the pending application
from issuing as a patent. Current USPTO rules permit the
submission of such prior art by third parties only if it is in
the form of a patent or publication,\114\ and the submitter is
precluded from explaining why the prior art was submitted or
what its relevancy to the application might be.\115\ Such
restrictions decrease the value of the information to the
examiner and may, as a result, deter such submissions.\116\
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\114\See 35 C.F.R. Sec. 1.99.
\115\See 35 C.F.R. Sec. 1.99(d) (``A submission under this section
shall not include any explanation of the patents or publications, or
any other information.'').
\116\See Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
167-179 (2005) (statement of David Simon, Chief Patent Counsel, Intel
Corporation).
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Discussion of changes
Section 7 of the Act improves the process by which third
parties submit relevant information to the USPTO by permitting
those third parties to make statements concerning the relevance
of the patents, patent applications, and other printed
publications they bring to the USPTO's attention.
SECTION 8: VENUE AND JURISDICTION
Venue
Background
Venue statutes generally place restrictions on where a
plaintiff may sue a defendant. A specific venue provision has
existed for patent cases since 1897.\117\ Yet, Federal Circuit
decisions have virtually eliminated any meaningful distinction
between the patent venue provision and general venue.\118\ In
VE Holding, the Federal Circuit held that despite the specific
patent venue statute, the expanded jurisdiction under the
general venue statute also applied to corporate defendants in
patent infringement cases.\119\ As a result, the Federal
Circuit held that venue for a corporate defendant in a patent
infringement case was proper wherever personal jurisdiction
existed. Four years later, in Beverly Hills Fan Co., the
Federal Circuit held that personal jurisdiction for a patent
defendant essentially exists wherever an infringing product is
made, used or sold.\120\ The effect of these decisions is that
venue for a patent infringement defendant is proper wherever an
alleged infringing product can be found. To compound matters,
the Federal Circuit applied a different set of standards in
patent cases that were brought pursuant to the declaratory
judgment act.\121\
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\117\28 U.S.C. Sec. 1400.
\118\See, e.g., VE Holding Corp. v. Johnson Gas Appliance Co., 917
F.2d 1574 (Fed. Cir. 1990).
\119\See VE Holding, 917 F.2d at 1580.
\120\See Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d
1558, 1566 (Fed. Cir. 1994).
\121\See VE Holding, 917 F.2d at 1583.
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Since most patented products are sold nationally, a patent
holder can often bring a patent infringement action in any one
of the 94 judicial districts in the United States. The judicial
weakening of the patent venue statute has reportedly led to
forum shopping in patent infringement suits. A comprehensive
study revealed that approximately half of the patent
infringement cases are filed in only 10 of the districts, many
of which have no significant relation to either the plaintiff
or the defendant.\122\ A report issued last year indicates this
pattern has continued and may even become more
concentrated.\123\
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\122\See Kimberly A. Moore, Forum Shopping in Patent Cases: Does
Geographic Choice Affect Innovation?, 79 N.C. L. Rev. 889 (2001).
\123\See Roderick R. McKelvie, Forum Selection In Patent
Litigation: A Traffic Report, 19 NO. 8 Intell. Prop. & Tech. L.J. 1, 1
(2007).
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Venue exists to ensure the case is brought where the
defendant has more than minimum contacts in the forum the
plaintiff has chosen.\124\ Moreover, judicial resources are
best spent in locations where the evidence and witnesses are
located. If a venue is chosen that has little or no relation to
the defendant's business, it can cause significant hardship to
the defendant and increase already expensive litigation costs.
In addition, court dockets can become backlogged where a
disproportionate number of patent cases are brought in a small
number of districts.\125\
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\124\See 17 Moore's Federal Practice Sec. 110.01[5][a] (3d ed.
1997).
\125\See McKelvie, Forum Selection In Patent Litigation: A Traffic
Report, 19 NO. 8 Intell. Prop. & Tech. L.J. at 3.
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Discussion of changes
As with other provisions in the Act, the venue language was
changed considerably during the Committee process. The initial
language worked a modest change to the venue statute in that
patent infringement suits could be brought only in the judicial
district where (i) either party resided (which for a
corporation is its principal place of business or its state of
incorporation), or (ii) where the defendant had committed acts
of infringement and had a regular and established place of
business.
Amendments during the mark-ups made significant
revisions.\126\ Section 8 of the Committee-passed bill limits
the plaintiff-based venue available to certain plaintiffs in
patent cases, namely individual inventors, institutions of
higher education, and technology-transfer non-profit
organizations affiliated with such institutions. The Committee
also determined that the same venue rules shall apply for both
patent declaratory judgment cases and patent infringement
cases.
---------------------------------------------------------------------------
\126\See Transcript of Proceedings of Business Meeting of the
Senate Committee on the Judiciary, 110th Cong., 1st Sess. 4 (June 21,
2007); Transcript of Proceedings of Business Meeting of the Senate
Committee on the Judiciary, 110th Cong., 1st Sess. 5-7, 14-17, 19-20,
51-63 (July 12, 2007); Transcript of Proceedings of Business Meeting of
the Senate Committee on the Judiciary, 110th Cong., 1st Sess. 2, 12
(July 19, 2007).
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Also, under the changes worked in the Act, parties will not
be permitted to manufacture venue. Thus, for example, a company
cannot establish venue in a given State simply by incorporating
there. Section 1400 of title 28 is amended to provide that
defendants in patent cases may be sued where the defendant has
its principal place of business, or where it is incorporated or
formed. They may also be sued where substantial acts of
infringement occur, but only if the defendant also has a
regular and established, substantial physical facility in that
district, which the defendant controls, and which constitutes a
substantial portion of the defendant's overall operations in
the district. A foreign defendant that has a U.S subsidiary may
only be sued where its primary U.S. subsidiary is located, or
its principal place of business in the U.S. is incorporated or
formed.\127\
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\127\28 U.S.C. Sec. 1391(d) shall continue to determine venue for a
foreign defendant that does not have a subsidiary in the United States.
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The Committee is sensitive to the unique position of
universities, non-profit organizations and truly small
inventors, for which certain venue restrictions could prove
burdensome. Revised section 1400 therefore creates an
exception, permitting these parties to file their patent
infringement or declaratory judgment actions in the district
where they reside.
Section 1400 also provides for limited requests for
transfer of venue where the court deems it appropriate.
Interlocutory appeals of claim construction orders
Background
In many patent infringement cases, the proper meaning of a
patent claim (referred to as ``claim construction'') is a
vital, threshold determination. A finding of patent
infringement will often turn on the proper interpretation of
the patent claims, which may also determine the patent's
validity.\128\ A decade ago, the Supreme Court held in Markman
v. Westview Instruments, Inc.,\129\ that district court judges,
not juries, should determine the proper meaning of a patent
claim. Shortly thereafter, the Federal Circuit in Cybor Corp.
v. FAS Technologies, Inc.,\130\ held that the standard of
review of claim construction decisions by the district court
was de novo, giving no deference to the district court judges
that made those determinations. Determining the proper meaning
of the claims is vital to the outcome of most patent cases, and
should occur early in the litigation to avoid unnecessary
costs.\131\ Moreover, since the Federal Circuit would review
such decisions without giving deference to the district court,
its view of the proper claim construction is paramount.\132\
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\128\See, e.g., Amgen Inc. v. Hoechst Marion Roussel, Inc., 457
F.3d 1293 (Fed. Cir. 2006) (reversing the district court's claim
construction and remanding for a second time for the district court to
determine whether the newly construed claim was anticipated by the
prior art).
\129\517 U.S. 370 (1996).
\130\138 F.3d 1448 (Fed. Cir. 1998) (en banc).
\131\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 289-
291 (2007) (statement of John A. Squires, Esq., Chief Intellectual
Property Counsel, Goldman, Sachs & Co.); Perspectives on Patents: Post-
Grant Review Procedures and Other Litigation Reforms: Hearing Before
the Subcomm. on Intellectual Prop. of the Senate Comm. on the
Judiciary, 109th Cong. 34 (2006) (statement of Andrew Cadel, Managing
Director and Chief Intellectual Property Counsel, JP Morgan Chase);
Patent Law Reform: Injunctions and Damages: Hearing Before the Subcomm.
on Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
68-78 (2005) (statement of Jonathan Band, Counsel, on behalf of Visa
and the Financial Services Roundtable); see also Cybor Corp. v. FAS
Techs., Inc., 138 F.3d 1448, 1475-77 (Fed. Cir. 1998) (en banc)
(dissenting opinion of Rader, J.).
\132\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 289-
290 (2007) (statement of John A. Squires, Esq., Chief Intellectual
Property Counsel, Goldman, Sachs & Co.); Patent Law Reform: Injunctions
and Damages: Hearing Before the Subcomm. on Intellectual Prop. of the
Senate Comm. on the Judiciary, 109th Cong. 68-78 (2005) (statement of
Jonathan Band, Counsel, on behalf of Visa and the Financial Services
Roundtable).
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Following these decisions, many district courts began
holding separate claim construction hearings, which became
known as ``Markman'' hearings. District courts often then issue
Markman claim construction decisions.\133\ In certain cases,
parties requested, and district judges certified, Markman
decisions for interlocutory appeal to the Federal Circuit. The
parties, and the district courts, understood the importance of
having a claim construction decision early in the process and,
because of de novo review, that the Federal Circuit would have
to rule on construction before the parties could accurately
assess their liabilities. The Federal Circuit, however, refused
to take most such requests.\134\ As a result, full trials often
had to be held before an appeal could be taken of the claim
construction issue.\135\
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\133\See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1479 (Fed.
Cir. 1998) (en banc) (``Although the district courts have extended
themselves, and so-called `Markman hearings' are common, this has not
been accompanied by interlocutory review of the trial judge's claim
interpretation. The Federal Circuit has thus far declined all such
certified questions.'').
\134\See V. Ajay Singh, Interlocutory Appeals In Patent Cases Under
28 U.S.C. Sec. 1292(C)(2): Are They Still Justified And Are They
Implemented Correctly?, Duke L.J. Vol. 55, 179, 196 (2005) (``the
Federal Circuit has thus far refused to hear permissive appeals related
to claim construction'').
\135\Unfortunately, there are also examples where the Federal
Circuit has had to hear multiple district court claim construction
related appeals, and has remanded the case back to the district court
several times based on new claim construction theories. See, e.g.,
Amgen Inc. v. Hoechst Marion Roussel, Inc., 457 F.3d 1293 (Fed. Cir.
2006) (a 10-year litigation that has to date already had two appeals,
and the case is remanded back for a likely third district court
decision, and possible third appeal).
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Numerous studies have shown that the Federal Circuit's
reversal rate of district court claim construction decisions is
unusually high.\136\ District court decisions may place several
claim terms in dispute, and reversal by the Federal Circuit as
to the meaning of just one claim term may require that the case
be remanded to the district court for further proceedings.\137\
The Committee heard that the manner claim construction
determinations are currently reviewed increases litigation
costs, decreases certainty and predictability, and can prolong
settlement discussions.\138\
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\136\See, e.g., Paul M. Schoenhard, Reversing the Reversal Rate:
Using Real Property Principles to Guide Federal Circuit Patent
Jurisdiction, 17 Fordham Intel. Prop. Media & Ent. L.J. 299, 303 (2007)
(citing several studies of Federal Circuit reversal rates of claim
construction decisions, ranging from 33% to over 50%). Although the
exact number is subject to debate, it is safe to say the number is
relatively high, especially as compared to traditional reversal rates.
This is not entirely surprising since current Federal Circuit precedent
encourages the parties to contest the meaning of several different
claim terms both before the district court and the Federal Circuit. For
example, it is not uncommon for a party to appeal (or cross appeal) the
meaning of several terms, and if the Federal Circuit disagrees as to
just one, it is likely the case will need to be remanded to the
district court.
\137\See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1474 n. 2
(Fed. Cir. 1998) (opinion by Rader, J. dissenting, ``In the words of
United States District Court Judge Roderick McKelvie: `[I]n spite of a
trial judge's ruling on the meaning of disputed words in a claim,
should a three-judge panel of the Federal Circuit disagree, the entire
case could be remanded for retrial on [a] different [claim
interpretation]''', citing Elf Atochem North Am., Inc. v. Libbey-Owens-
Ford Co., 894 F.Supp. 844, 857, 37 USPQ2d 1065, 1075 (D. Del. 1995)).
\138\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 289-
291 (2007) (statement of John A. Squires, Esq., Chief Intellectual
Property Counsel, Goldman, Sachs & Co.).
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Discussion of changes
Section 8 of the Act amends subsection (c)(2) of section
1292 of title 28, giving district court judges discretion to
certify Markman claim construction orders for interlocutory
review. When such orders are certified, the Federal Circuit
must decide the appeal.
The Committee intends to transfer the discretion from the
Federal Circuit to the district court judge as to whether--and
when--a claim construction order should be decided on appeal.
The district court judges are in the best position to know when
the evidence adduced, and the arguments marshaled by the
litigants, have brought the case to a point at which a decision
by the appellate court on claim construction could best promote
resolution of the case. As a case management tool, the
Committee is confident that the interlocutory appeal of a
Markman decision could be both useful and effective. The
district court also has the discretion to stay the case pending
the appeal.
Venue for the USPTO
Background
In 1999, as part of the American Inventors Protection Act
(AIPA), Congress established that as a general matter the venue
of the USPTO is the district where it resides.\139\ The USPTO
currently resides in the Eastern District of Virginia. However,
Congress inadvertently failed to make this change uniform
throughout the entire patent statute, so that certain sections
of the patent statute (and one section of the trademark
statute) continue to allow challenge of USPTO decisions to be
brought in the District of Columbia, where the USPTO has not
resided for decades.
---------------------------------------------------------------------------
\139\See 35 U.S.C. Sec. 1(b).
---------------------------------------------------------------------------
Discussion of changes
Since the USPTO no longer resides in the District of
Columbia, the sections that authorized venue for litigation
against the USPTO are changed to reflect the venue where the
USPTO currently resides.
SECTION 9: PATENT AND TRADEMARK OFFICE REGULATORY AUTHORITY
Background
Although the USPTO has had the ability to set certain fees
by regulation, most fees (e.g., filing fee, issuance fee,
maintenance fees) are set by Congress.\140\ History has shown
that such a scheme does not allow the USPTO to respond promptly
to challenges facing it. The USPTO has argued for years that it
must have fee setting authority to administer properly the
agency and its growing workload.
---------------------------------------------------------------------------
\140\See, e.g., 35 U.S.C. Sec. 41.
---------------------------------------------------------------------------
Discussion of changes
Section 9 of the Act allows the USPTO to set or adjust all
of its fees, including those related to patents and trademarks,
so long as they do no more than reasonably compensate the USPTO
for the services performed. Prior to setting such fees, the
Director must give notice to, and receive input from, the
Patent or Trademark Public Advisory Committee (PPAC or TPAC).
The Director may also reduce fees for any given fiscal year,
but only after consultation with the PPAC or TPAC. Section 9
details the procedures for how the Director shall consult with
the PPAC and TPAC, including providing for public hearings and
the dissemination to the public of any recommendations made by
either Committee. Fees shall be prescribed by rule. Any
proposed fee change shall be published in the Federal Register
and include the specific rationale and purpose for the proposed
change. The Director must seek public comments for no less than
45 days. The Director must also notify, through the Chair and
Ranking Member of the Senate and House Judiciary Committees,
the Congress of any final decision regarding proposed fees.
Congress shall have no more than 45 days to consider and
comment on any proposed fee, but no proposed fee shall be
effective prior to the expiration of this 45-day period.
SECTION 10: RESIDENCY OF FEDERAL CIRCUIT JUDGES.
Background
Federal appellate judges in all of the regional circuits
must reside within the geographic region of the relevant
circuit's jurisdiction. A judge on the First Circuit, for
example, must reside in Massachusetts, Rhode Island, Maine, New
Hampshire or Puerto Rico. Judges on the District of Columbia
Circuit have no residency restrictions because it is not a
regional circuit. By contrast, since its creation in 1982, the
Federal Circuit has had an arbitrary restriction that all
active judges reside within 50 miles of the District of
Columbia.
Without casting any aspersions on the current occupants of
the Federal Circuit bench, the Committee believes that having
an entire nation of talent to draw upon in selecting these
judges could only be a benefit. The duty stations of the
Federal Circuit judges will, of course, remain in the District
of Columbia. Judges in regional circuits often travel
considerable distances for court sessions within the circuit,
far from their homes and chambers, and there is no practical
reason why Federal Circuit judges could not do so as well.
Discussion of changes
Section 10 of the Act eliminates the residency restriction
for Federal Circuit judges by repealing the relevant portion of
subsection 44(c) of title 28.
SECTION 11: APPLICANT QUALITY SUBMISSIONS
Search reports and explanations of submitted references
Background
In fiscal year 2006, the USPTO received over 440,000 patent
applications, representing an 8 percent increase from the
previous fiscal year. This rate of increase is expected to
continue, a testament to U.S. inventiveness and a growing
burden on the USPTO.
Patent examiners at the USPTO are responsible for
determining whether the inventions claimed in patent
applications meet the statutory requirements of novelty and
non-obviousness.\141\ Unfortunately, approximately 25% of the
applications filed at the USPTO do not discuss or disclose any
prior art.\142\ Many applicants do not search for prior art
before filing their application.\143\ An examiner has only a
limited amount of time to search for prior art, and the
applicant is often in the best position to know the invention
and the relevant art that may apply. At the other extreme,
approximately 25% of the applications cite twenty or more
references, typically with little or no explanation as to how
the prior art is relevant, which is equally unhelpful to the
examiner.\144\ Although patent examiners have excellent
electronic search tools, and are well trained in the art of
searching, added assistance from applicants citing relevant
prior art and explaining how it applies to their applications
will improve the quality of issued patents. In addition,
requiring applicants to do their own initial research and
disclosure will improve the quality of the application.
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\141\35 U.S.C. Sec. 131 provides: ``The Director shall cause an
examination to be made of the application and the alleged new
invention; and if on such examination it appears that the applicant is
entitled to a patent under the law, the Commissioner shall issue a
patent therefore.'' In practice, the Director empowers a ``patent
examiner'' to examine the application and determine whether it meets
the statutory requirements and USPTO guidelines for receiving a patent
grant. See Christopher T. Kent, Reducing The Scope Of Patent Protection
And Incentives For Innovation Through Unfair Application Of Prosecution
History Estoppel And The Recapture, 10 Geo. Mason L. Rev. 595, 596 n.7
(2002).
\142\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 10-11
(2007) (statement of Jon W. Dudas, Under Secretary of Commerce for
Intellectual Property and Director of the USPTO).
\143\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 267
(2007) (statement of Jon W. Dudas, Under Secretary of Commerce for
Intellectual Property and Director of the USPTO).
\144\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 10-11
(2007) (statement of Jon W. Dudas, Under Secretary of Commerce for
Intellectual Property and Director of the USPTO).
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Discussion of changes\145\
Section 11 of the Act gives the Director express authority
to require by regulation the submission of search reports and
other relevant information as the Director determines. Failure
to comply with such requirements shall constitute abandonment
of the applications.
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\145\The USPTO strongly advocated for inclusion of ``applicant
quality submissions'' provision in the bill, stating it was one of its
highest priorities in order to improve the patent examination process
and the quality of issued patents. See Patent Reform: The Future of
American Innovation: Hearing on S. 1145 Before the Senate Comm. on the
Judiciary, 110th Cong. 265-267 (2007) (statement of Jon W. Dudas, Under
Secretary of Commerce for Intellectual Property and Director of the
USPTO).
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The Act exempts the truly small inventor (defined in the
Act as a ``micro-entity'') from regulations prescribed pursuant
to this authority.
Micro-entity
Background
As part of the on-going effort to nurture U.S. innovation,
Congress has long recognized that certain groups, including
independent inventors, small business concerns, and non-profit
organizations (collectively referred to as ``small business
entities'') should not bear the same financial burden for
filing patent applications as larger corporate interests. The
current statute provides for a significant reduction in certain
fees for small business entities.\146\ The Committee was made
aware, however, that there is likely a benefit to describing--
and then accommodating--a group of inventors who are even
smaller, in order to be sure that the USPTO can tailor its
requirements, and its assistance, to the people with very
little capital, and just a few inventions, as they are starting
out.
---------------------------------------------------------------------------
\146\See 35 U.S.C. Sec. 41(h).
---------------------------------------------------------------------------
Discussion of changes
This section of the Act defines an even smaller group--the
micro-entity--which comprises only true, independent inventors.
This section exempts micro-entities from the requirement of
submitting the search reports and other information that the
Director may require under Section 11 of the Act. The Committee
expects that the USPTO will make further accommodations under
its authority in recognition of the special status of micro-
entities.
SECTION 12: INEQUITABLE CONDUCT
Background
Candor and truthfulness are essential to the functioning of
the patent application system. The application process is
conducted ex parte; only the patent applicant participates in
the patent prosecution proceeding before the USPTO. The
agency's rules require applicants to be honest and forthcoming
and to disclose fully all relevant information to the USPTO
during that proceeding.\147\ The judicially-created
``inequitable conduct'' doctrine is designed to enforce those
requirements by permitting a judge to render a patent
unenforceable, even if it is valid and infringed, if the patent
was obtained by misleading statements or omissions of material
information which were intended to deceive the USPTO.\148\
Courts have developed a two-part test in which inequitable
conduct is found when (i) the undisclosed or misrepresented
information was ``material,'' and (ii) it was not disclosed or
was misrepresented with an ``intent to deceive'' the
USPTO.\149\
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\147\See 37 C.F.R. Sec. 1.56.
\148\See Dippin' Dots, Inc. v. Mosey, 476 F.3d 1337, 1345 (Fed.
Cir. 2007) (``a patent may be rendered unenforceable for inequitable
conduct if an applicant, with intent to mislead or deceive the
examiner, fails to disclose material information or submits materially
false information to the PTO during prosecution'') (citations omitted).
\149\See J.P. Stevens & Co., Inc., v. Lex Tex Ltd., Inc., 747 F.2d
1553, 1560 (Fed. Cir. 1984), cert. denied, 474 U.S. 822 (1985).
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The Act did not address inequitable conduct upon
introduction, but during the Committee process the Committee
heard several concerns about the doctrine as it has developed
in the Federal Circuit.\150\ First, the Federal Circuit has
failed to establish one clear standard of materiality for
inequitable conduct purposes.\151\ Having multiple materiality
standards is hardly helpful to the district courts that are
charged with making inequitable conduct determinations in the
first instance, and patent holders are left with less than
clear guidance about what they should disclose to the
USPTO.\152\ Second, direct evidence of an intent to deceive is
uncommon, so some courts collapse the issue of intent into the
issue of materiality, so that intent to deceive is often
inferred from materiality.\153\ Third, if inequitable conduct
is found, judges have no discretion as to the remedy--no claim
of the patent can ever be enforced against anyone.\154\
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\150\See Perspectives on Patents: Hearing Before the Subcomm. on
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong.
45-71 (2005) (statement of Robert A. Armitage, Senior Vice President
and General Patent Counsel, Eli Lilly and Company).
\151\See Digital Control v. Charles Machine Works, 437 F.3d 1309
(Fed. Cir. 2006), where the Federal Circuit held there is no single
standard to define ``materiality'' for inequitable conduct. In fact,
the Federal Circuit has discussed five different standards for
materiality, stating that there is ``no reason to be bound by any
single standard'': (1) the objective ``but for'' standard, where the
misrepresentation was so material that the patent should not have
issued; (2) the subjective ``but for'' test, where the
misrepresentation actually caused the examiner to approve the patent
application when he would not otherwise have done so; (3) the ``but it
may have'' standard, where the misrepresentation may have influenced
the parent examiner in the course of prosecution; (4) the old Rule 56
standard where it is likely a reasonable examiner would have considered
the information important in deciding whether to issue of the patent;
and (5) the new Rule 56 standard where the information is not
cumulative and (i) establishes a prima facie case of unpatentability
(either alone or in combination with other references), or (ii) refutes
or is inconsistent with a position the applicant has taken (the new
Rule 56 standard). See Digital Control at 1314-16; see also American
Hoist & Derrick Co. v. Sowa & Sons, Inc., 725 F.2d 1350, 1362 (Fed.
Cir. 1984).
\152\As a practical matter, this has led to two types of conduct
that frequently occur during patent prosecution. Either patent holders
(i) ``dump'' everything they have on the USPTO (sometimes many boxes of
printed documents), or (ii) do not search the prior art, and thus in
turn have little or nothing to give the USPTO. Neither approach is
helpful to the patent examiner or the patent system in general.
\153\See In re Metoprolol Succinate Patent Litigation, 494 F.3d
1011, 1019 (Fed. Cir. 2007) (``We have stated that intent need not, and
rarely can, be proven by direct evidence. Rather, intent to deceive is
generally inferred from the facts and circumstances surrounding the
applicant's overall conduct.'') (citations and quotations omitted).
\154\See Impax Laboratories, Inc. v. Aventis Pharmaceuticals Inc.,
468 F.3d 1366, 1375 (Fed. Cir. 2006) (citing Kingsdown Med.
Consultants, Ltd. v. Hollister, Inc., 863 F.2d 867, 877 (Fed. Cir.
1988) (en banc)).
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Discussion of changes
Section 12 of the Act inserts a new section 298 of title 35
that codifies and improves the doctrine of inequitable conduct.
Subsection (a) of section 298 requires a party advancing an
inequitable conduct argument to prove that claim by clear and
convincing evidence. Subsection (b) provides that information
is ``material'' if a reasonable examiner would consider the
non-cumulative information important in deciding whether to
allow the patent application.\155\ Subsection (c) permits an
intent to deceive the USPTO to be inferred, but it cannot be
inferred solely on the basis of gross negligence of the
applicant (or its representative), or on the materiality of the
information misrepresented or not disclosed. Subsection (d)
requires the party asserting the defense or claim to plead with
particularity in accordance with Rule 9(b) of the Federal Rules
of Civil Procedure.\156\
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\155\The Committee noted that certain court decisions appear to
emphasize improperly the first part of this definition (reasonably
important to an examiner) without giving necessary consideration to the
latter part of the definition (in deciding whether to allow the
patent). See, e.g., Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223
(Fed. Cir. 2007); McKesson Information Solutions, Inc. v. Bridge
Medical, Inc., 487 F.3d 897 (Fed. Cir. 2007); Ferring v. Barr Labs, 437
F.3d 1309 (Fed. Cir. 2006). As a result, when improperly applied, the
materiality standard becomes essentially a relevancy standard. The
codification of the definition makes clear the entire definition must
be satisfied.
\156\The Committee heard some concerns that inequitable conduct is
``over plead'' and a tool of harassment. Presumably the requirements of
pleading with particularity and clear and convincing evidence should
help ameliorate any such concerns.
---------------------------------------------------------------------------
Finally, subsection (e) grants the court discretion to
fashion the appropriate remedy if it finds inequitable conduct,
which can include holding one, more than one, or all of the
claims unenforceable, and/or that the patent holder is not
entitled to the equitable relief of an injunction.
The Committee views it as axiomatic that applicants should
be honest and forthcoming in their dealings with the USPTO. The
rules governing such conduct, however, should not chill
meaningful disclosures with the Office for fear of a future
allegation. New section 298 is intended to balance these
interests.
SECTION 13: AUTHORITY OF THE DIRECTOR OF THE PATENT AND TRADEMARK
OFFICE TO ACCEPT LATE FILINGS
Background
There are numerous deadlines a patent applicant must comply
with during prosecution and subsequent to the patent's
issuance. The Director has the authority to accept late filings
(including payment of fees) in only a limited number of
situations.\157\
---------------------------------------------------------------------------
\157\See, e.g., 35 U.S.C. Sec. Sec. 41(a)(7) (revival of an
application for unintentional delay); 41(c)(1) (reinstatement of a
patent for unintentional delay); 111(a)(4) (revival for unintentional
or unavoidable delay in submitting the filing fee or inventor's oath);
133 (revival if failure to prosecute was unavoidable).
---------------------------------------------------------------------------
Discussion of changes
Section 13 of the Act expands the Director's authority to
accept any late-filed applications or other filings, if the
filer satisfies the Director that the delay was unintentional.
Any request by an applicant for the Director to accept a late-
filed application under this section must be filed within 30
days of the missed deadline and must demonstrate that the delay
was unintentional. The Director has the discretion to decide
whether to grant such requests and the Director's decision is
not appealable.
SECTION 14: LIMITATION ON DAMAGES AND OTHER REMEDIES WITH RESPECT TO
PATENTS FOR METHODS IN COMPLIANCE WITH CHECK IMAGING METHODS
Background
In 1994, the Federal Reserve proposed the idea of an
electronic check image processing, archival, and retrieval
system. In 1996, the American National Standard for Financial
Image Interchange issued its architecture and design
specification for such a system. The Federal Reserve
implemented this technology in a check truncation pilot in
1999. Years later, this evolving technology became standard
practice in the banking industry, and its importance became
particularly noted in the days after September 11, 2001, when
transporting paper checks by airplane was impossible for
several days.\158\ In 1999 and 2000, several inventors sought a
series of patents relating to a system/process for imaging and
storing documents, building their technology around what the
government was already doing. The patent claims relate to a
three-tiered system for imaging, transferring, and storing
(archiving) paper checks tendered for processing via the
electronic payment system.
---------------------------------------------------------------------------
\158\See Mark Hargrave, Check 21: A Year in the Life, 38 UCC L.J. 3
Art. 3 (2006).
---------------------------------------------------------------------------
The 108th Congress enacted the Check 21 Act of 2003, P.L.
108-100,\159\ which allowed the recipient of a paper check to
create a digital version to store and transfer (referred to as
a ``substitute check''),\160\ thereby eliminating the need for
further handling of the physical document.\161\ The Check 21
Act requires all banks to recognize and accept the digital
images of checks it receives from other banks.\162\ The
financial services industry (including banks) and their
technology providers must be able to implement the Check 21
Act, which permits electronic check transfer based on
technology developed by the federal government.\163\
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\159\The Check Clearing for the 21st Century Act (Check 21 Act),
P.L. 108-100, 117 Stat. 1177 (2003) (codified at 12 U.S.C.
Sec. Sec. 5001-5018) (2000).
\160\See Jeffrey Barry, The Check Clearing For The 21st Century Act
(``Check 21''), 24 Ann. Rev. Banking & Fin. L. 130, 132 (2005).
\161\For a thorough discussion of the Check 21 Act, see H.R. Rep.
108-132 (2003) and H.R. Rep. 108-291 (2003).
\162\See Mark Hargrave, Check 21: A Year in the Life, 38 UCC L.J. 3
Art. 3 (2006).
\163\See Patent Reform: The Future of American Innovation: Hearing
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. 291
(2007) (statement of John A. Squires, Esq., Chief Intellectual Property
Counsel, Goldman, Sachs & Co.), explaining that the manner in which
commercial banks currently process checks is effectively prescribed by
the Check 21 Act.
---------------------------------------------------------------------------
Discussion of changes
Because Congress has mandated implementation of the Check
21 Act, the Committee accepted an amendment during the mark-up
of the bill that declares practicing of the Check 21 industry
standard should not constitute patent infringement. Section 14
of the Act amends section 287 of title 35 to limit the remedies
available against a financial institution with respect to a
check imaging and archival method or system that is called for
under the Check 21 Act, but not for any other uses of those
methods or systems. This amendment shall apply to any civil
action for patent infringement pending or filed on or after the
date of enactment of this Act.
SECTION 15: PATENT AND TRADEMARK OFFICE FUNDING.
The USPTO collects user fees, but it does not retain and
spend those fees. Instead, the fees are deposited in the
Treasury and the USPTO is funded by annual Congressional
appropriations. Although Congress has fully funded the user
fees to USPTO for the last several years, it has not always
done so--resulting in what is commonly termed ``fee
diversion.'' This lack of connection between the monies flowing
into the agency and those available for expenditure has,
according to the USPTO, contributed to (i) the growing number
of unexamined patent applications (``backlog''), and (ii) the
increased time it takes to have a patent application examined
(``pendency'').\164\ The current backlog of unexamined
applications is approximately 730,000;\165\ average pendency to
have a patent examined is over 31 months.\166\ The USPTO has
explained that the uncertainty of the annual funding process
and the recurring possibility of fee diversion severely
restricts its ability to plan strategically for long-term
personnel and technology needs and to implement procedures to
ensure that only high quality patents are awarded. In addition,
the Committee heard that many patent users would be willing to
pay increased fees for better examination, but only on the
condition that all of those fees go to the USPTO, and that none
be diverted.\167\
---------------------------------------------------------------------------
\164\See Perspectives on Patents: Harmonization and Other Matters:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 45-47 (2005) (statement of Q. Todd
Dickinson, Former Under Secretary of Commerce for Intellectual Property
and Director of the United States Patent and Trademark Office).
\165\See GAO 07-1102, Hiring Efforts Are Not Sufficient to Reduce
the Patent Application Backlog, 1 (September, 2007). The GAO Report
explains that since fiscal year 2002 alone, the backlog has increased
by nearly 73%. Moreover, the USPTO predicts the backlog could approach
1.4 million by 2012 unless something is done. See USPTO Strategic Plan,
2007-2112 at 11, available at http://www.uspto.gov/web/offices/com/
strat2007/stratplan2007-2012.pdf.
\166\See USPTO Strategic Plan, 2007-2112 at 6, available at http://
www.uspto.gov/web/offices/com/strat2007/stratplan2007-2012.pdf.
\167\See Perspectives on Patents: Harmonization and Other Matters:
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm.
on the Judiciary, 109th Cong. 45-47 (2005) (statement of Q. Todd
Dickinson, Former Under Secretary of Commerce for Intellectual Property
and Director of the United States Patent and Trademark Office).
---------------------------------------------------------------------------
Discussion of changes
Section 15 of the Act establishes a revolving fund that
permits the USPTO to retain the fees it collects without
relying on annual appropriations. Reporting, notification, and
auditing requirements are put in place to assure fiscal
discipline, responsibility and accountability.
SECTION 16: TECHNICAL AMENDMENTS
Section 16 of the Act contains technical amendments
consistent with the Act to improve the organization of the
patent statute.
SECTION 17: EFFECTIVE DATE; RULE OF CONSTRUCTION
Section 17 of the Act provides that, unless otherwise
provided, the Act takes effect 12 months after the date of
enactment and applies to any patent issued on or after that
effective date. It also provides that the enactment of section
102(b)(3) of title 35, under section (2)(b) of the Act is done
with the same intent to promote joint research activities that
was expressed in the Cooperative Research and Technology
Enhancement Act of 2004 (Public Law 108-453) and shall be
administered in a manner consistent with such.
II. History of the Bill and Committee Consideration
A. INTRODUCTION OF THE BILL
On August 3, 2006, in the 109th Congress, Senator Hatch
introduced the Patent Reform Act of 2006 (S. 3818) with Senator
Leahy. It was referred to the Committee on the Judiciary, where
it stayed until the end of the session.
On April 18, 2007, in the 110th Congress, Senator Leahy,
along with Senator Hatch, introduced the Patent Reform Act of
2007. Senator Schumer, Senator Whitehouse, and Senator Cornyn
were original cosponsors of the bill; Senator Craig, Senator
Crapo, Senator Bennett, Senator Salazar, and Senator Smith
later joined as cosponsors. The bill was referred to the
Committee on the Judiciary, and was first placed on the
Committee's agenda on June 14, 2007.
B. HEARINGS
The Senate Committee on the Judiciary held six hearings on
patent reform from 2005 through 2007.
On April 25, 2005, the Senate Committee on the Judiciary
Subcommittee on Intellectual Property held a hearing on
``Perspectives on Patents.'' This first hearing was attended by
Chairman Hatch, Ranking Member Leahy, Senator Cornyn, and
Senator Feinstein. Testifying on Panel I was the Honorable Jon
W. Dudas, Under Secretary of Commerce for Intellectual
Property, and Director, U.S. Patent and Trademark Office.
Testifying on Panel II were Richard C. Levin, President, Yale
University, and Co-Chair, Committee on Intellectual Property
Rights in the Knowledge-Based Economy, Board on Science,
Technology, and Economic Policy, National Research Council; and
Mark B. Myers, Visiting Executive Professor, Management
Department, Wharton Business School, University of
Pennsylvania, and Co-Chair, Committee on Intellectual Property
Rights in the Knowledge-Based Economy, Board on Science,
Technology, and Economic Policy, National Research Council.
Testifying on Panel III were William Parker, Chief Executive
Office and Director of Research, Diffraction, Ltd.; Joel L.
Poppen, Deputy General Counsel, Micron Technology, Inc.; David
Simon, Chief Patent Counsel, Intel Corporation; Dean Kamen,
President, DEKA Research and Development Corp.; Robert A.
Armitage, Senior Vice President and General Counsel, Eli Lilly
and Company; and Michael K. Kirk, Executive Director, American
Intellectual Property Law Association (AIPLA). The following
materials were submitted for the record: Comments of the
National Association of Patent Practitioners on the Proposed
Patent Act of 2005, submitted by Tony Venturino, President, on
May 6, 2005; prepared statement of Jon W. Dudas; prepared
statement of Richard C. Levin; prepared statement of Mark B.
Myers; prepared statement of William Parker; prepared statement
of Joel L. Poppen; prepared statement of David Simon; prepared
statement of Dean Kamen; prepared statement of Robert A.
Armitage; and prepared statement of Michael K. Kirk.
On June 14, 2005, the Senate Committee on the Judiciary
Subcommittee on Intellectual Property held a hearing on
``Patent Law Reform: Injunctions and Damages.'' This second
hearing was attended by Chairman Hatch, Ranking Member Leahy,
and Senator Kennedy. The following witnesses testified: Carl
Gulbrandsen, Managing Director, Wisconsin Alumni Research
Foundation (WARF); Jonathan Band, Counsel on behalf of Visa and
the Financial Services Roundtable; Mark A. Lemley, Professor of
Law, Stanford Law School; Jeffrey P. Kushan, Sidley Austin
Brown and Wood, LLP; Chuck Fish, Vice President and Chief
Patent Counsel, Time Warner, Inc.; and J. Jeffrey Hawley,
President, Intellectual Property Owners Association, and Vice
President and Director, Patent Legal Staff, Eastman Kodak
Company. The following materials were submitted for the record:
prepared statement of Carl Gulbrandsen; the prepared statement
of Jonathan Band; the prepared statement of Mark A. Lemley; the
prepared statement of Jeffrey P. Kushan; the prepared statement
of Chuck Fish; and the prepared statement of J. Jeffrey Hawley.
On July 26, 2005, the Senate Committee on the Judiciary
Subcommittee on Intellectual Property held a hearing on
``Perspectives on Patents: Harmonization and Other Matters.''
Chairman Hatch attended this hearing and Ranking Member Leahy
submitted a statement for the record. The following witnesses
testified: The Honorable Gerald J. Mossinghoff, former
Assistant Secretary of Commerce and Commissioner of Patents and
Trademarks, and Senior Counsel, Oblon, Spivak, McClelland,
Maier & Neustadt; The Honorable Q. Todd Dickinson, former Under
Secretary of Commerce for Intellectual Property and Director of
the U.S. Patent and Trademark Office, and Vice President and
Chief Intellectual Property Counsel, General Electric Company;
Marshall C. Phelps, Corporate Vice President and Deputy General
Counsel for Intellectual Property, Microsoft Corporation;
Christine Siwik, Partner, Rakoczy Molino Mazzochi Siwik, LLP;
Charles E. Phelps, Provost, University of Rochester, on behalf
of the Association of American Universities, American Council
on Education, Association of American Medical Colleges and
Council on Governmental Relations; and David Beier, Senior Vice
President for Global Government Affairs, Amgen. The following
materials were submitted for the record: prepared statement of
David Beier; article, Bureau of National Affairs, Inc., Patent,
Trademark & Copyright Journal, C. Boyden Gray, former White
House Counsel and Partner, Wilmer Cutler Pickering Hale and
Dorr; prepared statement of Q. Todd Dickinson; prepared
statement of Gerald J. Mossinghoff; prepared statement of
Charles E. Phelps; prepared statement of Marshall C. Phelps;
prepared statement of Christine J. Siwik; and prepared
statement of Teva North America, Steven J. Lee, Partner, Kenyon
& Kenyon, Thomas L. Creel, Partner, Goodwin Procter LLP,
Outside Patent Counsel.
On May 23, 2006, the Senate Committee on the Judiciary
Subcommittee on Intellectual Property held a hearing on
``Perspectives on Patents: Post-Grant Review Procedures and
Other Litigation Reforms.'' Chairman Hatch and Ranking Member
Leahy attended, and the following witnesses testified: Mark
Chandler, Senior Vice President and General Counsel, Cisco
Systems, Inc.; Philip S. Johnson, Chief Patent Counsel, Johnson
& Johnson; Nathan P. Myhrvold, Chief Executive Officer,
Intellectual Ventures; John R. Thomas, Professor of Law,
Georgetown University Law Center; and Andrew Cadel, Managing
Director, Associate General Counsel, and Chief Intellectual
Property Counsel, JP Morgan Chase. The following materials were
submitted for the record: prepared statement of Andrew Cadel;
prepared statement of Mark Chandler; prepared statement of Jack
Haken, Vice President, Intellectual Property & Standards, U.S.
Phillips Corporation; prepared statement of Philip S. Johnson;
prepared statement of Nathan P. Myhrvold; and prepared
statement of John R. Thomas.
On May 1, 2007, the Senate Committee on the Judiciary held
a hearing on ``Process Patents.'' This hearing was attended by
Chairman Leahy, Ranking Member Specter, Senator Cardin, Senator
Whitehouse, Senator Graham, and Senator Coburn. Senator
Feinstein submitted a statement for the record. The following
witnesses testified: Wayne Herrington, Assistant General
Counsel, United States International Trade Commission; John R.
Thomas, Professor of Law, Georgetown University Law Center;
Mike Kirk, Executive Director, American Intellectual Property
Law Association; and Christopher A. Cotropia, Professor of Law,
Richmond School of Law. The following materials were submitted
for the record: prepared statement of Wayne Herrington;
prepared statement of John R. Thomas; prepared statement of
Mike Kirk; prepared statement of Christopher A. Cotropia;
letter from the United Steel Workers to Senator Leahy and
Senator Specter dated February 6, 2007; letter from the AFL-CIO
to Senator Leahy and Senator Specter dated February 21, 2007;
and an article by Mickey Kantor and Theodore B. Olsen titled
``Pet Food and Pool Cues,'' published May 13, 2006.
On June 6, 2007, the Senate Committee on the Judiciary held
its sixth and final hearing on patent reform, entitled ``Patent
Reform: The Future of American Innovation.'' Senator Leahy,
Senator Specter, Senator Cardin, Senator Whitehouse, Senator
Hatch, and Senator Coburn attended the hearing. Testifying on
Panel I was the Honorable Jon W. Dudas, Undersecretary of
Commerce for Intellectual Property, Director of the U.S. Patent
and Trademark Office. Testifying on Panel II were Bruce G.
Bernstein, Chief Intellectual Property and Licensing Officer,
InterDigital Communications Corporation; Mary Doyle, Senior
Vice President, General Counsel and Secretary, Palm, Inc.; John
A. Squires, Chief Intellectual Property Counsel, Goldman, Sachs
& Co.; and Kathryn L. Biberstein, Senior Vice President,
General Counsel and Secretary, and Chief Compliance Officer,
Alkermes, Inc. The following materials were submitted for the
record: letter from the Department of Commerce to Senator Leahy
and Senator Specter dated May 18, 2007; letter from BIO to
Senator Leahy and Senator Specter dated May 29, 2007; letter
from Chief Judge Paul R. Michel of the Federal Circuit to
Congressman Conyers dated May 21, 2007; letter from the
National Association of Manufacturers to Congressman Conyers
and Congressman Smith dated May 18, 2007; letter from Chief
Judge Paul R. Michel of the Federal Circuit to Senator Leahy
and Senator Specter dated May 3, 2007; the prepared statement
of Jon W. Dudas; the prepared statement of Bruce G. Bernstein;
prepared statement of Mary Doyle; prepared statement of John A.
Squires; and prepared statement of Kathryn L. Biberstein.
C. LEGISLATIVE HISTORY
On June 21, 2007, the Senate Judiciary Committee first
considered S. 1145. Senator Leahy offered a Manager's
Amendment, which was adopted by unanimous consent. This
Manager's Amendment made several changes including eliminating
inter partes reexamination; making denials of PGR petitions
discretionary and not reviewable; raising the standard for
initiating PGR to requiring both a showing of likely economic
harm and notice of infringement; making technical changes
regarding USPTO venue from the District of Columbia to the
Eastern District of Virginia; limiting the venue choices
against foreign defendants; clarifying that the apportionment
language does not apply to lost profits calculations; providing
that false substitute statements in 115 are subject to the same
criminal penalties as false inventor oaths; eliminating the
requirement that to request a derivation proceeding, the
inventor had to have filed a patent application prior to the
publication of the allegedly derived application; clarifying
the one a year grace period set forth in 102; eliminating the
DC-area residency requirement for Federal Circuit judges;
establishing a new ``micro-entity'' status for truly small
inventors; eliminating the provision in the Act that would have
expanded the prior user rights defense to apply to all patents;
and providing that a report on prior user rights be provided to
Congress.
On July 12, 2007, the Senate Judiciary Committee considered
S. 1145 as previously amended on June 21, 2007. The Committee
accepted Senator Leahy's Second Manager's Amendment by
unanimous consent. This Manager's Amendment made several
changes to post-grant review, including for both 1st and 2nd
window raising the standard to initiate a PGR to ``substantial
new question of patentability''; for both windows prohibiting
the filing of a PGR petition by a party that has instituted a
district court action challenging the validity of the same
patent; for both windows providing for settlement; for 2nd
window, providing that the challenged patent has a presumption
of validity; and for 2nd window requiring that a PGR petition
be filed within 12 months of receiving notice of infringement.
This Manager's Amendment also made changes to venue including
clarifying that the new section would apply to declaratory
judgment actions, as well as making changes regarding venue for
foreign defendants. This Manager's Amendment also expanded who
has standing to assert the prior user rights defense to include
affiliates of the person who performed the acts that constitute
the defense. This Manager's Amendment also eliminated the
provision requesting a reexamination study; gave the USPTO fee
setting authority; reduced the maximum number of years (from 6
to 2) of past damages that a patentee could recover where the
patent was not subject to the marking requirements of 287(a).
This Manager's Amendment also added the phrase ``otherwise
available to the public'' to 102 to make clear that secret
collaborative agreements, which are not available to the
public, are not prior art. This Amendment added the applicant
quality submission (AQS) provision to the Act; clarified the
damage language regarding apportionment and the entire market
value rule; and gave district court judges discretion as to
when to certify claim construction decisions for interlocutory
appeal, and when to stay the underlying case pending such
appeal. Finally, this Manager's Amendment eliminated the
provision in the Act giving the USPTO substantive rulemaking
authority.
Senator Specter offered an amendment that changed the venue
provision for civil actions relating to patents in several
respects. The amendment prohibits a party from manufacturing
venue by assignment, incorporation or otherwise. The amendment
limits venue in patent infringement and declaratory judgment
actions to the district in which (1) the defendant has its
principal place of business or is incorporated, or, for a
foreign defendant, where its primary United States subsidiary
is located; (2) the defendant has committed substantial acts of
infringement if the defendant has a regular and established
physical facility in that district that constitutes a
substantial portion of the defendant's operations, or (3) the
primary plaintiff resides if the plaintiff is a university or
an individual inventor that qualifies as a micro-entity. The
Specter venue amendment also provided for transfer of cases in
limited situations where appropriate.
The Committee concluded consideration of S. 1145 at a
business meeting on July 19, 2007, at which 10 amendments were
considered.
Senator Leahy and Senator Hatch offered a Third Managers'
Amendment adopted by unanimous consent that made changes
including clarifying that the venue provision applied to non-
incorporated businesses; restoring the willfulness section of
the bill that was inadvertently struck in the Second Managers'
Amendment due to a clerical error; narrowing the patents
subject to 2nd window post-grant review to those that issue
after the effective date of that section of the Act, as well as
those that would have been subject to inter partes
reexamination; making clear that PGR Board decisions were only
appealable to the Federal Circuit and not to a federal district
court; clarifying the burden of proof required to invalidate a
patent under PGR 2nd window; and making a technical change to
the conforming amendment in Section 9 regarding USPTO
regulatory authority.
Senator Specter offered an amendment that would have
eliminated best mode as grounds for invalidating a patent. This
amendment was rejected on a roll call vote. The vote record is
as follows:
YEAS (9)--Brownback (Kan.), Coburn (Okla.), Cornyn (Texas),
Feinstein (Calif.), Graham (S.C.), Hatch (Utah), Kyl (Ariz.),
Sessions, J. (Ala.), Specter (Pa.).
NAYS (10)--Biden (Del.), Cardin (Md.), Durbin (Ill.),
Feingold (Wis.), Grassley (Iowa), Kennedy (Mass.), Kohl (Wis.),
Leahy (Vt.), Schumer (N.Y.), Whitehouse (R.I.).
Senator Kennedy offered an amendment that would give the
Director of the United States Patent and Trademark Office the
discretion to accept late filings in limited circumstances when
the delay is unintentional. The amendment was agreed to by
unanimous consent; Senator Grassley and Senator Sessions later
changed their votes to no votes, which did not affect the
outcome of the vote.
Senator Sessions offered an amendment that would limit
liability for certain check imaging patents against certain
potential defendants. The amendment was agreed to by unanimous
consent.
Senator Coburn offered an amendment that would eliminate
fee diversion at the United States Patent and Trademark Office.
The amendment was agreed to by a voice vote.
Senator Hatch offered an amendment that would codify and
raise the standard to prove inequitable conduct, including
defining materiality as information that is considered would
render a claim of the patent invalid. Senator Leahy then
offered a second degree amendment that instead would define
materiality as information that a patent examiner would
consider important in deciding whether to allow the patent. The
second degree amendment was accepted on a roll call vote. The
vote record is as follows:
YEAS (10)--Cardin (Md.), Cornyn (Texas), Durbin (Ill.),
Feingold (Wis.), Graham (S.C.), Kennedy (Mass.), Kohl (Wis.),
Leahy (Vt.), Schumer (N.Y.), Whitehouse (R.I.).
NAYS (9)--Biden (Del.), Brownback (Kan.), Coburn (Okla.),
Feinstein (Calif.), Grassley (Iowa), Hatch (Utah), Kyl (Ariz.),
Sessions (Ala.), Specter (Pa.).
Senator Kyl offered an amendment that would have modified
the bill's damages language by defining how a reasonable
royalty should be calculated as what a willing licensor/
licensee would have voluntarily negotiated at the time of the
infringement. This amendment was rejected on a roll call vote,
with 2 not voting. The vote record was as follows:
YEAS (7)--Brownback (Kan.), Coburn (Okla.), Feingold
(Wis.), Grassley (Iowa), Kennedy (Mass.), Kyl (Ariz.), Specter
(Pa.).
NAYS (10)--Biden (Del.), Cardin (Md.), Cornyn (Texas),
Durbin (Ill.), Hatch (Utah), Kohl (Wis.), Leahy (Vt.), Sessions
(Ala.), Schumer (N.Y.), Whitehouse (R.I.).
Senator Kyl offered an amendment that would strike Section
4 (damages) from the bill. This amendment was rejected on a
roll call vote, with 1 not voting. The vote record is as
follows:
YEAS (7)--Biden (Del.), Brownback (Kan.), Coburn (Okla.),
Feingold (Wis.), Grassley (Iowa), Kyl (Ariz.), Specter (Pa.).
NAYS (11)--Cardin (Md.), Cornyn (Texas), Durbin (Ill.),
Feinstein (Calif.), Hatch (Utah), Kennedy (Mass.), Kohl (Wis.),
Leahy (Vt.), Schumer (N.Y.), Sessions (Ala.), Whitehouse
(R.I.).
Senator Coburn offered an amendment that would strike
Section 5 (post-grant review) from the bill, and would require
the USPTO and the Department of Justice conduct a 6-month study
of post-grant review systems used by foreign countries. This
amendment was rejected by a roll call vote, with 1 not voting.
The vote record is as follows:
YEAS (5)--Brownback (Kan.), Coburn (Okla.), Feingold
(Wis.)*, Grassley (Iowa), Kyl (Ariz.).
NAYS (13)--Cardin (Md.), Cornyn (Texas), Durbin (Ill.),
Feinstein (Calif.), Graham (S.C.), Hatch (Utah), Kennedy
(Mass.), Kohl (Wis.), Leahy (Vt.), Schumer (N.Y.)*, Sessions,
J. (Ala.), Specter (Pa.), Whitehouse (R.I.).
The Committee voted the Patent Reform Act of 2007 as
amended to be reported favorably by a roll call vote of 13 yeas
to 5 nays, with 1 not voting.
YEAS (13)--Cardin (Md.), Cornyn (Texas), Durbin (Ill.),
Feinstein (Calif.), Graham (S.C.), Hatch (Utah), Kennedy
(Mass.), Kohl (Wis.), Leahy (Vt.), Schumer (N.Y.)*, Sessions,
J. (Ala.), Specter (Pa.), Whitehouse (R.I.).
NAYS (5)--Brownback (Kan.), Coburn (Okla.), Feingold
(Wis.)*, Grassley (Iowa), Kyl (Ariz.).
III. Section-by-Section Summary of the Bill
Sec. 1. Short title; table of contents
This Act may be cited as the Patent Reform Act of 2007.
Sec. 2. Right of the first inventor to file
This section, inter alia, converts the United States'
patent system into a first-inventor-to-file system, giving
priority to the earlier-filed application for a claimed
invention. Interference proceedings are replaced with a
derivation proceeding to determine whether the applicant of an
earlier-filed application was the proper applicant for the
claimed invention. This section also provides for a grace
period for publicly disclosing the subject matter of the
claimed invention, without losing priority.
Specifically, this section makes the following amendments:
Subsection (a)--Sec. 100 is amended to include definitions
for additional terms.
Subsection (b)--Sec. 102 is amended as follows:
(a)(1) A patent shall not issue for a claimed invention if
the invention was patented, described in a printed publication,
or in public use, on sale or otherwise available to the public
(A) more than a year before the filing date, or (B) anytime
prior to the filing date if not through disclosure by the
inventor or joint inventor, or by others who obtained the
subject matter, directly or indirectly, from the inventor or
joint inventor. A one-year grace period is provided for an
inventor or joint inventor that discloses the subject matter of
the claimed invention.
(2) A patent also may not be issued if the claimed
invention was described in a patent or patent application by
another inventor filed prior to the filing date of the claimed
invention.
(b) Exceptions:
Subject matter that would otherwise qualify as prior art
under (a)(1)(B) shall not be prior art if the subject matter
had, before such disclosure, been publicly disclosed by the
inventor, joint inventor, or others who obtained the subject
matter from the inventor/joint inventor. Subject matter that
would otherwise qualify as prior art under (a)(2) shall not be
prior art if (A) the subject matter was obtained directly or
indirectly from the inventor or joint inventor, (B) the subject
matter had been previously disclosed by the inventor or a joint
inventor or others who obtained the subject matter, directly or
indirectly, from the inventor or a joint inventor, or (C) prior
to the effective filing date, the subject matter and the
claimed invention was owned by the same person or subject to an
obligation of assignment to the same person.
The CREATE Act is preserved by including an exception for
subject matter of a claimed invention made by parties to a
joint research agreement.
The requirements for an effective filing date are set
forth.
Subsection (c)--Sec. 103 is amended consistent with moving
to a first-inventor-to-file system. Existing subsection (a) is
amended slightly; subsection (b) is deleted because it is no
longer needed; subsection (c), which is the CREATE Act, has
been moved, and slightly changed, to Sec. 102.
Subsection (d)--Repeals Sec. 104 (Inventions Made Abroad).
Subsection (e)--Repeals Sec. 157 (Statutory Invention
Registration).
Subsection (f)--Amends Sec. 120 related to filing dates to
conform with the CREATE Act.
Subsection (g)--Makes various conforming amendments.
Subsections (h), (i) & (j)--Repeals interference proceeding
and repeals Sec. 291. Amends Sec. 135(a) and provides for a
``derivation proceeding,'' designed to determine the inventor
with the right to file an application on a claimed invention.
An applicant requesting a derivation proceeding must set forth
the basis for finding that an earlier applicant derived the
claimed invention and without authorization filed an
application claiming such invention. The request must be filed
within 12 months of the date of first publication of an
application for a claim that is substantially the same as the
claimed invention. The Patent Trial and Appeal Board (the
``Board'') shall determine the right to patent and issue a
final decision thereon. Decisions of the Board may be appealed
to the Federal Circuit, or to district court pursuant to
Sec. 146.
Sec. 3. Inventor's oath or declaration
The section streamlines the requirement that the inventor
submit an oath as part of a patent application, and makes it
easier for patent owners to file applications.
Subsection (a)--Section 115 is amended to permit an
applicant to submit a substitute statement in lieu of the
inventor's oath or declaration in certain circumstances,
including if the inventor is (i) unable to do so, or (ii)
unwilling to do so and is under an obligation to assign the
invention. A savings clause provides that failure to comply
with the requirements of this section will not be a basis for
invalidity or unenforceability of the patent if the failure is
remedied by a supplemental and corrected statement. False
substitute statements are subject to the same penalties as
false oaths and declarations.
Subsection (b)--Amends section 118 to allow the person to
whom the inventor has assigned (or is under an obligation to
assign) the invention to file a patent application. A person
who otherwise shows sufficient proprietary interest in the
invention may file a patent application as an agent of the
inventor to preserve the rights of the parties.
Sec. 4. Right of the inventor to obtain damages
Subsection (a)--Sec. 284, the patent damage statute, is
amended as follows:
The court shall award the claimant damages adequate to
compensate for the infringement but not less than a reasonable
royalty, together with interest and costs. The court may
receive expert testimony to assist it in determining damages.
In determining a reasonable royalty, the court shall
determine which of the following methods should be used, and
should identify the factors that are relevant thereto:
(A) Entire market value--the royalty may be based upon the
entire market value of the larger apparatus/process, that
incorporates the infringing product/process, if the claimed
invention's specific contribution over the prior art is the
predominant basis for the market demand of the larger
apparatus/process;
(B) Established royalty based on marketplace licensing--the
royalty may be based on other nonexclusive licenses of the
patented invention if the claimed invention has been the
subject of a nonexclusive license to a number of persons
sufficient to indicate a general marketplace recognition of the
reasonableness of the licensing terms, if the license was
secured prior to the filing of the case, and if the infringer's
use is of substantially the same scope, volume and benefit of
the rights granted under such license.
(C) If showings under (A) and (B) have not been made, the
court shall conduct an analysis to ensure that a reasonable
royalty is applied only to the portion of the economic value of
the infringing product or process properly attributable to the
claimed invention's specific contribution over the prior art.
In the case of a combination invention whose elements are
present individually in the prior art, the contribution over
the prior art may include the value of the additional function
resulting from the combination, as well as the enhanced value,
if any, of some or all of the prior art elements as part of the
combination, if the patentee demonstrates that value.
In determining a reasonable royalty, where appropriate, the
court may also consider (or direct the jury to consider) any
other relevant factors under applicable law.
The methods set forth in this subsection shall only apply
to calculation of damages based on a reasonable royalty.
Willful infringement--Sec. 284 is amended by adding
subsection (e) to codify, and change, the doctrine of willful
infringement.
A court may increase damages by up to three times based on
a finding of willful infringement. A determination of willful
infringement shall be made without a jury. To prove willful
infringement, a patentee must prove by clear and convincing
evidence that:
(A) the infringer received written notice from the patentee
(i) alleging acts of infringement in a manner sufficient to
give the infringer an objectively reasonable apprehension of
suit on such patent, and (ii) identifying with particularity
each claim of the patent, each allegedly infringing product or
process, and the relationship of such product or process to
such claim, the infringer, after a reasonable opportunity to
investigate, thereafter performed one or more acts of
infringement;
(B) after receiving such notice and after a reasonable
opportunity to investigate, the infringer intentionally copied
the patented invention with knowledge that it was patented; or
(C) after having been found by a court to infringe a
patent, the infringer engaged in conduct that was not colorably
different from the conduct previously found to have infringed
the patent, and which resulted in a separate finding of
infringement of the same patent.
The doctrine of willful infringement has the following
limitations:
(i) ``Good faith''--A court may not find that an infringer
has willfully infringed a patent for any period of time during
which the infringer had an informed good faith belief that the
patent was invalid or unenforceable, or would not be infringed.
An informed good faith belief may be established by (a)
reasonable reliance on advice of counsel; (b) evidence that the
infringer sought to modify its conduct to avoid infringement
once it had discovered the patent; or (c) other evidence a
court may find sufficient to establish good faith. The decision
of the infringer not to present evidence of advice of counsel
is not relevant to a determination of willful infringement.
(ii) Pleadings--A patentee may not plead (and a court may
not determine) willful infringement before the date on which a
court determines that the patent in suit is not invalid, is
enforceable, and has been infringed by the infringer.
Subsection (b)--Prior user rights study--Within 2 years
from the date of enactment, the Director shall report to
Congress his findings and recommendations regarding the
operation of ``prior user rights'' in selected countries as
compared to the United States.
Subsection (c)--Marking and notice--Subsection (a) of
Sec. 287 is renumbered as (a)(1). Subsection (a)(2), which is
added, provides that for patented inventions not covered under
subsection (a)(1), past damages shall be limited to 2 years
prior to the filing of a complaint (or counterclaim) except
upon proof that the infringer was notified of infringement by
the patentee. In no case shall liability for past damages
exceed 6 years.
Subsection (d)--Subsection (b)(6) of Sec. 273 is amended to
also allow ``affiliates'' of the person who performed the
necessary prior user rights acts to assert the defense.
Subsection (e)--The amendments made by this section shall
apply to any civil action commenced on or after the date of
enactment of this Act.
Sec. 5. Post-grant procedures and other quality enhancements
This section creates a new post-grant review proceeding
that allows third parties to petition the USPTO to review
patents that may be invalid. There are two different
``windows'' for the filing of such petitions: 1st window
petitions must be filed within 1 year of the patent issuing;
2nd window petitions may be filed at anytime after the patent
issues.
The procedures and standards for each window differ when
expressly specified in the statute.
In view of the creation of this new PGR system, Sec. 303(a)
is amended and inter partes reexamination is repealed.
Subsection (a)--Amends Sec. 303(a) to provide that, within
three months of a request for reexamination of a patent by the
patent owner, or at any time on the Director's own initiative,
the Director may determine whether a substantial new question
of patentability is raised by patents discovered by the
Director or cited by any other person.
Subsection (b)--Repeals inter partes reexamination.
Subsection (c)--Sets forth post-grant opposition
procedures. The specific statutory sections are as follows:
Sec. 321--Petition for post-grant review
Permits a 3rd party to file a PGR petition with the PTO to
cancel a claim as invalid based on any ground that might be
raised under Sec. 282(b)(2) and (3). The Director shall
establish fees to be paid by the person requesting the
proceeding.
Sec. 322--Timing and basis of petition
A PGR petition may be filed in any one of three
circumstances:
(1) The petition is filed within 12 months of the patent's
issuance or reissuance (referred to as ``1st window'');
(2)(i) There is substantial reason to believe that the
continued existence of the challenged claim is likely to cause
the petitioner significant economic harm, and (ii) the
petitioner files the petition within 12 months after receiving
notice (explicitly or implicitly) of infringement; or
(3) The patent owner consents ((2) and (3) are referred to
as ``2nd window'').
Sec. 323--Requirements of petition
A petition must, inter alia, include the necessary fee,
identify the real parties in interest, specifically identify
each claim challenged, the grounds for challenging it, and the
evidence that supports each challenge, including, where
applicable, copies of relevant patents and printed
publications, or supporting affidavits or declarations. The
Director may, by regulation, require additional information.
The petitioner must provide a copy of the petition with
supporting documents to the patent owner or his designated
representative.
Sec. 324--Publication and public availability of petition
The Director shall publish the petition in the Federal
Register and make that petition available on the USPTO website.
Any PGR file shall be made available to the public unless a
petition or document is accompanied with a motion to seal. Such
petition or document shall be treated as sealed, pending the
outcome of the ruling on the motion. Failure to file a motion
to seal will result in the pleading being placed in the public
record.
Sec. 325--Prohibited filings
Successive petitions under any subsection of Sec. 322,
filed by the same party on the same patent, are prohibited. A
PGR proceeding may not be instituted or maintained under
paragraph (1) or (2) of Sec. 322 if the petitioner or real
party in interest has instituted a civil action challenging the
validity of a claim of the patent.
Sec. 326--Submission of additional information
A petitioner shall file such additional information as the
Director may require by regulation.
Sec. 327--Institution of post-grant review proceedings
The Director may not authorize a post-grant review
proceeding to commence unless the Director determines that the
information presented in the petition raises a substantial new
question of patentability for at least 1 of the challenged
claims. The Director shall decide a petition within 90 days of
its receipt, shall notify the petitioner and patent owner of
the Director's decision, and if granted shall publish each
notice of PGR institution in the Federal Register and on the
USPTO website, including the date the PGR proceeding shall
commence. The determination by the Director whether to
authorize a PGR proceeding is not appealable. The Director
shall assign a PGR proceeding to a panel of 3 Board judges.
Sec. 328--Consolidation of proceedings and joinder
If more than 1 petition is submitted under Sec. 322(1)
against the same patent and each raises a substantial new
question of patentability warranting commencement, the Director
may consolidate such proceedings. If the Director commences a
PGR proceeding on the basis of a petition filed under
Sec. 322(2), any person who files in compliance with section
322(2)(A) a petition that the Director finds sufficient to
proceed under Sec. 327 may be joined at the discretion of the
Director, and such person shall participate in such PGR
proceeding.
Sec. 329--Conduct of post-grant review proceedings
The Director shall prescribe regulations establishing and
governing PGR proceedings under this chapter and their
relationship to other proceedings under this title. The
regulations shall set forth the standards for showings of
substantial reason to believe and significant economic harm
under Sec. 322(2) and substantial new question of patentability
under Sec. 327(a). The regulations shall (i) provide for the
publication in the Federal Register all requests for the
institution of PGR, (ii) establish procedures for the
submission of supplemental information after the petition is
filed, and (iii) set forth procedures for discovery of relevant
evidence. The regulations shall require that the final
determination in a PGR proceeding issue not later than 1 year
after the date on which the Director notices its institution,
except that, for good cause shown, the Director may extend the
1-year period by not more than 6 months. The regulations shall
(i) provide for discovery upon order of the Director, as
required in the interests of justice, (ii) prescribe sanctions
for abuse of discovery, abuse of process, or any other improper
use of the proceeding, (iii) provide for protective orders
governing the exchange and submission of confidential
information; and (iv) ensure that any information submitted by
the patent owner in support of any amendment entered under
Sec. 332 is made available to the public as part of the
prosecution history of the patent.
In prescribing regulations, the Director shall consider the
effect on the economy, the integrity of the patent system, and
the efficient administration of the Office. The Patent Trial
and Appeal Board shall conduct each proceeding authorized by
the Director.
Sec. 330--Patent owner response
After a post-grant review proceeding has been instituted,
the patent owner shall have the right to file a timely
response, which may include affidavits, declarations and any
additional factual evidence and expert opinions on which the
patent owner relies in support of the response.
Sec. 331--Proof and evidentiary standards
The presumption of validity set forth in Sec. 282 of this
title shall not apply to challenges brought under Sec. 322(1)
but shall apply in a challenge brought under paragraph (2) or
(3) of Sec. 322 to any patent claim under this chapter. The
petitioner under Sec. 322(1) shall have the burden of proving a
proposition of invalidity by a preponderance of the evidence.
For petitions filed under paragraphs (2) or (3) of Sec. 322,
the existence, authentication, availability, and scope of any
evidence offered to establish invalidity shall be established
by clear and convincing evidence. If such predicate facts are
so established, invalidity shall be proven only if the
persuasive force of such facts demonstrates invalidity by a
preponderance of the evidence.
Sec. 332--Amendment of the patent
During a post-grant review proceeding, the patent owner may
file 1 motion to amend the patent in 1 or more of the following
ways: (1) cancel any challenged patent claim; (2) for each
challenged claim, propose a substitute claim; or (3) amend the
patent drawings or otherwise amend the patent other than the
claims. Additional motions to amend may be permitted only for
good cause shown. An amendment under this section may not
enlarge the scope of the claims of the patent or introduce new
matter.
Sec. 333--Settlement
A PGR proceeding 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 matter before
the request for termination is filed. If the PGR proceeding is
terminated with respect to a petitioner under this section, no
estoppel under this chapter shall apply to that petitioner. If
no petitioner remains in the PGR proceeding, the Office shall
terminate the PGR proceeding. Any agreement or understanding
between the patent owner and a petitioner to terminate the
proceeding, including any collateral agreements referred to
therein, shall be in writing and a true copy shall be filed in
the USPTO before the termination of the post-grant review
proceeding. If any party filing such agreement or understanding
so requests, the copy shall be kept separate from the file of
the PGR proceeding, and made available only to Federal
Government agencies upon written request, or to any other
person on a showing of good cause.
Sec. 334--Decision of the board
If the proceeding is not otherwise dismissed, the Patent
Board shall issue a final written decision with respect to the
patentability of any patent claim challenged and any new claim
added.
Sec. 335--Effect of decision
If a final decision of the Board that is not timely
appealed, or if that appeal is terminated, the Director shall
publish a certificate canceling any claim determined
unpatentable, and shall incorporate in the patent any new claim
determined to be patentable.
Sec. 336--Relationship to other pending proceedings
The Director may determine rules relating to other ongoing
proceedings.
Sec. 337--Effect of decisions rendered in civil action on
future post-grant review proceedings
If a final decision has been entered against a party in a
civil action arising under section 1338 of title 28
establishing that the party has not sustained its burden of
proving the invalidity of any patent claim, that party to the
civil action may not subsequently request a PGR proceeding on
that patent claim on the basis of any grounds under Sec. 322.
In addition, the Director may not subsequently maintain a PGR
proceeding previously requested by that party.
Sec. 338--Effect of final decision on future proceedings
If a final decision under Sec. 334 is favorable to the
patentability of any original or new claim of the patent
challenged by the petitioner, the petitioner may not
thereafter, based on any ground which the petitioner raised
during the PGR proceeding (1) request or pursue a derivation
proceeding with respect to such claim; or (2) assert the
invalidity of any such claim in any civil action arising in
whole or in part under section 1338 of title 28. If the final
decision is the result of a petition filed on the basis of
Sec. 322(2), the prohibition under this section shall extend to
any ground which the petitioner raised during the PGR
proceeding.
Sec. 339--Appeal
A party dissatisfied with the final determination of the
Board in a PGR proceeding may appeal the determinations under
Sec. Sec. 141 through 144. Any party to the PGR proceeding
shall have the right to be a party to the appeal.
Subsection (d)--Sets forth technical and conforming
amendments.
Subsection (e)--Within 1 year after the enactment of this
Act, the Director shall issue regulations to implement PGR, as
added by this section.
PGR shall take effect on the date that is 1 year after the
date of the enactment of this Act and shall apply to patents
issued on, or after that date, except that, in the case of a
patent issued before the effective date of this Act on an
application filed between November 29, 1999 and the effective
date of this Act, a petition for post-grant review may only be
filed under subsections (2) or (3) of Sec. 322. The Director
shall determine the procedures under which interferences
commenced before the effective date of this Section are to
proceed and issue appropriate regulations.
Sec. 6. Definitions; patent trial and appeal board
The Board of Patent Appeals and Interferences is replaced
with the new Patent Trial and Appeal Board (``Board''). The
Board is charged with (i) reviewing adverse decisions of
examiners on applications and reexamination proceedings, (ii)
conducting derivation proceedings, and (iii) conducting the
post-grant review proceedings.
Sec. 7. Submissions by third parties and other quality enhancements
Subsection (a)--Sec. 122(b)(2), which provides an exception
to the 18-month publication requirement for an applicant who is
not filing in another country, is repealed.
Subsection (b)--Creates a mechanism in Sec. 122 for third
parties to submit timely pre-issuance information relevant to
the examination of the application, including a concise
statement of the relevance of the submission.
Sec. 8. Venue and jurisdiction
Subsection (a)--The venue provision for patent cases,
section 1400 of title 28, is amended as follows:
Civil actions for patent infringement, including
declaratory judgment actions, may only be brought in a judicial
district (1) where the defendant has its principal place of
business or is incorporated or formed, or, for a foreign
corporation with a U.S. subsidiary, where its primary United
States subsidiary has its principal place of business or is
incorporated or formed; (2) where the defendant has committed
substantial acts of infringement and has a regular and
established physical facility that the defendant controls and
that constitutes a substantial portion of the operations of the
defendant; (3) where the primary plaintiff resides, if the
primary plaintiff in the action is an institution of higher
education or a nonprofit patent and licensing organization (as
those terms are defined in this section); (4) where the
plaintiff resides, if the sole plaintiff in the action is an
individual inventor who qualifies as a ``micro-entity''
pursuant to section 123 of title 35. A defendant may request
the case be transferred where (1) any of the parties has
substantial evidence or witnesses that otherwise would present
considerable evidentiary burdens to the defendant if such
transfer were not granted, (2) transfer would not cause undue
hardship to the plaintiff, and (3) venue would be otherwise
appropriate under section 1391 of title 28.
Subsection (b)--Interlocutory Appeals--Subsection (c)(2) of
section 1292 of title 28, is amended to require the Federal
Circuit to accept all interlocutory appeals of claim
construction orders when certified by the district court. A
party wishing to appeal such an order shall file a motion with
the district court within 10 days after entry of the order. The
district court shall have discretion whether to certify such
appeals, and if so, whether to stay the district court
proceedings during such appeal.
Subsection (c)--Technical Amendments Relating to USPTO
Venue--The venue for certain district court challenges of USPTO
decisions is changed from the District of Columbia to the
Eastern District of Virginia, the district where the USPTO
resides.
Sec. 9. Patent and Trademark Office regulatory authority
This section gives the director rulemaking authority to set
or adjust any fee under Sec. Sec. 41 and 376, and section 1113
of title 15, provided that such fee amounts are set to
reasonably compensate the USPTO for the services performed. The
Director may also reduce such fees. The Director shall consult
with the patent and trademark advisory committees as provided
for in this section. Any proposal for a change in fees
(including the rationale, purpose, and possible expectations or
benefits that will result) shall be published in the Federal
Register and shall seek public comment for a period of not less
than 45 days. The Director shall notify Congress of any final
proposed fee change and Congress shall have up to 45 days to
consider and comment before any proposed fee change becomes
effective.
Rules of construction are provided.
Sec. 10. Residency of Federal Circuit judges
The District of Columbia area residency requirement for
Federal Circuit judges in section 44(c) of title 28 is
repealed.
Sec. 11. Applicant quality submissions
Sec. 123 is added to provide the Director authority to
promulgate rules that require a patent applicant to submit a
search report and analysis relevant to patentability and other
relevant information as determined by the Director. Failure to
comply with such requirements shall result in abandonment of
the application. A ``micro-entity'', as defined in this
section, is exempt from this requirement.
Sec. 124 is added to define the qualifications for ``micro-
entity'' status.
Sec. 12. Inequitable conduct
Sec. 298 is added to improve and codify the doctrine of
``inequitable conduct''.
A party advancing the proposition that a patent should be
cancelled or held unenforceable due to inequitable conduct
shall prove independently, by clear and convincing evidence,
that material information was misrepresented, or omitted, from
the patent application with the intention of deceiving the
USPTO. Information is material if a reasonable examiner would
consider such information important in deciding whether to
allow the patent application; any such information is not
cumulative. Although intent to deceive the USPTO may be
inferred, it may not be done so based solely on the gross
negligence of the patent owner or its representative, or on the
materiality of the information misrepresented or not disclosed.
The party asserting the defense or claim shall comply with the
pleading requirements set forth under Federal Rules of Civil
Procedure 9(b). If the court finds inequitable conduct, the
court has discretion to (1) hold the entire patent
unenforceable, (2) hold 1 or more claims unenforceable, or (3)
hold that patentee is not entitled an injunction.
Sec.13. Authority of the Director of the Patent and Trademark Office to
accept late filings
Subsection (e) is added to Sec. 2 to give the Director
discretion to accept late filings in certain cases of
unintentional delay. Specifically the Director may accept a
late filing if the applicant or owner of a patent or trademark
(i) files a petition within 30 days after the missed deadline,
and (ii) demonstrates to the satisfaction of the director the
delay was unintentional. The petition shall be deemed denied if
the Director has not made a determination within 60 days after
the date of its filing. Director's decisions on such petitions
shall not be subject to judicial review. This subsection shall
not apply to any other provision of the patent or trademark
laws that allow the Director to accept late filings, or to
statutory deadlines required by treaty.
This amendment shall apply to any application or other
filing that (i) is filed on or after the date of the enactment
of this Act; or (ii) on such date of enactment, is pending
before the Director or is subject to judicial review, and for
such cases in (ii), the 30-day period shall begin on the date
of the enactment of this Act.
Sec. 14. Limitation on damages and other remedies with respect to
patents for methods in compliance with check imaging methods
Sec. 287 is amended by adding subsection (d)(1), which
provides that use by a financial institution of a check
collection system that constitutes an infringement under
subsection (a) or (b) of section 271, the provisions of
sections 281, 283, 284, and 285 shall not apply against the
financial institution. Definitions are provided for various
terms including ``check,'' ``check collection system,''
``financial institution,'' ``substitute check,'' and
``truncate.'' This amendment shall apply to any civil action
for patent infringement pending or filed on or after the date
of enactment of this Act.
Sec. 15. Patent and Trademark Office funding
This section terminates appropriation of USPTO fees and
shall take effect on October 1, 2008. All fees collected by the
Director shall be available until expended. The provisions of
any prior appropriation Act that makes amounts available
pursuant to 42(c), and are in effect on the effective date set
forth in subparagraph (A) shall cease to be effective on that
effective date, and any unexpended amounts made available
pursuant to such section shall be transferred in accordance
with subsection (c)(5). A revolving fund is established in the
Treasury of the United States and any amounts in the fund shall
be available for use by the Director without fiscal year
limitation. Any fees collected under sections 41, 42, and 376
of title 35, and section 1113 of title 15, shall be deposited
in the fund. Amounts deposited into the fund shall be available
to the Director without fiscal year limitation. Any unexpended
balances in any accounts held on behalf of the Director, or the
Office, shall be transferred to the fund and shall remain
available until expended. The Director shall submit an annual
report to Congress within 60 days after the end of each fiscal
year.
Within 30 days after the beginning of each fiscal year, the
Director shall notify Congress the Office's annual spending
plan.
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.
In accordance with section 9301 of title 31, United States
Code, the fund shall prepare and submit each year to the
President a business-type budget in such manner, and before
such date, as the President prescribes by regulation for the
budget program.
Sec. 16. Technical amendments
This section sets forth technical amendments consistent
with this Act.
Sec. 17. Effective date; rule of construction
Except as otherwise provided, this Act takes effect 12
months after the date of enactment and applies to any patent
issued on or after that effective date.
The enactment of Sec. 102(b)(3), under section (2)(b) of
this Act, is done with the same intent to promote joint
research activities that was expressed in the CREATE Act
(Cooperative Research and Technology Enhancement Act of 2004
(Public Law 108-453; the ``CREATE Act'')), and shall be
administered by the in the manner consistent with such.
IV. Congressional Budget Office Cost Estimate
The cost estimate provided by the Congressional Budget
Office pursuant to section 402 of the Congressional Budget Act
of 1974 was not available for inclusion in this report. The
estimate will be printed in either a supplemental report or the
Congressional Record when it is available.
V. Regulatory Impact Evaluation
In compliance with rule XXVI of the Standing Rules of the
Senate, the Committee finds that no significant regulatory
impact will result from the enactment of S. 1145.
VI. Conclusion
The Patent Reform Act of 2007, S. 1145, will establish a
more efficient and streamlined patent system that will improve
patent quality and limit unnecessary and counterproductive
litigation costs. By ensuring the patent system in the 21st
century accurately reflects the constitutional mandate to
``promote the progress of science and useful arts'', the Patent
Reform Act will help ensure that the United States maintains
its competitive edge in the global economy.
VII. Additional and Minority Views
----------
ADDITIONAL VIEWS FROM SENATOR SPECTER ON CHANGES TO THE VENUE STATUTE
As the majority notes, current case law on the venue
statute governing patent cases (28 U.S.C. aA1400(b)) permits a
patent holder to ``bring a patent infringement action in any
one of the 94 judicial districts in the United States''\1\ as
long as the district court has personal jurisdiction over the
defendant.\2\ This case law is contrary to the plain language
of the patent venue statute as well as the intent behind the
provision. More troubling, though, is the practical effect this
interpretation has had on the patent litigation system by
permitting plaintiffs to engage in ``forum shopping,''
resulting in patent infringement cases being brought in
judicial districts that have little or no connection to the
alleged infringement.
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\1\S. Rep. No. 110-_, at 25 (2008).
\2\See VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d
1574, 1580 (Fed. Cir. 1990).
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While some of these districts may facilitate swifter
resolution of patent cases with their ``rocket dockets,'' most
cases are filed there because of the view that they are
``plaintiff-friendly'' locales. This has led to the perception
that justice in patent cases can he ``gamed.'' This does not
serve the interests of justice, or the patent system as a
whole. Section 8(a) of S. 1145, the Patent Reform Act of 2007,
seeks to remedy this by establishing that venue in patent
infringement cases, and declaratory judgment actions related to
patents, should only be properly found in those jurisdictions
that have a direct relationship to the underlying patent
question.
HISTORY OF THE VENUE STATUTE
Since 1800, the federal district courts have had original
and exclusive jurisdiction ``of any civil action arising under
any Act of Congress relating to patents, plant variety
protection, copyrights and trademarks.''\3\ Recognizing the
unique nature of patent infringement suits, Congress first
enacted a special patent venue statute in 1897. The statute
provided for venue ``in the district of which the defendant is
an inhabitant, or in any district in which the defendant,
whether a person, partnership, or corporation, shall have
committed acts of infringement and have a regular and
established place of business.''\4\ Similar language is now
codified as 28 U.S.C. 1400(b).
---------------------------------------------------------------------------
\3\28 U.S.C. 1338(a) (2000).
\4\29 Stat. 695, ch. 395 (1895).
---------------------------------------------------------------------------
Section 1400(b) currently provides that venue is proper in
the judicial district: (1) ``where the defendant resides,'' or
(2) ``where the defendant has committed acts of infringement
and has a regular and established place of business.'' This
venue provision was designed to serve as a counterpoint to
other procedural requirements controlled by the plaintiff. For
instance, the plaintiff generally determines when and where to
file their case, so long as they establish personal
jurisdiction over the defendant. For most patent defendants,
this minimal test will be met in virtually all districts. The
venue requirement is thus the protection provided to the
defendant by ensuring that patent infringement suits are
brought only in those locations ``reasonably convenient to the
defendant.''\5\ In reviewing the provision, the Supreme Court
has held that section 1400(b) exclusively governs venue in
patent infringement suits.\6\ The Supreme Court reinforced its
position when it held that section 28 U.S.C. 1391, which
generally governs proper venue in other types of federal cases,
cannot be used as the basis for venue in infringement suits.\7\
---------------------------------------------------------------------------
\5\See Bradford Novelty Co. v. Manheim, 156 F.Supp. 489 (SDNY
1957).
\6\See Fourco Class Co. v. Transmirra Products Corp., 353 U.S. 222
(1957).
\7\See Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260 (1961).
---------------------------------------------------------------------------
In 1988, Congress expanded the general venue statute (28
U.S.C. 1391(c)) to provide: ``For the purposes of venue under
this chapter, a corporation that is a defendant shall be deemed
to reside in any judicial district in which it is subject to
personal jurisdiction at the time the action is commenced.''
Despite significant Supreme Court precedent to the contrary, in
1990, the Federal Circuit held in VE Holding Corp. v. Johnson
Gas Appliance Co. that the amendments made to the general venue
statute also apply to the patent venue statute (28 U.S.C.
1400(b)).\8\ This ruling undermined the original purposes of 28
U.S.C. 1400(b)--which recognized the unique and complex nature
of patent cases, deserving of a narrower venue statute. S. 1145
seeks to ensure that these cases are once again brought in more
appropriate fora.
---------------------------------------------------------------------------
\8\917 F.2d 1575 (Fed.Cir. 1990).
---------------------------------------------------------------------------
THE NEED FOR CHANGE
After the Federal Circuit's decision in VE Holding,
plaintiffs no longer have to establish both personal
jurisdiction over the defendant and proper venue for the case
to proceed. It has effectively become a one step process--if
the plaintiff establishes personal jurisdiction over a
corporate defendant (a fairly low threshold), then the case may
be brought in that district, even if the defendant has no
significant ties or business operations in that location.
This change in the law has brought with it significant
changes in litigation tactics. Plaintiffs no longer have to
bring patent suits in judicial districts that bear a direct
relationship to the defendant, their business operations, or
where a substantial share of the acts of infringement occurred.
They can file patent suits in any district in which they
establish some presence of the defendant, regardless of whether
it is minimal in nature and without the actual knowledge of the
defendant. While this has allowed some plaintiffs to file in
districts with faster dockets, it has also opened the door to
abusive forum shopping.
Forum shopping is problematic not only for the defendants
in these cases, but also for the U.S. judicial system for
several reasons. First, Congress created the Federal Circuit to
develop a uniform national body of patent law to override the
confusing, conflicting law of the different regional
circuits.\9\ Yet, forum shopping that favors select district
courts results in the development of localized bodies of law,
thereby frustrating the national patent system, undermining the
role of the Federal Circuit, and defeating the intent of
Congress. Second, the ability to require a defendant to
litigate in certain districts can inappropriately pressure
defendants (or potential defendants) into settlement without
regard to the underlying merits of the case. Third, forum
shopping raises the cost of litigation by moving the court
action away from the key witnesses and documents.
---------------------------------------------------------------------------
\9\The Federal Courts Improvement Act of 1982, 96 Stat. 25, 37-38.
---------------------------------------------------------------------------
Independent studies have also confirmed that, if permitted,
plaintiffs file patent suits in the district court where they
have the greatest likelihood of success rather than in
districts that have some connection to the underlying patent
question or relevant evidence. One commentator made just this
point when he noted that patent ``cases have traditionally
moved from district to district as courts show themselves more
or less efficient in processing these enormously complex
cases.''\10\ Further, a 2007 study conducted by
PriceWaterhouseCoopers of 1,367 patent suits brought between
1995-2006 found that plaintiffs filed in the five districts
where they had significantly higher success rates, especially
at trial.\11\
---------------------------------------------------------------------------
\10\Michael C. Smith, ``Rocket Docket: Marshall Court Leads Nation
in Hearing Patent Cases,'' 69 Tex. B.J. 1045 (2006).
\11\2007 Patent and Trademark Damages Study 20, 29 (Pricewaterhoue
Coopers). The top districts were: Western District of Wisconsin with an
overall plaintiff success rate of 63% and trial success rate of 91%;
Eastern District of Texas with an overall plaintiff success rate of 60%
and a trial success rate of 83%; Eastern District of Virginia with an
overall plaintiff success rate of 47% and trial success rate of 78%;
Central District of California with an overall plaintiff success rate
of 44% and a trial success rate of 74%; and District of Delaware with
an overall plaintiff success rate of 42% and a trial success rate of
58%. Id.
---------------------------------------------------------------------------
The gravity of the problem is underscored by the growing
number of patent suits filed each year. In 1990, in the twenty
busiest patent jurisdictions in the country there were only 626
patent cases filed nationwide against 1,085 defendants. By
2007, that number has grown exponentially in those same
jurisdictions to 2,082 patent cases filed nationwide against
5,672 defendants. In other words, the number of patent suits
filed has more than tripled since 1990. While the increasing
number of patents issued by the Patent and Trademark Office
accounts for some of these increases, many believe that the
emergence of ``plaintiff friendly'' courts account for the bulk
of the increase. For example, in 1990, only one patent suit was
filed in the Eastern District of Texas. By 2007, this number
had grown to 367, or approximately one-eighth of all of the
patent suits brought nationwide. The Central District of
California is another example. In 1990, there were only 30
patent suits filed in the district. By 2007, that number had
jumped to 320. The question of whether forum shopping of patent
suits has reached alarming levels cannot be denied when one
considers that in 2007 two districts handled approximately one-
quarter of the patent suits filed in the country.
Some have argued that the emergence of one or two
``magnet'' jurisdictions does not warrant a wholesale change to
the patent venue statute. However, the problem of forum
shopping is not limited to the Eastern District of Texas or the
Central District of California. Indeed, Congress has received
evidence that a disproportionate number of patent suits are
also being filed in the Western District of Wisconsin, and a
few other jurisdictions.
As the jurisdictions that attract plaintiffs change, so do
the techniques for establishing venue. No case demonstrates the
growing problem of forum shopping better than those involving
the conglomeration of patent licensing companies known as ``The
Zodiac.''
Named for the constellations, the ten related entities that
comprise the Zodiac have asserted fifteen patents in 43 patent
infringement suits against 488 defendants since August 2004.
Although most of these suits were originally brought in the
Eastern District of Texas, these licensing ``corporations''
later filed articles of incorporation for related entities in
the Western District of Wisconsin, allowing them to sue in
Madison. By establishing personal jurisdiction and meeting the
current venue requirements merely by incorporating a new entity
where they are likely to recover, the Zodiac has successfully
forced numerous defendants to settle. It would seem only a
matter of time before other companies follow suit.
INTENT OF THE AMENDMENTS
The purpose of the amendments to the current patent venue
statute (28 U.S.C. Sec. 1400(b)) is not to penalize or demonize
those districts with a growing patent docket and that have
gained significant expertise in patent law. These districts are
to be commended for taking on a formidable area of the law and
other districts should be encouraged to do the same. Rather,
the amendments will ensure that the patent venue statute
operates as originally intended. Given the complexity of the
issues involved in patent disputes, venue for patent cases
warrants different treatment than general litigation. The
proposed language attempts to balance the rights of patent
holders with the need to ensure patent cases are brought where
there is a true connection to the underlying dispute.
Section 8(a) modifies 28 U.S.C. Sec. 1400 by adding a new
paragraph that explicitly states that: ``a party shall not
manufacture venue by assignment, incorporation, or otherwise to
invoke the venue of a specific district court.''\12\ This
provision is intended to curb the growing trend of establishing
venue in districts where venue would not otherwise be proper by
incorporating there, transferring assets to that location,
suing local defendants, or assigning assets to entities in
those preferred districts.\13\ Such gamesmanship undermines the
clear history of the patent venue provision which is ``to
protect the defendant where the defendant has no more than
minimum contacts in the forum the plaintiff has chosen.''\14\
---------------------------------------------------------------------------
\12\See proposed 28 U.S.C. Sec. 1400(b), as modified by S. 1145.
\13\This provision is not intended to supersede the court's ability
to transfer or dismiss cases for lack of proper venue under 28 U.S.C.
Sections 1404, 1406 or other relevant provisions.
\14\S. Rep. No. 110-_, at 25 (2008) (citing 17 Moore's Federal
Practice Sec. 110.01[5][a] (3d ed. 1997)).
---------------------------------------------------------------------------
The amendments provide that venue is proper, among other
places, ``where the defendant has its principal place of
business or in the location or place in which the defendant is
incorporated or formed.''\15\ Further, the amendments also
provide that venue for foreign corporations is proper where
``defendant's primary United States subsidiary has its
principal place of business or is incorporated or formed.''\16\
Current law, which subjects alien defendants to venue anywhere
in the U.S., would continue to apply to foreign corporations
that lack U.S. based operations.\17\
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\15\See proposed 28 U.S.C. Sec. 1400(c), as modified by S. 1145.
\16\See proposed 28 U.S.C. Sec. 1400(c), as modified by S. 1145.
\17\28 U.S.C. Sec. 1391(d) (2000).
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The amendments to the venue provision also protect
plaintiffs' access to justice by providing that, under certain
circumstances, venue will lie where the plaintiff resides.
Thus, if the primary plaintiff is an institution of higher
education, a non-profit technology transfer entity that serves
as the licensing organization for an institution of higher
education, or an individual inventor, then the plaintiff can
claim venue where that entity resides, so long as it meets the
other requirements under the Act.
The amendments also address a significant ambiguity in the
patent venue language. Under the second prong of the current
patent venue test, cases can be heard ``where the defendant has
committed acts of infringement and has a regular and
established place of business.''\18\ The amendments specify
that venue is only proper where ``substantial acts of
infringement'' have occurred and where the defendant, ``has a
regular and established physical facility that the defendant
controls and that constitutes a substantial portion of the
operations of the defendant.''\19\
---------------------------------------------------------------------------
\18\ 28 U.S.C. Sec. 1400(b) (2000).
\19\ See proposed 28 U.S.C. Sec. 1400(c), as modified by S. 1145.
---------------------------------------------------------------------------
Some courts have interpreted the existing ``acts of
infringement'' language very broadly. For example, in 1990, the
Northern District of Illinois held that the continuous
solicitation of sales combined with an activity such as the
maintenance of a sales office and service center satisfies the
``acts of infringement'' test.\20\ This has enabled plaintiffs
to establish venue in districts that have no real connection to
the defendant other than the fact that a national retail store
sells its product there. In other words, under the current
interpretation of the ``acts of infringement test,'' a
plaintiff can establish venue in any district where the
defendant's product happens to flow in the stream of commerce.
---------------------------------------------------------------------------
\20\See Union Asbestos v. Evans, 328 F.2d 949, 953 (7th Cir. 1964);
see also Hako Minuteman, Inc. v. Advance Machine Company, 729 F. Supp.
65, 67 (N.D. Ill. 1990) (determining that a continuous solicitation of
sales combined with an activity such as the maintenance of a sales
office and service center satisfies the ``act of infringement'' test).
---------------------------------------------------------------------------
Proper venue should not be determined by downstream
decisions of third parties. As such, the amendments to the
venue provision provide that the defendant must have
``committed substantial acts of infringement'' in that district
before a case may be heard there. This language seeks to
prevent venue from being based solely on isolated or
insubstantial acts of infringement by the defendant, such as
the sale of a few allegedly infringing computers, medical
devices, or farm equipment in that district, especially if
these items are routinely sold throughout the U.S.
In addition, some courts have also failed to apply the
``regular and established place of business'' test with
appropriate rigor. Many courts have made clear that in order to
satisfy the ``regular and established place of business''
requirement, ``[a] defendant must be regularly engaged in
carrying on a substantial part of its ordinary business on a
permanent basis in a physical location within the district over
which it exercises some measure of control.''\21\ However,
other courts have found the requirement satisfied where a
defendant simply does business through employees located in the
district\22\ or leases office space in the district.\23\ The
amendments clarify that the requirement is satisfied only if
the defendant ``has a regular and established physical facility
that the defendant controls and that constitutes a substantial
portion of the operations of the defendant.'' For example, a
few sales kiosks, one small office or some minor
telecommunications infrastructure should not be sufficient to
meet this test, especially if the defendant operates similar
facilities throughout the U.S. This change will ensure that
patent infringement cases are heard in appropriate forums.
---------------------------------------------------------------------------
\21\Kinetic Instruments v. Lares, 802 F. Supp. 976, 987 (S.D.N.Y.
1992) (emphasis added; internal quotation marks and citations omitted).
\22\See, e.g., In re Cordis Corp., 769 F.2d 733 (Fed. Cit. 1985),
cert. denied, 474 U.S. 851 (1985); Brunswick v. Suzuki Motor Co., 575
F. Supp. 1412, 1424 (E.D. Wisc. 1983).
\23\See Hako, 729 F. Supp. at 67.
---------------------------------------------------------------------------
CONCLUSION
Although forum shopping is not unique to patent law, it has
proven especially pernicious in patent litigation and is a
practice that Congress has repeatedly addressed.\24\
Unfortunately, it is not a problem that will correct itself
with time but is one that will continue to grow unless Congress
intervenes. The proposed changes to the patent venue statute
will restore balance to the patent system, by ensuring that
these complex cases are heard in the most appropriate district.
---------------------------------------------------------------------------
\24\See generally the Class Action Fairness Act of 2005, Pub. L.
109-2, 119 Stat. 4, the Securities Litigation Reform Act of 1998, Pub.
L. 105-353, 112 Stat. 3227 (legislation where Congress also sought to
address forum shopping concerns).
---------------------------------------------------------------------------
Arlen Specter.
ADDITIONAL VIEWS OF SENATORS ARLEN SPECTER AND ORRIN HATCH ON THE
INEQUITABLE CONDUCT DEFENSE, S. 1145
As the Committee Report on S. 1145 notes, ``candor and
truthfulness are essential to the functioning of the patent
examination process.''\1\ Despite the importance of this
fundamental principle, Congress has never addressed the matter
legislatively. Rather, it has left the matter for the United
States Patent and Trademark Office (USPTO) to infer and for the
courts to interpret. The result has been, as the Committee
Report notes,\2\ shifting standards that encourage improper
challenges to patents based on assertions of inequitable
conduct. Such challenges give rise to significant litigation
costs and uncertainty about patent rights. They also chill
communications between inventors and patent examiners during
the patent examination process. Given this current state of
affairs, it is imperative that Congress take steps to ensure
that the inequitable conduct doctrine is applied in a manner
consistent with its original purpose: to sanction true
misconduct and to do so in a proportional and fair manner.
---------------------------------------------------------------------------
\1\S. Rep. No. 110-_, at 31 (2008).
\2\Id. at 32.
---------------------------------------------------------------------------
HISTORY OF THE INEQUITABLE CONDUCT DEFENSE
The Supreme Court arguably first recognized the doctrine of
inequitable conduct in the 1933 decision, Keystone Driller Co.
v. Gen. Excavator Co.\3\ In that case, the Court noted, ``It is
one of the fundamental principles upon which equity
jurisprudence is founded that, before a complainant can have a
standing in court, he must first show that not only has he a
good and meritorious cause of action, but he must come into
court with clean hands.''\4\ In so doing, the Court recognized
that a patent could be rendered unenforceable when the patent
holder engages in less than honest conduct.
---------------------------------------------------------------------------
\3\Keystone Driller Co. v. Gen. Excavator Co., 290 U.S. 240, 244
(1933).
\4\Id. (citing Joseph Story, Story's Equity Jurisprudence Sec. 98
(14th ed. 1918)).
---------------------------------------------------------------------------
The most notable development following Keystone Driller
occurred when the USPTO imposed a duty of candor.\5\ 37 Code of
Federal Regulations (C.F.R.) 1.56 (commonly referred to as
``Rule 56'') states that ``Each individual associated with the
filing and prosecution of a patent application has a duty of
candor and good faith in dealing with the Office, which
includes a duty to disclose to the Office all information known
to that individual to be material to patentability * * * .''\6\
When applying Rule 56, lower courts have refused to enforce
patents whenever material information is withheld from, or
misrepresented to, the USPTO. However, as the Committee Report
notes, the type of information that is material to the
patentability of an invention is far from clear.\7\
---------------------------------------------------------------------------
\5\37 C.F.R. Sec. 1.56 (2007).
\6\Id.
\7\S. Rep. No. 110-_, at 32 (2008).
---------------------------------------------------------------------------
THE NEED FOR REFORM
We believe the inequitable conduct doctrine needs to be
reformed because the modern examination environment is no
longer confidential or closed to the public. Instead, the
entire contents of applications, and their up-to-date status,
are made available to the public in real-time by the USPTO.
Moreover, additional provisions of S. 1145 advance greater
participation by the public in the examination process and
create a new administrative procedure to allow the public to
challenge patent validity.
As originally articulated by courts, the inequitable
conduct doctrine required clear and convincing evidence that a
person with a duty of disclosure to the USPTO concealed or
misrepresented material information during examination of a
patent application, and did so with the specific intent of
misleading the Office into issuing the patent. Unfortunately,
the law governing inequitable conduct today is far removed from
its original legal foundations. The inequitable conduct defense
today has become a convenient and frequently raised litigation
tactic that is overpled and a quick route to taking down
otherwise valid and commercially valuable patents. It has
become, in the words of the Federal Circuit, a ``plague'' on
the patent system.\8\
---------------------------------------------------------------------------
\8\See Burlington Industries, Inc. v. Dayco Corp., 849 F.2d 1418 at
1422 (Fed. Cir. 1988) (``the habit of charging inequitable conduct in
almost every major patent case has become an absolute plague.'').
---------------------------------------------------------------------------
Reforms to several aspects of the law governing inequitable
conduct doctrine are needed to correct the problems with
current law. These reforms are needed to not only align the
doctrine with its public policy justifications, but also to
make the doctrine useful to the USPTO. It is timely for us to
reform the inequitable conduct doctrine as part of S. 1145.
Today, virtually any information can be characterized as
``material'' to the examination of a patent application. For
example, courts have found the fact that an applicant paid the
incorrect patent maintenance fee or failed to update the USPTO
regarding the status of other pending applications to be
``material'' even though such information is unrelated to
whether the invention at issue can be patented or is readily
available and known to the USPTO.\9\ In other cases, courts
have found an applicant's failure to adequately disclose its
relationship with an expert to be material even though the
expert's views were accurate and true.\10\ Given these cases,
Congress must bring the doctrine of inequitable conduct back in
line with its original purpose by limiting the standard for
materiality to information that affects the patentability of an
invention.
---------------------------------------------------------------------------
\9\See Nilssen v. Osram Sylvania, Inc., 504 F.3d 1223 (Fed. Cir.
2007); McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d
897 (Fed. Cit. 2007).
\10\See Ferring B.V. v. Barr Labs., Inc., 437 F.3d 1181 (Fed. Cir.
2006).
---------------------------------------------------------------------------
We do not support the ambiguous language reported by the
Committee defining material information as that which a
``reasonable patent examiner would consider such information
important.'' This standard does not improve current law.
Instead, it codifies current law, which will preclude any
beneficial judicial developments that might occur in the
future.\11\ We consider this an unworkable solution. The
language will make the problem worse for both the USPTO and for
patent owners by allowing defendants to characterize irrelevant
information as material. Under current law, patent applicants
are compelled to provide too much information, much of it
irrelevant, to the USPTO during examination. This state of
affairs only leads to an inefficient patent examination
process. A more appropriate standard will encourage applicants
to provide only the most pertinent information to the Office,
which will enable the USPTO to focus on truly material prior
art and information that can affect the validity of a patent
claim.
---------------------------------------------------------------------------
\11\Indeed, the Bill language codifies the materiality standard in
precisely the way in which it has been explicated by the courts for
decades. See, e.g. Nilssen v. Osram Sylvania, Inc. 504 F.3d 1223, 1235
(Fed. Cir. 2007) (``Information is material if there is a substantial
likelihood that a reasonable examiner would have considered the
information important in deciding whether to allow the application to
issue as a patent.''); Honeywell Intern. Inc. v. Universal Avionics
Systems Corp., 488 F.3d 982, 1000 (Fed. Cir. 2007) (same); Halliburton
Co. v. Schlumberger Tech. Corp., 925 F.2d 1435, 1440 (Fed. Cir. 1991)
(same); McKesson Information Solutions, Inc. v. Bridge Medical, Inc.,
487 F.3d 897, 913 (Fed. Cir. 2007) (Materiality of information withheld
during prosecution may be judged by ``reasonable examiner'' standard,
in determining whether a patent is rendered unenforceable for
inequitable conduct; that is, materiality embraces any information that
a reasonable rexaminer would substantially likely consider important in
deciding whether to allow an application to issue as a patent); Akron
Polymer Container Corp. v. Exxel Container, Inc., 148 F.3d 1380, 1382
(Fed. Cir. 1998) (same).
---------------------------------------------------------------------------
Further, as the Committee Report states, courts often
ignore the requirement of proving that the person accused of
inequitable conduct specifically intended to deceive the USPTO
so that it would grant the patent.\12\ Courts have done this by
inferring the intent to deceive from the ``materiality'' of the
information at issue. In order to have a viable fraud standard,
we believe intent must be proven with independent evidence
separate from and unrelated to the materiality of the
information at issue.
---------------------------------------------------------------------------
\12\S. Rep. No. 110-_, at 32 (2008).
---------------------------------------------------------------------------
Additionally, holding an entire patent unenforceable is an
excessive sanction and needs to be changed. This sanction,
which provides a windfall to private litigants, is inconsistent
with the nature of equitable remedies. The law should impose a
sanction that is appropriate to the circumstances of each case.
In this respect, we do not support the Committee-passed
language, which simply lists possible sanctions that can be
imposed by a court. Giving courts--and defendants--unfettered
discretion to impose any of the enumerated sanctions, rather
than providing guidance in the law as to when to impose more
severe or less severe penalties, will do little to address the
problems in the current law. Indeed, it can fairly be asked
whether expanding the range of available sanctions for
inequitable conduct in the absence of other meaningful changes
to the doctrine will encourage more, not less, inequitable
conduct litigation.
We also believe the law needs to set an objective threshold
showing regarding the significance of the information withheld
or misrepresented to the USPTO before courts are authorized to
impose the most severe sanction of unenforceability. With
respect to remedies that limit damages, the standard should
give the court the discretion to limit a damages award as it
sees fit, rather than to require the court to simply impose a
``reasonable royalty.''\13\ These reforms to the sanctioning
authority need to be sufficient to eliminate the strong
incentive that exists under current law for defendants to
assert inequitable conduct, regardless of the facts of the
case.
---------------------------------------------------------------------------
\13\Concerns about this language are further compounded by the fact
that at the time that the Committee Report on S. 1145 is filed, it is
unclear what the standard for a ``reasonable royalty'' will be under
the bill, in light of the Committee Report's note that the standard
will have to be changed ``yet again.'' Id. at 13 n. 51.
---------------------------------------------------------------------------
Finally, given that inequitable conduct contributes
significantly to the complexity and cost of litigation,
measures are needed to eliminate the use of this defense as a
litigation tactic. Inserting an objective test for the
relationship of any asserted misconduct to the patent claims
being asserted is necessary, as are measures that will ensure
that the defense is raised only in appropriate cases. In this
context, it is important to remember that the doctrine must
operate to serve the public interest as well as the interests
of individual litigants. The public interest includes an
interest in candid and truthful disclosures during the patent
application process, but it also includes an interest in
preserving commercial decisions which were correctly made in
reliance on valid patents. Reformed standards for inequitable
conduct must fairly balance these interests.
CONCLUSION
Under current inequitable conduct law, every claim in a
valid United States patent will be held to be unenforceable if
``inequitable conduct'' is established. This is true regardless
of the merits of the invention, or the connection (if any)
between the misconduct or information at issue and the claims
of the patent. The defense has proven to be irresistible for
litigants--if proven, it allows an infringer to escape any
liability for infringing a valid patent. This powerful
incentive leads defendants to raise even the most questionable
inequitable conduct challenges on the remote chance that they
will prevail.
Reforms to several aspects of the law governing inequitable
conduct doctrine are needed to correct the problems with
current law. These reforms are needed to not only align the
doctrine with its public policy justifications, but also to
make the doctrine useful to the USPTO. It is timely for us to
reform the inequitable conduct doctrine as part of S. 1145.
The development of a more objective and clearer inequitable
conduct standard will remove the uncertainty and confusion that
defines current patent litigation. The Committee-passed
language is consistent with existing law, and essentially
maintains the status quo, rather than making meaningful reforms
that address the abuses associated with the current inequitable
conduct doctrine and that foster a strong and vibrant
environment for innovators.
Arlen Specter.
Orrin Hatch.
ADDITIONAL VIEWS OF SENATOR KYL
A few words about business-method patents: the
justification for granting patents--and 20-year monopolies--to
inventors is that the costs of innovation and development are
so high in many fields that only the prospect of a limited
monopoly is sufficient to persuade inventors to devote the time
and money that is required for a socially beneficial level of
innovation. The classic example is new drugs. It may easily
cost $100 million to develop and win approval of a new drug. If
a company could not get a limited monopoly on the drug once it
is approved--if anyone could immediately start copying the
drug--no one would develop the drug in the first place.
This economic reality generally holds true throughout the
hard sciences. It is generally true for mechanical inventions,
new chemical compounds, and new computer hardware products.
It is not true for business methods. Methods of conducting
business have obviously been around since the first patent law
was enacted in this country in 1790, but there had long been an
understanding that methods of doing business are not
patentable. It may take a lot of money and effort to develop a
new mousetrap, but it does not require expensive R&D to think
up new ways to market that new mousetrap.\1\ The PTO began to
slip somewhat from this longtime recognition of a ``business-
methods exception'' to patentability in the 1980s, and the
Federal Circuit radically accelerated this shift when it
eliminated the business-methods exception in its 1998 State
Street decision.
---------------------------------------------------------------------------
\1\For a thorough defense of this viewpoint, see Jay Dratler,
``Does Lord Darcy Yet Live? The Case Against Software and Business-
method Patents,'' 43 Santa Clara L. Rev. 823 (2003).
---------------------------------------------------------------------------
Though a three judge panel of the Federal Circuit recently
took a big step back from State Street, that decision remains
on the books--as it must, since only an en banc panel could
overrule it. Congress should act to restore the generally
recognized limits on patentability that prevailed throughout
the first 200 years of the history of patent law in this
country. The costs of giving a monopoly to persons who think up
new business methods are greater than the benefits derived from
the resulting increase in invention of ``business methods.''
Business methods are not expensive to invent, and since, by
definition, business is already engaged in business, there is
little or no inherent barrier to commercialization of these
methods. Business methods should not be patentable.
Jon Kyl.
ADDITIONAL VIEWS OF SENATOR SPECTER JOINED WITH MINORITY VIEWS OF
SENATORS KYL, GRASSLEY, COBURN, AND BROWNBACK
Discussions over this bill, and our own understanding of
patent law, evolved considerably over the course of 2007, and
they continue to evolve. And as the committee notes in footnote
51 of the draft report--a footnote that undoubtedly will be
carefully parsed by many sets of eyes--``calming fears'' of the
many patent holders who are deeply concerned about the bill's
damages provision ``requires amendment of this language yet
again.'' Thus the bill remains a work in progress, and there is
no cause for belaboring in this statement any particular
legislative language, as neither the bill text nor our own
position on these issues is yet final. Nevertheless, the many
parties whose livelihoods are affected by this legislation are
entitled to know where things stand at the moment. With such
limited objectives in mind, we present these minority views on
the current legislative landscape.
Earlier in the course of the consideration of this bill,
there was much legislative head scratching over the phrase in
the bill's damages provision ``specific contribution over the
prior art.'' Many of the principal parties advocating for this
bill made clear early and consistently that this language was
of central importance to them, but it remained unclear what the
language means. Even the advocates for the language adhered to
sharply different interpretations of what this phrase requires,
which were of varying degrees of unacceptability.
What this phrase means is very important. Although limited
exceptions were created in the committee markup to the
``specific contribution'' test, the vast bulk of reasonable-
royalty cases would still need to be litigated under that
standard under the committee reported bill. The new exceptions
to the ``specific contribution'' test--in subsection (c)(1)(B)
of proposed section 284 of the reported bill--are for damages
that are established either by way of established royalties or
through the prices paid for noninfringing substitutes.
Established royalties are rare in the world of patent
litigation. To constitute ``established royalties,'' historical
royalties paid for a patent must be for the very patent at
issue, they must have been agreed to outside of the context of
litigation, they must be non-exclusive, and there must be
enough of them to demonstrate a market value for the patented
invention. Few holders of even useful and valuable patents can
make such a showing. Non-infringing substitutes are rare too.
After all, the more that a patented invention is truly
revolutionary and essential to a product's market success, the
less likely it will be that non-infringing substitutes are
available.
The bill's reformulation of the entire-market value test,
in subparagraph (A) of proposed section 284(c)(1), compounds
these problems. Under current law, ``entire market value'' is
generally understood to mean the rule for expanding the damages
base beyond the infringing product to also include other
products sold with or in relation to the infringing product.
Subparagraph (A) narrows this rule so that it limits when the
infringing product itself may serve as the damages base, in
effect repealing current law's presumption that the infringing
product is the damages base. Moreover, the bill predicates
application of this new ``entire market value'' rule, which
will now govern when the infringing product may serve as the
damages base, to situations where demand for the infringing
product is driven by those magic words, ``specific contribution
over the prior art.''
Consider for a moment what this would do to the already
quite limited exceptions to the ``specific contribution'' test
that are enumerated in subparagraph (B). Suppose that a
plaintiff is able to demonstrate the existence of an
established royalty for his patent, thus entitling him to an
exception to the ``specific contribution'' test. But now
further suppose that this established royalty is expressed as a
small percentage of the total price of the infringing product.
Though the royalty is based on established royalties, and is
thus freed from the ``specific contribution'' test by
subparagraph (B), the royalty itself uses the infringing
product as the damages base, and thus comes within the scope of
subparagraph (A)'s ``entire market value'' rule, which bars use
of the price of the infringing product as the damages base
unless sales of the infringing product are driven by the
patent's ``specific contribution over the prior art.'' So which
would control in this hypothetical situation, subparagraph (A)
or (B)? Do the damages need to be proven under the ``specific
contribution'' test or don't they?
This hypothetical scenario would not be a minor matter. A
number of experienced patent litigators have affirmed to us
that the net sales price of the infringing product tends to be
the most commonly employed damages base when royalties are
negotiated at arm's length. (This apparently stems from the
fact that the net sales price usually is an easily and
objectively verifiable datum. It is used as the damages base
even when the value added by the patented invention to the
product is minor. In such circumstances, the low significance
of the invention is reflected in a royalty that is a very low
percentage of the net sales price.) So this question could be
expected to arise frequently under the proposed legislative
text when damages are sought to be proven by way of established
royalties.
Most problematic of all, however, is what the phrase
``specific contribution over the prior art'' appears to be
intended to mean. In recent weeks, it has become apparent to us
that this language is designed to allow de facto relitigation
of claim construction and validity issues during the damages
phase of a lawsuit. This interpretation is confirmed by the
committee report. Footnote 51 of the report and its
accompanying text state that ``specific contribution over the
prior art'' means ``the reason why the patent was allowed in
view of the existing information at the time of the
invention;'' that it is meant to capture ``the actual
invention,'' ``the gist of the patent,'' ``the reason a patent
issued,'' or even--in a nod to the crystalline clarity of
obscenity jurisprudence--``I know it when I see it;'' and
finally, that it describes what is ``novel and nonobvious'' in
the patent.
All of these issues are validity issues. ``Why the patent
was allowed,'' as well as novelty and nonobviousness, are
issues that are properly raised as validity issues and, in a
bifurcated trial, are resolved long before the jury begins to
consider damages. To allow these issues to again be litigated
as damages questions is to overlay a second (and presumably
different) set of validity standards over current law at the
damages phase of the trial. Allowing such relitigation
immediately raises the question of what was the point of the
earlier phase of the litigation where prior art, novelty, and
obviousness were litigated in the first instance. To the extent
that these legal tests need to be modified, this bill should
amend sections 102, 103, and 112, not section 284.
Nor is it apparent that the changes to validity standards
that would be prescribed by the phrase ``specific contribution
over the prior art'' are beneficial. ``Gist of the patent,''
for example, is a test that was used in the past under the
doctrine of equivalents and that was discarded many years ago,
because it tended to have the effect of unduly broadening the
scope of the patent. Patent plaintiffs arguing doctrine of
equivalents would reduce their patent claims to a back-of-the-
envelope ``gist'' or ``nub'' of the patent, and then argue that
the defendant's product fell within that ``gist,'' the actual
claims of the patent be damned. This test effectively allowed a
plaintiff to broaden his patent and claim things that were not
even the equivalent of what was described in the patent's
claims. If there is one thing on which we are certain that the
advocates for this bill would agree, it is that they do not
want to expand the reach of valid patents that are claimed to
have been infringed.
We remain open to exploring changes to damages law.
Representatives of many manufacturers have complained to us
about excessive awards of damages made for valid and infringed
but relatively trivial patents. It is clear that these firms'
concerns about this matter are genuine and deep. That alone
entitles this matter to our serious consideration. One proposal
recently made to us that may have merit is that, at least in
high-value cases, the law should favor estimates of damages
that are based on economic analysis, rather than the usual
shorthand of total product value multiplied by an expert's
unverifiable assertions about what constitutes a reasonable
royalty. Such economic analyses are expensive. But especially
when tens of millions of dollars are at stake, it is
appropriate to favor the best available evidence of what a
patent is worth.
A few words about second window: opening up a second window
for administrative challenges to a patent only makes sense if
defending a patent in such proceedings is not unduly expensive,
and if such proceedings substitute for a phase of district-
court litigation. If second-window proceedings are expensive to
participate in, a large manufacturer might abuse this system by
forcing small holders of important patents into such
proceedings and waiting until they run out of money. Defending
oneself in these proceedings requires retention of patent
lawyers who often charge $600 an hour, quickly exceeding the
means of a brilliant inventor operating out of his garage--or
even of a university or small research firm.
Second, if estoppel rules are unduly liberalized, second-
window proceedings could easily be used as a delaying tactic.
If estoppel is limited only to issues actually raised by the
defendant, for example, a defendant with four possible prior
art challenges to a patent might initiate second window
proceedings with regard to only two of those pieces of prior
art. The initiation of the proceedings is likely to lead to a
stay in the litigation, which likely will remain in place
through the appeal of the PTO's second-window decision. Once
those challenges are rejected, the defendant could then raise
the two remaining prior-art challenges in the district court,
starting the litigation again at the exact same place where it
was stopped years earlier. If second window proceedings are to
be permitted, they should generally serve as a complete
substitute for at least some phase of the litigation.
If a second-window provision is to be enacted into law, an
appropriate solution to these dilemmas might be to limit second
window proceedings to those types of issues that require very
little discovery (and to only allow limited discovery), and to
make estoppel rules more certain than the current ``could have
raised'' test but to still require that defendants raise in the
second window all of the claims of a particular type that are
available to them. Perhaps, for example, a defendant who
chooses to address prior-art issues in the second window might
be required to raise all prior art identified to him as a
result of a reasonable search request submitted to a commercial
search firm.
A very few words about interlocutory appeals: the committee
has gone a long way toward addressing our concerns about these
appeals. It has added language to the bill allowing such
appeals only if the district court finds both that there is a
sufficient evidentiary record to allow an appeal, and that such
an appeal would save judicial resources. Advocates of allowing
such appeals contend that if the Federal Circuit is allowed
discretion to refuse such appeals, it will do so wantonly. Be
that as it may, we nevertheless believe that the Federal
Circuit should have some limited discretion to refuse an
interlocutory appeal. Though some patent litigants criticize
the inclinations of the Federal Circuit, a number of others
have noted to us that some district judges do not enjoy patent
litigation and will bend the rules to rid themselves of such
cases. We cannot assume that every district judge will only
certify an interlocutory appeal when the evidentiary record
before him is in fact sufficient. If a district judge were to
send up an appeal on a manifestly inadequate record, and the
Federal Circuit were given no recourse, that appellate court
would be forced to issue a ``final'' claim construction
ruling--which would serve as the law of the case for the
remainder of the litigation--without having enough information
before the court to allow it to be certain that it had
correctly construed the patent. The Federal Circuit should be
permitted to reject the district court's predicate
interlocutory-appeal findings, and to refuse an interlocutory
appeal, when those findings are clearly erroneous.
Patent law is a matter whose importance to the American
economy is matched only by its complexity. This bill would work
major changes to this area of the law--the biggest changes in
at least half a century. We look forward to continuing to work
carefully with Chairman Leahy on this important legislation.
Arlen Specter.
Jon Kyl.
Chuck Grassley.
Tom Coburn.
Sam Brownback.
MINORITY VIEWS OF SENATORS FEINGOLD AND COBURN
This legislation fails to strike a fair balance between
patent holders and patent infringement defendants. In our view,
it remains far too lenient on infringement. In its current
form, it could potentially undermine one of the most important
engines of American innovation.
The Constitution gives 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.'' The Framers understood
that granting exclusive rights to license an invention was the
key to spurring technological development. Just as your home is
not worth much if neighbors are constantly entering, eating
your food, and sleeping in your bed, so the value of
intellectual property rights depends on their security.
No system is immune from abuse, of course, and the more
than five decades since the last major reform of the patent
system have demonstrated some need for revisiting and reforming
the law to deter strategic litigation and gamesmanship that
little benefits the American people. We recognize that the
Chairman has made an effort to bring competing interests to the
table, soliciting the proposals of all groups, private and
public, and presenting compromises that strive for a workable
and just balance.
Nonetheless, the two central provisions of the bill, in our
view, are not balanced. S. 1145 still includes an unlimited
opportunity to challenge a patent's validity throughout its
twenty-year life, the so-called ``second window.'' One could be
forgiven for wondering what kind of window opens, but does not
shut. Though shoddy patents do exist and must be addressed,
after careful consideration, I decided that defending a
patent's validity throughout its life will be so burdensome
that only patent owners with deep pockets could consider this a
viable and attractive option. Moreover, since a patent will no
longer be a presumptively valid seal of approval, but a mere
opportunity to defend a claimed invention's novelty over its
entire life, patentees will find it much more difficult to
secure the investment necessary to bring a novel idea to
market. Patents will be devalued and many inventors will opt
for trade secrecy instead, undermining the Framers' intent to
promote disclosure and public benefit through a strong patent
system. S. 1145 borrowed its first-to-file system from other
nations, but refuses to heed the experience of nations that
experimented with second window review.
Unfortunately, the bill put far less energy into crafting
proposals for more rigorous pre-grant examination of prior art
and novelty. That is a way to deal with the problem of so-
called ``junk patents'' without threatening the value of
legitimate patents. There are already some innovative programs
operating on the front end to make the PTO's application review
more informed, accurate and efficient. Moving forward, I hope
that Congress abandons ``second window'' reexamination and that
fresh thinking on improving application examination will be
forthcoming.
Two other provisions in S. 1145 are very troubling: the
mandatory apportionment of damages and the restriction of
plaintiffs' ability to sue infringers in their home venue. The
law governing damages in patent infringement cases goes to the
very core of the patent system. Shifting to mandatory
apportionment will create a system of de facto compulsory
licensing that will neither adequately compensate the patent
holder nor adequately deter future infringers. Paying a royalty
down the road will simply become the cost of doing business,
unless the patented component part meets the high threshold of
a ``predominant basis'' for market demand.
The truth is that, with the exception of a few possibly
excessive awards, current law on damages is working. The
fifteen Georgia-Pacific factors, which the courts have adopted,
preserve flexibility for jury calculations by covering a wide
range of real business circumstances. The royalty base may
exclude the value added by an infringer and include the full
value of products and services in demand principally due to the
patented invention. By contrast, S. 1145's ``prior art
subtraction'' method is unworkable given the complexity of
modern products and straitjackets deliberations that already
struggle to accurately capture the harm of infringement. Though
our preference was to strike the damages section altogether, we
did support the defeated Kyl amendment, which largely preserves
current law, and Senator Grassley's proposal to codify all 15
of the Georgia-Pacific factors, which was not offered. We would
even have considered a form of enhanced inter partes
reexamination, which the House Judiciary Committee adopted, but
two-window, post-grant review unfortunately carried the day.
Similarly, as reported, the bill's venue provision is
skewed heavily in favor of infringer-defendants. It may be true
that forum-shopping is a problem in patent litigation, but this
provision sweeps too broadly. Notwithstanding the carve-out for
universities and non-profit patent licensing institutions, we
think S. 1145 unduly restricts plaintiffs' choice of forum and
will deter the filing of legitimate infringement suits.
We want this legislation to succeed, but it is crucial that
it not undermine the stability of the patent system that has
put America at the cutting edge of innovation worldwide. We
look forward to voting for patent reform that adequately and
fairly addresses these problems.
Russ Feingold.
Tom Coburn.
MINORITY VIEWS ON POST GRANT REVIEW BY SENATORS COBURN, GRASSLEY, KYL
AND BROWNBACK
As one way to improve patent quality, the Committee is
considering modification to the post grant review process, such
as creating a brand new administrative system to review patents
after their issuance or revising the current system. Such a
process should serve to either solidify the patent's validity
or to catch a patent that should have been rejected during the
initial examination. The process should be timely and
streamlined and should take issues off the table that cannot be
resurrected in subsequent litigation, providing a cost
effective alternative to litigation. To protect patent holders
from harassment and abuse by a competitor or infringer, the
system must be narrowly crafted with appropriate safeguards.
Additional consideration should be given to creating a
system that is workable and manageable for the U.S. Patent and
Trademark Office so that USPTO will not be overwhelmed with
post grant challenges. If the system is too broad, USPTO
resources will be stretched and will likely siphon resources
away from the examination process. This would be a doubly
destructive result.
Whatever post grant system is ultimately devised, at some
point the patent should be final and the inventor should enjoy
the benefit of their invention without a cloud of uncertainty
lingering over it during the full life of the patent. Although
the Committee markup process incorporated some safeguards into
the original broad and unfettered proposal, and because the
``2nd window'' is uncharted territory that provides the
opportunity for abuse, more effort needs to be made to provide
a tighter second window or none at all.
The Committee Report at page 21 asserts that the changes
that occurred during the Committee process ``have addressed the
concerns of the many interested aspects of the patent
community.'' This is simply not the case.
Numerous inventor companies, industry organizations, patent
attorney organizations, patent practitioner organizations,
research universities, and life science industries continue to
express deep concern with the current post grant scheme in S.
1145. Our own colleagues in the House of Representative
considered the bill's post grant scheme so suspect that they
eliminated the 2nd window altogether and expanded the current
reexamination process at USPTO. Furthermore, data from the
USPTO suggests that the current reexamination process is
gaining popularity. Since FY03, the number or requests for both
inter partes reexamination and ex parte reexamination has
steadily increased. Thus, someone in the patent community must
think the current system has redeeming attributes. The
overwhelming lack of consensus on whether or how to implement
the 2nd window should signal to this Committee to proceed
cautiously.
The post-grant opposition system proposed in 5.1145 would
encompass a quasi-judicial proceeding with judges, experts,
discovery, cross-examination and other costly aspects of
litigation. However, it would lack the many safeguards of
existing judicial and administrative reexamination procedures
that protect patent owners against unwarranted, duplicative,
and abusive post-grant challenges. As a result, the proposed
post-grant opposition system could encourage patent litigation
and significantly increase the costs, delays, and uncertainty
of patent ownership instead of doing the opposite. Moreover,
the threat of expansive opposition litigation would
significantly undermine a patent's value and enforceability if
such procedures were available throughout a patent's life. This
uncertainty over the patent would limit the ability of
inventors to attract capital investment and further develop
their innovation and bring it to the marketplace. The Committee
must not be so intent on creating a new process that they
disregard the legitimate industries that need a more certain
and final system. The U.S. economy needs and relies on these
industries' ability to continue to provide innovative products
to improve our quality of life and continue providing jobs for
our constituents.
The Committee also needs to further assess the experiences
of foreign countries as they have tinkered with their post
grant opposition systems. We know that countries like Japan,
Korea, China, Taiwan and the European Union faced various
hurdles as they implemented or reformed their post grant
systems. In fact, some of the countries scrapped their system
and revised it to avoid some of the same problems that U.S.
companies warn of today. The risk of harassment is more than
theoretical. In the EU, Japan and other markets with a post-
grant opposition system, U.S. patent holders have reported a
pattern of practice where foreign competitors routinely use
administrative opposition proceedings as a means of tying up
issued patents in multiple challenges with the aim of depleting
the useful life of the patent. News accounts in foreign markets
have documented the eager interests of foreign competitors as
they look forward to using the new post grant system in S. 1145
to gain a competitive business advantage against their U.S.
competitors. If we know other countries had problems in their
reform efforts, why wouldn't we take the time available to us
to more thoroughly study the issue to make sure we don't repeat
their mistakes?
Where consensus does seem apparent is in implementing a
``1st window''. A more prudent course than launching into an
unknown and potentially unnecessary 2nd window may be to enact
the 1st window, make adjustments to the current reexamination
system and monitor the results. If the changes are still
inadequate, then maybe the need for a 2nd window, and the
appropriate parameters, will be more apparent. It is safer for
this Committee and the full Senate to tread cautiously and make
adjustments in the future than it is to stumble into a thicket
that we cannot easily escape.
We stand ready to assist the sponsors in their efforts to
make the necessary adjustments to improve the post grant system
in S. 1145.
Tom Coburn.
Chuck Grassley.
Jon Kyl.
Sam Brownback.
MINORITY VIEWS BY SENATORS COBURN, SPECTER, GRASSLEY, KYL AND BROWNBACK
GENERAL OBSERVATIONS
Primum non nocere is Latin phrase that means ``First, do no
harm.'' This principal precept of medicine should be applied
more often by Congress when debating the merits of proposed
legislation. More specifically, the nation would be best served
were the Committee on the Judiciary to consider further what
harm might befall our patent system should the intervention
proposed in S. 1145 ``The Patent Reform Act of 2007'' be
enacted, and how does this harm compare to any potential
benefits?
Although the sponsors of S. 1145 have concluded that S.
1145 will establish a ``balanced set of changes,'' we have come
to a starkly different conclusion. In our opinion, the
intervention the bill proposes will create real and certain
damage to our patent system and the ability of America's
inventors and innovation industries to protect their
intellectual property rights. As the U.S. battles to retain its
status as the leader of the global economy, Congress can ill
afford to misstep by passing S. 1145 as is, and further weaken
the economy's shifting foundation.
Recently Congress has focused its attention on numerous
issues through the lens of helping the ``little guy''
especially as he's pitted directly against the ``big guy''
corporate interests. Without significant changes, S. 1145 will
considerably tilt the intellectual property landscape to favor
a few high-tech mega-corporations and some large financial
service interests against a myriad of players including
academia, agriculture, alternative energy, biotechnology,
chemical, electronics, environmental technology, financial
services, information technology, life sciences, manufacturing,
nanotechnology, and telecommunications industries. Congress
will send to the President a bill that picks winners and losers
based on business models and not on protecting the
Constitutional rights of patent holders. The interests of
infringers will be elevated over the interests of inventors;
the interests of those with deep pockets over the interests of
start-ups; litigation over licensing; and the interests of
foreign competitors over the interests of domestic innovators.
As patents become more significant to U.S. industry,
Congressional interest in the operation of our nation's patent
system has increased. As the United States becomes a knowledge-
based, technology economy, the commercial significance of
patents is at a premium. When Congress looks to the knowledge
economy and contemplates our future, it must strengthen, not
weaken, America's intellectual property system because that
system--the inventions it protects and the innovation systems
it stimulates--will be the key to our nation's future success
in the knowledge economy lying ahead.
Economic growth depends upon the continued strength and
reliability of the U.S. patent system, which has recognized and
protected the rights of inventors for more than two centuries.
Our Country's Founders understood that property rights are as
essential to the fruits of the mind as they are to the fruits
of the land. Just as a deed creates legal incentives to
cultivate and improve a plot of land, patent rights create
incentives to invest in the development and commercialization
of an idea. Patent certainty and reliability enables the
collaborative development and funding required to nurture basic
research through its upstream refinement to its downstream
commercialization for the public benefit. That same certainty
enables others to confidently invent around--or incrementally
improve--published, patented technology. Thriving innovation is
the key to a sound economy. It benefits the public while
enhancing our nation's security and economic leadership. Thus
the focus of patent legislation should be improvement of patent
quality and protection of intellectual property rights.
Legislation should not inject uncertainty into the patent
system which will take years of litigation to sort out and that
creates unknown ramifications for American innovation.
Proponents of the Senate bill have argued, and continue to
argue, that the present patent regime is ``broken'' and
sweeping reform is needed to right the ship. However,
deficiencies cited with the U.S. Patent and Trademark Office's
patent production are being remedied. USPTO reports that the
number of rejections of patent applications is at an all time
high while new and creative methods to involve the applicant
and accelerate examinations are showing success. If our shared
objective is to improve patent quality while preserving
incentives to innovate, we should instead pursue reforms that
enhance patent examination resources and capabilities within
the USPTO and make it harder for questionable patents to
survive scrutiny.
The USPTO has already taken important steps to achieve
these goals, hiring thousands of new examiners, instituting new
training programs and committing annually to performance
benchmarks. But it needs Congress's support in the form of a
predictable flow of resources and hence the Committee was right
to pass an amendment to permanently end fee diversion, which
will further buttress USPTO in its efforts to improve patent
quality for years to come. In addition, Congress should
continue to pursue constructive but narrowly tailored reforms
that would increase access to prior art and lessen the
subjective aspects of litigation. Carefully structured measures
of this type would ultimately fortify the health of our patent
system without endangering the rights of American's most
innovative firms.
Furthermore, since the inception of the legislative reform
effort, the patent playing field has been dramatically altered
by some of the most significant Supreme Court and Federal
Circuit decisions on patent rights and remedies since the
codification of the U.S. patent laws more than 200 years ago.
These decisions have, among other changes, made it far more
difficult for many patent holders to obtain injunctive relief
(eBay v. MercExchange); significantly altered the patentability
test of obviousness, calling into question the validity of all
issued patents (KSR International v. Teleflex); permitted
patent licensees to bring declaratory judgment actions
challenging the validity and enforceability of issued patents
(MedImmune v. Genentech); and heightened the standard for
proving willful infringement (In re Seagate Technology LLC).
These decisions signify an effort by the Supreme Court and
Federal Circuit to rectify perceived imbalances in the patent
system. At a minimum, this recent trend by the Courts in the
patent field suggests that Congress should exercise extreme
caution before tilting the playing field even further towards
the interests of potential infringers. A far more prudent
course would be to take the necessary time to further
scrutinize and assess the combined impact of these key patent
decisions before moving forward with particular reforms that
may no longer be needed and will likely do more harm than good.
COMMITTEE PROCESS
The sponsors of S. 1145 have worked diligently in pursuit
of this legislation's passage and we are grateful for their
efforts and leadership. Over the previous Congresses, Senator
Leahy and Senator Hatch have held a number of hearings on
general patent issues. We appreciate their willingness to
discuss our concerns in the weeks leading up to the Committee's
consideration of the bill.
However, once the bill was actually filed in the Senate,
with its House companion, the pace to passage was quick, with
our Committee holding only one hearing before marking up the
bill. The numerous provisions in the bill that require careful
discussion and debate simply need more attention. In fact, in
September of 2007, the sponsors of the bill convened a meeting
with patent stakeholders to solicit concerns and possible
revisions. At that meeting ten issues were identified as
needing further refinement as follows: (1) how to determine
damage awards in patent litigation, (2) post grant review, (3)
venue, (4) inequitable conduct reform, (5) interlocutory
appeal, (6) willful infringement, (7) permanently ending fee
diversion, (8) applicant quality submissions, (9) first to file
and (10) best mode.
Throughout the advancement of this legislation, House
sponsors, the Administration and Senate sponsors have said that
more work needed to be done on the bill and that such work
would certainly occur. The Majority Report even acknowledges at
footnote 51 that the provision in the bill creating the most
sweeping change in the patent litigation system--the provision
regarding how damage awards are allocated in patent
infringement cases--``requires amendment * * * yet again.''
With plenty of time left in the 2008 Senate session, we stand
ready and willing to assist the sponsors to make progress
toward a consensus bill that can be supported by a broad cross-
section of the patent community.
CONCLUSION
Given the critical importance of our patent system to
American innovation and economic leadership, it is imperative
that changes to the patent system be cautiously tailored to
achieve needed improvements. Congress should be cautious to
accept changes to the patent system advanced by one industry
sector at the expense of many others. The over-arching goal of
patent quality is ill served by measures that would destabilize
our current system of patent rights and remedies and, in turn,
jeopardize the global leadership of this country's most
innovative industries. Moreover, by creating uncertainty as to
the validity and enforceability of patent rights, Congress
stands to encourage, not discourage, costly litigation and
infringement. Added costs, delayed enforcement, and increased
risk combined with reduced damages for infringement is a sure
recipe for the withdrawal of private capital from early stage
development or innovative research.
In closing, the U.S. economy has long benefited from the
strongest intellectual property laws in the world. Making
dramatic changes to a patent system that is working well and,
in so doing, risking capital investment in innovation is
clearly not worth the risk. America's system of patent rights
and remedies is universally recognized as the gold standard,
and, as such, it has given us the moral authority and
credibility to fight for stronger protection of U.S.
innovations in other markets. Maintaining that authority is
critical in today's increasingly competitive global economy.
America's leadership in this knowledge-based economy is
critically dependent upon the ideas and innovations that
constitute our most valuable natural resources and our most
desirable exports. If the United States weakens patent rights
and remedies at home, our ability to press foreign countries to
respect American intellectual property will be greatly
diminished. Indeed, we will embolden other countries to adopt
even more damaging policies that could jeopardize the continued
preeminence of America's most productive industries.
President Lincoln observed, ``Any man might instantly use
what another had invented; so that the inventor had no special
advantage from his own invention. The patent system changed
this; secured to the inventor, for a limited time, the
exclusive use of his invention and thereby added the fuel of
interest to the fire of genius, in the discovery and production
of new and useful things.''\1\ Congress should be careful to
act in such a way that the fuel of interest and the fire of
genius are not snuffed out.
\1\Allen, Joseph in ``Swords Into Plowshares: How Tech Transfer
(Unless We Mess It Up) Can Help Change the World,'' les Nouvelles,
December 2006, p. 219.
Tom Coburn.
Chuck Grassley.
Jon Kyl.
Sam Brownback.
VIII. Changes To Existing Law Made by the Bill, as Reported
In compliance with paragraph 12 of rule XXVI of the
Standing Rules of the Senate, changes in existing law made by
S. 1145, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, and existing law in which no
change is proposed is shown in roman):
UNITED STATES CODE
TITLE 15--COMMERCE AND TRADE
* * * * * * *
CHAPTER 22--TRADEMARKS
Subchapter I--The Principal Register
* * * * * * *
Sec. 1071. Appeal to courts
* * * * * * *
(b) Civil action; persons entitled to; jurisdiction of
court; status of Director; procedure.
* * * * * * *
(4) Where there is an adverse party, such suit may
be instituted against the party in interest as shown by
the records of the Patent and Trademark Office at the
time of the decision complained of, but any party in
interest may become a party to the action. If there be
adverse parties residing in a plurality of districts
not embraced within the same State, or an adverse party
residing in a foreign country, the [United States
District Court for the District of Columbia] United
States District Court for the Eastern District of
Virginia shall have jurisdiction and may issue summons
against the adverse parties directed to the marshal of
any district in which any adverse party resides.
Summons against adverse parties residing in foreign
countries may be served by publication or otherwise as
the court directs.
* * * * * * *
UNITED STATES CODE
TITLE 28--JUDICIARY AND JUDICIAL PROCEDURE
PART I--ORGANIZATION OF COURTS
* * * * * * *
CHAPTER 3--COURTS OF APPEALS
* * * * * * *
Sec. 44. Appointment, tenure, residence and salary of circuit judges
* * * * * * *
(c) Except in the District of Columbia, each circuit judge
shall be a resident of the circuit for which appointed at the
time of his appointment and thereafter while in active service.
[While in active service, each circuit judge of the Federal
judicial circuit appointed after the effective date of the
Federal Courts Improvement Act of 1982, and the chief judge of
the Federal judicial circuit, whenever appointed, shall reside
within fifty miles of the District of Columbia.] In each
circuit (other than the Federal judicial circuit) there shall
be at least one circuit judge in regular active service
appointed from the residents of each state in that circuit.
* * * * * * *
PART IV--JURISDICTION AND VENUE
* * * * * * *
CHAPTER 83--COURTS OF APPEALS
* * * * * * *
Sec. 1292. Interlocutory decisions
* * * * * * *
(c) The United States Court of Appeals for the Federal
Circuit shall have exclusive jurisdiction--
(1) of an appeal from an interlocutory order or
decree described in subsection (a) or (b) of this
section in any case over which the court would have
jurisdiction of an appeal under section 1295 of this
title; and
(2) of an appeal from a judgment in a civil action
for patent infringement which would otherwise be
appealable to the United States Court of Appeals for
the Federal Circuit and is final except for an
accounting.
(3) of an appeal from an interlocutory order or
decree determining construction of claims in a civil
action for patent infringement under section 271 of
title 35.] Application for an appeal under paragraph
(3) shall be made to the court within 10 days after
entry of the order or decree. The district court shall
have discretion whether to approve the application and,
if so, whether to stay proceedings in the district
court during the pendency of such appeal.
* * * * * * *
Sec. 1295. Jurisdiction of the United States Court of Appeals for the
Federal Circuit
(a) The United States Court of Appeals for the Federal
Circuit shall have exclusive jurisdiction--
* * * * * * *
(4) of an appeal from a decision of--
(A) [the Board of Patent Appeals and
Interferences of the United States Patent and
Trademark Office with respect to patent
applications and interferences, at the instance
of an applicant for a patent or any party to a
patent interference, and any such appeal shall
waive the right of such applicant or party to
proceed under section 145 or 146 of title 35]
the Patent Trial and Appeal Board of the United
States Patent and Trademark Office with respect
to patent applications, derivation proceedings,
and post-grant review proceedings, at the
instance of an applicant for a patent or any
party to a patent interference (commenced
before the effective date of the Patent Reform
Act of 2007), derivation proceeding, or post-
grant review proceeding, and any such appeal
shall waive any right of such applicant or
party to proceed under section 145 or 146 of
title 35;
(B) the Under Secretary of Commerce for
Intellectual Property and Director of the
United States Patent and Trademark Office or
the Trademark Trial and Appeal Board with
respect to applications for registration of
marks and other proceedings as provided in
section 21 of the Trademark Act of 1946 (15
U.S.C. 1071); or
(C) a district court to which a case was
directed pursuant to section 145, 146, or 154
(b) of title 35;
* * * * * * *
CHAPTER 87--DISTRICT COURTS; VENUE
* * * * * * *
Sec. 1400. Patents and copyrights, mask works, and designs
* * * * * * *
(b) [Any civil action for patent infringement may be
brought in the judicial district where the defendant resides,
or where the defendant has committed acts of infringement and
has a regular and established place of business.]
Notwithstanding section 1391 of this title, in any civil action
arising under any Act of Congress relating to patents, a party
shall not manufacture venue by assignment, incorporation, or
otherwise to invoke the venue of a specific district court.
(c) Notwithstanding section 1391 of this title, any civil
action for patent infringement or any action for declaratory
judgment may be brought only in a judicial district--
(1) where the defendant has its principal place of
business or in the location or place in which the
defendant is incorporated or formed, or, for foreign
corporations with a United States subsidiary, where the
defendant's primary United States subsidiary has its
principal place of business or is incorporated or
formed.
(2) where the defendant has committed substantial
acts of infringement and has a regular and established
physical facility that the defendant controls and that
constitutes a substantial portion of the operations of
the defendant;
(3) where the primary plaintiff resides, if the
primary plaintiff in the action is--
(A) an institution of higher education as
defined under section 101(a) of the Higher
Education Act of 1965 (20 U.S.C. 1001(a)); or
(B) a nonprofit organization that--
(i) qualifies for treatment under
section 501(c)(3) of the Internal
Revenue Code (26 U.S.C. 501(c)(3));
(ii) is exempt from taxation under
section 501(a) of such Code; and
(iii) serves as the patent and
licensing organization for an
institution of higher education as
defined under section 101(a) of the
Higher Education Act of 1965 (20 U.S.C.
1001(a)); or
(4) where the plaintiff resides, if the sole
plaintiff in the action is an individual inventor who
is a natural person and who qualifies at the time such
action is filed as a micro-entity pursuant to section
123 of title 35.
(d) If a plaintiff brings a civil action for patent
infringement or declaratory judgment relief under subsection
(c), then the defendant may request the district court to
transfer that action to another district or division where, in
the court's determination--
(1) any of the parties has substantial evidence or
witnesses that otherwise would present considerable
evidentiary burdens to the defendant if such transfer
were not granted;
(2) such transfer would not cause undue hardship to
the plaintiff; and
(3) venue would be otherwise appropriate under
section 1391 of this title.
UNITED STATES CODE
TITLE 35--PATENTS
PART I--UNITED STATES PATENT AND TRADEMARK OFFICE
CHAPTER 1--ESTABLISHMENT, OFFICERS AND EMPLOYEES, FUNCTIONS
* * * * * * *
Sec. 2. Powers and duties
* * * * * * *
(e) Discretion to Accept Late Filings in Certain Cases of
Unintentional Delay.--
(1) In general.--The Director may accept any
application or other filing made by--
(A) an applicant for, or owner of, a patent
after the applicable deadline set forth in this
title with respect to the application or
patent; or
(B) an applicant for, or owner of, a mark
after the applicable deadline under the
Trademark Act of 1946 with respect to the
registration or other filing of the mark,
to the extent that the Director considers appropriate, if the
applicant or owner files a petition within 30 days after such
deadline showing, to the satisfaction of the Director, that the
delay was unintentional.
(2) Treatment of director's actions on petition.--If
the Director has not made a determination on a petition
filed under paragraph (1) within 60 days after the date
on which the petition is filed, the petition shall be
deemed to be denied. A decision by the Director not to
exercise, or a failure to exercise, the discretion
provided by this subsection shall not be subject to
judicial review.
(3) Other provisions not affected.--This subsection
shall not apply to any other provision of this title,
or to any provisions of the Trademark Act of 1946, that
authorizes the Director to accept, under certain
circumstances, applications or other filings made after
a statutory deadline or to statutory deadlines that are
required by reason of the obligations of the United
States under any treaty.
(4) Definitions.--In this subsection, 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 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).
* * * * * * *
Sec. 6. [Board of Patent Appeals and Interferences] Patent Trial and
Appeal Board
(a) Establishment and Composition.--[There shall be in the
United States Patent and Trademark Office a Board of Patent
Appeals and Interferences. The Director, the Commissioner for
Patents, the Commissioner for Trademarks, and the
administrative patent judges shall constitute the Board. The
administrative patent judges shall be persons of competent
legal knowledge and scientific ability who are appointed by the
Director.] There shall be in the Office a Patent and Trial
Appeal Board. The Director, the Deputy Director, the Commission
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 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 Board of Patent Appeals and Interferences
shall, on written appeal of an applicant, review adverse
decisions of examiners upon applications for patents and shall
determine priority and patentability of invention in
interferences declared under section 135(a). Each appeal and
interference shall be heard by at least three members of the
Board, who shall be designated by the Director. Only the Board
of Patent Appeals and Interferences may grant rehearings.] The
Patent Trial and Appeal Board shall--
(1) on written appeal of an applicant, review adverse
decisions of examiners upon application for patents;
(2) on written appeal of a patent owner, review
adverse decisions of examiners upon patents in
reexamination proceedings under chapter 30;
(3) determine priority and patentability of invention
in derivation proceedings under subsection 135(a); and
(4) conduct post-grant opposition proceedings under
chapter 32.
Each appeal and derivation proceeding 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. The Director shall assign each
post-grant review proceeding to a panel of 3 administrative
patent judges. Once assigned, each such panel of administrative
patent judges shall have the responsibilities under chapter 32
in connection with post-grant review proceedings.
* * * * * * *
CHAPTER 3--PRACTICE BEFORE PATENT AND TRADEMARK OFFICE
* * * * * * *
Sec. 32. Suspension or exclusion from practice
The Director may, after notice and opportunity for a
hearing, suspend or exclude, either generally or in any
particular case, from further practice before the Patent and
Trademark Office, any person, agent, or attorney shown to be
incompetent or disreputable, or guilty of gross misconduct, or
who does not comply with the regulations established under
section 2(b)(2)(D) of this title, or who shall, by word,
circular, letter, or advertising, with intent to defraud in any
manner, deceive, mislead, or threaten any applicant or
prospective applicant, or other person having immediate or
prospective business before the Office. The reasons for any
such suspension or exclusion shall be duly recorded. The
Director shall have the discretion to designate any attorney
who is an officer or employee of the United States Patent and
Trademark Office to conduct the hearing required by this
section. The [United States District Court for the District of
Columbia)] United States District Court for the Eastern
District of Virginia, under such conditions and upon such
proceedings as it by its rules determines, may review the
action of the Director upon the petition of the person so
refused recognition or so suspended or excluded.
* * * * * * *
CHAPTER 4--PATENT FEES; FUNDING; SEARCH SYSTEMS
* * * * * * *
Sec. 41. Patent fees; patent and trademark search systems
(a) The Director shall charge the following fees:
* * * * * * *
(6)(A) On filing an appeal from the examiner to the
[Board of Patent Appeals and Interferences] Patent
Trial and Appeal Board, $300.
(B) In addition, on filing a brief in support of the
appeal, $300, and on requesting an oral hearing in the
appeal before the [Board of Patent Appeals and
Interferences] Patent Trial and Appeal Board, $260.
* * * * * * *
Sec. 42. Patent and Trademark Office funding
* * * * * * *
(b) All fees paid to the Director and all appropriations
for defraying the costs of the activities of the Patent and
Trademark Office will be credited to the [Patent and Trademark
Office Appropriation Account] United States Patent and
Trademark Office Public Enterprise Fund in the Treasury of the
United States.
(c) [To the extent and in the amounts provided in advance
in appropriations Acts, fees] Fees authorized in this title or
any other Act to be charged or established by the Director
[shall be collected by and shall be available to the Director]
shall be collected by the Director and shall be available until
expended to carry out the activities of the Patent and
Trademark Office. All fees available to the Director under
section 31 of the Trademark Act of 1946 shall be used only for
the processing of trademark registrations and for other
activities, services, and materials relating to trademarks and
to cover a proportionate share of the administrative costs of
the Patent and Trademark Office.
* * * * * * *
PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS
CHAPTER 10--PATENTABILITY OF INVENTIONS
Sec. 100. Definitions
* * * * * * *
(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 ``effective filing date of a claimed invention''
is--
(1) the filing date of the patent or the application
for patent containing the claim to the invention; or
(2) if the patent or application for patent is
entitled to a right of priority of any other
application under section 119, 365(a), or 365(b) or to
the benefit of an earlier filing date in the United
States under section 120, 121, or 365(c), the filing
date of the earliest such application in which the
claimed invention is disclosed in the manner provided
by the first paragraph of section 112.
(i) The term ``claimed invention'' means the subject matter
defined by a claim in a patent or an application for a patent.
(j) The term ``joint invention'' means an invention
resulting from the collaboration of inventive endeavors of 2 or
more persons working toward the same end and producing an
invention by their collective efforts.
(k) The term ``cancellation petitioner'' means the real
party in interest requesting cancellation of any claim of a
patent under chapter 31 of this title and the privies of the
real party in interest.
* * * * * * *
Sec. 102. [Conditions for patentability; novelty and loss of right to
patent
[A person shall be entitled to a patent unless--
[(a) the invention was known or used by others in this
country, or patented or described in a printed publication in
this or a foreign country, before the invention thereof by the
applicant for patent, or
[(b) the invention was patented or described in a printed
publication in this or a foreign country or in public use or on
sale in this country, more than one year prior to the date of
the application for patent in the United States, or
[(c) he has abandoned the invention, or
[(d) the invention was first patented or caused to be
patented, or was the subject of an inventor's certificate, by
the applicant or his legal representatives or assigns in a
foreign country prior to the date of the application for patent
in this country on an application for patent or inventor's
certificate filed more than twelve months before the filing of
the application in the United States, or
[(e) the invention was described in
[(1) an application for patent, published under
section 122(b), by another filed in the United States
before the invention by the applicant for patent or
[(2) a patent granted on an application for patent by
another filed in the United States before the invention
by the applicant for patent, except that an
international application filed under the treaty
defined in section 351(a) shall have the effects for
the purposes of this subsection of an application filed
in the United States only if the international
application designated the United States and was
published under Article 21(2) of such treaty in the
English language, or
[(f) he did not himself invent the subject matter sought to
be patented, or
[(g)(1) during the course of an interference conducted
under section 135 or section 291, another inventor involved
therein establishes, to the extent permitted in section 104,
that before such person's invention thereof the invention was
made by such other inventor and not abandoned, suppressed, or
concealed, or
[(2) before such person's invention thereof, the invention
was made in this country by another inventor who had not
abandoned, suppressed, or concealed it. In determining priority
of invention under this subsection, there shall be considered
not only the respective dates of conception and reduction to
practice of the invention, but also the reasonable diligence of
one who was first to conceive and last to reduce to practice,
from a time prior to conception by the other.]
Conditions for patentability; novelty
(a) Novelty; Prior Art.--A patent for a claimed invention
may not be obtained if--
(1) the claimed invention was patented, described in
a printed publication, or in public use, on sale, or
otherwise available to the public--
(A) more than 1 year before the effective
filing date of the claimed invention; or
(B) 1 year or less before the effective
filing date of the claimed invention, other
than through disclosures made by the inventor
or a joint inventor or by others who obtained
the subject matter disclosed directly or
indirectly from the inventor or joint inventor;
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) Prior inventor disclosure exception.--Subject
matter that would otherwise qualify as prior art based
upon a disclosure under subparagraph (B) of subsection
(a)(1) shall not be prior art to a claimed invention
under that subparagraph if the subject matter had,
before such disclosure, been publicly disclosed by the
inventor or a joint inventor or others who obtained the
subject matter disclosed directly or indirectly from
the inventor or joint inventor.
(2) Derivation, prior disclosure, and common
assignment exceptions.--Subject matter that would
otherwise qualify as prior art only under subsection
(a)(2), after taking into account the exception under
paragraph (1), shall not be prior art to a claimed
invention if--
(A) the subject matter was obtained directly
or indirectly from the inventor or a joint
inventor;
(B) the subject matter had been publicly
disclosed by the inventor or a joint inventor
or others who obtained the subject matter
disclosed, directly or indirectly, from the
inventor or a joint inventor before the
effective filing date of the application or
patent set forth under subsection (a)(2); or
(C) the subject matter and the claimed
invention, nor 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.
(3) Joint research agreement exception.--
(A) In general.--Subject matter 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 paragraph (2) if--
(i) the claimed invention was made by
or on behalf of parties to a joint
research agreement that was in effect
on or before the effective filing date
of the claimed invention;
(ii) the claimed invention was made
as a result of activities undertaken
within the scope of the joint research
agreement; and
(iii) the application for patent for
the claimed invention discloses or is
amended to disclose the names of the
parties to the joint research
agreement.
(B) For purposes of subparagraph (A), 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.
(4) Patents and published applications effectively
filed.--A patent or application for patent is
effectively filed under subsection (a)(2) with respect
to any subject matter described in the patent or
application--
(A) as of the filing date of the patent or
the application for patent; or
(B) 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 describes
the subject matter.
Sec. 103. [Conditions for patentability; non-obvious subject matter
[(a) A patent may not be obtained though the invention is
not identically disclosed or described as set forth in section
102 of this title, if the differences between the subject
matter sought to be patented and the prior art are such that
the subject matter as a whole would have been obvious at the
time the invention was made to a person having ordinary skill
in the art to which said subject matter pertains. Patentability
shall not be negatived by the manner in which the invention was
made.
[(b) (1) Notwithstanding subsection (a), and upon timely
election by the applicant for patent to proceed under this
subsection, a biotechnological process using or resulting in a
composition of matter that is novel under section 102 and
nonobvious under subsection (a) of this section shall be
considered nonobvious if--
[(A) claims to the process and the composition of
matter are contained in either the same application for
patent or in separate applications having the same
effective filing date; and
[(B) the composition of matter, and the process at
the time it was invented, were owned by the same person
or subject to an obligation of assignment to the same
person.
[(2) A patent issued on a process under paragraph (1)--
[(A) shall also contain the claims to the composition
of matter used in or made by that process, or
[(B) shall, if such composition of matter is claimed
in another patent, be set to expire on the same date as
such other patent, notwithstanding section 154.
[(3) For purposes of paragraph (1), the term
``biotechnological process'' means--
[(A) a process of genetically altering or otherwise
inducing a single- or multi-celled organism to--
[(i) express an exogenous nucleotide
sequence,
[(ii) inhibit, eliminate, augment, or alter
expression of an endogenous nucleotide
sequence, or
[(iii) express a specific physiological
characteristic not naturally associated with
said organism;
[(B) cell fusion procedures yielding a cell line that
expresses a specific protein, such as a monoclonal
antibody; and
[(C) a method of using a product produced by a
process defined by subparagraph (A) or (B), or a
combination of subparagraphs (A) and (B).
[(c)(1) Subject matter developed by another person, which
qualifies as prior art only under one or more of subsections
(e), (f), and (g) of section 102 of this title, shall not
preclude patentability under this section where the subject
matter and the claimed invention were, at the time the claimed
invention was made, owned by the same person or subject to an
obligation of assignment to the same person.
[(2) For purposes of this subsection, subject matter
developed by another person 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 if--
[(A) the claimed invention was made by or on behalf
of parties to a joint research agreement that was in
effect on or before the date the claimed invention was
made;
[(B) the claimed invention was made as a result of
activities undertaken within the scope of the joint
research agreement; and
[(C) the application for patent for the claimed
invention discloses or is amended to disclose the names
of the parties to the joint research agreement.
[(3) For purposes of paragraph (2), the term ``joint
research agreement'' means a written contract, grant, or
cooperative agreement entered into by two or more persons or
entities for the performance of experimental, developmental, or
research work in the field of the claimed invention.]
Conditions for patentability; nonobvious subject matter
A patent for a claimed invention may not be obtained though
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
and the prior art are such that the claimed invention as a
whole would have been obvious before the effective filing date
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.
[Sec. 104. Invention made abroad
[(a) In General.--
[(1) Proceedings.--In proceedings in the Patent and
Trademark Office, in the courts, and before any other
competent authority, an applicant for a patent, or a
patentee, may not establish a date of invention by
reference to knowledge or use thereof, or other
activity with respect thereto, in a foreign country
other than a NAFTA country or a WTO member country,
except as provided in sections 119 and 365 of this
title.
[(2) Rights.--If an invention was made by a person,
civil or military--
[(A) while domiciled in the United States,
and serving in any other country in connection
with operations by or on behalf of the United
States,
[(B) while domiciled in a NAFTA country and
serving in another country in connection with
operations by or on behalf of that NAFTA
country, or
[(C) while domiciled in a WTO member country
and serving in another country in connection
with operations by or on behalf of that WTO
member country, that person shall be entitled
to the same rights of priority in the United
States with respect to such invention as if
such invention had been made in the United
States, that NAFTA country, or that WTO member
country, as the case may be.
[(3) Use of information.--To the extent that any
information in a NAFTA country or a WTO member country
concerning knowledge, use, or other activity relevant
to proving or disproving a date of invention has not
been made available for use in a proceeding in the
Patent and Trademark Office, a court, or any other
competent authority to the same extent as such
information could be made available in the United
States, the Director, court, or such other authority
shall draw appropriate inferences, or take other action
permitted by statute, rule, or regulation, in favor of
the party that requested the information in the
proceeding.
[(b) Definitions.--As used in this section--
[(1) the term ``NAFTA country'' has the meaning given
that term in section 2(4) of the North American Free
Trade Agreement Implementation Act; and
[(2) the term ``WTO member country'' has the meaning
given that term in section 2(10) of the Uruguay Round
Agreements Act.]
* * * * * * *
CHAPTER 11--APPLICATION FOR PATENT
Sec. 111. Application
(a) In General.--
* * * * * * *
(2) Contents.--Such application shall include--
(A) a specification as prescribed by section
112 of this title;
(B) a drawing as prescribed by section 113 of
this title; and
(C) an oath [by the applicant] or declaration
as prescribed by section 115 of this title.
(3) Fee [and oath].--The application must be
accompanied by the fee required by law. The fee [and
oath] may be submitted after the specification and any
required drawing are submitted, within such period and
under such conditions, including the payment of a
surcharge, as may be prescribed by the Director.
(4) Failure to submit.--Upon failure to submit the
fee [and oath] within such prescribed period, the
application shall be regarded as abandoned, unless it
is shown to the satisfaction of the Director that the
delay in submitting the fee [and oath] was unavoidable
or unintentional. The filing date of an application
shall be the date on which the specification and any
required drawing are received in the Patent and
Trademark Office.
(b) Provisional Application.--
* * * * * * *
(8) Applicable provisions.--The provisions of this
title relating to applications for patent shall apply
to provisional applications for patent, except as
otherwise provided, and except that provisional
applications for patent shall not be subject to
[sections 115, 131, 135, and 157] sections 131 and 135
of this title.
Sec. 112. Specification
[The specification] (a) In General.--The specification
shall contain a written description of the invention, and of
the manner and process of making and using it, in such full,
clear, concise, and exact terms as to enable any person skilled
in the art to which it pertains, or with which it is most
nearly connected, to make and use the same, and shall set forth
the best mode contemplated by the inventor [of carrying out his
invention] or joint inventor of carrying out the invention.
[The specification] (b) Conclusion.--The specifications
shall conclude with one or more claims particularly pointing
out and distinctly claiming the subject matter which the
[applicant regards as his invention] inventor or a joint
inventor regards as the invention.
[A claim] (c) Form.--A claim may be written in independent
or, if the nature of the case admits, in dependent or multiple
dependent form.
[Subject to the following paragraph] (d) Reference in
Dependent Forms.--Subject to subsection (e), a claim in
dependent form shall contain a reference to a claim previously
set forth and then specify a further limitation of the subject
matter claimed. A claim in dependent form shall be construed to
incorporate by reference all the limitations of the claim to
which it refers.
[A claim] (e) Reference in Multiple Dependent Form.--A
claim in multiple dependent form shall contain a reference, in
the alternative only, to more than one claim previously set
forth and then specify a further limitation of the subject
matter claimed. A multiple dependent claim shall not serve as a
basis for any other multiple dependent claim. A multiple
dependent claim shall be construed to incorporate by reference
all the limitations of the particular claim in relation to
which it is being considered.
[An element] (f) Element in Claim for a Combination.--An
element in a claim for a combination may be expressed as a
means or step for performing a specified function without the
recital of structure, material, or acts in support thereof, and
such claim shall be construed to cover the corresponding
structure, material, or acts described in the specification and
equivalents thereof.
* * * * * * *
Sec. 115. [Oath of applicant] Inventor's oath or declaration
[The applicant shall make oath that he believes himself to
be the original and first inventor of the process, machine,
manufacture, or composition of matter, or improvement thereof,
for which he solicits a patent; and shall state of what country
he is a citizen. Such oath may be made before any person within
the United States authorized by law to administer oaths, or,
when, made in a foreign country, before any diplomatic or
consular officer of the United States authorized to administer
oaths, or before any officer having an official seal and
authorized to administer oaths in the foreign country in which
the applicant may be, whose authority is proved by certificate
of a diplomatic or consular officer of the United States, or
apostille of an official designated by a foreign country which,
by treaty or convention, accords like effect to apostilles of
designated officials in the United States, and such oath shall
be valid if it complies with the laws of the state or country
where made. When the application is made as provided in this
title by a person other than the inventor, the oath may be so
varied in form that it can be made by him. For purposes of this
section, a consular officer shall include any United States
citizen serving overseas, authorized to perform notarial
functions pursuant to section 1750 of the Revised Statutes, as
amended (22 U.S.C. 4221).]
(a) Naming the Inventor; Inventor's Oath or Declaration.--
An application for patent that is filed under section 111(a),
that commences the national stage under section 363, or that is
filed by an inventor for an invention for which an application
has previously been filed under this title by that inventor
shall include, or be amended to include, the name of the
inventor of any claimed invention in the application. Except as
otherwise provided in this section, an 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
(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) and 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.--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 that claims the benefit
under section 120 or 365(c) of the filing of an earlier-filed
application, if--
(1) 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;
(2) a substitute statement meeting the requirements
of subsection (d) was filed in the earlier filed
application with respect to the individual; or
(3) 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.
(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 under
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.--No patent shall 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) Acknowledgement of Penalties.--Any declaration or
statement filed pursuant to this section shall contain an
acknowledgement 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.
Sec. 116. Inventors
[When] (a) Joint Inventions.--When an invention is made by
two or more persons jointly, they shall apply for patent
jointly and each make the required oath, except as otherwise
provided in this title. Inventors may apply for a patent
jointly even though
(1) they did not physically work together or at the
same time,
(2) each did not make the same type or amount of
contribution, or
(3) each did not make a contribution to the subject
matter of every claim of the patent.
[If a joint inventor] (b) Omitted Inventor.--If a joint
inventor refuses to join in an application for patent or cannot
be found or reached after diligent effort, the application may
be made by the other inventor on behalf of himself and the
omitted inventor. The Director, on proof of the pertinent facts
and after such notice to the omitted inventor as he prescribes,
may grant a patent to the inventor making the application,
subject to the same rights which the omitted inventor would
have had if he had been joined. The omitted inventor may
subsequently join in the application.
[Whenever] (c) Correction of Errors in Application.--
Whenever through error a person is named in an application for
patent as the inventor, or through error an inventor is not
named in an application, and such error arose without any
deceptive intention on his part, the Director may permit the
application to be amended accordingly, under such terms as he
prescribes.
* * * * * * *
Sec. 118. Filing by other than inventor
[Whenever an inventor refuses to execute an application for
patent, or cannot be found or reached after diligent effort, a
person to whom the inventor has assigned or agreed in writing
to assign the invention or who otherwise shows sufficient
proprietary interest in the matter justifying such action, may
make 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 necessary to preserve the rights of the parties
or to prevent irreparable damage; and the Director may grant a
patent to such inventor upon such notice to him as the Director
deems sufficient, and on compliance with such regulations as he
prescribes.] 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.
Sec. 119. Benefit of earlier filing date; right of priority
(a) An application for patent for an invention filed in
this country by any person who has, or whose legal
representatives or assigns have, previously regularly filed an
application for a patent for the same invention in a foreign
country which affords similar privileges in the case of
applications filed in the United States or to citizens of the
United States, or in a WTO member country, shall have the same
effect as the same application would have if filed in this
country on the date on which the application for patent for the
same invention was first filed in such foreign country, if the
application in this country is filed within twelve months from
the earliest date on which such foreign application was filed[;
but no patent shall be granted on any application for patent
for an invention which had been patented or described in a
printed publication in any country more than one year before
the date of the actual filing of the application in this
country, or which had been in public use or on sale in this
country more than one year prior to such filing].
Sec. 120. Benefit of earlier filing date in the United States
An application for patent for an invention disclosed in the
manner provided by the first paragraph of section 112 of this
title in an application previously filed in the United States,
or as provided by section 363 of this title, [which is filed by
an inventor or inventors named] which names an inventor or
joint inventor in the previously filed application shall have
the same effect, as to such invention, as though filed on the
date of the prior application, if filed before the patenting or
abandonment of or termination of proceedings on the first
application or on an application similarly entitled to the
benefit of the filing date of the first application and if it
contains or is amended to contain a specific reference to the
earlier filed application. No application shall be entitled to
the benefit of an earlier filed application under this section
unless an amendment containing the specific reference to the
earlier filed application is submitted at such time during the
pendency of the application as required by the Director. The
Director may consider the failure to submit such an amendment
within that time period as a waiver of any benefit under this
section. The Director may establish procedures, including the
payment of a surcharge, to accept an unintentionally delayed
submission of an amendment under this section.
Sec. 121. Divisional applications
If two or more independent and distinct inventions are
claimed in one application, the Director may require the
application to be restricted to one of the inventions. If the
other invention is made the subject of a divisional application
which complies with the requirements of section 120 of this
title it shall be entitled to the benefit of the filing date of
the original application. A patent issuing on an application
with respect to which a requirement for restriction under this
section has been made, or on an application filed as a result
of such a requirement, shall not be used as a reference either
in the Patent and Trademark Office or in the courts against a
divisional application or against the original application or
any patent issued on either of them, if the divisional
application is filed before the issuance of the patent on the
other application. [If a divisional application is directed
solely to subject matter described and claimed in the original
application as filed, the Director may dispense with signing
and execution by the inventor.] The validity of a patent shall
not be questioned for failure of the Director to require the
application to be restricted to one invention.
Sec. 122. Confidential status of applications; publication of patent
applications
* * * * * * *
(b) Publication.--
* * * * * * *
(2) Exceptions.--
[(A) An application] An application shall not
be published if that application is--
[(i)] (A) no longer pending;
[(ii)] (B) subject to a secrecy order
under section 181 of this title;
[(iii)] (C) a provisional application
filed under section 111(b) of this
title; or
[(iv)] (D) an application for a
design patent filed under chapter 16 of
this title.
[(B)(i) If an applicant makes a request upon
filing, certifying that the invention disclosed
in the application has not and will not be the
subject of an application filed in another
country, or under a multilateral international
agreement, that requires publication of
applications 18 months after filing, the
application shall not be published as provided
in paragraph (1).
[(ii) An applicant may rescind a request made
under clause (i) at any time.
[(iii) An applicant who has made a request
under clause (i) but who subsequently files, in
a foreign country or under a multilateral
international agreement specified in clause
(i), an application directed to the invention
disclosed in the application filed in the
Patent and Trademark Office, shall notify the
Director of such filing not later than 45 days
after the date of the filing of such foreign or
international application. A failure of the
applicant to provide such notice within the
prescribed period shall result in the
application being regarded as abandoned, unless
it is shown to the satisfaction of the Director
that the delay in submitting the notice was
unintentional.
[(iv) If an applicant rescinds a request made
under clause (i) or notifies the Director that
an application was filed in a foreign country
or under a multilateral international agreement
specified in clause (i), the application shall
be published in accordance with the provisions
of paragraph (1) on or as soon as is practical
after the date that is specified in clause (i).
[(v) If an applicant has filed applications
in one or more foreign countries, directly or
through a multilateral international agreement,
and such foreign filed applications
corresponding to an application filed in the
Patent and Trademark Office or the description
of the invention in such foreign filed
applications is less extensive than the
application or description of the invention in
the application filed in the Patent and
Trademark Office, the applicant may submit a
redacted copy of the application filed in the
Patent and Trademark Office eliminating any
part or description of the invention in such
application that is not also contained in any
of the corresponding applications filed in a
foreign country. The Director may only publish
the redacted copy of the application unless the
redacted copy of the application is not
received within 16 months after the earliest
effective filing date for which a benefit is
sought under this title. The provisions of
section 154(d) shall not apply to a claim if
the description of the invention published in
the redacted application filed under this
clause with respect to the claim does not
enable a person skilled in the art to make and
use the subject matter of the claim.]
* * * * * * *
(e) Preissuance Submissions by Third Parties.--
(1) In general.--Any person may submit for
consideration and inclusion in the record of a patent
application, any patent, published patent application,
or other 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 mailed in the application for
patent; or
(B) either--
(i) 6 months after the date on which
the application for patent is published
under section 122, 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,
whichever occurs later.
(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.
Sec. 123. Additional information; micro-entity exception
(a) In General.--The Director shall, by regulation, require
that an applicant for a patent under this title submit to the
Director--
(1) a search report and analysis relevant to
patentability; and
(2) any other information relevant to patentability
that the Director, in his discretion, determines
necessary.
(b) Failure To Comply.--If an applicant fails to submit the
search report, analysis, or information required under
subsection (a) in the manner and within the time period
prescribed by the Director, such application shall be regarded
as abandoned.
(c) Exception.--Any application for a patent submitted by a
micro-entity shall not be subject to the requirements of this
section.
(d) Micro-Entity Defined.--
(1) In general.--For purposes of this section, the
term ``micro-entity'' means an applicant who makes a
certification under either paragraph (2) or (3).
(2) Unassigned application.--For an unassigned
application, each applicant shall certify that the
applicant--
(A) qualifies as a small entity, as defined
in regulations issued by the Director;
(B) has not been named on 5 or more
previously filed patent applications;
(C) has not assigned, granted, or conveyed,
and is not under an obligation by contract or
law to assign, grant, or convey, a license or
any other ownership interest in the particular
application; and
(D) does not have a gross income, as defined
in section 61(a) of the Internal Revenue Code
(26 U.S.C. 61(a)), exceeding 2.5 times the
average gross income, as reported by the
Department of Labor, in the calendar year
immediately preceding the calendar year in
which the examination fee is being paid.
(3) Assigned application.--For an assigned
application, each applicant shall certify that the
applicant--
(A) qualifies as a small entity, as defined
in regulations issued by the Director, and
meets the requirements of paragraph (2)(D);
(B) has not been named on 5 or more
previously filed patent applications; and
(C) 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 an entity that has 5 or fewer
employees and that such entity has a gross
income, as defined in section 61(a) of the
Internal Revenue Code (26 U.S.C. 61(a)), that
does not exceed 2.5 times the average gross
income, as reported by the Department of Labor,
in the calendar year immediately preceding the
calendar year in which the examination fee is
being paid.
(4) Income level adjustment.--The gross income levels
established under paragraphs (2) and (3) shall be
adjusted by the Director on October 1, 2009, and every
year thereafter, to reflect any fluctuations occurring
during the previous 12 months in the Consumer Price
Index, as determined by the Secretary of Labor.
* * * * * * *
CHAPTER 12--EXAMINATION OF APPLICATION
* * * * * * *
Sec. 134. [Appeal to the Board of Patent Appeals and Interferences]
Appeal to the Patent Trial and Appeal Board.
(a) Patent Applicant.--An applicant for a patent, any of
whose claims has been twice rejected, may appeal from the
decision of the primary examiner to the [Board of Patent
Appeals and Interferences] Patent Trial and Appeal Board,
having once paid the fee for such appeal.
(b) Patent Owner.--A patent owner in any reexamination
proceeding may appeal from the final rejection of any claim by
the primary examiner to the [Board of Patent Appeals and
Interferences] Patent Trial and Appeal Board, having once paid
the fee for such appeal.
(c) Third Party.--A third-party requester in an inter
partes proceeding may appeal to the [Board of Patent Appeals
and Interferences] Patent Trial and Appeal Board from the final
decision of the primary examiner favorable to the patentability
of any original or proposed amended or new claim of a patent,
having once paid the fee for such appeal.
Sec. 135. [Interferences] Derivation proceedings
(a) [Whenever an application is made for a patent which, in
the opinion of the Director, would interfere with any pending
application, or with any unexpired patent, an interference may
be declared and the Director shall give notice of such
declaration to the applicants, or applicant and patentee, as
the case may be. The Board of Patent Appeals and Interferences
shall determine questions of priority of the inventions and may
determine questions of patentability. Any final decision, if
adverse to the claim of an applicant, shall constitute the
final refusal by the Patent and Trademark Office of the claims
involved, and the Director may issue a patent to the applicant
who is adjudged the prior inventor. A final judgment adverse to
a patentee from which no appeal or other review has been or can
be taken or had shall constitute cancellation of the claims
involved in the patent, and notice of such cancellation shall
be endorsed on copies of the patent distributed after such
cancellation by the Patent and Trademark Office.] Dispute Over
Right To Patent._
(1) Institution of derivation proceeding.--An
applicant may request initiation of a derivation
proceeding to determine the right of the applicant to a
patent by filing a request which sets forth with
particularity the basis for finding that an earlier
applicant derived the claimed invention from the
applicant requesting the proceeding and, without
authorization, filed an application claiming such
invention. Any such request may only be made within 12
months after the date of first publication of an
application containing a claim that is the same or is
substantially the same as the claimed invention, must
be made under oath, and must be supported by
substantial evidence. Whenever the Director determines
that patents or applications for patent naming
different individuals as the inventor interfere with
one another because of a dispute over the right to
patent under section 101, the Director shall institute
a derivation proceeding for the purpose of determining
which applicant is entitled to a patent.
(2) Determination by patent trial and appeal board.--
In any proceeding under this subsection, the Patent
Trial and Appeal Board--
(A) shall determine the question of the right
to patent;
(B) in appropriate circumstances, may correct
the naming of the inventor in any application
or patent at issue; and
(C) shall issue a final decision on the right
to patent.
(3) Derivation proceeding.--The Board may defer
action on a request to initiate a derivation proceeding
until 3 months after the date on which the Director
issues a patent to the applicant that filed the earlier
application.
(4) Effect of final decision.--The final decision of
the Patent Trial and Appeal Board, if adverse to the
claim of an applicant, shall constitute the final
refusal by the United States Patent and Trademark
Office on the claims involved. The Director may issue a
patent to an applicant who is determined by the Patent
Trial and Appeal Board to have the right to patent. The
final decision of the Board, if adverse to a patentee,
shall, if no appeal or other review of the decision has
been or can be taken or had, constitute cancellation of
the claims involved in the patent, and notice of such
cancellation shall be endorsed on copies of the patent
distributed after such cancellation by the United
States Patent and Trademark Office.
* * * * * * *
CHAPTER 13--REVIEW OF PATENT AND TRADEMARK OFFICE DECISIONS
Sec. 141. Appeal to the Court of Appeals for the Federal Circuit
An applicant dissatisfied with the decision in an appeal to
the [Board of Patent Appeals and Interferences] Patent Trial
and Appeal Board under section 134 of this title may appeal the
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 of this title. A patent
owner, or a third-party requester in an inter partes
reexamination proceeding, who is in any reexamination
proceeding dissatisfied with the final decision in an appeal to
the [Board of Patent Appeals and Interferences] Patent Trial
and Appeal Board under section 134 may appeal the decision only
to the United States Court of Appeals for the Federal Circuit.
A party to [an interference] a derivation proceeding
dissatisfied with the decision of the [Board of Patent Appeals
and Interferences] Patent Trial and Appeal Board on the
[interference] derivation 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
[interference] derivation proceeding, within twenty days after
the appellant has filed notice of appeal in accordance with
section 142 of this title, files notice with the Director that
the party elects to have all further proceedings conducted as
provided in section 146 of this title. If the appellant does
not, within thirty days after filing of such notice by the
adverse party, file a civil action under section 146, the
decision appealed from shall govern the further proceedings in
the case.
* * * * * * *
Sec. 145. Civil action to obtain patent
An applicant dissatisfied with the decision of the [Board
of Patent Appeals and Interferences] Patent Trial and Appeal
Board in an appeal under section 134(a) of this title may,
unless appeal has been taken to the United States Court of
Appeals for the Federal Circuit, have remedy by civil action
against the Director in the [United States District Court for
the District of Columbia] United States District Court for the
Eastern District of Virginia if commenced within such time
after such decision, not less than sixty days, as the Director
appoints. The court may adjudge that such applicant is entitled
to receive a patent for his invention, as specified in any of
his claims involved in the decision of the [Board of Patent
Appeals and Interferences] Patent Trial and Appeal Board, as
the facts in the case may appear, and such adjudication shall
authorize the Director to issue such patent on compliance with
the requirements of law. All the expenses of the proceedings
shall be paid by the applicant.
Sec. 146. [Civil action in case of interference] Civil action in case
of derivation proceeding
Any party to [an interference] a derivation proceeding
dissatisfied with the decision of the [Board of Patent Appeals
and Interferences] Patent Trial and Appeal Board may have
remedy by civil action, if commenced within such time after
such decision, not less than sixty days, as the Director
appoints or as provided in section 141 of this title, unless he
has appealed to the United States Court of Appeals for the
Federal Circuit, and such appeal is pending or has been
decided. In such suits the record in the Patent and Trademark
Office shall be admitted on motion of either party upon the
terms and conditions as to costs, expenses, and the further
cross-examination of the witnesses as the court imposes,
without prejudice to the right of the parties to take further
testimony. The testimony and exhibits of the record in the
Patent and Trademark Office when admitted shall have the same
effect as if originally taken and produced in the suit.
Such suit may be instituted against the party in interest
as shown by the records of the Patent and Trademark Office at
the time of the decision complained of, but any party in
interest may become a party to the action. If there be adverse
parties residing in a plurality of districts not embraced
within the same state, or an adverse party residing in a
foreign country, the [United States District Court for the
District of Columbia] United States District Court for the
Eastern District of Virginia shall have jurisdiction and may
issue summons against the adverse parties directed to the
marshal of any district in which any adverse party resides.
Summons against adverse parties residing in foreign countries
may be served by publication or otherwise as the court directs.
The Director shall not be a necessary party but he shall be
notified of the filing of the suit by the clerk of the court in
which it is filed and shall have the right to intervene.
Judgment of the court in favor of the right of an applicant to
a patent shall authorize the Director to issue such patent on
the filing in the Patent and Trademark Office of a certified
copy of the judgment and on compliance with the requirements of
law.
* * * * * * *
CHAPTER 14--ISSUE OF PATENT
* * * * * * *
Sec. 154. Contents and term of patent; provisional rights
* * * * * * *
(b) Adjustment of Patent Term.--
(1) Patent term guarantees.--
(A) Guarantee of prompt patent and trademark
office responses.--Subject to the limitations
under paragraph (2), if the issue of an
original patent is delayed due to the failure
of the Patent and Trademark Office to--
(i) provide at least one of the
notifications under section 132 of this
title or a notice of allowance under
section 151 of this title not later
than 14 months after--
(I) the date on which an
application was filed under
section 111 (a) of this title;
or
(II) the date on which an
international application
fulfilled the requirements of
section 371 of this title;
(ii) respond to a reply under section
132, or to an appeal taken under
section 134, within 4 months after the
date on which the reply was filed or
the appeal was taken;
(iii) act on an application within 4
months after the date of a decision by
the [Board of Patent Appeals and
Interferences] Patent Trial and Appeal
Board under section 134 or 135 or a
decision by a Federal court under
section 141, 145, or 146 in a case in
which allowable claims remain in the
application; or
(iv) issue a patent within 4 months
after the date on which the issue fee
was paid under section 151 and all
outstanding requirements were
satisfied,
the term of the patent shall be extended 1 day
for each day after the end of the period
specified in clause (i), (ii), (iii), or (iv),
as the case may be, until the action described
in such clause is taken.
(B) Guarantee of no more than 3-year
application pendency.--Subject to the
limitations under paragraph (2), if the issue
of an original patent is delayed due to the
failure of the United States Patent and
Trademark Office to issue a patent within 3
years after the actual filing date of the
application in the United States, not
including--
(i) any time consumed by continued
examination of the application
requested by the applicant under
section 132(b);
(ii) any time consumed by a
proceeding under section 135(a), any
time consumed by the imposition of an
order under section 181, or any time
consumed by appellate review by the
[Board of Patent Appeals and
Interferences] Patent Trial and Appeal
Board or by a Federal court; or
(iii) any delay in the processing of
the application by the United States
Patent and Trademark Office requested
by the applicant except as permitted by
paragraph (3)(C),
the term of the patent shall be extended 1 day
for each day after the end of that 3-year
period until the patent is issued.
(C) Guarantee or adjustments for delays due
to [interferences] derivation proceedings,
secrecy orders, and appeals.--Subject to the
limitations under paragraph (2), if the issue
of an original patent is delayed due to--
(i) a proceeding under section
135(a);
(ii) the imposition of an order under
section 181; or
(iii) appellate review by the [Board
of Patent Appeals and Interferences]
Patent Trial and Appeal Board or by a
Federal court in a case in which the
patent was issued under a decision in
the review reversing an adverse
determination of patentability,
the term of the patent shall be extended 1 day
for each day of the pendency of the proceeding,
order, or review, as the case may be.
* * * * * * *
(4) Appeal of patent term adjustment determination.--
(A) An applicant dissatisfied with a
determination made by the Director under
paragraph (3) shall have remedy by a civil
action against the Director filed in the
[United States District Court for the District
of Columbia] United States District Court for
the Eastern District of Virginia within 180
days after the grant of the patent. Chapter 7
of title 5 shall apply to such action. Any
final judgment resulting in a change to the
period of adjustment of the patent term shall
be served on the Director, and the Director
shall thereafter alter the term of the patent
to reflect such change.
(B) The determination of a patent term
adjustment under this subsection shall not be
subject to appeal or challenge by a third party
prior to the grant of the patent.
* * * * * * *
[Sec. 157. Statutory invention registration
[(a) Notwithstanding any other provision of this title, the
Director is authorized to publish a statutory invention
registration containing the specification and drawings of a
regularly filed application for a patent without examination if
the applicant--
[(1) meets the requirements of section 112 of this
title;
[(2) has complied with the requirements for printing,
as set forth in regulations of the Director;
[(3) waives the right to receive a patent on the
invention within such period as may be prescribed by
the Director; and
[(4) pays application, publication, and other
processing fees established by the Director.
[If an interference is declared with respect to such an
application, a statutory invention registration may not be
published unless the issue of priority of invention is finally
determined in favor of the applicant.
[(b) The waiver under subsection (a)(3) of this section by
an applicant shall take effect upon publication of the
statutory invention registration.
[(c) A statutory invention registration published pursuant
to this section shall have all of the attributes specified for
patents in this title except those specified in section 183 and
sections 271 through 289 of this title. A statutory invention
registration shall not have any of the attributes specified for
patents in any other provision of law other than this title. A
statutory invention registration published pursuant to this
section shall give appropriate notice to the public, pursuant
to regulations which the Director shall issue, of the preceding
provisions of this subsection. The invention with respect to
which a statutory invention certificate is published is not a
patented invention for purposes of section 292 of this title.
[(d) The Director shall report to the Congress annually on
the use of statutory invention registrations. Such report shall
include an assessment of the degree to which agencies of the
Federal Government are making use of the statutory invention
registration system, the degree to which it aids the management
of federally developed technology, and an assessment of the
cost savings to the Federal Government of the use of such
procedures.]
* * * * * * *
CHAPTER 16--DESIGNS
* * * * * * *
Sec. 172. Right of priority
The right of priority provided for by subsections (a)
through (d) of section 119 of this title [and the time
specified in section 102(d)] shall be six months in the case of
designs. The right of priority provided for by section 119(e)
of this title shall not apply to designs.
* * * * * * *
CHAPTER 17--SECRECY OF CERTAIN INVENTIONS AND FILING APPLICATIONS IN
FOREIGN COUNTRY
* * * * * * *
Sec. 184. Filing of application in foreign country
[Except when] (a) Filing in Foreign Country.--Except when
authorized by a license obtained from the Commissioner of
Patents a person shall not file or cause or authorize to be
filed in any foreign country prior to six months after filing
in the United States an application for patent or for the
registration of a utility model, industrial design, or model in
respect of an invention made in this country. A license shall
not be granted with respect to an invention subject to an order
issued by the Commissioner of Patents pursuant to section 181
of this title without the concurrence of the head of the
departments and the chief officers of the agencies who caused
the order to be issued. The license may be granted
retroactively where an application has been filed abroad
through error and without deceptive intent and the application
does not disclose an invention within the scope of section 181
of this title.
[The term] (b) Application.--The term ``application'' when
used in this chapter includes applications and any
modifications, amendments, or supplements thereto, or divisions
thereof.
[The scope] (c) Subsequent Modifications, Amendments, and
Supplements.--The scope of a license shall permit subsequent
modifications, amendments, and supplements containing
additional subject matter if the application upon which the
request for the license is based is not, or was not, required
to be made available for inspection under section 181 of this
title and if such modifications, amendments, and supplements do
not change the general nature of the invention in a manner
which would require such application to be made available for
inspection under such section 181. In any case in which a
license is not, or was not, required in order to file an
application in any foreign country, such subsequent
modifications, amendments, and supplements may be made, without
a license, to the application filed in the foreign country if
the United States application was not required to be made
available for inspection under section 181 and if such
modifications, amendments, and supplements do not, or did not,
change the general nature of the invention in a manner which
would require the United States application to have been made
available for inspection under such section 181.
* * * * * * *
CHAPTER 18--PATENT RIGHTS IN INVENTIONS MADE WITH FEDERAL ASSISTANCE
* * * * * * *
Sec. 202. Disposition of rights
* * * * * * *
(c) Each funding agreement with a small business firm or
nonprofit organization shall contain appropriate provisions to
effectuate the following:
* * * * * * *
(2) That the contractor make a written election
within two years after disclosure to the Federal agency
(or such additional time as may be approved by the
Federal agency) whether the contractor will retain
title to a subject invention: Provided, That in any
case where [publication, on sale, or public use, has
initiated the one year statutory period in which valid
patent protection can still be obtained in the United
States] the 1-year period referred to in section 102(a)
would end before the end of that 2-year period, the
period for election may be shortened by the Federal
agency to a date that is not more than sixty days prior
to the end of [the statutory] that 1-year period: And
provided further, That the Federal Government may
receive title to any subject invention in which the
contractor does not elect to retain rights or fails to
elect rights within such times.
(3) That a contractor electing rights in a subject
invention agrees to file a patent application prior to
[any statutory bar date that may occur under this title
due to publication, on sale, or public use] the
expiration of the 1-year period referred to in section
102(a), and shall thereafter file corresponding patent
applications in other countries in which it wishes to
retain title within reasonable times, and that the
Federal Government may receive title to any subject
inventions in the United States or other countries in
which the contractor has not filed patent applications
on the subject invention within such times.
* * * * * * *
PART III--PATENTS AND PROTECTION OF PATENT RIGHTS
CHAPTER 25--AMENDMENT AND CORRECTION OF PATENTS
Sec. 251. Reissue of defective patents
[Whenever] (a) In General.--Whenever any patent is, through
error without any deceptive intention, deemed wholly or partly
inoperative or invalid, by reason of a defective specification
or drawing, or by reason of the patentee claiming more or less
than he had a right to claim in the patent, the Director shall,
on the surrender of such patent and the payment of the fee
required by law, reissue the patent for the invention disclosed
in the original patent, and in accordance with a new and
amended application, for the unexpired part of the term of the
original patent. No new matter shall be introduced into the
application for reissue.
[The Director] (b) Multiple Reissued Patents.--The Director
may issue several reissued patents for distinct and separate
parts of the thing patented, upon demand of the applicant, and
upon payment of the required fee for a reissue for each of such
reissued patents.
[The provisions] (c) Applicability of This Title.--The
provisions of this title relating to applications for patent
shall be applicable to applications for reissue of a patent,
except that application for reissue may be made and sworn to by
the assignee of the entire interest if the application does not
seek to enlarge the scope of the claims of the original patent.
[No reissued patent] (d) Reissue Patent Enlarging Scope of
Claims.--No reissued patent shall be granted enlarging the
scope of the claims of the original patent unless applied for
within two years from the grant of the original patent.
* * * * * * *
Sec. 253. Disclaimer
[Whenever] (a) In General.--Whenever, without any deceptive
intention, a claim of a patent is invalid the remaining claims
shall not thereby be rendered invalid. A patentee, whether of
the whole or any sectional interest therein, may, on payment of
the fee required by law, make disclaimer of any complete claim,
stating therein the extent of his interest in such patent. Such
disclaimer shall be in writing, and recorded in the Patent and
Trademark Office; and it shall thereafter be considered as part
of the original patent to the extent of the interest possessed
by the disclaimant and by those claiming under him.
[In like manner] (b) Additional Disclaimer or Dedication.--
In the manner set forth in subsection (a), any patentee or
applicant may disclaim or dedicate to the public the entire
term, or any terminal part of the term, of the patent granted
or to be granted.
* * * * * * *
Sec. 256. Correction of named inventor
[Whenever] (a) Correction.--Whenever through error a person
is named in an issued patent as the inventor, or through error
an inventor is not named in an issued patent and such error
arose without any deceptive intention on his part, the Director
may, on application of all the parties and assignees, with
proof of the facts and such other requirements as may be
imposed, issued a certificate correcting such error.
[The error] (b) Patent Valid if Error Corrected.--The error
of omitting inventors or naming persons who are not inventors
shall not invalidate the patent in which such error occurred if
it can be corrected as provided in this section. The court
before which such matter is called in question may order
correction of the patent on notice and hearing of all parties
concerned and the Director shall issue a certificate
accordingly.
* * * * * * *
CHAPTER 28--INFRINGEMENT OF PATENTS
* * * * * * *
Sec. 273. Defense to infringement based on earlier inventor
* * * * * * *
(b) Defense to Infringement.--
* * * * * * *
(6) Personal defense.--[The defense under this section
may be asserted only by the person who performed the
acts necessary to establish the defense 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.] 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.
Notwithstanding the preceding sentence, any person may,
on its own behalf, assert a defense based on the
exhaustion of rights provided under paragraph (3),
including any necessary elements thereof.
* * * * * * *
CHAPTER 29--REMEDIES FOR INFRINGEMENT OF PATENT, AND OTHER ACTIONS
* * * * * * *
Sec. 282. Presumption of validity; defenses
[A patent] (a) In General.--A patent shall be presumed
valid. Each claim of a patent (whether in independent,
dependent, or multiple dependent form) shall be presumed valid
independently of the validity of other claims; dependent or
multiple dependent claims shall be presumed valid even though
dependent upon an invalid claim. Notwithstanding the preceding
sentence, if a claim to a composition of matter is held invalid
and that claim was the basis of a determination of
nonobviousness under section 103(b)(1), the process shall no
longer be considered nonobvious solely on the basis of section
103(b)(1). The burden of establishing invalidity of a patent or
any claim thereof shall rest on the party asserting such
invalidity.
[The following] (b) Defenses.--The following shall be
defenses in any action involving the validity or infringement
of a patent and shall be pleaded:
(1) Noninfringement, absence of liability for
infringement or unenforceability,
(2) Invalidity of the patent or any claim in suit on
any ground specified in part II of this title as a
condition for patentability,
(3) Invalidity of the patent or any claim in suit for
failure to comply with any requirement of sections 112
or 251 of this title,
(4) Any other fact or act made a defense by this
title.
[In actions] (c) Notice of Actions; Actions During
Extension of Patent Term.--In actions involving the validity or
infringement of a patent the party asserting invalidity or
noninfringement shall give notice in the pleadings or otherwise
in writing to the adverse party at least thirty days before the
trial, of the country, number, date, and name of the patentee
of any patent, the title, date, and page numbers of any
publication to be relied upon as anticipation of the patent in
suit or, except in actions in the United States Court of
Federal Claims, as showing the state of the art, and the name
and address of any person who may be relied upon as the prior
inventor or as having prior knowledge of or as having
previously used or offered for sale the invention of the patent
in suit. In the absence of such notice proof of the said
matters may not be made at the trial except on such terms as
the court requires. Invalidity of the extension of a patent
term or any portion thereof under section 154(b) or 156 of this
title because of the material failure--
(1) by the applicant for the extension, or
(2) by the Director,
to comply with the requirements of such section shall be a
defense in any action involving the infringement of a patent
during the period of the extension of its term and shall be
pleaded. A due diligence determination under section 156(d)(2)
is not subject to review in such an action.
* * * * * * *
Sec. 284. Damages
[Upon finding for the claimant the court shall award the
claimant damages adequate to compensate for the infringement,
but in no event less than a reasonable royalty for the use made
of the invention by the infringer, together with interest and
costs as fixed by the court.
When the damages are not found by a jury, the court shall
assess them. In either event the court may increase the damages
up to three times the amount found or assessed. Increased
damages under this paragraph shall not apply to provisional
rights under section 154(d) of this title.
The court may receive expert testimony as an aid to the
determination of damages or of what royalty would be reasonable
under the circumstances.]
(a) In General.--Upon finding for the claimant the court
shall award the claimant damages adequate to compensate for the
infringement but in no event less than a reasonable royalty for
the use made of the invention by the infringer, together with
interests and costs as fixed by the court, subject to the
provisions of this section.
(b) Determination of Damages; Evidence Considered;
Procedure.--The court may receive expert testimony as an aid to
the determination of damages or of what royalty would be
reasonable under the circumstances. The admissibility of such
testimony shall be governed by the rules of evidence governing
expert testimony. When the damages are not found by a jury, the
court shall assess them.
(c) Standard for Calculating Reasonable Royalty.--
(1) In general.--The court shall determine, based on
the facts of the case and after adducing any further
evidence the court deems necessary, which of the
following methods shall be used by the court or the
jury in calculating a reasonable royalty pursuant to
subsection (a). The court shall also identify the
factors that are relevant to the determination of a
reasonable royalty, and the court or jury, as the case
may be, shall consider only those factors in making
such determination.
(A) Entire market value.--Upon a showing to
the satisfaction of the court that the claimed
invention's specific contribution over the
prior art is the predominant basis for market
demand for an infringing product or process,
damages may be based upon the entire market
value of that infringing product or process.
(B) Established royalty based on marketplace
licensing.--Upon a showing to the satisfaction
of the court that the claimed invention has
been the subject of a nonexclusive license for
the use made of the invention by the infringer,
to a number of persons sufficient to indicate a
general marketplace recognition of the
reasonableness of the licensing terms, if the
license was secured prior to the filing of the
case before the court, and the court determines
that the infringer's use is of substantially
the same scope, volume, and benefit of the
rights granted under such license, damages may
be determined on the basis of the terms of such
license. Upon a showing to the satisfaction of
the court that the claimed invention has
sufficiently similar noninfringing substitutes
in the relevant market, which have themselves
been the subject of such nonexclusive licenses,
and the court determines that the infringer's
use is of substantially the same scope, volume,
and benefit of the rights granted under such
licenses, damages may be determined on the
basis of the terms of such licenses.
(C) Valuation calculation.--Upon a
determination by the court that the showings
required under subparagraphs (A) and (B) have
not been made, the court shall conduct an
analysis to ensure that a reasonable royalty is
applied only to the portion of the economic
value of the infringing product or process
properly attributable to the claimed
invention's specific contribution over the
prior art. In the case of a combination
invention whose elements are present
individually in the prior art, the contribution
over the prior art may include the value of the
additional function resulting from the
combination, as well as the enhanced value, if
any, of some or all of the prior art elements
as part of the combination, if the patentee
demonstrates that value.
(2) Additional factors.--Where the court determines
it to be appropriate in determining a reasonable
royalty under paragraph (1), the court may also
consider, or direct the jury to consider, any other
relevant factors under applicable law.
(d) Inapplicability to Other Damages Analysis.--The methods
for calculating a reasonable royalty described in subsection
(c) shall have no application to the calculation of an award of
damages that does not necessitate the determination of a
reasonable royalty as a basis for monetary relief sought by the
claimant.
(e) Willful Infringement.--
(1) Increased damages.--A court that has determined
that an infringer has willfully infringed a patent or
patents may increase damages up to 3 times the amount
of the damages found or assessed under subsection (a),
except that increased damages under this paragraph
shall not apply to provisional rights under section
154(d).
(2) Permitted grounds for willfulness.--A court may
find that an infringer has willfully infringed a patent
only if the patent owner presents clear and convincing
evidence that--
(A) after receiving written notice from the
patentee--
(i) alleging acts of infringement in
a manner sufficient to give the
infringer an objectively reasonable
apprehension of suit on such patent,
and
(ii) identifying with particularity
each claim of the patent, each product
or process that the patent owner
alleges infringes the patent, and the
relationship of such product or process
to such claim,
the infringer, after a reasonable opportunity
to investigate, thereafter performed 1 or more
of the alleged acts of infringement;
(B) the infringer intentionally copied the
patented invention with knowledge that it was
patented; or
(C) after having been found by a court to
have infringed that patent, the infringer
engaged in conduct that was not colorably
different from the conduct previously found to
have infringed the patent, and which resulted
in a separate finding of infringement of the
same patent.
(3) Limitation of willfulness.--
(A) In general.--A court may not find that an
infringer has willfully infringed a patent
under paragraph (2) for any period of time
during which the infringer had an informed good
faith belief that the patent was invalid or
unenforceable, or would not be infringed by the
conduct later shown to constitute infringement
of the patent.
(B) Good faith established.--An informed good
faith belief within the meaning of subparagraph
(A) may be established by--
(i) reasonable reliance on advice of
counsel;
(ii) evidence that the infringer
sought to modify its conduct to avoid
infringement once it had discovered the
patent; or
(iii) other evidence a court may find
sufficient to establish such good faith
belief.
(C) Relevance of not presenting certain
evidence.--The decision of the infringer not to
present evidence of advice of counsel is not
relevant to a determination of willful
infringement under paragraph (2).
(4) Limitation on pleading.--Before the date on which
a court determines that the patent in suit is not
invalid, is enforceable, and has been infringed by the
infringer, a patentee may not plead and a court may not
determine that an infringer has willfully infringed a
patent. The court's determination of an infringer's
willfulness shall be made without a jury.
* * * * * * *
Sec. 287. Limitation on damages and other remedies; marking and notice
(a) [Patentees, and persons making, offering for sale, or
selling within the United States any patented article for or
under them, or importing any patented article into the United
States, may give notice to the public that the same is
patented, either by fixing thereon the word ``patent'' or the
abbreviation ``pat.'', together with the number of the patent,
or when, from the character of the article, this can not be
done, by fixing to it, or to the package wherein 1 or more of
them is contained, a label containing a like notice. In the
event of failure so to mark, no damages shall be recovered by
the patentee in any action for infringement, except on proof
that the infringer was notified of the infringement and
continued to infringe thereafter, in which event damages may be
recovered only for infringement occurring after such notice.
Filing of an action for infringement shall constitute such
notice.]
(1) Patentees, and persons making, offering for sale, or
selling within the United States any patented article for or
under them, or importing any patented article into the United
States, may give notice to the public that the same is
patented, either by fixing thereon the word ``patent'' or the
abbreviation ``pat.'', together with the number of the patent,
or when, from the character of the article, this cannot be
done, by fixing to it, or to the package wherein 1 or more of
them is contained, a label containing a like notice. In the
event of failure so to mark, no damages shall be recovered by
the patentee in any action for infringement, except on proof
that the infringer was notified of the infringement and
continued to infringe thereafter, in which event damages may be
recovered only for infringement occurring after such notice.
Filing of an action for infringement shall constitute such
notice.
(2) In the case of a patented invention not covered under
paragraph (1), no recovery shall be had for any infringement
committed more than 2 years prior to the filing of the
complaint or counterclaim for infringement in the action,
except upon proof that the infringer was notified of the
infringement by the patentee. Upon such proof, the patentee may
recover damages for infringement for up to 2 years prior to
such notice, as well as for infringement after such notice. In
no event may damages be recovered for more than 6 years prior
to the filing of the complaint or counterclaim for infringement
in the action.
* * * * * * *
(c) * * *
* * * * * * *
(4) This subsection shall not apply to any patent
issued based on an application [the earliest effective
filing date of which is prior to] which has an
effective date before September 30, 1996.
(d)(1) With respect to the use by a financial institution
of a check collection system that constitutes an infringement
under subsection (a) or (b) of section 271, the provisions of
sections 281, 283, 284, and 285 shall not apply against the
financial institution with respect to such a check collection
system.
(2) For the purposes of this subsection--
(A) the term ``check'' has the meaning given under
section 3(6) of the Check Clearing for the 21st Century
Act (12 U.S.C. 5002(6));
(B) the term ``check collection system'' means the
use, creation, transmission, receipt, storing,
settling, or archiving of truncated checks, substitute
checks, check images, or electronic check data
associated with or related to any method, system, or
process that furthers or effectuates, in whole or in
part, any of the purposes of the Check Clearing for the
21st Century Act (12 U.S.C. 5001 et seq.);
(C) the term ``financial institution'' has the
meaning given under section 509 of the Gramm-Leach-
Bliley Act (15 U.S.C. 6809);
(D) the term ``substitute check'' has the meaning
given under section 3(16) of the Check Clearing for the
21st Century Act (12 U.S.C. 5002(16)); and
(E) the term ``truncate'' has the meaning given under
section 3(18) of the Check Clearing for the 21st
Century Act (12 U.S.C. 5002(18)).
* * * * * * *
[Sec. 291. Interfering patents
[The owner of an interfering patent may have relief against
the owner of another by civil action, and the court may adjudge
the question of the validity of any of the interfering patents,
in whole or in part. The provisions of the second paragraph of
section 146 of this title shall apply to actions brought under
this section.]
* * * * * * *
Sec. 293. Nonresident patentee; service and notice
Every patentee not residing in the United States may file
in the Patent and Trademark Office a written designation
stating the name and address of a person residing within the
United States on whom may be served process or notice of
proceedings affecting the patent or rights thereunder. If the
person designated cannot be found at the address given in the
last designation, or if no person has been designated, the
[United States District Court for the District of Columbia]
United States District Court for the Eastern District of
Virginia shall have jurisdiction and summons shall be served by
publication or otherwise as the court directs. The court shall
have the same jurisdiction to take any action respecting the
patent or rights thereunder that it would have if the patentee
were personally within the jurisdiction of the court.
* * * * * * *
Sec. 298. Inequitable conduct
(a) In General.--A party advancing the proposition that a
patent should be cancelled or held unenforceable due to
inequitable conduct in connection with a matter or proceeding
before the United States Patent and Trademark Office shall
prove independently by clear and convincing evidence that
material information was misrepresented or omitted from the
patent application of such patent with the intention of
deceiving the Office.
(b) Materiality.--Information shall be considered material
for purposes of subsection (a) if--
(1) a reasonable patent examiner would consider such
information important in deciding whether to allow the
patent application; and
(2) such information is not cumulative to information
already of record in the application.
(c) Intent.--Intent to deceive the Office may be inferred
under subsection (a), but the inference may not be based solely
on the gross negligence of the patent owner or its
representative, or on the materiality of the information
misrepresented or not disclosed.
(d) Pleading.--In actions involving allegations of
inequitable conduct before the Office, the party asserting the
defense or claim shall comply with the pleading requirements
set forth under Federal Rules of Civil Procedure 9(b).
(e) Remedies.--If the court finds both that material
information was misrepresented to, or withheld from, the Office
and an intent to deceive, after balancing the equities, the
court, using its discretion, shall impose 1 or more of the
following remedies as it deems appropriate:
(1) Hold the patent unenforceable.
(2) Hold 1 or more claims of the patent
unenforceable.
(3) Order that the patentee is not entitled to
equitable relief and that the sole and exclusive remedy
for infringement of the patent shall be a reasonable
royalty.
CHAPTER 30--PRIOR ART CITATIONS TO OFFICE AND EX PARTE REEXAMINATION OF
PATENTS
* * * * * * *
Sec. 303. Determination of issue by Director
(a) [Within three months following the filing of a request
for reexamination under the provisions of section 302 of this
title, the Director will determine whether a substantial new
question of patentability affecting any claim of the patent
concerned is raised by the request, with or without
consideration of other patents or printed publications. On his
own initiative, and any time, the Director may determine
whether a substantial new question of patentability is raised
by patents and publications discovered by him or cited under
the provisions of section 301 of this title. The existence of a
substantial new question of patentability is not precluded by
the fact that a patent or printed publication was previously
cited by or to the Office or considered by the Office.] Within
3 months after the owner of a patent files a request for
reexamination under section 302, the Director shall determine
whether a substantial new question of patentability affecting
any claim of the patent concerned is raised by the request,
with or without consideration of other patents or printed
publications. On the Director's own initiative, and at any
time, the Director may determine whether a substantial new
question of patentability is raised by patents and publications
discovered by the Director, is cited under section 301, or is
cited by any person other than the owner of the patent under
section 302 or section 311. The existence of a substantial new
question of patentability is not precluded by the fact that a
patent or printed publication was previously cited by or to the
Office or considered by the Office.
* * * * * * *
Sec. 305. Conduct of reexamination proceedings
After the times for filing the statement and reply provided
for by section 304 of this title have expired, reexamination
will be conducted according to the procedures established for
initial examination under the provisions of sections 132 and
133 of this title. In any reexamination proceeding under this
chapter, the patent owner will be permitted to propose any
amendment to his patent and a new claim or claims thereto, in
order to distinguish the invention as claimed from the prior
art cited under the provisions of section 301 of this title, or
in response to a decision adverse to the patentability of a
claim of a patent. No proposed amended or new claim enlarging
the scope of a claim of the patent will be permitted in a
reexamination proceeding under this chapter. All reexamination
proceedings under this section, including any appeal to the
[Board of Patent Appeals and Interferences] Patent Trial and
Appeal Board, will be conducted with special dispatch within
the Office.
* * * * * * *
[CHAPTER 31--OPTIONAL INTER PARTES REEXAMINATION PROCEDURES]
[Sec. 311. Request for inter partes reexamination
[(a) In General.--Any third-party requester at any time may
file a request for inter partes reexamination by the Office of
a patent on the basis of any prior art cited under the
provisions of section 301.
[(b) Requirements.--The request shall--
[(1) be in writing, include the identity of the real
party in interest, and be accompanied by payment of an
inter partes reexamination fee established by the
Director under section 41; and
[(2) set forth the pertinency and manner of applying
cited prior art to every claim for which reexamination
is requested.
[(c) Copy.--The Director promptly shall send a copy of the
request to the owner of record of the patent.
[Sec. 312. Determination of issue by Director
[(a) Reexamination.--Not later than 3 months after the
filing of a request for inter partes reexamination under
section 311, the Director shall determine whether a substantial
new question of patentability affecting any claim of the patent
concerned is raised by the request, with or without
consideration of other patents or printed publications. The
existence of a substantial new question of patentability is not
precluded by the fact that a patent or printed publication was
previously cited by or to the Office or considered by the
Office.
[(b) Record.--A record of the Director's determination
under subsection (a) shall be placed in the official file of
the patent, and a copy shall be promptly given or mailed to the
owner of record of the patent and to the third-party requester.
[(c) Final Decision.--A determination by the Director under
subsection (a) shall be final and non-appealable. Upon a
determination that no substantial new question of patentability
has been raised, the Director may refund a portion of the inter
partes reexamination fee required under section 311.
[Sec. 313. Inter partes reexamination order by Director
[If, in a determination made under section 312 (a), the
Director finds that a substantial new question of patentability
affecting a claim of a patent is raised, the determination
shall include an order for inter partes reexamination of the
patent for resolution of the question. The order may be
accompanied by the initial action of the Patent and Trademark
Office on the merits of the inter partes reexamination
conducted in accordance with section 314.
[Sec. 314. Conduct of inter partes reexamination proceedings
[(a) In General.--Except as otherwise provided in this
section, reexamination shall be conducted according to the
procedures established for initial examination under the
provisions of sections 132 and 133. In any inter partes
reexamination proceeding under this chapter, the patent owner
shall be permitted to propose any amendment to the patent and a
new claim or claims, except that no proposed amended or new
claim enlarging the scope of the claims of the patent shall be
permitted.
[(b) Response.--
[(1) With the exception of the inter partes
reexamination request, any document filed by either the
patent owner or the third-party requester shall be
served on the other party. In addition, the Office
shall send to the third-party requester a copy of any
communication sent by the Office to the patent owner
concerning the patent subject to the inter partes
reexamination proceeding.
[(2) Each time that the patent owner files a response
to an action on the merits from the Patent and
Trademark Office, the third-party requester shall have
one opportunity to file written comments addressing
issues raised by the action of the Office or the patent
owner's response thereto, if those written comments are
received by the Office within 30 days after the date of
service of the patent owner's response.
[(c) Special Dispatch.--Unless otherwise provided by the
Director for good cause, all inter partes reexamination
proceedings under this section, including any appeal to the
[Board of Patent Appeals and Interferences] Patent Trial and
Appeal Board, shall be conducted with special dispatch within
the Office.
[Sec. 315. Appeal
[(a) Patent Owner.--The patent owner involved in an inter
partes reexamination proceeding under this chapter--
[(1) may appeal under the provisions of section 134
and may appeal under the provisions of sections 141
through 144, with respect to any decision adverse to
the patentability of any original or proposed amended
or new claim of the patent; and
[(2) may be a party to any appeal taken by a third-
party requester under subsection (b).
[(b) Third-Party Requester.--A third-party requester--
[(1) may appeal under the provisions of section 134,
and may appeal under the provisions of sections 141
through 144, with respect to any final decision
favorable to the patentability of any original or
proposed amended or new claim of the patent; and
[(2) may, subject to subsection (c), be a party to
any appeal taken by the patent owner under the
provisions of section 134 or sections 141 through 144.
[(c) Civil Action.--A third-party requester whose request
for an inter partes reexamination results in an order under
section 313 is estopped from asserting at a later time, in any
civil action arising in whole or in part under section 1338 of
title 28, the invalidity of any claim finally determined to be
valid and patentable on any ground which the third-party
requester raised or could have raised during the inter partes
reexamination proceedings. This subsection does not prevent the
assertion of invalidity based on newly discovered prior art
unavailable to the third-party requester and the Patent and
Trademark Office at the time of the inter partes reexamination
proceedings.
[Sec. 316. Certificate of patentability, unpatentability, and claim
cancellation
[(a) In General.--In an inter partes reexamination
proceeding under this chapter, when the time for appeal has
expired or any appeal proceeding 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 any proposed amended or new claim
determined to be patentable.
[(b) Amended or New Claim.--Any proposed amended or new
claim determined to be patentable and incorporated into a
patent following an inter partes reexamination proceeding 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,
prior to issuance of a certificate under the provisions of
subsection (a) of this section.
[Sec. 317. Inter partes reexamination prohibited
[(a) Order for Reexamination.--Notwithstanding any
provision of this chapter, once an order for inter partes
reexamination of a patent has been issued under section 313,
neither the third-party requester nor its privies,\1\ may file
a subsequent request for inter partes reexamination of the
patent until an inter partes reexamination certificate is
issued and published under section 316, unless authorized by
the Director.
[(b) Final Decision.--Once a final decision has been
entered against a party in a civil action arising in whole or
in part under section 1338 of title 28, that the party has not
sustained its burden of proving the invalidity of any patent
claim in suit or if a final decision in an inter partes
reexamination proceeding instituted by a third-party requester
is favorable to the patentability of any original or proposed
amended or new claim of the patent, then neither that party nor
its privies may thereafter request an inter partes
reexamination of any such patent claim on the basis of issues
which that party or its privies raised or could have raised in
such civil action or inter partes reexamination proceeding, and
an inter partes reexamination requested by that party or its
privies on the basis of such issues may not thereafter be
maintained by the Office, notwithstanding any other provision
of this chapter. This subsection does not prevent the assertion
of invalidity based on newly discovered prior art unavailable
to the third-party requester and the Patent and Trademark
Office at the time of the inter partes reexamination
proceedings.
[Sec. 318. Stay of litigation
[Once an order for inter partes reexamination of a patent
has been issued under section 313, the patent owner may obtain
a stay of any pending litigation which involves an issue of
patentability of any claims of the patent which are the subject
of the inter partes reexamination order, unless the court
before which such litigation is pending determines that a stay
would not serve the interests of justice.]
CHAPTER 32--POST-GRANT REVIEW PROCEDURES
Sec. 321. Petition for post-grant review
Subject to sections 322, 324, 332, and 333 of this chapter,
a person who is not the patent owner may file with the Office a
petition seeking to institute a post-grant review proceeding to
cancel as unpatentable any claim 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). The
Director shall establish, by regulation, fees to be paid by the
person requesting the proceeding, in such amounts as the
Director determines to be reasonable, considering the aggregate
costs of the post-grant review proceeding and the status of the
petitioner.
Sec. 322. Timing and bases of petition
A post-grant proceeding may be instituted under this
chapter pursuant to a petition filed under section 321 only
if--
(1) the petition is filed not later than 12 months
after the grant of the patent or issuance of a reissue
patent, as the case may be;
(2)(A) the petitioner establishes in the petition a
substantial reason to believe that the continued
existence of the challenged claim in the petition
causes or is likely to cause the petitioner significant
economic harm; and
(B) the petitioner files a petition not later than 12
months after receiving notice, explicitly or
implicitly, that the patent holder alleges
infringement; or
(3) the patent owner consents in writing to the
proceeding.
Sec. 323. 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 any 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 each challenged
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 information as the
Director may require by regulation; and
(5) the petitioner provides copies of any of the
documents required under paragraphs (3) and (4) to the
patent owner or, if applicable, the designated
representative of the patent owner.
Sec. 324. Publication and public availability of petition
(a) In General.--As soon as practicable after the receipt
of a petition under section 321, the Director shall--
(1) publish the petition in the Federal Register; and
(2) make that petition available on the website of
the United States Patent and Trademark Office.
(b) Public Availability.--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 to be sealed
shall be accompanied by a motion to seal. Such petition or
document shall be treated as sealed, pending the outcome of the
ruling on the motion. Failure to file a motion to seal will
result in the pleading being placed in the public record.
Sec. 325. Prohibited filings
(a) In General.--A post-grant review proceeding may not be
instituted under paragraph (1), (2), or (3) of section 322 if
the petition requesting the proceeding identifies the same
petitioner or real party in interest and the same patent as a
previous petition filed under any paragraph of section 322.
(b) Previously Filed Civil Actions.--A post-grant review
proceeding may not be instituted or maintained under paragraph
(1) or (2) of section 322 if the petitioner or real party in
interest has instituted a civil action challenging the validity
of a claim of the patent.
Sec. 326. Submission of additional information
A petitioner under this chapter shall file such additional
information with respect to the petition as the Director may
require by regulation.
Sec. 327. Institution of post-grant review proceedings
(a) In General.--The Director may not authorize a post-
grant review proceeding to commence unless the Director
determines that the information presented in the petition
raises a substantial new question of patentability for at least
1 of the challenged claims. The Director shall determine
whether to authorize a post-grant proceeding within 90 days
after receiving a petition.
(b) Notification.--The Director shall notify the petitioner
and patent owner, in writing, of the Director's determination
under subsection (a). The Director shall publish each notice of
institution of a post-grant review proceeding in the Federal
Register and make such notice available on the website of the
United States Patent and Trademark Office. Such notice shall
list the date on which the proceeding shall commence.
(c) Determination Not Appealable.--The determination by the
Director regarding whether to authorize a post-grant review
proceeding under subsection (a) shall not be appealable.
(d) Assignment of the Proceeding to a Panel.--Upon a
determination of the Director to commence a post-grant review
proceeding, the Director shall assign the proceeding to a panel
of 3 administrative patent judges from the Patent Trial and
Appeal Board.
Sec. 328. Consolidation of proceedings and joinder
(a) Consolidation of Post-Grant Proceedings.--If more than
1 petition is submitted under section 322(1) against the same
patent and the Director determines that each raises a
substantial new question of patentability warranting the
commencement of a post-grant review proceeding under section
327, the Director may consolidate such proceedings into a
single post-grant review proceeding.
(b) Joinder.--If the Director commences a post-grant review
proceeding on the basis of a petition filed under section
322(2), any person who files in compliance with section
322(2)(A) a petition that the Director finds sufficient to
proceed under section 327 may be joined at the discretion of
the Director, and such person shall participate in such post-
grant review proceeding.
Sec. 329. Conduct of post-grant review proceedings
(a) In General.--The Director shall prescribe regulations--
(1) in accordance with section 2(b)(2), establishing
and governing post-grant review proceedings under this
chapter and their relationship to other proceedings
under this title;
(2) for setting forth the standards for showings of
substantial reason to believe and significant economic
harm under section 322(2) and substantial new question
of patentability under section 327(a);
(3) providing for the publication in the Federal
Register all requests for the institution of post-grant
proceedings;
(4) establishing procedures for the submission of
supplemental information after the petition is filed;
and
(5) setting forth 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.
(b) Post-Grant Review Regulations.--Regulations under
subsection (a)(1) shall--
(1) require that the final determination in a post-
grant review proceeding issue not later than 1 year
after the date on which the Director notices the
institution of a post-grant proceeding under this
chapter, except that, for cause shown, the Director may
extend the 1-year period by not more than 6 months;
(2) provide for discovery upon order of the Director,
as required in the interests of justice;
(3) prescribe 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 unnecessary increase in the cost of the
proceeding;
(4) provide for protective orders governing the
exchange and submission of confidential information;
and
(5) ensure that any information submitted by the
patent owner in support of any amendment entered under
section 332 is made available to the public as part of
the prosecution history of the patent.
(c) Considerations.--In prescribing regulations under this
section, the Director shall consider the effect on the economy,
the integrity of the patent system, and the efficient
administration of the Office.
(d) Conduct of Proceeding.--The Patent Trial and Appeal
Board shall, in accordance with section 6(b), conduct each
proceeding authorized by the Director.
Sec. 330. Patent owner response
After a post-grant review proceeding under this chapter has
been instituted with respect to a patent, the patent owner
shall have the right to file, within a time period set by the
Director, a response to the petition. The patent owner shall
file with the response, through affidavits or declarations, any
additional factual evidence and expert opinions on which the
patent owner relies in support of the response.
Sec. 331. Proof and evidentiary standards
(a) In General.--The presumption of validity set forth in
section 282 of this title shall not apply to challenges brought
under section 322(1) but shall apply in a challenge brought
under paragraph (2) or (3) of section 322 to any patent claim
under this chapter.
(b) Burden of Proof.--The petitioner under section 322(1)
shall have the burden of proving a proposition of invalidity by
a preponderance of the evidence. For petitions filed under
paragraphs (2) or (3) of section 322, the existence,
authentication, availability, and scope of any evidence offered
to establish invalidity shall be established by clear and
convincing evidence. If such predicate facts are so
established, invalidity shall be proven only if the persuasive
force of such facts demonstrates invalidity by a preponderance
of the evidence.
Sec. 332. Amendment of the patent
(a) In General.--During a post-grant review proceeding, the
patent owner may file 1 motion to amend the patent in 1 or more
of the following ways:
(1) Cancel any challenged patent claim.
(2) For each challenged claim, propose a substitute
claim.
(3) Amend the patent drawings or otherwise amend the
patent other than the claims.
(b) Additional Motions.--Additional motions to amend may be
permitted only for good cause shown.
(c) Scope of Claims.--An amendment under this section may
not enlarge the scope of the claims of the patent or introduce
new matter.
Sec. 333. Settlement
(a) In General.--A post-grant review proceeding 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 matter before the request for
termination is filed. If the post-grant review proceeding is
terminated with respect to a petitioner under this section, no
estoppel under this chapter shall apply to that petitioner. If
no petitioner remains in the post-grant review proceeding, the
Office shall terminate the post-grant review proceeding.
(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 proceeding under this
section shall be in writing and a true copy of such agreement
or understanding shall be filed in the United States Patent and
Trademark Office before the termination of the post-grant
review proceeding as between the parties to the agreement or
understanding. If any party filing such agreement or
understanding so requests, the copy shall be kept separate from
the file of the post-grant review proceeding, and made
available only to Federal Government agencies upon written
request, or to any other person on a showing of good cause.
Sec. 334. Decision of the board
If the post-grant review proceeding 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 and any new claim
added under section 322.
Sec. 335. Effect of decision
If the Patent Trial and Appeal Board issues a final
decision under section 334 and the time for appeal has expired
or any appeal proceeding has terminated, the Director shall
issue and publish a certificate canceling any claim of the
patent finally determined to be unpatentable and incorporating
in the patent by operation of the certificate any new claim
determined to be patentable.
Sec. 336. Relationship to other pending proceedings
Notwithstanding section 135(a), 251, and 252, and chapter
30, the Director may determine the manner in which any ex parte
reexamination proceeding, reissue proceeding, interference
proceeding (commenced before the effective date of the Patent
Reform Act of 2007), derivation proceeding, or post-grant
review proceeding, that is pending during a post-grant review
proceeding, may proceed, including providing for stay,
transfer, consolidation, or termination of any such proceeding.
Sec. 337. Effect of decisions rendered in civil action on future post-
grant review proceedings
If a final decision has been entered against a party in a
civil action arising in whole or in part under section 1338 of
title 28 establishing that the party has not sustained its
burdens of proving the invalidity of any patent claim--
(1) that party to the civil action and the privies of
that party may not thereafter request a post-grant
review proceeding on that patent claim on the basis of
any grounds under section 322; and
(2) the Director may not thereafter maintain a post-
grant review proceeding previously requested by that
party or the real parties in interest of that party.
Sec. 338. Effect of final decision on future proceedings
(a) In General.--If a final decision under section 334 is
favorable to the patentability of any original or new claim of
the patent challenged by the petitioner, the petitioner may not
thereafter, based on any ground which the petitioner raised
during the post-grant review proceeding--
(1) request or pursue a derivation proceeding with
respect to such claim; or
(2) assert the invalidity of any such claim in any
civil action arising in whole or in part under section
1338 of title 28.
(b) Extension of Prohibition.--If the final decision is the
result of a petition filed on the basis of section 322(2), the
prohibition under this section shall extend to any ground which
the petitioner raised during the post-grant review proceeding.
Sec. 339. Appeal
A party dissatisfied with the final determination of the
Patent Trial and Appeal Board in a post-grant proceeding under
this chapter may appeal the determination under sections 141
through 144. Any party to the post-grant proceeding shall have
the right to be a party to the appeal.
* * * * * * *
PART IV--PATENT COOPERATION TREATY
* * * * * * *
CHAPTER 36--INTERNATIONAL STAGE
* * * * * * *
Sec. 363. International application designating the United States:
Effect
An international application designating the United States
shall have the effect, from its international filing date under
article 11 of the treaty, of a national application for patent
regularly filed in the Patent and Trademark Office [except as
otherwise provided in section 102(e) of this title].
* * * * * * *
CHAPTER 37--NATIONAL STAGE
* * * * * * *
Sec. 374. Publication of international application
The publication under the treaty defined in section 351(a)
of this title, of an international application designating the
United States shall be deemed a publication under section
122(b), except as provided in [sections 102(e) and 154(d)]
section 154(d) of this title.
Sec. 375. Patent issued on international application: Effect
(a) A patent may be issued by the Director based on an
international application designating the United States, in
accordance with the provisions of this title. [Subject to
section 102(e) of this title, such] Such patent shall have the
force and effect of a patent issued on a national application
filed under the provisions of chapter 11 of this title.
* * * * * * *
CONSOLIDATED APPROPRIATIONS ACT OF 2005 (P.L. 108-447)
* * * * * * *
DIVISION B--DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY,
AND RELATED AGENCIES APPROPRIATIONS ACT OF 2005
* * * * * * *
TITLE VIII--PATENT AND TRADEMARK FEES
SEC. 801. FEES FOR PATENT SERVICES
(a) General Patent Fees.--[During fiscal years 2005, 2006
and 2007] Until such time as the Director sets or adjusts the
fees otherwise, subsection (a) of section 41 of title 35,
United States Code, shall be administered as though that
subsection reads as follows:
* * * * * * *
SEC. 802. ADJUSTMENT OF TRADEMARK FEES
(a) Fee for Filing Application.--[During fiscal years 2005,
2006 and 2007] Until such time as the Director sets or adjusts
the fees otherwise, under such conditions as may be prescribed
by the Director, the fee under section 31(a) of the Trademark
Act of 1946 (15 U.S.C. 1113(a)) for: (1) the filing of a paper
application for the registration of a trademark shall be $375;
(2) the filing of an electronic application shall be $325; and
(3) the filing of an electronic application meeting certain
additional requirements prescribed by the Director shall be
$275. During fiscal years 2005, 2006 and 2007, the provisions
of the second and third sentences of section 31(a) of the
Trademark Act of 1946 shall apply to the fees established by
this section.
* * * * * * *
SEC. 803. EFFECTIVE DATE, APPLICABILITY, AND TRANSITIONAL PROVISION
(a) Effective Date.--Except as otherwise provided in this
title (including in this section), the provisions of this title
shall take effect on the date of the enactment of this Act [and
shall apply only with respect to the remaining portion of
fiscal year 2005, 2006 and 2007].
* * * * * * *