[Senate Report 110-259]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 563
110th Congress                                                   Report
                                 SENATE
 2d Session                                                     110-259

======================================================================



 
                     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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \36\See 18 U.S.C. Sec. 1001.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \41\See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. 
Cir. 1995) (en banc).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \49\See 35 U.S.C. Sec. 284.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
            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\
---------------------------------------------------------------------------
    \52\See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 
1995) (en banc).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \53\See, e.g., Nickson Industries, Inc. v. Rol Mfg. Co., 847 F.2d 
795, 798 (Fed. Cir. 1988).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.).
---------------------------------------------------------------------------
            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.).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------
    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.'').
---------------------------------------------------------------------------
    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)
---------------------------------------------------------------------------
    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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \100\See new Sec. 331(a) as added by S. 1145.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \107\See Sec. 329 as added by S. 1145.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

         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\
---------------------------------------------------------------------------
    \109\See 35 U.S.C. Sec. 122.
    \110\See 35 U.S.C. Sec. 122(b)(2)(B).
---------------------------------------------------------------------------
            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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
            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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.).
---------------------------------------------------------------------------
            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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
            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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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)).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.

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PART IV--PATENT COOPERATION TREATY

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CHAPTER 36--INTERNATIONAL STAGE

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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].

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CHAPTER 37--NATIONAL STAGE

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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.

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CONSOLIDATED APPROPRIATIONS ACT OF 2005 (P.L. 108-447)

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DIVISION B--DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, 
AND RELATED AGENCIES APPROPRIATIONS ACT OF 2005

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                 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:

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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.

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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].

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