[Senate Report 111-18]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                                 SENATE
 1st Session                                                     111-18

======================================================================
 
                     THE PATENT REFORM ACT OF 2009

                                _______
                                

                  May 12, 2009.--Ordered to be printed

                                _______
                                

Mr. Leahy, from the Committee on the Judiciary, submitted the following

                              R E P O R T

                             together with

              ADDITIONAL, SUPPLEMENTAL, AND MINORITY VIEWS

                         [To accompany S. 515]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to which was referred the 
bill (S. 515), to amend title 35, United States Code, to 
provide for patent reform, having considered the same, reports 
favorably thereon, with amendments, and recommends that the 
bill, as amended, do pass.

                                CONTENTS

                                                                   Page
  I. Background and Purpose of the Patent Reform Act of 2009..........1
 II. History of the Bill and Committee Consideration.................27
III. Section-by-Section Summary of the Bill..........................32
 IV. Congressional Budget Office Cost Estimate.......................40
  V. Regulatory Impact Evaluation....................................45
 VI. Conclusion......................................................45
VII. Additional, Supplemental, and Minority Views....................46
VIII.Changes to Existing Law Made by the Bill, as Reported...........62


       I. Background and Purpose of the Patent Reform Act of 2009


                         A. PURPOSE OF THE BILL

    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 
make use of that invention after the expiration of 20 years 
from the date the patent application was filed.
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    \1\U.S. Const. Art. 1, 8.
    \2\See 35 U.S.C. 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. (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. 
(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 eight 
hearings before the United States Senate Committee on the 
Judiciary, 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 National Research Council of the National 
Academies, ``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 and 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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    While Congress has considered patent reform legislation 
over the last three Congresses, the need to modernize our 
patent laws has found expression in the courts, as well. The 
Supreme Court has reversed the Federal Circuit in five of the 
patent related cases that it has heard since the beginning of 
the 109th Congress.\7\ The Court's decisions have moved in the 
direction of improving patent quality and making the 
determination of patent validity more efficient. The decisions 
reflect a growing sense that questionable patents are too 
easily obtained and are too difficult to challenge.\8\ Recent 
decisions by the Federal Circuit reflect a similar trend in 
response to these concerns.\9\ But the courts are constrained 
in their decisions by the text of the statutes at issue. It is 
time for Congress to act.
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    \7\See Quanta Computer, Inc. v. LG Elecs. Inc., _U.S., _, 128 S.Ct. 
2109 (2008) (reversing the Federal Circuit and holding that patent 
exhaustion applies to method patents when the essential or inventive 
feature of the invention is embodied in the product); Microsoft Corp. 
v. AT&T Corp., 550 U.S. 437 (2007) (reversing the Federal Circuit and 
limiting the extraterritorial reach of section 271(f), which imposes 
liability on a party which supplies from the U.S. components of a 
patented invention for combination outside the U.S.); KSR Int'l Co. v. 
Teleflex Inc., 550 U.S. 398 (2007) (reversing the Federal Circuit and 
strengthening the standard for determining when an invention is obvious 
under section 103); MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 
(2007) (reversing the Federal Circuit and holding that the threat of a 
private enforcement action is sufficient to confirm standing under the 
Constitution); eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) 
(reversing the Federal Circuit and holding that the generally 
applicable four-factor test for injunctive relief applies to disputes 
in patent cases).
    \8\See generally Patent Reform in the 111th Congress: Legislation 
and Recent Court Decisions, Senate Judiciary Committee, 111th Cong. 
(2009) (statement of Professor Mark A. Lemley, Stanford Law School).
    \9\See, e.g., In re Seagate Tech., LLC, 497 F.3d 1360 (Fed. Cir. 
2007) (holding that willful infringement requires at least a 
demonstration of objectively reckless behavior and removing any 
affirmative obligation to obtain an opinion of counsel letter to combat 
an allegation of willful infringement); In re Bilski, 545 F.3d 943 
(Fed. Cir. 2008) (limiting significantly the availability of business 
method patents by applying a machine-or-transformation test for 
determining patent eligibility under section 101).
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    The voices heard during the debate over changes to the 
patent law have been diverse and their proposals have been far 
from uniform. They have focused the Committee's attention on 
the value of harmonizing our system for granting patents with 
the best parts of other major patent systems throughout the 
industrialized world for the benefit of U.S. patent holders; 
improving patent quality and providing a more efficient system 
for challenging patents that should not have been issued; and 
reducing unwarranted litigation costs and inconsistent damage 
awards.
    The purpose of the Patent Reform Act of 2009, as reported 
by the United States Senate Committee on the Judiciary, is to 
ensure that the patent system in the 21st century reflects the 
constitutional imperative. Congress must promote innovation by 
granting inventors temporally limited monopolies on their 
inventions in a manner that ultimately benefits the public 
through the disclosure of the invention to 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 Committee 
has taken testimony from, and its members have held meetings 
with interested parties that have different, and often 
conflicting, perspectives on the patent system. The Committee 
has taken all of those views into consideration, and amended 
the Patent Reform Act of 2009 to balance the competing 
interests. The version of the legislation ordered reported by 
the Committee on a vote of 15-4 is a consensus approach that 
will modernize the United States patent system in significant 
respects.

                 B. BACKGROUND AND SUMMARY OF THE BILL

Right of the first inventor to file

    The Patent Reform Act of 2009 creates a new ``first-
inventor-to-file'' system. 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 based on 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;\10\ 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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    \10\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 significant, practical differences between the 
two systems. Among them, is the ease of determining the right 
to a claimed invention in the 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 at the United States Patent and 
Trademark Office (``USPTO'') to determine who actually invented 
first.\11\ 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.\12\ In addition, 
since it is always possible an applicant could be involved in 
an interference proceeding, companies must maintain extensive 
recording and document retention systems in case they are later 
required to prove the date they invented the claimed invention.
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    \11\See 35 U.S.C. 135.
    \12\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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    Another important difference is that 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 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. The Committee 
heard from universities and small inventors, in particular, 
about the importance of maintaining that grace period in our 
system.\13\ 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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    \13\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. (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 Prop. of the 
Senate Comm. on the Judiciary, 109th Cong. (2005) (statement of Carl 
Gulbrandsen, Managing Director, Wisconsin Alumni Research Foundation 
(WARF)); Perspective on Patents: Hearing Before the Subcomm. on 
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 
(2005) (statement of William Parker, Diffraction, Ltd.).
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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.\14\ The National Academy 
of Sciences made a similar recommendation after an extensive 
study of the patent system.\15\ 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.\16\ 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 
who, in most instances, also file in other countries.\17\ A 
change is long overdue.\18\
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    \14\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. (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. (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. 
(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. (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. (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. (2005) 
(statement of Michael K. Kirk, Executive Director, American 
Intellectual Property Law Association).
    \15\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. (2005) (statement of Richard C. Levin, 
Yale University).
    \16\See Perspectives on Patents: Harmonization and Other Matters: 
Hearing Before the Subcomm. on Intellectual Prop. of the Senate Comm. 
on the Judiciary, 109th Cong. (2005) (statement of Gerald J. 
Mossinghoff, Former Assistant Secretary of Commerce and Commissioner of 
Patents and Trademarks).
    \17\See Perspectives on Patents: Hearing Before the Subcomm. on 
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 
(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 the lack of harmonization regarding filing 
systems adds unnecessary cost and delay.
    \18\The NAS recommended changing the U.S. to a first-to-file 
system, while maintaining a grace period. See NAS Report at 124-27. See 
also Patent Reform in the 111th Congress: Legislation and Recent Court 
Decisions: Hearing Before the Senate Comm. on the Judiciary, 111th 
Cong. (2009) (statement of Steven Appleton, Chairman and Chief 
Executive Officer, Micron Technologies, Inc.); Patent Reform in the 
111th Congress: Legislation and Recent Court Decisions: Hearing Before 
the Senate Comm. on the Judiciary, 111th Cong. (2009) (statement of 
Philip S. Johnson, Chief Patent Counsel, Johnson & Johnson); Patent 
Reform in the 111th Congress: Legislation and Recent Court Decisions: 
Hearing Before the Senate Comm. on the Judiciary, 111th Cong. (2009) 
(statement of Herbert C. Wamsley, Executive Director, Intellectual 
Property Owners Association); Patent Reform in the 111th Congress: 
Legislation and Recent Court Decisions: Hearing Before the Senate Comm. 
on the Judiciary, 111th Cong. (2009) (statement of Mark A. Lemley, 
Professor, Stanford Law School).
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    Drawing on the best aspects of the two existing systems, 
the Patent Reform Act of 2009, 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 by moving the U.S. system 
much closer to a first-to-file system and making the filing 
date that which is most relevant in determining whether an 
application is patentable. 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. This will ensure that a person will 
not be able to obtain a patent for the invention that he did 
not actually invent. 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. The Act also simplifies how 
prior art is determined, provides more certainty, and reduces 
the cost associated with filing and litigating patents.
    The Act 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.
    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.\19\ Sections (and 
subsections) of the existing statute are renumbered, modified, 
or deleted consistent with converting to a first-inventor-to-
file system.\20\ Finally, the intent behind the CREATE Act to 
promote joint research activities is preserved by including a 
prior art exception for subject matter invented by parties to a 
joint research agreement.\21\
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    \19\Compare current Sec. 102(e) with new Sec. 102(a)(2).
    \20\The Committee does not intend a substantive change by replacing 
the word ``negatived'' in section 103 of title 35 with ``negated.''
    \21\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 section 103 to 102 of 
title 35 and shall be administered in a manner consistent with the 
CREATE Act.
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Inventor's oath or declaration

    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.\22\ In fact, many 
employment contracts require employees to assign their 
inventions to their employer.\23\
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    \22\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).
    \23\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.\24\ 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,\25\ many have 
advocated that the statute be modernized to facilitate the 
filing of applications by assignees.\26\
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    \24\35 U.S.C. Sec. 115.
    \25\See 37 C.F.R. Sec. 1.47, which 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.
    \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. (2005) (statement of David Beier, Senior 
Vice President of Global Government Affairs, Amgen).
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    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 (i) is 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.\27\
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    \27\See 18 U.S.C. Sec. 1001.
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    Section 118 of title 35 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.

Right of the inventor to obtain damages

            Compensatory damages
    Patent holders are granted the right to exclude others from 
making, using, selling and importing their patented 
inventions.\28\ When another party, without the inventor's 
permission, commits one of these acts, or actively induces such 
act, that party infringes the patent.\29\ The remedies for 
infringement include an injunction\30\ and damages. 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.''\31\ 
An increasing number of cases require the calculation of an 
appropriate reasonable royalty.\32\ Damages are intended to 
compensate the patent holder for the infringement of patent 
rights. Absent willful infringement, damages are not meant to 
be punitive or excessive in nature, but are meant to compensate 
adequately the inventor.\33\
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    \28\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.''
    \29\See 35 U.S.C. Sec. 271.
    \30\The Supreme Court recently 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).
    \31\See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. 
Cir. 1995) (en banc).
    \32\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).
    \33\See Donald S. Chisum, Chisum on Patents Sec. 20.01, at 20-7 
(2002); Aro Mfg. Co. v. Convertible Top Co., 377 U.S. 476, 507 (1963); 
Riles v. Shell Exploration and Prod. Co., 298 F.3d 1302, 1312-13 (Fed. 
Cir. 2002).
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    The Supreme Court reminded us just last year that ```the 
primary purpose of our patent laws is not the creation of 
private fortunes for the owners of patents but is to promote 
the progress of science and useful arts.'''\34\ The Committee 
has heard concerns that damage awards, particularly those 
stemming from cases in which the plaintiffs do not practice 
their inventions, are too often excessive and untethered from 
the harm that compensatory damages are intended to measure.\35\ 
The threat of excessive awards has a direct effect on licensing 
demands. This concern was also highlighted recently by the 
Supreme Court, with Justice Kennedy specifically admonishing: 
``In cases now arising trial courts should bear in mind that in 
many instances the nature of the patent being enforced and the 
economic function of the patent holder present considerations 
quite unlike earlier cases. An industry has developed in which 
firms use patents not as a basis for producing and selling 
goods but, instead, primarily for obtaining license fees.''\36\ 
The Committee recognizes, at the same time, there are important 
societal and economic benefits that flow from the ingenuity of 
small inventors, whether at universities, operating 
independently, or within existing markets. In many instances, 
the only avenue to bring their inventions to market and to the 
public is through licensing agreements and leveraging 
resources, often with pre-existing structures of larger 
corporations.\37\
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    \34\Quanta, _ U.S. at _; 128 S.Ct. at 2116, quoting Motion Picture 
Patents Co. v. Universal Film Mfg. Co., 243 U.S. 502, 511 (1917).
    \35\See Patent Reform in the 111th Congress: Legislation and Recent 
Court Decisions: Hearing Before the Senate Comm. on the Judiciary, 
111th Cong. (2009) (statement of Steven Appleton, Chairman and Chief 
Executive Officer, Micron Technologies, Inc.); Patent Reform in the 
111th Congress: Legislation and Recent Court Decisions: Hearing Before 
the Senate Comm. on the Judiciary, 111th Cong. (2009) (statement of 
David J. Kappos, Vice President and Assistant General Counsel, IBM 
Corporation); Patent Reform in the 111th Congress: Legislation and 
Recent Court Decisions: Hearing Before the Senate Comm. on the 
Judiciary, 111th Cong. (2009) (statement of Mark A. Lemley, Professor, 
Stanford Law School).
    \36\ eBay, 547 U.S. at 396 (Kennedy J., concurring).
    \37\Indeed, encouraging the commercialization of inventions 
discovered at universities is the objective of the Patent and Trademark 
Amendments Act of 1980 (commonly referred to as the Bayh-Dole Act), 
P.L. 96-517.
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    The current damage statute is vague and provides little 
guidance to judges or juries determining the proper damage 
award, particularly when the award is based on the reasonable 
royalty standard.\38\ Juries are presented with all or several 
of the 15 ``Georgia-Pacific'' factors\39\ and provided with 
little or inadequate guidance to divine an appropriate 
award.\40\
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    \38\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.
    \39\See Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 
1116 (S.D.N.Y. 1970).
    \40\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.
---------------------------------------------------------------------------
    Given that the issue of damages is typically just one of 
many issues in complex patent trials, and given that the jury 
may have to examine as many as 15 different factors 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.\41\
---------------------------------------------------------------------------
    \41\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 alone 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 willing 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.
---------------------------------------------------------------------------
    The Committee adopted an amendment that takes a modest 
approach to reforming the calculation of damages. The 
legislation maintains the current provision that damage awards 
should be adequate to compensate for the infringement but in no 
case less than a reasonable royalty. The amendment 
intentionally does not address whether the current 
interpretation by courts of the damages statute for 
compensating patent owners in reasonable royalty calculations 
has been proper. As such, the Committee has not altered 
existing substantive law on patent damages and the Committee 
expects that the courts will develop the law of remedies in 
patent cases consistent with the text of the statute.
    The amendment responds to concerns the Committee has heard 
regarding inconsistency in the quality and sufficiency of the 
direction given by judges to juries to guide them in awarding 
reasonable royalty damages in patent litigation. At the same 
time, the amendment preserves the flexibility necessary for 
courts to account for the vast differences in patent disputes 
that arise from varying business models and distinctions 
between industries impacted.
    The amendment inserts a more robust, procedural, gate 
keeping role for the court pursuant to which district court 
judges will assess, based on the facts and evidence proffered 
by the parties, the legal basis for the specific damages 
theories and jury instructions sought by the parties. The gate 
keeping provisions are intended to ensure consistency, 
uniformity, and fairness in the way that courts administer 
patent damages law, without encroaching on the parties' Seventh 
Amendment rights to have patent damages determined by the jury, 
and without substantively altering the law of patent damages. 
Patent trials should not be unnecessarily burdened and 
complicated by theories and methodologies that are based on 
legally insufficient evidentiary support. The amendments made 
by this section should ensure that both parties' damages 
theories, and the bases thereof, are disclosed sufficiently in 
advance of trial, unless otherwise ordered by the court, to 
allow them to be challenged by pre-trial motion as lacking a 
legally sufficient evidentiary basis.
    This section will ensure both that the challenged bases 
presented to the finder of fact are legally cognizable, and 
that they are supported by sufficient evidence that a 
reasonable jury could find for the party on that issue. In 
fulfilling its gatekeeper responsibilities, the court shall 
prevent consideration of an improper or unsupportable theory, 
methodology or opinion submissions which would be unduly 
burdensome to the judicial process and cause confusion among 
juries.
    Specifically, the amendment first makes clear that the 
court may receive expert testimony as an aid to determining 
damages. Second, the amendment requires the court to identify 
the methodologies and factors that are relevant to the 
determination of damages. Third, the amendment requires the 
parties to state, in writing and with particularity, the 
methodologies and factors the parties propose for jury 
instructions in determining damages and the relevant underlying 
legal and factual contentions. Fourth, prior to the 
introduction of evidence concerning damages, the court is 
required to consider whether one or more of a party's damages 
contentions lacks a legally sufficient evidentiary basis and 
identify on the record those methodologies and factors for 
which there is a legally sufficient evidentiary basis. Fifth, 
the court shall identify for the record those factors and 
methodologies that are deemed relevant and possessing legally 
sufficient evidentiary basis for a damages calculation. The 
court or jury shall only consider those methodologies and 
factors so identified as legally sufficient, and the court 
shall only permit the introduction of evidence relating to the 
determination of damages that is relevant to those factors.
    Although this section will reinforce the district court's 
gate keeping role with respect to admissibility of evidence and 
jury instructions as they relate to the determination of patent 
damages, it is not the Committee's intent to elevate the 
court's role from gatekeeper to fact finder. Further, this 
section does not require a preliminary hearing or ``mini-
trial'' on damages outside of the presence of the jury. Rather, 
the Committee intends this provision to provide better guidance 
to the court and jury so that damage awards are based on 
sufficient evidence and appropriate factors and will preserve a 
more detailed record for appeal.
            Willfulness
    The Act also addresses the issue of willfulness, adopting 
the standard of In re Seagate, which requires that a party may 
not be found to willfully infringe unless that party has acted 
with respect to the infringement of a patent in a manner that 
was objectively reckless. These provisions of S. 515 identify 
certain conduct that can be deemed objectively reckless, as 
well as certain mitigating conduct that will preclude a finding 
of willfulness.
    Current law allows for up to the trebling of damages when 
it is determined the infringement was ``willful.''\42\ The 
statute, however, provides no guidance regarding what 
activities constitute willful infringement.\43\ The Committee 
has heard that this lack of clarity has resulted in excessive 
pleading,\44\ and inappropriate findings of willfulness which, 
in turn, have inflated litigation and transaction costs as well 
as damage awards.
---------------------------------------------------------------------------
    \42\See In re Seagate Tech., LLC, 497 F.3d 1360, 1368 (Fed. Cir. 
2007); Knorr-Bremse Systeme Fuer Nutzfahrzeuge GmbH v. Dana Corp., 383 
F.3d 1337, 1342 (Fed. Cir. 2004) (en banc).
    \43\In re Seagate, 497 F.3d at 1368 (``[T]he current statute, 
similar to its predecessors, is devoid of any standard for awarding 
[enhanced damages].'').
    \44\See Kimberly A. Moore, Empirical Statistics on Willful Patent 
Infringement, 14 Fed. Cir. B.J. 227, 232 (2004) (reporting that willful 
infringement is plead 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 alleging which 
activities allegedly infringe which patents.\45\ 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 mentioned in 
the conclusory letter.\46\
---------------------------------------------------------------------------
    \45\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. (2005) (statement of Joel 
Poppen, Deputy General Counsel, Micron Technologies, Inc.).
    \46\See Perspectives on Patents: Hearing Before the Subcomm. on 
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 
(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.\47\ 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.\48\
---------------------------------------------------------------------------
    \47\See Perspectives on Patents: Hearing Before the Subcomm. on 
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 
(2005) (statement of David Simon, Chief Patent Counsel, Intel 
Corporation).
    \48\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 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. (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 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 it reviews de 
novo.\49\ 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.\50\ In 
addition, simply pleading willfulness\51\ can gain the patent 
holder significant litigation advantages, including breaching 
the attorney-client privilege, necessitating different trial 
counsel, and resulting in costly additional discovery.\52\ 
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.\53\
---------------------------------------------------------------------------
    \49\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.
    \50\See Comark Communications, Inc. v. Harris Corp., 156 F.3d 1182, 
1191 (Fed. Cir. 1998).
    \51\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. (2005) (statement of Michael 
K. Kirk, Executive Director, American Intellectual Property Law 
Association).
    \52\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. (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. 
(2005) (statement of Jonathan Band, Counsel, on behalf of Visa and the 
Financial Services Roundtable).
    \53\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. (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. (2005) 
(statement of Joel Poppen, Deputy General Counsel, Micron Technologies, 
Inc.).
---------------------------------------------------------------------------
    The Federal Circuit recently addressed the problem created 
by the lack of statutory guidance as to when enhanced damages 
are authorized, which has manifested itself in the case law. In 
In re Seagate, the Federal Circuit abandoned its case law that 
had imposed an affirmative duty of due care, emphasizing also 
that there is no affirmative obligation to obtain opinion of 
counsel.\54\ The court also instituted an objectively reckless 
standard for finding willful infringement.\55\ The Committee 
views this decision as a positive development, but one that 
still leaves companies with no clear statutory guidance, and 
which may, therefore, continue the unacceptable practice of 
companies instructing employees not to conduct patent searches 
for fear of subjecting such companies to treble damages.\56\
---------------------------------------------------------------------------
    \54\In re Seagate, 497 F.3d at 1371.
    \55\Id.
    \56\The concurrence by Judge Gajarsa, joined by Judge Newman, makes 
clear the need for a statutory standard. Id. at 1377 (Gajarsa J., 
concurring) (``Because the language of the statute unambiguously omits 
any [willfulness] requirement, and because there is no principled 
reason for continuing to engraft a willfulness requirement onto section 
284, I believe we should adhere to the plain meaning of the statute and 
leave the discretion to enhance damages in the capable hands of the 
district courts.'') (internal citations omitted).
---------------------------------------------------------------------------
    The Act 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 past practice where willfulness could be pleaded at 
the outset, willfulness will now be decided only after finding 
that the patent was valid and infringed. The Committee 
recognizes the importance of preserving the attorney-client 
privilege and its importance to the pursuit of justice by 
enabling open communication between an attorney and client. The 
consequence of not permitting pleading of willfulness until a 
liability finding is that the infringer will not be forced to 
disclose or identify on a privilege log its opinions of counsel 
relating to the patent at issue unless the infringer waives 
privilege for some other reason.
    Pursuant to new paragraph (c)(2) of section 284, 
willfulness must also be proven by clear and convincing 
evidence. Moreover, conclusory allegations no longer suffice 
for notice of infringement. Under subparagraph (c)(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 (c)(2)(B) permits a finding of 
willfulness if the infringer intentionally copied the patented 
invention with knowledge it was patented. Subparagraph 
(c)(2)(C) permits such a finding if the infringer continued to 
engage in infringing conduct after a court found the party to 
be infringing the patent.
    Paragraph (c)(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 
infringer not to present evidence of advice of counsel is not 
relevant to a determination of willful infringement.
    The good faith defenses to willful infringement were 
amended in Committee to make clear that no inference should be 
drawn that they create an affirmative duty or reverse in any 
way the Federal Circuit's decision to abandon the affirmative 
duty of due care and emphasis that there is no affirmative 
obligation to obtain opinion of counsel.\57\
---------------------------------------------------------------------------
    \57\Id. at 1371.
---------------------------------------------------------------------------
            Prior user rights
    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''\58\ and its inventor uses the 
invention, but never files a patent application for it.\59\ 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 may be.
---------------------------------------------------------------------------
    \58\35 U.S.C. Sec. 273(a)(3) states: ``The term `method' means a 
method of doing or conducting business.''
    \59\See 35 U.S.C. Sec. 273.
---------------------------------------------------------------------------
    The bill amends paragraph (b)(6) of section 273 to clarify 
that ``affiliates'' of the user may also assert the defense to 
include those who caused or controlled the acts that were 
performed that give rise to the defense. Additionally, 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.
            Virtual marking
    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.\60\ 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.\61\ Failure to appropriately mark an article 
can preclude the recovery of damages until notice is effective.
---------------------------------------------------------------------------
    \60\See 35 U.S.C. Sec. 287.
    \61\See id.
---------------------------------------------------------------------------
    The Committee adopted an amendment that will permit patent 
holders to ``virtually mark'' a product by providing the 
address of a publicly available website that associates the 
patented article with the number of the patent. The burden will 
remain on the patent holder to demonstrate that the marking was 
effective. This amendment will save costs for producers of 
products that include technology on which a patent issues after 
the product is on the market, and will facilitate effective 
marking on smaller products.

Post-grant procedures and other quality enhancements

    The Act amends ex parte and inter partes reexamination and 
establishes a new post-grant review procedure. Under current 
law, there are two ways to challenge the validity and 
enforceability of a patent that has issued. The patent may be 
challenged in district court litigation or in a reexamination 
at the USPTO.
    Nearly 30 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,\62\ in the expectation that 
it would serve as an effective and efficient alternative to 
often costly and protracted district court litigation.\63\ 
Reexamination requires the USPTO to review the patent in light 
of a substantial new question of patentability not presented 
during the original examination.\64\ 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 
could only be based on prior art, and could not be based on 
prior public use or prior sales. Moreover, the requestor could 
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, had fewer challenges 
it could 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, taking several years to complete,\65\ 
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.\66\
---------------------------------------------------------------------------
    \62\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.
    \63\``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.
    \64\See 35 U.S.C. Sec. 303.
    \65\See Perspectives on Patents: Hearing Before the Subcomm. on 
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 
(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 also 35 
U.S.C. Sec. 305.
    \66\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).
---------------------------------------------------------------------------
    Congress has responded several times to criticisms of the 
reexamination system by making amendments to the process.\67\ 
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.\68\ At the same time, Congress imposed severe 
estoppel provisions that preclude a later court challenge based 
on issues not raised during an inter partes reexamination 
proceeding.\69\ Congress also eventually gave third party 
challengers the right to appeal adverse decisions.\70\
---------------------------------------------------------------------------
    \67\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'').
    \68\See 35 U.S.C. Sec. Sec. 311-318.
    \69\See 35 U.S.C. Sec. 317(b).
    \70\See 35 U.S.C. Sec. 315(b).
---------------------------------------------------------------------------
    As part of the 1999 improvements to reexamination, Congress 
directed the USPTO to submit a report to Congress evaluating 
the inter partes reexamination process and making any 
recommendations for changes.\71\ Initially, the USPTO projected 
that in the first year after the creation of inter partes 
reexamination, it would receive 400 such requests and it 
projected that by 2004 it would receive nearly 600.\72\ Zero 
inter partes reexamination requests were actually filed in 2000 
and 27 such requests were filed by 2004.\73\ Over the five-year 
period studied by the USPTO, it issued 900,000 patents and 
received only 53 requests for inter partes reexamination.\74\
---------------------------------------------------------------------------
    \71\AIPA, Sec. 4606.
    \72\See United States Patent and Trademark Office Report to 
Congress on Inter Partes Reexamination (2004) (hereinafter referred to 
as ``Report on Inter Partes Reexamination''), at 4.
    \73\Id. at 5.
    \74\Id.
---------------------------------------------------------------------------
    The 2004 Report to Congress, therefore, made a number of 
important recommendations in response to inequities the USPTO 
identified in the current inter partes reexamination process. 
The USPTO Report identified the ``could have been raised'' part 
of the estoppel bar as the primary deterrent to using the 
procedure.\75\ The USPTO also recommended that third-party 
requesters have an independent right to comment on each Office 
action generated by the USPTO and that they have more than 30 
days in which to comment.\76\ In addition, as part of the 21st 
Century Strategic Plan, the USPTO recommended a new, first-
window opposition proceeding in which patents that should not 
have issued can be challenged.\77\
---------------------------------------------------------------------------
    \75\Id. at 9.
    \76\Id.
    \77\See United States Patent and Trademark Office, The 21st Century 
Strategic Plan (2003).
---------------------------------------------------------------------------
    The Act a post-grant review opposition proceeding, and 
improves upon the current inter partes reexamination process, 
in a manner consistent with the USPTO's recommendations, to 
provide a more efficient mechanism to challenge patents that 
should not have issued and are, therefore, not promoting the 
purpose of the patent laws.
    The Act expands the category of documents that may be cited 
in a reexamination proceeding to include written statements of 
the patent owner that have been filed in a proceeding before a 
Federal court or the USPTO regarding the scope of claims. This 
addition will counteract the ability of patent owners to offer 
differing interpretations of prior art in different 
proceedings. These written statements, which include documents, 
pleadings or evidence from proceedings that address the patent 
owner's statements, shall not be considered for any purpose 
other than to determine the proper meaning of the claims that 
are the subject of the request in a proceeding. Specifically, 
the Committee does not intend these statements to be a basis 
for the institution of a reexamination proceeding. 
Reexaminations will continue to be available only on the basis 
of ``patents or printed publications.''\78\
---------------------------------------------------------------------------
    \78\The scope of ``patent and printed publication'' prior art in 
the amended section 301 is intended to be coextensive with these terms 
in current section 102 of the title 35. Further, amendments made by 
Section 2 of the Act, which expand certain other forms of prior art, 
are not intended to expand the particular ``patent or printed 
publication'' prior art, which will continue to be the sole basis for 
initiating reexamination proceedings.
---------------------------------------------------------------------------
    The Act also amends the ex parte reexamination procedure to 
allow the Director to institute a reexamination on the 
Director's own initiative if a substantial new question of 
patentability is raised by patents or publications.
    The Act amends and improves the current inter partes 
reexamination process in a number of respects:\79\ First, under 
the revised procedures, reexamination will be heard by an 
administrative patent judge (APJ) under procedures established 
by the Director, rather than by a patent examiner. By 
eliminating the requirement that inter partes reexamination be 
conducted according to the procedures established for initial 
examination under sections 132 and 133 of the Patent Act, the 
USPTO will have authority to reshape the procedures for inter 
partes reexamination in ways that address inefficiencies with 
the current proceeding. Second, the third-party requester will 
have 60 days to file written comments in response to any action 
on the merits by the USPTO and responses by the patent owner. 
Third, the APJ will conduct an oral hearing upon request by 
either party, unless the APJ finds cause lacking for such a 
hearing. An oral hearing is equivalent to an oral argument in 
the presence of, and with participation by, the parties, as at 
a motion hearing or appeal in civil litigation. It is not an 
opportunity to present evidence or witnesses. Fourth, the 
estoppel bar is retained but narrowed. A third-party requester 
is still estopped from reasserting patent invalidity in court 
on any ground actually raised in an inter partes reexamination, 
but the ``or could have raised'' bar is struck. With respect to 
serial requests for inter partes reexamination by the same 
third party requester or its privies, a final decision in an 
inter partes reexamination will continue to have claim-
preclusive effect against subsequent requests. Fifth, an inter 
partes reexamination will no longer be able to be brought after 
a district court decision has been entered. Finally, the inter 
partes reexamination process will be available for all patents, 
not just those issued after November 29, 1999.
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    \79\The minority draws heavily on the possibility that inter partes 
reexamination can be used as a tool for abuse by infringers to harass 
patent owners. The Committee is concerned about the potential for abuse 
and, therefore, specifically directed the USPTO, in promulgating rules 
for the new first-window, to prevent such misuse. The minority views 
notes the puffery of a law firm that calls itself Patent Assassins as 
an ``excellent demonstration'' of the alleged abuse. Were misuse of 
inter partes reexamination a successful strategy for infringers, the 
minority's concerns would be well taken. But the Committee is cognizant 
that the USPTO issued 182,556 patents in 2008 and received only 168 
requests for inter partes reexamination. Micron presented testimony 
before the Committee that just nine companies received more than 1,200 
licensing requests in 2008. If the Patent Assassins have a successful 
model for harassing patent owners, it clearly is not one that alleged 
infringers have adopted. In the nearly five years since the Committee 
began hearings on proposed changes to the patent laws, no demonstrable 
evidence of systematic abuse of the inter partes reexamination process 
has been presented.
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    The Act also creates a new post-grant opposition procedure 
that can be utilized during the first 12 months after a patent 
issues, or later if both parties consent. Unlike reexamination 
proceedings, which have only a limited basis on which to 
consider whether a patent should have issued, the post-grant 
review proceeding permits a challenge on any ground related to 
invalidity under section 282. The intent of the post-grant 
review process is to enable early challenges to patents, while 
still protecting the rights of inventors and patent owners 
against new patent challenges unbounded in time and scope. The 
Committee believes that this new early stage process for 
challenging patent validity and its clear procedures for 
submission of art will make the patent system more efficient 
and improve the quality of patents and the patent system. This 
new, but time-limited post-grant review procedure will provide 
a meaningful opportunity to improve patent quality and restore 
confidence in the presumption of validity that comes with 
issued patents in court.
    In utilizing the post-grant review process, the petitioner, 
real party(ies) in interest, and their privies are precluded 
from improperly mounting multiple challenges of a patent or 
initiating a challenge after an unfavorable final decision in a 
civil action based on grounds the petitioner raised or could 
have raised. Further, a final decision in a post-grant review 
process will prevent the petitioner, a real party in interest 
and their privies from challenging any patent claim on a ground 
that was raised in the post-grant review process. The post-
grant review procedure is not intended, however, to inhibit 
patent owners from pursuing the various avenues of enforcement 
of their rights under a patent, and the amendment makes clear 
that the filing or institution of a post-grant review 
proceeding does not limit a patent owner from commencing such 
actions.
    The Committee recognizes the importance of quiet title to 
patent owners to ensure continued investment resources. While 
this amendment is intended to remove current disincentives to 
current administrative processes, the changes made by it are 
not to be used as tools for harassment or a means to prevent 
market entry through repeated litigation and administrative 
attacks on the validity of a patent. Doing so would frustrate 
the purpose of the section as providing quick and cost 
effective alternatives to litigation. Further, such activity 
would divert resources from the research and development of 
inventions. As such, the Committee intends for the USPTO to 
address potential abuses and current inefficiencies under its 
expanded procedural authority.

Definitions; Patent Trial and Appeal Board

    The Act renames the Patent Board 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.

Preissuance submissions by third parties

    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,\80\ but the submitter is 
precluded from explaining why the prior art was submitted or 
what its relevancy to the application might be.\81\ Such 
restrictions decrease the value of the information to the 
examiner and may, as a result, deter such submissions.\82\
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    \80\See 35 C.F.R. Sec. 1.99.
    \81\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.'').
    \82\See Perspectives on Patents: Hearing Before the Subcomm. on 
Intellectual Prop. of the Senate Comm. on the Judiciary, 109th Cong. 
(2005) (statement of David Simon, Chief Patent Counsel, Intel 
Corporation).
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    The Act improves the process by which third parties submit 
relevant information to the UPSTO 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.

Venue and jurisdiction

            Venue
    The Act amends the venue statute for patent cases. Venue 
statutes generally place restrictions on where a plaintiff may 
sue a defendant. A specific venue provision exists for patent 
cases.\83\ Federal Circuit decisions have virtually eliminated 
any meaningful distinction between the patent venue provision 
and general venue.\84\ In VE Holding, the Federal Circuit held 
that despite the specific patent venue statute, the general 
venue statute applied to corporate defendants in patent 
infringement cases.\85\ As a result, the Federal Circuit held 
that venue for a corporate defendant in a patent infringement 
case existed 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.\86\ The 
effect of these decisions is that venue for a patent 
infringement defendant is proper wherever an alleged infringing 
product can be found. In addition, the Federal Circuit applied 
a different set of precedent in patent cases that were brought 
pursuant to the Declaratory Judgment Act.\87\ Since most 
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.
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    \83\28 U.S.C. Sec. 1400.
    \84\See, e.g., VE Holding Corp. v. Johnson Gas Appliance Co., 917 
F.2d 1574 (Fed. Cir. 1990).
    \85\See id.
    \86\See Beverly Hills Fan Co. v. Royal Sovereign Corp., 21 F.3d 
1558, 1566 (Fed. Cir. 1994).
    \87\See VE Holding, 917 F.2d at 1583.
---------------------------------------------------------------------------
    The Act as introduced contained significant restrictions on 
the venue available to plaintiffs in patent cases which were 
designed to prevent plaintiffs from manufacturing venue. The 
venue restrictions in the Act as introduced were identical to 
those adopted during Committee consideration of S. 1145 in the 
110th Congress. In the time since the Committee reported S. 
1145, the Federal Circuit and the Fifth Circuit have shown an 
increased willingness to issue writs of mandamus to transfer 
venue when another venue is clearly more convenient.\88\ As 
approved by the Committee, the Act strikes the previous 
modification to the patent venue statute and adopts the 
standard articulated by the Federal Circuit in In re TS Tech 
USA Corp., for transfers, applying the standard to patent cases 
generally. The amendment to 28 U.S.C. Sec. 1400(b) provides 
that patent cases shall be transferred to judicial districts 
that are ``clearly more convenient'' for the parties and 
witnesses.
---------------------------------------------------------------------------
    \88\See In re TS Tech USA Corp., 551 F.3d 1315 (Fed. Cir. 2008); In 
re Volkswagen, Inc., 545 F.3d 304 (5th Cir. 2008).
---------------------------------------------------------------------------

Interlocutory appeals of claim construction orders

    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.\89\ A decade ago, the Supreme Court held in Markman 
v. Westview Instruments, Inc.,\90\ 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.,\91\ 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.\92\
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    \89\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).
    \90\517 U.S. 370 (1996).
    \91\138 F.3d 1448 (Fed. Cir. 1998) (en banc).
    \92\See Patent Reform: The Future of American Innovation: Hearing 
on S. 1145 Before the Senate Comm. on the Judiciary, 110th Cong. (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. 
(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) (Rader, J., 
dissenting).
---------------------------------------------------------------------------
    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.\93\ When a claims 
construction order and ensuing summary judgment motion lead to 
the entry of final judgment, an aggrieved party may immediately 
appeal to the Federal Circuit. Such appeals, which now account 
for approximately half of the Federal Circuit's docket of 
patent appeals, typically lead to the early final disposition 
of the action, to the adoption of a revised claims construction 
or to other rulings that govern the case on remand. In those 
cases where the district court's claims construction order does 
not lead to final judgment, there is little opportunity for 
appellate review. A party may appeal under 28 U.S.C. 
Sec. 1292(b), but that provision requires the district judge to 
determine that the ``order involves a controlling question of 
law as to which there is substantial ground for difference of 
opinion and that an immediate appeal from the order may 
materially advance the ultimate termination of the 
litigation.'' Acceptance of such an appeal is within the 
discretion of the appellate court, and, to date, the Federal 
Circuit has refused to take most such requests. As a result, 
full trials often had to be held before an appeal could be 
taken of the claim construction issue.\94\
---------------------------------------------------------------------------
    \93\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.'').
    \94\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 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.\95\ 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.\96\ 
The Committee heard that the manner in which claim construction 
determinations are currently reviewed increases litigation 
costs, decreases certainty and predictability, and can prolong 
settlement discussions.\97\
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    \95\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.
    \96\See Cybor Corp. v. FAS Techs., Inc., 138 F.3d 1448, 1474 n. 2 
(Fed. Cir. 1998) (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)).
    \97\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.).
---------------------------------------------------------------------------
    Even when a claims construction order does not lead to 
immediate entry of final judgment, the Committee recognizes 
that there are instances in which an immediate appeal of a 
district court's final claims construction order is warranted. 
Accordingly, the Act amends subsection (c) of section 1292 of 
title 28, giving the district court discretion to certify 
Markman claim construction final orders for interlocutory 
review if the district court finds that there is a sufficient 
evidentiary record and an immediate appeal from the order may 
materially advance the termination of the litigation or will 
likely control the outcome of the case, and such finding is not 
clearly erroneous.
            Venue for the USPTO
    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.\98\ 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.
---------------------------------------------------------------------------
    \98\See 35 U.S.C. Sec. 1(b).
---------------------------------------------------------------------------
    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.

Patent and trademark office regulatory authority

    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.\99\ 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.
---------------------------------------------------------------------------
    \99\See, e.g., 35 U.S.C. Sec. 41.
---------------------------------------------------------------------------
    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. The Act 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 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.

Residency of Federal Circuit Judges

    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.
    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.
    The Act eliminates the residency restriction for Federal 
Circuit judges by repealing the relevant portion of subsection 
44(c) of title 28. The Act directs the Director of the 
Administrative Office of the United States Courts to provide 
appropriate facilities and administrative support in the 
District of the District of Columbia to judges of the Federal 
Circuit living within 50 miles of the District of Columbia and, 
to judges who live more than 50 miles from the District of 
Columbia, such services in the district in which that judge 
resides or, if such facilities are not available, in the 
closest district to the residence of the judge in which 
facilities are available.

Micro-entity defined

    As part of the ongoing 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.\100\ 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.
---------------------------------------------------------------------------
    \100\See 35 U.S.C. Sec. 41(h).
---------------------------------------------------------------------------
    This section of the Act defines an even smaller group--the 
micro-entity--that comprises only true, independent inventors. 
The Committee expects that the USPTO will make accommodations 
under its authority in recognition of the special status of 
micro-entities.

Funding agreements

    The Patent and Trademark Amendments Act of 1980 (commonly 
referred to as the Bayh-Dole Act)\101\ granted universities, 
other non-profit organizations, and small businesses the right 
to title to inventions developed using Federal funds. In 1984, 
Congress amended the law to ensure that universities and small 
businesses operating at Government facilities (GOCOs) reaped 
the benefits of Bayh-Dole by giving them the right to elect 
title to a subject invention.\102\ The 1984 Act permitted GOCOs 
to retain the balance of any royalties or income earned from 
licensing inventions, up to 5 percent of the annual budget of 
the facility, for further research, development and related 
activities. If the balance exceeds 5 percent of the facility's 
annual budget, however, 75 percent of the excess is recouped by 
the Government, with the remaining 25 percent of the excess 
also retained by the GOCO for further research, development, 
and related activities.\103\
---------------------------------------------------------------------------
    \101\P.L. 96-517.
    \102\P.L. 98-620, Sec. 501.
    \103\35 U.S.C. Sec. 202(c)(7).
---------------------------------------------------------------------------
    The Committee has considered testimony that the requirement 
to repay the government 75 percent of the excess on royalty 
payments may be causing a disincentive for universities and 
small business operating under the GOCO provisions to 
commercialize products.\104\ Based on these concerns, the 
Committee adopted an amendment that maintains the essence of 
the agreement GOCOs made with the taxpayers when they received 
funding that they would reimburse the taxpayer if they are 
sufficiently successful in commercializing a product invented 
with taxpayer dollars, but which reduces the burden on 
universities and small businesses, thereby encouraging 
commercialization. Under the amendment, instead of reimbursing 
75% of the excess to the Government, the GOCO will retain 85 
percent for further research, development, and related 
activities and reimburse the Government 15 percent.
---------------------------------------------------------------------------
    \104\See The Role of Federally-Funded University Research in the 
Patent System: Hearing Before the Senate Comm. on the Judiciary, 110th 
Cong. (2008) (statement of Dr. Elizabeth Hoffman, Executive Vice 
President and Provost, Iowa State University).
---------------------------------------------------------------------------

Patent and trademark office travel expenses test program

    The Act seeks to improve patent quality by empowering the 
USPTO to hire and retain examiners nationwide through an 
expanded telework program.
    The USPTO currently has a successful telework program in 
which both patent and trademark examiners participate. 
Regulations continue to require each examiner to appear at his 
or her duty station at least one day per week, which limits the 
efficiency and the effectiveness of the program.\105\ The cost 
associated with travelling to the duty station in Virginia once 
a week is a major impediment to potential examiners living 
beyond the Washington, D.C. metro area. Additionally, numerous 
work hours are lost as the examiner is in transit. Furthermore, 
the weekly appearance in Alexandria generally serves no 
training or work quality enhancement purpose. The Patent Public 
Advisory Committee (``PPAC'') noted that the result of the 
regulation is that the ``number of such examiners who 
participate in the [telework] program is vanishingly 
small.''\106\
---------------------------------------------------------------------------
    \105\Patent Public Advisory Committee 2008 Annual Report, p. 16. 
http://www.uspto.gov/web/offices/com/advisory/reports/
ppac_2008annualrpt.pdf.
    \106\Id.
---------------------------------------------------------------------------
    The PPAC recommended that both the USPTO management and 
labor unions ``place this issue among their highest priorities 
and look for a concrete resolution'' to working around the 
Federal regulations by agreement or seeking legislation to fix 
it.\107\
---------------------------------------------------------------------------
    \107\Id. at 18. PPAC clearly laid down the gauntlet: ``No more 
studies; no more tentative steps. It is time to get the job done.'' Id.
---------------------------------------------------------------------------
    The Act simply gives the USPTO the authority to implement a 
telework pilot program that would address its specific needs. 
It protects labor concerns by creating an oversight committee 
to review telework implementation and gives labor an equal 
membership in that committee. Examiners may still be required 
to return to Alexandria, but the Act requires the oversight 
committee to first explore ``reasonable technological or other 
alternatives to employee travel . . . including 
teleconferencing, videoconferencing or internet-based 
technologies.'' These alternatives provide the right balance to 
encourage hiring beyond the Washington, D.C. metro area but 
still protect management needs for certain travel.
    Section 13 provides the USPTO an important opportunity to 
recruit and retain top talent that might be looking for 
challenging employment around the country. These newly hired 
telework employees will contribute significantly to the 
reduction of the staggering patent backlog and pendency 
challenges facing the USPTO and American industry.

Best mode requirement

    The Act amends Sec. 282(b) to eliminate as a defense to 
patent infringement the patentee's failure to comply with the 
best mode requirement of Sec. 112. An applicant for a patent 
must disclose: (1) a written description of the invention; (2) 
a written description of the manner of making and using the 
invention, sufficient to enable one skilled in the art to make 
and use it (known as the ``enablement requirement''); and (3) 
the best mode contemplated by the inventor of carrying out the 
invention.\108\ The disclosures required of an applicant are 
part of the important tradeoff that underlies the patent laws: 
the grant of a limited-term monopoly in exchange for disclosure 
of the invention.
---------------------------------------------------------------------------
    \108\35 U.S.C. Sec. 112. Section 112 also requires an applicant to 
disclose a written description of the invention and a written 
description of the manner of making and using the invention, sufficient 
to enable one skilled in the art to make and use it.
---------------------------------------------------------------------------
    Under current law, the defense of patent invalidity is 
available for failure to comply with any requirement of 
Sec. 112 (specification) or Sec. 251 (reissued patents). 
Further, a defendant in patent litigation may also allege an 
intentional nondisclosure of the best mode, with intent to 
deceive the Office, as a basis for an unenforceability defense. 
Many have argued in recent years that the best mode 
requirement, which is unique to American patent law, is 
counterproductive.\109\ They argue that challenges to patents 
based on best mode are inherently subjective and not relevant 
by the time the patent is in litigation, because the best mode 
contemplated at the time of the invention may not be the best 
mode for practicing the invention years later.
---------------------------------------------------------------------------
    \109\National Academy of Sciences, the Biotechnology Industry 
Organization, the American Intellectual Property Law Association, the 
Intellectual Property Owners Association, and Pharmaceutical Research 
and Manufacturers of America.
---------------------------------------------------------------------------
    In response to concerns, the Committee adopted an amendment 
that eliminates best mode as a basis for both invalidity and 
unenforceability defenses under Sec. 282; other defenses are 
unaffected. However, the Committee views public disclosure as 
an important part of the patent system, and the best mode 
disclosure requirement will remain in Sec. 112, where it serves 
as an affirmative requirement for patentability and as a basis 
for rejection of a claim if it appears that the best mode 
contemplated by the inventor has not been disclosed.

Pilot program in certain district courts

    The Act establishes a pilot program in certain United 
States district courts to encourage the enhancement of 
expertise in patent cases among district judges. The intent of 
this section is to authorize the creation of a patent 
specialists' pilot program at the U.S. district court level, to 
improve the adjudication of patent disputes.
    ``One of the most significant problems facing the United 
States patent system is the spiraling cost and complexity 
associated with enforcement of patent rights.''\110\ The 
problems associated with providing efficient, stable, and 
predictable adjudication of patent disputes present issues of 
longstanding concern. The complex and dynamic nature of patent 
law along with the increasing sophistication of technologies, 
which tend to underlie determinations of prior art and whether 
material is patentable, present unique challenges to those 
responsible for adjudicating these disputes. These are 
particularly acute at the trial court level where judges tend 
to be generalists and lay jurors tend to be unfamiliar with 
patent law concepts and untrained in the sophisticated 
technologies that frequently lie at the heart of litigation.
---------------------------------------------------------------------------
    \110\The Advisory Commission on Patent Law Reform, Report to the 
Secretary of Commerce 75 (1992).
---------------------------------------------------------------------------
    Over the years, judges, patent professionals and patent 
owners have identified a number of judicial and litigation 
reforms without endorsing one proposal to the exclusion of 
others. Still, the vast majority of structural reforms have 
something in common: they share a widespread perception that 
patent litigation has become too expensive, too time-consuming, 
and too uncertain.
    District courts are trial courts that possess general civil 
and criminal jurisdiction. Title 28 of the United States Code 
grants U.S. district courts exclusive, original jurisdiction of 
``any civil action arising under any Act of Congress relating 
to patents.''
    Within the United States, the adjudication of patent 
interpretation and enforcement disputes typically commences 
with the filing of a case in an appropriate U.S. district 
court. Patent cases constitute an insubstantial number of the 
total cases filed. The overwhelming majority of such cases are 
settled or decided by motion with the rest, approximately 100 
cases, going to trial in a given year. Due to their novelty and 
complexity, the cases that are tried tend to be resource-
intensive and account for a disproportionate share of district 
court judges' time and effort. As with other civil and criminal 
cases, the standard practice is randomly to assign patent cases 
to the various judges within a district.
    Given this background--the relative infrequency of patent 
litigation, early settlement of most suits, and random 
assignment of cases--district court judges generally receive 
little exposure to actual patent claim trials.
    The right of exclusivity, which is critical to protecting 
the economic benefit and inherent value of a patent, can be 
protected only ``if patent owners have effective and 
inexpensive access to an efficient judicial system''\111\ to 
enforce their patent. There is substantial evidence that the 
adjudication of patent cases is neither effective nor 
inexpensive.\112\
---------------------------------------------------------------------------
    \111\The Advisory Comm'n On Patent Law Reform, Report to the 
Secretary of Commerce 75 (1992).
    \112\James F. Holderman, Judicial Patent Specialization: A View 
from the Trial Bench, 2002 J. L. Tech. & Pol'y 425 (2002).
---------------------------------------------------------------------------
    The Committee adopted an amendment that is intended to 
increase judicial expertise in the area of patent law by 
authorizing the creation of a pilot program in those districts 
with judges interested in handling patent cases. It authorizes 
the Director of the Administrative Office of the Courts to 
designate not fewer than six U.S. district courts in at least 
three different circuits to participate in a 10-year pilot 
program that would permit district judges to request assignment 
of patent-related cases, permit the Chief Judge to designate 
requesting judges to hear such cases, allow `undesignated' 
judges to decline such cases, and require random assignment of 
such cases to either all of the judges of the district court or 
only the designated judges in certain instances. The Director 
of the Administrative Office of the United States Courts will 
select pilot districts from those courts that: (1) were one of 
the 15 with the largest volume of patent-related filings in the 
previous year or have adopted local rules for handling patent 
cases; and of those districts that qualify (2) (i) three have 
at least 10 federally appointed judges sitting on the bench, 
and at least three (3) of whom have expressed interest in 
receiving specialized training for patent cases; and (ii) three 
have fewer than 10 federally-appointed judges sitting on the 
bench, and at least two of whom have expressed interest in 
receiving specialized training for patent cases.
    This section authorizes not less than $5,000,000 for each 
of the 10 fiscal years to be expended for the educational and 
professional development of designated judges and to compensate 
law clerks who possess expertise in technical matters that 
arise in patent cases. The section also requires the Director 
of the Administrative Office of the Courts to compile 
information on the pilot program and to provide periodic 
reports to the Judiciary Committees of the House of 
Representatives and the Senate.

Technical amendments

    The Act contains technical amendments to improve the 
organization of the patent statute.

Effective date; Rule of construction

    The Act provides that, unless otherwise provided, it 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 the 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.
    On April 18, 2007, in the 110th Congress, Senator Leahy, 
along with Senator Hatch, introduced the Patent Reform Act of 
2007 (S. 1145). Senator Schumer, Senator Whitehouse, and 
Senator Cornyn were original cosponsors of the bill. Senator 
Craig, Senator Crapo, Senator Bennett, Senator Salazar, and 
Senator Smith joined as cosponsors. The bill was referred to 
the Committee on the Judiciary, which considered the bill and 
reported it with an amendment on January 24, 2008. See S. Rep. 
110-259.
    On March 3, 2009, Senator Leahy and Senator Hatch 
introduced the Patent Reform Act of 2009. Senator Crapo, 
Senator Gillibrand, Senator Risch, Senator Schumer, and Senator 
Whitehouse were original cosponsors. Senator Cornyn, Senator 
Feinstein, Senator Klobuchar, and Senator Specter joined as 
cosponsors. This bill was referred to the Committee on the 
Judiciary.

                              B. HEARINGS

    The Senate Committee on the Judiciary held eight hearings 
on patent reform from 2005 through 2009.
    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 
a hearing on ``Patent Reform: The Future of American 
Innovation.'' Chairman Leahy, Ranking Member 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.
    On October 24, 2007, the Senate Committee on the Judiciary 
held a hearing on ``The Role of Federally-Funded University 
Research in the Patent System.'' Chairman Leahy, Senator 
Cardin, and Senator Grassley attended the hearing. The 
following witnesses testified: Arti K. Rai, Professor of Law, 
Duke University Law School; Elizabeth Hoffman, Executive Vice 
President and Provost, Iowa State University; Robert Weissman, 
Director, Essential Action; and Dr. Charles Louis, Vice 
Chancellor for Research, University of California, Riverside. 
The following materials were submitted for the record: 
statement of Senator Tom Harkin of Iowa; statement of 
Representative Tom Latham of Iowa; statement of the 
Biotechnology Industry Association; statement of the Wisconsin 
Alumni Research Foundation; prepared statement of Elizabeth 
Hoffman; prepared statement of Charles Louis; prepared 
statement of Arti K. Rai; and the prepared statement of Robert 
Weissman.
    On March 10, 2009, the Senate Committee on the Judiciary 
held a hearing on ``Patent Reform in the 111th Congress: 
Legislation and Recent Court Decisions.'' Chairman Leahy 
attended the hearing, along with Ranking Member Specter, 
Senator Feinstein, Senator Cardin, Senator Whitehouse, Senator 
Klobuchar, Senator Kaufman, Senator Hatch, Senator Kyl, and 
Senator Coburn. The following witnesses testified: Steven R. 
Appelton, Chairman and CEO of Micron Technologies, Inc.; Philip 
S. Johnson, Chief Intellectual Property Counsel, Johnson & 
Johnson; David J. Kappos, Vice President and Assistant General 
Counsel, International Business Machines Corporation; Taraneh 
Maghame, Vice President, Tessera, Incorporated; Herbert C. 
Wamsley, Executive Director, Intellectual Property Owners 
Association; and Mark A. Lemley, the William H. Neukom 
Professor of Law, Stanford Law School. The following materials 
were submitted for the record: statement of Robert T. Nelsen, 
Managing Director, ARCH Venture Partners; letter from America's 
Specialty Medicines Companies to Chairman Leahy and Ranking 
Member Specter dated March 16, 2009; statement of the 
Biotechnology Industry Association; paper by Mark Blaxill and 
Ralph Eckardt entitled: ``The Innovation Imperative: Building 
America's Invisible Edge for the 21st Century''; statement of 
the Computing Technology Industry Association; statement of 
FotoTime, Inc.; statement of the Generic Pharmaceutical 
Association; letter from David J. Kappos of IBM to Members of 
the Judiciary Committee dated March 19, 2009; letter from AARP, 
Consumer Federation of America, Consumers Union, and U.S. 
Public Interest Research Group to Chairman Leahy dated March 9, 
2009; letter from Aetna Inc., Apotex Corporation, Generic 
Pharmaceutical Association, Hospira Inc., Mylan 
Pharmaceuticals, National Association of Chain Drug Stores, 
Teva Pharmaceuticals, and Watson Pharmaceuticals to Senator 
Leahy and Senator Hatch, dated March 9, 2009; statement of the 
National Association of Realtors; and the statement of the 
Wisconsin Alumni Research Foundation.

                         C. LEGISLATIVE HISTORY

    The bill was on the agenda for the March 19, 2009 business 
meeting but was held over. On March 26, 2009, the Senate 
Judiciary Committee began its consideration of S. 515. Senator 
Leahy offered an amendment cosponsored by Senator Hatch, 
Senator Whitehouse, Senator Specter, Senator Feinstein and 
Senator Kyl, which was adopted by unanimous consent. This 
amendment included a number of technical changes and 
clarifications. In particular, the amendment tightened the 
language on prior art and derivation proceedings. It also 
clarified that first-window, post-grant review proceedings must 
be instituted by the Director. Finally, the amendment added a 
provision permitting patent holders to ``virtually mark'' 
products by providing the address of a publicly available 
website that associates the patented article with the number of 
the patent.
    On March 31, 2009, the Senate Judiciary Committee resumed 
consideration of S. 515, as previously amended on March 26, 
2009. Senators Leahy and Hatch offered an amendment, which was 
adopted by unanimous consent. The first section of this 
amendment modified the Bayh-Dole Act to allow nonprofit 
organizations at government-owned-contractor-operated 
facilities to retain a larger portion of licensing royalties in 
excess of 5% of the facility's operating budget for scientific 
research, development, and education. The second section of 
this amendment authorized a pilot program at the USPTO for 
teleworking.
    The Committee concluded consideration of S. 515 on April 2, 
2009. Three amendments were considered during this meeting:
    Senator Leahy offered an amendment cosponsored by Senator 
Specter, Senator Feinstein, Senator Whitehouse, Senator 
Kaufman, and Senator Cornyn, which was adopted by unanimous 
consent. This amendment struck the calculation of reasonable 
royalty language in section 4 and replaced it with enhanced 
procedural protections, which will provide more of a role for 
the judge to identify the appropriate legal standards and 
relevant factual contentions. The amendment also tightened the 
provision in section 4 related to willfulness, to ensure it 
does not detract from the Federal Circuit's recent Seagate 
decision. In section 5, the amendment struck the language of 
the original bill that would have permitted a challenger to 
raise evidence that the claimed invention was in public use or 
on sale in the United States as a basis for invalidating the 
patent in an inter partes reexamination. In section 7, the 
amendment provided the district court with specific standards 
that it must certify have been met before certifying a claims 
construction order for interlocutory appeal. The amendment also 
struck the changes that would have been made by section 8 to 
the patent venue statute, 28 U.S.C. 1400, in favor of a new 
subsection (c), which requires the court to transfer venue in a 
patent case if the transferee venue is clearly more convenient 
than the venue in which the action is pending. The amendment 
added a new section 14 to the bill, which retains the 
requirement that a specification contain the best mode of 
carrying out an invention as part of the patent application, 
but does not allow best mode to be used as a basis for 
invalidating an issued patent. The amendment added a new 
section 15 to the bill, which creates a pilot program for 
training district court judges in patent law, and for the 
hiring of law clerks devoted to working on patent cases.
    Senator Kyl offered an amendment that would have modified 
the post-grant review section. This amendment was rejected by a 
roll call vote.
    The vote record was as follows:
    Tally: 4 Yeas, 13 Nays, 2 Not Voting
    Yeas (4): Coburn (R-OK), Feingold (D-WI), Grassley (R-IA), 
Kyl (R-AZ).
    Nays (13): Cardin (D-MD), Cornyn (R-TX), Durbin (D-IL), 
Feinstein (D-CA), Hatch (R-UT), Kaufman (D-DE), Klobuchar (D-
MN), Kohl (D-WI), Leahy (D-VT), Schumer (D-NY), Specter (R-PA), 
Whitehouse (D-RI), Wyden (D-OR).
    Senator Coburn offered an amendment that would have removed 
the United States Patent and Trademark Office from the regular 
budget process. The amendment was tabled on a roll call vote.
    The vote record was as follows:
    Tally: 10 Yeas, 9 Nays
    Yeas (10): Cardin (D-MD), Durbin, (D-IL), Feinstein (D-CA), 
Kaufman (D-DE), Klobuchar (D-MN), Kohl (D-WI), Leahy (D-VT), 
Schumer (D-NY), Whitehouse (D-RI), Wyden (D-OR).
    Nays (9): Coburn (R-OK), Cornyn (R-TX), Feingold (D-WI), 
Graham (R-SC), Grassley (R-IA), Hatch (R-UT), Kyl (R-AZ), 
Sessions (R-AL), Specter (R-PA).
    The Committee then voted to report the Patent Reform Act of 
2009, as amended, favorably to the Senate. The Committee 
proceeded by roll call vote as follows:
    Tally: 15 Yeas, 4 Nays
    Yeas (15): Cardin (D-MD), Cornyn (R-TX), Durbin (D-IL), 
Feinstein (D-CA), Graham (R-SC), Grassley (R-IA), Kaufman (D-
DE), Klobuchar (D-MN), Kohl (D-WI), Leahy (D-VT), Schumer (D-
NY), Sessions (R-AL), Specter (R-PA), Whitehouse (D-RI), Wyden 
(D-OR).
    Nays (4): Coburn (R-OK), Feingold (D-WI), Hatch (R-UT), Kyl 
(R-AZ).

              III. Section-by-Section Summary of the Bill


Section 1. Short title; table of contents

    This Act may be cited as the Patent Reform Act of 2009.

Section 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 person is entitled to a patent unless 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.
    Subsection (k)--Amends Sec. 131 to clarify that examination 
and search duties for the grant of a United States patent are 
sovereign functions to be performed by employees of the United 
States Government, to the extent consistent with obligations 
under international agreements.

Section 3. Inventor's oath or declaration

    This 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)--Section 118 is amended 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.

Section 4. Right of the inventor to obtain damages

    Subsection (a)--Sec. 284, the patent damage statute, is 
amended to provide as follows:
    (a) The court shall award the claimant damages adequate to 
compensate for the infringement, but in no event less than a 
reasonable royalty, together with interest and costs. The court 
may receive expert testimony to assist it in determining 
damages.
    (b) In determining damages, the court shall identify, and 
the court or jury shall only consider, the methodologies and 
factors that are relevant. The parties must state, in writing 
and with particularity, the methodologies and factors they 
propose for instruction to the jury by no later than the final 
pretrial order, unless otherwise ordered by the court.
    Prior to the introduction of evidence concerning damages, 
the court shall consider whether one or more of a party's 
damages contentions lacks a legally sufficient evidentiary 
basis and identify on the record those methodologies and 
factors for which there is a legally sufficient evidentiary 
basis. The court or jury shall only consider those 
methodologies and factors so identified, and the court shall 
only permit the introduction of evidence relating to the 
determination of damages that is relevant to those factors.
    (c) A court may increase damages by up to three times based 
on a finding of willful infringement. To prove willful 
infringement, a patentee must prove by clear and convincing 
evidence that acting with objective recklessness:
          (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.
    Notwithstanding facts that may otherwise establish a prima 
facie case of willful infringement, an infringer may not be 
found to have acted with objective recklessness at a time 
during which the infringer had an informed good faith belief 
that the patent was invalid or unenforceable, or would not be 
infringed, and: (i) there was reasonable reliance on advice of 
counsel; (b) the infringer sought to modify its conduct to 
avoid infringement once it had discovered the patent; or (c) 
there is sufficient 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.
    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)--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 (d)--The amendments made by this section shall 
apply to any civil action commenced on or after the date of 
enactment of this Act.
    Subsection (e)--Subsection (a) of Sec. 287 is amended to 
permit patent holders to ``virtually mark'' a product by 
providing the address of a publicly available website that 
associates the patented article with the number of the patent.

Section 5. Post-grant procedures and other quality enhancements

    Subsection (a)--Sec. 301 is amended to include written 
statements of the patent owner filed in a proceedings before a 
Federal court or the USPTO as citable prior art. The section is 
further amended to provide rules for submitting such statements 
and the limitations on their use.
    Subsection (b)--Sec. 303 is amended to clarify that the 
Director may determine whether to initiate reexamination on the 
Director's own initiative based on citations by any person 
other than the owner of the patent under section 302 or 311.
    Subsection (c)--Sec. 314 is amended to provide that inter 
partes reexamination proceedings will be heard by 
administrative patent judges in accordance with procedures 
established by the Director. Third-party requesters are given 
60 days to respond in writing to any action on the merits by 
the USPTO and to any response filed by the patent owner. A 
patent owner may make amendments to the patent and submit new 
claims that do not enlarge the patent's scope. This subsection 
also authorizes oral hearings on request of either party.
    Subsection (d)--Sec. 315 is amended to limit the estoppel 
bar to those invalidity issues that the third-party requester 
raised during the reexamination procedure.
    Subsection (e)--Sec. 317 is amended to prohibit a request 
for inter partes reexamination by any party against whom a 
district court decision has been entered finding that the party 
has not sustained its burden of proving the invalidity of any 
patent claim in suit.
    Subsection (f)--This subsection creates a new chapter 32 of 
title 35, which provides as follows:
    Sec. 321--A person who is not the patent owner may file a 
petition for cancellation seeking to institute a post-grant 
review proceeding based on any ground that could be raised 
under section 282. The Director shall establish reasonable fees 
to be paid by the person requesting the proceeding.
    Sec. 322--A petition under this chapter may only be filed 
within 12 months after the issuance or reissuance of the patent 
or by consent of the patent owner.
    Sec. 323--The petition may only be considered if it is 
accompanied by the fee established by the Director; identifies 
the petitioner; sets forth the basis for cancellation and the 
evidence in support; and provides copies of such to the patent 
owner or designated representative.
    Sec. 324--A proceeding may not be instituted if the 
petition identified the same petitioner and the same patent as 
a previous petition or if the petition is based on the best 
mode requirement.
    Sec. 325--The Director shall determine what additional 
information must be filed with a petition and, for each 
petition, the Director shall determine whether the petition 
establishes that a substantial question of patentability 
exists. The director shall notify the patent owner and each 
petition of the Director's determination, which shall be made 
not later than 60 days after receiving the petition. Such 
decision is not reviewable.
    Sec. 326--The Director shall prescribe regulations 
governing the conduct of post-grant review proceedings. Those 
regulations shall, among other things, require that a final 
determination issue not later than one year after instituting 
the proceeding; provide for discovery upon order of the 
Director; provide for publication of the petition and related 
documents; and prescribe sanctions for abuse of discovery or 
process, or any other improper use of the proceeding. The 
Patent Trial and Appeal Board (the ``Board'') shall conduct 
each proceeding instituted by the Director.
    Sec. 327--The patent owner shall have a right to file a 
response to a cancelation petition.
    Sec. 328--The presumption of validity set forth in section 
282 does not apply in a post-grant review proceeding, but the 
party advancing a proposition shall have the burden of proving 
that proposition by a preponderance of the evidence.
    Sec. 329--In response to a cancellation petition, the 
patent owner may file a motion to amend the patent by canceling 
or substituting any challenged claim or by amending the drawing 
or otherwise amend the patent other than the claims. The patent 
owner may file one such motion as of right, but subsequent 
motions will be permitted only for good cause. An amendment may 
not enlarge the scope of the claims of the patent or introduce 
new matter.
    Sec. 330--Once the Director has initiated a proceeding, the 
Board is required to issue a final written decision addressing 
the patentability of any patent claim challenged and any new 
claim added under section 329.
    Sec. 331--The Director shall issue and publish a 
certificate canceling any claim of a patent finally determined 
by the Board to be unpatentable and incorporating in the patent 
any new claim determined to be patentable. Any new claim held 
to be patentable shall have the same effect as that specified 
in Sec. 252 for reissued patents on prior users.
    Sec. 332--The proceeding can be terminated with respect to 
any petitioner upon the joint request of the petitioner and the 
patent owner if such request is filed prior to the Board 
issuing a written decision. Any agreement made in connection 
with the termination of the proceeding must be in writing and 
must be filed with the USPTO. Upon request, such agreements may 
be kept separate from the file on the proceeding and made 
available only to Government agencies on written request or to 
any person on a showing of good cause.
    Sec. 333--The Director may determine the manner in which 
other proceedings that are pending during a post-grant review 
proceeding may proceed, including providing for stay, transfer, 
consolidation, or termination of any such proceeding. The 
Director may stay the post-grant proceeding if a pending 
infringement action addresses the same or substantially the 
same questions of patentability. The commencement of a post-
grant review proceeding shall not limit the right of the patent 
owner to commence an action for infringement and shall not be 
cited as evidence relating to the validity of any claim of the 
patent in a proceeding before a court or the International 
Trade Commission.
    Sec. 334--A final decision in a civil action establishing 
that the party did not sustain its burden of proving the 
invalidity of any patent claim shall preclude such party (and 
privies of that party) from requesting a post-grant review 
proceeding based on any grounds raised or that could have been 
raised. Further, the Director may not maintain any post-grant 
review proceeding after a final decision was entered on the 
basis of such grounds.
    Sec. 335--This section gives preclusive effect to a finding 
favorable to the patentability of any claim based on any claim 
the cancellation petitioner raised during the proceeding. Such 
petitioner may not raise any such ground to request or pursue a 
reexamination, derivation proceeding, or post-grant review 
proceeding with respect to such claim. Nor can the cancellation 
petitioner assert such ground as a basis for invalidity in a 
civil action or before the International Trade Commission in a 
section 337 action.
    Sec. 336--Judicial review of a final decision of the Board 
in a post-grant review proceeding may be obtained from the 
Federal Circuit.
    Subsection (g)--This subsection provides a conforming 
amendment for the table of chapters for part III.
    Subsection (h)--This subsection repeals Sec. 4607 of the 
Optional Inter Partes Reexamination Procedures Act of 1999, 
which describes the estoppel grounds in inter partes 
reexamination. Estoppel resulting from inter partes 
reexamination decisions is now governed by Sec. 315(c), as 
amended by this Act.
    Subsection (i)--The amendments made by this section become 
effective 1 year after the date of enactment of the Act. 
Section 301 (citation of prior art) and the reexamination 
procedures of Sec. 311 through Sec. 318, however, apply to all 
patents. The new, post-grant review proceeding, however, will 
apply only to patents issued on or after the effective date, 
which is 1 year after the date of enactment.
    Subsection (j)--The Director is instructed to issue 
regulations to carry out the post-grant review proceeding 
within 1 year of the date of enactment of the Act.

Section 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.

Section 7. Submissions by third parties and other quality enhancements

    This section amends Sec. 122 to create a mechanism 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.

Section 8. Venue and jurisdiction

    Subsection (a)--The venue provision for patent cases, 
section 1400 of title 28, is amended by adding at the end a new 
subsection (c) providing that, for the convenience of parties 
and witnesses, in the interest of justice, a district court 
shall transfer a case upon a showing that the transferee venue 
is clearly more convenient than the venue in which the case is 
pending.
    Subsection (b)--Interlocutory Appeals--Subsection (c) of 
section 1292 of title 28, is amended to give the district court 
discretion to certify a final order determining construction of 
a patent claim for interlocutory review if the district court 
finds that there is a sufficient evidentiary record and an 
immediate appeal from the order may materially advance the 
termination of the litigation or will likely control the 
outcome of the case. A certification can be reversed if clearly 
erroneous.
    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.

Section 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.

Section 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. A new subsection (e) is added at the end, which 
directs the Director of the Administrative Office of the United 
States Courts to provide appropriate facilities and 
administrative support in the District of the District of 
Columbia to judges of the Federal Circuit living within 50 
miles of the District of Columbia and, to judges who live more 
than 50 miles from the District of Columbia, such services in 
the district in which that judge resides or, if such facilities 
are not available, in the closest district to the residence of 
the judge in which facilities are available.

Section 11. Micro-entity defined

    This section adds a new Sec. 124 to define the 
qualifications for ``micro-entity'' status.

Section 12. Funding agreements

    Clause (i) of Sec. 202(c)(7)(E) is amended to permit a 
nonprofit organization that has a funding agreement for the 
operation of a Government-owned-contractor-operated facility to 
retain 85%, rather than 25% under current law, of licensing 
royalties in excess of the amount equal to 5% of the annual 
budget of the facility.

Section 13. Patent and Trademark Office Travel Expenses Test Program

    This section amends Sec. 5710 of title 5 to direct the 
USPTO to create a teleworking test program. Pursuant to the 
program, USPTO may pay certain travel expenses for an employee 
for travel to and from the USPTO under the program. The USPTO 
is directed to establish an oversight committee comprising an 
equal number of members representing management and labor. The 
oversight committee shall develop operating procedures. The 
test program contains a number reporting requirements to ensure 
it is designed to save costs and improve efficiency. The test 
program terminates 20 years after the effective date of the 
Travel and Transportation Reform Act of 1998, P.L. 105-264.

Section 14. Best mode requirement

    This section amends Sec. 282(b) by removing the failure to 
disclose the best mode under section 112 as a basis for 
canceling or holding either invalid or unenforceable a patent 
claim.

Section 15. Pilot Program in certain district courts

    This section creates a pilot program in at least 6 district 
courts from at least 3 different circuits that will receive 
funding for training in patent law and to hire law clerks 
devoted to working on patent cases. The section authorizes a 
minimum of $5 million for the program annually for a period of 
ten (10) years. The Director of the Administrative Office of 
the United States Courts will select pilot districts from those 
courts that: (1) were one of the fifteen with the largest 
volume of patent-related filings in the previous year or have 
adopted local rules for handling patent cases; and of those 
districts that qualify (2) (i) 3 have at least ten federally 
appointed judges sitting on the bench, and at least three of 
whom have expressed interest in receiving specialized training 
for patent cases; and (ii) 3 have fewer than ten federally 
appointed judges sitting on the bench, and at least two of whom 
have expressed interest in receiving specialized training for 
patent cases.

Section 16. Technical amendments

    This section sets forth technical amendments consistent 
with this Act.

Section 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.

Section 18. Severability

    This section provides that if any provision of this Act is 
held to be invalid or unenforceable, the remainder of the Act 
shall not be affected by such holding.

             IV. Congressional Budget Office Cost Estimate

    The Committee sets forth, with respect to the bill, S. 515, 
the following estimate and comparison prepared by the Director 
of the Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974:

                                                    April 30, 2009.
Hon. Patrick J. Leahy,
Chairman, Committee on the Judiciary,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 515, the Patent 
Reform Act of 2009.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.

S. 515--The Patent Reform Act of 2009

    Summary: S. 515 would amend various provisions of current 
law that regulate how the Patent and Trademark Office (PTO) 
awards patents. Among other things, the bill would alter the 
rule that prioritizes the award of a patent from the ``first to 
invent'' to the ``first inventor to file.'' As a result, PTO 
would change certain procedures it follows in awarding patents 
and establish new procedures that would allow individuals to 
challenge the validity of patents that have been awarded.
    Under current law, PTO is authorized to collect a variety 
of fees for the services it performs. The fee rates are set in 
statute, and the amounts collected are available to offset the 
cost of PTO's operations. The bill would permanently set higher 
fee rates for certain actions and authorize PTO to set or 
adjust fees periodically. S. 515 also would authorize PTO to 
establish fees to offset most of the costs associated with new 
procedures it must follow when presented with a challenge to 
the validity of a patent.
    Subject to appropriation of the necessary amounts, CBO 
estimates that implementing S. 515 would have a net 
discretionary cost of $3 million in 2010, and would reduce 
discretionary spending by $173 million over the 2010-2014 
period. CBO estimates that enacting S. 515 also would increase 
direct spending by about $3 million over the 2010-2019 period; 
the bill would have no effect on revenues.
    S. 515 contains an intergovernmental and private-sector 
mandate, as defined in the Unfunded Mandates Reform Act (UMRA), 
on certain patent applicants. Based on information from PTO, 
CBO estimates that the costs of the mandate would fall below 
the annual thresholds established in UMRA ($69 million for 
intergovernmental mandates and $139 million for private-sector 
mandates, in 2009, adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 515 is shown in the following table. The 
costs of this legislation primarily fall within budget 
functions 370 (commerce and housing credit) and 750 
(administration of justice).

----------------------------------------------------------------------------------------------------------------
                                                                 By fiscal year, in millions of dollars--
                                                         -------------------------------------------------------
                                                            2010     2011     2012     2013     2014   2010-2014
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Inter Partes Reexaminations:
    Estimated Authorization Level.......................        0       11       15       21       25        72
    Estimated Outlays...................................        0        9       14       20       25        68
Post-grant Opposition Procedures:
    Estimated Authorization Level.......................        0        3        4        9       10        26
    Estimated Outlays...................................        0        2        4        8       10        24
Administrative Costs:
    Estimated Authorization Level.......................        5        5        0        0        0        10
    Estimated Outlays...................................        1        7        2        0        0        10
Pilot Program in District Courts:
    Estimated Authorization Level.......................        5        5        5        5        5        25
    Estimated Outlays...................................        2        5        5        5        5        22
Offsetting Collections:
    Estimated Authorization Level.......................        0      -67      -68      -78      -84      -297
    Estimated Outlays...................................        0      -67      -68      -78      -84      -297
Net Changes in Spending:
    Estimated Authorization Level.......................       10      -43      -44      -43      -44      -164
    Estimated Outlays...................................        3      -44      -43      -45      -44      -173

                                          CHANGES IN DIRECT SPENDING\1\

    Estimated Budget Authority..........................        0        1        1        1        0         3
    Estimated Outlays...................................        0        1        1        1        0        3
----------------------------------------------------------------------------------------------------------------
\1\CBO estimates that increases in direct spending under the bill would total $3 million over the 2010-2019
  period.

    Basis of estimate: For this estimate, CBO assumes that the 
bill will be enacted near the end of fiscal year 2009, that the 
necessary amounts will be appropriated each year, and that 
spending will follow historical patterns for the agency. 
Further, CBO assumes that most of the bill's provisions would 
be effective one year after the date of enactment.

Spending subject to appropriation

    S. 515 would change the basis that PTO uses to award 
patents. Under current law, where two or more persons 
independently develop identical or similar patents at 
approximately the same time, the patent is awarded to the first 
inventor established through the examination process. S. 515 
would direct PTO, under the same circumstances, to award the 
patent to the inventor whose application has the earliest 
filing date. The bill also would establish a new procedure 
(post-grant opposition) to challenge the validity of a patent 
and would authorize PTO to collect fees to offset much of the 
costs associated with that process.
    Based on information from PTO, CBO expects that the volume 
of requests for reconsideration of patents already granted 
(inter partes reexaminations) would increase as a result of 
changes S. 515 would make to the reexamination process. Under 
current law, PTO is authorized to collect fees for those 
reviews as well. The collection and spending of fees are 
subject to provisions in annual appropriations acts, and the 
fees are recorded on the budget as offsets to the discretionary 
spending of PTO. For 2009, the PTO received a gross 
appropriation of $2,010 million, and CBO estimates that amount 
will be offset by $1,937 million in fee collections. Assuming 
appropriation of the necessary amounts, CBO estimates that 
implementing S. 515 would reduce PTO's net outlays by $195 
million over the 2010-2014 period. Further, CBO estimates that 
discretionary spending would increase by $22 million over the 
2010-2014 period for a pilot program authorized within the 
Department of Justice, assuming appropriation of the amounts 
specified in the bill. In total, implementing S. 515 would 
reduce net discretionary spending by $173 million over the 
2010-2014 period.
    Inter Partes Reexaminations. Under current law, an 
individual may question the validity of an awarded patent 
through an inter partes reexamination, which allows both the 
challenger and the patent-holder to participate in the 
proceedings by submitting arguments and filing appeals.
    There is no time limit on raising an inter partes 
challenge, however, such challenges may only be brought against 
patent applications filed after a certain date. S. 515 would 
expand the universe of awarded patents that could be challenged 
through this proceeding; as a result, CBO expects that the 
number of inter partes reexaminations would increase. Further, 
the bill would require the inter partes proceedings to be 
conducted by an administrative patent judge; under current law, 
these proceedings are conducted by a patent examiner.
    Based on information from PTO, CBO expects that around 80 
additional employees would ultimately be necessary to handle an 
increase in patent challenges. We estimate that implementing 
the changes to the inter partes reexamination procedures would 
cost about $9 million in 2011 to hire and train additional 
staff and $68 million over the 2010-2014 period. PTO is 
authorized to collect fees that would offset a portion of the 
costs of conducting those examinations.
    Post-grant Opposition Procedures. S. 515 would authorize 
PTO to create a new procedure to review the validity of patents 
already awarded. This opportunity for such a post-grant review 
generally would be available within 12 months of the date the 
patent was issued, and would take place in a court-like 
proceeding in which both the challenger and the owner of the 
patent would develop and present information regarding the 
validity of an awarded patent. The bill would authorize PTO to 
collect fees to offset the cost of this new process.
    Based on information from PTO, CBO expects that the volume 
of requests for post-grant reviews would grow each year once 
regulations defining the process are complete. CBO estimates 
that implementing this new process would cost $2 million in 
2011 and $24 million over the 2010-2014 period, which would be 
offset by fee collections starting in 2011. The cost would be 
higher in the early years because we expect that the agency 
would incur expenses to establish the system before cases would 
be presented for review.
    Administrative Costs. As a result of the switch to a 
``first to file'' principle, PTO would incur additional 
administrative costs, including updating its information 
technology systems and training staff. CBO estimates that those 
changes would increase discretionary spending by about $10 
million over the 2010-2014 period.
    Pilot Program in District Courts. Section 15 would create a 
10-year pilot program in certain district courts to hone 
judicial expertise in patent protection cases. The bill would 
authorize the appropriation of not less than $5 million a year 
for the professional development of district judges and 
compensation of law clerks with expertise in such cases. After 
2014, the Administrative Office of the United States Courts 
would be required to submit two reports to the Congress 
detailing the progress of the pilot program. CBO estimates that 
implementing those activities would cost $22 million over the 
2010-2014 period. After 2014, CBO estimates that the program 
would cost an additional $31 million.
    Offsetting Collections. Certain provisions of S. 515 would 
permanently extend some, but not all, fee increases that have 
been authorized in annual appropriations actions since fiscal 
year 2005. Further, as noted above, the bill would authorize 
PTO to set and collect fees for the new post-grant opposition 
process. Finally, S. 515 would authorize PTO to adjust fees 
periodically to offset the organization's costs of providing 
its services.
    Based on information from PTO and historical patterns of 
collections, CBO estimates that those new authorities would 
increase offsetting collections by $70 million in 2011 and $320 
million over the 2010-2014 period. Of that amount, $277 million 
would be generated through the permanent extension of fee 
increases, the balance would result from fees related to the 
increased volume in patent challenges (both inter partes re-
examinations and post-grant reviews).
    Other provisions of S. 515 would expand the number of 
patent applications filed in foreign countries that would be 
reviewed in the course of PTO's examination process. Based on 
information from PTO, CBO expects that some of the U.S. 
applications that would be approved under current law would be 
denied under the provisions of S. 515 because of information 
made available in the foreign applications. CBO estimates that 
fee collections would fall by $3 million in 2011 and by $23 
million over the 2010-2014 period due to the loss of issuance 
and maintenance fees due after a patent has been awarded. CBO 
estimates that net offsetting collections would increase by $67 
million in 2011 and by $297 million over the 2010-2014 period.

Direct spending and revenues

    Section 12 would change the amount of royalties or income 
earned by certain contractors that is required to be remitted 
to the federal government. Under current law, funding 
agreements between the federal government and contractors 
operating government-owned-contractor-operated (GOCO) 
laboratories allow contractors to retain, up to a certain 
threshold, all royalty and other income earned from patents 
received as a result of work performed under the contract. 
Beyond that, 75 percent of royalties or income earned above the 
threshold must be returned to the U.S. Treasury. The royalties 
returned to the Treasury are recorded as offsetting receipts 
(credits against direct spending). S. 515 would reduce that 
amount to 15 percent.
    Currently, only one entity operating a GOCO laboratory 
returns excess royalties and license fees to the federal 
government. Over the past several years, the Ames Laboratory, 
operated by Iowa State University, has returned to the Treasury 
approximately $1 million a year in license fees earned from 
patents awarded under its contract with the federal government. 
Based on information from the Department of Energy (which 
operates most of the GOCO laboratories), CBO assumes that the 
Ames Laboratory is the only facility that is expected to return 
income to the federal government over the next five to ten 
years. CBO estimates that reducing the percentage of income 
that is returned to the Treasury would increase direct spending 
(and would be recorded as a loss of offsetting receipts) by 
about $3 million over the 2010-2014 and 2010-2019 periods. 
Receipts would end after 2013 when the Ames patent generating 
the bulk of the royalties expires.
    Intergovernmental and private-sector impact: S. 515 would 
impose a mandate on both intergovernmental and private-sector 
entities, by allowing PTO to set or adjust certain fees and by 
permanently extending other fee increases that are set to 
expire at the end of fiscal year 2009. The requirement to pay 
those fees is a mandate because the federal government controls 
the patent and trademark systems, and no reasonable 
alternatives to the systems exist.
    Based on information from PTO, CBO estimates that the cost 
to comply with the mandate would amount to less than $1 million 
for public entities and between $70 million and $80 million for 
private-sector entities in each of the first five years the 
mandate is in effect. Therefore, the costs of the mandate would 
fall below the annual thresholds established in UMRA ($69 
million for intergovernmental mandates and $139 million for 
private-sector mandates in 2009, adjusted annually for 
inflation).
    Estimate prepared by: Federal effects: Patent and Trademark 
Office--Susan Willie; District Courts--Leigh Angres; Federal 
Health Programs and Revenues--Julia Christensen; Impact on 
state, local, and tribal governments: Elizabeth Cove Delisle; 
Impact on the private sector: Paige Piper/Bach.
    Estimate approved by: Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                    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. 515.

                             VI. Conclusion

    The Patent Reform Act of 2009, S. 515, 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 of 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, Supplemental, and Minority Views

                              ----------                              


                  ADDITIONAL VIEWS OF SENATOR GRASSLEY

    Intellectual property rights are extremely important to our 
nation's economy, so it is important to proceed in a 
deliberative and responsible manner to ensure that the American 
patent system remains strong. Significant improvements to S. 
515 were adopted in Committee which I was pleased to support. 
In particular, the agreement to make changes to the damages 
provision in the bill was critical to moving this legislation 
forward. I also was pleased that the Committee adopted a 
modified version of the Bayh Dole amendment that I circulated 
at the markup to incentivize smaller institutions and 
laboratories to continue investing in their research and 
development endeavors. This amendment will go a long way in 
increasing the ability of government-operated-contractor-owned 
facilities to reinvest licensing royalties for crucial 
scientific research, development and education.
    However, I believe that more due diligence and work needs 
to be done. I share several of the concerns expressed in the 
views of Senator Kyl and others, in particular those dealing 
with the provisions on post grant review. There are legitimate 
concerns about the threshold for access to, and the open-ended 
nature of, the expanded inter partes reexamination process. The 
U.S. Patent and Trademark Office has expressed concerns that 
they may not be able to administer the changes proposed in the 
bill, and that they will be overwhelmed with filings. It would 
be prudent for the Judiciary Committee to work with the PTO to 
determine whether these provisions contained in the bill are 
workable and can effectively be implemented.
    In addition, I circulated an amendment at the markup that 
would provide that certain tax planning inventions are not 
patentable. There are strong policy reasons to ban tax strategy 
patents. Tax strategy patents may lead to the marketing of 
aggressive tax shelters or otherwise mislead taxpayers about 
expected results. Tax strategy patents encumber the ability of 
taxpayers and their advisors to use the tax law freely, 
interfering with the voluntary tax compliance system. I believe 
it is important to pass legislation that eliminates tax 
strategy patents, and I look forward to working with Chairman 
Leahy, Chairman Baucus and others to include this tax patent 
ban in the bill.
                                                    Chuck Grassley.

                  SUPPLEMENTAL VIEWS OF SENATOR HATCH

    For years I have been arguing if we are serious about 
enacting comprehensive patent law reform, then we must 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. Inequitable conduct reform is core to patent 
reform, as it dictates how patent applications are prosecuted 
years before litigation.
    Currently, any perceived transgression of the patent owner 
is being painted as fraud. If an inequitable conduct claim 
wins, a valid patent is held entirely void and the infringer 
walks away without any liability. The inequitable conduct 
defense is frequently pled, rarely proven, and always drives up 
the cost of litigation. There is virtually no downside for the 
infringer to raise this type of defense, even if it lacks a 
true basis. For these reasons, inequitable conduct challenges 
are raised in nearly every patent case.
    The current law has made patent applicants over-disclose 
information to the U.S. Patent and Trademark Office (USPTO) for 
fear of missing something. During the 110th Congress, former 
USPTO Director Jon Dudas testified before the Senate Judiciary 
Committee. He brought with him a box of materials to show the 
Committee what a patent examiner reviews when processing an 
Information Disclosure Statement. There were about 2,600 pages 
of material submitted in one box. And there were 27 other boxes 
that had the same amount of material for the one patent 
application. Such a deluge of information is not only 
counterproductive, but it certainly does not help produce high-
quality patents.
    Unfortunately, as things currently stand, anything an 
applicant does to help the examiner focus on the most relevant 
information during examination becomes the target of an 
inequitable conduct challenge in court. This highly corrosive 
result undermines the original intent of the doctrine. 
Moreover, it precludes an open and interactive examination 
process, which we would all agree would result in the granting 
of high-quality patents. The development of a more objective 
and clearer inequitable conduct standard will remove the 
uncertainty and confusion that defines current patent 
litigation. We cannot settle for mere codification of current 
practices.
    Some have suggested that those who seek to reform the 
inequitable conduct defense condone fraudulent conduct before 
the USPTO. Nothing could be further from the truth. That line 
of reasoning could not be more misguided and is contrary to the 
type of reform I have been advocating for years. Without 
question, there need to be significant penalties for someone 
who tries to perpetrate fraud on the Office, but sanctions 
should be commensurate with the misconduct. Reform to the 
inequitable conduct defense should focus on the nature of the 
misconduct and not permit the unenforceability of a perfectly 
valid patent on a meritorious invention. The very foundation of 
our patent system is to reward invention. Yet, under our 
current system, the inequitable conduct doctrine only stifles 
innovation. This is something that our nation cannot afford, 
especially during these challenging economic times.
    In my opinion, true inequitable conduct reform has the 
potential to single-handedly revolutionize the manner in which 
patent applications are prosecuted. Arguably, reform in this 
area will have the most favorable impact on patent quality and 
will give the USPTO the ability to reduce its pendency, thereby 
fostering a strong and vibrant environment for all innovation 
and entrepreneurship. And that, after all, is one of the goals 
for patent reform legislation as stated in the Committee 
Report.
                                                    Orrin G. Hatch.

    SUPPLEMENTAL VIEWS OF SENATORS COBURN, HATCH, GRASSLEY, AND KYL

    Previous and current versions of the Patent Reform Act have 
been stymied because of major disagreements among the varying, 
competing interests within the patent community. For several 
years, industry heavyweights from numerous sectors of the 
American economy have battled multiple provisions of the bill. 
However, the one area where Patent Reform Act combatants reach 
near unanimous agreement is the need for Congress to 
permanently end ``fee diversion.''
    The United States Patent and Trademark Office (USPTO) is 
different than nearly every other federal government agency in 
that it is totally funded by user fees. For nearly two decades, 
zero taxpayer dollars have been appropriated to fund the USPTO. 
The user fees are generated as inventors, universities, small 
businesses, other companies, and investors bring their idea to 
the USPTO in return for a patent or trademark. Those patent and 
trademark applicants hope for a quick response from the USPTO, 
granting their idea protection and the chance to go build their 
American Dream.
    When the USPTO collects the fees from those applicants, 
``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.''\1\ Although the user fees are 
available and ready to be spent by the USPTO, USPTO is legally 
restricted from accessing those fees until Congress determines 
how much of those fees the USPTO can use. Unfortunately, for 
more than a decade Congress mismanaged and misspent the user 
fees USPTO collected by diverting those user fees to other 
general revenue purposes in Congress' yearly appropriations 
process. Such chronic diversion cost the USPTO more than three 
quarters of a billion dollars.\2\ ``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').''\3\
---------------------------------------------------------------------------
    \1\U.S. Senate Judiciary Committee Majority Report, ``The Patent 
Reform Act of 2007,'' Section I--Background and Purpose of S. 1145, p. 
34.
    \2\The latest calculations by the USPTO show a total of $762 
million in user fees diverted by Congress.
    \3\U.S. Senate Judiciary Committee Majority Report, ``The Patent 
Reform Act of 2007,'' Section I--Background and Purpose of S. 1145, pp. 
34-35.
---------------------------------------------------------------------------
    The most recent data from the USPTO show that the backlog 
now consists of 1.2 million patent applications waiting to be 
issued, with 771,000 of those applications waiting for an 
examiner to pick up the application and begin examining it.\4\ 
Current pendency statistics show that it takes an examiner 
anywhere from 19 to 32 months to pick up and start a first 
action on the patent application.\5\ To fully dispose of the 
patent application takes anywhere from 32 to 43 months 
depending on the type of patent being sought.\6\ Thus, 
Congress' chronic action to divert fees has resulted in an 
``innovation tax''\7\ on the American economy. In these 
challenging economic times, what great ideas are trapped in 
that backlog, helplessly waiting to jumpstart America's economy 
by creating jobs, expanding business, and bringing new products 
and technology to market?
---------------------------------------------------------------------------
    \4\USPTO 2008 Performance and Accountability Report, Table 3: 
Patent Applications Pending Prior To Allowance.
    \5\USPTO 2008 Performance and Accountability Report, Table 4: 
Patent Pendency Statistics.
    \6\Id.
    \7\See generally, The Institute for Policy Innovation, Issue brief: 
``Diversion of USPTO User Fees: A Tax on Innovation,'' April 30, 2009, 
by Marla Page Grossman.
---------------------------------------------------------------------------
    In order to remedy the problem, the Senate Judiciary 
Committee again had before it an amendment that would 
permanently secure funding for the USPTO by creating a new 
revolving fund designated solely for receipt of USPTO user fees 
and to be expended only by USPTO in the course of patent and 
trademark issuance.\8\ The new revolving fund, or USPTO fee 
lockbox, allows USPTO to retain all the user fees it collects 
without relying on annual Congressional appropriations. 
Consequently, the lockbox prevents Congress from misusing USPTO 
user fees for other, unrelated general revenue purposes as has 
repeatedly occurred in the past.
---------------------------------------------------------------------------
    \8\See Amendment to create a USPTO fee lockbox offered by Senator 
Coburn at the April 2, 2009 Judiciary Committee markup in this Report 
under Section II, C. Legislative History. The Report mislabels the 
Coburn Amendment as a ``budget process'' amendment.
---------------------------------------------------------------------------
    In the 110th Congress, the Senate Judiciary Committee 
passed essentially the same amendment by overwhelming voice 
vote.\9\ Now as then, the USPTO fee lockbox amendment enjoyed 
broad support and appeal. The American Bar Association sent a 
letter to the Senate Judiciary Committee explaining that the 
ABA

          determined that such fee diversion drained away 
        essential resources from the PTO and threatened the 
        capacity of the agency to effectively operate the 
        patent and trademark systems that are critical to the 
        U.S. economy. In response, the ABA House of Delegates 
        adopted policy urging Congress to enact legislation to 
        prohibit such fee diversion and to guarantee that all 
        PTO fee revenue is used to provide services for which 
        the fees were collected.\10\
---------------------------------------------------------------------------
    \9\See Section 15 of S. 1145 as reported out of the Senate 
Judiciary Committee in the 110th Congress.
    \10\See March 26, 2009, letter from Thomas M. Susman, Director of 
Governmental Affairs Office, of the American Bar Association, to 
Chairman Leahy, Ranking Member Specter and the Senate Judiciary 
Committee.

    The ABA concluded that adoption of the Coburn Amendment to 
create a USPTO fee lockbox ``would provide a significant 
structural protection against future diversion, and we strongly 
urge its enactment.''\11\ The National Treasury Employees 
Union, which represents USPTO employees, expressed similar 
concern regarding the negative impacts of Congressional fee 
diversion:
---------------------------------------------------------------------------
    \11\Id.

          It is neither fair to applicants nor employees to 
        endure the problems resulting from PTO staff hiring 
        increases followed by lay-offs coupled with workload 
        speed-ups because of a lack of a stable funding source. 
        . . . it is our belief that PTO, its applicants, and 
        employees would be best served by legislation to create 
        a fee `lockbox.' This would permit the PTO to hire and 
        train sufficient staff to carry out its mission and 
        meet its need for staff stability.''\12\
---------------------------------------------------------------------------
    \12\See March 28, 2009, letter from Colleen M. Kelley, National 
President of the National Treasury Employees Union, to Chairman Leahy, 
Ranking Member Specter and the Senate Judiciary Committee.
---------------------------------------------------------------------------
    In expressing their ``strong support'' for the fee lockbox 
amendment, the American Intellectual Property Law Association 
trumpeted the theme of the USPTO's need for a permanent end to 
fee diversion stating that,

          Without the amendment, the USPTO has no assurance of 
        full funding, and perhaps more importantly, no way to 
        intelligently plan long term to meet the multitude of 
        challenges facing the Office. Given the importance of 
        our intellectual property system as a key economic 
        driver which attracts and protects investment in new 
        technology, our country's innovators who pay the fees 
        deserve no less. True patent law reform and 
        improvements at the USPTO depend on the Office's fiscal 
        ability to meet its growing challenges. The time has 
        come for Congress to once and for all provide the USPTO 
        with the ability to more predictably and intelligently 
        plan its fiscal operation by ending the possibility of 
        fee diversion.\13\
---------------------------------------------------------------------------
    \13\See March 25, 2009, letter from Terry Rea, President of the 
American Intellectual Property Law Association, to Chairman Leahy, 
Ranking Member Specter and the Senate Judiciary Committee.

    The witnesses at the hearing the Senate Judiciary Committee 
held on S. 515 also stated that they supported a permanent end 
to fee diversion.\14\ One witness, Phillip Johnson, made it 
clear how important it is for Congress to include permanently 
ending fee diversion in its patent reform effort in the 111th 
Congress:
---------------------------------------------------------------------------
    \14\Five out of the six witnesses that testified have responded to 
Questions for the Record. All five witnesses strongly supported 
permanently ending fee diversion.

          Ensuring adequate, predictable funding for the USPTO 
        is perhaps the single most important step Congress 
        could take to enhance patent quality and begin to bring 
        the backlog under control. It would enable the Office 
        to develop a long-range strategic plan to address these 
        problems, something it has not been able to do with 
        year-to-year budgeting necessitated under the existing 
        appropriations process.\15\
---------------------------------------------------------------------------
    \15\See answers from Phillip Johnson to Questions for the Record 
from Senator Coburn after Senate Judiciary Committee hearing, March 10, 
2009, Patent Reform in the 111th Congress.

    These examples of support for creating a USPTO fee lockbox 
and permanently ending fee diversion are just a sampling of 
examples from the breadth of support for the proposition.\16\
---------------------------------------------------------------------------
    \16\See various statements or letters from the Intellectual 
Property Owners Association, USPTO Patent Public Advisory Committee, 
both the Republican and Democratic High-Tech Taskforces, the University 
of California and other universities, the Wisconsin Alumni Research 
Foundation and other similar university research foundations, numerous 
major stakeholders involved in the negotiations over S. 515 including 
the 21st Century Coalition, the Coalition for Patent Fairness, the 
Innovation Alliance, Bio, and Phrma, the National Academy of Sciences, 
and the National Academy of Public Administration.
---------------------------------------------------------------------------
    Although a few appropriators have raised the concern that 
the Amendment does not provide adequate oversight of USPTO, a 
plain reading of the amendment reveals that the amendment 
requires the USPTO to provide Congress four different annual 
reports. These reports give Congress oversight and 
accountability tools to monitor the performance of the USPTO 
and its use of user fees.\17\ Additionally, the witnesses at 
the Senate Judiciary Committee hearing held on S. 515 believed 
the Coburn Amendment provided Congress and themselves as 
representatives of the USPTO user community, plenty of 
information by which to monitor USPTO actions and 
expenditures.\18\
---------------------------------------------------------------------------
    \17\The Coburn Amendment to S. 515 and Section 15 of S. 1145 both 
included requirements that USPTO produce an annual independent audit, 
an annual spending plan, an annual report, and that the USPTO continue 
to submit an annual business-type budget to the President in the 
President's budget cycle.
    \18\Four out of the six witnesses that testified answered the 
relevant Question for the Record but all were in agreement.
---------------------------------------------------------------------------
    Furthermore, the Coburn Amendment included a sunset which 
forces Congress to reauthorize the lockbox in five years.\19\ 
The sunset gives the USPTO warning that Congress will be 
closely watching how the USPTO handles the new responsibility 
given to it by the lockbox. At any point during those five 
years, the Appropriations Committee or the Judiciary Committee, 
or both jointly, could require the USPTO Director to testify at 
hearings and explain any questionable expenditures or policies. 
Thus, the concerns regarding oversight simply ring hollow and 
are unfounded.
---------------------------------------------------------------------------
    \19\Senate appropriators chose not to accept an agreement for a 
shorter sunset.
---------------------------------------------------------------------------
    Without a substantial policy rationale for opposition, it 
is time for the Senate to act in the best interest of the 
economy and USPTO users and permanently end fee diversion.

                                   Tom Coburn.
                                   Orrin G. Hatch.
                                   Chuck Grassley.
                                   Jon Kyl.

          MINORITY VIEWS OF SENATORS KYL, FEINGOLD, AND COBURN

    American manufacturing is not going to succeed in future 
years by paying low wages to American workers. Nor will it 
thrive because of lax environmental and safety regulations in 
this country. And our industrial dominance does not depend 
solely on the success of the incumbent members of the Fortune 
500--new companies are constantly rising to the top of that 
list and becoming the reason why America still leads the 
industrialized world.
    What is critical to the health and strength of American 
manufacturing is our ability to innovate. It is the products 
that expand on the state of the art that produce high profit 
margins and require skilled labor--both of which make it 
possible for U.S. manufacturing to pay high wages. And it is 
these innovative products that also dominate and define the 
particular sectors--high technology, pharmaceuticals, aircraft, 
chemicals, medical devices, and others--where American industry 
remains pre-eminent. Indeed, reputable economists estimate that 
historically, between 35 and 40 percent of all U.S. 
productivity growth has been the result of innovation.
    The legal foundation of American innovation is the U.S. 
patent system. Its grant of a limited monopoly to the inventors 
of new and useful products creates an incentive for our 
scientists and engineers to innovate, while also drawing 
capital to their efforts and talent. It is also the U.S. patent 
system that allows a new company that has invented a better 
product to reap the benefits of its ingenuity. If such a 
company did not have a right to the exclusive use of its 
invention, its established competitors would quickly copy that 
invention and appropriate its market value for themselves. Not 
only would a vigorous and innovative company be prevented from 
rising in an otherwise stagnant field, but the incentive for 
others to invest the time and resources to develop new and 
better products would be destroyed.
    The post-grant review proceedings authorized by this bill 
would make it much more expensive to keep a patent, and would 
also make it much more difficult to enforce the rights granted 
by that patent. And the bill's changes to the doctrine of 
willfulness would immunize even outrageous conduct that 
infringes a patent, and would in some cases make the 
intentional infringement of patents a viable business strategy. 
Both of these changes go far beyond what is necessary to 
achieve their legitimate objectives, and they are the primary 
reason why we opposed this bill in the Judiciary Committee. We 
urge our colleagues to join us in insisting that these 
provisions be fixed before the Senate adopts this legislation.
Post-grant review
    The bill creates one new administrative proceeding for 
challenging a patent within 12 months of its issue, and greatly 
expands the use of the existing system of inter partes re-
examination for challenging a patent during the course of its 
life.
    Current law bars inter partes re-examination for any patent 
issued before November 22, 1999. Section 5(i) of the committee-
reported bill strikes this limitation, effectively doubling the 
universe of patents that may be challenged by inter partes re-
examination.
    Even more importantly, section 5(d) of the committee-
reported bill eliminates the ``could-have-raised estoppel'' 
standard that currently governs inter partes re-examination. 
Under this test, a party that challenges a patent in an inter 
partes re-examination is barred from subsequently raising in a 
civil action any issues that it could have raised in the inter 
partes re-examination. As the majority report notes, PTO has 
identified could-have-raised estoppel as ``the primary 
deterrent to using [inter partes re-examination].'' Many 
businesses also have described could-have-raised estoppel as a 
powerful brake on their use of inter partes re-examination. 
They find this standard vague and uncertain, and fear that if 
they challenge a patent in an inter partes re-examination, they 
will lose the ability to raise later-discovered prior art 
against the patent if they are subsequently sued for 
infringement.
    There can be little doubt that, by striking the 1999 limit 
and eliminating could-have-raised estoppel, this bill will 
result in the greatly expanded use of inter partes re-
examination.\1\
---------------------------------------------------------------------------
    \1\It also appears that the deterrent effect of could-have-raised 
estoppel is dissipating. The use of inter partes re-examination is 
accelerating even in the absence of legislative change: according to 
the latest data from the PTO, of the 609 requests for inter partes re-
examination that have been filed since 1999, over 70% (427 requests) 
have been filed since the beginning of fiscal year 2007. See Inter 
Partes Reexamination Filing Data, March 31, 2009, at http://
www.uspto.gov/web/patents/documents/inter_partes.pdf (last visited May 
6, 2009). The same PTO data also show that of the 609 requests for 
inter partes re-examination that have been granted, only 55 have 
resulted in a final decision in the agency. As of this date, no inter 
partes re-examination has ever been completed through final appeal.
---------------------------------------------------------------------------
    It thus bears considering the problems with the current 
system of inter partes re-examination and the burdens that it 
imposes on patent owners. These are, in summary: it costs a 
patent owner hundreds of thousands of dollars to defend his 
patent in these proceedings; it is difficult to license or 
enforce a patent during the pendency of a re-examination; the 
threshold for initiating the proceeding is so low that 95% of 
all requests are granted; the proceedings typically last for 
several years; and competitors and infringers are allowed to 
bring serial challenges to the same patent.
    Although inter partes re-examination is an administrative 
proceeding and is cheaper than litigation, it is still an 
expensive process. A patent owner whose patent is challenged in 
this proceeding must hire a patent lawyer to respond to the 
challenge. And that patent lawyer must be careful in the 
defense he mounts, as statements made during the proceeding can 
later form the basis of a claim in civil litigation that the 
patent should be held unenforceable because of inequitable 
conduct. Such statements also become part of the patent's 
history and can be used to construe its claims narrowly in 
litigation. The end result is that it typically costs hundreds 
of thousands of dollars to defend a patent in these 
proceedings. One university patent owner recently told us that 
it spent nearly a million dollars to successfully defend its 
patent. And, unlike in civil litigation, a patent owner who 
prevails in an inter partes re-examination receives--nothing. 
(Other than could-have-raised estoppel against some challenges 
in subsequent litigation--which this bill proposes to take 
away.) A patent owner who prevails in an inter partes re-
examination otherwise simply gets the right to keep his patent, 
and must pursue civil litigation if he wants to enjoin others 
from infringing the patent or receive damages for its 
infringement.
    The fact that an inter partes re-examination is pending 
also substantially undermines a patent owner's ability to 
enforce his patent. Many district judges will stay a civil 
action for infringement if a request for inter partes re-
examination of the patent has been granted. A pending re-
examination also casts a cloud over a patent and inevitably 
reduces what it can command in licensing negotiations. These 
problems are compounded by the fact that it typically takes 
three or four years before the PTO decides an inter partes re-
examination. That decision can then be appealed, which can make 
the process last from 5 to 8 years. And once one inter partes 
re-examination is completed, nothing in the law prevents 
another challenger from seeking an additional inter partes re-
examination of the same patent. It is not uncommon for the 
competitors of a patent's owner or licensee to coordinate their 
efforts and bring serial inter partes challenges to a patent, 
one after the other, each raising a different set of prior art 
in its challenge.
    In sum, the current system of inter partes re-examination 
can be misused to greatly devalue, if not effectively nullify, 
a patent for most of its useful life, even if that patent is 
perfectly valid and enforceable. This is the system that, by 
doubling the universe of challengeable patents and eliminating 
could-have-raised estoppel, the committee-reported bill 
proposes to vastly expand.
    An excellent demonstration that inter partes re-examination 
is subject to abuse can be found on the website of a San 
Fernando Valley-based law firm that calls itself the ``Patent 
Assassins.''\2\ This law firm advertises its ability to ``use 
reexaminations to effectively, inexpensively and quickly reduce 
certain corporate risks;'' its website notes that the firm 
``handles intellectual property matters for high technology 
[firms]'' and that most of its clients are ``companies in the 
$10 million to $2 billion range.''
---------------------------------------------------------------------------
    \2\www.patentassassins.com. (Last visited May 6, 2009.)
---------------------------------------------------------------------------
    One of the ways in which inter partes re-examination 
currently can be used involves a strategy that this law firm 
calls the ``traffic jam.'' A white paper that is available on 
the firm's website describes how the ``traffic jam'' works:

          British statesman and Prime Minister William E. 
        Gladstone said, ``Justice delayed is justice denied.'' 
        The Patent Assassins turn this truth on its head in the 
        Traffic Jam Mission. By creating uncertainty about a 
        problem patent and tying it up in a long reexam 
        process, the Patent Assassins effectively nullify the 
        problem patent.
          Sometimes the Traffic Jam Mission involves a series 
        of petitions for reexam. Though the USPTO's rules aim 
        for a speedy resolution, the Patent Assassins have an 
        arsenal of tactics that can keep a problem patent in 
        reexam for a long, long time.
          Because of the uncertainty created, Traffic Jam 
        Missions are excellent during license negotiations.
          You can argue against paying royalties until the 
        reexam is complete or for lower rates until the 
        uncertainty ends.
          Traffic Jam Missions also work well in litigation. A 
        judge can ``stay'' a patent lawsuit pending the outcome 
        of a reexam. If the reexam is filed early, the judge is 
        more likely to stay the case, delaying any ruling 
        regarding the patent at issue.

    The Patent Assassins' website describes other ways in which 
re-examination can be used to abuse patent owners. It states 
that challengers can ``deploy a number of covert tactics to 
ensure absolute anonymity. We can even make it look like the 
reexam was filed by someone else (e.g., one of your 
competitors).'' The website notes that inter partes re-
examination can be used to ``reduce or defer royalty costs 
without retribution.'' And the Patent Assassins even in effect 
make a policy argument for preserving the current could-have-
raised estoppel standard in inter partes re-examination: their 
website reveals that one of the firm's tactics in ex parte re-
examination (where could-have-raised estoppel does not apply) 
is ``using one set of prior art in the reexam, and saving a 
second set of prior art for use in litigation.''
    In a recent article about the Patent Assassins in the 
online journal EE Times, one of the firm's attorneys protests 
that none of the firm's tactics are unethical. He notes that 
``[i]f there are wrinkles in the rules created by Congress or 
the patent office, we have every right to use them.''\3\ We 
highlight this law firm's advertisements not to single out or 
condemn this firm--indeed, as another observer quoted by the EE 
Times notes, ``they are [simply] doing what many other law 
firms are doing, but others are being a bit more discreet about 
it.'' Rather, these statements show how the ``wrinkles'' in 
current re-examination allow that system to be abused--and why 
Congress should reform that system before allowing its use to 
be vastly expanded.
---------------------------------------------------------------------------
    \3\``Patent Assassins'' ad stirs reform debate, EE Times, April 21, 
2009, at http://www.eetimes.com/showArticle.jhtml?articleID=217000005. 
(Last visited May 6, 2009.)
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    We should also note that the committee-reported bill's 
post-grant review provisions would create serious problems for 
the Patent and Trademark Office. Those provisions are almost 
identical to post-grant review provisions that passed the House 
of Representatives as part of a patent reform bill in 2007. 
Shortly after that bill passed the House, senior career staff 
at the PTO made clear to some of us that the post-grant review 
system proposed by that bill was unadministrable, would strain 
the PTO's resources, and would create an enormous backlog at 
the Office. Representatives of the Patent Office Professional 
Association and members of the Patent Public Advisory Committee 
have expressed the same concerns to us.
    Congress has an obligation to seriously consider the views 
of those officials who will be charged with administering the 
system that we create. The fact that PTO's experts believe that 
the Office will not be able to manage the system that this bill 
proposes alone is reason enough to insist that these proposals 
be reformed.
    The Congressional Budget Office's Cost Estimate for this 
bill also should give the Senate pause. CBO believes that the 
PTO will need an additional $9 million to implement the bill's 
expanded inter partes re-examination, and that operating the 
new post-grant review system will cost $2 million. At a time 
when the PTO faces a potentially severe revenue shortfall and 
is under a hiring freeze, it is unclear how the Office is 
expected to implement these proposals without diverting 
resources from its core mission of examining and issuing high-
quality patents.
    To address the interests of patent owners and the needs of 
the PTO, several changes should be made to section 5 of the 
bill. We highlight the most important ones here. First, the 
threshold for initiating a post-grant review proceeding needs 
to elevated. The current standard--``substantial new question 
of patentability''--simply requires the requester to raise some 
interesting or noteworthy question about a patent, but does not 
require that the request ever raise a serious doubt in the 
examiner's mind as to the validity of the patent. This 
threshold allows 95% of all requests for inter partes re-
examination to be granted. Even currently, this test overwhelms 
the Office with re-examinations that do not merit its time--an 
effect that would be compounded by the bill's elimination of 
restraints on the use of inter partes re-examination.
    Allowing 95% of all petitions to be granted also is unduly 
burdensome to patent owners. It is not uncommon that a small 
business or university will simply abandon a patent once a 
request for re-examination is granted because it lacks the 
resources to defend the patent in that proceeding. There have 
also been incidents in which a large company, while negotiating 
a license with a small company, has initiated an inter partes 
re-examination for each of that small company's patents, simply 
to strain that company's resources and force its hand in the 
licensing negotiations (an effect of inter partes re-
examination that is noted on the Patent Assassins' website). 
Given these dynamics and the fact that simply initiating an 
inter partes re-examination amounts to a virtual death sentence 
for some patents, the threshold for initiating the proceeding 
should require presentation of evidence that raises serious 
doubts about the patent's validity.
    Another reform that is needed in order to reduce the burden 
that inter partes re-examination places on the PTO is to allow 
the Office to operate inter partes re-examination on an 
oppositional, rather than examinational, model (while 
continuing to limit the proceeding to patents and printed 
publications). The examinational model places the burden on the 
PTO to show that a claim is not patentable, and requires a 
series of filings, office actions, and responses that make this 
system inherently slow. By contrast, in an oppositional system, 
the burden is always on the challenger to show that a claim is 
not patentable. The parties present their evidence up front, 
the patent owner offers any amendments, and the PTO simply 
decides whether the challenger has met his burden of proving 
invalidity. The PTO's career staff believe than an oppositional 
system, accompanied by other reforms, would allow the PTO to 
complete almost all of these proceedings within a year.
    The committee-reported bill adopts an oppositional system 
for the bill's first-window proceeding. Indeed, the bill even 
partially authorizes the PTO to use an oppositional system in 
inter partes re-examination. At section 5(c), the bill strikes 
language from the current code that expressly requires use of 
the examinational model, and instead allows inter partes re-
examination to be conducted ``in accordance with procedures 
which the Director shall establish.'' Unfortunately, however, 
the bill's recodification of 35 U.S.C. Sec. 314(b)(2) 
effectively requires the continued use of an examinational 
system. We do not think it too much to ask that this bill 
simply complete the changes that it originally set out to make.
    Further, this bill's post-grant review proceedings should 
be accompanied by procedural reforms that restrict serial 
challenges to a patent, coordinate these proceedings with 
litigation, and otherwise prevent abuse and manipulation of 
post-grant review proceedings. And since the bill authorizes a 
new form of post-grant review--the first window proceeding in 
proposed chapter 32 of title 35--and makes inter partes re-
examination available for all patents and eliminates barriers 
to its use, it would be appropriate to restrict use of ex parte 
re-examination to patent owners. Any challenge that a third 
party could seek in ex parte re-examination, it will now be 
able to seek through the first window or in inter partes re-
examination. Giving challengers three different administrative 
proceedings for challenging patents after they have been 
issued--in addition to civil litigation--simply invites serial 
challenges to patents via different proceedings and allows 
other forms of abuse.
    Also, in light of the current economic recession and its 
impact on the PTO's revenues, Congress should consider 
authorizing the PTO to delay implementation of post-grant 
review if the Director certifies that the Office lacks the 
resources to start conducting such reviews. And finally, we 
would note that section 5 of the bill should be edited to 
eliminate several redundancies (compare the last clause of 
proposed 323(3) with the first sentence of 325(a), and proposed 
326(a)(3) with 326(b)(2)) and logical inconsistencies (see 
proposed 331(b) in light of 329(c)), and to ensure that it is 
logically and chronologically organized (passim). Whatever 
post-grant review system this Congress creates will be endured 
by thousands of patent owners, infringers, and lawyers, and 
will generate hundreds of thousands of billable hours. We owe 
it to these parties to take the time to see that this system is 
fair, logical, and easy to use.

Willfulness

    Section 4 of the bill sharply restricts the circumstances 
under which a party that has infringed a patent may be found to 
have done so willfully and be subject to enhanced damages. 
Proposed section 284(c) effectively confines all findings of 
willfulness to one of the following three scenarios: (1) the 
infringer continued to infringe after receiving a demand letter 
that describes with particularity how the infringer's product 
infringes a patent; (2) the infringer intentionally copied the 
patented invention and knew that it was patented; or (3) the 
infringer continued its same infringing activities after having 
been found by a court to infringe.
    If the committee-reported bill were enacted into law, 
consider the following examples of conduct that could never be 
found to be willful and that would never subject the infringer 
to enhanced damages:
     The infringer did not copy the patent, but was 
fully aware of it, knew that his product or process infringed 
the patent, had no reason to think the patent invalid or 
unenforceable, and continued to infringe because he thought 
that his infringement would not be discovered and that he could 
get away with it. (Note that this scenario is particularly 
likely for industrial processes. A finished product may show no 
sign that it was produced through the infringing use of a 
patented process that, for example, reduces the cost or 
increases the speed of producing the product.) Because this 
infringer did not ``intentionally copy'' the patented 
invention, under subparagraph (B) he cannot be found to have 
willfully infringed.
     A dozen different companies are producing 
indistinguishable products that blatantly and unquestionably 
infringe the same patent. The first ten companies are 
successfully sued for infringement. The last two know that the 
first ten have been found to infringe, and they know that their 
own products are indistinguishable from the ten products that 
have been found to infringe. But they continue to infringe 
anyway. Because these two companies have not ``intentionally 
copied'' the patented invention, they cannot be found to have 
acted willfully under subparagraph (B), and because they 
themselves have not yet been adjudicated to have infringed, 
they have not willfully infringed under subparagraph (C).
     A patent owner strongly suspects that a company is 
infringing his patent. He sends a demand letter that describes 
with particularity the patent claims that he believes to be 
infringed, that describes the particular products or processes 
that he believes may infringe, and that states his reasons for 
suspecting that the product infringes (or is produced by an 
infringing process). However, because the infringing product is 
very difficult to open and reverse engineer, or because the 
infringer is using a patented process inside a closed factory, 
the demand letter does not describe with particularity how the 
product or process infringes the patented invention. Even after 
the infringer has received this demand letter and continues to 
infringe, he cannot be found to have acted willfully under 
subparagraph (A), because the letter did not describe with 
particularity how the product or process infringes the patent.
     An infringer becomes aware that one of its product 
infringes a competitor's patented invention. It sends its 
agents to break into the competitor's research laboratory in 
order to learn better ways of enabling the invention that it is 
infringing. Because the infringer did not copy the invention 
itself, it cannot be found to have willfully infringed under 
subparagraph (A).
    By limiting willful infringement only to the three 
scenarios described in the first paragraph of this section, the 
bill's proposed paragraph (2) guts the doctrine of willfulness 
and immunizes even outrageous infringing behavior. But the bill 
does not stop at that. Paragraph (3) goes on to create an 
absolute safe harbor for infringers if there is ``sufficient 
evidence'' that an infringer had an ``informed good faith 
belief'' that it did not infringe or that the patent was 
invalid or unenforceable. Paragraph (3) also makes clear that 
reliance on advice of counsel is one way to demonstrate an 
``informed good faith belief.'' And the paragraph further 
immunizes infringement accompanied by an ``informed good faith 
belief''--even in the absence of ``sufficient evidence'' of 
such a belief--if the infringer ``sought to modify its conduct 
to avoid infringement.''
    There are several problems with paragraph (3). First, by 
imposing a test of ``good faith belief,'' the provision appears 
to substantially unravel the progress made by the Seagate 
decision. As the majority report notes, Seagate imposed an 
``objective recklessness'' test for identifying willful 
infringement, and also made clear that under this standard, 
notice of possible infringement does not give rise to an 
affirmative obligation to obtain opinion of counsel. But 
paragraph (3), by defining willfulness in terms of the 
infringer's good-faith belief, directs courts straight back 
into the discovery-intensive inquiries into the infringer's 
subjective intent that the Seagate standard was expected to 
eliminate. And moreover, by expressly making receipt of opinion 
of counsel an element of the safe harbor, clause (i) revives 
the cottage industry of lawyers who provide non-infringement 
opinions to companies that are accused of infringing a patent--
something, again, that Seagate was expected to shut down. And 
finally, clause (ii)'s safe harbor for infringers who ``seek to 
modify their conduct to avoid infringement'' is absurdly broad. 
On its face, it extends a safe harbor even to obviously 
ineffective and unreasonable efforts to avoid infringement--so 
long as such efforts are accompanied by ``good faith.''
    Of course, it is possible that all of paragraph (3)'s safe 
harbors would be irrelevant because paragraph (2) so tightly 
restricts the possible bases of willfulness that such a finding 
would never be made and no safe harbor would ever be needed. 
But the more likely course is that cautious corporate counsel 
would look to the safe harbors as potentially useful defenses, 
and, pursuant to clause (i), would seek opinion of counsel 
whenever they receive a demand letter in order to protect 
themselves against a finding of willfulness.
    Although this part of the bill has been modified since 
Seagate was decided, the new text does not appear to fully 
assimilate the teachings of Seagate. (The fact that proposed 
(c)(2)(A)(i) continues to incorporate the ``reasonable 
apprehension of suit'' test that was eliminated by MedImmune v. 
Genentech, 549 U.S. 118 (2007), tends to confirm this 
supposition.) The bill's willfulness provisions not only unduly 
restrict the bases of willfulness and immunize conduct that 
merits enhanced damages; they also are a step backward for 
accused infringers, returning us to the pre-Seagate world of 
inquiries into the infringer's subjective intent and the 
cottage industry of opinion counsel.

National Academies and ABA recommendations

    Finally, before the Senate sends this bill to the House of 
Representatives, it should consider amending it to implement 
proposals that have been endorsed by the National Academies and 
the American Bar Association to remove subjective elements from 
patent law. These elements, such as various ``deceptive 
intent'' exceptions and patent-forfeiture provisions that apply 
only to non-public prior art, no longer serve any meaningful 
purpose, are inconsistent with other industrialized nations' 
patentability standards, and add greatly to the burden and 
expense of patent litigation. Should this bill be enacted, it 
will probably be another decade before Congress again musters 
the will to consider patent legislation. Some of these 
proposals are themselves nearly a decade old, and we know of no 
reasonable argument against them. If we do not enact them via 
this legislation, it will be at least another decade before 
they are enacted. They should be considered for addition to 
this bill.

                                   Jon Kyl.
                                   Russ Feingold.
                                   Tom Coburn.

      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 5--GOVERNMENT ORGANIZATION AND EMPLOYEES

PART III--EMPLOYEES

           *       *       *       *       *       *       *


Subpart D--Pay and Allowances

           *       *       *       *       *       *       *


          CHAPTER 57--TRAVEL, TRANSPORTATION, AND SUBSISTENCE

Subchapter I--Travel and Subsistence Expenses; Mileage Allowances

           *       *       *       *       *       *       *


Sec. 5710. Authority for travel expenses test programs

    (a)(1) Notwithstanding any other provision of this 
subchapter, under a test program which the Administrator of the 
General Services determines to be in the interest of the 
Government and approves, an agency may pay through the proper 
disbursing official [for a period not to exceed 24 months] any 
necessary travel expenses in lieu of any payment otherwise 
authorized or required under this subchapter. An agency shall 
include in any request to the Administrator for approval of 
such a test program an analysis of the expected costs and 
benefits and a set of criteria for evaluating the effectiveness 
of the program.

           *       *       *       *       *       *       *

    [(e) The authority to conduct test programs under this 
section shall expire 7 years after the date of the enactment of 
the Travel and Transportation Reform Act of 1998.] (e)(1) The 
Patent and Trademark Office shall conduct a test program under 
this section.
    (2) In conducting the program under this subsection, the 
Patent and Trademark Office may pay any travel expenses of an 
employee for travel to and from a Patent and Trademark 
worksite, if--
          (A) the employee is employed at a Patent and 
        Trademark Office worksite and enters into an approved 
        telework arrangement;
          (B) the employee requests to telework from a location 
        beyond the local commuting area of the Patent and 
        Trademark Office worksite; and
          (C) the Patent and Trademark Office approves the 
        requested arrangement for reasons of employee 
        convenience instead of an agency need for the employee 
        to relocate in order to perform duties specific to the 
        new location.
    (3)(A) The Patent and Trademark Office shall establish an 
oversight committee comprising an equal number of members 
representing management and labor, including representatives 
from each collective bargaining unit.
    (B) The oversight committee shall develop the operating 
procedures for the program under this subsection to--
          (i) provide for the effective and appropriate 
        function of the program; and
          (ii) ensure that--
                  (I) reasonable technological or other 
                alternatives to employee travel are used before 
                requiring employee travel, including 
                teleconferencing, videoconferencing or 
                internet-based technologies;
                  (II) the program is applied consistently and 
                equitably throughout the Patent and Trademark 
                Office; and
                  (III) an optimal operating standard is 
                developed and implemented for maximizing the 
                use of the telework arrangement described under 
                paragraph (2) while minimizing agency travel 
                expenses and employee travel requirements.
    (4)(A) The test program under this subsection shall be 
designed to enhance cost savings or other efficiencies that 
accrue to the Government.
    (B) The Director of the Patent and Trademark Office shall--
          (i) prepare an analysis of the expected costs and 
        benefits and a set of criteria for evaluating the 
        effectiveness of the program; and
          (ii) before the test program is implemented, submit 
        the analysis and criteria to the Administrator of 
        General Services and to the appropriate committees of 
        Congress.
    (C) With respect to an employee of the Patent and Trademark 
Office who voluntarily relocates from the pre-existing duty 
station of that employee, the operating procedures of the 
program may include a reasonable maximum number of occasional 
visits to the pre-existing duty station before that employee is 
eligible for payment of any accrued travel expenses by the 
Office.
    (D)(i) Not later than 3 months after completion of the test 
program under this subsection, the Director of the Patent and 
Trademark Office shall provide a report on the results of the 
program to the Administrator of General Services and to the 
appropriate committees of Congress.
    (ii) The results in the report described under paragraph 
(1) may include--
          (I) the number of visits an employee makes to the 
        pre-existing duty station of that employee;
          (II) the travel expenses paid by the Office;
          (III) the travel expenses paid by the employee; or
          (IV) any other information that the Director 
        determines may be useful to aid the Administrator and 
        Congress in understanding the test program and the 
        impact of the program.
    (E) In this paragraph, the term ``appropriate committees of 
Congress'' means--
          (i) the Committees on Homeland Security and 
        Governmental Affairs and the on Judiciary of the 
        Senate; and
          (ii) the Committees on Government Oversight and 
        Reform and on the Judiciary of the House of 
        Representatives.
    (f)(1) Except as provided under paragraph (2), the 
authority to conduct test programs under this section shall 
expire 7 years after the date of the enactment of the Travel 
and Transportation Reform Act of 1998.
    (2) The authority to conduct a test program by the Patent 
and Trademark Office under this section shall expire 20 years 
after the date of the enactment of the Travel and 
Transportation Reform Act of 1998.

                           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.

           *       *       *       *       *       *       *

    (e)(1) The Director of the Administrative Office of the 
United States Courts shall provide--
          (A) a judge of the Federal judicial circuit who lives 
        within 50 miles of the District of Columbia with 
        appropriate facilities and administrative support 
        services in the District of the District of Columbia; 
        and
          (B) a judge of the Federal judicial circuit who does 
        not live within 50 miles of the District of Columbia 
        with appropriate facilities and administrative support 
        services--
                  (i) in the district and division in which 
                that judge resides; or
                  (ii) if appropriate facilities are not 
                available in the district and division in which 
                that judge resides, in the district and 
                division closest to the residence of that judge 
                in which such facilities are available, as 
                determined by the Director.
    (2) Nothing in this subsection may be construed to 
authorize or require the construction of new facilities.

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[.]; and
          (3) of a final order or decree of a district court 
        determining construction of a patent claim in a civil 
        action for patent infringement under section 271 of 
        title 35, if the district court finds that there is a 
        sufficient evidentiary record and an immediate appeal 
        from the order (A) may materially advance the ultimate 
        termination of litigation, or (B) will likely control 
        the outcome of the case, unless such certification is 
        clearly erroneous.

           *       *       *       *       *       *       *


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, interference 
                proceedings, 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 2009), 
                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

           *       *       *       *       *       *       *


    (c) Change of Venue.--For the convenience of parties and 
witnesses, in the interest of justice, a district court shall 
transfer any civil action arising under any Act of Congress 
relating to patents upon a showing that the transferee venue is 
clearly more convenient than the venue in which the civil 
action is pending.

                           UNITED STATES CODE

                           TITLE 35--PATENTS

           PART I--UNITED STATES PATENT AND TRADEMARK OFFICE

CHAPTER 1--ESTABLISHMENT, OFFICERS AND EMPLOYEES, FUNCTIONS

           *       *       *       *       *       *       *



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 
Commissioner for Patents, the Commissioner for Trademarks, and 
the administrative patent judges shall constitute the Patent 
Trial and Appeal Board. The administrative patent judges shall 
be persons of competent legal knowledge and scientific ability 
who are appointed by the Secretary of Commerce. 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 upon patents in reexamination 
        proceedings under chapter 30;
          (3) conduct derivation proceedings under subsection 
        135(a); and
          (4) conduct post-grant opposition proceedings under 
        chapter 32.
Each appeal, derivation, and post-grant review 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.

           *       *       *       *       *       *       *

    (d) Patent Search and Other Fees.--
          (1) Patent search fees.--
                  (A) The Director shall charge a fee for the 
                search of each application for a patent, except 
                for provisional applications. The Director 
                shall establish the fees charged under this 
                paragraph to recover an amount not to exceed 
                the estimated average cost to the Office of 
                searching applications for patent either by 
                acquiring a search report from a qualified 
                search authority, or by causing a search by 
                Office personnel to be made, of each 
                application for patent. For the 3-year period 
                beginning on the date of enactment of this Act 
                (Dec. 8, 2004), the fee for a search by a 
                qualified search authority of a patent 
                application described in clause (i), (iv), or 
                (v) of subparagraph (B) may not exceed $500, of 
                a patent application described in clause (ii) 
                of subparagraph (B) may not exceed $100, and of 
                a patent application described in clause (iii) 
                of subparagraph (B) may not exceed $300. The 
                Director may not increase any such fee by more 
                than 20 percent in each of the next three 1-
                year periods[, and the Director may not 
                increase any such fee thereafter].

           *       *       *       *       *       *       *


       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 a 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 ``cancellation petitioner'' means the real 
party in interest requesting cancellation of any claim of a 
patent under chapter 32 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 person shall be entitled to a 
patent unless--
          (1) the claimed invention was patented, described in 
        a printed publication, or in public use, on sale, or 
        otherwise available to the public--
                  (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 before the effective filing date of 
                the application or patent set forth under 
                subsection (a)(2) 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
                  (C) the subject matter and the claimed 
                invention, not later than the effective filing 
                date of the claimed invention, were owned by 
                the same person or subject to an obligation of 
                assignment to the same person.
          (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 subject matter and the 
                        claimed invention were 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 that 
                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.]

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                   CHAPTER 11--APPLICATION FOR PATENT


[Sec. 11. 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 specification 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.

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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 371 (including an application under section 111 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) 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

           *       *       *       *       *       *       *


    (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. Micro-entity defined

    (a) In General.--For purposes of this title, the term 
``micro-entity'' means an applicant who makes a certification 
under either subsection (b) or (c).
    (b) Unassigned Application.--For an unassigned application, 
each applicant shall certify that the applicant--
          (1) qualifies as a small entity, as defined in 
        regulations issued by the Director;
          (2) has not been named on 5 or more previously filed 
        patent applications;
          (3) 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
          (4) 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.
    (c) Assigned Application.--For an assigned application, 
each applicant shall certify that the applicant--
          (1) qualifies as a small entity, as defined in 
        regulations issued by the Director, and meets the 
        requirements of subsection (b)(4);
          (2) has not been named on 5 or more previously filed 
        patent applications; and
          (3) 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.
    (d) Income Level Adjustment.--The gross income levels 
established under subsections (b) and (c) 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

           *       *       *       *       *       *       *



131. Examination of Application.

    [The Director shall cause] (a) In General.--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 therefor.
    (b) Search and Examination Functions.--To the extent 
consistent with the United States obligations under 
international agreements, examination and search duties for the 
grant of a United States patent are sovereign functions which 
shall be performed within the United States by United States 
citizens who are employees of the United States Government. 

           *       *       *       *       *       *       *


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 102(a), 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 instituted by the Director under this 
        subsection, the Patent Trial and Appeal Board--
                  (A) shall determine which applicant or patent 
                owner is entitled to a patent on the claimed 
                invention that is the subject of the request;
                  (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 whose application has 
        the earlier effective filing date.
          (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.
    (b) Settlement.--Parties to a derivation proceeding may 
terminate the proceeding by filing a written statement 
reflecting the agreement of the parties as to the correct 
inventors of the claimed invention in dispute. Unless the 
Patent Trial and Appeal Board finds the agreement to be 
inconsistent with the evidence of record, it shall take action 
consistent with the agreement. Any written settlement or 
understanding of the parties shall be filed with the Director. 
At the request of a party to the proceeding, the agreement or 
understanding shall be treated as business confidential 
information, shall be kept separate from the file of the 
involved patents or applications, and shall be made available 
only to Government agencies on written request, or to any 
person on a showing of good cause.
    (c) Arbitration.--Parties to a derivation proceeding, 
within such time as may be specified by the Director by 
regulation, may determine such contest or any aspect thereof by 
arbitration. Such arbitration shall be governed by the 
provisions of title 9 to the extent such title is not 
inconsistent with this section. The parties shall give notice 
of any arbitration award to the Director, and such award shall, 
as between the parties to the arbitration, be dispositive of 
the issues to which it relates. The arbitration award shall be 
unenforceable until such notice is given. Nothing in this 
subsection shall preclude the Director from determining 
patentability of the invention involved in the derivation 
proceeding.

           *       *       *       *       *       *       *


      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 3371 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.

           *       *       *       *       *       *       *

          (7) In the case of a nonprofit organization, (A) a 
        prohibition upon the assignment of rights to a subject 
        invention in the United States without the approval of 
        the Federal agency, except where such assignment is 
        made to an organization which has as one of its primary 
        functions the management of inventions (provided that 
        such assignee shall be subject to the same provisions 
        as the contractor); (B) a requirement that the 
        contractor share royalties with the inventor; (C) 
        except with respect to a funding agreement for the 
        operation of a Government-owned-contractor-operated 
        facility, a requirement that the balance of any 
        royalties or income earned by the contractor with 
        respect to subject inventions, after payment of 
        expenses (including payments to inventors) incidental 
        to the administration of subject inventions, be 
        utilized for the support of scientific research or 
        education; (D) a requirement that, except where it 
        proves infeasible after a reasonable inquiry, in the 
        licensing of subject inventions shall be given to small 
        business firms; and (E) with respect to a funding 
        agreement for the operation of a Government-owned-
        contractor-operated facility, requirements (i) that 
        after payment of patenting costs, licensing costs, 
        payments to inventors, and other expenses incidental to 
        the administration of subject inventions, 100 percent 
        of the balance of any royalties or income earned and 
        retained by the contractor during any fiscal year up to 
        an amount equal to 5 percent of the annual budget of 
        the facility, shall be used by the contractor for 
        scientific research, development, and education 
        consistent with the research and development mission 
        and objectives of the facility, including activities 
        that increase the licensing potential of other 
        inventions of the facility; provided that if said 
        balance exceeds 5 percent of the annual budget of the 
        facility, that [75 percent] 15 percent of such excess 
        shall be paid to the Treasury of the United States and 
        the remaining [25 percent] 85 percent shall be used for 
        the same purposes as described above in this clause 
        (D); and (ii) that, to the extent it provides the most 
        effective technology transfer, the licensing of subject 
        inventions shall be administered by contractor 
        employees on location at the facility.

           *       *       *       *       *       *       *


           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,] (3) Invalidity of the patent 
        or any claim in suit for failure to comply with--
                  (A) any requirement of section 112 of this 
                title, except that the failure to disclose the 
                best mode shall not be a basis on which any 
                claim of a patent may be canceled or held 
                invalid or otherwise unenforceable; or
                  (B) any requirement of section 251 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.--
          (1) Compensatory damages authorized.--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 the interest and costs as fixed by the court.
          (2) Use of experts permitted.--The court may receive 
        expert testimony as an aid to the determination of 
        damages or of what royalty would be reasonable under 
        the circumstances.
    (b) Procedure for Determining Damages.--
          (1) In general.--The court shall identify the 
        methodologies and factors that are relevant to the 
        determination of damages, and the court or jury, shall 
        consider only those methodologies and factors relevant 
        to making such determination.
          (2) Disclosure of claims.--By no later than the entry 
        of the final pretrial order, unless otherwise ordered 
        by the court, the parties shall state, in writing and 
        with particularity, the methodologies and factors the 
        parties propose for instruction to the jury in 
        determining damages under this section, specifying the 
        relevant underlying legal and factual bases for their 
        assertions.
          (3) Sufficiency of evidence.--Prior to the 
        introduction of any evidence concerning the 
        determination of damages, upon motion of either party 
        or sua sponte, the court shall consider whether one or 
        more of a party's damages contentions lacks a legally 
        sufficient evidentiary basis. After providing a 
        nonmovant the opportunity to be heard, and after any 
        further proffer of evidence, briefing, or argument that 
        the court may deem appropriate, the court shall 
        identify on the record those methodologies and factors 
        as to which there is legally sufficient evidentiary 
        basis, and the court or jury shall consider only those 
        methodologies and factors in making a determination of 
        damages under this section. The court shall only permit 
        the introduction of evidence relating to the 
        determination of damages that is relevant to the 
        methodologies and factors that the court determines may 
        be considered in making the damages determination.
    (c) 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 proves by clear and convincing 
        evidence that acting with objective recklessness--
                  (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) Limitations on willfulness.--
                  (A) In general.--Notwithstanding paragraph 
                (2), an infringer may not be found to have 
                acted with objective recklessness where 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, and--
                          (i) there was reasonable reliance on 
                        advice of counsel;
                          (ii) the infringer sought to modify 
                        its conduct to avoid infringement once 
                        it had discovered the patent; or
                          (iii) there is sufficient evidence 
                        that the infringer had a good faith 
                        belief that the patent was invalid or 
                        unenforceable, or would not be 
                        infringed by conduct later shown to 
                        constitute infringement of the patent.
                  (B) 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.

           *       *       *       *       *       *       *


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 by fixing thereon the word ``patent'' or the abbreviation 
``pat.'' together with an address of a posting on the Internet, 
accessible to the public without charge for accessing the 
address, that associates the patented article with the number 
of the patent, or when, from the character of the article, this 
can not be done, by fixing to it, or to the package wherein one 
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.

           *       *       *       *       *       *       *

    (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 filing date before September 30, 1996.

           *       *       *       *       *       *       *


[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.

           *       *       *       *       *       *       *


CHAPTER 30--PRIOR ART CITATIONS TO OFFICE AND EX PARTE REEXAMINATION OF 
                                PATENTS


Sec. 301. Citation of prior art

    [Any person at any time may cite to the Office in writing 
prior art consisting of patents or printed publications which 
that person believes to have a bearing on the patentability of 
any claim of a particular patent. If the person explains in 
writing the pertinency and manner of applying such prior art to 
at least one claim of the patent, the citation of such prior 
art and the explanation thereof will become a part of the 
official file of the patent. At the written request of the 
person citing the prior art, his or her identity will be 
excluded from the patent file and kept confidential.]
    (a) In General.--Any person at any time may cite to the 
Office in writing--
          (1) prior art consisting of patents or printed 
        publications which that person believes to have a 
        bearing on the patentability of any claim of a 
        particular patent; or
          (2) written statements of the patent owner filed in a 
        proceeding before a Federal court or the Patent and 
        Trademark Office in which the patent owner takes a 
        position on the scope of one or more patent claims.
    (b) Submissions Part of Official File.--If the person 
citing prior art or written submissions under subsection (a) 
explains in writing the pertinence and manner of applying the 
prior art or written submission to at least one claim of the 
patent, the citation of the prior art or written submissions 
(as the case may be) and explanation thereof shall become a 
part of the official file of the patent.
    (c) Procedures for Written Statements.--
          (1) Submission of additional materials.--A party that 
        submits written statements under subsection (a)(2) in a 
        proceeding shall include any other documents, 
        pleadings, or evidence from the proceeding that address 
        the patent owner's statements or the claims addressed 
        by the written statements.
          (2) Limitation on use of statements.--Written 
        statements submitted under subsection (a)(2) shall not 
        be considered for any purpose other than to determine 
        the proper meaning of the claims that are the subject 
        of the request in a proceeding ordered pursuant to 
        section 304 or 313. Any such written statements, and 
        any materials submitted under paragraph (1), that are 
        subject to an applicable protective order shall be 
        redacted to exclude information subject to the order.
    (d) Identity Withheld.--Upon the written request of the 
person citing prior art or written statements under subsection 
(a), the person's identity shall be excluded from the patent 
file and kept confidential.

           *       *       *       *       *       *       *


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 
three months following the filing of 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 or 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 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. 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] heard by an administrative 
patent judge in accordance with procedures which the Director 
shall establish. 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.] The third-
        party requester shall have the opportunity to file 
        written comments on any action on the merits by the 
        Office in the inter partes reexamination proceeding, 
        and on any response that the patent owner files to such 
        an action, if those written comments are received by 
        the Office within 60 days after the date of service on 
        the third-party requester of the Office action or 
        patent owner response, as the case may be.
    (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.
    (d) Oral Hearing._At the request of a third-party requestor 
or the patent owner, the administrative patent judge shall 
conduct an oral hearing, unless the judge finds cause lacking 
for such a hearing.

Sec. 315. Appeal

           *       *       *       *       *       *       *


    (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. 317. Inter partes reexamination prohibited

           *       *       *       *       *       *       *


    (b) [Final Decision] District Court Decision.--[Once a 
final decision has been entered] Once the judgement of the 
district court 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.

           *       *       *       *       *       *       *


                CHAPTER 32--POST-GRANT REVIEW PROCEDURES

Sec. 321. Petition for post-grant review

    Subject to sections 322, 324, 332, and 333, a person who is 
not the patent owner may file with the Office a petition for 
cancellation 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 section 282 (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.

Sec. 322. Timing and bases of petition

    A post-grant proceeding may be instituted by the Director 
under this chapter pursuant to a cancellation petition filed 
under section 321. Such proceeding may be instituted only if--
          (1) the petition is filed not later than 12 months 
        after the issuance of the patent or a reissue patent, 
        as the case may be; or
          (2) the patent owner consents in writing to the 
        proceeding.

Sec. 323. Requirements of petition

    A cancellation 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 the cancellation 
        petitioner;
          (3) for each claim sought to be cancelled, the 
        petition sets forth in writing the basis for 
        cancellation and provides the evidence in support 
        thereof, including copies of patents and printed 
        publications, or written testimony of a witness 
        attested to under oath or declaration by the witness, 
        or any other information that the Director may require 
        by regulation; and
          (4) the petitioner provides copies of the petition, 
        including any evidence submitted with the petition and 
        any other information submitted under paragraph (3), to 
        the patent owner or, if applicable, the designated 
        representative of the patent owner.

Sec. 324. Prohibited filings

    A post-grant review proceeding may not be instituted under 
section 322 if the petition for cancellation requesting the 
proceeding--
          (1) identifies the same cancellation petitioner and 
        the same patent as a previous petition for cancellation 
        under such section; or
          (2) is based on the best mode requirement contained 
        in section 112.

Sec. 325. Submission of additional information; showing of sufficient 
                    grounds

    (a) In General.--The cancellation petitioner shall file 
such additional information with respect to the petition as the 
Director may require. For each petition submitted under section 
321, the Director shall determine if the written statement, and 
any evidence submitted with the request, establishes that a 
substantial question of patentability exists for at least one 
claim in the patent. The Director may institute a post-grant 
review proceeding if the Director determines that the 
information presented provides sufficient grounds to believe 
that there is a substantial question of patentability 
concerning one or more claims of the patent at issue.
    (b) Notification; Determinations not Reviewable.--The 
Director shall notify the patent owner and each petitioner in 
writing of the Director's determination under subsection (a), 
including a determination to deny the petition. The Director 
shall make that determination in writing not later than 60 days 
after receiving the petition. Any determination made by the 
Director under subsection (a), including whether or not to 
institute a post-grant review proceeding or to deny the 
petition, shall not be reviewable.

Sec. 326. Conduct of post-grant review proceedings

    (a) In General.--The Director shall prescribe regulations, 
in accordance with section 2(b)(2)--
          (1) establishing and governing post-grant review 
        proceedings under this chapter and their relationship 
        to other proceedings under this title;
          (2) establishing procedures for the submission of 
        supplemental information after the petition for 
        cancellation is filed; and
          (3) 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, 
        and the procedures for obtaining such evidence shall be 
        consistent with the purpose and nature of the 
        proceeding.
    In carrying out paragraph (3), the Director shall bear in 
mind that discovery must be in the interests of justice.
    (b) Post-Grant Regulations.--Regulations under subsection 
(a)(1)--
          (1) shall require that the final determination in a 
        post-grant proceeding issue not later than one year 
        after the date on which the post-grant review 
        proceeding is instituted under this chapter, except 
        that, for good cause shown, the Director may extend the 
        1-year period by not more than six months;
          (2) shall provide for discovery upon order of the 
        Director;
          (3) shall provide for publication of notice in the 
        Federal Register of the filing of a petition for post-
        grant review under this chapter, for publication of the 
        petition, and documents, orders, and decisions relating 
        to the petition, on the website of the Patent and 
        Trademark Office, and for filings under seal exempt 
        from publication requirements;
          (4) shall 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;
          (5) may provide for protective orders governing the 
        exchange and submission of confidential information; 
        and
          (6) shall ensure that any information submitted by 
        the patent owner in support of any amendment entered 
        under section 329 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 
post-grant review proceeding instituted by the Director.

Sec. 327. Patent owner response

    After a post-grant 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 cancellation 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. 328. Proof and evidentiary standards

    (a) In General.--The presumption of validity set forth in 
section 282 shall not apply in a challenge to any patent claim 
under this chapter.
    (b) Burden of Proof.--The party advancing a proposition 
under this chapter shall have the burden of proving that 
proposition by a preponderance of the evidence.

Sec. 329. Amendment of the patent

    (a) In General.--In response to a challenge in a petition 
for cancellation, the patent owner may file one motion to amend 
the patent in one 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. 330. 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 addressing the 
patentability of any patent claim challenged and any new claim 
added under section 329.

Sec. 331. Effect of decision

    (a) In General.--If the Patent Trial and Appeal Board 
issues a final decision under section 330 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.
    (b) New Claims.--Any new claim held to be patentable and 
incorporated into a patent in a post-grant review proceeding 
shall have the same effect as that specified in section 252 for 
reissued patents on the right of any person who made, 
purchased, offered to sell, or used within the United States, 
anything patented by such new claim, or who made substantial 
preparations therefor, before a certificate under subsection 
(a) of this section is issued.

Sec. 332. Settlement

    (a) In General.--A post-grant review proceeding shall be 
terminated with respect to any petitioner upon the joint 
request of the petitioner and the patent owner, unless the 
Patent Trial and Appeal Board has issued a written decision 
before the request for termination is filed. If the post-grant 
review proceeding is terminated with respect to a petitioner 
under this paragraph, no estoppel shall apply to that 
petitioner. If no petitioner remains in the proceeding, the 
panel of administrative patent judges assigned to the 
proceeding shall terminate the proceeding.
    (b) Agreement in Writing.--Any agreement or understanding 
between the patent owner and a petitioner, including any 
collateral agreements referred to in the agreement or 
understanding, that is made in connection with or in 
contemplation of the termination of a post-grant review 
proceeding, must be in writing. A post-grant review proceeding 
as between the parties to the agreement or understanding may 
not be terminated until a copy of the agreement or 
understanding, including any such collateral agreements, has 
been filed in the Office. If any party filing such an agreement 
or understanding requests, the agreement or understanding shall 
be kept separate from the file of the post-grant review 
proceeding, and shall be made available only to Government 
agencies on written request, or to any person on showing of 
good cause.

Sec. 333. Relationship to other proceedings

    (a) In General.--Notwithstanding subsection 135(a), 
sections 251 and 252, and chapter 30, the Director may 
determine the manner in which any reexamination proceeding, 
reissue proceeding, interference proceeding (commenced with 
respect to an application for patent filed before the effective 
date provided in section 5(k) of the Patent Reform act of 
2009), 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.
    (b) Stays.--The Director may stay a post-grant review 
proceeding if a pending civil action for infringement of a 
patent addresses the same or substantially the same questions 
of patentability raised against the patent in a petition for 
post-grant review proceeding.
    (c) Effect of Commencement of Proceeding.--The commencement 
of a post-grant review proceeding--
          (1) shall not limit in any way the right of the 
        patent owner to commence an action for infringement of 
        the patent; and
          (2) shall not be cited as evidence relating to the 
        validity of any claim of the patent in any proceeding 
        before a court or the International Trade Commission 
        concerning the patent.

Sec. 334. Effect of decisions rendered in civil action on post-grant 
                    review proceedings

    If a final decision is 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 burden 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 the provisions of section 321, which 
        that party or the privies of that party raised or could 
        have raised; and
          (2) the Director may not thereafter maintain a post-
        grant review proceeding that was requested, before the 
        final decision was so entered, by that party or the 
        privies of that party on the basis of such grounds.

Sec. 335. Effect of final decision on future proceedings

    If a final decision under section 330 is favorable to the 
patentability of any original or new claim of the patent 
challenged by the cancellation petitioner, the cancellation 
petitioner may not thereafter, based on any ground that the 
cancellation petitioner raised during the post-grant review 
proceeding--
          (1) request or pursue a reexamination of such claim 
        under chapter 31;
          (2) request or pursue a derivation proceeding with 
        respect to such claim;
          (3) request or pursue a post-grant review proceeding 
        under this chapter with respect to such claim;
          (4) assert the invalidity of any such claim in any 
        civil action arising in whole or in part under section 
        1338 of title 28; or
          (5) assert the invalidity of any such claim in 
        defense to an action brought under section 337 of the 
        Tariff Act of 1930 (19 U.S.C. 1337).

Sec. 336. Appeal

    A party dissatisfied with the final determination of the 
Patent Trial and Appeal Board in a post-grant proceeding under 
this chapter may appeal the determination under sections 141 
through 144. Any party to the post-grant proceeding shall have 
the right to be a party to the appeal.

           *       *       *       *       *       *       *


PART IV--PATENT COOPERATION TREATY

           *       *       *       *       *       *       *


CHAPTER 36--INTERNATIONAL STAGE

           *       *       *       *       *       *       *



Sec. 363. International application designating the United States: 
                    Effect

    An international application designating the United States 
shall have the effect, from its international filing date under 
article 11 of the treaty, of a national application for patent 
regularly filed in the Patent and Trademark Office [except as 
otherwise provided in section 102(e) of this title].

           *       *       *       *       *       *       *


CHAPTER 37--NATIONAL STAGE

           *       *       *       *       *       *       *



Sec. 374. Publication of international application

    The publication under the treaty defined in section 351(a) 
of this title, of an international application designating the 
United States shall be deemed a publication under section 
122(b), except as provided in [sections 102(e) and 154(d)] 
section 154(d) of this title.

Sec. 375. Patent issued on international application: Effect

    (a) A patent may be issued by the Director based on an 
international application designating the United States, in 
accordance with the provisions of this title. [Subject to 
section 102(e) of this title, such] Such patent shall have the 
force and effect of a patent issued on a national application 
filed under the provisions of chapter 11 of this title.

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CONSOLIDATED APPROPRIATIONS ACT OF 2000 (P.L. 106-113)

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Appendix I--S. 1948

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TITLE IV--INVENTOR PROTECTION

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Subtitle F--Optional inter partes Reexamination Procedure

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[SEC. 4607. ESTOPPEL EFFECT OF REEXAMINATION

    Any party who requests an inter partes reexamination under 
section 311 of title 35, United States Code, is estopped from 
challenging at a later time, in any civil action, any fact 
determined during the process of such reexamination, except 
with respect to a fact determination later proved to be 
erroneous based on information unavailable at the time of the 
inter partes reexamination decision. If this section is held to 
be unenforceable, the enforceability of the remainder of this 
subtitle or of this title shall not be denied as a result.]

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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 and 
2006] 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 
and 2006] 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 and fiscal year 2006].

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