PATENT REFORM ACT OF 2011--Continued
(Senate - March 08, 2011)

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[Pages S1360-S1394]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                  PATENT REFORM ACT OF 2011--Continued

  Mr. LEAHY. Mr. President, since the Senate began this debate on the 
American Invents Act more than a week ago, I have talked about American 
ingenuity and innovation. As this debate comes to a close, I want to 
emphasize that this is legislation that should promote innovation, help 
create jobs, and help energize the economy as we continue our recovery. 
This legislation can be a key part of a jobs agenda. We can help 
unleash innovation an promote American invention, all without adding a 
penny to the deficit. This is commonsense, bipartisan legislation.
  Innovation has been a cornerstone of the American economy from the 
time Thomas Jefferson examined the first patent to today. The Founders 
recognized the importance of promoting innovation. A number were 
themselves inventors. 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.'' The discoveries made by American 
inventors and research institutions, commercialized by American 
companies, and protected and promoted by American patent laws have made 
our system the envy of the world. The President has spoken all year 
about the need to win the future by out innovating our competition. 
This bill can play a key role in that effort.
  Yesterday, I commended Austan Goolsbee, the chair of the President's 
Council of Economic Advisers, for his white board presentation this 
week on the importance of patent reform to help America win the global 
competition and create jobs. The creation of more than 220,000 jobs in 
the private sector last month, the creation of 1.5 million jobs over 
the last 12 months, and the unemployment rate finally being reduced to 
8.9 percent are all signs that the efforts we have made over the last 2 
years to stave off the worst recession since the Great Depression are 
paying off and the economic recovery is taking hold. The almost full 
percent point drop in the unemployment rate over the last 3 months is 
the largest decline in unemployment since 1983. Despite interruptions 
of economic activity in many parts of the country caused by winter 
weather over the last months and in recent days, despite the 
extraordinary rise in oil

[[Page S1361]]

prices, the Dow Jones industrial average has climbed back to over 
12,000 from a low point of 6,500. Passage of the America Invents Act 
should help bolster our economic recovery and keep us on the right path 
toward business development and job creation.
  As we began this debate, I referred back to the President's State of 
the Union address and his challenge to the Nation to out-innovate, out-
build and out-educate our global competitors. Enacting the America 
Invents Act is a key to meeting this challenge. Reforming the Nation's 
antiquated patent system will promote American innovation, create 
American jobs, and grow America's economy. I thank the President and 
his administration for their help and support for the Leahy-Hatch-
Grassley America Invents Act. Commerce Secretary Locke has been a 
strong partner in our efforts, and Director Kappos of the Patent and 
Trademark Office has been an indispensable source of wise counsel.
  The America Invents Act will keep America in its longstanding 
position at the pinnacle of innovation. This bill will establish a more 
efficient and streamlined patent system that will improve patent 
quality and limit unnecessary and counterproductive litigation costs, 
while making sure no party's access to court is denied.
  The America Invents Act is the product of eight Senate hearings over 
the last three Congresses. Our bill is the product of years of work and 
compromise. The Senate Judiciary Committee has reported patent reform 
legislation to the Senate in each of the last three Congresses, this 
year, unanimously. And the House has seen efforts over the same period 
led by Congressmen Lamar Smith of Texas and Howard Berman of 
California. The legislation we are acting on today, in fact, is 
structured on the original House bill and contains many of the original 
provisions.
  From the beginning, we recognized the need for a more effective and 
efficient patent system, one that improves patent quality and provides 
incentives for entrepreneurs to create jobs. A balanced and efficient 
intellectual property system that rewards invention and promotes 
innovation through high quality patents is crucial to our Nation's 
economic prosperity and job growth. That is how we win the future--by 
unleashing the American inventive spirit. This bill, the America 
Invents Act, will allow our inventors and innovators to flourish.
  It is important to our country's continued economic recovery, and to 
our successfully competing in the global economy. America needs a 21st 
century patent system to lead. The last extensive reform of our patent 
system was nearly 60 years ago. It is time.
  While the Congress debates spending and budget measures in an often 
too partisan manner, the American people are craving--and the American 
economy is demanding--bipartisan legislation that can create jobs and 
help our economy through common sense measures. That is what this bill 
can do. It relies on not one dollar of taxpayer money. Let me 
emphasize, not a dime in taxpayer money is spent on the Patent and 
Trademark Office, PTO, reforms. They are all funded by patent fees, not 
taxes.
  Innovation drives the Nation's economy, and that entrepreneurial 
spirit can only be protected by a patent system that promotes invention 
and spurs new ideas. We need to reform our patent system so that these 
innovations can more quickly get to market. A modernized patent 
system--one that puts American entrepreneurs on the same playing field 
as those throughout the world--is a key to that success. This is an 
idea that cuts across the political spectrum.
  During Senate debate over the last week our bill has been improved by 
a number of Senators who have contributed amendments. Senators Bennet, 
Coons, Schumer, Menendez, Pryor, Stabenow, Baucus, Bingaman, Coburn and 
Kirk have all contributed, and I thank them for working with us. 
Senator Cardin attempted to offer germane amendments, and I regret that 
these were blocked.
  I thank our ranking Republican on the committee and the comanager of 
this measure, Senator Grassley, and his staff, Kolan Davis and Rita 
Lari, for their dedication to this effort. I commend Senator Hatch for 
sticking with it for these many years, and Senator Kyl for helping get 
this done.
  I also extend my personal thanks, as well, to Senator Klobuchar of 
Minnesota who was active during committee consideration and helped 
manage this legislation effort in the Senate. She has been outstanding.
  The Senate's action today could not have been accomplished without 
the hard work of many dedicated staffers. I would like to thank in 
particular the steadfast work of Aaron Cooper of my Judiciary Committee 
staff. Aaron has spent countless hours in meetings and briefings, with 
Members, other staff, and interested parties, working to help me ensure 
that the America Invents Act preserved the meaningful reforms we have 
been working toward since 2005. I would also like to thank Ed Pagano, 
my chief of staff, and Bruce Cohen, my chief counsel, who have worked 
on this issue since the start, as well as Susan Davies who served as my 
chief Intellectual Property counsel through the formative stages of 
this legislative effort. Erica Chabot, Curtis LeGeyt and Scott Wilson 
of my Judiciary Committee staff also deserve thanks for their committed 
work on this legislation.
  I also commend the hardworking Senate floor staff, Tim Mitchell and 
Trish Engle, as well as Dave Schiappa, and the staffs of other 
Senators, including Tim Molino, Joe Matal, and Matt Sandgren, for their 
dedicated efforts.
  I also thank the many individuals, companies, associations and 
coalitions that have helped with this effort. This legislation has been 
supported by both business and labor, including the National 
Association of Manufacturers, the United Steelworkers, the AFL-CIO, the 
Association of American Universities, the American Bar Association, the 
Association of Public and Land-Grant Universities, the Association of 
American Medical Colleges, the Association of University Technology 
Managers, the American Council on Education, the Council on Government 
Relations, PhRMA, BIO, the Intellectual Property Owners Association, 
the American Intellectual Property Law Association, the Coalition for 
21st Century Patent Reform, the Association for Competitive Technology, 
the Coalition for Patent and Trademark Information Dissemination, IBM, 
General Electric, Eli Lilly and Company, Bose Corporation, Johnson and 
Johnson, 3M, General Mills, Honeywell, Monsanto, Motorola, Cargill, 
Inc., Caterpillar, Enventys, Abbott, Astra Zeneca, AdvaMed, Air 
Liquide, Bayer, Beckman Coulter, Boston Scientific, BP, Bridgestone 
American Holdings, Inc., Bristol-Myers Squibb, the California 
Healthcare Institute, the Colorado BioScience Association, Cummins, The 
Dow Chemical Company, DuPont, Eastman Chemical Company, ExxonMobil, 
Genentech, Genzyme, GlaxoSmithKline, the Healthcare Institute of New 
Jersey, Henkel Corporation, Hoffman-LaRoche, Illinois Tool Works, 
International Game Technology, Kodak, Medtronic, Merck & Co., Inc., 
Millenium Pharmaceuticals, Milliken and Company, Northrop Grumman, 
Novartis, PepsiCo., Inc., Pfizer, Procter & Gamble, SanDisk 
Corporation, Sangamo BioSciences, Inc., United Technologies, USG 
Corporation, the Virginia Biotechnology Association, Weyerhaeuser, the 
American Institute for CPAs, the American Institute of Certified Public 
Accountants, the Tax Justice Network USA, the New Rules for Global 
Finance, the American College of Tax Counsel, Consumer Action, The 
American College of Trust and Estate Counsel, the Partnership for 
Philanthropic Planning, Global Financial Integrity, the International 
Association for Registered Financial Consultants, the National 
Association of Enrolled Agents, USPIRG, the Certified Financial Planner 
Board of Standards, the Financial Planning Association, the American 
Association of Attorney-Certified Public Accountants, the Citizens for 
Tax Justice, the National Treasury Employees Union, the Independent 
Community Bankers of America, and numerous other organizations and 
companies representing all sectors of the patent community that have 
been urging action on patent reform proposals for years.
  The America Invents Act will accomplish 3 important goals, which have 
been at the center of the patent reform debate from the beginning: It 
will improve and harmonize operations at the

[[Page S1362]]

PTO; it will improve the quality of patents that are issued; and it 
will provide more certainty in litigation. In particular, the 
legislation will move this Nation's patent system to a first-inventor-
to-file system, make important quality enhancement mechanisms, and 
provide the PTO with the resources it needs to work through its backlog 
by providing it with fee setting authority, subject to oversight. The 
America Invents Act provides the tools the PTO needs to separate the 
inventive wheat from the chaff, which will help business bring new 
products to market and create jobs.
  Innovation has always been at the heart of America and American 
success. From the founding of our Nation, we recognized the importance 
of promoting and protecting innovation, and so the Constitution 
explicitly grants Congress the power to ``promote the progress and 
science and useful arts, by securing for limited times to . . . 
inventors the exclusive right to their respective . . . discoveries.'' 
The patent system plays a key role in encouraging innovation and 
bringing new products to market. The discoveries made by American 
inventors and research institutions, commercialized by our companies, 
and protected and promoted by our patent laws have made our system the 
envy of the world.
  High quality patents are the key to our economic growth. They benefit 
both patent owners and users who can be more confident in the validity 
of issued patents. Patents of low quality and dubious validity, by 
contrast, enable patent trolls who extort unreasonable licensing fees 
from legitimate businesses, and constitute a drag on innovation. Too 
many dubious patents also unjustly cast doubt on truly high quality 
patents.
  After 6 years of debate and discussion, more than a dozen hearings 
and mark up sessions, and countless hours of member and staff meetings 
with two presidential administrations and interested parties across the 
spectrum, the Senate is finally acting to make the first meaningful, 
comprehensive reforms to the nation's patent system in nearly 60 years. 
The Senate debate has now extended for more than a week. Passage of the 
America Invents Act demonstrates what we can accomplish when we cast 
aside partisan rhetoric, and focus on working together for the American 
people and for our future.
  It has been almost 6 years since Chairman Smith and Congressman 
Berman introduced the first version of patent reform legislation in 
2005, but the structure and guiding principles of the legislation 
remain the same. The bill will speed the process by which the Patent 
Office considers applications and should improve the quality of patents 
it issues.
  Innovation and economic development are not uniquely Democratic or 
Republican objectives, so we worked together to find the proper balance 
for America--for our economy, for our inventors, for our consumers. 
Working together, we can smooth the path for more interesting--and 
great--American inventions. That is what this bipartisan, comprehensive 
patent reform bill will do. No one claims that ours is a perfect bill. 
It is a compromise that will make key improvements in the patent 
system. Having coordinated with the leaders in the House through this 
process, I hope that the House will look favorably on our work and 
adopt this measure so that it can be sent to the President without 
delay and its improvements can take effect in order to encourage 
American innovation and promote American invention.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. REID. I ask unanimous consent that the order for the quorum call 
be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I ask unanimous consent the Reid amendment 
No. 152 be withdrawn; that the Reid amendment No. 143 be modified with 
the changes at the desk; the Senate proceed to vote on the amendment, 
as modified, with no amendments in order prior to the vote; that there 
then be 30 minutes of debate equally divided between the two managers 
or their designees; that S. 23 be read a third time; that a budgetary 
pay-go statement be read; the Senate then proceed to a vote on passage 
of the bill, as amended; and the motions to reconsider be considered 
made and laid upon the table with no intervening action or debate.
  Further, I ask unanimous consent that at 12 noon Wednesday, March 9, 
the Senate proceed to the consideration of Calendar No. 14, H.R. 1, the 
Defense appropriations long-term continuing resolution for fiscal year 
2011; that there be 3 hours of debate on H.R. 1 and the Democratic 
alternative, the Inouye substitute amendment No. 149, with the time 
equally divided between the two leaders or their designees prior to a 
vote on passage of H.R. 1; that the vote on passage be subject to a 60-
vote threshold; that if the bill achieves 60 affirmative votes, the 
bill be read a third time and passed; that if the bill does not achieve 
60 affirmative votes, the majority leader be recognized to offer the 
Inouye substitute amendment No. 149; the Senate then proceed to a vote 
on the substitute amendment; that the substitute amendment be subject 
to a 60-vote threshold; if the substitute amendment achieves 60 
affirmative votes, the substitute amendment be agreed to; the bill, as 
amended, be read a third time and passed; if the substitute amendment 
does not achieve 60 affirmative votes, H.R. 1 be returned to the 
calendar; that no motions or amendments be in order to the substitute 
amendment or to the bill prior to the votes; further, that all of the 
above occur with no intervening action or debate.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, with this agreement, I ask unanimous consent 
that the cloture vote with respect to the motion to proceed to H.R. 1 
be vitiated.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, even though there have been a few turns in 
the road, we are at the place where we need to be. We need to be able 
to show the American people where we are on these two measures. I 
express my appreciation to my friend, the Republican leader. As I said, 
things don't always work smoothly around here, but they usually work. 
Now we are at a point where we can vote on these two measures which is 
what we need to do.
  The PRESIDING OFFICER. Under the previous order, amendment No. 152 is 
withdrawn.
  Under the previous order, amendment No. 143 is modified with the 
changes at the desk.
  The amendment, as modified, is as follows:

  (Purpose: To include public institutions of higher education in the 
                     definition of a micro entity)

       On page 93, before line 18, insert the following:
       ``(d) State Institutions of Higher Education.--
       ``(1) In general.--For purposes of this section, a micro 
     entity shall include an applicant who certifies that--
       ``(A) the applicant's employer, from which the applicant 
     obtains the majority of the applicant's income, is a State 
     public institution of higher education, as defined in section 
     102 of the Higher Education Act of 1965 (20 U.S.C. 1002); or
       ``(B) the applicant has assigned, granted, conveyed, or is 
     under an obligation by contract or law to assign, grant, or 
     convey, a license or other ownership interest in the 
     particular application to such State public institution.
       ``(2) Director's authority.--The Director may, in the 
     Director's discretion, impose income limits, annual filing 
     limits, or other limits on who may qualify as a micro entity 
     pursuant to this subsection if the Director determines that 
     such additional limits are reasonably necessary to avoid an 
     undue impact on other patent applicants or owners or are 
     otherwise reasonably necessary and appropriate. At least 3 
     months before any limits proposed to be imposed pursuant to 
     this paragraph shall take effect, the Director shall inform 
     the Committee on the Judiciary of the House of 
     Representatives and the Committee on the Judiciary of the 
     Senate of any such proposed limits.''.

  The PRESIDING OFFICER. The question is on agreeing to amendment No. 
143, as modified.
  The amendment (No. 143), as modified, was agreed to.
  Mr. COBURN. I wish to express my opposition to Reid amendment No. 
143, as modified. I do not believe public institutions of higher 
education, or any entity, should be carved out of the definition of 
micro entity in the underlying legislation. Had a rollcall vote 
occurred, I would have voted no.

[[Page S1363]]

  Mr. LEAHY. Mr. President, I suggest the absence of a quorum, with 
unanimous consent that the time be equally divided.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                          Check 21 Act Patents

  Mr. PRYOR. I would like to clarify some concerns I have about the 
Schumer-Kyl program that was included in the managers' amendment to the 
America Invents Act, adopted on March 1. I am specifically concerned 
that this provision revives an amendment that had been included in 
previous versions of the bill--that amendment specifically targeted 
patents related to the Check 21 Act and eliminated the ability of the 
holder of such patents to collect damages. Is that the purpose of the 
Schumer-Kyl language?
  Mr LEAHY. No, the amendment is entirely different from the 2008 
amendment related to patents that place on tax on implementation of the 
Check 21 Act. The Schumer-Kyl program addresses certain business method 
patents and does not target any specific patents. The Schumer-Kyl 
program is intended to provide a cost-effective alternative to 
litigation to examine business-method patents.
  Mr. PRYOR. Am I correct then that the Schumer-Kyl program is simply 
trying to address the problem of business method patents of dubious 
validity that are commonly associated with the Federal Circuit's 1998 
decision in State Street Bank v. Signature?
  Mr. LEAHY. That is correct. It is still unclear whether the subject 
matter of these patents qualifies as patentable subject matter under 
current law. Patents of low quality and dubious validity, as you know, 
are a drag on innovation because they grant a monopoly right for an 
invention that should not be entitled to one under the patent law.
  Mr. PRYOR. Can the Senator describe how the program would work in 
practice?
  Mr. LEAHY. Certainly. If a petitioner provides evidence to the PTO 
and the PTO determines that the patent is on a ``covered business 
method patent'' then the PTO would institute a post-grant review of 
that patent. In this review, the PTO could consider any challenge that 
could be heard in court.
  Mr. PRYOR. Is it correct then that the Schumer proceeding would only 
have an effect if the PTO determines it is more likely than not that a 
claim of the patent is invalid and, even then, the proceeding would 
have no effect on a patent unless the petitioner can demonstrate that 
under current law the patent is not valid?
  Mr. LEAHY. That is correct. The proceeding has a higher threshold 
than current reexamination before the PTO will even undertake a review 
of the patent. So as a practical matter, a patent without any serious 
challenge to its validity would never be subject to a proceeding.
  Mr. PRYOR. Would the Senator agree that in a case in which the 
validity of the patent has been upheld by a district court but the case 
remains on appeal, that this amendment would likely not affect the 
pending appeal?
  Mr. LEAHY. I would. The patent may still be subject to the 
proceeding, but since the court did not hold the patent invalid or 
unforceable, it would not likely have an effect on the pending appeal.
  Mr. SCHUMER. Mr. President, I want to take the opportunity to explain 
further a few elements of the Schumer-Kyl provision in the patent bill. 
The Transitional Program for business method patents addresses a 
critical problem in the patent world, and it is crucial that it be 
administered and implemented appropriately by both the Patent and 
Trademark Office and the courts.
  Business method patents are the bane of the patent world. The 
business method problem began in 1998 with the U.S. Court of Appeals 
for the Federal Circuit decision in State Street Bank & Trust Co. v. 
Signature Financial Group, Inc. State Street created a sea-change in 
the patentability of business-methods, holding that any invention can 
be patented so long as it produces a ``useful, concrete, and tangible 
result'' and meets other requirements of the patent laws.
  State Street launched an avalanche of patent applications seeking 
protection for common business practices. The quality of these business 
method patents has been much lower than that of other patents, as 
Justice Kennedy noted in his concurring opinion in eBay Inc. v. 
MercExchange. Justice Kennedy wrote about the ``potential vagueness and 
suspect validity'' of some of ``the burgeoning number of patents over 
business methods.'' Commentators like Rochelle Dreyfuss have also 
lamented ``the frequency with which the Patent Office issues patents on 
shockingly mundane business inventions.'' Malla Pollack pointed out 
that ``[M]any of the recently-issued business method patents are 
facially (even farcically) obvious to persons outside the USPTO.''
  One of the main reasons for the poor quality of business method 
patents is the lack of readily accessible prior art references. Because 
business methods were not patentable prior to 1998 when the State 
Street decision was issued, the library of prior art on business method 
patents is necessarily limited--as opposed, say, to more traditional 
types of patents for which there can be centuries of patents and 
literature about them for the PTO to examine. Furthermore, information 
about methods of conducting business, unlike information about other 
patents, is often not documented in patents or published in journals. 
This means a patent examiner has significantly less opportunity than he 
might with a traditional patent to weed out undeserving applications. 
Unfortunately, that means the burden falls on private individuals and 
an expensive court process to clean up the mess.
  The ability to easily obtain business method patents without a 
rigorous and thorough review in the Patent Office has created a flood 
of poor quality business method patents and a cottage industry of 
business method patent litigation. The Federal courts have recognized 
this problem, and indeed even the Supreme Court has begun to address 
it. In KSR Intl Co. v. Teleflex, Inc. and Bilski v. Kappos, the Court 
articulated a new standard for obviousness and made clear that abstract 
business methods are not patentable. While these legal developments are 
important, the leave in limbo the many patents that were issued by the 
PTO since State Street that are not in fact valid.
  Litigation over invalid patents places a substantial burden on U.S. 
courts and the U.S. economy. Business-method inventions generally are 
not and have not been patentable in countries other than the United 
States. In order to reduce the burden placed on courts and the economy 
by this back-and-forth shift in judicial precedent, the Schumer-Kyl 
transitional proceeding authorizes a temporary administrative 
alternative for reviewing business method patents.
  It is important to clarify two elements of the Schumer-Kyl program's 
operation in particular. First, there is the issue of how a district 
court should treat a motion for a stay of litigation in the event the 
PTO initiates a pilot program. Second, there is the issue of how the 
Federal circuit will treat interlocutory appeals from stay decisions. 
Finally, there is the issue of which patents should be considered to be 
covered business method patents.
  The transition program created by the Schumer-Kyl amendment is 
designed to provide a cheaper, faster alternative to district court 
litigation over the validity of business-method patents. This program 
should be used instead of, rather than in addition to, civil 
litigation. To that end, the amendment expressly authorizes a stay of 
litigation in relation to such proceedings and places a very heavy 
thumb on the scale in favor of a stay being granted. It is 
congressional intent that a stay should only be denied in extremely 
rare instances.
  When Congress initially created ex parte reexamination, it did not 
expressly provide for a stay of litigation pending the outcome of an ex 
parte reexamination proceeding. Rather, Congress relied on the courts' 
inherent power to grant stays and encouraged courts to liberally grant 
stays. However, relying on the courts' inherent

[[Page S1364]]

power to grant stays did not result in courts liberally granting stays. 
For example, one commentator who surveyed the grant rates on motions 
for stay pending reexamination, Matthew A. Smith, found that numerous 
district courts granted stays less than half the time. In fact, Eastern 
District of Texas grants stays only 20 percent of the time. Due to low 
grant rates for stays in several jurisdictions, this amendment 
instructs courts to apply the four-factor test first announced in 
Broadcast Innovation, L.L.C. v. Charter Communications when evaluating 
stay motions.
  The amendment employs the Broadcast Innovation test, rather than 
other multifactor tests employed by other district courts, because this 
test properly emphasizes a fourth factor that is often ignored by the 
courts: ``whether a stay will reduce the burden of litigation on the 
parties and on the court.'' Too many district courts have been content 
to allow litigation to grind on while a reexamination is being 
conducted, forcing the parties to fight in two fora at the same time. 
This is unacceptable, and would be contrary to the fundamental purpose 
of the Schumer-Kyl amendment to provide a cost-efficient alternative to 
litigation.
  Absent some exceptional circumstance, the institution of a business-
methods proceeding--which requires a high up-front showing and will be 
completed in a relatively short period of time--should serve as a 
substitute for litigation, and result in a stay of co-pending district 
court litigation.
  By adopting this four-factor test, rather than one of the three-
factor tests used by other courts, the amendment also precludes the use 
of additional factors that are not codified here and that have 
occasionally been used by some district courts. For example, a few 
courts have occasionally employed a different de facto fourth factor: 
whether the challenger offers ``to forgo invalidity arguments based on 
prior art patents and/or printed publications considered during an ex 
parte reexamination process.'' The proceeding authorized by this 
amendment, at subsection (b)(1)(D), sets its own standard for 
determining what issues may still be raised in civil litigation if a 
patent survives PTO review. By codifying the exclusive set of factors 
that courts are to consider when granting stays, the amendment 
precludes courts from inventing new factors such as extra-statutory 
estoppel tests.
  Several unique features of this proceeding further make it 
appropriate to grant stays in all but the most unusual and rare 
circumstances. These proceedings will only be instituted upon a high 
up-front showing of likely invalidity. The proceeding is limited to 
certain business method patents, which, as noted above, are generally 
of dubious quality because unlike other types of patents, they have not 
been thoroughly reviewed at the PTO due to a lack of the best prior 
art. And the proceeding will typically be completed within 1 year.
  In summary, it is expected that, if a proceeding against a business 
method patent is instituted, the district court would institute a stay 
of litigation unless there were an extraordinary and extremely rare set 
of circumstances not contemplated in any of the existing case law 
related to stays pending reexamination. In the rare instance that a 
stay is not granted, the PTO should make every effort to complete its 
review expeditiously. We encourage the PTO Director to promulgate 
regulations to this effect to ensure that petitioners know that in 
extreme circumstance where a gay is not granted, the PTO will complete 
its review in a compressed timeframe, such as within 6 months.
  To ensure consistent and rigorous application of the Broadcast 
Innovation standard, the amendment also allows the parties, as of 
right, to have the Federal Circuit closely review the application of 
this test in a manner that ensures adherence to these precedents and 
consistent results across cases. As such, either party may file an 
interlocutory appeal directly with the Federal Circuit. Because this 
amendment provides an automatic right to an interlocutory appeal, the 
district court does not need to certify the appeal in writing, as it 
would ordinarily need to do under 28 U.S.C. Sec. 1292(b). Also, unlike 
the discretion typically afforded an appellate court under 28 U.S.C. 
Sec. 1292(b), under this amendment the Federal Circuit may not decline 
to hear an interlocutory appeal.
  Since the denial of a stay pending post-grant review under this 
amendment is an extraordinary and extremely rare circumstance, the 
filing of an interlocutory appeal should result in the stay of 
proceedings in the district court pending the appeal. Staying the lower 
court proceedings while the Federal Circuit reviews the question of 
whether the case should be stayed pending the post-grant review will 
help ensure that requests to stay are consistently applied across cases 
and across the various district courts.
  On appeal the Federal Circuit can and should review the district 
court's decision de novo. It is expected that the Federal Circuit will 
review the district court's decision regarding a stay de novo, unless 
there are unique circumstances militating against a de novo review, 
such as subsequent requests for an interlocutory appeal in the same 
case. A de novo review is central to the purpose of the interlocutory 
appeal provision in the Schumer-Kyl amendment, which is to ensure 
consistent application of standards and precedents across the country 
and to avoid one particular court with a favorable bench becoming the 
preferred venue of business method patent plaintiffs.
  The definition of covered business method patents in the transitional 
program was developed in close consultation with the PTO to capture all 
of the worst offenders in the field of business method patents, 
including those that are creatively drafted to appear to be true 
innovations when in fact they are not.
  The amendment only applies to ``covered business method patents.'' If 
the PTO determines that a patent is a ``covered business method 
patent''--and the other applicable requirements of this amendment and 
Chapter 32 are met--the patent will be subject to post-grant review 
under this amendment regardless of whether the patent has been through 
prior PTO proceedings, such as ex parte reexamination, or current or 
prior litigation.
  The definition of a ``covered business method patent'' includes ``a 
method or corresponding apparatus.'' The phrase ``method or 
corresponding apparatus'' is intended to encompass, but not be limited 
to, any type of claim contained in a patent, including, method claims, 
system claims, apparatus claims, graphical user interface claims, data 
structure claims--Lowry claims--and set of instructions on storage 
media claims--Beauregard claims. A patent qualifies as a covered 
business method patent regardless of the type or structure of claims 
contained in the patent. Clever drafting of patent applications should 
not allow a patent holder to avoid PTO review under this amendment. Any 
other result would elevate form over substance.
  Not all business method patents are eligible for PTO review under 
this amendment. Specifically, ``patents for technological inventions'' 
are out of scope. The ``patents for technological inventions'' 
exception only excludes those patents whose novelty turns on a 
technological innovation over the prior art and are concerned with a 
technical problem which is solved with a technical solution and which 
requires the claims to state the technical features which the inventor 
desires to protect. It is not meant to exclude patents that use known 
technology to accomplish a business process or method of conducting 
business--whether or not that process or method appears to be novel. 
The technological invention exception is also not intended to exclude a 
patent simply because it recites technology. For example, the 
recitation of computer hardware, communication or computer networks, 
software, memory, computer-readable storage medium, scanners, display 
devices or databases, specialized machines, such as an ATM or point of 
sale device, or other known technologies, does not make a patent a 
technological invention. In other words, a patent is not a 
technological invention because it combines known technology in a new 
way to perform data processing operations.
  The amendment covers not only financial products and services, but 
also the ``practice, administration and management'' of a financial 
product or service. This language is intended to

[[Page S1365]]

make clear that the scope of patents eligible for review under this 
program is not limited to patents covering a specific financial product 
or service. In addition to patents covering a financial product or 
service, the ``practice, administration and management'' language is 
intended to cover any ancillary activities related to a financial 
product or service, including, without limitation, marketing, customer 
interfaces, Web site management and functionality, transmission or 
management of data, servicing, underwriting, customer communications, 
and back office operations--e.g., payment processing, stock clearing.
  The amendment also requires a patent to relate to a ``financial 
product or service.'' To meet this requirement, the patent need not 
recite a specific financial product or service. Rather the patent 
claims must only be broad enough to cover a financial product or 
service. For example, if a patent claims a general online marketing 
method but does not specifically mention the marketing of a financial 
product, such as a savings account, if that marketing method could be 
applied to marketing a financial product or service, the patent would 
be deemed to cover a ``financial product or service.'' Likewise, if a 
patent holder alleges that a financial product or service infringes its 
patent, that patent shall be deemed to cover a ``financial product or 
service'' for purposes of this amendment regardless of whether the 
asserted claims specifically reference the type of product of service 
accused of infringing.
  In conclusion, I am very pleased that the Senate has adopted the 
Schumer-Kyl provision and trust that it will go a long way towards 
addressing the havoc that frivolous business method patent litigation 
has wreaked upon the courts and the economy. Indeed, Senator Kyl and I 
received a letter of thanks and appreciation from the Independent 
Community Bankers of America, who represent nearly 5,000 community 
banks. As they point out, the money they are required to spend 
defending litigation from business method patent trolls--and the 
capital they must reserve against these contingent liabilities--is 
money which ``cannot find its way into the hands of worthy borrowers, 
retarding economic growth and job creation at the time such activity is 
most needed.''
  To that end, I would ask unanimous consent that the letter from the 
Independent Community Bankers of America be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                             Independent Community


                                           Bankers of America,

                                    Washington, DC, March 3, 2011.
     Hon. Charles E. Schumer,
     U.S. Senate,
     Washington, DC.
     Hon. Jon Kyl,
     U.S. Senate,
     Washington, DC.
       Dear Senators Schumer and Kyl: On behalf of the Independent 
     Community Bankers of America (ICBA) and the nearly 5,000 
     community banks that we represent, we thank you for your 
     efforts to improve S. 23 the Patent Reform Act of 2011 
     through your amendment to establish an oppositional 
     proceeding at the United States Patent and Trademark Office 
     (PTO) where business-method patents can be examined using the 
     best available prior art. Such patents have, unfortunately, 
     become the preferred method of extracting large settlements 
     from community banks and these practices threaten our 
     bankers' ability to provide banking and banking related 
     services to their local communities and to local small 
     businesses.
       Under the current system, business method patents of 
     questionable quality are used to force community banks to pay 
     meritless settlements to entities that may have patents 
     assigned to them, but who have invented nothing, offer no 
     product or service and employ no one. In addition, all public 
     companies are required by accounting rules to reserve capital 
     against contingent liabilities. For community banks, this is 
     money which cannot find its way into the hands of worthy 
     borrowers, retarding economic growth and job creation as the 
     precise time such activity is most needed. The Schumer-Kyl 
     amendment is critical to stopping this economic harm.
       We appreciate that you have worked hard with the Patent and 
     Trademark Office and other stakeholders to refine the 
     amendment and make compromises to enable the amendment to 
     move forward. We support those efforts and will continue to 
     push to ensure that business method patents cannot be used as 
     a weapon by those who seek to game the patent granting and 
     litigation system at the expense of legitimate businesses.
       We are pleased to learn that the Senate has adopted much of 
     the Schumer-Kyl amendment into the base text of S. 23. We 
     encourage the Senate to only strengthen this provision, where 
     possible, for the good of our nation's community banks and 
     the countless neighborhoods and communities that they serve.
       Thank you again.
           Sincerely,

                                           Stephen J. Verdier,

                                         Executive Vice President,
                                          Congressional Relations.

  Mr. KYL. Mr. President, I ask unanimous consent to have printed in 
the Record materials concerning the America Invents Act that were 
distributed by the Republican Policy Committee last week. These consist 
of a legislative notice describing the bill that was brought to the 
Senate floor, and a summary of the Senate managers' amendment that was 
adopted on Tuesday.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

   [From the Republican Policy Committee, U.S. Senate, Feb. 28, 2011]

                           Legislative Notice

                  S. 23--The Patent Reform Act of 2011

     Calendar #6
     Reported by the Judiciary Committee with amendments on 
         February 3, 2011 by a vote of 15-0. No written report.


                               Noteworthy

       At 3:30 p.m. today, the Senate will begin consideration of 
     S. 23.
       The Act adopts a ``First Inventor to File'' patent regime. 
     Currently the United States is the only country in the world 
     operating under a ``First to Invent'' regime.
       The Act grants the U.S. Patent and Trademark Office (PTO) 
     authority to set its own fees to better ensure proper funding 
     for its operations.
       The Act makes a variety of changes to improve the quality 
     of patents, including allowing for greater submission of 
     information by third parties while a patent application is 
     pending and establishing a post-grant review procedure for 
     promptly raised challenges to a patent.
       Unlike prior patent reform bills, the Act does not disturb 
     substantive damages law; but it does take steps to improve 
     the consistency and predictability of the application of that 
     law.


                          Background/Overview

       Innovation is a key facet of American economic power, as 
     our Founders recognized in the Constitution by giving 
     Congress the power to ``promote the progress of science and 
     useful arts'' by granting inventors time limited monopolies--
     patents--on their discoveries. This basic framework set the 
     course for centuries of American innovation, but the law has 
     not been substantially updated since the Patent Act of 1952. 
     Responding to concerns about the quality and timeliness of 
     patents issued by the PTO, the last several Congresses have 
     considered substantial patent reform measures. [In the 109th 
     Congress Senators Hatch and Leahy introduced the Patent 
     Reform Act of 2006 (S. 3818). The next year, Senators Leahy 
     and Hatch introduced the Patent Reform Act of 2007 (S. 1145). 
     This bill was reported from the Judiciary Committee, as 
     amended, on January 24, 2008, with a Committee Report (S. 
     Rep. 110-259), but it was not considered by the full Senate. 
     On March 3, 2009, Senators Leahy and Hatch introduced the 
     Patent Reform Act of 2009, which was reported with amendments 
     on April 2, 2009, with a Committee Report (S. Rep. 111-18). 
     Again the bill was not considered by the full Senate. During 
     this time, the Senate Judiciary Committee has held eight 
     hearings on patent reform, and the House has held hearings on 
     the subject as well.]
       Over the course of these Congresses the substance of the 
     reform proposals evolved. On January 25, 2011, Senator Leahy 
     and Senator Hatch introduced the current bill, the Patent 
     Reform Act of 2011 (S. 23), which was reported with 
     amendments on February 3, 2011. Significant features of the 
     legislation include: a transition to a ``First Inventor to 
     File'' patent regime consistent with other industrialized 
     countries; PTO fee setting authority to ensure proper 
     funding; and post-grant and supplemental review procedures to 
     improve patent quality.


                            Bill Provisions

     Section 1. Title/Table of Contents
     Section 2. First Inventor to File
       The United States, alone among advanced economies, 
     currently operates under a ``First to Invent'' rather than a 
     ``First Inventor to File'' patent regime in which the date of 
     filing with the patent office is the most important 
     determinant of who is the legitimate patent holder. Defenders 
     of the First to Invent regime claim that it has served 
     America well, that it favors small inventors by allowing them 
     to focus on inventing rather than paperwork, and that it 
     avoids overburdening the PTO with prematurely filed 
     applications.
       However, the system poses challenges for American inventors 
     who must operate under one regime domestically and another if 
     they wish to profit from their innovation abroad. The First 
     to Invent system also results in less certainty about the 
     validity of patents and often leads to expensive and lengthy 
     litigation. Many commentators and organizations, including 
     the National Academy of Sciences, have urged the United 
     States to

[[Page S1366]]

     adopt a First Inventor to File system. S. 23 moves the 
     United States to a First Inventor to File regime. As part 
     of that, it creates an administrative proceeding to ensure 
     that the first person to file is actually the true 
     inventor. It also preserves and strengthens current law's 
     grace period, by providing that disclosures made by the 
     true inventor, or someone who got the information from the 
     inventor, less than one year before the application is 
     filed will not be held against their application.
       Additionally, during the one-year period before the 
     application is filed, if the inventor publicly discloses his 
     invention, no subsequently-disclosed ``prior art,'' 
     regardless of whether it is derived from the inventor, can be 
     used to invalidate the patent. Prior art is a term of art in 
     intellectual property law. S. 23 defines ``prior art'' as 
     actions by the patent owner or another (such as publication, 
     public use, or sale) that make the invention available to the 
     public.] This effectively creates a ``first to publish'' rule 
     within the one year grace period. An inventor who publishes 
     his invention retains an absolute right to priority if he 
     files an application within one year of his disclosure. No 
     application effectively filed after his disclosure, and no 
     prior art disclosed after his disclosure, can defeat his 
     patent application.
     Section 3. Inventor's Oath or Declaration
       U.S. patent law requires oaths or declarations by inventors 
     as part of the application process. This can be challenging 
     when applications are pursued by company-assignees for whom a 
     variety of past and present employees may have played a role 
     in developing the invention. This section makes it easier for 
     assignees to file and prosecute a patent application where 
     the inventor is unable to do so or unwilling and 
     contractually obligated to do so.
     Section 4. Damages
       The current damage statute is vague, and juries must 
     evaluate up to 15 factors developed by the courts. This has 
     led to inconsistent and unpredictable damage awards. Section 
     4 does not upset the existing substantive law, but it makes 
     certain changes to increase predictability in damages by 
     authorizing courts to play a gatekeeper role, in which they 
     will provide detailed instructions to juries on what factors 
     are most relevant to the case before them.
     Section 5. Post-Grant Review
       This section establishes a new administrative procedure for 
     challenging the validity of granted patents within a nine-
     month post-grant window, providing an early opportunity to 
     improve the quality of patents.
       The bill also changes procedures for later challenges by 
     third parties to the validity of patents (the so-called 
     ``inter partes reexamination'' process, under current law). 
     These reforms add additional procedural protections to the 
     process by converting the reexamination into an adjudicative 
     proceeding to be known as ``inter partes review.'' Inter 
     partes review must be completed within one year of being 
     instituted (though this deadline can be extended by six 
     months for good cause). The proceedings will take place 
     before a panel of three administrative judges whose decisions 
     are appealable directly to the Federal Circuit.
     Section 6. Patent Trial and Appeal Board
       This section renames the Patent Board the ``Patent Trial 
     and Appeal Board'' and clarifies its role in administering 
     the new proceedings established by the Act.
     Section 7. Pre-Issuance Submissions by Third Parties
       Current law restricts what third parties can file with the 
     PTO when they possess relevant information on pending patent 
     applications. This section would permit third parties, 
     typically another innovator in the same or a similar field, 
     to submit relevant information and make statements explaining 
     their submissions.
     Section 8. Venue
       Codifies the standard for transfers of venue established by 
     the Federal Circuit in the case In re TS Tech USA Corp and 
     applies it to patent cases generally. [551 F.3d 1315 (Fed. 
     Cir. 2008).] That standard provides for transfer to the 
     judicial district that is ``clearly more convenient'' for 
     both the parties and witnesses. The section also clarifies 
     that venue for litigation against the PTO is the Eastern 
     District of Virginia, where the PTO is headquartered, rather 
     than the District of Columbia, where it used to be based.
     Section 9. Fee Setting Authority
       In order to provide sufficient funding to the PTO's 
     operations, this section grants the office the ability, and 
     sets forth procedures, to set or adjust the fees it charges 
     applicants.
     Section 10. Supplemental Examination
       This provision authorizes a supplemental examination 
     process by which patent holders can correct errors or 
     omissions in past proceedings with the PTO. During the 
     process, additional information can be presented to the 
     office and, if it does not undermine the original patent 
     determination, the earlier omission of that information 
     cannot be later used in a lawsuit alleging inequitable 
     conduct.
     Section 11. Residency Requirement for Federal Circuit Judges
       This section repeals the requirement that judges on the 
     Federal Circuit reside within 50 miles of Washington, DC. The 
     duty station of Federal Circuit judges, however, will remain 
     in Washington.
     Section 12. Micro-Entity Defined
       Under current law, the PTO charges small businesses and 
     nonprofits lower fees than it charges large corporations. 
     This section establishes an even smaller category--truly 
     independent inventors--for which the PTO may make additional 
     accommodations.
     Section 13. Funding Agreements
       This section changes the formula for what universities, 
     nonprofits, and others may do with royalties or other income 
     generated by inventions developed using federal funds. Under 
     current law, if such royalties exceed the annual budget of 
     the entity, 75 percent of the excess is returned to the 
     government. In order to encourage innovation and 
     commercialization, this section allows the entity to retain 
     85 percent of that excess for further research. The remainder 
     would be paid to the government.
     Section 14. Tax Strategies Deemed within Prior Art
       This section ends the patentability of tax strategies. The 
     bill, as reported, does not change the patentability of other 
     forms of business method patents.
     Section 15. Best Mode Requirement
       As part of a patent application, an applicant must disclose 
     the ``best mode'' for carrying out his or her invention. In 
     subsequent litigation an accused infringer can offer as a 
     defense that the best mode was not properly disclosed by the 
     patent holder. This section eliminates that defense, which 
     many consider subjective and possibly irrelevant, as the best 
     mode may change over time. Best mode disclosure remains a 
     requirement for patentability.
     Section 16. Technical Amendments
       This section contains technical amendments to reorganize 
     the patent statute.
     Section 17. Clarification of Jurisdiction
       This section clarifies exclusive federal jurisdiction over 
     patent claims.
     Section 18. Effective Date
       Except where otherwise provided by specific provisions in 
     the Act, the effective date of the Act is 12 months after 
     enactment, meaning it would apply to all patents issued on or 
     after that date.


                        Administration Position

       As of the publication of this Notice, no Statement of 
     Administration Policy (SAP) has been issued.


                                  Cost

       As of the publication of this Notice, no Congressional 
     Budget Office cost estimate for S. 23 has been issued.


                          Possible Amendments

       At this time, there is no unanimous consent agreement with 
     respect to consideration of S. 23 or limiting the submission 
     of amendments.
                                  ____


                   Summary of the Managers' Amendment

       The title is changed to the ``America Invents Act''.
       The date of the repeal of statutory invention 
     registrations, which are used only in first-to-invent, is 
     changed to conform to the date of the switch to first to 
     file.
       All remaining damages language--gatekeeper, sequencing, and 
     recodification of current law as subsection (a)--is struck. 
     The bill now makes no changes to section 284.
       In PGR, the subsection imposing a six-month deadline on 
     filing after litigation is commenced is replaced with the 
     ``shoot first'' provision requiring a court to consider a PI 
     request without taking a PGR petition or its institution into 
     account if the patent owner sues within 3 months of the 
     issuance of patent. The six-month deadline did not work well 
     here--PGR can only be requested within 9 months of patent 
     issuance anyway, and no suit can be brought until the patent 
     issues. Also, a much broader range of issues can be raised in 
     PGR than in IPR, justifying more time for filing.
       PGR is limited to only FTF patents--no FTI patents can be 
     challenged in PGR. This is done because FTI patents raise 
     discovery-intensive invention-date and secret-prior-art 
     issues that would be difficult to address in an 
     administrative proceeding. This also effectively gives PTO a 
     much easier ramp up for PGR. In light of this change, the 
     time for implementing PGR is moved back to 1 year after 
     enactment, so that it is done at the same time as new IPR is 
     implemented, which is PTO's preference.
       During the first four years after new IPR is implemented, 
     the Director has discretion to continue to use old inter 
     partes reexam. This is done because the Director believes his 
     reforms of the CRU have greatly improved old inter partes, 
     and it may actually work more efficiently than new IPR during 
     the ramp up. Old inter partes can also be used for PGR 
     proceedings that are instituted only on the basis of patents 
     and printed publications, which are the only issues that can 
     be raised in old inter partes (as well as new IPR).
       The codification of the TS Tech transfer-of-venue rule is 
     struck. TS Tech already applies as a matter of caselaw in the 
     Fifth Circuit. (The Federal Circuit applies regional circuit 
     law to procedural matters, and reads Fifth Circuit law as 
     applying the transfer of venue rule.) Complaints about venue 
     generally focus on EDTX, so there is little need to apply TS 
     Tech nationally, and it seemed odd for Congress to regulate 
     such matters in any event.
       A blue-slip fix to the Director's fee setting authority. 
     The revised language identifies

[[Page S1367]]

     with great specificity the sources of authority to impose 
     patent and trademark user fees, in order to avoid a violation 
     of the Origination Clause.
       A new provision requiring the Director to charge reduced 
     fees to small entities for use of accelerated examination.
       Language is added making clear that the repeal of the 
     Baldwin rule (which rule requires Federal Circuit judges to 
     live within 50 miles of Washington, D.C.) shall not be 
     construed to require the AOC to provide judges office space 
     or staff outside of D.C.
       A PTO-approved broadening of the definition of 
     ``microentity,'' a status that entitles applicants to reduced 
     fees.
       In the tax patents section, language is added: [(1) 
     clarifying that the language does not bar patenting of tax 
     software that is novel as software--i.e., where the 
     innovation is in the software] (this may be dropped); and (2) 
     establishing that making tax strategies unpatentable shall 
     not be construed to imply that other business methods are 
     patentable or valid. In Bilski v. Kappos, (2010), the Supreme 
     Court interpreted Congress's 1999 enactment of a prior-user 
     right that only applied against business-method patents as 
     implying that business methods qualify as patentable subject 
     matter under section 101, which was enacted in 1793.
       Language is added to the part of the Holmes Group fix 
     allowing removal of patent cases from state to federal court 
     to clarify that derivative jurisdiction is not required in 
     such cases. Derivative jurisdiction is the doctrine that, 
     even if a federal district court would have had original 
     jurisdiction over an action, on removal, the district court 
     can only have jurisdiction if the state court from which the 
     action is removed properly had jurisdiction. (In other words, 
     the federal court's removal jurisdiction is regarded as 
     derivative of the state court's jurisdiction.) This silly 
     form-over-substance doctrine was abrogated by Congress, but 
     some courts have continued to read it into other parts of the 
     law, and thus it was thought best to also make clear here 
     that derivative jurisdiction is not required.
       The Schumer-Kyl business-methods proceeding, as modified to 
     accommodate industry concerns and PTO needs. In its 1998 
     State Street decision, the Federal Circuit greatly broadened 
     the patenting of business methods. Recent court decisions, 
     culminating in last year's Supreme Court decision in Bilski 
     v. Kappos, have sharply pulled back on the patenting of 
     business methods, emphasizing that these ``inventions'' are 
     too abstract to be patentable. In the intervening years, 
     however, PTO was forced to issue a large number of business-
     method patents, many or possibly all of which are no longer 
     valid. The Schumer proceeding offers a relatively cheap 
     alternative to civil litigation for challenging these 
     patents, and will reduce the burden on the courts of dealing 
     with the backwash of invalid business-method patents. The 
     proceeding has been limited since mark up so that: (1) only 
     defendants or accused infringers may invoke the proceeding; 
     (2) prior art is limited to old 102(a), which must be 
     publicly available, or prior art of old 102(a) scope that 
     shall be presumed to beat old 102(a) invention-date limits 
     but that falls outside the old 102(b) grace period (i.e., 
     effectively, old 102(b) prior art but limited to old 102(a)'s 
     publicly-available prior-art scope); (3) the proceeding may 
     not be used to challenge a patent while it is eligible for a 
     PGR challenge (i.e., an FTF patent during the first 9 months 
     after its issue); (4) the proceeding is available only for 
     four years; (5) district courts decide whether to stay 
     litigation based on the four-factor Broadcast Innovation 
     test, and the Federal Circuit reviews stay decision on 
     interlocutory appeal to ensure consistent application of 
     established precedent; (5) the definition of business-method 
     patent, which tracks the language of Class 705, is limited to 
     data processing relating to just a financial product or 
     service (rather than also to an enterprise).
       PTO is given greater flexibility in paying and compensating 
     the travel of APJs. A large number of APJs will need to be 
     recruited, trained, and retained to adjudicate PGR and new 
     IPR. This change's enhancements will be paid for out of 
     existing funds.
       The Coburn end to fee diversion. Currently, PTO fees go 
     into a Treasury account and are only available to the Office 
     as provided in appropriations. In the last two decades, about 
     $800 million in PTO user fees has been diverted from PTO to 
     other federal spending. The Coburn amendment creates a 
     revolving fund, giving PTO direct access to its fees without 
     the need for enactment of an appropriations act.
       Budget Committee paygo language is added at the end.

  Mr. KOHL. Mr. President, I rise today in support of S. 23, the 
America Invents Act. This bipartisan bill is the product of a great 
deal of hard work and negotiation, and I congratulate Senators Leahy, 
Hatch and Grassley on their accomplishment. This bill is a reasonable 
compromise that will update and strengthen our U.S. Patent system so 
that American businesses can better compete in the 21st Century.
  The American system of patenting inventions has helped make our 
country the center of innovation for more than two centuries. The 
America Invents Act will ensure that inventors and those who invest in 
their discoveries are able to rely on their most important asset--their 
patent. Patents are vital components in the research and development 
cycle that help create small businesses and jobs.
  In my home State of Wisconsin, we have a strong tradition of 
invention and innovation--from the invention of the first practical 
typewriter in 1869 to a cure for Rickets disease in 1925 to cutting 
edge drug therapies for the 21st Century. More than 50 Wisconsin based 
startup companies have been fueled by patents that resulted from 
research at the University of Wisconsin. And there are countless other 
Wisconsin companies that rely on patents to sustain and grow their 
business.
  I am able to support the Patent Reform Act because of the 
improvements made to the bill since it was first introduced. As is the 
nature of compromise, I recognize that we cannot all get every change 
we want. I thank Senator Leahy for making substantial changes to 
accommodate many of my concerns.
  Specifically, I appreciate your willingness to strike a major section 
of the bill regarding prior user rights--which would have done serious 
harm to the University of Wisconsin and its patent licensing business. 
The bill incorporates additional changes that were important to 
research universities, including provisions related to venue, grace 
period for first inventor to file, oath, and collaborative research.
  Patent protection will be stronger with the inclusion of ``could have 
raised'' estoppel, strong administrative estoppel, and explicit 
statutory authority for the Patent and Trademark Office, PTO, to reject 
petitions by third parties and order joinder of related parties. 
Improvements have also been made regarding damages. Finally, I am 
pleased that we were able to address the PTO's funding needs in a way 
that maintains Congress' duty to carefully oversee the PTO while 
ensuring that it has the resources necessary to issue top quality 
patents in a timely manner.
  Again, I commend Senator Leahy for his many years of work on this 
bill, and I look forward to the House taking up this legislation.
  Mr. LEVIN. Mr. President, I thank my colleagues, Senator Leahy, who 
is the chairman of the Judiciary Committee, and Senator Grassley, who 
is the ranking Republican, for including in the Patent Reform Act a 
provision that a number of us have been working on for several years to 
stop the granting of tax strategy patents.
  The key provision contains the text of legislation that Senators 
Baucus, Grassley and I, as well as others, introduced earlier this 
year, S. 139, the Equal Access to Tax Planning Act, to end the 
troubling practice of persons seeking patents for tax-avoidance 
strategies. Issuing such patents perverts the Tax Code by granting what 
some could see as a government imprimatur of approval for questionable 
or illegal tax strategies, while at the same time penalizing taxpayers 
seeking to use legitimate strategies.
  Since 1998, when Federal courts ruled that business practices were 
eligible for patent protection, the Patent and Trademark Office has 
issued more than 130 patents for tax strategies, with more than 150 
applications pending. These patents are a terrible idea for two 
reasons.
  First, they may be providing unintended support for abusive tax 
shelters. Some unscrupulous tax shelter promoters may claim that the 
patent represents an official government endorsement of their tax 
scheme and evidence that the scheme would withstand IRS challenge. 
Given the well-documented problem we have with tax avoidance in this 
country, allowing persons to patent tax strategies is not only a waste 
of government resources needed elsewhere, but an invitation to 
wrongdoers to misuse those government resources to promote tax 
avoidance.
  Second, the granting of tax patents threatens to penalize taxpayers 
seeking to use legal tax strategies to minimize their tax bills. If a 
tax practitioner is the first to discover a legal advantage and secures 
a patent for it, that person could then effectively charge a toll for 
all other taxpayers to use the same strategy, even though as a matter 
of public policy all persons ought to be able to take advantage of the 
law to minimize their taxes. Companies could even patent a legal method 
to minimize their taxes and then

[[Page S1368]]

refuse to license that patent to their competitors in order to prevent 
them from lowering their operating costs. Tax patents could be used to 
hinder productivity and competition rather than foster it.
  Federal patent law is supposed to encourage innovation, productivity, 
and competition by encouraging inventors to innovate, secure in the 
knowledge that they can profit from their efforts. In the tax arena, 
there is already ample incentive for taxpayers to seek legitimate ways 
of reducing their tax burden, as the wealth of advice and consulting in 
this area demonstrates. Injecting patents into the mix encourages 
abusive tax avoidance while raising the cost of legal tax planning at 
the same time, both to society's detriment.
  I introduced the first bill to ban tax patents back in 2007. Since 
then, Senators on both sides of the aisle have been trying to get this 
problem fixed. The language in the bill before us today is designed to 
put a halt to the issuance of patents for tax strategies once and for 
all, including for the 155 pending applications. Although the bill does 
not apply on its face to the 130-plus tax patents already granted, if 
someone tries to enforce one of those patents in court by demanding 
that a taxpayer provide a fee before using it to reduce their taxes, I 
hope a court will consider this bill's language and policy 
determination and refuse to enforce the patent as against public 
policy.
  The tax patent provisions of this bill are significant, but they are 
not the only reasons to support passage. This legislation will create 
jobs, help keep our manufacturers competitive and strengthen and expand 
the ability of our universities to conduct research and turn that 
research into innovative products and processes that benefit Michigan 
and our Nation. It also will assist the new satellite Patent and Trade 
Office that will be established in Detroit by modernizing the patent 
system and improving efficiency of patent review and the hiring of 
patent examiners. One objective of the new office in Detroit is to 
recruit patent examiners to reduce the backlog of patent applications. 
This legislation is a huge step forward in that effort.
  Mr. GRASSLEY. Mr. President, I want to discuss an important component 
of the patent reform legislation that protects against frivolous and 
vexatious litigation arising from qui tam suits for false patent 
markings. The bill before the Senate abolishes this qui tam procedure 
and I would like to discuss why I support doing so, even though I am 
generally a strong proponent of using the qui tam mechanism to protect 
American taxpayers.
  The qui tam provisions of the False Claims Act specifically allow the 
government to intervene and control litigation when the government has 
been harmed through false or fraudulent billing. The qui tam provisions 
of the patent law do not.
  In fact, a recent Federal court decision struck down the qui tam 
provisions of the patent law as unconstitutional because the false 
patent marking statute does not give the executive branch sufficient 
control over the litigation to ensure that the President can ``take 
Care that the Laws be faithfully executed.''
  As I mentioned, the False Claims Act is completely different. The 
Justice Department has the right to intervene, to prosecute, or to 
dismiss a False Claims Act qui tam. I was instrumental in ensuring such 
controls on frivolous lawsuits were inserted into the False Claims Act 
and the absence of similar controls in the false patent marking law is 
problematic.
  I would not want anyone watching the patent reform bill to conclude 
that Congress will weaken or undermine the False Claims Act qui tam 
statute because we have stricken a flawed qui tam provision in the 
patent bill. I will vigorously defend the False Claims Act and urge my 
colleagues to do the same. The False Claims Act is the Federal 
Government's strongest weapon to protecting the taxpayer dollars from 
fraud and abuse. It would be a serious miscalculation for anyone to 
imply or attempt to characterize my support for the removal of the 
patent qui tam as a starting point for striking or reforming the False 
Claims Act qui tam provisions.
  The False Claims Act qui tam provisions have helped the Federal 
Government recover over $28 billion since I amended it to add the qui 
tam provisions in 1986. With the recent amendments to the False Claims 
Act that I, along with Senator Leahy, included in the Fraud Enforcement 
and Recovery Act of 2009, the False Claims Act will continue to serve 
as the Federal Government's most valuable tool to combat fraud in 
government programs for decades to come.
  Mr. KYL. Mr. President, I rise today to make a few comments about the 
present bill, which has now been retitled the ``America Invents Act.'' 
This bill is almost identical to the managers' amendment that was 
negotiated by Chairman Leahy and then-Ranking Member Sessions during 
the last Congress and announced in March 2010. I cosponsored and 
strongly supported that managers' amendment, which substantially 
addressed all of the concerns that Senators Feingold, Coburn, and I 
raised in our Minority Report to the 2009 committee report for the 
bill, Senate Report 111-18, at pages 53 through 61. As the bill was 
renegotiated in the fall of 2009 and early 2010, improvements and 
corrections were made throughout the bill, and a number of new 
provisions were added. I would like to take a moment to comment on some 
of those changes and additions.
  In section 2(a) of the bill, the definition of ``effective filing 
date'' in section 100(i) has been modified in several ways. In 
subparagraph (A), the word ``actual'' is added before ``filing date.'' 
When the word ``filing date'' is used in current law, it is sometimes 
used to mean the actual filing date and sometimes used to mean the 
effective filing date. Since section 100 is a definitional section, it 
should be clear in its language, and thus the word ``actual'' is added 
in order to avoid a lingering ambiguity. Also, the language of 
subparagraph (B) is streamlined to clarify that a patent gets the 
benefit or priority of an earlier application if it is entitled to such 
benefit or priority as to the invention in question under the relevant 
code sections, which require satisfaction of the requirements of 
section 112(a), a specific reference to the prior application, and 
copendency.
  The new language makes it clear that the definition of effective-
filing date does not create new rules for entitlement to priority or 
the benefit of an earlier filing date. Rather, the definition simply 
incorporates the rules created by existing code sections. Also, since 
those rules expressly require an enabling disclosure, there is no need 
to separately require such disclosure in this definition, and thus the 
reference at the end of subparagraph (B) to the first paragraph of 
section 112 that appeared in earlier versions of the bill is dropped. 
Keeping that citation would have created a negative implication that 
unless such a requirement of section 120 was expressly incorporated 
into the definition of effective-filing date, then such requirement 
need not be satisfied in order to secure the benefit of an earlier 
effective-filing date.
  It should be noted that, for purposes of subparagraph (A) of section 
100(i)(1), a patent or application for patent contains a claim to an 
invention even if the claim to the particular invention was added via 
an amendment after the application was filed. Of course, such an 
amendment may not introduce new matter into the application--it may 
only claim that which was disclosed in the application.
  Finally, new section 100(i)(2) of title 35 governs the effective date 
of reissued patents. Consistent with section 251, this new paragraph 
effectively treats the reissue as an amendment to the patent, which is 
itself treated as if it were a still-pending application. It bears 
emphasis that the first paragraph of section 251, which is designated 
as subsection (a) by this bill, bars the introduction of new matter in 
an application for reissue. Moreover, paragraph (3) of section 251, now 
designated as section 251(c), makes the rules governing applications 
generally applicable to reissues. A reissue is treated as an amendment 
to the patent, and the last sentence of section 132(a) bars the 
introduction of new matter in an amendment. See In re Rasmussen, 650 
F.2d 1212, 1214-15, CCPA 1981. Thus a claim that relies for its support 
on new matter introduced in a reissue would be invalid.
  Section 2(b) of the bill recodifies section 102 of title 35. In the 
present bill, this recodification is reorganized by

[[Page S1369]]

consolidating all exceptions to the definition of prior art in section 
102(b)--and excluding from subsection (b) provisions that do not define 
exceptions to prior art, such as the CREATE Act and the definition of 
the effective date of patents and applications cited as prior art. Thus 
what previously appeared as section 102(a)(1)(B) in earlier versions of 
the bill is now 102(b)(1)(A), and former paragraphs (3) and (4) of 
subsection (b) are now subsections (c) and (d), respectively.
  Also, the wording of subparagraph (B) of section 102(b)(2), which 
appeared at the same place in earlier versions of the bill, is changed 
so that it tracks the wording of subparagraph (B) of subsection (b)(1). 
These two subparagraph (B)s are intended to operate in the same way, 
and their previous differences in wording, although not substantive, 
tended to create an implication that they were intended to operate in 
different ways.
  Under the first subparagraph (B), at section 102(b)(1)(B), if an 
inventor publicly discloses his invention, no subsequent disclosure 
made by anyone, regardless of whether the subsequent discloser obtained 
the subject matter from the inventor, will constitute prior art against 
the inventor's subsequent application for patent in the United States. 
The parallel provision at section 102(b)(2)(B) applies the same rule to 
subsequent applications: if the inventor discloses his invention, a 
subsequently filed application by another will not constitute prior art 
against the inventor's later-filed application for patent in the United 
States, even if the other filer did not obtain the subject matter from 
the first-disclosing inventor. And of course, the inventor's earlier 
disclosure will constitute prior art that invalidates the other filer's 
subsequent application.

  In other words, under the regime of the two subparagraph (B)s, an 
inventor's disclosure of his invention to the public not only 
invalidates anyone else's subsequently filed application, but no one 
else's subsequent disclosure or filing of an application during the 1-
year grace period will constitute prior art against that inventor's 
application. The bill thus effectively creates a ``first to publish'' 
rule that guarantees patent rights in the United States to whoever 
discloses the invention to the public first.
  Of course, until the Europeans and the Japanese adopt a more 
substantial grace period, an inventor's pre-filing disclosure will 
prevent patenting in Europe and Japan. An inventor who is concerned 
about protecting his invention from theft, but who also wants to 
preserve his rights overseas, can instead file a provisional 
application in the United States. This inexpensive alternative protects 
the inventor's rights both in the United States and abroad.
  Another change that this bill makes to chapter 10 is that the CREATE 
Act, formerly at section 103(c) of title 35, has been moved to section 
102(c). The present bill departs from earlier versions of the bill by 
giving the CREATE Act is own subsection and making several clarifying 
and technical changes. In particular, the citation at the end of the 
chapeau is made more specific, and in paragraph (1) the words ``was 
developed'' are added because subject matter is not always ``made,'' 
but is always ``developed.'' Also in the same paragraph, the reference 
to ``parties'' is replaced with ``1 or more parties'', to further 
clarify that not all parties to the joint research agreement need have 
participated in developing the prior art or making the invention. 
Finally, as noted previously, the definition of ``joint research 
agreement'' is moved to section 100, which contains other definitions 
relevant to CREATE. As section 2(b)(2) of this bill notes, these 
changes are made with the same ``intent'' to promote joint-research 
activities that animated the CREATE Act. None of the changes in this 
legislation alter the meaning of the original law.
  The present bill's new subsection 102(d) of title 35 makes several 
changes to earlier bills' version of this provision. Specifically, the 
chapeau of this subsection, which defines the effective date of patents 
and applications cited as prior art, is modified in the first clause by 
expressly stating the purpose of this subsection, and by otherwise 
clarifying the language employed. In paragraph (1), a clause is added 
at the outset to make clear that the paragraph applies only if 
paragraph (2) does not apply. Paragraph (2) is unmodified save for the 
nonsubstantive addition of a comma.
  Though the language of section 102(d)(2) remains unchanged from 
earlier versions of the bill, that language deserves some comment. 
Paragraph (2) is intended to overrule what remains of In re Wertheim, 
646 F.2d 527 (CCPA 1981), which appeared to hold that only an 
application that could have become a patent on the day that it was 
filed can constitute prior art against another application or patent. 
See id. at 537, noting that:

       If, for example, the PTO wishes to utilize against an 
     applicant a part of that patent disclosure found in an 
     application filed earlier than the date of the application 
     which became the patent, it must demonstrate that the 
     earlier-filed application contains sections 120/112 support 
     for the invention claimed in the reference patent. For if a 
     patent could not theoretically have issued the day the 
     application was filed, it is not entitled to be used against 
     another as `secret prior art,' the rationale of Milburn being 
     inapplicable.

  Wertheim, however, was already almost completely overruled by the 
American Inventors Protection Act of 1999, Public Law 106-113, which, 
by making any published application prior art, effectively displaced 
Wertheim's requirement that the application have been capable of 
becoming a patent on the day that it was filed. Two recent BPAI 
decisions, Ex parte Yamaguchi, 88 U.S.P.Q.2d 1606, BPAI 2008, and Ex 
parte Jo Anne Robbins, 2009 WL 3490271, BPAI October 26, 2009, confirm 
this overruling, holding that any application that is ultimately 
published is prior art as of its filing date, and that provisional 
applications--which typically cannot become patents as filed--also are 
prior art. See Robbins at page *4, noting that ``[i]n our opinion, a 
published patent application which is statutorily destined to be 
published constitutes prior art for all that it discloses on its 
earliest filing date,'' and Yamaguchi at page 9, noting that ``a 
provisional application--like a regular utility application--
constitutes prior art for all that it teaches,'' and the same case at 
page 13, Judge Torczon concurring that ``[i]f [the majority] is 
correct, In re Wertheim is no longer tenable authority.'' Moreover, 
these BPAI decisions' holding that a patent has a patent-defeating 
effect as of the filing date of the provisional application to which it 
claims priority was recently affirmed by the Federal Circuit in In re 
Giacomini, 612 F.3d 1380 (Fed. Cir. 2010).
  The caselaw also teaches that parent applications to the published 
application set the effective date of the prior art if they describe 
the invention and the invention is enabled before the filing of the 
patent under review, even if that prior-art description, standing 
alone, may not be adequate to show enablement. This point is 
illustrated by Application of Samour, 571 F.2d 559, CCPA 1978, which 
holds that prior art must be enabled before the effective filing date 
of the application or patent under review, but this enablement need not 
be disclosed at the same place and time as the primary reference relied 
on as prior art--and can even come later than the primary reference, so 
long as it still comes before the effective-filing date of the 
application under review. Samour at page 563, notes that:

     we do not believe that a reference showing that a method of 
     preparing the claimed subject matter would have been known 
     by, or would have been obvious to, one of ordinary skill in 
     the pertinent art, must antedate the primary reference. The 
     critical issue under 35 U.S.C. Sec. 102(b) is whether the 
     claimed subject matter was in possession of the public more 
     than one year prior to applicant's filing date, not whether 
     the evidence showing such possession came before or after the 
     date of the primary reference.

  Technically, In re Wertheim still controls the prior-art effect of 
the limited universe of applications that are not published before they 
are patented, but the Office's examination guidelines ignore even this 
vestigial effect, and extend prior-art effect to all prior applications 
that describe an invention as of the date of their filing. MPEP 
21360.03, part IV, which notes that:

       For prior art purposes, a U.S. patent or patent application 
     publication that claims the benefit of an earlier filing date 
     under 35 U.S.C. 120 of a prior nonprovisional application 
     would be accorded the earlier filing date as its prior art 
     date under 35 U.S.C. 102(e), provided the earlier-filed 
     application properly supports the subject matter relied upon 
     in any rejection in compliance with 35 U.S.C. Sec. 112, first 
     paragraph.


[[Page S1370]]


  A prior-art parent application, however, must be copendent, have some 
continuity of disclosure, and be specifically referred to in the patent 
or published application. The continuous disclosure must be a 
description of the subject matter that is relied on as prior art. That 
description can become narrower in the intervening applications. But so 
long as there is still some description of the subject matter in the 
intervening applications, the Office can rely on an earlier 
application's fuller description as prior art.
  The language of paragraph (2) is somewhat indirect in its imposition 
of these requirements. They are mostly incorporated through the 
paragraph's mandate that the prior-art application be ``entitled to 
claim * * * priority or benefit'' under section 120 et al. In section 
100(i), which defines the effective-filing date of the patent under 
review, the patent must be entitled to the priority or benefit itself 
under the relevant sections. Here again in section 102(d), however, the 
application need only be entitled to claim the benefit or priority 
under those sections. This difference in language, which offers an 
excellent example of why people hate lawyers, distinguishes between the 
core requirement of section 120 et al.--that the application include an 
enabling disclosure--and the ministerial requirements of that section--
that the application be copendent and specifically referenced. In 
effect, an application that meets the ministerial requirements of 
copendency and specific reference is entitled to claim the benefit or 
priority, but only an application that also offers an enabling 
disclosure is actually entitled to the benefit or priority itself. The 
language of paragraph (2) also expressly requires that the earliest 
application ``describe'' the subject matter, and the Office has 
traditionally required that this disclosure be continuous, as discussed 
above.
  Paragraph (2) can be criticized as codifying current BPAI common law 
and examination practice without fully describing that practice. 
However, a fully descriptive codification of the principles codified 
therein would be unduly long, requiring repetition of the already 
somewhat inelegant language of section 120.
  Another aspect of the bill's changes to current section 102 also 
merits special mention. New section 102(a)(1) makes two important 
changes to the definition of non-patent prior art. First, it lifts 
current law's geographic limits on what uses, knowledge, or sales 
constitute prior art. And second, it limits all non-patent prior art to 
that which is available to the public. This latter change is clearly 
identified in Senate Report 110-259, the report for S. 1145, the 
predecessor to this bill in the 110th Congress. The words ``otherwise 
available to the public'' were added to section 102(a)(1) during that 
Congress's Judiciary Committee mark up of the bill. The word 
``otherwise'' makes clear that the preceding clauses describe things 
that are of the same quality or nature as the final clause--that is, 
although different categories of prior art are listed, all of them are 
limited to that which makes the invention ``available to the public.'' 
As the committee report notes at page 9, ``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 [i.e., the relevant prior art] 
must be publicly available.'' In other words, as the report notes, 
``[p]rior art will be measured from the filing date of the application 
and will include all art that publicly exists prior to the filing date, 
other than disclosures by the inventor within one year of filing.''

  The Committee's understanding of the effect of adding the words ``or 
otherwise available to the public'' is confirmed by judicial 
construction of this phraseology. Courts have consistently found that 
when the words ``or otherwise'' or ``or other'' are used to add a 
modifier at the end of a string of clauses, the modifier thus added 
restricts the meaning of the preceding clauses. Strom v. Goldman, Sachs 
& Co., 202 F.3d 138, 146-47, Second Cir. 1999, states that:

       The position of the phrase `or any other equitable relief' 
     in the sentence in which it appears indicates that it 
     modifies one or both of the two specific remedies referred to 
     just before it in the same sentence * * * [T]he use of the 
     words `other' immediately after the reference to back pay and 
     before `equitable relief' demonstrated Congress' 
     understanding that the back pay remedy is equitable in 
     nature.

  Strom construed the phrase ``may include * * * back pay, * * * or any 
other equitable relief.'' Universal City Studios, Inc. v. Reimerdes, 
111 F.Supp.2d 294, 325, S.D.N.Y. 2000, holds that:

       The statute makes it unlawful to offer, provide or 
     otherwise traffic in described technology. To `traffic' in 
     something is to engage in dealings in it, conduct that 
     necessarily involves awareness of the nature of the subject 
     of the trafficking. * * * The phrase `or otherwise traffic 
     in' modifies and gives meaning to the words `offer' and 
     `provide.' In consequence, the anti-trafficking provision of 
     the DMCA is implicated where one presents, holds out or makes 
     a circumvention technology or device available, knowing its 
     nature, for the purpose of allowing others to acquire it.

  Reimerdes construed the phrase ``offer to the public, provide, or 
otherwise traffic in any technology.'' Williamson v. Southern Regional 
Council, Inc., 223 Ga. 179, 184, 154 S.E.2d 21, 25 (Ga. 1967), noted 
that:

       The words `carrying on propaganda' in this statute must be 
     construed in connection with the words following it, `or 
     otherwise attempting to influence legislation.' The use of 
     the word `otherwise' indicates that `carrying on propaganda' 
     relates to `attempting to influence legislation.'

  Williamson construed the phrase ``carrying on propaganda, or 
otherwise attempting to influence legislation.''
  In other words, the Judiciary Committee's design in adding the 2007 
amendment to section 102(a)(1), as expressed in the relevant committee 
report, is consistent with the unanimous judicial construction of the 
same turn of phrase. It appears that every court that has considered 
this question agrees with the committee's understanding of the meaning 
of this language.
  Moreover, the fact that the clause ``or otherwise available to the 
public'' is set off from its preceding clauses by a comma confirms that 
it applies to both ``public use'' and ``on sale.'' Finisar Corp. v. 
DirecTV Group, Inc., 523 F.3d 1323, 1336, Fed. Cir. 2008, notes that 
``when a modifier is set off from a series of antecedents by a comma, 
the modifier should be read to apply to each of those antecedents.'' 
Thus new section 102(a)(1) imposes a public-availability standard on 
the definition of all prior art enumerated by the bill--an 
understanding on which the remainder of the bill is predicated.
  Whether an invention has been made available to the public is the 
same inquiry that is undertaken under existing law to determine whether 
a document has become publicly accessible, but is conducted in a more 
generalized manner to account for disclosures of information that are 
not in the form of documents.

       A document is publicly accessible if it has been 
     disseminated or otherwise made available to the extent that 
     persons interested and ordinarily skilled in the subject 
     matter or art, exercising reasonable diligence, can locate it 
     and recognize and comprehend therefrom the essentials of the 
     claimed invention without need of further research or 
     experimentation.

  That is a quotation from Cordis Corp. v. Boston Scientific Corp., 561 
F.3d 1319, 1333, Fed. Cir. 2009. That decision also states that ``[i]n 
general, accessibility goes to the issue of whether interested members 
of the relevant public could obtain the information if they wanted 
to.'' See also In re Lister, 583 F.3d 1307, Fed. Cir. 2009.
  Another important aspect of public availability or accessibility is 
the doctrine of inherency. ``Under the doctrine of inherency, if an 
element is not expressly disclosed in a prior art reference, the 
reference will still be deemed to anticipate a subsequent claim if the 
missing element is necessarily present in the thing described in the 
reference, and that it would be so recognized by persons of ordinary 
skill,'' a point noted in Rosco, Inc. v. Mirror Lite Co., 304 F.3d 
1373, 1380, Fed. Cir. 2002. This doctrine applies to products sold to 
the public as well as published references. Thus once a product is sold 
on the market, any invention that is inherent to the product becomes 
publicly available prior art and cannot be patented.

  The present bill's elimination of the patent forfeiture doctrines in 
favor of a general public availability standard also limits and 
reconciles the various purposes that previously have been ascribed to 
section 102's definition of prior art. Current 102(b), which imposes 
the forfeiture doctrines, has been described as being ``primarily 
concerned

[[Page S1371]]

with the policy that encourages an inventor to enter the patent system 
promptly,'' a quotation from Woodland Trust v. Flowertree Nursery, 
Inc., 148 F.3d 1368, 1370, Fed. Cir. 1998. And the ``overriding concern 
of the on-sale bar'' has been described as ``an inventor's attempt to 
commercialize his invention beyond the statutory term,'' as stated in 
Netscape Communications Corp. v. Konrad, 295 F.3d 1315, 1323, Fed. Cir. 
2002.
  By adopting the first-to-file system, however, the present bill 
already provides ample incentive for an inventor to enter the patent 
system promptly. There is no need to also require forfeiture of patents 
simply because the inventor has made some use of the invention that has 
not made the invention available to the public. And the current on-sale 
bar imposes penalties not demanded by any legitimate public interest. 
There is no reason to fear ``commercialization'' that merely consists 
of a secret sale or offer for sale but that does not operate to 
disclose the invention to the public.
  The current forfeiture doctrines have become traps for unwary 
inventors and impose extreme results to no real purpose. In 
Beachcombers International, Inc. v. Wildewood Creative Products, Inc., 
31 F.3d 1154, 1159-60, Fed. Cir. 1994, for example, an improved 
kaleidoscope was held to be ``in public use'' within the meaning of 
current section 102(b) because the inventor had demonstrated the device 
to several guests at a party in her own home. And in JumpSport, Inc. v. 
Jumpking, Inc., 2006 WL 2034498, Fed. Cir. July 21, 2006, the court of 
appeals affirmed the forfeiture of a patent for a trampoline enclosure 
on the ground that the enclosure had been in ``public use'' because 
neighbors had been allowed to use it in the inventor's back yard. 
Obviously, neither of these uses made the inventions accessible to 
persons interested and skilled in the subject matter. The only effect 
of rulings like these is to create heavy discovery costs in every 
patent case, and to punish small inventors who are unaware of the 
pitfalls of the current definition of prior art.
  The present bill's new section 102(a) precludes extreme results such 
as these and eliminates the use of the definition of prior art to 
pursue varied goals such as encouraging prompt filing or limiting 
commercialization. Instead, the new definition of prior art will serve 
only one purpose: ``to prevent the withdrawal by an inventor of that 
which was already in the possession of the public,'' as noted in 
Bruckelmyer v. Ground Heaters, Inc., 335 F.3d 1374, 1378, Fed. Cir. 
2006. The new definition is ``grounded on the principle that once an 
invention is in the public domain, it is no longer patentable by 
anyone,'' as stated in SRI International, Inc. v. Internet Security 
Systems, Inc., 511 F.3d 1186, 1194, Fed. Cir. 2008.
  The present definition thus abrogates the rule announced in Egbert v. 
Lippman, 104 U.S. 333, 336 (1881), one of the more unusual patent cases 
to come before the Supreme Court. That case held that:

     whether the use of an invention is public or private does not 
     necessarily depend upon the number of persons to whom its use 
     is known. If an inventor, having made his device, gives or 
     sells it to another, to be used by the donee or vendee, 
     without limitation or restriction, or injunction of secrecy, 
     and it is so used, such use is public, even though the use 
     and knowledge of the use may be confined to one person.

  Egbert v. Lippman is another case whose result can fairly be 
characterized as extreme. The invention there was an improved corset 
spring. The evidence showed only that the inventor had given the 
improved corset spring to one lady friend, who gave it to no other, and 
who used it in a corset, which of course was worn under her dress. The 
U.S. Supreme Court deemed this to be a ``public use'' of the invention 
within the meaning of section 102(b).
  Justice Miller dissented. He began by noting that the word ``public'' 
in section 102(b) is ``an important member of the sentence.'' Justice 
Miller went on to conclude:

       A private use with consent, which could lead to no copy or 
     reproduction of the machine, which taught the nature of the 
     invention to no one but the party to whom such consent was 
     given, which left the public at large as ignorant of this as 
     it was before the author's discovery, was no abandonment to 
     the public, and did not defeat his claim for a patent. If the 
     little steep spring inserted in a single pair of corsets, and 
     used by only one woman, covered by her outer-clothing, and in 
     a position always withheld from public observation, is a 
     public use of that piece of steel, I am at a loss to know the 
     line between a private and a public use.

  In this bill's revisions to section 102, vindication has finally come 
to Justice Miller, albeit 130 years late.
  I emphasize these points about the bill's imposition of a general 
public availability standard and its elimination of secret prior art 
because they are no small matter. A contrary construction of section 
102(a)(1), which allowed private and non-disclosing uses and sales to 
constitute invalidating prior art, would be fairly disastrous for the 
U.S. patent system. First, the bill's new post-grant review, in which 
any validity challenge can be raised, would be utterly unmanageable if 
the validity of all patents subject to review under the new system 
continued to depend on discovery-intensive searches for secret offers 
for sale and non-disclosing uses by third parties. Only patents issued 
under the new prior-art rules can be efficiently reviewed under chapter 
32.
  Second, a general public-availability standard is a necessary 
accompaniment to this bill's elimination of geographic restrictions on 
the definition of prior art. As unwieldy as the current rules may be, 
at least those rules allow only those secret sales and private third-
party uses that occur in the United States to constitute prior art. 
Under the new regime, however, sales and uses occurring overseas will 
also constitute prior art. A sale or use that discloses an invention to 
the public is relatively hard to falsify. If the invention truly was 
made available to the public by sale or use, independent validation of 
that sale or use should be readily available. By contrast, the 
existence of a secret offer for sale, or a nondisclosing third-party 
use, largely will turn on the affidavits or statements of the parties 
to such an occurrence. Unfortunately, some foreign countries continue 
to have weak business ethics and few scruples about bending the rules 
to favor domestic interests over foreign competitors. A system that 
allowed foreign interests to invalidate a U.S. patent simply by 
securing statements from individuals that a secret offer for sale or 
non-disclosing third-party use of the invention had occurred in a 
foreign country would place U.S. inventors at grave risk of having 
their inventions stolen through fraud. That is not a risk that Congress 
is willing to accept.
  In section 2(c), the present bill, for clarity's sake, changes the 
previous bills' recodification of section 103 of title 35 by replacing 
the word ``though'' with ``, notwithstanding that''. The modified text 
reflects more conventional English usage. Also, in both the present 
bill and earlier versions, former subsection (b) of section 103 has 
been dropped, since it has already been subsumed in caselaw. And 
subsection (c), the CREATE Act, has been moved to subsection (d) of 
section 102.
  In section 2(e) of the present bill, an effective date is added to 
the repeal of statutory invention registrations. SIRs are needed only 
so long as interferences exist. The bill repeals the authority to 
initiate interferences 18 months after the date of enactment. The added 
effective-date language also repeals SIRs 18 months after enactment, 
making clear that preexisting SIRs will remain effective for purposes 
of pending interferences, which may continue under this bill.
  Section 2(e)(2) of the bill strikes the citation to section 115 from 
section 111(b)(8)'s enumeration of application requirements that do not 
apply to provisionals. This conforming change is made because, in 
section 3 of the bill, section 115 itself has been amended so that it 
only applies to nonprovisionals. In other words, there is no longer any 
need for section 111(b)(8) to except out the oath requirement because 
that requirement no longer extends to provisionals. There is no need 
for an exception to a requirement that does not apply.
  Sections 2(h) and (i) of the present bill make a number of changes to 
the previous bills' treatment of remedies for derivation. These changes 
are made largely at the Patent Office's suggestion. In particular, the 
new section 135 proceeding is simplified, the Office is given authority 
to implement the proceeding through regulations, the Office is 
permitted to stay a derivation proceeding pending an ex parte

[[Page S1372]]

reexamintion, IPR, or PGR for the earlier-filed patent, and the Office 
is permitted but not required to institute a proceeding if the Office 
finds substantial evidence of derivation. In lieu of a section 135 
proceeding, parties will be allowed to challenge a derived patent 
through a civil action under a revised section 291.
  New section 2(k) of the bill eliminates the qui tam remedy for false 
marking, while allowing a party that has suffered a competitive injury 
as a result of such marking to seek compensatory damages. Section 292 
of title 35 prohibits false patent marking and imposes a penalty of 
$500 for each such offense. Under current law, subsection (b) allows 
``any person'' to sue for the penalty, and requires only that one half 
of the proceeds of the suit shall go to the United States. Current 
subsection (b) is, in effect, a qui tam remedy for false marking, but 
without any of the protections and government oversight that normally 
accompany qui tam actions.
  The changes made by section 2(k) of the bill would allow the United 
States to continue to seek the $500-per-article fine, and would allow 
competitors to recover in relation to actual injuries that they have 
suffered as a result of false marking, but would eliminate litigation 
initiated by unrelated, private third parties.
  In recent years, patent attorneys have begun to target manufacturers 
of high-volume consumer products with section 292(b) actions. Since the 
fine of up to $500 is assessed for each article that is falsely marked, 
such litigants have an incentive to target products that are sold in 
high volume. Though one might assume that section 292 is targeted at 
parties that assert fictitious patents in order to deter competitors, 
such a scenario is almost wholly unknown to false-marking litigation. 
False-marking suits are almost always based on allegations that a valid 
patent that did cover the product has expired, but the manufacturer 
continued to sell products stamped with the patent, or allegations that 
an existing patent used to mark products is invalid or unenforceable, 
or that an existing and valid patent's claims should not be construed 
to cover the product in question.
  Indeed, a recent survey of such suits found that a large majority 
involved valid patents that covered the products in question but had 
simply expired. For many products, it is difficult and expensive to 
change a mold or other means by which a product is marked as patented, 
and marked products continue to circulate in commerce for some time 
after the patent expires. It is doubtful that the Congress that 
originally enacted this section anticipated that it would force 
manufacturers to immediately remove marked products from commerce once 
the patent expired, given that the expense to manufacturers of doing so 
will generally greatly outweigh any conceivable harm of allowing such 
products to continue to circulate in commerce.
  Indeed, it is not entirely clear how consumers would suffer any 
tangible harm from false marking that is distinct from that suffered 
when competitors are deterred from entering a market. Patent marking's 
primary purpose is to inform competitors, not consumers, that a product 
is patented. I doubt that consumers would take any interest, for 
example, in whether a disposable plastic cup is subject to a patent, to 
take one case recently decided by the courts. Even less clear is how 
the consumer would be harmed by such marking, absent a deterrence of 
competition. Current section 292(b) creates an incentive to litigate 
over false marking that is far out of proportion to the extent of any 
harm actually suffered or the culpability of a manufacturer's conduct.
  To the extent that false patent marking deters competition, the 
bill's revised section 292(b) allows those competitors to sue for 
relief. This remedy should be more than adequate to deter false marking 
that harms competition. And to the extent that false marking somehow 
harms the public in a manner distinct from any injury to competitors 
and competition, revised section 292(a) would allow the United States 
to seek relief on behalf of the public. The Justice Department can be 
expected to be more judicious in its use of this remedy than is a 
private qui tam litigant seeking recovery that will benefit him 
personally. These revisions to section 292 should restore some 
equilibrium to this field of litigation.
  Finally, because the Federal Circuit's recent decision in Forest 
Group, Inc. v. Bon Tool Co., 590 F.3d 1295, Fed Cir. 2009, appears to 
have created a surge in false-marking qui tam litigation, the changes 
made by paragraph (1) of section 2(k) of the bill are made fully 
retroactive by paragraph (2). Because the courts have had difficulty 
properly construing effective-date language in recent years, paragraph 
(2) employs the language of section 7(b) of Public Law 109-366, the 
Military Commissions Act of 2006, which recently was given an 
authoritative construction in Boumediene v. Bush, 476 F.3d 981, 987, 
D.C. Cir. 2007. As that court noted when construing effective-date 
language identical to that of section 2(k)(2):

       Section 7(b) could not be clearer. It states that ``the 
     amendment made by subsection (a)''--which repeals habeas 
     jurisdiction--applies to ``all cases, without exception'' 
     relating to any aspect of detention. It is almost as if the 
     proponents of these words were slamming their fists on the 
     table shouting ``When we say `all,' we mean all--without 
     exception!''

  It is anticipated that courts will find the same clarity in the 
language of section 2(k)(2), and will apply the revised section 292(b) 
to cases pending at any level of appeal or review.
  Section 2(l) of the present bill modifies the statute of limitations 
for initiating a proceeding to exclude an attorney from practice before 
the Office. Under this provision, a section 32 proceeding must be 
initiated either within 10 years of when the underlying misconduct 
occurred, or within 1 year of when the misconduct is reported to that 
section of PTO charged with conducting section 32 proceedings, 
whichever is earlier.
  It is not entirely clear how the time limitation applies under 
present law. A recent D.C. Circuit case, 3M v. Browner, 17 F.3d 1461 
D.C. Cir. 1994, effectively makes the 5-year statute of limitations 
that generally applies to enforcement of civil penalties, at 28 U.S.C. 
Sec. 2462, run from the date when a violation occurred, rather than 
from the date when the enforcement agency first learned of the 
violation or reasonably could have learned of it. A recent Federal 
Circuit case, Sheinbein v. Dudas, 465 F.3d 493, 496, Fed. Cir. 2006, 
applies the section 2462 5-year limitation to section 32 proceedings, 
and applies 3M v. Browner's general rule, as described by Sheinbein, 
that ``[a] claim normally accrues when the factual and legal 
prerequisites for filing suit are in place.'' However, another court 
case, S.E.C. v. Koenig, 557 F.3d 736, 739, 7th Cir. 2009, has recently 
held that when a fraud has occurred, section 2462 only runs from when 
the fraud ``could have been discovered by a person exercising 
reasonable diligence.''
  Although the Federal Circuit appears to be inclined to follow 3M v. 
Browner, it is not entirely clear that it would reject Koenig's 
exception for cases of fraud, Koenig having been decided subsequently 
to Sheinbein. In any event, neither rule would be entirely satisfactory 
for section 32 proceedings. On the one hand, a strict five-year statute 
of limitations that runs from when the misconduct occurred, rather than 
from when it reasonably could have been discovered, would appear to 
preclude a section 32 proceeding for a significant number of cases of 
serious misconduct, since prosecution misconduct often is not 
discovered until a patent is enforced. On the other hand, a fraud 
exception that effectively tolls the statute of limitations until the 
fraud reasonably could have been discovered would be both overinclusive 
and underinclusive. Such tolling could allow a section 32 proceeding to 
be commenced more than two decades after the attorney's misconduct 
occurred. This is well beyond the time period during which individuals 
can reasonably be expected to maintain an accurate recollection of 
events and motivations. And yet, a fraud exception would also be 
underinclusive, since there is a substantial range of misconduct that 
PTO should want to sanction that does not rise to the level of fraud, 
which requires reliance on the perpetrator's misrepresentations.
  Section 2(1) of the bill adopts neither 3M v. Browner nor Koenig's 
approach, but instead imposes an outward limit of 10 years from the 
occurrence of the misconduct for the initiation of a section 32 
proceeding. A 10-year limit

[[Page S1373]]

would appear to allow a proceeding for the vast bulk of misconduct that 
is discovered, while also staying within the limits of what attorneys 
can reasonably be expected to remember.
  Paragraph (2) of section 2(l) requires the Office to report to 
Congress every two years on incidents of misconduct that it becomes 
aware of and would have investigated but for the 10 year limit. By 
providing a description of the character and apparent seriousness of 
such incidents, these reports will alert a future Congress if there is 
a need to revisit the 10-year limit. If the number and seriousness of 
such incidents is substantial enough, it may outweigh the interest in 
repose with regard to such matters.
  Section 2(m) of the present bill requires the Small Business 
Administration to report to Congress on the expected impact of the 
first-to-file system on small businesses. On the one hand, some parties 
have suggested that the first-to-file system will be relatively 
burdensome for small businesses because it will require patent 
applicants to file their applications earlier, and will require that 
more applications be filed for a complex invention. On the other hand, 
others have suggested that the first-to-file system will be far simpler 
and cleaner to administer, that the ability to file provisional 
applications mitigates the burden of filing earlier, and that by 
inducing American patent applicants to file earlier, the first-to-file 
system is more likely to result in American patents that are valid and 
have priority elsewhere in the industrialized world.
  Under current law, even if an American small business or independent 
inventor is legally sophisticated enough to maintain the type of third-
party validation that will preserve his priority under the first-to-
invent system, if that American inventor relies on first-to-invent 
rules to delay filing his application, he runs a serious risk that 
someone in another country will file an application for the same 
invention before the American does. Because the rest of the world uses 
the first-to-file system, even if the American inventor can prove that 
he was the first to have possession of the invention, the foreign filer 
would obtain the patent rights to the invention everywhere outside of 
the United States. In today's world, patent rights in Europe and Asia 
are valuable and important and cannot be ignored.
  Section 2(n) of the bill requires the Director to report on the 
desirability of authorizing prior-user rights, particularly in light of 
the adoption of a first-to-file system.
  In section 2(o) of the bill, the time for implementing the first-to-
file system has been moved to 18 months, so that Congress might have an 
opportunity to act on the conclusions or recommendations of the reports 
required by subsections (m) and (n) before first-to-file rules are 
implemented.
  Subsection (o) generally adopts the Office's preferred approach to 
transitioning to the first-to-file system. Under this approach, if an 
application contains or contained a claim to an invention with an 
effective-filing date that is 18 months after the date of enactment of 
the Act, the entire application is subject to the first-to-file regime. 
As a practical matter, this allows applicants to flip their 
applications forward into the first-to-file system, but prevents them 
from flipping backward into the first-to-invent universe once they are 
already subject to first-to-file rules.

  New section 100(i)(2) of title 35 ensures that reissues of first-to-
invent patents will remain subject to first-to-invent rules. Also, 
continuations of first-to-invent applications that do not introduce new 
matter will remain subject to first-to-invent rules. This last rule is 
important because if a continuation filed 18 months after the enactment 
of the Act were automatically subject to first-to-file rules, even if 
it introduced no new matter, the Office likely would see a flood of 
continuation filings on the eve of the first-to-file effective date. 
Under subsection (o), an applicant who wants to add to his disclosure 
after this section's 18-month effective date can choose to pull the 
whole invention into the first-to-file universe by including the new 
disclosure in a continuation of his pending first-to-invent 
application, or he can choose to keep the pending application in the 
first-to-file world by filing the new disclosure as a separate 
invention.
  Paragraph (2) of subsection (o) provides a remedy in situations in 
which interfering patents are issued, one of which remains subject to 
first-to-invent rules, and the other of which was filed earlier but has 
a later date of conception and has transitioned into the first-to-file 
system. Paragraph (2) subjects the latter patent to the first-to-invent 
rule, and allows the other patent owner and even third parties to seek 
invalidation of that later-conceived interfering patent on that basis.
  In section 3(a) of the present bill, the language of section 115 of 
title 35, the inventor's oath requirement, has been tidied up from that 
appearing in earlier versions of the bill. A grammatical error is 
corrected, an unnecessary parenthetical is struck, and stylistic 
changes are made.
  In the new section 115(g), a paragraph (2) has been added that allows 
the Director to require an applicant claiming the benefit of an 
earlier-filed application to include copies of previous inventor's 
oaths used in those applications. The Office cannot begin examining an 
application until it knows who those inventors are, since their 
identity determines which prior art counts as prior art against the 
claimed invention. However, a later-filed application is not currently 
required to name inventors. Such information is included in an 
application data sheet, but such data sheets are not always filed--the 
requirement is not statutory. Moreover, a later-filed application often 
will cite to multiple prior applications under section 120, each of 
which may list several inventors. Thus unless the Office can require 
the applicant to identify which oath or other statement applies to the 
later-filed application, the Office may not be able to figure out who 
the inventor is for that later application.
  In new section 115(h)(2), the present bill replaces the word 
``under'' with ``meeting the requirements of'' in order to conform to 
the formulation used later in the same sentence.
  In section 3(a)(3) of the bill, the changes to section 111(a) are 
modified to reflect that either an oath or declaration may be 
submitted.
  In section 3(b), the present bill adds a new paragraph (2) that 
modifies section 251 to allow an assignee who applied for a patent to 
also seek broadening reissue of the patent within two years of its 
issue. Notwithstanding the language of the fourth paragraph of current 
section 251, the Office currently does allow assignees to seek 
broadening reissue, so long as the inventor does not oppose the 
reissue. The Office views such unopposed applications for reissue as 
effectively being made ``in the name'' of the inventor. Expanding an 
assignee's right to seek broadening reissue is consistent with the 
bill's changes to sections 115 and 118, which expand assignees' rights 
by allowing assignees to apply for a patent against the inventor's 
wishes. If an assignee exercises his right to apply for a patent 
against the inventor's wishes, there is no reason not to allow the same 
assignee to also seek a broadening reissue within the section 251 time 
limits.
  Turning to the issue of damages, at the end of the 110th Congress, I 
introduced a patent reform bill, S. 3600, that proposed restrictions on 
the use of some of the factors that are used to calculate a reasonable 
royalty. Discussions with patent-damages experts had persuaded me that 
several of the metrics that are employed by litigants are unsound, 
unduly manipulable and subjective, and prone to producing excessive 
awards. The most significant of the restrictions that I proposed in S. 
3600 were limits on the use of supposedly comparable licenses for other 
patents to value the patent in suit, and limits on the use of 
standardized measures such as the so-called rule of thumb. These 
proposals are discussed in my statement accompanying the introduction 
of S. 3600, at 154 Congressional Record S9982, S9984-85, daily ed. 
September 27, 2008. I argued at the time that the only way to ensure 
that courts and juries would stop using these metrics ``is for Congress 
to tell the courts to disallow them.''
  It appears that I underestimated the courts' ability and willingness 
to address these problems on their own. And I certainly did not 
anticipate the speed with which they might do so. Three recent 
decisions from the Federal Circuit

[[Page S1374]]

have sharply restricted the use of licenses for supposedly comparable 
patents to value the patent in suit. Lucent Technologies, Inc. v. 
Gateway, Inc., 580 F.3d 1301, 1328, Fed. Cir. 2009, makes clear that 
mere ``kinship'' in a field of technology is not enough to allow use of 
evidence of licenses for other patents. Lucent bars the use of other-
patent licenses where there is no showing of the significance of such 
other patented inventions to their licensed products, or no showing of 
how ``valuable or essential'' those other licensed inventions are. In a 
similar vein, ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 870, 872, 
Fed. Cir. 2010, condemns the use of ``unrelated'' licenses for other 
patents as a measure of value and makes clear that a supposedly 
comparable license must have ``an economic or other link to the 
technology in question.'' And Wordtech Systems, Inc. v. Integrated 
Network Solutions, Inc., 609 F.3d 1308, 1320, Fed. Cir. 2010, recently 
reiterated that ``comparisons of past patent licenses to the 
infringement must account for the technological and economic 
differences between them.''

  And just two months ago, I was particularly pleased to see the 
Federal Circuit announce, in Uniloc USA, Inc. v. Microsoft Corp.,____ 
F.3d____, 2011 WL 9738, Fed. Cir. 2011, that the ``court now holds as a 
matter of Federal Circuit law that the 25 percent rule of thumb is a 
fundamentally flawed tool for determining a baseline royalty rate in a 
hypothetical negotiation.'' The court ruled that testimony based on the 
rule of thumb is inadmissible under the Daubert standard.
  The rule of thumb is a particularly arbitrary and inaccurate measure 
of patent value. I am glad to see that it will no longer be used.
  The Lucent case that I quoted earlier also struck down a damages 
award that was based on the entire market value of the infringing 
product. The court did so because there was no substantial evidence 
that the patented invention was the basis for consumer demand for the 
product. See Lucent, 580 F.3d at 1337-38. This holding addresses one of 
the principal complaints that I have heard about patent-damages 
calculations. And it effects a reform that Congress itself cannot 
enact. Existing law already required that the invention be the basis 
for consumer demand before damages can be assessed on the whole 
product, and the law already required parties to support their 
contentions with legally sufficient evidence. Congress can change the 
underlying law, but it cannot make the courts enforce it. The Lucent 
case did so.
  The limits that I had proposed in S. 3600 on the use of metrics such 
as the rule of thumb, and that bill's restrictions on the use of 
licenses for comparable patents to value the patent in suit, are 
rendered superfluous by these intervening judicial decisions. The 
present bill appropriately leaves patent-damages law to common law 
development in the courts.
  The present bill also makes no changes to the standard for awards of 
treble damages. As noted in the Minority Report to the committee report 
for the 2009 bill, Senate Report 111-18 at pages 58-60, that bill's 
grounds for allowing awards of treble damages were exceedingly narrow, 
and its safe harbors were overly broad. That bill would have created 
immunity from willfulness damages even for an infringer who was fully 
aware of a patent and had no real doubts as to its validity. It also 
created immunity, in some cases, even for infringers who had engaged in 
wanton conduct such as deliberate copying.
  Awards of enhanced damages play an important role in the U.S. patent 
system. It is not uncommon that a manufacturer will find itself in a 
situation where it feels great pressure to copy a competitor's patented 
invention. In a typical scenario, the sales staff report that they are 
losing sales because the competitor's product has a particular feature. 
The manufacturer's engineers discover that the feature is protected by 
a valid patent, and they find that they are unable to produce the same 
feature without infringing the patent. The company then has two 
choices. It can choose to continue to try to reproduce or substitute 
for the patented feature, and as it does so, continue to lose market 
share, and in some cases, lose convoyed sales of associated products or 
services. Or it can choose to infringe the competitor's patent.
  Treble damages are authorized in order to deter manufacturers from 
choosing the second option. Absent the threat of treble damages, many 
manufacturers would find that their most financially reasonable option 
is simply to infringe patents. Lost-profits damages are often hard to 
prove or unavailable. The patent owner is always entitled to a 
reasonable royalty, but under that standard, the infringer often can 
keep even some of the profits produced by his infringing behavior. 
Without treble damages, many companies would find it economically 
rational to infringe valid patents. Section 284's authorization of 
treble damages is designed to persuade these companies that their best 
economic option is to respect valid patents.
  If patents were routinely ignored and infringed, the patent system 
would cease to be of use to many companies and other entities that do 
some of our nation's most important research and development. These 
companies are profitable because people respect their patents and 
voluntarily pay a license. They would not be viable enterprises if they 
always had to sue in order to get paid for others' use of their 
patented inventions.
  By dropping the 2009 bill's restrictions on treble-damages awards, 
the present bill preserves these awards' role as a meaningful deterrent 
to reckless or wanton conduct. Ultimately, we want a treble-damages 
standard that creates an environment where the most economically 
reasonable option for a party confronted by a strong patent is to take 
a license--and where no one thinks that he can get away with copying.
  Section 4(c) of the present bill adds a new section 298 to title 35. 
This section bars courts and juries from drawing an adverse inference 
from an accused infringer's failure to obtain opinion of counsel as to 
infringement or his failure to waive privilege and disclose such an 
opinion. The provision is designed to protect attorney-client privilege 
and to reduce pressure on accused infringers to obtain opinions of 
counsel for litigation purposes. It reflects a policy choice that the 
probative value of this type of evidence is outweighed by the harm that 
coercing a waiver of attorney-client privilege inflicts on the 
attorney-client relationship. Permitting adverse inferences from a 
failure to procure an opinion or waive privilege undermines frank 
communication between clients and counsel. It also feeds the cottage 
industry of providing such opinions--an industry that is founded on an 
unhealthy relationship between clients and counsel and which amounts to 
a deadweight loss to the patent system. Some lawyers develop a 
lucrative business of producing these opinions, and inevitably become 
aware that continued requests for their services are contingent on 
their opinions' always coming out the same way--that the patent is 
invalid or not infringed. Section 298 reflects legislative skepticism 
of the probative value of such opinions.
  Section 298 applies to findings of both willfulness and intent to 
induce infringement--and thus legislatively abrogates Broadcom Corp. v. 
Qualcomm Inc., 543 F.3d 683, Fed. Cir. 2008. That case held, at page 
699, that:

       Because opinion-of-counsel evidence, along with other 
     factors, may reflect whether the accused infringer `knew or 
     should have known' that its actions would cause another to 
     directly infringe, we hold that such evidence remains 
     relevant to the second prong of the intent analysis. 
     Moreover, we disagree with Qualcomm's argument and further 
     hold that the failure to procure such an opinion may be 
     probative of intent in this context.

  Section 5 of the bill has been substantially reorganized and modified 
since the 2009 bill. In general, the changes to this part of the bill 
aim to make inter partes and post-grant review into systems that the 
Patent Office is confident that it will be able to administer. The 
changes also impose procedural limits on post-grant administrative 
proceedings that will prevent abuse of these proceedings for purposes 
of harassment or delay.
  Accused infringers, however, also will benefit from some of the 
changes made by the present bill. The bill eliminates current law's 
requirement, at section 317(b) of title 35, that an inter partes 
reexamination be terminated if litigation results in a final judgment. 
It also removes the bar on challenging pre-1999 patents in inter partes 
proceedings. All patents can now be challenged in inter partes review.
  In addition, the bill creates a new post-grant review in which a 
patent

[[Page S1375]]

can be challenged on any validity ground during the first nine months 
after its issue. Challengers who use this proceeding will be estopped 
in litigation from raising only those issues that were raised and 
decided in the post-grant review, rather than all issues that could 
have been raised, the standard employed in inter partes reexamination.
  The present bill also softens the could-have-raised estoppel that is 
applied by inter partes review against subsequent civil litigation by 
adding the modifier ``reasonably.'' It is possible that courts would 
have read this limitation into current law's estoppel. Current law, 
however, is also amenable to the interpretation that litigants are 
estopped from raising any issue that it would have been physically 
possible to raise in the inter partes reexamination, even if only a 
scorched-earth search around the world would have uncovered the prior 
art in question. Adding the modifier ``reasonably'' ensures that could-
have-raised estoppel extends only to that prior art which a skilled 
searcher conducting a diligent search reasonably could have been 
expected to discover.
  Section 5(a) of the 2009 version of the bill, which would amend 
section 301, has been modified and moved to section 5(g) of the bill. 
This provision allows written statements of the patent owner regarding 
claim scope that have been filed in court or in the Office to be made a 
part of the official file of the patent, and allows those statements to 
be considered in reexaminations and inter partes and post-grant reviews 
for purposes of claim construction. This information should help the 
Office understand and construe the key claims of a patent. It should 
also allow the Office to identify inconsistent statements made about 
claim scope--for example, cases where a patent owner successfully 
advocated a claim scope in district court that is broader than the 
``broadest reasonable construction'' that he now urges in an inter 
partes review.
  The present bill preserves the agreement reached in the 2009 
Judiciary Committee mark up to maintain the current scope of inter 
partes proceedings: only patents and printed publications may be used 
to challenge a patent in an inter partes review.
  One important structural change made by the present bill is that 
inter partes reexamination is converted into an adjudicative proceeding 
in which the petitioner, rather than the Office, bears the burden of 
showing unpatentability. Section 5(c) of the previous bill eliminated 
language in section 314(a) that expressly required inter partes 
reexamination to be run as an examinational rather than adjudicative 
proceeding, but failed to make conforming changes eliminating 
provisions in section 314(b) that effectively would have required inter 
partes reexamination to still be run as an examinational proceeding. In 
the present bill, section 316(a)(4) gives the Office discretion in 
prescribing regulations governing the new proceeding. The Office has 
made clear that it will use this discretion to convert inter partes 
into an adjudicative proceeding. This change also is effectively 
compelled by new section 316(e), which assigns to the petitioner the 
burden of proving a proposition of unpatentability by a preponderance 
of the evidence. Because of these changes, the name of the proceeding 
is changed from ``inter partes reexamination'' to ``inter partes 
review.''
  The present bill also makes changes to the petition requirements that 
appear in new sections 312(a)(5) and 322(a)(5). These sections have 
been modified to require petitioners to provide to the patent owner the 
same identification of any real parties in interest or privies that is 
provided to the Office. The Office anticipates that patent owners will 
take the initiative in determining whether a petitioner is the real 
party in interest or privy of a party that is barred from instituting a 
proceeding with respect to the patent.
  Language that previously appeared as the last sentences of what are 
now sections 312(c) and 322(c), and which stated that failure to file a 
motion to seal will result in pleadings' being placed in the record, 
has been struck. At best this sentence was redundant, and at worst it 
created an ambiguity as to whether material accompanying the pleadings 
also would be made public absent a motion to seal.
  Many of the procedural limits added to inter partes and post-grant 
review by the present bill are borrowed from S. 3600, the bill that I 
introduced in the 110th Congress. My comments accompanying the 
introduction of that bill, at 154 Congressional Record S9982-S9993, 
daily ed. Sept. 27, 2008, are relevant to those provisions of the 
present bill that are carried over from S. 3600, particularly to the 
extent that the comments disclose understandings reached with the 
Patent Office, conscious use of terms of art, or the reasoning behind 
various provisions. Relevant passages include page S9987's discussion 
of the use of the adjudicative or oppositional model of post-grant 
review and estoppel against parties in privity, and page S9988's 
discussion of what is now section 324(b)'s additional threshold for 
instituting a post-grant review, the expectation that the Director will 
identify the issues that satisfied the threshold for instituting an 
inter partes or post-grant review, the meaning of ``properly filed'' 
when used in the joinder provisions in sections 315(c) and 325(c), the 
authorization to consolidate proceedings in sections 315(d) and 325(d), 
and the standards for discovery in sections 316(a)(6) and 326(a)(5). 
Also relevant is page S9991's discussion of the excesses and effects of 
inequitable-conduct litigation, which informs this bill's provisions 
relating to that doctrine.
  Among the most important protections for patent owners added by the 
present bill are its elevated thresholds for instituting inter partes 
and post-grant reviews. The present bill dispenses with the test of 
``substantial new question of patentability,'' a standard that 
currently allows 95% of all requests to be granted. It instead imposes 
thresholds that require petitioners to present information that creates 
serious doubts about the patent's validity. Under section 314(a), inter 
partes review will employ a reasonable-likelihood-of-success threshold, 
and under section 324(a), post-grant review will use a more-likely-
than-not-invalidity threshold.
  Satisfaction of the inter partes review threshold of ``reasonable 
likelihood of success'' will be assessed based on the information 
presented both in the petition for review and in the patent owner's 
response to the petition. The ``reasonable likelihood'' test is 
currently used in evaluating whether a party is entitled to a 
preliminary injunction, and effectively requires the petitioner to 
present a prima facie case justifying a rejection of the claims in the 
patent.
  Post-grant review uses the ``more likely than not invalid'' test. 
This slightly higher threshold is used because some of the issues that 
can be raised in post-grant review, such as enablement and section 101 
invention issues, may require development through discovery. The Office 
wants to ensure that petitioners raising such issues present a complete 
case at the outset, and are not relying on obtaining information in 
discovery in the post-grant review in order to satisfy their ultimate 
burden of showing invalidity by a preponderance of the evidence.
  Subsections (a) and (b) of sections 315 and 325 impose time limits 
and other restrictions when inter partes and post-grant review are 
sought in relation to litigation. Sections 315(a) and 325(a) bar a 
party from seeking or maintaining such a review if he has sought a 
declaratory judgment that the patent is invalid. This restriction 
applies, of course, only if the review petitioner has filed the civil 
action. These two subsections (a) do not restrict the rights of an 
accused infringer who has been sued and is asserting invalidity in a 
counterclaim. That situation is governed by section 315(b), 
which provides that if a party has been sued for infringement and wants 
to seek inter partes review, he must do so within 6 months of when he 
was served with the infringement complaint.

  Section 325(b) provides that if a patent owner sues to enforce his 
patent within three months after it is granted, a court cannot refuse 
to consider a motion for a preliminary injunction on the basis that a 
post-grant review has been requested or instituted. A patent owner who 
sues during this period is likely to be a market participant who 
already has an infringer intruding on his market, and who needs an 
injunction in order to avoid irreparable harm.

[[Page S1376]]

This provision strengthens and carries over to post-grant review the 
rule of Procter & Gamble Co. v. Kraft Foods Global, Inc., 549 F.3d 842, 
Fed. Cir. 2008.
  Sections 315(c) and 325(c) allow joinder of inter partes and post-
grant reviews. The Office anticipates that joinder will be allowed as 
of right--if an inter partes review is instituted on the basis of a 
petition, for example, a party that files an identical petition will be 
joined to that proceeding, and thus allowed to file its own briefs and 
make its own arguments. If a party seeking joinder also presents 
additional challenges to validity that satisfy the threshold for 
instituting a proceeding, the Office will either join that party and 
its new arguments to the existing proceeding, or institute a second 
proceeding for the patent. The Director is given discretion, however, 
over whether to allow joinder. This safety valve will allow the Office 
to avoid being overwhelmed if there happens to be a deluge of joinder 
petitions in a particular case.
  In the second sentence of section 325(d), the present bill also 
authorizes the Director to reject any request for ex parte 
reexamination or petition for post-grant or inter partes review on the 
basis that the same or substantially the same prior art or arguments 
previously were presented to the Office. This will prevent parties from 
mounting attacks on patents that raise issues that are substantially 
the same as issues that were already before the Office with respect to 
the patent. The Patent Office has indicated that it currently is forced 
to accept many requests for ex parte and inter partes reexamination 
that raise challenges that are cumulative to or substantially overlap 
with issues previously considered by the Office with respect to the 
patent.
  The second sentence of section 325(d) complements the protections 
against abuse of ex parte reexamination that are created by sections 
315(e) and 325(e). The estoppels in subsection (e) will prevent inter 
partes and post-grant review petitioners from seeking ex parte 
reexamination of issues that were raised or could have been raised in 
the inter partes or post-grant review. The Office has generally 
declined to apply estoppel, however, to an issue that is raised in a 
request for inter partes reexamination if the request was not granted 
with respect to that issue. Under section 325(d), second sentence, 
however, the Office could nevertheless refuse a subsequent request for 
ex parte reexamination with respect to such an issue, even if it raises 
a substantial new question of patentability, because the issue 
previously was presented to the Office in the petition for inter partes 
or post-grant review.
  Under paragraph (1) of sections 315(e) and 325(e), a party that uses 
inter partes or post-grant review is estopped from raising in a 
subsequent PTO proceeding any issue that he raised or reasonably could 
have raised in the post-grant or inter partes review. This effectively 
bars such a party or his real parties in interest or privies from later 
using inter partes review or ex parte reexamination against the same 
patent, since the only issues that can be raised in an inter partes 
review or ex parte reexamination are those that could have been raised 
in the earlier post-grant or inter partes review. The Office recognizes 
that it will need to change its regulations and require that ex parte 
reexamination requesters identify themselves to the Office in order for 
the Office to be able to enforce this new restriction.
  The present bill also incorporates S. 3600's extension of the 
estoppels and other procedural limits in sections 315 and 325 to real 
parties in interest and privies of the petitioner. As discussed at 154 
Congressional Record S9987, daily ed. Sept. 27, 2008, privity is an 
equitable rule that takes into account the ``practical situation,'' and 
should extend to parties to transactions and other activities relating 
to the property in question. Ideally, extending could-have-raised 
estoppel to privies will help ensure that if an inter partes review is 
instituted while litigation is pending, that review will completely 
substitute for at least the patents-and-printed-publications portion of 
the civil litigation. Whether equity allows extending privity estoppel 
to codefendants in litigation, however, will depend in large measure 
upon the actions of the patent owner, and whether he has made it 
reasonably and reliably clear which patent claims he is asserting and 
what they mean. If one defendant has instituted an inter partes review, 
but other defendants do not have an opportunity to join that review 
before it becomes reasonably clear which claims will be litigated and 
how they will be construed, it would be manifestly unfair to extend 
privity estoppel to the codefendants.
  The Office also has the authority to address such scenarios via its 
authority under section 316(a)(5), which gives the Office discretion in 
setting a time limit for allowing joinder. The Office has made clear 
that it intends to use this authority to encourage early requests for 
joinder and to discourage late requests. The Office also has indicated 
that it may consider the following factors when determining whether and 
when to allow joinder: differences in the products or processes alleged 
to infringe; the breadth or unusualness of the claim scope that is 
alleged, particularly if alleged later in litigation; claim-
construction rulings that adopt claim interpretations that are 
substantially different from the claim interpretation used in the first 
petition when that petition's interpretation was not manifestly in 
error; whether large numbers of patents or claims are alleged to be 
infringed by one or more of the defendants; consent of the patent 
owner; a request of the court; a request by the first petitioner for 
termination of the first review in view of strength of the second 
petition; and whether the petitioner has offered to pay the patent 
owner's costs.

  Sections 316(a)(6) and 326(a)(5) prescribe standards for discovery. 
In inter partes review, discovery is limited to deposition of witnesses 
submitting affidavits or declarations, and as otherwise necessary in 
the interest of justice. In post-grant review, discovery is broader, 
but must be limited to evidence directly related to factual assertions 
advanced by either party. For commentary on these standards, which are 
adopted from S. 3600, see 154 Congressional Record S9988-89, daily ed. 
Sept. 27, 2008.
  Sections 316(a)(12) and 326(a)(11) provide that inter partes and 
post-grant reviews must be completed within 12 months of when the 
proceeding is instituted, except that the Office can extend this 
deadline by 6 months for good cause. Currently, inter partes 
reexaminations usually last for 3 to 5 years. Because of procedural 
reforms made by the present bill to inter partes proceedings, the 
Patent Office is confident that it will be able to complete these 
proceedings within one year. Among the reforms that are expected to 
expedite these proceedings are the shift from an examinational to an 
adjudicative model, and the elevated threshold for instituting 
proceedings. The elevated threshold will require challengers to front 
load their case. Also, by requiring petitioners to tie their challenges 
to particular validity arguments against particular claims, the new 
threshold will prevent challenges from ``mushrooming'' after the review 
is instituted into additional arguments employing other prior art or 
attacking other claims.
  Although sections 316 and 326 do not regulate when and how 
petitioners will be allowed to submit written filings once a review is 
instituted, the Office has made clear that it will allow petitioners to 
do so via the regulations implementing the proceedings. Sections 316 
and 326 do clearly allow petitioners to obtain some discovery and to 
have an oral hearing. Obviously, it would make no sense to do so if 
petitioners were not also allowed to submit written arguments. The bill 
conforms to the Office's preference, however, that it be given 
discretion in determining the procedures for written responses and 
other filings, in order to avoid the formalism of current chapter 31, 
which adds substantially to the delays in that proceeding.
  The bill also eliminates intermediate administrative appeals of inter 
partes proceedings to the BPAI, instead allowing parties to only appeal 
directly to the Federal Circuit. By reducing two levels of appeal to 
just one, this change will substantially accelerate the resolution of 
inter partes cases.
  Sections 5(c)(2)(C) and 5(c)(3) of the bill provide for a transition 
from current inter partes reexamination to new inter partes review. To 
protect the Office from being overwhelmed by the

[[Page S1377]]

new inter partes and post-grant proceedings, sections 5(c)(2)(C) and 
5(f)(2) allow the Director to place a limit on the number of post-grant 
and inter partes reviews that will be instituted during the first four 
years that the proceedings are in effect. It is understood that if the 
Office rejects a petition during this period because of this numerical 
limit, it will make clear that the rejection was made because of this 
limit and not on the merits of the validity challenges presented in the 
petition. Otherwise, even a challenger with strong invalidity arguments 
might be deterred from using inter partes or post-grant review by fear 
that his petition might be rejected because of the numerical limit, and 
the fact of the rejection would then be employed by the patent owner in 
civil litigation to suggest that the experts at the Patent Office found 
no merit in the challenger's arguments.
  Similarly, under subsection (a)(2) of sections 316 and 326, the 
Office is required to implement the inter partes and post-grant review 
thresholds via regulations, and under subsection (b) of those sections, 
in prescribing regulations, the Office is required to take into 
account, among other things, the Office's ability ``to timely complete 
proceedings instituted under'' those chapters. It is expected that the 
Office will include in the threshold regulations a safety valve that 
allows the Office to decline to institute further proceedings if a high 
volume of pending proceedings threatens the Office's ability to timely 
complete all proceedings. The present bill's inclusion of this 
regulations consideration in subsection (b) reflects a legislative 
judgment that it is better that the Office turn away some petitions 
that otherwise satisfy the threshold for instituting an inter partes or 
post-grant review than it is to allow the Office to develop a backlog 
of instituted reviews that precludes the Office from timely completing 
all proceedings. Again, though, if the Office rejects a petition on the 
basis of this subsection (b) consideration, rather than on the basis of 
a failure to satisfy the substantive standards of the thresholds in 
section 314 or 324, it is expected that Office will make this fact 
clear when rejecting the petition.

  Section 5(c)(3) of the present bill applies the bill's new threshold 
for instituting an inter partes review to requests for inter partes 
reexamination that are filed between the date of enactment of the bill 
and one year after the enactment of the bill. This is done to ensure 
that requesters seeking to take advantage of the lax standards of the 
old system do not overwhelm the Office with requests for inter partes 
reexamination during the year following enactment of the bill.
  Finally, section 5(h)(2) of the bill addresses an issue raised by a 
recent publication, Charles E. Miller & Daniel P. Archibald, The 
Destructive Potential of the Senate Version of the Proposed Patent 
Reform Act of 2010: The Abolition of de novo Review in Ex parte Patent 
Reexaminations (circulated April 16, 2010). This article criticizes the 
draft managers' amendment that Senators Leahy and Sessions circulated 
in March 2010 on the ground that it eliminates authority for a patent 
owner to have relief by civil action under section 145 from an adverse 
decision in the BPAI on review of an ex parte reexamination. It is 
fairly apparent, however, that this authority was intended to be 
eliminated by the amendments made by section 4605 of the American 
Inventors Protection Act of 1999, Public Law 106-113, to sections 134 
and 141 of title 35. The 2010 managers' amendment simply maintained the 
AIPA's changes to sections 134 and 141.
  The AIPA neglected, however, to eliminate a cross reference to 
section 145 in section 306 of title 35, which delineates the appeals 
available from ex parte reexaminations. The maintenance of this cross 
reference in section 306 created an ambiguity as to whether the AIPA 
did, in fact, eliminate a patent owner's right to seek remedy in the 
district court under section 145 from an adverse BPAI decision on 
review of an ex parte reexamination. See Sigram Schindler 
Beteiligungsgesellschaft mbH v. Kappos, 93 USPQ2d 1752, E.D. Va. 2009, 
(Ellis, J.), notes that ``the fact that Sec. 306 continues to cross-
reference Sec. 141 to 145 following the AIPA's enactment appears to be 
in tension with the AIPA amendment to Sec. 141.''
  Section 5(h)(2) of the present bill eliminates this ambiguity by 
striking the citation to section 145 from section 306 of title 35.
  Section 6 of the bill includes all provisions of the bill addressing 
the jurisdiction of the Patent Trial and Appeal Board and 
administrative and judicial appeals. In section 6(a), the 
recodification of section 6 of title 35 is modified so that all members 
of the PTAB can participate in all proceedings. Also, subsection (d) is 
added to the recodification of section 6 of title 35. By omitting this 
provision, the 2009 bill would have effectively repealed the APJ 
``appointments fix'' that had been enacted in 2008.
  In section 6(c) of the bill, section 141 of title 35 is modified to 
allow appeals of PTAB decisions in inter partes and post-grant reviews, 
and the section is edited and reorganized. To address the continuing 
need to allow appeals of pending interferences, language has been added 
to section 5(f)(3) of the bill that deems references to derivation 
proceedings in the current appeals statutes to extend to interferences 
commenced before the effective date of the bill's repeal of 
interferences, and that allows the Director to deem the PTAB to be the 
BPAI for purposes of pending interferences and to allow the PTAB to 
conduct such interferences.
  In section 6(c)(2) of the bill, section 1295(a)(4)(A) of title 28 is 
modified to authorize appeals of reexaminations and reviews. 
Interestingly, current 1295(a)(4)(A) only gives the Federal Circuit 
jurisdiction over appeals from applications and interferences. It 
appears that Congress never gave the Federal Circuit jurisdiction over 
appeals from reexaminations when it created those proceedings. The 
language of subparagraph (A) is also generalized and clarified, 
recognizing that the details of what is appealable will be in sections 
134 and 141. Also, for logical consistency, language is added to 
subparagraph (A) making clear that section 145 and 146 proceedings are 
an exception to the Federal Circuit's otherwise exclusive appellate 
jurisdiction over applications and interferences under that 
subparagraph.
  In section 6(c)(3) of the bill, section 143 of title 35 is modified 
to allow the Director to intervene in the appeal of a decision of the 
PTAB in an inter partes or post-grant review or a derivation 
proceeding.
  In the effective-date provision at the end of section 6, various 
existing authorities are extended so that they may continue to apply to 
inter partes reexaminations commenced under the old system, and the 
apparent gap in current section 1295(a)(4)(A)'s authorization of 
jurisdiction is immediately filled with respect to all inter partes and 
ex parte reexaminations.
  In section 7, the present bill makes several PTO-recommended changes 
to previous bill versions' authorization to make preissuance 
submissions of prior art. In paragraph (1) of new section 122(e) of 
title 35, the word ``person'' has been replaced with ``third party,'' 
so that submissions may only be submitted by third parties. This 
addresses the Office's concern that applicants might otherwise use 
section 122(e) to submit prior art and thereby evade other examination 
disclosure requirements.

  In subparagraph (A) of section 122(e)(1), the word ``given'' has been 
added. This has the effect of including email notices of allowances.
  In clause (i) of section 122(e)(1)(B), the word ``first'' has been 
added. This change was sought by the Office, which prefers to limit 
submissions to the first publication for two reasons. First, 
republications overwhelmingly only narrow the claims, and in such cases 
anyone who would want to submit prior art could have done so at the 
first publication. Second, and more importantly, most republications 
occur only after the first office action, when there is usually rapid 
back-and-forth action on the application between the applicant and the 
Office. Allowing third parties to make prior-art submissions at this 
point would require the Office to wait six months after the 
republication in order to allow such submissions, and would otherwise 
greatly slow down this otherwise relatively speedy final phase of 
prosecution.
  Also in clause (i) of section 122(e)(1)(B), the words ``by the 
Office'' are added to ensure that only publication by the United States 
Patent and Trademark Office begins the period for

[[Page S1378]]

making pre-issuance submissions. The Office sought this change because 
a foreign publication can be deemed a publication under section 122, 
and the Office wants to ensure that it is only required to collect 
third-party submissions for an application if that application is 
actually filed in the United States.
  Section 8 of the present bill omits provisions appearing in prior 
bills that would have created an expanded right to an interlocutory 
appeal from claim-construction rulings. Even as revised in the 2009 
Judiciary Committee mark up, previous section 8(b) gave the Federal 
Circuit insufficient discretion to turn away such appeals and posed a 
serious risk of overwhelming the court. The 2009 mark-up revisions 
allowed the Federal Circuit to reject an interlocutory appeal if it 
found clear error in the district court's certification that there is a 
sufficient evidentiary record for an interlocutory appeal and that such 
an appeal may advance the termination of the litigation or will likely 
control the outcome of the case. It would be difficult in any case, 
however, to reject a finding that an interlocutory appeal of claim-
construction rulings may lead to the termination of the litigation. 
Moreover, if a district judge has certified a case for interlocutory 
appeal, it is very unlikely that the record that he has created would 
support a finding that his decision is clearly erroneous. And finally, 
given the disdain for patent cases felt by a substantial number of 
district judges, there is a serious likelihood that a large number of 
judges would take advantage of a new authorization from Congress to 
send away such cases to the Federal Circuit, with the hope that they do 
not return. Current law's grant of discretion to the Federal Circuit to 
entertain interlocutory appeals of claim-construction rulings strikes 
the appropriate balance.
  Section 10 of the present bill authorizes supplemental examination of 
a patent to correct errors or omissions in proceedings before the 
Office. Under this new procedure, information that was not considered 
or was inadequately considered or was incorrect can be presented to the 
Office. If the Office determines that the information does not present 
a substantial new question of patentability or that the patent is still 
valid, that information cannot be used as a basis for an inequitable-
conduct attack on the surviving patent in civil litigation. New section 
257(c)(1) follows the usual practice of referring to inequitable-
conduct attacks in terms of unenforceability, rather than invalidity, 
though courts have in the past used the terms interchangeably when 
describing the effect of fraud or inequitable conduct on a patent. J.P. 
Stevens & Co., Inc. v. Lex Tex Ltd., Inc., 747 F.2d 1553, 1560, Fed. 
Cir. 1984, notes that ``[w]hether the holding should be one of 
invalidity or unenforceability has had no practical significance in 
cases thus far presented to this court.'' The term should be considered 
to be used interchangeably with ``invalidity'' in this bill as well. 
Obviously, Congress would not create a procedure for reexamining 
patents that allowed them to be protected against subsequent 
inequitable-conduct challenges of unenforceability, only to allow the 
same patents to be challenged on the same basis and declared invalid on 
the basis of inequitable conduct.
  While some critics of this proposal have suggested that it would 
immunize misconduct by inventors and practitioners, I would note that 
the Patent Office has ample authority to sanction such misconduct. 
Under section 32 of title 35, the Office can bar an attorney from 
appearing before the Office if he has engaged in misconduct in any 
proceeding before the Office. In section 2(l) of this bill, we have 
extended the statute of limitations for initiating such a proceeding. 
Under current regulations, the Office also sanctions misconduct by 
striking offending filings or reducing the weight that they are given. 
And the Federal Circuit has recognized that the Office also ``has 
inherent authority to govern procedure before the [Office],'' as noted 
in In re Bogese II, 303 F.3d 1362, 1368, Fed. Cir. 2002, and that 
inherent authority to sanction attorneys for misconduct is not 
restricted to Article III courts, a point noted in In re Bailey, 182 
F.3d 860, 864 n.4, Fed. Cir. 1999.
  Given the Office's existing tools for sanctioning misconduct, there 
is no need to make the courts into supervisors of attorney conduct in 
Office proceedings. It is doubtful that a practitioner who is 
discovered to have engaged in substantial misconduct in proceedings 
before the Office would escape adequate and effective sanction by the 
Office itself.

  Section 11 of the bill repeals the so-called Baldwin rule, which 
requires judges on the Federal Circuit to live within 50 miles of 
Washington, D.C. Subsection (b) provides that the repeal of the Baldwin 
rule shall not be construed to imply that the Administrative Office of 
the Courts must provide court facilities or administrative support 
services to judges who choose to reside outside of the District of 
Columbia. This proviso does not affect the AOC's existing authority to 
provide services to judges outside of the District of Columbia. Its 
reference to ``court facilities'' means space within a courthouse or 
federal building, and the reference to ``administrative support 
services'' means those services that would be provided to judges within 
a courthouse or federal building.
  In section 15 of the bill, a conforming subsection (b) has been added 
to ensure that the best-mode requirement cannot be used to challenge a 
patent's entitlement to a right of priority or to the benefit of an 
earlier filing date. In the new effective-date subsection, the section 
is made applicable to all ``proceedings'' commenced after enactment of 
the Act, in order to make clear that the section's changes to the law 
will be immediately applicable not just in litigation but also in post-
grant reviews of patents under chapter 32.
  At subsections (a) through (h), section 16 of the bill has been 
modified by reinserting language that eliminates various deceptive-
intent requirements that relate to correcting the naming of the 
inventor or a joint inventor, obtaining a retroactive foreign filing 
license, seeking section 251 reissue, or enforcing remaining valid 
claims if a claim is invalidated. See generally Kearney & Trecker Corp. 
v. Giddings & Lewis, Inc., 452 F.2d 579, 596, 7th Cir. 1971. These 
changes were first proposed in section 5 of the original Patent Reform 
Act of 2005, H.R. 2795, 109th Congress, and have been advocated by 
universities and their technology-transfer offices. For reasons that 
are not entirely clear, subsequent bills maintained this section and 
its addition of substructure and titles to the affected code sections, 
but struck the substantive part of the section--i.e., its elimination 
of the deceptive-intent requirements.
  Eliminating the various deceptive-intent requirements moves the U.S. 
patent system away from the 19th century model that focused on the 
patent owner's subjective intent, and towards a more objective-
evidence-based system that will be much cheaper to litigate and more 
efficient to administer.
  Section 16(i) of the present bill corrects several errors and typos 
throughout title 35 that are noted in the reviser's notes to the U.S. 
Code.
  Section 16(j) strikes unnecessary references to ``of this title'' 
that are sprinkled throughout title 35. The 1952 Act included such 
unnecessary references, but more recent additions to the code have not, 
and the current bill's changes omit such references. Because the 
unnecessary references greatly outnumber the necessary references, the 
provision is written to strike all references but then except out the 
necessary references.
  The present bill's new section 17 enacts the so-called Holmes Group 
fix, H.R. 2955, 109th Congress, which was reported out of the House 
Judiciary Committee in 2006. The committee report accompanying that 
bill, House Report 109-407, explains the bill's reasons for abrogating 
Holmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 
826 (2002), and more fully precluding state court jurisdiction over 
patent legal claims.
  Section 17 makes two modifications to the reported version of H.R. 
2955. The first modification, at subsection (c), limits the bill's 
expansion of Federal Circuit jurisdiction to only compulsory 
counterclaims asserting patent rights, rather than the original bill's 
expansion of jurisdiction to include any counterclaim asserting patent 
rights. Compulsory counterclaims are defined at Rule 13(a) and 
basically consist of counterclaims that arise out of the same 
transaction or occurrence and that do not require the joinder of 
parties over whom the court would lack

[[Page S1379]]

jurisdiction. A compulsory counterclaim must be raised as a 
counterclaim in the case in question, and cannot be asserted in a later 
case. Without this modification, it is possible that a defendant could 
raise unrelated and unnecessary patent counterclaims simply in order to 
manipulate appellate jurisdiction. With the modification, a defendant 
with a permissive patent counterclaim who wanted to preserve Federal 
Circuit appellate review of that counterclaim could simply wait to 
assert it in a separate action.
  The second modification, in subsection (d), corrects an error in H.R. 
2955 that would have required remand of patent and other intellectual-
property counterclaims after their removal. H.R. 2955's proposed 
removal statute, at section 1454(c)(1) of title 28, required a remand 
to the state court of all claims that are not within the original or 
supplemental jurisdiction of the district court. Since the bill no 
longer amends section 1338 to give district courts original 
jurisdiction over patent counterclaims, however--and since, pursuant to 
Holmes Group itself, patent counterclaims are not within the district 
courts' original jurisdiction--then under paragraph (1), district 
courts would be required to remand the patent counterclaims. Courts 
would probably strain to avoid reading the paragraph this way, since 
doing so defeats the only apparent purpose of the section, and the 
amendments to section 1338 strip the state courts of jurisdiction over 
patent counterclaims. But that is exactly what H.R. 2955's proposed 
1454(c)(1) ordered the court to do. In the modified text of section 
17(d) of this bill, the court is instructed to not remand those claims 
that were a basis for removal in the first place--that is, the 
intellectual-property counterclaims.
  Section 18 of the bill creates an administrative mechanism for 
reviewing the validity of business-method patents. In 1998, the U.S. 
Court of Appeals for the Federal Circuit, in its decision in State 
Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 
1368 (Fed. Cir. 1998), substantially expanded the patentability of 
business-method inventions in the United States, holding that any 
invention can be patented so long as it produces a ``useful, concrete, 
and tangible result'' and meets other requirements of title 35. In 
recent years, federal judicial decisions, culminating in the U.S. 
Supreme Court's decision in Bilski v. Kappos, 561 U.S. __, 130 S.Ct. 
3218 (2010), have overruled State Street and retracted the 
patentability of business methods and other abstract inventions. This 
judicial expansion and subsequent judicial retraction of U.S. 
patentability standards resulted in the issuance, in the interim, of a 
large number of business-method patents that are no longer valid. 
Section 18 creates a relatively inexpensive administrative alternative 
to litigation for addressing disputes concerning the validity of these 
patents.
  This section grew out of concerns originally raised in the 110th 
Congress about financial institutions' inability to take advantage of 
the authority to clear checks electronically pursuant the Check 
Clearing for the 21st Century Act, at chapter 50 of title 12 of the 
U.S. Code, without infringing the so-called Ballard patents, patents 
number 5,910,988 and 6,032,137. See generally Senate Report 110-259 at 
pages 33 through 34. Once the committee began to examine this issue in 
greater depth, however, the question quickly turned from whether the 
Ballard patents should be allowed to disrupt compliance with the Check 
21 Act, to how it is that the Ballard patents were issued in the first 
place. These patents consist of long recitations of technology created 
by others to implement the supposed ``invention'' of transmitting and 
processing checks and other business records electronically. The first 
of these patents was assigned to the class of cryptography inventions, 
but its specification itself concedes that the invention's 
``controller'' will ``execute[] an encryption algorithm which is well 
known to an artisan of ordinary skill in the field.'' The second patent 
is assigned to Class 705, home to many of the most notorious business-
method patents. Both of these patents are obviously business-method 
patents, and it is difficult to see how they were even novel and 
nonobvious and otherwise valid under the more liberal State Street 
standard, much less how they could survive the strictures of Bilski.

  Section 18's definition of business-method patent, and its 
authorization to raise prior-art challenges in the petition for review, 
are designed to allow the Office to recognize a business-method patent 
as such despite its recitation of technological elements that are not 
colorably novel and nonobvious. This definition does not require the 
Office to conduct a merits inquiry into the nonobviousness of a 
technological invention, and should not be construed in a way that 
makes it difficult for the Office to administer. But if a technological 
element in a patent is not even assertedly or plausibly outside of the 
prior art, the Office should not rely on that element to classify the 
patent as not being a business-method patent. Thus when patents such as 
the Ballard patents recite elements incorporating off-the-shelf 
technology or other technology ``know to those skilled in the art,'' 
that should not preclude those patents' eligibility for review under 
this program.
  At the request of other industry groups, section 18's definition of 
``covered business-method patent'' has been limited to those patents 
that relate to a financial product or service. Given the protean nature 
of many business-method patents, it often will be unclear on the face 
of the patent whether it relates to a financial product or service. To 
make such a determination, the Office may look to how the patent has 
been asserted. Section 5(g) of the present bill modifies section 301 of 
title 35 to allow any person to submit to the Office the patent owner's 
statements in federal court or in any Office proceeding about the scope 
of the patent's claims. With this and other information, the Office 
should be able to determine whether the patent reads on products or 
services that are particular to or characteristic of financial 
institutions.
  As the proviso at the end of the definition makes clear, business 
methods do not include ``technological inventions.'' In other words, 
the definition applies only to abstract business concepts and their 
implementation, whether in computers or otherwise, but does not apply 
to inventions relating to computer operations for other uses or the 
application of the natural sciences or engineering.
  One feature of section 18 that has been the subject of prolonged 
discussion and negotiation between various groups during the last few 
weeks is its subsection (c), which concerns stays of litigation. The 
current subsection (c) reflects a compromise that requires a district 
judge to consider fixed criteria when deciding whether to grant a stay, 
and provides either side with a right to an interlocutory appeal of the 
district judge's decision. The appeal right has been modified to 
provide that such review ``may be de novo,'' and in every case requires 
the Federal Circuit to ensure consistent application of established 
precedent. Thus whether or not every case is reviewed de novo, the 
court of appeals cannot simply leave the stay decision to the 
discretion of the district court and allow different outcomes based on 
the predilections of different trial judges.
  It is expected that district judges will liberally grant stays of 
litigation once a proceeding is instituted. Petitioners are required to 
make a high threshold showing in order to institute a proceeding, and 
proceedings are required to be completed within one year to 18 months 
after they are instituted. The case for a stay is particularly 
pronounced in a section 18 proceeding, given the expectation that most 
if not all true business-method patents are abstract and therefore 
invalid in light of the Bilski decision.
  In pursuit of this congressional policy strongly favoring stays when 
proceedings are instituted under this section, subsection (c) 
incorporates the four-factor test for stays of litigation that was 
first announced in Broadcast Innovation, L.L.C. v. Charter 
Communications, 2006 WL 1897165, D. Colo. 2006. Broadcast Innovation 
includes, and gives separate weight to, a fourth factor that has often 
been ignored by other courts: ``whether a stay will reduce the burden 
of litigation on the parties and on the court.''
  In order to ensure consistency in decisions whether to stay, 
regardless of the court in which a section 281 action is pending, 
paragraph (2) of subsection (c) requires consistent application of

[[Page S1380]]

``established precedent.'' This particular requirement is based on 
section 2245(d)(1) of title 28, which has been construed to require 
lower courts to look only to a fixed body of caselaw when making 
decisions under section 2254. Currently, district judge's decisions 
whether to stay litigation when a reexamination has been ordered are 
not appealable and therefore have never been reconciled by the Federal 
Circuit. Unsurprisingly, the resulting district-court caselaw is a 
dog's breakfast of different combinations of factors and different 
meanings ascribed to those factors. Although the cases applying 
Broadcast Innovation cite other opinions applying other tests as 
sources for some of its factors, by requiring application of 
``established precedent,'' subsection (c) limits the relevant precedent 
to that applying the four factors of Broadcast Innovation in 
combination. By requiring courts to apply this limited and relatively 
consistent body of caselaw when determining whether to grant a stay, 
subsection (c) should ensure predictability and stability in stay 
decisions across different district courts, and limit the incentive to 
forum shop. The existence of forum shopping is an embarrassment to the 
legal system. Federal courts should apply equal justice, and give 
federal law the same meaning, regardless of where they are located.
  Mr. President, I will conclude by noting that the present bill is the 
product of almost a decade of hard work. The path to this bill included 
three Senate Judiciary Committee mark ups, as well as the untold hours 
devoted by Chairman Smith and other members of the House of 
Representatives to the development of the Patent Reform Act of 2005, 
the foundation of today's bill. The present bill will protect our 
heritage of innovation while updating the patent system for the current 
century. It will create clear and efficient rules for defining prior 
art and establishing patent priority. It will fix problems with current 
administrative proceedings, and create new means for improving patent 
quality. And it will move us toward a patent system that is objective, 
transparent, clear, and fair to all parties. I look forward to the 
Senate's passage of this bill and its enactment into law.
  Mr. GRASSLEY. Mr. President, I urge my colleagues to support final 
passage on the America Invents Act. The Judiciary Committee has held 
numerous hearings on the need for patent reform, and has done a lot of 
work over the past several Congresses. We have had a good process on 
the floor. We adopted several amendments to improve the bill. We had 
votes on amendments and a pretty good open process, which we have not 
seen much of in the last few years. We have a good bipartisan bill--the 
chairman of the Judiciary Committee has successfully brought Senators 
and industry together to craft this compromise legislation. Now I urge 
my colleagues to support final passage on this important bill so we can 
conclude our work in the Senate.
  The America Invents Act will protect inventors' rights and encourage 
innovation and investment in our economy. It will improve transparency 
and third party participation in the patent review process, which will 
strengthen patent quality and reduce costs. The bill will institute 
beneficial changes to the patent approval and review process, and will 
curb litigation abuses and improve certainty for investors and 
innovators. It will help companies do business more efficiently on an 
international basis.
  The America Invents Act will also help small entities in their patent 
applications and provide for reduced fees for microentities and small 
businesses. The bill will prevent patents from being issued on claims 
for tax strategies, which can add unwarranted fees on taxpayers simply 
for attempting to comply with the Tax Code.
  Finally, the America Invents Act will enhance operations of the 
Patent and Trademark Office with administrative reforms and will give 
the Office fee setting authority to reduce backlogs. It will end fee 
diversion, which will improve the ability of the Patent and Trademark 
Office to manage its affairs and allocate resources where they are most 
needed.
  I thank Chairman Leahy and Senator Hatch for their hard work on this 
bill. Without their leadership, we would not be where we are today. I 
thank Senators Kyl, Sessions, and Coburn. They were instrumental in 
making improvements to the bill. I also wish to acknowledge the Senate 
Judiciary Committee staff for their efforts on this bill: in 
particular, Bruce Cohen, Aaron Cooper, and Curtis LeGeyt of Chairman 
Leahy's staff, Matt Sandgren of Senator Hatch's staff, Joe Matal of 
Senator Kyl's staff, and Sarah Beth Groshart of Senator Coburn's staff. 
I especially thank Kolan Davis and Rita Lari Jochum of my staff for 
their good work on this bill.
  In conclusion, I urge my colleagues to vote for the America Invents 
Act. This is a bill that will spur inventions, create innovative new 
products and services, and stimulate job creation. This bill will help 
upgrade and strengthen our patent system so America can stay 
competitive in an increasingly global environment. I urge my colleagues 
to support this carefully crafted bill.
  Mr. LEAHY. Mr. President, the managers' amendment to the America 
Invents Act, adopted 97-2 on March 1, contained a rule of construction 
that nothing in section 14 of the act should be construed to imply that 
other business methods are patentable or that other business-method 
patents are valid. This provision was included merely as a 
clarification. No inference should be drawn in any way from any part of 
section 14 of the act about the patentability of methods of doing 
business.
  Mr. President, I have discussed this with the Republican leadership, 
and we are prepared to yield back all time on both the Democratic and 
Republican sides.
  The PRESIDING OFFICER. All time is yielded back.
  Mr. LEAHY. Mr. President, I ask for the yeas and nays on the bill.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second.
  The yeas and nays were ordered.
  The bill was ordered to be engrossed for a third reading and was read 
the third time.
  The PRESIDING OFFICER. The clerk will read the pay-go statement.
  The bill clerk read as follows:

       Mr. Conrad: This is the Statement of Budgetary Effects of 
     PAYGO Legislation for S. 23, as amended.

       Total Budgetary Effects of S. 23 for the 5-year statutory 
     PAYGO Scorecard: net reduction in the deficit of $590 
     million.
       Total Budgetary Effects of S. 23 for the 10-year statutory 
     PAYGO Scorecard: net reduction in the deficit of $750 
     million.

       Also submitted for the Record as part of this statement is 
     a table prepared by the Congressional Budget Office, which 
     provides additional information on the budgetary effects of 
     this Act, as follows:

  CBO ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS FOR S. 23, THE AMERICA INVENTS ACT, WITH AMENDMENTS APPROVED BY THE SENATE THROUGH MARCH 8, 2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                         By fiscal year, in millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                   2011     2012     2013     2014     2015     2016     2017     2018     2019     2020     2021   2011-2016  2011-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             NET DECREASE (-) IN THE DEFICIT
 
Statutory Pay-As-You-Go Impact.        0     -420      -90      -30      -20      -30      -30      -30      -30      -40      -30      -590       -750
Memorandum:
    Changes in Outlays.........        0    2,060    2,600    2,800    2,940    3,070    3,200    3,320    3,450    3,570    3,700    13,470     30,710
    Changes in Revenues........        0    2,480    2,690    2,830    2,960    3,100    3,230    3,350    3,480    3,610    3,730    14,060     31,460
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Components may not sum to totals because of rounding.
The legislation would give the Patent and Trademark Office permanent authority to collect and spend fees.
Sources: Congressional Budget Office.


[[Page S1381]]

  The PRESIDING OFFICER. The bill having been read the third time, the 
question is, Shall the bill, as amended, pass?
  The yeas and nays have been ordered.
  The clerk will call the roll.
  The bill clerk called the roll.
  The result was announced--yeas 95, nays 5, as follows:

                      [Rollcall Vote No. 35 Leg.]

                                YEAS--95

  

     Akaka
     Alexander
     Ayotte
     Barrasso
     Baucus
     Begich
     Bennet
     Bingaman
     Blumenthal
     Blunt
     Boozman
     Brown (MA)
     Brown (OH)
     Burr
     Cardin
     Carper
     Casey
     Chambliss
     Coats
     Coburn
     Cochran
     Collins
     Conrad
     Coons
     Corker
     Cornyn
     DeMint
     Durbin
     Enzi
     Feinstein
     Franken
     Gillibrand
     Graham
     Grassley
     Hagan
     Harkin
     Hatch
     Hoeven
     Hutchison
     Inhofe
     Inouye
     Isakson
     Johanns
     Johnson (SD)
     Johnson (WI)
     Kerry
     Kirk
     Klobuchar
     Kohl
     Kyl
     Landrieu
     Lautenberg
     Leahy
     Lee
     Levin
     Lieberman
     Lugar
     Manchin
     McCain
     McCaskill
     McConnell
     Menendez
     Merkley
     Mikulski
     Moran
     Murkowski
     Murray
     Nelson (NE)
     Nelson (FL)
     Paul
     Portman
     Pryor
     Reed
     Reid
     Roberts
     Rockefeller
     Rubio
     Sanders
     Schumer
     Sessions
     Shaheen
     Shelby
     Snowe
     Stabenow
     Tester
     Thune
     Toomey
     Udall (CO)
     Udall (NM)
     Vitter
     Warner
     Webb
     Whitehouse
     Wicker
     Wyden
  


                                NAYS--5

  

     Boxer
     Cantwell
     Crapo
     Ensign
     Risch
       
  

  The bill (S. 23), as amended, was passed, as follows:

                                 S. 23

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.
Sec. 2. First inventor to file.
Sec. 3. Inventor's oath or declaration.
Sec. 4. Virtual marking and advice of counsel.
Sec. 5. Post-grant review proceedings.
Sec. 6. Patent Trial and Appeal Board.
Sec. 7. Preissuance submissions by third parties.
Sec. 8. Venue.
Sec. 9. Fee setting authority.
Sec. 10. Supplemental examination.
Sec. 11. Residency of Federal Circuit judges.
Sec. 12. Micro entity defined.
Sec. 13. Funding agreements.
Sec. 14. Tax strategies deemed within the prior art.
Sec. 15. Best mode requirement.
Sec. 16. Technical amendments.
Sec. 17. Clarification of jurisdiction.
Sec. 18. Transitional program for covered business-method patents.
Sec. 19. Travel expenses and payment of administrative judges.
Sec. 20. Patent and Trademark Office funding.
Sec. 21. Satellite offices.
Sec. 22. Patent Ombudsman Program for small business concerns.
Sec. 23. Priority examination for technologies important to American 
              competitiveness.
Sec. 24. Designation of Detroit satellite office.
Sec. 25. Effective date.
Sec. 26. Budgetary effects.

     SEC. 2. FIRST INVENTOR TO FILE.

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

     ``Sec. 102. Conditions for patentability; novelty

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

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

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

     ``Sec. 103. Conditions for patentability; nonobvious subject 
       matter

       ``A patent for a claimed invention may not be obtained, 
     notwithstanding that the

[[Page S1382]]

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

     ``Sec. 291. Derived patents

       ``(a) In General.--The owner of a patent may have relief by 
     civil action against the owner of another patent that claims 
     the same invention and has an earlier effective filing date 
     if the invention claimed in such other patent was derived 
     from the inventor of the invention claimed in the patent 
     owned by the person seeking relief under this section.
       ``(b) Filing Limitation.--An action under this section may 
     only be filed within 1 year after the issuance of the first 
     patent containing a claim to the allegedly derived invention 
     and naming an individual alleged to have derived such 
     invention as the inventor or joint inventor.''.
       (i) Derivation Proceedings.--Section 135 of title 35, 
     United States Code, is amended to read as follows:

     ``Sec. 135. Derivation proceedings

       ``(a) Institution of Proceeding.--An applicant for patent 
     may file a petition to institute a derivation proceeding in 
     the Office. The petition shall set forth with particularity 
     the basis for finding that an inventor named in an earlier 
     application derived the claimed invention from an inventor 
     named in the petitioner's application and, without 
     authorization, the earlier application claiming such 
     invention was filed. Any such petition may only be filed 
     within 1 year after the first publication of a claim to an 
     invention that is the same or substantially the same as the 
     earlier application's claim to the invention, shall be made 
     under oath, and shall be supported by substantial evidence. 
     Whenever the Director determines that a petition filed under 
     this subsection demonstrates that the standards for 
     instituting a derivation proceeding are met, the Director may 
     institute a derivation proceeding. The determination by the 
     Director whether to institute a derivation proceeding shall 
     be final and nonappealable.
       ``(b) Determination by Patent Trial and Appeal Board.--In a 
     derivation proceeding instituted under subsection (a), the 
     Patent Trial and Appeal Board shall determine whether an 
     inventor named in the earlier application derived the claimed 
     invention from an inventor named in the petitioner's 
     application and, without authorization, the earlier 
     application claiming such invention was filed. The Director 
     shall prescribe regulations setting forth standards for the 
     conduct of derivation proceedings.
       ``(c) Deferral of Decision.--The Patent Trial and Appeal 
     Board may defer action on a petition for a derivation 
     proceeding until 3 months after the date on which the 
     Director issues a patent that includes the claimed invention 
     that is the subject of the petition. The Patent Trial and 
     Appeal Board also may defer action on a petition for a 
     derivation proceeding, or stay the proceeding after it has 
     been instituted, until the termination of a proceeding under 
     chapter 30, 31, or 32 involving the patent of the earlier 
     applicant.
       ``(d) Effect of Final Decision.--The final decision of the 
     Patent Trial and Appeal Board, if adverse to claims in an 
     application for patent, shall constitute the final refusal by 
     the Office on those claims. The final decision of the Patent 
     Trial and Appeal Board, if adverse to claims in a patent, 
     shall, if no appeal or other review of the decision has been 
     or can be taken or had, constitute cancellation of those 
     claims, and notice of such cancellation shall be endorsed on 
     copies of the patent distributed after such cancellation.
       ``(e) Settlement.--Parties to a proceeding instituted under 
     subsection (a) may terminate the proceeding by filing a 
     written statement reflecting the agreement of the parties as 
     to the correct inventors of the claimed invention in dispute. 
     Unless the Patent Trial and Appeal Board finds the agreement 
     to be inconsistent with the evidence of record, if any, it 
     shall take action consistent with the agreement. Any written 
     settlement or understanding of the parties shall be filed 
     with the Director. At the request of a party to the 
     proceeding, the agreement or understanding shall be treated 
     as business confidential information, shall be kept separate 
     from the file of the involved patents or applications, and 
     shall be made available only to Government agencies on 
     written request, or to any person on a showing of good cause.
       ``(f) Arbitration.--Parties to a proceeding instituted 
     under subsection (a) may, within such time as may be 
     specified by the Director by regulation, determine such 
     contest or any aspect thereof by arbitration. Such 
     arbitration shall be governed by the provisions of title 9, 
     to the extent such title is not inconsistent with this 
     section. The parties shall give notice of any arbitration 
     award to the Director, and such award shall, as between the 
     parties to the arbitration, be dispositive of the issues to 
     which it relates. The arbitration award shall be 
     unenforceable until such notice is given. Nothing in this 
     subsection shall preclude the Director from determining the 
     patentability of the claimed inventions involved in the 
     proceeding.''.
       (j) Elimination of References to Interferences.--(1) 
     Sections 41, 134, 145, 146, 154, 305, and 314 of title 35, 
     United States Code, are each amended by striking ``Board of 
     Patent Appeals and Interferences'' each place it appears and 
     inserting ``Patent Trial and Appeal Board''.
       (2)(A) Sections 146 and 154 of title 35, United States 
     Code, are each amended--
       (i) by striking ``an interference'' each place it appears 
     and inserting ``a derivation proceeding''; and
       (ii) by striking ``interference'' each additional place it 
     appears and inserting ``derivation proceeding''.
       (B) The subparagraph heading for section 154(b)(1)(C) of 
     title 35, United States Code, as amended by this paragraph, 
     is further amended by--
       (i) striking ``or'' and inserting ``of''; and
       (ii) striking ``secrecy order'' and inserting ``secrecy 
     orders''.
       (3) The section heading for section 134 of title 35, United 
     States Code, is amended to read as follows:

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

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

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

       (5) Section 154(b)(1)(C) of title 35, United States Code, 
     is amended by striking ``interferences'' and inserting 
     ``derivation proceedings''.
       (6) The item relating to section 6 in the table of sections 
     for chapter 1 of title 35, United States Code, is amended to 
     read as follows:

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

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

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

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

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


[[Page S1383]]


       (k) False Marking.--
       (1) In general.--Section 292 of title 35, United States 
     Code, is amended--
       (A) in subsection (a), by adding at the end the following:
       ``Only the United States may sue for the penalty authorized 
     by this subsection.''; and
       (B) by striking subsection (b) and inserting the following:
       ``(b) Any person who has suffered a competitive injury as a 
     result of a violation of this section may file a civil action 
     in a district court of the United States for recovery of 
     damages adequate to compensate for the injury.''.
       (2) Effective date.--The amendments made by this subsection 
     shall apply to all cases, without exception, pending on or 
     after the date of the enactment of this Act.
       (l) Statute of Limitations.--
       (1) In general.--Section 32 of title 35, United States 
     Code, is amended by inserting between the third and fourth 
     sentences the following: ``A proceeding under this section 
     shall be commenced not later than the earlier of either 10 
     years after the date on which the misconduct forming the 
     basis for the proceeding occurred, or 1 year after the date 
     on which the misconduct forming the basis for the proceeding 
     is made known to an officer or employee of the Office as 
     prescribed in the regulations established under section 
     2(b)(2)(D).''.
       (2) Report to congress.--The Director shall provide on a 
     biennial basis to the Judiciary Committees of the Senate and 
     House of Representatives a report providing a short 
     description of incidents made known to an officer or employee 
     of the Office as prescribed in the regulations established 
     under section 2(b)(2)(D) of title 35, United States Code, 
     that reflect substantial evidence of misconduct before the 
     Office but for which the Office was barred from commencing a 
     proceeding under section 32 of title 35, United States Code, 
     by the time limitation established by the fourth sentence of 
     that section.
       (3) Effective date.--The amendment made by paragraph (1) 
     shall apply in all cases in which the time period for 
     instituting a proceeding under section 32 of title 35, United 
     State Code, had not lapsed prior to the date of the enactment 
     of this Act.
       (m) Small Business Study.--
       (1) Definitions.--In this subsection--
       (A) the term ``Chief Counsel'' means the Chief Counsel for 
     Advocacy of the Small Business Administration;
       (B) the term ``General Counsel'' means the General Counsel 
     of the United States Patent and Trademark Office; and
       (C) the term ``small business concern'' has the meaning 
     given that term under section 3 of the Small Business Act (15 
     U.S.C. 632).
       (2) Study.--
       (A) In general.--The Chief Counsel, in consultation with 
     the General Counsel, shall conduct a study of the effects of 
     eliminating the use of dates of invention in determining 
     whether an applicant is entitled to a patent under title 35, 
     United States Code.
       (B) Areas of study.--The study conducted under subparagraph 
     (A) shall include examination of the effects of eliminating 
     the use of invention dates, including examining--
       (i) how the change would affect the ability of small 
     business concerns to obtain patents and their costs of 
     obtaining patents;
       (ii) whether the change would create, mitigate, or 
     exacerbate any disadvantage for applicants for patents that 
     are small business concerns relative to applicants for 
     patents that are not small business concerns, and whether the 
     change would create any advantages for applicants for patents 
     that are small business concerns relative to applicants for 
     patents that are not small business concerns;
       (iii) the cost savings and other potential benefits to 
     small business concerns of the change; and
       (iv) the feasibility and costs and benefits to small 
     business concerns of alternative means of determining whether 
     an applicant is entitled to a patent under title 35, United 
     States Code.
       (3) Report.--Not later than 1 year after the date of 
     enactment of this Act, the Chief Counsel shall submit to the 
     Committee on Small Business and Entrepreneurship and the 
     Committee on the Judiciary of the Senate and the Committee on 
     Small Business and the Committee on the Judiciary of the 
     House of Representatives a report regarding the results of 
     the study under paragraph (2).
       (n) Report on Prior User Rights.--
       (1) In general.--Not later than 1 year after the date of 
     the enactment of this Act, the Director shall report, to the 
     Committee on the Judiciary of the Senate and the Committee on 
     the Judiciary of the House of Representatives, the findings 
     and recommendations of the Director on the operation of prior 
     user rights in selected countries in the industrialized 
     world. The report shall include the following:
       (A) A comparison between patent laws of the United States 
     and the laws of other industrialized countries, including 
     members of the European Union and Japan, Canada, and 
     Australia.
       (B) An analysis of the effect of prior user rights on 
     innovation rates in the selected countries.
       (C) An analysis of the correlation, if any, between prior 
     user rights and start-up enterprises and the ability to 
     attract venture capital to start new companies.
       (D) An analysis of the effect of prior user rights, if any, 
     on small businesses, universities, and individual inventors.
       (E) An analysis of legal and constitutional issues, if any, 
     that arise from placing trade secret law in patent law.
       (F) An analysis of whether the change to a first-to-file 
     patent system creates a particular need for prior user 
     rights.
       (2) Consultation with other agencies.--In preparing the 
     report required under paragraph (1), the Director shall 
     consult with the United States Trade Representative, the 
     Secretary of State, and the Attorney General.
       (o) Effective Date.--
       (1) In general.--Except as otherwise provided by this 
     section, the amendments made by this section shall take 
     effect on the date that is 18 months after the date of the 
     enactment of this Act, and shall apply to any application for 
     patent, and to any patent issuing thereon, that contains or 
     contained at any time--
       (A) a claim to a claimed invention that has an effective 
     filing date as defined in section 100(i) of title 35, United 
     States Code, that is 18 months or more after the date of the 
     enactment of this Act; or
       (B) a specific reference under section 120, 121, or 365(c) 
     of title 35, United States Code, to any patent or application 
     that contains or contained at any time such a claim.
       (2) Interfering patents.--The provisions of sections 
     102(g), 135, and 291 of title 35, United States Code, in 
     effect on the day prior to the date of the enactment of this 
     Act, shall apply to each claim of an application for patent, 
     and any patent issued thereon, for which the amendments made 
     by this section also apply, if such application or patent 
     contains or contained at any time--
       (A) a claim to an invention having an effective filing date 
     as defined in section 100(i) of title 35, United States Code, 
     earlier than 18 months after the date of the enactment of 
     this Act; or
       (B) a specific reference under section 120, 121, or 365(c) 
     of title 35, United States Code, to any patent or application 
     that contains or contained at any time such a claim.

     SEC. 3. INVENTOR'S OATH OR DECLARATION.

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

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

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

[[Page S1384]]

       ``(1) Exception.--The requirements under this section shall 
     not apply to an individual with respect to an application for 
     patent in which the individual is named as the inventor or a 
     joint inventor and who claims the benefit under section 120, 
     121, or 365(c) of the filing of an earlier-filed application, 
     if--
       ``(A) an oath or declaration meeting the requirements of 
     subsection (a) was executed by the individual and was filed 
     in connection with the earlier-filed application;
       ``(B) a substitute statement meeting the requirements of 
     subsection (d) was filed in the earlier filed application 
     with respect to the individual; or
       ``(C) an assignment meeting the requirements of subsection 
     (e) was executed with respect to the earlier-filed 
     application by the individual and was recorded in connection 
     with the earlier-filed application.
       ``(2) Copies of oaths, declarations, statements, or 
     assignments.--Notwithstanding paragraph (1), the Director may 
     require that a copy of the executed oath or declaration, the 
     substitute statement, or the assignment filed in the earlier-
     filed application be included in the later-filed application.
       ``(h) Supplemental and Corrected Statements; Filing 
     Additional Statements.--
       ``(1) In general.--Any person making a statement required 
     under this section may withdraw, replace, or otherwise 
     correct the statement at any time. If a change is made in the 
     naming of the inventor requiring the filing of 1 or more 
     additional statements under this section, the Director shall 
     establish regulations under which such additional statements 
     may be filed.
       ``(2) Supplemental statements not required.--If an 
     individual has executed an oath or declaration meeting the 
     requirements of subsection (a) or an assignment meeting the 
     requirements of subsection (e) with respect to an application 
     for patent, the Director may not thereafter require that 
     individual to make any additional oath, declaration, or other 
     statement equivalent to those required by this section in 
     connection with the application for patent or any patent 
     issuing thereon.
       ``(3) Savings clause.--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) Acknowledgment of Penalties.--Any declaration or 
     statement filed pursuant to this section shall contain an 
     acknowledgment that any willful false statement made in such 
     declaration or statement is punishable under section 1001 of 
     title 18 by fine or imprisonment of not more than 5 years, or 
     both.''.
       (2) Relationship to divisional applications.--Section 121 
     of title 35, United States Code, is amended by striking ``If 
     a divisional application'' and all that follows through 
     ``inventor.''.
       (3) Requirements for nonprovisional applications.--Section 
     111(a) of title 35, United States Code, is amended--
       (A) in paragraph (2)(C), by striking ``by the applicant'' 
     and inserting ``or declaration'';
       (B) in the heading for paragraph (3), by inserting ``or 
     declaration'' after ``and oath''; and
       (C) by inserting ``or declaration'' after ``and oath'' each 
     place it appears.
       (4) Conforming amendment.--The item relating to section 115 
     in the table of sections for chapter 11 of title 35, United 
     States Code, is amended to read as follows:

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

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

     ``Sec. 118. Filing by other than inventor

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

     SEC. 4. VIRTUAL MARKING AND ADVICE OF COUNSEL.

       (a) Defense to Infringement Based on Earlier Inventor.--
     Section 273(b)(6) of title 35, United States Code, is amended 
     to read as follows:
       ``(6) Personal defense.--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.''.
       (b) Virtual Marking.--Section 287(a) of title 35, United 
     States Code, is amended by inserting ``, or by fixing thereon 
     the word `patent' or the abbreviation `pat.' together with an 
     address of a posting on the Internet, accessible to the 
     public without charge for accessing the address, that 
     associates the patented article with the number of the 
     patent'' before ``, or when''.
       (c) Advice of Counsel.--Chapter 29 of title 35, United 
     States Code, is amended by adding at the end the following:

     ``Sec. 298. Advice of Counsel

       ``The failure of an infringer to obtain the advice of 
     counsel with respect to any allegedly infringed patent or the 
     failure of the infringer to present such advice to the court 
     or jury may not be used to prove that the accused infringer 
     willfully infringed the patent or that the infringer intended 
     to induce infringement of the patent.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to any civil action commenced on or after the 
     date of the enactment of this Act.

     SEC. 5. POST-GRANT REVIEW PROCEEDINGS.

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

                   ``CHAPTER 31--INTER PARTES REVIEW

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

     ``Sec. 311. Inter partes review

       ``(a) In General.--Subject to the provisions of this 
     chapter, a person who is not the patent owner may file with 
     the Office a petition to institute an inter partes review for 
     a patent. The Director shall establish, by regulation, fees 
     to be paid by the person requesting the review, in such 
     amounts as the Director determines to be reasonable, 
     considering the aggregate costs of the review.
       ``(b) Scope.--A petitioner in an inter partes review may 
     request to cancel as unpatentable 1 or more claims of a 
     patent only on a ground that could be raised under section 
     102 or 103 and only on the basis of prior art consisting of 
     patents or printed publications.
       ``(c) Filing Deadline.--A petition for inter partes review 
     shall be filed after the later of either--
       ``(1) 9 months after the grant of a patent or issuance of a 
     reissue of a patent; or
       ``(2) if a post-grant review is instituted under chapter 
     32, the date of the termination of such post-grant review.

     ``Sec. 312. Petitions

       ``(a) Requirements of Petition.--A petition filed under 
     section 311 may be considered only if--
       ``(1) the petition is accompanied by payment of the fee 
     established by the Director under section 311;
       ``(2) the petition identifies all real parties in interest;
       ``(3) the petition identifies, in writing and with 
     particularity, each claim challenged, the grounds on which 
     the challenge to each claim is based, and the evidence that 
     supports the grounds for the challenge to each claim, 
     including--
       ``(A) copies of patents and printed publications that the 
     petitioner relies upon in support of the petition; and
       ``(B) affidavits or declarations of supporting evidence and 
     opinions, if the petitioner relies on expert opinions;

[[Page S1385]]

       ``(4) the petition provides such other information as the 
     Director may require by regulation; and
       ``(5) the petitioner provides copies of any of the 
     documents required under paragraphs (2), (3), and (4) to the 
     patent owner or, if applicable, the designated representative 
     of the patent owner.
       ``(b) Public Availability.--As soon as practicable after 
     the receipt of a petition under section 311, the Director 
     shall make the petition available to the public.

     ``Sec. 313. Preliminary response to petition

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

     ``Sec. 314. Institution of inter partes review

       ``(a) Threshold.--The Director may not authorize an inter 
     partes review to commence unless the Director determines that 
     the information presented in the petition filed under section 
     311 and any response filed under section 313 shows that there 
     is a reasonable likelihood that the petitioner would prevail 
     with respect to at least 1 of the claims challenged in the 
     petition.
       ``(b) Timing.--The Director shall determine whether to 
     institute an inter partes review under this chapter within 3 
     months after receiving a preliminary response under section 
     313 or, if none is filed, within three months after the 
     expiration of the time for filing such a response.
       ``(c) Notice.--The Director shall notify the petitioner and 
     patent owner, in writing, of the Director's determination 
     under subsection (a), and shall make such notice available to 
     the public as soon as is practicable. Such notice shall list 
     the date on which the review shall commence.
       ``(d) No Appeal.--The determination by the Director whether 
     to institute an inter partes review under this section shall 
     be final and nonappealable.

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

       ``(a) Infringer's Action.--An inter partes review may not 
     be instituted or maintained if the petitioner or real party 
     in interest has filed a civil action challenging the validity 
     of a claim of the patent.
       ``(b) Patent Owner's Action.--An inter partes review may 
     not be instituted if the petition requesting the proceeding 
     is filed more than 6 months after the date on which the 
     petitioner, real party in interest, or his privy is served 
     with a complaint alleging infringement of the patent. The 
     time limitation set forth in the preceding sentence shall not 
     apply to a request for joinder under subsection (c).
       ``(c) Joinder.--If the Director institutes an inter partes 
     review, the Director, in his discretion, may join as a party 
     to that inter partes review any person who properly files a 
     petition under section 311 that the Director, after receiving 
     a preliminary response under section 313 or the expiration of 
     the time for filing such a response, determines warrants the 
     institution of an inter partes review under section 314.
       ``(d) Multiple Proceedings.--Notwithstanding sections 
     135(a), 251, and 252, and chapter 30, during the pendency of 
     an inter partes review, if another proceeding or matter 
     involving the patent is before the Office, the Director may 
     determine the manner in which the inter partes review or 
     other proceeding or matter may proceed, including providing 
     for stay, transfer, consolidation, or termination of any such 
     matter or proceeding.
       ``(e) Estoppel.--
       ``(1) Proceedings before the office.--The petitioner in an 
     inter partes review under this chapter, or his real party in 
     interest or privy, may not request or maintain a proceeding 
     before the Office with respect to a claim on any ground that 
     the petitioner raised or reasonably could have raised during 
     an inter partes review of the claim that resulted in a final 
     written decision under section 318(a).
       ``(2) Civil actions and other proceedings.--The petitioner 
     in an inter partes review under this chapter, or his real 
     party in interest or privy, may not assert either in a civil 
     action arising in whole or in part under section 1338 of 
     title 28 or in a proceeding before the International Trade 
     Commission that a claim in a patent is invalid on any ground 
     that the petitioner raised or reasonably could have raised 
     during an inter partes review of the claim that resulted in a 
     final written decision under section 318(a).

     ``Sec. 316. Conduct of inter partes review

       ``(a) Regulations.--The Director shall prescribe 
     regulations--
       ``(1) providing that the file of any proceeding under this 
     chapter shall be made available to the public, except that 
     any petition or document filed with the intent that it be 
     sealed shall be accompanied by a motion to seal, and such 
     petition or document shall be treated as sealed pending the 
     outcome of the ruling on the motion;
       ``(2) setting forth the standards for the showing of 
     sufficient grounds to institute a review under section 
     314(a);
       ``(3) establishing procedures for the submission of 
     supplemental information after the petition is filed;
       ``(4) in accordance with section 2(b)(2), establishing and 
     governing inter partes review under this chapter and the 
     relationship of such review to other proceedings under this 
     title;
       ``(5) setting a time period for requesting joinder under 
     section 315(c);
       ``(6) setting forth standards and procedures for discovery 
     of relevant evidence, including that such discovery shall be 
     limited to--
       ``(A) the deposition of witnesses submitting affidavits or 
     declarations; and
       ``(B) what is otherwise necessary in the interest of 
     justice;
       ``(7) prescribing sanctions for abuse of discovery, abuse 
     of process, or any other improper use of the proceeding, such 
     as to harass or to cause unnecessary delay or an unnecessary 
     increase in the cost of the proceeding;
       ``(8) providing for protective orders governing the 
     exchange and submission of confidential information;
       ``(9) allowing the patent owner to file a response to the 
     petition after an inter partes review has been instituted, 
     and requiring that the patent owner file with such response, 
     through affidavits or declarations, any additional factual 
     evidence and expert opinions on which the patent owner relies 
     in support of the response;
       ``(10) setting forth standards and procedures for allowing 
     the patent owner to move to amend the patent under subsection 
     (d) to cancel a challenged claim or propose a reasonable 
     number of substitute claims, and ensuring that any 
     information submitted by the patent owner in support of any 
     amendment entered under subsection (d) is made available to 
     the public as part of the prosecution history of the patent;
       ``(11) providing either party with the right to an oral 
     hearing as part of the proceeding; and
       ``(12) requiring that the final determination in an inter 
     partes review be issued not later than 1 year after the date 
     on which the Director notices the institution of a review 
     under this chapter, except that the Director may, for good 
     cause shown, extend the 1-year period by not more than 6 
     months, and may adjust the time periods in this paragraph in 
     the case of joinder under section 315(c).
       ``(b) Considerations.--In prescribing regulations under 
     this section, the Director shall consider the effect of any 
     such regulation on the economy, the integrity of the patent 
     system, the efficient administration of the Office, and the 
     ability of the Office to timely complete proceedings 
     instituted under this chapter.
       ``(c) Patent Trial and Appeal Board.--The Patent Trial and 
     Appeal Board shall, in accordance with section 6, conduct 
     each proceeding authorized by the Director.
       ``(d) Amendment of the Patent.--
       ``(1) In general.--During an inter partes review instituted 
     under this chapter, the patent owner may file 1 motion to 
     amend the patent in 1 or more of the following ways:
       ``(A) Cancel any challenged patent claim.
       ``(B) For each challenged claim, propose a reasonable 
     number of substitute claims.
       ``(2) Additional motions.--Additional motions to amend may 
     be permitted upon the joint request of the petitioner and the 
     patent owner to materially advance the settlement of a 
     proceeding under section 317, or as permitted by regulations 
     prescribed by the Director.
       ``(3) Scope of claims.--An amendment under this subsection 
     may not enlarge the scope of the claims of the patent or 
     introduce new matter.
       ``(e) Evidentiary Standards.--In an inter partes review 
     instituted under this chapter, the petitioner shall have the 
     burden of proving a proposition of unpatentability by a 
     preponderance of the evidence.

     ``Sec. 317. Settlement

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

     ``Sec. 318. Decision of the board

       ``(a) Final Written Decision.--If an inter partes review is 
     instituted and not dismissed under this chapter, the Patent 
     Trial and Appeal Board shall issue a final written decision 
     with respect to the patentability of any patent claim 
     challenged by the petitioner and any new claim added under 
     section 316(d).

[[Page S1386]]

       ``(b) Certificate.--If the Patent Trial and Appeal Board 
     issues a final written decision under subsection (a) and the 
     time for appeal has expired or any appeal has terminated, the 
     Director shall issue and publish a certificate canceling any 
     claim of the patent finally determined to be unpatentable, 
     confirming any claim of the patent determined to be 
     patentable, and incorporating in the patent by operation of 
     the certificate any new or amended claim determined to be 
     patentable.
       ``(c) Data on Length of Review.--The Patent and Trademark 
     Office shall make available to the public data describing the 
     length of time between the commencement of each inter partes 
     review and the conclusion of that review.

     ``Sec. 319. Appeal

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

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

       (c) Regulations and Effective Date.--
       (1) Regulations.--The Director shall, not later than the 
     date that is 1 year after the date of the enactment of this 
     Act, issue regulations to carry out chapter 31 of title 35, 
     United States Code, as amended by subsection (a) of this 
     section.
       (2) Applicability.--
       (A) In general.--The amendments made by subsection (a) 
     shall take effect on the date that is 1 year after the date 
     of the enactment of this Act and shall apply to all patents 
     issued before, on, or after the effective date of subsection 
     (a).
       (B) Exception.--The provisions of chapter 31 of title 35, 
     United States Code, as amended by paragraph (3), shall 
     continue to apply to requests for inter partes reexamination 
     that are filed prior to the effective date of subsection (a) 
     as if subsection (a) had not been enacted.
       (C) Graduated implementation.--The Director may impose a 
     limit on the number of inter partes reviews that may be 
     instituted during each of the first 4 years following the 
     effective date of subsection (a), provided that such number 
     shall in each year be equivalent to or greater than the 
     number of inter partes reexaminations that are ordered in the 
     last full fiscal year prior to the effective date of 
     subsection (a).
       (3) Transition.--
       (A) In general.--Chapter 31 of title 35, United States 
     Code, is amended--
       (i) in section 312--

       (I) in subsection (a)--

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

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

       (ii) in section 313, by striking ``a substantial new 
     question of patentability affecting a claim of the patent is 
     raised'' and inserting ``it has been shown that there is a 
     reasonable likelihood that the requester would prevail with 
     respect to at least 1 of the claims challenged in the 
     request''.
       (B) Application.--The amendments made by this paragraph 
     shall apply to requests for inter partes reexamination that 
     are filed on or after the date of the enactment of this Act, 
     but prior to the effective date of subsection (a).
       (d) Post-Grant Review.--Part III of title 35, United States 
     Code, is amended by adding at the end the following:

                    ``CHAPTER 32--POST-GRANT REVIEW

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

     ``Sec. 321. Post-grant review

       ``(a) In General.--Subject to the provisions of this 
     chapter, a person who is not the patent owner may file with 
     the Office a petition to institute a post-grant review for a 
     patent. The Director shall establish, by regulation, fees to 
     be paid by the person requesting the review, in such amounts 
     as the Director determines to be reasonable, considering the 
     aggregate costs of the post-grant review.
       ``(b) Scope.--A petitioner in a post-grant review may 
     request to cancel as unpatentable 1 or more claims of a 
     patent on any ground that could be raised under paragraph (2) 
     or (3) of section 282(b) (relating to invalidity of the 
     patent or any claim).
       ``(c) Filing Deadline.--A petition for a post-grant review 
     shall be filed not later than 9 months after the grant of the 
     patent or issuance of a reissue patent.

     ``Sec. 322. Petitions

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

     ``Sec. 323. Preliminary response to petition

       ``(a) Preliminary Response.--If a post-grant review 
     petition is filed under section 321, the patent owner shall 
     have the right to file a preliminary response within 2 months 
     of the filing of the petition.
       ``(b) Content of Response.--A preliminary response to a 
     petition for post-grant review shall set forth reasons why no 
     post-grant review should be instituted based upon the failure 
     of the petition to meet any requirement of this chapter.

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

       ``(a) Threshold.--The Director may not authorize a post-
     grant review to commence unless the Director determines that 
     the information presented in the petition, if such 
     information is not rebutted, would demonstrate that it is 
     more likely than not that at least 1 of the claims challenged 
     in the petition is unpatentable.
       ``(b) Additional Grounds.--The determination required under 
     subsection (a) may also be satisfied by a showing that the 
     petition raises a novel or unsettled legal question that is 
     important to other patents or patent applications.
       ``(c) Timing.--The Director shall determine whether to 
     institute a post-grant review under this chapter within 3 
     months after receiving a preliminary response under section 
     323 or, if none is filed, the expiration of the time for 
     filing such a response.
       ``(d) Notice.--The Director shall notify the petitioner and 
     patent owner, in writing, of the Director's determination 
     under subsection (a) or (b), and shall make such notice 
     available to the public as soon as is practicable. The 
     Director shall make each notice of the institution of a post-
     grant review available to the public. Such notice shall list 
     the date on which the review shall commence.
       ``(e) No Appeal.--The determination by the Director whether 
     to institute a post-grant review under this section shall be 
     final and nonappealable.

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

       ``(a) Infringer's Action.--A post-grant review may not be 
     instituted or maintained if the petitioner or real party in 
     interest has filed a civil action challenging the validity of 
     a claim of the patent.
       ``(b) Preliminary Injunctions.--If a civil action alleging 
     infringement of a patent is filed within 3 months of the 
     grant of the patent, the court may not stay its consideration 
     of the patent owner's motion for a preliminary injunction 
     against infringement of the patent on the basis that a 
     petition for post-grant review has been filed or that such a 
     proceeding has been instituted.
       ``(c) Joinder.--If more than 1 petition for a post-grant 
     review is properly filed against the same patent and the 
     Director determines that more than 1 of these petitions 
     warrants the institution of a post-grant review under section 
     324, the Director may consolidate such reviews into a single 
     post-grant review.
       ``(d) Multiple Proceedings.--Notwithstanding sections 
     135(a), 251, and 252, and chapter 30, during the pendency of 
     any post-grant review, if another proceeding or matter 
     involving the patent is before the Office, the Director may 
     determine the manner in which the post-grant review or other 
     proceeding or matter may proceed, including providing for 
     stay, transfer, consolidation, or termination of any such 
     matter or proceeding. In determining whether to institute or 
     order a proceeding under this chapter, chapter 30, or chapter 
     31, the Director may take into account whether, and reject 
     the petition or request because, the same or substantially 
     the same prior art or arguments previously were presented to 
     the Office.
       ``(e) Estoppel.--
       ``(1) Proceedings before the office.--The petitioner in a 
     post-grant review under this chapter, or his real party in 
     interest or

[[Page S1387]]

     privy, may not request or maintain a proceeding before the 
     Office with respect to a claim on any ground that the 
     petitioner raised or reasonably could have raised during a 
     post-grant review of the claim that resulted in a final 
     written decision under section 328(a).
       ``(2) Civil actions and other proceedings.--The petitioner 
     in a post-grant review under this chapter, or his real party 
     in interest or privy, may not assert either in a civil action 
     arising in whole or in part under section 1338 of title 28 or 
     in a proceeding before the International Trade Commission 
     that a claim in a patent is invalid on any ground that the 
     petitioner raised during a post-grant review of the claim 
     that resulted in a final written decision under section 
     328(a).
       ``(f) Reissue Patents.--A post-grant review may not be 
     instituted if the petition requests cancellation of a claim 
     in a reissue patent that is identical to or narrower than a 
     claim in the original patent from which the reissue patent 
     was issued, and the time limitations in section 321(c) would 
     bar filing a petition for a post-grant review for such 
     original patent.

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

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

     ``Sec. 327. Settlement

       ``(a) In General.--A post-grant review instituted under 
     this chapter shall be terminated with respect to any 
     petitioner upon the joint request of the petitioner and the 
     patent owner, unless the Office has decided the merits of the 
     proceeding before the request for termination is filed. If 
     the post-grant review is terminated with respect to a 
     petitioner under this section, no estoppel under section 
     325(e) shall apply to that petitioner. If no petitioner 
     remains in the post-grant review, the Office may terminate 
     the post-grant review or proceed to a final written decision 
     under section 328(a).
       ``(b) Agreements in Writing.--Any agreement or 
     understanding between the patent owner and a petitioner, 
     including any collateral agreements referred to in such 
     agreement or understanding, made in connection with, or in 
     contemplation of, the termination of a post-grant review 
     under this section shall be in writing, and a true copy of 
     such agreement or understanding shall be filed in the Office 
     before the termination of the post-grant review as between 
     the parties. If any party filing such agreement or 
     understanding so requests, the copy shall be kept separate 
     from the file of the post-grant review, and shall be made 
     available only to Federal Government agencies upon written 
     request, or to any other person on a showing of good cause.

     ``Sec. 328. Decision of the board

       ``(a) Final Written Decision.--If a post-grant review is 
     instituted and not dismissed under this chapter, the Patent 
     Trial and Appeal Board shall issue a final written decision 
     with respect to the patentability of any patent claim 
     challenged by the petitioner and any new claim added under 
     section 326(d).
       ``(b) Certificate.--If the Patent Trial and Appeal Board 
     issues a final written decision under subsection (a) and the 
     time for appeal has expired or any appeal has terminated, the 
     Director shall issue and publish a certificate canceling any 
     claim of the patent finally determined to be unpatentable, 
     confirming any claim of the patent determined to be 
     patentable, and incorporating in the patent by operation of 
     the certificate any new or amended claim determined to be 
     patentable.
       ``(c) Data on Length of Review.--The Patent and Trademark 
     Office shall make available to the public data describing the 
     length of time between the commencement of each post-grant 
     review and the conclusion of that review.

     ``Sec. 329. Appeal

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

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

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

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

       ``(a) In General.--Any person at any time may cite to the 
     Office in writing--
       ``(1) prior art consisting of patents or printed 
     publications which that person believes to have a bearing on 
     the patentability of any claim of a particular patent; or

[[Page S1388]]

       ``(2) statements of the patent owner filed in a proceeding 
     before a Federal court or the Office in which the patent 
     owner took a position on the scope of any claim of a 
     particular patent.
       ``(b) Official File.--If the person citing prior art or 
     written statements pursuant to subsection (a) explains in 
     writing the pertinence and manner of applying the prior art 
     or written statements to at least 1 claim of the patent, the 
     citation of the prior art or written statements and the 
     explanation thereof shall become a part of the official file 
     of the patent.
       ``(c) Additional Information.--A party that submits a 
     written statement pursuant to subsection (a)(2) shall include 
     any other documents, pleadings, or evidence from the 
     proceeding in which the statement was filed that addresses 
     the written statement.
       ``(d) Limitations.--A written statement submitted pursuant 
     to subsection (a)(2), and additional information submitted 
     pursuant to subsection (c), shall not be considered by the 
     Office for any purpose other than to determine the proper 
     meaning of a patent claim in a proceeding that is ordered or 
     instituted pursuant to section 304, 314, or 324. If any such 
     written statement or additional information is subject to an 
     applicable protective order, it shall be redacted to exclude 
     information that is subject to that order.
       ``(e) Confidentiality.--Upon the written request of the 
     person citing prior art or written statements pursuant to 
     subsection (a), that person's identity shall be excluded from 
     the patent file and kept confidential.''.
       (2) Effective date.--The amendment made by this subsection 
     shall take effect 1 year after the date of the enactment of 
     this Act and shall apply to patents issued before, on, or 
     after that effective date.
       (h) Reexamination.--
       (1) Determination by director.--
       (A) In general.--Section 303(a) of title 35, United States 
     Code, is amended by striking ``section 301 of this title'' 
     and inserting ``section 301 or 302''.
       (B) Effective date.--The amendment made by this paragraph 
     shall take effect 1 year after the date of the enactment of 
     this Act and shall apply to patents issued before, on, or 
     after that effective date.
       (2) Appeal.--
       (A) In general.--Section 306 of title 35, United States 
     Code, is amended by striking ``145'' and inserting ``144''.
       (B) Effective date.--The amendment made by this paragraph 
     shall take effect on the date of enactment of this Act and 
     shall apply to appeals of reexaminations that are pending 
     before the Board of Patent Appeals and Interferences or the 
     Patent Trial and Appeal Board on or after the date of the 
     enactment of this Act.

     SEC. 6. PATENT TRIAL AND APPEAL BOARD.

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

     ``Sec. 6. Patent Trial and Appeal Board

       ``(a) There shall be in the Office a Patent Trial and 
     Appeal Board. The Director, the Deputy Director, the 
     Commissioner for Patents, the Commissioner for Trademarks, 
     and the administrative patent judges shall constitute the 
     Patent Trial and Appeal Board. The administrative patent 
     judges shall be persons of competent legal knowledge and 
     scientific ability who are appointed by the Secretary, in 
     consultation with the Director. Any reference in any Federal 
     law, Executive order, rule, regulation, or delegation of 
     authority, or any document of or pertaining to the Board of 
     Patent Appeals and Interferences is deemed to refer to the 
     Patent Trial and Appeal Board.
       ``(b) The Patent Trial and Appeal Board shall--
       ``(1) on written appeal of an applicant, review adverse 
     decisions of examiners upon applications for patents pursuant 
     to section 134(a);
       ``(2) review appeals of reexaminations pursuant to section 
     134(b);
       ``(3) conduct derivation proceedings pursuant to section 
     135; and
       ``(4) conduct inter partes reviews and post-grant reviews 
     pursuant to chapters 31 and 32.
       ``(c) Each appeal, derivation proceeding, post-grant 
     review, and inter partes review shall be heard by at least 3 
     members of the Patent Trial and Appeal Board, who shall be 
     designated by the Director. Only the Patent Trial and Appeal 
     Board may grant rehearings.
       ``(d) The Secretary of Commerce may, in his discretion, 
     deem the appointment of an administrative patent judge who, 
     before the date of the enactment of this subsection, held 
     office pursuant to an appointment by the Director to take 
     effect on the date on which the Director initially appointed 
     the administrative patent judge. It shall be a defense to a 
     challenge to the appointment of an administrative patent 
     judge on the basis of the judge's having been originally 
     appointed by the Director that the administrative patent 
     judge so appointed was acting as a de facto officer.''.
       (b) Administrative Appeals.--Section 134 of title 35, 
     United States Code, is amended--
       (1) in subsection (b), by striking ``any reexamination 
     proceeding'' and inserting ``a reexamination''; and
       (2) by striking subsection (c).
       (c) Circuit Appeals.--
       (1) In general.--Section 141 of title 35, United States 
     Code, is amended to read as follows:

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

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

     SEC. 7. PREISSUANCE SUBMISSIONS BY THIRD PARTIES.

       (a) In General.--Section 122 of title 35, United States 
     Code, is amended by adding at the end the following:
       ``(e) Preissuance Submissions by Third Parties.--
       ``(1) In general.--Any third party may submit for 
     consideration and inclusion in the record of a patent 
     application, any patent, published patent application, or 
     other printed publication of potential relevance to the 
     examination of the application, if such submission is made in 
     writing before the earlier of--

[[Page S1389]]

       ``(A) the date a notice of allowance under section 151 is 
     given or mailed in the application for patent; or
       ``(B) the later of--
       ``(i) 6 months after the date on which the application for 
     patent is first published under section 122 by the Office, or
       ``(ii) the date of the first rejection under section 132 of 
     any claim by the examiner during the examination of the 
     application for patent.
       ``(2) Other requirements.--Any submission under paragraph 
     (1) shall--
       ``(A) set forth a concise description of the asserted 
     relevance of each submitted document;
       ``(B) be accompanied by such fee as the Director may 
     prescribe; and
       ``(C) include a statement by the person making such 
     submission affirming that the submission was made in 
     compliance with this section.''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect 1 year after the date of the enactment of 
     this Act and shall apply to patent applications filed before, 
     on, or after that effective date.

     SEC. 8. VENUE.

       (a) Technical Amendments Relating to Venue.--Sections 32, 
     145, 146, 154(b)(4)(A), and 293 of title 35, United States 
     Code, and section 21(b)(4) of the Act entitled ``An Act to 
     provide for the registration and protection of trademarks 
     used in commerce, to carry out the provisions of certain 
     international conventions, and for other purposes'', approved 
     July 5, 1946 (commonly referred to as the ``Trademark Act of 
     1946'' or the ``Lanham Act''; 15 U.S.C. 1071(b)(4)), are each 
     amended by striking ``United States District Court for the 
     District of Columbia'' each place that term appears and 
     inserting ``United States District Court for the Eastern 
     District of Virginia''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect upon the date of the enactment of this Act 
     and shall apply to civil actions commenced on or after that 
     date.

     SEC. 9. FEE SETTING AUTHORITY.

       (a) Fee Setting.--
       (1) In general.--The Director shall have authority to set 
     or adjust by rule any fee established, authorized, or charged 
     under title 35, United States Code, and the Trademark Act of 
     1946 (15 U.S.C. 1051 et seq.), notwithstanding the fee 
     amounts established, authorized, or charged thereunder, for 
     all services performed by or materials furnished by, the 
     Office, provided that patent and trademark fee amounts are in 
     the aggregate set to recover the estimated cost to the Office 
     for processing, activities, services, and materials relating 
     to patents and trademarks, respectively, including 
     proportionate shares of the administrative costs of the 
     Office.
       (2) Small and micro entities.--The fees established under 
     paragraph (1) for filing, searching, examining, issuing, 
     appealing, and maintaining patent applications and patents 
     shall be reduced by 50 percent with respect to their 
     application to any small entity that qualifies for reduced 
     fees under section 41(h)(1) of title 35, United States Code, 
     and shall be reduced by 75 percent with respect to their 
     application to any micro entity as defined in section 123 of 
     that title.
       (3) Reduction of fees in certain fiscal years.--In any 
     fiscal year, the Director--
       (A) shall consult with the Patent Public Advisory Committee 
     and the Trademark Public Advisory Committee on the 
     advisability of reducing any fees described in paragraph (1); 
     and
       (B) after the consultation required under subparagraph (A), 
     may reduce such fees.
       (4) Role of the public advisory committee.--The Director 
     shall--
       (A) submit to the Patent Public Advisory Committee or the 
     Trademark Public Advisory Committee, or both, as appropriate, 
     any proposed fee under paragraph (1) not less than 45 days 
     before publishing any proposed fee in the Federal Register;
       (B) provide the relevant advisory committee described in 
     subparagraph (A) a 30-day period following the submission of 
     any proposed fee, on which to deliberate, consider, and 
     comment on such proposal, and require that--
       (i) during such 30-day period, the relevant advisory 
     committee hold a public hearing related to such proposal; and
       (ii) the Director shall assist the relevant advisory 
     committee in carrying out such public hearing, including by 
     offering the use of Office resources to notify and promote 
     the hearing to the public and interested stakeholders;
       (C) require the relevant advisory committee to make 
     available to the public a written report detailing the 
     comments, advice, and recommendations of the committee 
     regarding any proposed fee;
       (D) consider and analyze any comments, advice, or 
     recommendations received from the relevant advisory committee 
     before setting or adjusting any fee; and
       (E) notify, through the Chair and Ranking Member of the 
     Senate and House Judiciary Committees, the Congress of any 
     final rule setting or adjusting fees under paragraph (1).
       (5) Publication in the federal register.--
       (A) In general.--Any rules prescribed under this subsection 
     shall be published in the Federal Register.
       (B) Rationale.--Any proposal for a change in fees under 
     this section shall--
       (i) be published in the Federal Register; and
       (ii) include, in such publication, the specific rationale 
     and purpose for the proposal, including the possible 
     expectations or benefits resulting from the proposed change.
       (C) Public comment period.--Following the publication of 
     any proposed fee in the Federal Register pursuant to 
     subparagraph (A), the Director shall seek public comment for 
     a period of not less than 45 days.
       (6) Congressional comment period.--Following the 
     notification described in paragraph (3)(E), Congress shall 
     have not more than 45 days to consider and comment on any 
     final rule setting or adjusting fees under paragraph (1). No 
     fee set or adjusted under paragraph (1) shall be effective 
     prior to the end of such 45-day comment period.
       (7) Rule of construction.--No rules prescribed under this 
     subsection may diminish--
       (A) an applicant's rights under title 35, United States 
     Code, or the Trademark Act of 1946; or
       (B) any rights under a ratified treaty.
       (b) Fees for Patent Services.--Division B of Public Law 
     108-447 is amended in title VIII of the Departments of 
     Commerce, Justice, and State, the Judiciary, and Related 
     Agencies Appropriations Act, 2005--
       (1) in subsections (a), (b), and (c) of section 801, by--
       (A) striking ``During'' and all that follows through `` 
     2006, subsection'' and inserting ``Subsection''; and
       (B) striking ``shall be administered as though that 
     subsection reads'' and inserting ``is amended to read'';
       (2) in subsection (d) of section 801, by striking 
     ``During'' and all that follows through ``2006, subsection'' 
     and inserting ``Subsection''; and
       (3) in subsection (e) of section 801, by--
       (A) striking ``During'' and all that follows through 
     ``2006, subsection'' and inserting ``Subsection''; and
       (B) striking ``shall be administered as though that 
     subsection''.
       (c) Adjustment of Trademark Fees.--Division B of Public Law 
     108-447 is amended in title VIII of the Departments of 
     Commerce, Justice and State, the Judiciary and Related 
     Agencies Appropriations Act, 2005, in section 802(a) by 
     striking ``During fiscal years 2005, 2006 and 2007'', and 
     inserting ``Until such time as the Director sets or adjusts 
     the fees otherwise,''.
       (d) Effective Date, Applicability, and Transition 
     Provisions.--Division B of Public Law 108-447 is amended in 
     title VIII of the Departments of Commerce, Justice and State, 
     the Judiciary and Related Agencies Appropriations Act, 2005, 
     in section 803(a) by striking ``and shall apply only with 
     respect to the remaining portion of fiscal year 2005, 2006 
     and 2007''.
       (e) Statutory Authority.--Section 41(d)(1)(A) of title 35, 
     United States Code, is amended by striking ``, and the 
     Director may not increase any such fee thereafter''.
       (f) Rule of Construction.--Nothing in this section shall be 
     construed to affect any other provision of Division B of 
     Public Law 108-447, including section 801(c) of title VIII of 
     the Departments of Commerce, Justice and State, the Judiciary 
     and Related Agencies Appropriations Act, 2005.
       (g) Definitions.--In this section, the following 
     definitions shall apply:
       (1) Director.--The term ``Director'' means the Director of 
     the United States Patent and Trademark Office.
       (2) Office.--The term ``Office'' means the United States 
     Patent and Trademark Office.
       (3) Trademark act of 1946.--The term ``Trademark Act of 
     1946'' means an Act entitled ``Act to provide for the 
     registration and protection of trademarks used in commerce, 
     to carry out the provisions of certain international 
     conventions, and for other purposes'', approved July 5, 1946 
     (15 U.S.C. 1051 et seq.) (commonly referred to as the 
     Trademark Act of 1946 or the Lanham Act).
       (h) Electronic Filing Incentive.--
       (1) In general.--Notwithstanding any other provision of 
     this section, a fee of $400 shall be established for each 
     application for an original patent, except for a design, 
     plant, or provisional application, that is not filed by 
     electronic means as prescribed by the Director. The fee 
     established by this subsection shall be reduced 50 percent 
     for small entities that qualify for reduced fees under 
     section 41(h)(1) of title 35, United States Code. All fees 
     paid under this subsection shall be deposited in the Treasury 
     as an offsetting receipt that shall not be available for 
     obligation or expenditure.
       (2) Effective date.--This subsection shall become effective 
     60 days after the date of the enactment of this Act.
       (i) Reduction in Fees for Small Entity Patents.--The 
     Director shall reduce fees for providing prioritized 
     examination of utility and plant patent applications by 50 
     percent for small entities that qualify for reduced fees 
     under section 41(h)(1) of title 35, United States Code, so 
     long as the fees of the prioritized examination program are 
     set to recover the estimated cost of the program.
       (j) Effective Date.--Except as provided in subsection (h), 
     the provisions of this section shall take effect upon the 
     date of the enactment of this Act.

     SEC. 10. SUPPLEMENTAL EXAMINATION.

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

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

       ``(a) In General.--A patent owner may request supplemental 
     examination of a patent in the Office to consider, 
     reconsider, or correct information believed to be relevant to

[[Page S1390]]

     the patent. Within 3 months of the date a request for 
     supplemental examination meeting the requirements of this 
     section is received, the Director shall conduct the 
     supplemental examination and shall conclude such examination 
     by issuing a certificate indicating whether the information 
     presented in the request raises a substantial new question of 
     patentability.
       ``(b) Reexamination Ordered.--If a substantial new question 
     of patentability is raised by 1 or more items of information 
     in the request, the Director shall order reexamination of the 
     patent. The reexamination shall be conducted according to 
     procedures established by chapter 30, except that the patent 
     owner shall not have the right to file a statement pursuant 
     to section 304. During the reexamination, the Director shall 
     address each substantial new question of patentability 
     identified during the supplemental examination, 
     notwithstanding the limitations therein relating to patents 
     and printed publication or any other provision of chapter 30.
       ``(c) Effect.--
       ``(1) In general.--A patent shall not be held unenforceable 
     on the basis of conduct relating to information that had not 
     been considered, was inadequately considered, or was 
     incorrect in a prior examination of the patent if the 
     information was considered, reconsidered, or corrected during 
     a supplemental examination of the patent. The making of a 
     request under subsection (a), or the absence thereof, shall 
     not be relevant to enforceability of the patent under section 
     282.
       ``(2) Exceptions.--
       ``(A) Prior allegations.--This subsection shall not apply 
     to an allegation pled with particularity, or set forth with 
     particularity in a notice received by the patent owner under 
     section 505(j)(2)(B)(iv)(II) of the Federal Food, Drug, and 
     Cosmetic Act (21 U.S.C. 355(j)(2)(B)(iv)(II)), before the 
     date of a supplemental-examination request under subsection 
     (a) to consider, reconsider, or correct information forming 
     the basis for the allegation.
       ``(B) Patent enforcement actions.--In an action brought 
     under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 
     1337(a)), or section 281 of this title, this subsection shall 
     not apply to any defense raised in the action that is based 
     upon information that was considered, reconsidered, or 
     corrected pursuant to a supplemental-examination request 
     under subsection (a) unless the supplemental examination, and 
     any reexamination ordered pursuant to the request, are 
     concluded before the date on which the action is brought.
       ``(d) Fees and Regulations.--The Director shall, by 
     regulation, establish fees for the submission of a request 
     for supplemental examination of a patent, and to consider 
     each item of information submitted in the request. If 
     reexamination is ordered pursuant to subsection (a), fees 
     established and applicable to ex parte reexamination 
     proceedings under chapter 30 shall be paid in addition to 
     fees applicable to supplemental examination. The Director 
     shall promulgate regulations governing the form, content, and 
     other requirements of requests for supplemental examination, 
     and establishing procedures for conducting review of 
     information submitted in such requests.
       ``(e) Rule of Construction.--Nothing in this section shall 
     be construed--
       ``(1) to preclude the imposition of sanctions based upon 
     criminal or antitrust laws (including section 1001(a) of 
     title 18, the first section of the Clayton Act, and section 5 
     of the Federal Trade Commission Act to the extent that 
     section relates to unfair methods of competition);
       ``(2) to limit the authority of the Director to investigate 
     issues of possible misconduct and impose sanctions for 
     misconduct in connection with matters or proceedings before 
     the Office; or
       ``(3) to limit the authority of the Director to promulgate 
     regulations under chapter 3 relating to sanctions for 
     misconduct by representatives practicing before the 
     Office.''.
       (b) Effective Date.--This section shall take effect 1 year 
     after the date of the enactment of this Act and shall apply 
     to patents issued before, on, or after that date.

     SEC. 11. RESIDENCY OF FEDERAL CIRCUIT JUDGES.

       (a) In General.--Section 44(c) of title 28, United States 
     Code, is amended--
       (1) by repealing the second sentence; and
       (2) in the third sentence, by striking ``state'' and 
     inserting ``State''.
       (b) No Provision of Facilities Authorized.--The repeal made 
     by the amendment in subsection (a)(1) shall not be construed 
     to authorize the provision of any court facilities or 
     administrative support services outside of the District of 
     Columbia.
       (c) Effective Date.--This section shall take effect on the 
     date of enactment of this Act.

     SEC. 12. MICRO ENTITY DEFINED.

       Chapter 11 of title 35, United States Code, is amended by 
     adding at the end the following new section:

     ``Sec. 123. Micro entity defined

       ``(a) In General.--For purposes of this title, the term 
     `micro entity' means an applicant who makes a certification 
     that the applicant--
       ``(1) qualifies as a small entity, as defined in 
     regulations issued by the Director;
       ``(2) has not been named on 5 or more previously filed 
     patent applications, not including applications filed in 
     another country, provisional applications under section 
     111(b), or international applications filed under the treaty 
     defined in section 351(a) for which the basic national fee 
     under section 41(a) was not paid;
       ``(3) did not in the prior calendar year have a gross 
     income, as defined in section 61(a) of the Internal Revenue 
     Code (26 U.S.C. 61(a)), exceeding 3 times the most recently 
     reported median household income, as reported by the Bureau 
     of Census; and
       ``(4) has not assigned, granted, conveyed, and is not 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 had a gross income, as defined 
     in section 61(a) of the Internal Revenue Code (26 U.S.C. 
     61(a)), exceeding 3 times the most recently reported median 
     household income, as reported by the Bureau of the Census, in 
     the calendar year preceding the calendar year in which the 
     fee is being paid, other than an entity of higher education 
     where the applicant is not an employee, a relative of an 
     employee, or have any affiliation with the entity of higher 
     education.
       ``(b) Applications Resulting From Prior Employment.--An 
     applicant is not considered to be named on a previously filed 
     application for purposes of subsection (a)(2) if the 
     applicant has assigned, or is under an obligation by contract 
     or law to assign, all ownership rights in the application as 
     the result of the applicant's previous employment.
       ``(c) Foreign Currency Exchange Rate.--If an applicant's or 
     entity's gross income in the preceding year is not in United 
     States dollars, the average currency exchange rate, as 
     reported by the Internal Revenue Service, during the 
     preceding year shall be used to determine whether the 
     applicant's or entity's gross income exceeds the threshold 
     specified in paragraphs (3) or (4) of subsection (a).
       ``(d) State Institutions of Higher Education.--
       ``(1) In general.--For purposes of this section, a micro 
     entity shall include an applicant who certifies that--
       ``(A) the applicant's employer, from which the applicant 
     obtains the majority of the applicant's income, is a State 
     public institution of higher education, as defined in section 
     102 of the Higher Education Act of 1965 (20 U.S.C. 1002); or
       ``(B) the applicant has assigned, granted, conveyed, or is 
     under an obligation by contract or law to assign, grant, or 
     convey, a license or other ownership interest in the 
     particular application to such State public institution.
       ``(2) Director's authority.--The Director may, in the 
     Director's discretion, impose income limits, annual filing 
     limits, or other limits on who may qualify as a micro entity 
     pursuant to this subsection if the Director determines that 
     such additional limits are reasonably necessary to avoid an 
     undue impact on other patent applicants or owners or are 
     otherwise reasonably necessary and appropriate. At least 3 
     months before any limits proposed to be imposed pursuant to 
     this paragraph shall take effect, the Director shall inform 
     the Committee on the Judiciary of the House of 
     Representatives and the Committee on the Judiciary of the 
     Senate of any such proposed limits.''.

     SEC. 13. FUNDING AGREEMENTS.

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

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

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

     SEC. 15. BEST MODE REQUIREMENT.

       (a) In General.--Section 282 of title 35, United State 
     Code, is amended in its second undesignated paragraph by 
     striking paragraph (3) and inserting the following:
       ``(3) Invalidity of the patent or any claim in suit for 
     failure to comply with--
       ``(A) any requirement of section 112, except that the 
     failure to disclose the best mode

[[Page S1391]]

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

     SEC. 16. TECHNICAL AMENDMENTS.

       (a) Joint Inventions.--Section 116 of title 35, United 
     States Code, is amended--
       (1) in the first paragraph, by striking ``When'' and 
     inserting ``(a) Joint Inventions.--When'';
       (2) in the second paragraph, by striking ``If a joint 
     inventor'' and inserting ``(b) Omitted Inventor.--If a joint 
     inventor''; and
       (3) in the third paragraph--
       (A) by striking ``Whenever'' and inserting ``(c) Correction 
     of Errors in Application.--Whenever''; and
       (B) by striking ``and such error arose without any 
     deceptive intent on his part,''.
       (b) Filing of Application in Foreign Country.--Section 184 
     of title 35, United States Code, is amended--
       (1) in the first paragraph--
       (A) by striking ``Except when'' and inserting ``(a) Filing 
     in Foreign Country.--Except when''; and
       (B) by striking ``and without deceptive intent'';
       (2) in the second paragraph, by striking ``The term'' and 
     inserting ``(b) Application.--The term''; and
       (3) in the third paragraph, by striking ``The scope'' and 
     inserting ``(c) Subsequent Modifications, Amendments, and 
     Supplements.--The scope''.
       (c) Filing Without a License.--Section 185 of title 35, 
     United States Code, is amended by striking ``and without 
     deceptive intent''.
       (d) Reissue of Defective Patents.--Section 251 of title 35, 
     United States Code, is amended--
       (1) in the first paragraph--
       (A) by striking ``Whenever'' and inserting ``(a) In 
     General.--Whenever''; and
       (B) by striking ``without any deceptive intention'';
       (2) in the second paragraph, by striking ``The Director'' 
     and inserting ``(b) Multiple Reissued Patents.--The 
     Director'';
       (3) in the third paragraph, by striking ``The provisions'' 
     and inserting ``(c) Applicability of This Title.--The 
     provisions''; and
       (4) in the last paragraph, by striking ``No reissued 
     patent'' and inserting ``(d) Reissue Patent Enlarging Scope 
     of Claims.--No reissued patent''.
       (e) Effect of Reissue.--Section 253 of title 35, United 
     States Code, is amended--
       (1) in the first paragraph, by striking ``Whenever, without 
     any deceptive intention'' and inserting ``(a) In General.--
     Whenever''; and
       (2) in the second paragraph, by striking ``in like manner'' 
     and inserting ``(b) Additional Disclaimer or Dedication.--In 
     the manner set forth in subsection (a),''.
       (f) Correction of Named Inventor.--Section 256 of title 35, 
     United States Code, is amended--
       (1) in the first paragraph--
       (A) by striking ``Whenever'' and inserting ``(a) 
     Correction.--Whenever''; and
       (B) by striking ``and such error arose without any 
     deceptive intention on his part''; and
       (2) in the second paragraph, by striking ``The error'' and 
     inserting ``(b) Patent Valid if Error Corrected.--The 
     error''.
       (g) Presumption of Validity.--Section 282 of title 35, 
     United States Code, is amended--
       (1) in the first undesignated paragraph--
       (A) by striking ``A patent'' and inserting ``(a) In 
     General.--A patent''; and
       (B) by striking the third sentence;
       (2) in the second undesignated paragraph, by striking ``The 
     following'' and inserting ``(b) Defenses.--The following''; 
     and
       (3) in the third undesignated paragraph, by striking ``In 
     actions'' and inserting ``(c) Notice of Actions; Actions 
     During Extension of Patent Term.--In actions''.
       (h) Action for Infringement.--Section 288 of title 35, 
     United States Code, is amended by striking ``, without 
     deceptive intention,''.
       (i) Reviser's Notes.--
       (1) Section 3(e)(2) of title 35, United States Code, is 
     amended by striking ``this Act,'' and inserting ``that 
     Act,''.
       (2) Section 202 of title 35, United States Code, is 
     amended--
       (A) in subsection (b)(3), by striking ``the section 
     203(b)'' and inserting ``section 203(b)''; and
       (B) in subsection (c)(7)--
       (i) in subparagraph (D), by striking ``except where it 
     proves'' and all that follows through ``; and'' and 
     inserting: ``except where it is determined to be infeasible 
     following a reasonable inquiry, a preference in the licensing 
     of subject inventions shall be given to small business firms; 
     and''; and
       (ii) in subparagraph (E)(i), by striking ``as described 
     above in this clause (D);'' and inserting ``described above 
     in this clause;''.
       (3) Section 209(d)(1) of title 35, United States Code, is 
     amended by striking ``nontransferrable'' and inserting 
     ``nontransferable''.
       (4) Section 287(c)(2)(G) of title 35, United States Code, 
     is amended by striking ``any state'' and inserting ``any 
     State''.
       (5) Section 371(b) of title 35, United States Code, is 
     amended by striking ``of the treaty'' and inserting ``of the 
     treaty.''.
       (j) Unnecessary References.--
       (1) In general.--Title 35, United States Code, is amended 
     by striking ``of this title'' each place that term appears.
       (2) Exception.--The amendment made by paragraph (1) shall 
     not apply to the use of such term in the following sections 
     of title 35, United States Code:
       (A) Section 1(c).
       (B) Section 101.
       (C) Subsections (a) and (b) of section 105.
       (D) The first instance of the use of such term in section 
     111(b)(8).
       (E) Section 157(a).
       (F) Section 161.
       (G) Section 164.
       (H) Section 171.
       (I) Section 251(c), as so designated by this section.
       (J) Section 261.
       (K) Subsections (g) and (h) of section 271.
       (L) Section 287(b)(1).
       (M) Section 289.
       (N) The first instance of the use of such term in section 
     375(a).
       (k) Effective Date.--The amendments made by this section 
     shall take effect 1 year after the date of the enactment of 
     this Act and shall apply to proceedings commenced on or after 
     that effective date.

     SEC. 17. CLARIFICATION OF JURISDICTION.

       (a) Short Title.--This section may be cited as the 
     ``Intellectual Property Jurisdiction Clarification Act of 
     2011''.
       (b) State Court Jurisdiction.--Section 1338(a) of title 28, 
     United States Code, is amended by striking the second 
     sentence and inserting the following: ``No State court shall 
     have jurisdiction over any claim for relief arising under any 
     Act of Congress relating to patents, plant variety 
     protection, or copyrights.''.
       (c) Court of Appeals for the Federal Circuit.--Section 
     1295(a)(1) of title 28, United States Code, is amended to 
     read as follows:
       ``(1) of an appeal from a final decision of a district 
     court of the United States, the District Court of Guam, the 
     District Court of the Virgin Islands, or the District Court 
     of the Northern Mariana Islands, in any civil action arising 
     under, or in any civil action in which a party has asserted a 
     compulsory counterclaim arising under, any Act of Congress 
     relating to patents or plant variety protection;''.
       (d) Removal.--
       (1) In general.--Chapter 89 of title 28, United States 
     Code, is amended by adding at the end the following new 
     section:

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

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

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

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

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

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

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

       (f) Effective Date.--The amendments made by this section 
     shall apply to any civil

[[Page S1392]]

     action commenced on or after the date of the enactment of 
     this Act.

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

       (a) References.--Except as otherwise expressly provided, 
     wherever in this section language is expressed in terms of a 
     section or chapter, the reference shall be considered to be 
     made to that section or chapter in title 35, United States 
     Code.
       (b) Transitional Program.--
       (1) Establishment.--Not later than 1 year after the date of 
     enactment of this Act, the Director shall issue regulations 
     establishing and implementing a transitional post-grant 
     review proceeding for review of the validity of covered 
     business-method patents. The transitional proceeding 
     implemented pursuant to this subsection shall be regarded as, 
     and shall employ the standards and procedures of, a post-
     grant review under chapter 32, subject to the following 
     exceptions and qualifications:
       (A) Section 321(c) and subsections (e)(2), (f), and (g) of 
     section 325 shall not apply to a transitional proceeding.
       (B) A person may not file a petition for a transitional 
     proceeding with respect to a covered business-method patent 
     unless the person or his real party in interest has been sued 
     for infringement of the patent or has been charged with 
     infringement under that patent.
       (C) A petitioner in a transitional proceeding who 
     challenges the validity of 1 or more claims in a covered 
     business-method patent on a ground raised under section 102 
     or 103 as in effect on the day prior to the date of enactment 
     of this Act may support such ground only on the basis of--
       (i) prior art that is described by section 102(a) (as in 
     effect on the day prior to the date of enactment of this 
     Act); or
       (ii) prior art that--

       (I) discloses the invention more than 1 year prior to the 
     date of the application for patent in the United States; and
       (II) would be described by section 102(a) (as in effect on 
     the day prior to the date of enactment of this Act) if the 
     disclosure had been made by another before the invention 
     thereof by the applicant for patent.

       (D) The petitioner in a transitional proceeding, or his 
     real party in interest, may not assert either in a civil 
     action arising in whole or in part under section 1338 of 
     title 28, United States Code, or in a proceeding before the 
     International Trade Commission that a claim in a patent is 
     invalid on any ground that the petitioner raised during a 
     transitional proceeding that resulted in a final written 
     decision.
       (E) The Director may institute a transitional proceeding 
     only for a patent that is a covered business-method patent.
       (2) Effective date.--The regulations issued pursuant to 
     paragraph (1) shall take effect on the date that is 1 year 
     after the date of enactment of this Act and shall apply to 
     all covered business-method patents issued before, on, or 
     after such date of enactment, except that the regulations 
     shall not apply to a patent described in the first sentence 
     of section 5(f)(2) of this Act during the period that a 
     petition for post-grant review of that patent would satisfy 
     the requirements of section 321(c).
       (3) Sunset.--
       (A) In general.--This subsection, and the regulations 
     issued pursuant to this subsection, are repealed effective on 
     the date that is 4 years after the date that the regulations 
     issued pursuant to paragraph (1) take effect.
       (B) Applicability.--Notwithstanding subparagraph (A), this 
     subsection and the regulations implemented pursuant to this 
     subsection shall continue to apply to any petition for a 
     transitional proceeding that is filed prior to the date that 
     this subsection is repealed pursuant to subparagraph (A).
       (c) Request for Stay.--
       (1) In general.--If a party seeks a stay of a civil action 
     alleging infringement of a patent under section 281 in 
     relation to a transitional proceeding for that patent, the 
     court shall decide whether to enter a stay based on--
       (A) whether a stay, or the denial thereof, will simplify 
     the issues in question and streamline the trial;
       (B) whether discovery is complete and whether a trial date 
     has been set;
       (C) whether a stay, or the denial thereof, would unduly 
     prejudice the nonmoving party or present a clear tactical 
     advantage for the moving party; and
       (D) whether a stay, or the denial thereof, will reduce the 
     burden of litigation on the parties and on the court.
       (2) Review.--A party may take an immediate interlocutory 
     appeal from a district court's decision under paragraph (1). 
     The United States Court of Appeals for the Federal Circuit 
     shall review the district court's decision to ensure 
     consistent application of established precedent, and such 
     review may be de novo.
       (d) Definition.--For purposes of this section, the term 
     ``covered business method patent'' means a patent that claims 
     a method or corresponding apparatus for performing data 
     processing operations utilized in the practice, 
     administration, or management of a financial product or 
     service, except that the term shall not include patents for 
     technological inventions. Solely for the purpose of 
     implementing the transitional proceeding authorized by this 
     subsection, the Director shall prescribe regulations for 
     determining whether a patent is for a technological 
     invention.
       (e) Rule of Construction.--Nothing in this section shall be 
     construed as amending or interpreting categories of patent-
     eligible subject matter set forth under section 101.

     SEC. 19. TRAVEL EXPENSES AND PAYMENT OF ADMINISTRATIVE 
                   JUDGES.

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

     SEC. 20. PATENT AND TRADEMARK OFFICE FUNDING.

       (a) Definitions.--In this section, the following 
     definitions shall apply:
       (1) Director.--The term ``Director'' means the Director of 
     the United States Patent and Trademark Office.
       (2) Fund.--The term ``Fund'' means the public enterprise 
     revolving fund established under subsection (c).
       (3) Office.--The term ``Office'' means the United States 
     Patent and Trademark Office.
       (4) Trademark act of 1946.--The term ``Trademark Act of 
     1946'' means an Act entitled ``Act to provide for the 
     registration and protection of trademarks used in commerce, 
     to carry out the provisions of certain international 
     conventions, and for other purposes'', approved July 5, 1946 
     (15 U.S.C. 1051 et seq.) (commonly referred to as the 
     ``Trademark Act of 1946'' or the ``Lanham Act'').
       (5) Under secretary.--The term ``Under Secretary'' means 
     the Under Secretary of Commerce for Intellectual Property.
       (b) Funding.--
       (1) In general.--Section 42 of title 35, United States 
     Code, is amended--
       (A) in subsection (b), by striking ``Patent and Trademark 
     Office Appropriation Account'' and inserting ``United States 
     Patent and Trademark Office Public Enterprise Fund''; and
       (B) in subsection (c), in the first sentence--
       (i) by striking ``To the extent'' and all that follows 
     through ``fees'' and inserting ``Fees''; and
       (ii) by striking ``shall be collected by and shall be 
     available to the Director'' and inserting ``shall be 
     collected by the Director and shall be available until 
     expended''.
       (2) Effective date.--The amendments made by paragraph (1) 
     shall take effect on the later of--
       (A) October 1, 2011; or
       (B) the first day of the first fiscal year that begins 
     after the date of the enactment of this Act.
       (c) USPTO Revolving Fund.--
       (1) Establishment.--There is established in the Treasury of 
     the United States a revolving fund to be known as the 
     ``United States Patent and Trademark Office Public Enterprise 
     Fund''. Any amounts in the Fund shall be available for use by 
     the Director without fiscal year limitation.
       (2) Derivation of resources.--There shall be deposited into 
     the Fund on or after the effective date of subsection 
     (b)(1)--
       (A) any fees collected under sections 41, 42, and 376 of 
     title 35, United States Code, provided that notwithstanding 
     any other provision of law, if such fees are collected by, 
     and payable to, the Director, the Director shall transfer 
     such amounts to the Fund, provided, however, that no funds 
     collected pursuant to section 9(h) of this Act or section 
     1(a)(2) of Public Law 111-45 shall be deposited in the Fund; 
     and
       (B) any fees collected under section 31 of the Trademark 
     Act of 1946 (15 U.S.C. 1113).
       (3) Expenses.--Amounts deposited into the Fund under 
     paragraph (2) shall be available, without fiscal year 
     limitation, to cover--
       (A) all expenses to the extent consistent with the 
     limitation on the use of fees set forth in section 42(c) of 
     title 35, United States Code, including all administrative 
     and operating expenses, determined in the discretion of the 
     Under Secretary to be ordinary and reasonable, incurred by 
     the Under Secretary and the Director for the continued 
     operation of all services, programs, activities, and duties 
     of the Office relating to patents and trademarks, as such 
     services, programs, activities, and duties are described 
     under--
       (i) title 35, United States Code; and
       (ii) the Trademark Act of 1946; and
       (B) all expenses incurred pursuant to any obligation, 
     representation, or other commitment of the Office.
       (d) Annual Report.--Not later than 60 days after the end of 
     each fiscal year, the Under Secretary and the Director shall 
     submit a report to Congress which shall--
       (1) summarize the operations of the Office for the 
     preceding fiscal year, including financial details and staff 
     levels broken down by each major activity of the Office;

[[Page S1393]]

       (2) detail the operating plan of the Office, including 
     specific expense and staff needs for the upcoming fiscal 
     year;
       (3) describe the long term modernization plans of the 
     Office;
       (4) set forth details of any progress towards such 
     modernization plans made in the previous fiscal year; and
       (5) include the results of the most recent audit carried 
     out under subsection (f).
       (e) Annual Spending Plan.--
       (1) In general.--Not later than 30 days after the beginning 
     of each fiscal year, the Director shall notify the Committees 
     on Appropriations of both Houses of Congress of the plan for 
     the obligation and expenditure of the total amount of the 
     funds for that fiscal year in accordance with section 605 of 
     the Science, State, Justice, Commerce, and Related Agencies 
     Appropriations Act, 2006 (Public Law 109-108; 119 Stat. 
     2334).
       (2) Contents.--Each plan under paragraph (1) shall--
       (A) summarize the operations of the Office for the current 
     fiscal year, including financial details and staff levels 
     with respect to major activities; and
       (B) detail the operating plan of the Office, including 
     specific expense and staff needs, for the current fiscal 
     year.
       (f) Audit.--The Under Secretary shall, on an annual basis, 
     provide for an independent audit of the financial statements 
     of the Office. Such audit shall be conducted in accordance 
     with generally acceptable accounting procedures.
       (g) Budget.--The Fund shall prepare and submit each year to 
     the President a business-type budget in a manner, and before 
     a date, as the President prescribes by regulation for the 
     budget program.

     SEC. 21. SATELLITE OFFICES.

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

     SEC. 22. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS 
                   CONCERNS.

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

     SEC. 23. PRIORITY EXAMINATION FOR TECHNOLOGIES IMPORTANT TO 
                   AMERICAN COMPETITIVENESS.

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

     SEC. 24. DESIGNATION OF DETROIT SATELLITE OFFICE.

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

     SEC. 25. EFFECTIVE DATE.

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

     SEC. 26. BUDGETARY EFFECTS.

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

  Mr. LEAHY. I move to reconsider the vote.
  Mr. GRASSLEY. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. LEAHY. Mr. President, it has been many years getting to this 
point. I cannot tell you the amount of pride I have in my fellow 
Senators, both Republicans and Democrats. I thank the Senator from Iowa 
who has been here with me and so many others I mentioned earlier. It is 
nice to finally have this bill through the Senate.
  Mr. KYL. Mr. President, I rise today to recognize and thank the 
patent lawyers and Senate staff who have played a critical role in the 
drafting and enactment of the present bill.
  Among the Senate staff who have played a role with regard to this 
bill are Chip Roy, Holt Lackey, and Zina Bash of Senator Cornyn's 
staff, David Barlow and Rob Porter of Senator Lee's staff, Walt Kuhn of 
Senator Graham's staff, and Danielle Cutrona and Bradley Hayes of 
Senator Sessions's staff. Special mention is merited for Matt Sandgren 
of Senator Hatch's staff, who fought tenaciously for the bill's 
supplemental examination provision, and who worked hard to defeat the 
amendment to strip the bill of its adoption of the first-to-file 
system, and Sarah Beth Groshart of Senator Coburn's staff, who helped 
draft the Coburn amendment, which will create a revolving fund for the 
PTO and put an end to fee diversion. Past staff who played an important 
role include Jennifer Duck of Senator Feinstein's staff, and Ryan 
Triplette, who managed the bill for Senator Hatch while he was chairman 
and for Senator Specter while he was the lead Republican on the 
committee. Miss Duck and Miss Triplette negotiated the managers' 
amendment that was adopted during the bill's 2009 committee mark up, 
and which represented a major breakthrough on this bill, resolving the 
contentious issues of damages and venue. In the House of 
Representatives, key staff include Blaine Merritt and Vishal Amin of 
Chairman Lamar Smith's staff, and Christal Sheppard of Mr. Conyers's 
staff. Bob Schiff of Senator Feingold's staff worked with my staff to 
develop minority views for the bill's 2009 committee report--I believe 
that this is the only time that Senator Feingold and I ever submitted a 
minority report together. I should also acknowledge Tim Molino of 
Senator Klobuchar's staff, Rebecca Kelly of Senator Schumer's staff, 
Caroline Holland of Senator Kohl's staff, and Galen Roehl, who worked 
in past Congresses for Senator Brownback, and who currently staffs 
Senator Toomey. Much of S. 3600 was drafted in Senator Brownback's 
conference room. Let me also recognize the work of Rob Grant of Senate 
Legislative Counsel, who has drafted literally hundreds of versions of 
and amendments to this bill. And finally, I must acknowledge Rita Lari, 
who managed this bill for Senator Grassley on the Senate floor this 
past week, and the indispensable Aaron Cooper, who has managed the bill 
for the chairman since the beginning of 2009.

[[Page S1394]]

  Among those outside the Senate, I recognize and thank Hayden Gregory 
of the American Bar Association, Laurie Self and Rod McKelvie of 
Covington & Burling, and Hans Sauer, Mike Schiffer, Bruce Burton, Matt 
Rainey, David Korn, Carl Horton, Steve Miller, Doug Norman, and Stan 
Fendley. The Wisconsin Alumni Research Foundation has played an 
important role, particularly with regard to the bill's enhanced grace 
period. I thank Carl Gulbrandsen, Howard Bremmer, Andy Cohn, and Mike 
Remington. I thank Todd Dickinson and Vince Garlock of AIPLA, and Jim 
Crowne, who was willing to come to the Senate to double check the draft 
enrolled bill. I should also mention Herb Wamsley of Intellectual 
Property Owners, as well as Dana Colarulli, who has worn two hats 
during the course of his work on this bill, first with IPO, and 
subsequently as the head of legislative affairs at the PTO. Key 
participants at the PTO have also included Mike Fleming, John Love, Jim 
Toupin, and Rob Clarke. And of course I must mention the current 
Director, David Kappos, without whose effort and dedication the passage 
of the present bill would not have been possible.
  Finally, allow me to acknowledge the key members of the 21st Century 
Coalition for Patent Reform, who have devoted countless hours to this 
bill, and stuck with it through thick and thin. They have also formed 
an important ``kitchen cabinet'' that has been indispensable to the 
committee's drafting of this bill and to the resolution of difficult 
technical questions. I thus acknowledge and thank Phil Johnson, Gary 
Griswold, Bob Armitage, and Mike Kirk for their key role in the 
creation of the America Invents Act.
  I yield the floor. I suggest the absence of a quorum.
  The PRESIDING OFFICER (Mr. Bennet). The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________