H. Rept. 113-279 - 113th Congress (2013-2014)
December 02, 2013, As Reported by the Judiciary Committee

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House Report 113-279 - INNOVATION ACT




[House Report 113-279]
[From the U.S. Government Publishing Office]


113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    113-279

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



 
                             INNOVATION ACT

                                _______
                                

December 2, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

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

                              R E P O R T

                             together with

                 DISSENTING VIEWS AND ADDITIONAL VIEWS

                        [To accompany H.R. 3309]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3309) to amend title 35, United States Code, and the 
Leahy-Smith America Invents Act to make improvements and 
technical corrections, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page

The Amendment....................................................     2
Purpose and Summary..............................................    16
Background and Need for the Legislation..........................    18
Hearings.........................................................    44
Committee Consideration..........................................    44
Committee Votes..................................................    44
Committee Oversight Findings.....................................    55
New Budget Authority and Tax Expenditures........................    56
Congressional Budget Office Cost Estimate........................    56
Duplication of Federal Programs..................................    57
Disclosure of Directed Rule Makings..............................    58
Performance Goals and Objectives.................................    58
Advisory on Earmarks.............................................    58
Section-by-Section Analysis......................................    58
Changes in Existing Law Made by the Bill, as Reported............    72
Dissenting Views.................................................    93
Additional Views.................................................   115

                             The Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
Sec. 3. Patent infringement actions.
Sec. 4. Transparency of patent ownership.
Sec. 5. Customer-suit exception.
Sec. 6. Procedures and practices to implement and recommendations to 
the Judicial Conference.
Sec. 7. Small business education, outreach, and information access.
Sec. 8. Studies on patent transactions, quality, and examination.
Sec. 9. Improvements and technical corrections to the Leahy-Smith 
America Invents Act.
Sec. 10. Effective date.

SEC. 2. DEFINITIONS.

  In this Act:
          (1) Director.--The term ``Director'' means the Under 
        Secretary of Commerce for Intellectual Property and Director of 
        the United States Patent and Trademark Office.
          (2) Office.--The term ``Office'' means the United States 
        Patent and Trademark Office.

SEC. 3. PATENT INFRINGEMENT ACTIONS.

  (a) Pleading Requirements.--
          (1) Amendment.--Chapter 29 of title 35, United States Code, 
        is amended by inserting after section 281 the following:

``Sec. 281A. Pleading requirements for patent infringement actions

  ``(a) Pleading Requirements.--Except as provided in subsection (b), 
in a civil action in which a party asserts a claim for relief arising 
under any Act of Congress relating to patents, a party alleging 
infringement shall include in the initial complaint, counterclaim, or 
cross-claim for patent infringement, unless the information is not 
reasonably accessible to such party, the following:
          ``(1) An identification of each patent allegedly infringed.
          ``(2) An identification of each claim of each patent 
        identified under paragraph (1) that is allegedly infringed.
          ``(3) For each claim identified under paragraph (2), an 
        identification of each accused process, machine, manufacture, 
        or composition of matter (referred to in this section as an 
        `accused instrumentality') alleged to infringe the claim.
          ``(4) For each accused instrumentality identified under 
        paragraph (3), an identification with particularity, if known, 
        of--
                  ``(A) the name or model number of each accused 
                instrumentality; or
                  ``(B) if there is no name or model number, a 
                description of each accused instrumentality.
          ``(5) For each accused instrumentality identified under 
        paragraph (3), a clear and concise statement of--
                  ``(A) where each element of each claim identified 
                under paragraph (2) is found within the accused 
                instrumentality; and
                  ``(B) with detailed specificity, how each limitation 
                of each claim identified under paragraph (2) is met by 
                the accused instrumentality.
          ``(6) For each claim of indirect infringement, a description 
        of the acts of the alleged indirect infringer that contribute 
        to or are inducing the direct infringement.
          ``(7) A description of the authority of the party alleging 
        infringement to assert each patent identified under paragraph 
        (1) and of the grounds for the court's jurisdiction.
          ``(8) A clear and concise description of the principal 
        business, if any, of the party alleging infringement.
          ``(9) A list of each complaint filed, of which the party 
        alleging infringement has knowledge, that asserts or asserted 
        any of the patents identified under paragraph (1).
          ``(10) For each patent identified under paragraph (1), 
        whether a standard-setting body has specifically declared such 
        patent to be essential, potentially essential, or having 
        potential to become essential to that standard-setting body, 
        and whether the United States Government or a foreign 
        government has imposed specific licensing requirements with 
        respect to such patent.
  ``(b) Information Not Readily Accessible.--If information required to 
be disclosed under subsection (a) is not readily accessible to a party, 
that information may instead be generally described, along with an 
explanation of why such undisclosed information was not readily 
accessible, and of any efforts made by such party to access such 
information.
  ``(c) Confidential Information.--A party required to disclose 
information described under subsection (a) may file, under seal, 
information believed to be confidential, with a motion setting forth 
good cause for such sealing. If such motion is denied by the court, the 
party may seek to file an amended complaint.
  ``(d) Exemption.--A civil action that includes a claim for relief 
arising under section 271(e)(2) shall not be subject to the 
requirements of subsection (a).''.
          (2) Conforming amendment.--The table of sections for chapter 
        29 of title 35, United States Code, is amended by inserting 
        after the item relating to section 281 the following new item:

        ``281A. Pleading requirements for patent infringement 
                        actions.''.

  (b) Fees and Other Expenses.--
          (1) Amendment.--Section 285 of title 35, United States Code, 
        is amended to read as follows:

``Sec. 285. Fees and other expenses

  ``(a) Award.--The court shall award, to a prevailing party, 
reasonable fees and other expenses incurred by that party in connection 
with a civil action in which any party asserts a claim for relief 
arising under any Act of Congress relating to patents, unless the court 
finds that the position and conduct of the nonprevailing party or 
parties were reasonably justified in law and fact or that special 
circumstances (such as severe economic hardship to a named inventor) 
make an award unjust.
  ``(b) Certification and Recovery.--Upon motion of any party to the 
action, the court shall require another party to the action to certify 
whether or not the other party will be able to pay an award of fees and 
other expenses if such an award is made under subsection (a). If a 
nonprevailing party is unable to pay an award that is made against it 
under subsection (a), the court may make a party that has been joined 
under section 299(d) with respect to such party liable for the 
unsatisfied portion of the award.
  ``(c) Covenant Not to Sue.--A party to a civil action that asserts a 
claim for relief arising under any Act of Congress relating to patents 
against another party, and that subsequently unilaterally extends to 
such other party a covenant not to sue for infringement with respect to 
the patent or patents at issue, shall be deemed to be a nonprevailing 
party (and the other party the prevailing party) for purposes of this 
section, unless the party asserting such claim would have been 
entitled, at the time that such covenant was extended, to voluntarily 
dismiss the action or claim without a court order under Rule 41 of the 
Federal Rules of Civil Procedure.''.
          (2) Conforming amendment and amendment.--
                  (A) Conforming amendment.--The item relating to 
                section 285 of the table of sections for chapter 29 of 
                title 35, United States Code, is amended to read as 
                follows:

        ``285. Fees and other expenses.''.

                  (B) Amendment.--Section 273 of title 35, United 
                States Code, is amended by striking subsections (f) and 
                (g).
          (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act and 
        shall apply to any action for which a complaint is filed on or 
        after the first day of the 6-month period ending on that 
        effective date.
  (c) Joinder of Interested Parties.--Section 299 of title 35, United 
States Code, is amended by adding at the end the following new 
subsection:
  ``(d) Joinder of Interested Parties.--
          ``(1) Joinder.--In a civil action arising under any Act of 
        Congress relating to patents in which fees and other expenses 
        have been awarded under section 285 to a prevailing party 
        defending against an allegation of infringement of a patent 
        claim, and in which the nonprevailing party alleging 
        infringement is unable to pay the award of fees and other 
        expenses, the court shall grant a motion by the prevailing 
        party to join an interested party if such prevailing party 
        shows that the nonprevailing party has no substantial interest 
        in the subject matter at issue other than asserting such patent 
        claim in litigation.
          ``(2) Limitation on joinder.--
                  ``(A) Discretionary denial of motion.--The court may 
                deny a motion to join an interested party under 
                paragraph (1) if--
                          ``(i) the interested party is not subject to 
                        service of process; or
                          ``(ii) joinder under paragraph (1) would 
                        deprive the court of subject matter 
                        jurisdiction or make venue improper.
                  ``(B) Required denial of motion.--The court shall 
                deny a motion to join an interested party under 
                paragraph (1) if--
                          ``(i) the interested party did not timely 
                        receive the notice required by paragraph (3); 
                        or
                          ``(ii) within 30 days after receiving the 
                        notice required by paragraph (3), the 
                        interested party renounces, in writing and with 
                        notice to the court and the parties to the 
                        action, any ownership, right, or direct 
                        financial interest (as described in paragraph 
                        (4)) that the interested party has in the 
                        patent or patents at issue.
          ``(3) Notice requirement.--An interested party may not be 
        joined under paragraph (1) unless it has been provided actual 
        notice, within 30 days after the date on which it has been 
        identified in the initial disclosure provided under section 
        290(b), that it has been so identified and that such party may 
        therefore be an interested party subject to joinder under this 
        subsection. Such notice shall be provided by the party who 
        subsequently moves to join the interested party under paragraph 
        (1), and shall include language that--
                  ``(A) identifies the action, the parties thereto, the 
                patent or patents at issue, and the pleading or other 
                paper that identified the party under section 290(b); 
                and
                  ``(B) informs the party that it may be joined in the 
                action and made subject to paying an award of fees and 
                other expenses under section 285(b) if--
                          ``(i) fees and other expenses are awarded in 
                        the action against the party alleging 
                        infringement of the patent or patents at issue 
                        under section 285(a);
                          ``(ii) the party alleging infringement is 
                        unable to pay the award of fees and other 
                        expenses;
                          ``(iii) the party receiving notice under this 
                        paragraph is determined by the court to be an 
                        interested party; and
                          ``(iv) the party receiving notice under this 
                        paragraph has not, within 30 days after 
                        receiving such notice, renounced in writing, 
                        and with notice to the court and the parties to 
                        the action, any ownership, right, or direct 
                        financial interest (as described in paragraph 
                        (4)) that the interested party has in the 
                        patent or patents at issue.
          ``(4) Interested party defined.--In this subsection, the term 
        `interested party' means a person, other than the party 
        alleging infringement, that--
                  ``(A) is an assignee of the patent or patents at 
                issue;
                  ``(B) has a right, including a contingent right, to 
                enforce or sublicense the patent or patents at issue; 
                or
                  ``(C) has a direct financial interest in the patent 
                or patents at issue, including the right to any part of 
                an award of damages or any part of licensing revenue, 
                except that a person with a direct financial interest 
                does not include--
                          ``(i) an attorney or law firm providing legal 
                        representation in the civil action described in 
                        paragraph (1) if the sole basis for the 
                        financial interest of the attorney or law firm 
                        in the patent or patents at issue arises from 
                        the attorney or law firm's receipt of 
                        compensation reasonably related to the 
                        provision of the legal representation; or
                          ``(ii) a person whose sole financial interest 
                        in the patent or patents at issue is ownership 
                        of an equity interest in the party alleging 
                        infringement, unless such person also has the 
                        right or ability to influence, direct, or 
                        control the civil action.''.
  (d) Discovery Limits.--
          (1) Amendment.--Chapter 29 of title 35, United States Code, 
        is amended by adding at the end the following new section:

``Sec. 299A. Discovery in patent infringement action

  ``(a) Discovery in Patent Infringement Action.--Except as provided in 
subsection (b), in a civil action arising under any Act of Congress 
relating to patents, if the court determines that a ruling relating to 
the construction of terms used in a patent claim asserted in the 
complaint is required, discovery shall be limited, until such ruling is 
issued, to information necessary for the court to determine the meaning 
of the terms used in the patent claim, including any interpretation of 
those terms used to support the claim of infringement.
  ``(b) Discretion To Expand Scope of Discovery.--
          ``(1) Timely resolution of actions.--If, under any provision 
        of Federal law (including the amendments made by the Drug Price 
        Competition and Patent Term Restoration Act of 1984 (Public Law 
        98-417)), resolution within a specified period of time of a 
        civil action arising under any Act of Congress relating to 
        patents will necessarily affect the rights of a party with 
        respect to the patent, the court shall permit discovery, in 
        addition to the discovery authorized under subsection (a), 
        before the ruling described in subsection (a) is issued as 
        necessary to ensure timely resolution of the action.
          ``(2) Resolution of motions.--When necessary to resolve a 
        motion properly raised by a party before a ruling relating to 
        the construction of terms described in subsection (a) is 
        issued, the court may allow limited discovery in addition to 
        the discovery authorized under subsection (a) as necessary to 
        resolve the motion.
          ``(3) Special circumstances.--In special circumstances that 
        would make denial of discovery a manifest injustice, the court 
        may permit discovery, in addition to the discovery authorized 
        under subsection (a), as necessary to prevent the manifest 
        injustice.''.
          (2) Conforming amendment.--The table of sections for chapter 
        29 of title 35, United States Code, is amended by adding at the 
        end the following new item:

        ``299A. Discovery in patent infringement action.''.

  (e) Sense of Congress.--It is the sense of Congress that it is an 
abuse of the patent system and against public policy for a party to 
send out purposely evasive demand letters to end users alleging patent 
infringement. Demand letters sent should, at the least, include basic 
information about the patent in question, what is being infringed, and 
how it is being infringed. Any actions or litigation that stem from 
these types of purposely evasive demand letters to end users should be 
considered a fraudulent or deceptive practice and an exceptional 
circumstance when considering whether the litigation is abusive.
  (f) Demand Letters.--Section 284 of title 35, United States Code, is 
amended--
          (1) in the first undesignated paragraph, by striking ``Upon 
        finding'' and inserting ``(a) In General.--Upon finding'';
          (2) in the second undesignated paragraph, by striking ``When 
        the damages'' and inserting ``(b) Assessment by Court; Treble 
        Damages.--When the damages'';
          (3) by inserting after subsection (b), as designated by 
        paragraph (2) of this subsection, the following:
  ``(c) Willful Infringement.--A claimant seeking to establish willful 
infringement may not rely on evidence of pre-suit notification of 
infringement unless that notification identifies with particularity the 
asserted patent, identifies the product or process accused, and 
explains with particularity, to the extent possible following a 
reasonable investigation or inquiry, how the product or process 
infringes one or more claims of the patent.''; and
          (4) in the last undesignated paragraph, by striking ``The 
        court'' and inserting ``(d) Expert Testimony.--The court''.
  (g) Effective Date.--Except as otherwise provided in this section, 
the amendments made by this section shall take effect on the date of 
the enactment of this Act and shall apply to any action for which a 
complaint is filed on or after that date.

SEC. 4. TRANSPARENCY OF PATENT OWNERSHIP.

  (a) Amendments.--Section 290 of title 35, United States Code, is 
amended--
          (1) in the heading, by striking ``suits'' and inserting 
        ``suits; disclosure of interests'';
          (2) by striking ``The clerks'' and inserting ``(a) Notice of 
        Patent Suits.--The clerks''; and
          (3) by adding at the end the following new subsections:
  ``(b) Initial Disclosure.--
          ``(1) In general.--Except as provided in paragraph (2), upon 
        the filing of an initial complaint for patent infringement, the 
        plaintiff shall disclose to the Patent and Trademark Office, 
        the court, and each adverse party the identity of each of the 
        following:
                  ``(A) The assignee of the patent or patents at issue.
                  ``(B) Any entity with a right to sublicense or 
                enforce the patent or patents at issue.
                  ``(C) Any entity, other than the plaintiff, that the 
                plaintiff knows to have a financial interest in the 
                patent or patents at issue or the plaintiff.
                  ``(D) The ultimate parent entity of any assignee 
                identified under subparagraph (A) and any entity 
                identified under subparagraph (B) or (C).
          ``(2) Exemption.--The requirements of paragraph (1) shall not 
        apply with respect to a civil action filed under subsection (a) 
        that includes a cause of action described under section 
        271(e)(2).
  ``(c) Disclosure Compliance.--
          ``(1) Publicly traded.--For purposes of subsection (b)(1)(C), 
        if the financial interest is held by a corporation traded on a 
        public stock exchange, an identification of the name of the 
        corporation and the public exchange listing shall satisfy the 
        disclosure requirement.
          ``(2) Not publicly traded.--For purposes of subsection 
        (b)(1)(C), if the financial interest is not held by a publicly 
        traded corporation, the disclosure shall satisfy the disclosure 
        requirement if the information identifies--
                  ``(A) in the case of a partnership, the name of the 
                partnership and the name and correspondence address of 
                each partner or other entity that holds more than a 5-
                percent share of that partnership;
                  ``(B) in the case of a corporation, the name of the 
                corporation, the location of incorporation, the address 
                of the principal place of business, and the name of 
                each officer of the corporation; and
                  ``(C) for each individual, the name and 
                correspondence address of that individual.
  ``(d) Ongoing Duty of Disclosure to the Patent and Trademark 
Office.--
          ``(1) In general.--A plaintiff required to submit information 
        under subsection (b) or a subsequent owner of the patent or 
        patents at issue shall, not later than 90 days after any change 
        in the assignee of the patent or patents at issue or an entity 
        described under subparagraph (B) or (D) of subsection (b)(1), 
        submit to the Patent and Trademark Office the updated 
        identification of such assignee or entity.
          ``(2) Failure to comply.--With respect to a patent for which 
        the requirement of paragraph (1) has not been met--
                  ``(A) the plaintiff or subsequent owner shall not be 
                entitled to recover reasonable fees and other expenses 
                under section 285 or increased damages under section 
                284 with respect to infringing activities taking place 
                during any period of noncompliance with paragraph (1), 
                unless the denial of such damages or fees would be 
                manifestly unjust; and
                  ``(B) the court shall award to a prevailing party 
                accused of infringement reasonable fees and other 
                expenses under section 285 that are incurred to 
                discover the updated assignee or entity described under 
                paragraph (1), unless such sanctions would be unjust.
  ``(e) Definitions.--In this section:
          ``(1) Financial interest.--The term `financial interest'--
                  ``(A) means--
                          ``(i) with regard to a patent or patents, the 
                        right of a person to receive proceeds related 
                        to the assertion of the patent or patents, 
                        including a fixed or variable portion of such 
                        proceeds; and
                          ``(ii) with regard to the plaintiff, direct 
                        or indirect ownership or control by a person of 
                        more than 5 percent of such plaintiff; and
                  ``(B) does not mean--
                          ``(i) ownership of shares or other interests 
                        in a mutual or common investment fund, unless 
                        the owner of such interest participates in the 
                        management of such fund; or
                          ``(ii) the proprietary interest of a 
                        policyholder in a mutual insurance company or 
                        of a depositor in a mutual savings association, 
                        or a similar proprietary interest, unless the 
                        outcome of the proceeding could substantially 
                        affect the value of such interest.
          ``(2) Proceeding.--The term `proceeding' means all stages of 
        a civil action, including pretrial and trial proceedings and 
        appellate review.
          ``(3) Ultimate parent entity.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), the term `ultimate parent entity' has the meaning 
                given such term in section 801.1(a)(3) of title 16, 
                Code of Federal Regulations, or any successor 
                regulation.
                  ``(B) Modification of definition.--The Director may 
                modify the definition of `ultimate parent entity' by 
                regulation.''.
  (b) Technical and Conforming Amendment.--The item relating to section 
290 in the table of sections for chapter 29 of title 35, United States 
Code, is amended to read as follows:

        ``290. Notice of patent suits; disclosure of interests.''.

  (c) Regulations.--The Director may promulgate such regulations as are 
necessary to establish a registration fee in an amount sufficient to 
recover the estimated costs of administering subsections (b) through 
(e) of section 290 of title 35, United States Code, as added by 
subsection (a), to facilitate the collection and maintenance of the 
information required by such subsections, and to ensure the timely 
disclosure of such information to the public.
  (d) Effective Date.--The amendments made by this section shall take 
effect upon the expiration of the 6-month period beginning on the date 
of the enactment of this Act and shall apply to any action for which a 
complaint is filed on or after such effective date.

SEC. 5. CUSTOMER-SUIT EXCEPTION.

  (a) Amendment.--Section 296 of title 35, United States Code, is 
amended to read as follows:

``Sec. 296. Stay of action against customer

  ``(a) Stay of Action Against Customer.--Except as provided in 
subsection (d), in any civil action arising under any Act of Congress 
relating to patents, the court shall grant a motion to stay at least 
the portion of the action against a covered customer related to 
infringement of a patent involving a covered product or process if the 
following requirements are met:
          ``(1) The covered manufacturer and the covered customer 
        consent in writing to the stay.
          ``(2) The covered manufacturer is a party to the action or to 
        a separate action involving the same patent or patents related 
        to the same covered product or process.
          ``(3) The covered customer agrees to be bound by any issues 
        that the covered customer has in common with the covered 
        manufacturer and are finally decided as to the covered 
        manufacturer in an action described in paragraph (2).
          ``(4) The motion is filed after the first pleading in the 
        action but not later than the later of--
                  ``(A) the 120th day after the date on which the first 
                pleading in the action is served that specifically 
                identifies the covered product or process as a basis 
                for the covered customer's alleged infringement of the 
                patent and that specifically identifies how the covered 
                product or process is alleged to infringe the patent; 
                or
                  ``(B) the date on which the first scheduling order in 
                the case is entered.
  ``(b) Applicability of Stay.--A stay issued under subsection (a) 
shall apply only to the patents, products, systems, or components 
accused of infringement in the action.
  ``(c) Lift of Stay.--
          ``(1) In general.--A stay entered under this section may be 
        lifted upon grant of a motion based on a showing that--
                  ``(A) the action involving the covered manufacturer 
                will not resolve a major issue in suit against the 
                covered customer; or
                  ``(B) the stay unreasonably prejudices and would be 
                manifestly unjust to the party seeking to lift the 
                stay.
          ``(2) Separate manufacturer action involved.--In the case of 
        a stay entered based on the participation of the covered 
        manufacturer in a separate action involving the same patent or 
        patents related to the same covered product or process, a 
        motion under this subsection may only be made if the court in 
        such separate action determines the showing required under 
        paragraph (1) has been met.
  ``(d) Exemption.--This section shall not apply to an action that 
includes a cause of action described under section 271(e)(2).
  ``(e) Consent Judgment.--If, following the grant of a motion to stay 
under this section, the covered manufacturer seeks or consents to entry 
of a consent judgment relating to one or more of the common issues that 
gave rise to the stay, or declines to prosecute through appeal a final 
decision as to one or more of the common issues that gave rise to the 
stay, the court may, upon grant of a motion, determine that such 
consent judgment or unappealed final decision shall not be binding on 
the covered customer with respect to one or more of such common issues 
based on a showing that such an outcome would unreasonably prejudice 
and be manifestly unjust to the covered customer in light of the 
circumstances of the case.
  ``(f) Rule of Construction.--Nothing in this section shall be 
construed to limit the ability of a court to grant any stay, expand any 
stay granted under this section, or grant any motion to intervene, if 
otherwise permitted by law.
  ``(g) Definitions.--In this section:
          ``(1) Covered customer.--The term `covered customer' means a 
        party accused of infringing a patent or patents in dispute 
        based on a covered product or process.
          ``(2) Covered manufacturer.--The term `covered manufacturer' 
        means a person that manufactures or supplies, or causes the 
        manufacture or supply of, a covered product or process or a 
        relevant part thereof.
          ``(3) Covered product or process.--The term `covered product 
        or process' means a product, process, system, service, 
        component, material, or apparatus, or relevant part thereof, 
        that--
                  ``(A) is alleged to infringe the patent or patents in 
                dispute; or
                  ``(B) implements a process alleged to infringe the 
                patent or patents in dispute.''.
  (b) Conforming Amendment.--The table of sections for chapter 29 of 
title 35, United States Code, is amended by striking the item relating 
to section 296 and inserting the following:

        ``296. Stay of action against customer.''.

  (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act and shall apply to any 
action for which a complaint is filed on or after the first day of the 
30-day period that ends on that date.

SEC. 6. PROCEDURES AND PRACTICES TO IMPLEMENT RECOMMENDATIONS OF THE 
                    JUDICIAL CONFERENCE.

  (a) Judicial Conference Rules and Procedures on Discovery Burdens and 
Costs.--
          (1) Rules and procedures.--The Judicial Conference of the 
        United States, using existing resources, shall develop rules 
        and procedures to implement the issues and proposals described 
        in paragraph (2) to address the asymmetries in discovery 
        burdens and costs in any civil action arising under any Act of 
        Congress relating to patents. Such rules and procedures shall 
        include how and when payment for document discovery in addition 
        to the discovery of core documentary evidence is to occur, and 
        what information must be presented to demonstrate financial 
        capacity before permitting document discovery in addition to 
        the discovery of core documentary evidence.
          (2) Rules and procedures to be considered.--The rules and 
        procedures required under paragraph (1) should address each of 
        the following issues and proposals:
                  (A) Discovery of core documentary evidence.--Whether 
                and to what extent each party to the action is entitled 
                to receive core documentary evidence and shall be 
                responsible for the costs of producing core documentary 
                evidence within the possession or control of each such 
                party, and whether and to what extent each party to the 
                action may seek nondocumentary discovery as otherwise 
                provided in the Federal Rules of Civil Procedure.
                  (B) Electronic communication.--If the parties 
                determine that the discovery of electronic 
                communication is appropriate, whether such discovery 
                shall occur after the parties have exchanged initial 
                disclosures and core documentary evidence and whether 
                such discovery shall be in accordance with the 
                following:
                          (i) Any request for the production of 
                        electronic communication shall be specific and 
                        may not be a general request for the production 
                        of information relating to a product or 
                        business.
                          (ii) Each request shall identify the 
                        custodian of the information requested, the 
                        search terms, and a time frame. The parties 
                        shall cooperate to identify the proper 
                        custodians, the proper search terms, and the 
                        proper time frame.
                          (iii) A party may not submit production 
                        requests to more than 5 custodians, unless the 
                        parties jointly agree to modify the number of 
                        production requests without leave of the court.
                          (iv) The court may consider contested 
                        requests for up to 5 additional custodians per 
                        producing party, upon a showing of a distinct 
                        need based on the size, complexity, and issues 
                        of the case.
                          (v) If a party requests the discovery of 
                        electronic communication for additional 
                        custodians beyond the limits agreed to by the 
                        parties or granted by the court, the requesting 
                        party shall bear all reasonable costs caused by 
                        such additional discovery.
                  (C) Additional document discovery.--Whether the 
                following should apply:
                          (i) In general.--Each party to the action may 
                        seek any additional document discovery 
                        otherwise permitted under the Federal Rules of 
                        Civil Procedure, if such party bears the 
                        reasonable costs, including reasonable 
                        attorney's fees, of the additional document 
                        discovery.
                          (ii) Requirements for additional document 
                        discovery.--Unless the parties mutually agree 
                        otherwise, no party may be permitted additional 
                        document discovery unless such a party posts a 
                        bond, or provides other security, in an amount 
                        sufficient to cover the expected costs of such 
                        additional document discovery, or makes a 
                        showing to the court that such party has the 
                        financial capacity to pay the costs of such 
                        additional document discovery.
                          (iii) Limits on additional document 
                        discovery.--A court, upon motion, may determine 
                        that a request for additional document 
                        discovery is excessive, irrelevant, or 
                        otherwise abusive and may set limits on such 
                        additional document discovery.
                          (iv) Good cause modification.--A court, upon 
                        motion and for good cause shown, may modify the 
                        requirements of subparagraphs (A) and (B) and 
                        any definition under paragraph (3). Not later 
                        than 30 days after the pretrial conference 
                        under Rule 16 of the Federal Rules of Civil 
                        Procedure, the parties shall jointly submit any 
                        proposed modifications of the requirements of 
                        subparagraphs (A) and (B) and any definition 
                        under paragraph (3), unless the parties do not 
                        agree, in which case each party shall submit 
                        any proposed modification of such party and a 
                        summary of the disagreement over the 
                        modification.
                          (v) Computer code.--A court, upon motion and 
                        for good cause shown, may determine that 
                        computer code should be included in the 
                        discovery of core documentary evidence. The 
                        discovery of computer code shall occur after 
                        the parties have exchanged initial disclosures 
                        and other core documentary evidence.
                  (D) Discovery sequence and scope.--Whether the 
                parties shall discuss and address in the written report 
                filed pursuant to Rule 26(f) of the Federal Rules of 
                Civil Procedure the views and proposals of each party 
                on the following:
                          (i) When the discovery of core documentary 
                        evidence should be completed.
                          (ii) Whether additional document discovery 
                        will be sought under subparagraph (C).
                          (iii) Any issues about infringement, 
                        invalidity, or damages that, if resolved before 
                        the additional discovery described in 
                        subparagraph (C) commences, might simplify or 
                        streamline the case, including the 
                        identification of any terms or phrases relating 
                        to any patent claim at issue to be construed by 
                        the court and whether the early construction of 
                        any of those terms or phrases would be helpful.
          (3) Definitions.--In this subsection:
                  (A) Core documentary evidence.--The term ``core 
                documentary evidence''--
                          (i) includes--
                                  (I) documents relating to the 
                                conception of, reduction to practice 
                                of, and application for, the patent or 
                                patents at issue;
                                  (II) documents sufficient to show the 
                                technical operation of the product or 
                                process identified in the complaint as 
                                infringing the patent or patents at 
                                issue;
                                  (III) documents relating to 
                                potentially invalidating prior art;
                                  (IV) documents relating to any 
                                licensing of, or other transfer of 
                                rights to, the patent or patents at 
                                issue before the date on which the 
                                complaint is filed;
                                  (V) documents sufficient to show 
                                profit attributable to the claimed 
                                invention of the patent or patents at 
                                issue;
                                  (VI) documents relating to any 
                                knowledge by the accused infringer of 
                                the patent or patents at issue before 
                                the date on which the complaint is 
                                filed;
                                  (VII) documents relating to any 
                                knowledge by the patentee of 
                                infringement of the patent or patents 
                                at issue before the date on which the 
                                complaint is filed;
                                  (VIII) documents relating to any 
                                licensing term or pricing commitment to 
                                which the patent or patents may be 
                                subject through any agency or standard-
                                setting body; and
                                  (IX) documents sufficient to show any 
                                marking or other notice provided of the 
                                patent or patents at issue; and
                          (ii) does not include computer code, except 
                        as specified in paragraph (2)(C)(v).
                  (B) Electronic communication.--The term ``electronic 
                communication'' means any form of electronic 
                communication, including email, text message, or 
                instant message.
          (4) Implementation by the district courts.--Not later than 6 
        months after the date on which the Judicial Conference has 
        developed the rules and procedures required by this subsection, 
        each United States district court and the United States Court 
        of Federal Claims shall revise the applicable local rules for 
        such court to implement such rules and procedures.
          (5) Authority for judicial conference to review and modify.--
                  (A) Study of efficacy of rules and procedures.--The 
                Judicial Conference shall study the efficacy of the 
                rules and procedures required by this subsection during 
                the 4-year period beginning on the date on which such 
                rules and procedures by the district courts and the 
                United States Court of Federal Claims are first 
                implemented. The Judicial Conference may modify such 
                rules and procedures following such 4-year period.
                  (B) Initial modifications.--Before the expiration of 
                the 4-year period described in subparagraph (A), the 
                Judicial Conference may modify the requirements under 
                this subsection--
                          (i) by designating categories of ``core 
                        documentary evidence'', in addition to those 
                        designated under paragraph (3)(A), as the 
                        Judicial Conference determines to be 
                        appropriate and necessary; and
                          (ii) as otherwise necessary to prevent a 
                        manifest injustice, the imposition of a 
                        requirement the costs of which clearly outweigh 
                        its benefits, or a result that could not 
                        reasonably have been intended by the Congress.
  (b) Judicial Conference Patent Case Management.--The Judicial 
Conference of the United States, using existing resources, shall 
develop case management procedures to be implemented by the United 
States district courts and the United States Court of Federal Claims 
for any civil action arising under any Act of Congress relating to 
patents, including initial disclosure and early case management 
conference practices that--
          (1) will identify any potential dispositive issues of the 
        case; and
          (2) focus on early summary judgment motions when resolution 
        of issues may lead to expedited disposition of the case.
  (c) Revision of Form for Patent Infringement.--
          (1) Elimination of form.--The Supreme Court, using existing 
        resources, shall eliminate Form 18 in the Appendix to the 
        Federal Rules of Civil Procedure (relating to Complaint for 
        Patent Infringement), effective on the date of the enactment of 
        this Act.
          (2) Revised form.--The Supreme Court may prescribe a new form 
        or forms setting out model allegations of patent infringement 
        that, at a minimum, notify accused infringers of the asserted 
        claim or claims, the products or services accused of 
        infringement, and the plaintiff's theory for how each accused 
        product or service meets each limitation of each asserted 
        claim. The Judicial Conference should exercise the authority 
        under section 2073 of title 28, United States Code, to make 
        recommendations with respect to such new form or forms.
  (d) Protection of Intellectual-Property Licenses in Bankruptcy.--
          (1) In general.--Section 1520(a) of title 11, United States 
        Code, is amended--
                  (A) in paragraph (3), by striking ``; and'' and 
                inserting a semicolon;
                  (B) in paragraph (4), by striking the period at the 
                end and inserting ``; and''; and
                  (C) by inserting at the end the following new 
                paragraph:
          ``(5) section 365(n) applies to intellectual property of 
        which the debtor is a licensor or which the debtor has 
        transferred.''.
          (2) Trademarks.--
                  (A) In general.--Section 101(35A) of title 11, United 
                States Code, is amended--
                          (i) in subparagraph (E), by striking ``or'';
                          (ii) in subparagraph (F), by striking ``title 
                        17;'' and inserting ``title 17; or''; and
                          (iii) by adding after subparagraph (F) the 
                        following new subparagraph:
                  ``(G) a trademark, service mark, or trade name, as 
                those terms are defined in section 45 of the Act of 
                July 5, 1946 (commonly referred to as the `Trademark 
                Act of 1946') (15 U.S.C. 1127);''.
                  (B) Conforming amendment.--Section 365(n)(2) of title 
                11, United States Code, is amended--
                          (i) in subparagraph (B)--
                                  (I) by striking ``royalty payments'' 
                                and inserting ``royalty or other 
                                payments''; and
                                  (II) by striking ``and'' after the 
                                semicolon;
                          (ii) in subparagraph (C), by striking the 
                        period at the end of clause (ii) and inserting 
                        ``; and''; and
                          (iii) by adding at the end the following new 
                        subparagraph:
          ``(D) in the case of a trademark, service mark, or trade 
        name, the trustee shall not be relieved of a contractual 
        obligation to monitor and control the quality of a licensed 
        product or service.''.
          (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act and 
        shall apply to any case that is pending on, or for which a 
        petition or complaint is filed on or after, such date of 
        enactment.

SEC. 7. SMALL BUSINESS EDUCATION, OUTREACH, AND INFORMATION ACCESS.

  (a) Small Business Education and Outreach.--
          (1) Resources for small business.--Using existing resources, 
        the Director shall develop educational resources for small 
        businesses to address concerns arising from patent 
        infringement.
          (2) Small business patent ombudsman.--The Patent Ombudsman 
        Program established under section 28 of the Leahy-Smith America 
        Invents Act (Public Law 112-29; 125 Stat. 339; 35 U.S.C. 2 
        note) shall coordinate with the existing small business 
        outreach programs of the Office, and the relevant offices at 
        the Small Business Administration and the Minority Business 
        Development Agency, to provide education and awareness on 
        abusive patent litigation practices. The Director may give 
        special consideration to the unique needs of small firms owned 
        by disabled veterans, service-disabled veterans, women, and 
        minority entrepreneurs in planning and executing the outreach 
        efforts by the Office.
  (b) Improving Information Transparency for Small Business and the 
United States Patent and Trademark Office Users.--
          (1) Web site.--Using existing resources, the Director shall 
        create a user-friendly section on the official Web site of the 
        Office to notify the public when a patent case is brought in 
        Federal court and, with respect to each patent at issue in such 
        case, the Director shall include--
                  (A) information disclosed under subsections (b) and 
                (d) of section 290 of title 35, United States Code, as 
                added by section 4(a) of this Act; and
                  (B) any other information the Director determines to 
                be relevant.
          (2) Format.--In order to promote accessibility for the 
        public, the information described in paragraph (1) shall be 
        searchable by patent number, patent art area, and entity.

SEC. 8. STUDIES ON PATENT TRANSACTIONS, QUALITY, AND EXAMINATION.

  (a) Study on Secondary Market Oversight for Patent Transactions To 
Promote Transparency and Ethical Business Practices.--
          (1) Study required.--The Director, in consultation with the 
        Secretary of Commerce, the Secretary of the Treasury, the 
        Chairman of the Securities and Exchange Commission, the heads 
        of other relevant agencies, and interested parties, shall, 
        using existing resources of the Office, conduct a study--
                  (A) to develop legislative recommendations to ensure 
                greater transparency and accountability in patent 
                transactions occurring on the secondary market;
                  (B) to examine the economic impact that the patent 
                secondary market has on the United States;
                  (C) to examine licensing and other oversight 
                requirements that may be placed on the patent secondary 
                market, including on the participants in such markets, 
                to ensure that the market is a level playing field and 
                that brokers in the market have the requisite expertise 
                and adhere to ethical business practices; and
                  (D) to examine the requirements placed on other 
                markets.
          (2) Report on study.--Not later than 1 year after the date of 
        the enactment of this Act, the Director shall submit a report 
        to the Committee on the Judiciary of the House of 
        Representatives and the Committee on the Judiciary of the 
        Senate on the findings and recommendations of the Director from 
        the study required under paragraph (1).
  (b) Study on Patents Owned by the United States Government.--
          (1) Study required.--The Director, in consultation with the 
        heads of relevant agencies and interested parties, shall, using 
        existing resources of the Office, conduct a study on patents 
        owned by the United States Government that--
                  (A) examines how such patents are licensed and sold, 
                and any litigation relating to the licensing or sale of 
                such patents;
                  (B) provides legislative and administrative 
                recommendations on whether there should be restrictions 
                placed on patents acquired from the United States 
                Government;
                  (C) examines whether or not each relevant agency 
                maintains adequate records on the patents owned by such 
                agency, specifically whether such agency addresses 
                licensing, assignment, and Government grants for 
                technology related to such patents; and
                  (D) provides recommendations to ensure that each 
                relevant agency has an adequate point of contact that 
                is responsible for managing the patent portfolio of the 
                agency.
          (2) Report on study.--Not later than 6 months after the date 
        of the enactment of this Act, the Director shall submit to the 
        Committee on the Judiciary of the House of Representatives and 
        the Committee on the Judiciary of the Senate a report on the 
        findings and recommendations of the Director from the study 
        required under paragraph (1).
  (c) Study on Patent Quality and Access to the Best Information During 
Examination.--
          (1) GAO study.--The Comptroller General of the United States 
        shall conduct a study on patent examination at the Office and 
        the technologies available to improve examination and improve 
        patent quality.
          (2) Contents of the study.--The study required under 
        paragraph (1) shall include the following:
                  (A) An examination of patent quality at the Office.
                  (B) An examination of ways to improve patent quality, 
                specifically through technology, that shall include 
                examining best practices at foreign patent offices and 
                the use of existing off-the-shelf technologies to 
                improve patent examination.
                  (C) A description of how patents are classified.
                  (D) An examination of procedures in place to prevent 
                double patenting through filing by applicants in 
                multiple art areas.
                  (E) An examination of the types of off-the-shelf 
                prior art databases and search software used by foreign 
                patent offices and governments, particularly in Europe 
                and Asia, and whether those databases and search tools 
                could be used by the Office to improve patent 
                examination.
                  (F) An examination of any other areas the Comptroller 
                General determines to be relevant.
          (3) Report on study.--Not later than 6 months after the date 
        of the enactment of this Act, the Comptroller General shall 
        submit to the Committee on the Judiciary of the House of 
        Representatives and the Committee on the Judiciary of the 
        Senate a report on the findings and recommendations from the 
        study required by this subsection, including recommendations 
        for any changes to laws and regulations that will improve the 
        examination of patent applications and patent quality.
  (d) Study on Patent Small Claims Court.--
          (1) Study required.--
                  (A) In general.--The Director of the Administrative 
                Office of the United States Courts, in consultation 
                with the Director of the Federal Judicial Center and 
                the United States Patent and Trademark Office, shall, 
                using existing resources, conduct a study to examine 
                the idea of developing a pilot program for patent small 
                claims courts in certain judicial districts within the 
                existing patent pilot program mandated by Public Law 
                111-349.
                  (B) Contents of study.--The study under subparagraph 
                (A) shall examine--
                          (i) the number of and qualifications for 
                        judges that could serve on such small claims 
                        courts;
                          (ii) how such small claims courts would be 
                        designated and the necessary criteria for such 
                        designation;
                          (iii) the costs that would be incurred for 
                        establishing, maintaining, and operating such a 
                        pilot program; and
                          (iv) the steps that would be taken to ensure 
                        that the courts in the pilot program are not 
                        misused for abusive patent litigation.
          (2) Report on study.--Not later than 1 year after the date of 
        the enactment of this Act, the Director of the Administrative 
        Office of the United States Courts shall submit a report to the 
        Committee on the Judiciary of the House of Representatives and 
        the Committee on the Judiciary of the Senate on the findings 
        and recommendations of the Director of the Administrative 
        Office from the study required under paragraph (1).
  (e) Study on Demand Letters.--
          (1) Study.--The Director, in consultation with the heads of 
        other appropriate agencies, shall conduct a study of the 
        prevalence of the practice of sending patent demand letters in 
        bad faith and the extent to which that practice may, through 
        fraudulent or deceptive practices, impose a negative impact on 
        the marketplace.
          (2) Report to congress.--Not later than 1 year after the date 
        of the enactment of this Act, the Director shall submit a 
        report to the Committee on the Judiciary of the House of 
        Representatives and the Committee on the Judiciary of the 
        Senate on the findings and recommendations of the Director from 
        the study required under paragraph (1).
          (3) Patent demand letter defined.--In this subsection, the 
        term ``patent demand letter'' means a written communication 
        relating to a patent that states or indicates, directly or 
        indirectly, that the recipient or anyone affiliated with the 
        recipient is or may be infringing the patent.
  (f) Study on Business Method Patent Quality.--
          (1) GAO study.--The Comptroller General of the United States 
        shall conduct a study on the volume and nature of litigation 
        involving business method patents.
          (2) Contents of study.--The study required under paragraph 
        (1) shall focus on examining the quality of business method 
        patents asserted in suits alleging patent infringement, and may 
        include an examination of any other areas that the Comptroller 
        General determines to be relevant.
          (3) Report to congress.--Not later than 6 months after the 
        date of the enactment of this Act, the Comptroller General 
        shall submit to the Committee on the Judiciary of the House of 
        Representatives and the Committee on the Judiciary of the 
        Senate a report on the findings and recommendations from the 
        study required by this subsection, including recommendations 
        for any changes to laws or regulations that the Comptroller 
        General considers appropriate on the basis of the study.

SEC. 9. IMPROVEMENTS AND TECHNICAL CORRECTIONS TO THE LEAHY-SMITH 
                    AMERICA INVENTS ACT.

  (a) Repeal of Civil Action To Obtain a Patent.--
          (1) Repeal.--Section 145 of title 35, United States Code, is 
        repealed.
          (2) Conforming amendments.--
                  (A) Federal circuit jurisdiction.--Section 1295(a)(4) 
                of title 28, United States Code, is amended--
                          (i) in subparagraph (A), by striking ``except 
                        that an applicant or a party'' and all that 
                        follows through the end of the subparagraph and 
                        inserting the following: ``except that a party 
                        to a derivation proceeding may also have remedy 
                        by civil action under section 146 of title 35; 
                        an appeal under this subparagraph of a decision 
                        of the Board with respect to a derivation 
                        proceeding shall waive the right of such party 
                        to proceed under section 146 of title 35;''; 
                        and
                          (ii) in subparagraph (C), by striking 
                        ``section 145, 146, or'' and inserting 
                        ``section 146 or''.
                  (B) Federal circuit appeal.--Section 141(a) of title 
                35, United States Code, is amended--
                          (i) by striking ``may appeal the Board's 
                        decision to'' and inserting ``may appeal the 
                        Board's decision only to''; and
                          (ii) by striking the second sentence.
                  (C) Adjustment of patent term.--Section 
                154(b)(1)(A)(iii) of title 35, United States Code, is 
                amended by striking ``section 141, 145, or 146'' and 
                inserting ``section 141 or 146''.
                  (D) Clerical amendment.--The table of sections for 
                chapter 13 of title 35, United States Code, is amended 
                by repealing the item relating to section 145.
          (3) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act and 
        apply to any proceeding in which a decision is made by the 
        Patent Trial and Appeal Board on or after such date of 
        enactment.
  (b) Post-Grant Review Amendment.--Section 325(e)(2) of title 35, 
United States Code is amended by striking ``or reasonably could have 
raised''.
  (c) Use of District-Court Claim Construction in Post-Grant and Inter 
Partes Reviews.--
          (1) Inter partes review.--Section 316(a) of title 35, United 
        States Code, is amended--
                  (A) in paragraph (12), by striking ``; and'' and 
                inserting a semicolon;
                  (B) in paragraph (13), by striking the period at the 
                end and inserting ``; and''; and
                  (C) by adding at the end the following new paragraph:
          ``(14) providing that for all purposes under this chapter--
                  ``(A) each claim of a patent shall be construed as 
                such claim would be in a civil action to invalidate a 
                patent under section 282(b), including construing each 
                claim of the patent in accordance with the ordinary and 
                customary meaning of such claim as understood by one of 
                ordinary skill in the art and the prosecution history 
                pertaining to the patent; and
                  ``(B) if a court has previously construed the claim 
                or a claim term in a civil action in which the patent 
                owner was a party, the Office shall consider such claim 
                construction.''.
          (2) Post-grant review.--Section 326(a) of title 35, United 
        States Code, is amended--
                  (A) in paragraph (11), by striking ``; and'' and 
                inserting a semicolon;
                  (B) in paragraph (12), by striking the period at the 
                end and inserting ``; and''; and
                  (C) by adding at the end the following new paragraph:
          ``(13) providing that for all purposes under this chapter--
                  ``(A) each claim of a patent shall be construed as 
                such claim would be in a civil action to invalidate a 
                patent under section 282(b), including construing each 
                claim of the patent in accordance with the ordinary and 
                customary meaning of such claim as understood by one of 
                ordinary skill in the art and the prosecution history 
                pertaining to the patent; and
                  ``(B) if a court has previously construed the claim 
                or a claim term in a civil action in which the patent 
                owner was a party, the Office shall consider such claim 
                construction.''.
          (3) Technical and conforming amendment.--Section 18(a)(1)(A) 
        of the Leahy-Smith America Invents Act (Public Law 112-29; 126 
        Stat. 329; 35 U.S.C. 321 note) is amended by striking ``Section 
        321(c)'' and inserting ``Sections 321(c) and 326(a)(13)''.
          (4) Effective date.--The amendments made by this subsection 
        shall take effect upon the expiration of the 90-day period 
        beginning on the date of the enactment of this Act, and shall 
        apply to any proceeding under chapter 31 or 32 of title 35, 
        United States Code, as the case may be, for which the petition 
        for review is filed on or after such effective date.
  (d) Codification of the Double-Patenting Doctrine for First-Inventor-
To-File Patents.--
          (1) Amendment.--Chapter 10 of title 35, United States Code, 
        is amended by adding at the end the following new section:

``Sec. 106. Prior art in cases of double patenting

  ``A claimed invention of a patent issued under section 151 (referred 
to as the `first patent') that is not prior art to a claimed invention 
of another patent (referred to as the `second patent') shall be 
considered prior art to the claimed invention of the second patent for 
the purpose of determining the nonobviousness of the claimed invention 
of the second patent under section 103 if--
          ``(1) the claimed invention of the first patent was 
        effectively filed under section 102(d) on or before the 
        effective filing date of the claimed invention of the second 
        patent;
          ``(2) either--
                  ``(A) the first patent and second patent name the 
                same inventor; or
                  ``(B) the claimed invention of the first patent would 
                constitute prior art to the claimed invention of the 
                second patent under section 102(a)(2) if an exception 
                under section 102(b)(2) were deemed to be inapplicable 
                and the claimed invention of the first patent was, or 
                were deemed to be, effectively filed under section 
                102(d) before the effective filing date of the claimed 
                invention of the second patent; and
          ``(3) the patentee of the second patent has not disclaimed 
        the rights to enforce the second patent independently from, and 
        beyond the statutory term of, the first patent.''.
          (2) Regulations.--The Director shall promulgate regulations 
        setting forth the form and content of any disclaimer required 
        for a patent to be issued in compliance with section 106 of 
        title 35, United States Code, as added by paragraph (1). Such 
        regulations shall apply to any disclaimer filed after a patent 
        has issued. A disclaimer, when filed, shall be considered for 
        the purpose of determining the validity of the patent under 
        section 106 of title 35, United States Code.
          (3) Conforming amendment.--The table of sections for chapter 
        10 of title 35, United States Code, is amended by adding at the 
        end the following new item:

        ``106. Prior art in cases of double patenting.''.

          (4) Exclusive rule.--A patent subject to section 106 of title 
        35, United States Code, as added by paragraph (1), shall not be 
        held invalid on any nonstatutory, double-patenting ground.
          (5) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act and 
        shall apply to a patent or patent application only if both the 
        first and second patents described in section 106 of title 35, 
        United States Code, as added by paragraph (1), are patents or 
        patent applications that are described in section 3(n)(1) of 
        the Leahy-Smith America Invents Act (35 U.S.C. 100 note).
  (e) PTO Patent Reviews.--
          (1) Clarification.--
                  (A) Scope of prior art.--Section 18(a)(1)(C)(i) of 
                the Leahy-Smith America Invents Act (35 U.S.C. 321 
                note) is amended by striking ``section 102(a)'' and 
                inserting ``subsection (a) or (e) of section 102''.
                  (B) Effective date.--The amendment made by 
                subparagraph (A) shall take effect on the date of the 
                enactment of this Act and shall apply to any proceeding 
                pending on, or filed on or after, such date of 
                enactment.
          (2) Authority to waive fee.--Subject to available resources, 
        the Director may waive payment of a filing fee for a 
        transitional proceeding described under section 18(a) of the 
        Leahy-Smith America Invents Act (35 U.S.C. 321 note).
  (f) Clarification of Limits on Patent Term Adjustment.--
          (1) Amendments.--Section 154(b)(1)(B) of title 35, United 
        States Code, is amended--
                  (A) in the matter preceding clause (i), by striking 
                ``not including--'' and inserting ``the term of the 
                patent shall be extended 1 day for each day after the 
                end of that 3-year period until the patent is issued, 
                not including--'';
                  (B) in clause (i), by striking ``consumed by 
                continued examination of the application requested by 
                the applicant'' and inserting ``consumed after 
                continued examination of the application is requested 
                by the applicant'';
                  (C) in clause (iii), by striking the comma at the end 
                and inserting a period; and
                  (D) by striking the matter following clause (iii).
          (2) Effective date.--The amendments made by this subsection 
        shall take effect on the date of the enactment of this Act and 
        apply to any patent application or patent that is pending on, 
        or filed on or after, such date of enactment.
  (g) Clarification of Jurisdiction.--
          (1) In general.--The Federal interest in preventing 
        inconsistent final judicial determinations as to the legal 
        force or effect of the claims in a patent presents a 
        substantial Federal issue that is important to the Federal 
        system as a whole.
          (2) Applicability.--Paragraph (1)--
                  (A) shall apply to all cases filed on or after, or 
                pending on, the date of the enactment of this Act; and
                  (B) shall not apply to a case in which a Federal 
                court has issued a ruling on whether the case or a 
                claim arises under any Act of Congress relating to 
                patents or plant variety protection before the date of 
                the enactment of this Act.
  (h) Patent Pilot Program in Certain District Courts Duration.--
          (1) Duration.--Section 1(c) of Public Law 111-349 (124 Stat. 
        3674; 28 U.S.C. 137 note) is amended to read as follows:
  ``(c) Duration.--The program established under subsection (a) shall 
be maintained using existing resources, and shall terminate 20 years 
after the end of the 6-month period described in subsection (b).''.
          (2) Effective date.--The amendment made by paragraph (1) 
        shall take effect on the date of the enactment of this Act.
  (i) Technical Corrections.--
          (1) Novelty.--
                  (A) Amendment.--Section 102(b)(1)(A) of title 35, 
                United States Code, is amended by striking ``the 
                inventor or joint inventor or by another'' and 
                inserting ``the inventor or a joint inventor or 
                another''.
                   (B) Effective date.--The amendment made by 
                subparagraph (A) shall be effective as if included in 
                the amendment made by section 3(b)(1) of the Leahy-
                Smith America Invents Act (Public Law 112-29).
          (2) Inventor's oath or declaration.--
                  (A) Amendment.--The second sentence of section 115(a) 
                of title 35, United States Code, is amended--
                          (i) by striking ``Except as otherwise 
                        provided'' and inserting ``Except for an 
                        application filed under section 118 or as 
                        otherwise provided''; and
                          (ii) by striking ``shall execute'' and 
                        inserting ``may be required by the Director to 
                        execute''.
                  (B) Effective date.--The amendments made by 
                subparagraph (A) shall be effective as if included in 
                the amendment made by section 4(a)(1) of the Leahy-
                Smith America Invents Act (Public Law 112-29).
          (3) Assignee filers.--
                  (A) Benefit of earlier filing date; right of 
                priority.--Section 119(e)(1) of title 35, United States 
                Code, is amended, in the first sentence, by striking 
                ``by an inventor or inventors named'' and inserting 
                ``that names the inventor or a joint inventor''.
                  (B) Benefit of earlier filing date in the united 
                states.--Section 120 of title 35, United States Code, 
                is amended, in the first sentence, by striking ``names 
                an inventor or joint inventor'' and inserting ``names 
                the inventor or a joint inventor''.
                  (C) Effective date.--The amendments made by this 
                paragraph shall take effect on the date of the 
                enactment of this Act and shall apply to any patent 
                application, and any patent issuing from such 
                application, that is filed on or after September 16, 
                2012.
          (4) Derived patents.--
                  (A) Amendment.--Section 291(b) of title 35, United 
                States Code, is amended by striking ``or joint 
                inventor'' and inserting ``or a joint inventor''.
                  (B) Effective date.--The amendment made by 
                subparagraph (A) shall be effective as if included in 
                the amendment made by section 3(h)(1) of the Leahy-
                Smith America Invents Act (Public Law No. 112-29).
          (5) Specification.--Notwithstanding section 4(e) of the 
        Leahy-Smith America Invents Act (Public Law 112-29; 125 Stat. 
        297), the amendments made by subsections (c) and (d) of section 
        4 of such Act shall apply to any proceeding or matter that is 
        pending on, or filed on or after, the date of the enactment of 
        this Act.
          (6) Time limit for commencing misconduct proceedings.--
                  (A) Amendment.--The fourth sentence of section 32 of 
                title 35, United States Code, is amended by striking 
                ``1 year'' and inserting ``2 years''.
                  (B) Effective date.--The amendment made by this 
                paragraph shall take effect on the date of the 
                enactment of this Act and shall apply to any action in 
                which the Office files a complaint on or after such 
                date of enactment.
          (7) Patent owner response.--
                  (A) Conduct of inter partes review.--Paragraph (8) of 
                section 316(a) of title 35, United States Code, is 
                amended by striking ``the petition under section 313'' 
                and inserting ``the petition under section 311''.
                  (B) Conduct of post-grant review.--Paragraph (8) of 
                section 326(a) of title 35, United States Code, is 
                amended by striking ``the petition under section 323'' 
                and inserting ``the petition under section 321''.
                  (C) Effective date.--The amendments made by this 
                paragraph shall take effect on the date of the 
                enactment of this Act.
          (8) International applications.--
                  (A) Amendments.--Section 202(b) of the Patent Law 
                Treaties Implementation Act of 2012 (Public Law 112-
                211; 126 Stat. 1536) is amended--
                          (i) by striking paragraph (7); and
                          (ii) by redesignating paragraphs (8) and (9) 
                        as paragraphs (7) and (8), respectively.
                  (B) Effective date.--The amendments made by 
                subparagraph (A) shall be effective as if included in 
                title II of the Patent Law Treaties Implementation Act 
                of 2012 (Public Law 112-21).

SEC. 10. EFFECTIVE DATE.

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

                          Purpose and Summary

    The Leahy-Smith America Invents Act (AIA), signed into law 
just over 2 years ago, was a landmark Act that made fundamental 
changes to American patent law. Its principal provisions, such 
as its adoption of the first-inventor-to-file system of 
establishing a patent's priority date, its simplified 
definition of prior art, and its creation of a limited prior 
user right, are reforms that were literally decades in the 
making. Other provisions, such as the AIA's comprehensive 
revision of existing administrative proceedings for post-
issuance review of patents, and its creation of several new 
administrative proceedings, will ensure that such proceedings 
are efficient alternatives to civil litigation that are fair to 
both patent owners and accused infringers. The AIA addressed 
scores of matters both large and small, updating or abrogating 
statutory provisions and judicial constructions from as 
recently as the last few years to as far back as the first half 
of the 19th century.
    Despite the breadth and depth of the AIA's reforms, 
however, it was apparent even before the Act was signed into 
law that further legislative work remained to be done. The harm 
inflicted on American innovation and manufacturing by various 
abusive patent-enforcement practices has been widely known and 
acknowledged for most of the last decade. Some of these 
problems clearly have grown worse even since the AIA's 
enactment. What has been absent in the past, however, is a 
consensus among different American industrial and technological 
sectors as to how to cure these abuses without undermining the 
patent system's purpose of encouraging research and innovation.
    The present bill--the Innovation Act--represents the 
emergence of a new consensus. As reflected in hearings held 
before this Committee and the Subcommittee on Courts, 
Intellectual Property, and the Internet earlier this year,\1\ 
industry leaders from different sectors have reached broad 
agreement on a common set of reforms that will address the most 
serious abuses currently afflicting the patent-enforcement 
system. Some of these reforms reflect new thinking about ways 
of addressing the burden and expense of litigation. Others are 
variants of proposals that were included in preliminary 
versions of the AIA itself or its various precursors, but which 
were omitted from the final public law. Still others address 
problems that have arisen only in the time since the AIA's 
enactment. Finally, the Innovation Act corrects several 
important technical problems that have become apparent during 
the course of the implementation of the AIA.
---------------------------------------------------------------------------
    \1\See Abusive Patent Litigation: The Impact on American Innovation 
and Jobs, and Potential Solutions: Hearing Before the Subcomm. on 
Courts, Intellectual Property, and the Internet of the H. Comm. on the 
Judiciary, 113th Cong. (2013) [hereinafter March hearing]; Abusive 
Patent Litigation: The Issues Impacting American Competitiveness and 
Job Creation at the International Trade Commission and Beyond: Hearing 
Before the Subcomm. on Courts, Intellectual Property, and the Internet 
of the H. Comm. on the Judiciary, 113th Cong. (2013) [hereinafter April 
hearing]; H.R. 3309: Improving the Patent System to Promote American 
Innovation and Competitiveness: Hearing Before the H. Comm. on the 
Judiciary, 113th Cong. (2013) [hereinafter October hearing].
---------------------------------------------------------------------------
    Every member of this Committee wishes to see the patent 
system fulfill its constitutional mandate to ``promote the 
progress of science and the useful arts.'' As one industry 
leader noted during the Subcommittee on Courts, Intellectual 
Property, and the Internet's hearings earlier this year, the 
proper goal of reform legislation

        is to ensure that the patent system fairly rewards 
        those who contribute to our society through the 
        invention and development of new and useful products 
        and processes. A fair, efficient, and reliable patent 
        system will continue to stimulate the investment in 
        innovation that is necessary in today's technologically 
        complex world to create the new products and processes 
        that will lead to better lives for Americans and the 
        rest of the world. In addition, the best promise for 
        preserving and enhancing our place in an increasingly 
        competitive global marketplace will be to stimulate 
        U.S. investment in research by universities and small 
        and large companies.\2\
---------------------------------------------------------------------------
    \2\March hearing at 61 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform).

    While the particular focus of the Innovation Act is to cure 
the misuse of various patent-enforcement mechanisms, the 
Committee remains mindful of the importance of preserving a 
---------------------------------------------------------------------------
strong and efficient patent system. As the same witness noted,

        Research based companies are rational decision makers 
        when it comes to deciding whether and how much to 
        invest in R&D. . . . In determining the expected return 
        on investment, a critical element is the likelihood 
        that meaningful patent protection will be accorded to 
        deserving inventions resulting from the project, the 
        degree and duration of exclusivity that resulting 
        products or processes will enjoy, and the likelihood 
        that the involved patents will either be respected by 
        competitors, or can be promptly and successfully 
        enforced in the event of infringement. When such 
        projections indicate that the return on investment 
        exceeds a threshold commensurate with the risk 
        involved, the investment is, or continues to be, made. 
        When it does not, the project is not begun, or is 
        cancelled.\3\
---------------------------------------------------------------------------
    \3\Id.; see also March hearing at 81 (Statement of Dana Rao, Vice 
President of Intellectual Property and Litigation, Adobe Systems) 
(``the patent system gives us the freedom to invest in R&D, knowing 
that our key differentiating innovations can be protected and that the 
patent system will be there to help us earn a return on that 
investment.'').

    It is the goal of this Committee to ensure that American 
manufacturing, small businesses, and start ups are protected 
against patent-enforcement abuse, while also ensuring that the 
patent system continue to protect and encourage American 
ingenuity. The Innovation Act, which has earned the support of 
a broad coalition of America's most innovative companies, 
recalibrates the Nation's patent-enforcement mechanisms in a 
manner that strikes a balance between these overlapping and 
sometimes conflicting goals, and ensures that the Nation's 
patent system continues to drive technological innovation and 
economic growth.

                Background and Need for the Legislation

    Testimony before this Committee and the Subcommittee on 
Courts, Intellectual Property, and the Internet has established 
that misuse of various patent-enforcement mechanisms is a 
serious problem--and one that has grown worse in recent years. 
One witness who appeared before this Committee noted how the 
processes and the expense of patent litigation often make 
pursuit of even meritorious defenses or claims a difficult 
business decision. He commented on

        the sad state of affairs that exists under current U.S. 
        patent law and practice--enforcement of a valid patent, 
        or pursuit of a winning defense to a manifestly invalid 
        patent, can each be an economically irrational choice 
        on account of the delays, costs, and unpredictability 
        of doing so under the rules and procedures defining the 
        conduct of patent litigation.\4\
---------------------------------------------------------------------------
    \4\October hearing, Statement of Robert A. Armitage, Former General 
Counsel, Eli Lilly & Co., at *i. Because the record of the October 29 
hearing has not been published as of the publication of this report, 
citations to the testimony and other material in that record are to the 
material as submitted, rather than to the pages of the GPO print, and 
are identified by asterisks.

    Another witness described how the cost of patent 
litigation--due to its technical nature and complexity--can 
lead to settlements driven by the economics of litigation 
rather than the merits of the case. He noted the ``common 
---------------------------------------------------------------------------
complaint'' that in patent litigation,

        too many specious claims or defenses are filed solely 
        for the purpose of forcing an unjust settlement, 
        typically at a cost that is less than the cost of 
        successfully completing the litigation. While this type 
        of abuse no doubt exists in other types of litigation, 
        it may be more effective in patent litigation, where 
        the subject matter is complex, extensive document 
        discovery is available, a large number of potential 
        witnesses may be deposed, and expert testimony is a 
        practical necessity. Coupled with the difficulty in 
        patent cases of distinguishing specious from 
        meritorious claims and defenses, many parties choose to 
        settle rather than litigate to a final conclusion.\5\
---------------------------------------------------------------------------
    \5\March hearing at 64 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform).

    Other witnesses noted that the volume and character of 
patent litigation has grown worse in the last several years. 
---------------------------------------------------------------------------
One witness described his company's recent experience:

        Growing and systematic abuse has led to increasing 
        waste, inefficiency, and unfairness. The historical 
        trend of litigation illustrates the problem well. . . . 
        [F]rom 1995, when Yahoo was founded, through 2006, 
        Yahoo had between two to four defensive patent cases on 
        its active docket at any given time. In stark contrast, 
        since the beginning of 2007, Yahoo has had between 20 
        to 25 cases on its active docket at any given time. 
        That is a tenfold increase in patent litigation.\6\
---------------------------------------------------------------------------
    \6\October hearing, Statement of Kevin Kramer, Vice President and 
Deputy General Counsel for Intellectual Property, Yahoo! Inc., at *2; 
see also id. at *3 (``Along with the increase in numbers, Yahoo has 
seen a decrease in the substantive merits of the cases filed against 
it.'').

    Similarly, a witness testifying on behalf of a major 
retailer described the growth in patent litigation and misuse 
---------------------------------------------------------------------------
that her company has seen:

        When I joined the company 4 years ago, JCPenney had no 
        patent cases. Over the last 4 years, the company has 
        had to defend or settle over two dozen patent 
        infringement lawsuits that have nothing to do with the 
        products JCPenney actually sells. . . . [T]his number 
        does not include those claims that are settled upon 
        receipt of demand letters.\7\
---------------------------------------------------------------------------
    \7\March hearing at 39 (statement of Janet L. Dhillon, Executive 
Vice President, General Counsel and Corporate Secretary, JCPenney).

    The fact that a representative of a major retailer 
testified before the Subcommittee about patent-litigation 
abuses is illustrative of another recent phenomenon: problems 
with the patent-enforcement system have reached beyond the 
industrial sectors that are directly involved in technological 
innovation. Increasingly, patent lawsuits have affected 
businesses that one ordinarily does not expect to be involved 
with the patent system. Concerns about abusive litigation 
practices have been expressed to this Committee by 
constituencies as diverse as the National Retail Federation,\8\ 
the Food Marketing Institute (which conducts programs on food 
safety for food retailers and wholesalers),\9\ the National 
Association of Realtors,\10\ and the American Bankers 
Association.\11\
---------------------------------------------------------------------------
    \8\Id. at 122 (``In recent years, over 200 retailers have contacted 
NRF about this issue because they have been, or are currently, the 
target of patent trolls' abusive practices.'').
    \9\Id. at 163.
    \10\March hearing at 160.
    \11\Id. at 220-221.
---------------------------------------------------------------------------
    Witnesses who appeared before the Subcommittee also 
described how recent trends in patent litigation have 
negatively affected small businesses:

        In response to the wave of patent troll cases, we have 
        changed our business practices. [F]or example, in the 
        past, . . . we might have considered licensing 
        technology from a small inventor, . . . [a] few guys in 
        a garage who are putting together a very exciting idea 
        about technology. . . . [But now,] we are taking a 
        second look at that. . . . [W]e [often] do not license 
        that technology because we are concerned that that 
        young inventor, that startup, may not have the 
        wherewithal to defend and indemnify us in a patent 
        troll case. And I think that that is a very unfortunate 
        thing for innovation in general.\12\
---------------------------------------------------------------------------
    \12\March hearing at 140-141 (statement of Janet L. Dhillon, 
Executive Vice President, General Counsel and Corporate Secretary, 
JCPenney); see also April hearing at 46 (Statement of Colleen V. Chien, 
Assistant Professor, Santa Clara University Law School) (``Allowing 
suits against customers as we currently do puts small suppliers in a 
difficult position-- . . . they make small suppliers unattractive, 
because of their inability to indemnify large companies.'').

    Others have noted that ``[c]ompanies that make $10 million 
or less in revenue are the majority of unique defendants''--and 
that ``[s]tartups are particularly vulnerable. Although 
startups are a crucial source of new jobs, [patent-troll] 
demands have impacted their ability to hire and meet other 
milestones, caused them to change their products, and shut down 
lines of business.''\13\
---------------------------------------------------------------------------
    \13\April hearing at 42 (Statement of Colleen V. Chien, Assistant 
Professor, Santa Clara University Law School).
---------------------------------------------------------------------------
    Finally, one witness with deep experience of the patent 
system offered the following stark warning about the risks 
posed by these problems to the system as a whole:

        Absent resolution, the concerns over the existing 
        patent litigation rules and procedures--producing 
        litigation consequences that often bedevil both 
        plaintiffs and defendants alike--seem certain to doom 
        the broad public support for the patent system.\14\
---------------------------------------------------------------------------
    \14\October hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *12.

    The inefficiencies and inequities currently afflicting the 
Nation's patent-enforcement system are a problem that calls for 
this Committee's attention.\15\
---------------------------------------------------------------------------
    \15\The Committee notes, but declines to rely on, the oft-cited--
and surprisingly specific--figure that patent-troll litigation costs 
United States businesses $29 billion annually. The study upon which 
that figure is based has been questioned. See, e.g., March hearing at 
111 (statement of Graham Gerst, Partner, Global IP Law Group). It 
appears to be derived from the survey responses of just 82 companies, a 
sample that would not appear to be statistically significant, and that 
would appear to be prone to selection bias. Legislation cannot be 
permitted to be based on academic pseudoscience. The counsel of trusted 
industry leaders with direct experience of the patent-enforcement 
system, and views expressed by respected trade associations 
representing diverse industrial sectors, are thus the principal 
``data'' on which the Committee places reliance.
---------------------------------------------------------------------------
Patent Infringement Actions
            1. Attorney's Fees
    Witnesses who appeared before this Committee and the 
Subcommittee on Courts, Intellectual Property, and the Internet 
repeatedly described how the high cost of mounting a defense to 
a complaint of patent infringement can force a defendant to 
settle the case and pay the plaintiff--even when the defendant 
has good reason to believe that it would have prevailed at 
trial on a defense of noninfringement or invalidity. Witnesses 
also predicted that allowing more liberal shifting of 
attorney's fees against losing parties would reduce the 
frequency of such nuisance settlements, and would allow more 
defendants to challenge patents that are invalid or that have 
been asserted beyond what their claims reasonably allow. As one 
witness stated at the March 14 Subcommittee hearing:

        Given that it costs $5 million to defend [against] a 
        patent through trial, and the average settlement demand 
        is less than $1 million, the [patent-assertion 
        entities] have an economic advantage over the targeted 
        defendants. If, however, the PAEs faced the real 
        possibility that the $5 million would be shifted to 
        them if they were unsuccessful, I believe they would 
        think twice about bringing lawsuits based on meritless 
        patents. And it would just take one defendant out of 
        the hundreds of targets to challenge them to take the 
        profit out of the aggressive litigation model.\16\
---------------------------------------------------------------------------
    \16\March hearing at 89 (Statement of Dana Rao, Vice President of 
Intellectual Property and Litigation, Adobe Systems); see also October 
hearing, Statement of Kevin Kramer, Vice President and Deputy General 
Counsel for Intellectual Property, Yahoo! Inc., at *6 (``Without that 
threat of fees, there is no disincentive for plaintiffs to file weak 
cases or, worse yet, bring weak cases to trial. Congress's providing 
clarity as to when courts should shift fees will force patent 
plaintiffs to act more responsibly during litigation and when 
contemplating whether to file suit at all.''); March hearing at 105 
(Statement of John Boswell, Senior Vice President and General Counsel, 
SAS) (``If Congress did something to [expand the availability of fee 
awards], then we would have less incentive to settle. We would be 
inclined to take the cases until you got a decision. As soon as you do 
that, the entire business model of the patent trolls changes, because 
they use early settlements to fund litigation. And as soon as people 
stop settling, the whole paradigm shifts.'').

    Witnesses appearing before the Subcommittee also urged that 
any new fee-shifting standard be applied evenhandedly to 
plaintiffs and defendants, and recommended that the law not 
attempt to discriminate among patent business models. As one 
witness noted, ``non-meritorious litigation positions are no 
more acceptable coming in the form of specious infringement 
defenses or counterclaims pled by an accused infringer, and no 
more acceptable coming from a patent owner that practices its 
patent than from a non-practicing entity.''\17\
---------------------------------------------------------------------------
    \17\April hearing at 14 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company); see 
also March hearing at 74 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform) (``abusive litigation behavior 
should be targeted regardless of the party that engages in it. With 
respect to patent owners, there is no basis to single out [non-
practicing entites] for special treatment as opposed to patent owners 
who practice their inventions--if either type of patent owner takes an 
unjustified litigation position, fee shifting is warranted.'').
---------------------------------------------------------------------------
    Another industry witness urged the Committee to adopt a 
clear standard for fee awards, rather than leaving such matters 
to the whim of the district judge. He noted that ``patent 
trolls file cases in jurisdictions where judges are disinclined 
to award attorney fees. Providing greater discretion to judges 
who are not using the discretion they currently have does not 
seem to be particularly helpful.''\18\
---------------------------------------------------------------------------
    \18\March hearing at 241 (Answer of John G. Boswell, Senior Vice 
President, Chief Legal Officer, and Corporate Secretary, SAS, to 
Questions for the Record from Ranking Member Melvin Watt). Such 
concerns militate against adoption of the standard employed by the 
Copyright Act, which one Court of Appeals has interpreted to provide 
that ``[a] district court has discretion to decline to award attorney's 
fees even when the plaintiff's copyright infringement case is quite 
weak.'' Airframe Sys., Inc. v. L-3 Commc'ns, 658 F.3d 100, 109 (1st 
Cir. 2011).
---------------------------------------------------------------------------
    Finally, one leading industry coalition urged the Committee 
to enact a rule that shifts fees and costs to the losing party 
unless its litigation position was ``substantially justified'' 
or special circumstances would make a fee award unjust.\19\ 
This standard is the same as that of the Equal Access to 
Justice Act,\20\ which has been applied since 1980 to allow 
awards of attorney's fees against the Federal Government.
---------------------------------------------------------------------------
    \19\March hearing at 74 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform) (``[S]ince 2006, the 21st Century 
Coalition has supported amending 35 U.S.C Sec. 285 to require fee 
awards to prevailing parties, unless the court makes a finding that the 
losing party's position was `substantially justified' or that `special 
circumstances' make the fee award `unjust.' Similar language to amend 
35 U.S.C Sec. 285 was proposed first in the Patent Reform Act of 2006, 
S. 3818, 109th Cong., 2d Sess. (introduced August 3, 2006).'').
    \20\28 U.S.C. sec. 2412(d).
---------------------------------------------------------------------------
            2. Heightened Pleading Standards
    An industry witness who testified before the Committee on 
October 29 described the scope of the problem of vague, 
uninformative patent infringement complaints that has 
confronted his company:

        More often than not, when a complaint is filed against 
        Yahoo, we are left guessing as to the scope of the 
        case. Since 2007, 70 patent cases have been filed 
        against Yahoo. A review of those complaints reveals 
        that only 11 of these cases--just 16%--identified the 
        asserted claims of the patents. Because patent claims 
        are what is infringed, and not patents, it is 
        insufficient to identify only the asserted patent and 
        not the asserted claims of that patent. Furthermore, 
        although 52 of the complaints against us identified at 
        least one accused product, only 21 identified the 
        accused feature within the product that was alleged to 
        have infringed. Because asserted patents are typically 
        much narrower in scope than one of our products, . . . 
        the relevant information is the accused feature, and 
        that is only provided about 30% of the time. Finally, 
        only three patent complaints against us since 2007 
        provided both asserted claims and accused features of 
        products. Thus, only in about 4% of our cases do we 
        have genuine insight at the pleading stage into what 
        those cases are about. In the other 96% of cases, we 
        must guess.\21\
---------------------------------------------------------------------------
    \21\October hearing, Statement of Kevin Kramer, Vice President and 
Deputy General Counsel for Intellectual Property, Yahoo! Inc., at *7-8 
(emphasis in original).

    The same witness also described the problems that such 
complaints--which fail to identify the asserted claims or 
explain how they are infringed by the accused products and 
features--pose for defendants. The lack of such information 
undermines a defendant's ability to prepare a defense, and 
---------------------------------------------------------------------------
leads to unnecessary delays and expenses:

        Without knowing the asserted claims and the accused 
        features of products, it is very difficult for us to 
        begin to defend ourselves. For example, it is difficult 
        to identify potentially relevant witnesses in order to 
        institute hold notices to prevent inadvertent document 
        destruction. It is difficult to determine what the 
        potential non-infringement arguments might be in any 
        given case. Without knowing, we need to wait months 
        down the road until . . . discovery when plaintiffs are 
        required to provide infringement contentions or expert 
        reports in order to learn what the case is really 
        about. Accordingly, not providing the necessary 
        information at the beginning of a case in the complaint 
        slows down the litigation and makes it inefficient and 
        expensive for both parties.\22\
---------------------------------------------------------------------------
    \22\Id.

    Another industry witness who testified at the October 29 
hearing explained that enhanced pleading standards will not 
impose a greater burden on patent plaintiffs than that already 
created by the duty to conduct an investigation and develop a 
reasonable, good-faith case before filing a complaint for 
---------------------------------------------------------------------------
infringement:

        While current law does not require the disclosure of 
        infringement theories in a plaintiff's complaint, Rule 
        11 does require that the plaintiff have conducted due 
        diligence and arrived at a tenable, good-faith theory 
        of infringement before filing suit. The [Innovation 
        Act's] heightened pleading requirement, therefore, 
        imposes no new burden on diligent plaintiffs; they 
        merely need to disclose the results of their required 
        analysis. But [Sec. 281A] will have a real effect on 
        those plaintiffs who are not as diligent, barring them 
        at the outset from filing suit where they have 
        conducted no proper due diligence and ensuring that the 
        plaintiff has in fact conducted an analysis, and that 
        the plaintiff has a real basis for filing suit.\23\
---------------------------------------------------------------------------
    \23\October hearing, Statement of Krish Gupta, Senior Vice 
President and Deputy General Counsel, EMC Corporation, at *9. During 
the course of the consideration of this Act, some have questioned 
Congress's authority to legislate with regard to pleading standards for 
patent-infringement actions and other matters of Federal judicial 
procedure. ``From almost the founding days of this country,'' however, 
``it has been firmly established that Congress, acting pursuant to its 
authority to make all laws `necessary and proper' to the[] 
establishment [of the lower Federal courts], also may enact laws 
regulating the conduct of those courts and the means by which their 
judgments are enforced.'' Willy v. Coastal Corp., 503 U.S. 131, 136 
(1992); see also Sibbach v. Wilson & Co., 312 U.S. 1, 9 (1941) 
(``Congress has undoubted power to regulate the practice and procedure 
of Federal courts . . .''); Paul Taylor, Congress's Power to Regulate 
the Federal Judiciary: What the First Congress and the First Federal 
Courts Can Teach Today's Congress and Courts, 37 Pepp. L. Rev. 847 
(2010).

            3. Limiting Discovery to Claim Construction
    Testimony presented before the Committee explained the need 
for limiting discovery in patent cases to issues concerning 
claim construction during the period before a necessary claim 
construction has been entered:

        In patent cases, an early ruling by the judge 
        construing the claims of the asserted patent often is 
        case-dispositive. The plaintiff's infringement theory 
        may rely on a particular interpretation of a claim 
        term, or a defendant may place significant emphasis on 
        a prior art reference that is only within the scope of 
        the claims under a particular construction. And in any 
        event, before the court construes the claims, it is 
        often difficult to know what the theories of 
        infringement or invalidity will be.

        [Limits on pre-claim-construction discovery] will help 
        prevent wasted effort by either eliminating the need 
        for discovery entirely (where, for example, the court's 
        claim construction order effectively resolves the 
        case), or at minimum by focusing the parties on truly 
        relevant discovery, which can only be known after the 
        court has told the parties how the claims will be 
        interpreted.\24\
---------------------------------------------------------------------------
    \24\October hearing, Statement of Krish Gupta, Senior Vice 
President and Deputy General Counsel, EMC Corporation, at *10; see also 
id., Statement of Kevin Kramer, Vice President and Deputy General 
Counsel for Intellectual Property, Yahoo! Inc., at *10 (``Claim 
construction represents a decisive point in most patent cases. Once the 
court construes the claims at issue in the case, the parties have much 
more clarity as to the issues and the arguments to be litigated, if 
any. In fact, claim construction can and often is determinative of the 
issue of infringement.''). But see id., Statement of Robert A. 
Armitage, Former General Counsel, Eli Lilly & Co., at *17 (``In some 
patent infringement litigations, the Markman Ruling can be dispositive 
of the infringement issues in the litigation; in other patent 
infringement litigations, the Markman Ruling is inconsequential to the 
ultimate resolution of the lawsuit. A one-size-fits-all statute tying 
the commencement of available discovery to the initial Markman Ruling 
would make sense in some litigations, but possibly not in others.'').
---------------------------------------------------------------------------
Transparency of Patent Ownership
    A witness who testified before the Subcommittee on Courts, 
Intellectual Property, and the Internet on March 14 catalogued 
the reasons why the Patent Act should require greater 
disclosure as to who owns or has a financial interest in a 
patent. The witness explained that greater transparency would 
allow a party seeking to practice a technology to more readily 
and completely determine whether other patents also need to be 
evaluated and possibly licensed, and noted that such ownership 
information would aid in identifying relevant prior art:

        There are many costs associated with an incomplete 
        ownership record, as well as benefits associated with a 
        complete ownership record. First, the lack of 
        transparency throughout the life of the patent hinders 
        the public's ability to accurately assess the risk of 
        entering into a new technology market and increases the 
        cost of performing patent clearance analyses. Second, 
        parties may not necessarily achieve a meaningful 
        ``patent peace'' in settlements or licenses because 
        they have no way of double-checking the true extent of 
        the other party's patent holdings, and therefore might 
        not negotiate a broad enough license to foreclose 
        future conflicts. Third, a similar double-checking 
        problem may occur in the context of standard setting, 
        where some entities may try to hide standard-essential 
        patents. Fourth, a complete ownership record would 
        benefit the USPTO by providing examiners with another 
        tool to search for prior art, and to make accurate 
        prior art determinations in the context of the [common-
        ownership] exceptions. Finally, having a complete 
        ownership record would facilitate the use of post-grant 
        proceedings at the USPTO by giving potential 
        petitioners more information to assess the benefits or 
        risks of filing petitions and to locate the most 
        relevant prior art (which is crucial because of the 
        estoppel provisions of these proceedings).\25\
---------------------------------------------------------------------------
    \25\March hearing at 98 (Statement of Dana Rao, Vice President of 
Intellectual Property and Litigation, Adobe Systems); see also id. at 
99 (``as defendants, we should know who is getting the ultimate 
economic benefit from the patents that are being asserted against 
us.'').

    The same witness also described how some patent owners try 
to conceal information about which patents they own or hold a 
financial interest in, in order to forestall review of those 
---------------------------------------------------------------------------
patents:

        [T]he large patent aggregation entities are typically 
        holding the patents in other names or shell companies, 
        because they don't want to draw attention to the size 
        of their portfolio. . . . [T]hey also want to ensure 
        that . . . declaratory judgment actions and 
        reexamination proceedings [are not] initiated against 
        them.\26\
---------------------------------------------------------------------------
    \26\Id.

    A witness who appeared before this Committee on October 29 
described the difficulties posed when ownership and financial-
interest information is withheld: defendants do not know whom 
they are negotiating with or who has the authority to settle 
---------------------------------------------------------------------------
the case.

        In most cases, a defendant goes to court knowing who is 
        on the other side. In stark contrast, the [patent-
        assertion entity] model is such that a patent defendant 
        often does not know, beyond the name of a shell 
        corporation plaintiff, who has an interest in the 
        litigation and the patent at issue. Yet this is 
        knowledge that will inform decisions around every facet 
        of a case, including key decisions such as when and 
        whether to settle a case.

        [O]ur experience plays a role in our viewpoint on this 
        issue. In several cases, settlement has been 
        complicated by the ``investors'' or ``partners'' that 
        had a financial interest in a litigation. . . . This 
        often comes to light during mediation or settlement 
        talks when a plaintiff reveals that it cannot accept a 
        lower offer because it would not satisfy unnamed 
        investors in the endeavor. Transparency into the 
        ownership stakes in a patent or in the plaintiff would 
        help to avoid these issues and help to ensure that the 
        parties at the bargaining table are the ones with the 
        power and authority to settle the litigation.\27\
---------------------------------------------------------------------------
    \27\October hearing, Statement of Kevin Kramer, Vice President and 
Deputy General Counsel for Intellectual Property, Yahoo! Inc., at *9.

    The same witness also emphasized the special obligation of 
transparency and disclosure that attends any government-granted 
---------------------------------------------------------------------------
property right:

        [A] patent is a government grant. Like real property or 
        any other government grant, it is reasonable to expect 
        that the government's records disclose who owns that 
        right. If anything, the expectation [of transparency] 
        should be greater in patent cases given the ability to 
        enforce that right through litigation and the strict 
        liability for infringement.\28\
---------------------------------------------------------------------------
    \28\Id.

The Customer-Suit Exception
    A leading industry witness, testifying at the Subcommittee 
on Courts, Intellectual Property, and the Internet's March 14 
hearing, described the phenomenon of patent infringement suits 
that are filed against the customer who uses an allegedly 
infringing product, rather than against the manufacturer who 
made the product. The witness noted the potentially coercive 
nature of such suits--and their potential to overcompensate the 
plaintiff:

        A patent litigation practice that has been sharply 
        criticized is the institution of suits against large 
        numbers of assemblers, distributors, or retailers 
        rather than the original manufacturer or provider of 
        the component or product alleged to infringe. This 
        tactic takes advantage of the fact that such suits 
        threaten defendants with the disruption of aspects of 
        their businesses that are at best tangentially related 
        to the invention which is the subject of the patent, 
        and that each individual defendant has less motivation 
        to litigate the issue to final conclusion than the 
        manufacturer of the product at issue. The result can be 
        to collect enormous sums as the result of a very large 
        number of small settlements whose cumulative value far 
        exceeds the amount that could have been recovered from 
        the original manufacturer.\29\
---------------------------------------------------------------------------
    \29\March hearing at 65 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform); see also id. at 250 (Answers of 
Philip S. Johnson, Chief Intellectual Property Counsel, Johnson & 
Johnson, to Questions for the Record from Ranking Member Melvin Watt); 
April hearing at 45 (Statement of Colleen V. Chien, Assistant 
Professor, Santa Clara University Law School).

    Similarly, a witness at the Subcommittee's April 16 hearing 
described how ``[b]y targeting multiple customers or end users, 
a [patent-assertion entity] may create increased settlement 
opportunities, particularly when the customers or end users 
lack sufficient technical knowledge of the accused product or 
sufficient resources to litigate.''\30\ The same witness noted 
that current law's remedies for such abuses have proven 
inadequate: ``the stay of a customer suit . . . is not 
automatic, but rather is committed to the discretion of the 
district court. Unfortunately, courts have been inconsistent in 
their willingness to stay such customer suits, thus encouraging 
their filing.''\31\
---------------------------------------------------------------------------
    \30\April hearing at 36-38 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company); see 
also March hearing at 76 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform); October hearing, Statement of 
Krish Gupta, Senior Vice President and Deputy General Counsel, EMC 
Corporation, at *10-11; March hearing at 122 (Statement for the Record 
of the National Retail Federation and Shop.org).
    \31\Id.
---------------------------------------------------------------------------
    Another Subcommittee witness described the following 
infamous example of the abuse of lawsuits against customers. 
His example involved infringement actions that have been 
brought by a patent owner against small businesses that offer 
their customers wireless Internet access:

        The [patent-assertion entity's] plan was to assert the 
        patents against users of equipment that provides a form 
        of wireless Internet access commonly known as ``Wi-
        Fi.'' By the time the patents were assigned to the PAE, 
        however, the patents had already been broadly cross-
        licensed to competitors and were nearing the end of 
        their patent terms. Additionally, the prior owners [of 
        the patents] had made binding contractual commitments 
        to license all comers on fair and reasonable terms.

        Its targets--it has sent over 13,000 letters 
        threatening litigation--often are nonprofits, local and 
        state governments, and small and medium-sized 
        businesses including retirement homes, children's 
        health clinics, coffee shops, cafes, restaurants, and 
        convenience stores. These entities are targets because 
        they (like most every modern business) provide Wi-Fi on 
        their premises, using equipment supplied by Cisco and 
        other manufacturers. Some of this equipment is already 
        licensed under the patents-in-suit because of broad 
        licenses previously granted by the previous owners. But 
        the PAE doesn't tell their targets this, or that the 
        patents are subject to commitments to license on a 
        reasonable and nondiscriminatory basis to all comers. 
        Instead, the PAE tells these targets, who may have 
        spent as little as $40 on their wireless equipment, 
        that, unless they pay at least $2,000 or $3,000 per 
        location within 2 weeks, they will be sued and have to 
        engage counsel to review thousands of pages of 
        documents.\32\
---------------------------------------------------------------------------
    \32\March hearing at 15-16 (Statement of Mark Chandler, Senior Vice 
President and General Counsel, Cisco Systems Inc.). Although the suits 
described by this witness clearly appear to be abusive, the Committee 
recognizes that in some situations, a patent owner will have legitimate 
reason to sue users of a product rather than the manufacturer of the 
product. For example, as one witness who appeared before the 
Subcommittee noted, ``[w]hen a product is made and sold abroad but then 
used in the U.S., the downstream user may be the only entity that is 
subject to U.S. patent law.'' March hearing at 244 (Answer of Graham 
Gerst, Partner, Global IP Law Group, LLC to Questions for the Record 
from Ranking Member Melvin Watt). The same witness also described the 
scenario in which ``it is clear that the downstream user is infringing, 
but there is no way to know who manufactured the device the downstream 
user is using. In those cases, the end user is the only one to sue.'' 
Id. Another Subcommittee witness explained why the law should not 
immunize end users against suits for infringement: ``It may be the case 
that, due to the nature of the patented invention, infringement depends 
on how a customer uses, installs, or integrates a product with other 
products.'' April hearing at 36-38 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company). The 
same witness also noted that ``end user immunity might run the risk 
that would-be infringers could game the system, with the manufacturer 
stopping just short of selling an infringing product so that the 
customer who is immune from infringement can complete the assembly of 
what would otherwise be an infringing device.'' Id.

    Other industry witnesses noted that the phenomenon of 
abusive suits brought against customers who use allegedly 
infringing products is a problem that has grown worse in recent 
---------------------------------------------------------------------------
years:

        Increasingly, these suits are directed at our 
        customers, who in turn look to us to indemnify them of 
        liability for using our products. Since 2009, Adobe has 
        received more than 100 such indemnification requests. 
        In one recent example, hundreds of retailers were sued 
        by a particular [patent-assertion entity]. Each of 
        these retailers faced the choice of settling for 
        relatively low amounts, less than $100,000, or ending 
        up in expensive protracted litigation costing as much 
        as $5 million per suit.\33\
---------------------------------------------------------------------------
    \33\March hearing at 86 (Statement of Dana Rao, Vice President of 
Intellectual Property and Litigation, Adobe Systems); see also March 
hearing at 246 (Answer of Graham Gerst, Partner, Global IP Law Group, 
LLC to Questions for the Record from Ranking Member Melvin Watt) 
(``[T]he tactic of suing a large number of targets with bogus claims 
only became common over the last few years.'').

    Despite Federal Circuit precedent recognizing a customer-
suit exception,\34\ a review of recent district-court decisions 
confirms Subcommittee witnesses' characterization of the courts 
as inconsistent in their application of the law. The current 
caselaw is a dog's breakfast of overlapping, inconsistent, and 
conflicting decisions. Even in the relatively simple scenario 
of the customer who uses or sells the manufacturer's product, 
and a patent that has claims covering that very product or the 
process used to make the product,\35\ courts have refused to 
stay an infringement suit against the customer despite the 
participation of the manufacturer in a suit involving the same 
patent. Some courts have denied a stay in such circumstances on 
the ground that the manufacturer has been sued in the same 
court as the customer.\36\ Other courts, by contrast, have 
denied a stay when the manufacturer files a declaratory-
judgment action challenging the patent in another district. 
These courts have held that a stay should be denied if the 
manufacturer could have intervened in the suit against the 
customer.\37\ Of course, these lines of cases could be 
alternately applied in every customer suit to deny a stay 
regardless of where the manufacturer filed suit or intervened.
---------------------------------------------------------------------------
    \34\See Katz v. Lear Siegler, Inc., 909 F.2d 1459 (Fed. Cir. 1990).
    \35\The customer is liable for infringement in such a situation 
under 35 U.S.C. Sec. 271(g).
    \36\See, e.g., Heinz Kettler GmbH & Co. v. Indian Indus., Inc., 575 
F.Supp.2d 728, 730 (E.D. Va. 2008) (``the customer suit exception is 
inapplicable in this case . . . [b]ecause plaintiffs have 
simultaneously sued both the manufacturer (Escalade) and the customer 
(Sears) of the allegedly infringing table-tennis tables'') (emphasis in 
original); Alloc, Inc. v. Unilin Decor N.V., 2005 WL 3448060, at *3 
(E.D. Wis. Dec. 15, 2005) (no customer-suit stay because ``the 
allegedly infringing manufacturers . . . and the allegedly infringing 
customer . . . are defending claims of infringement in the same 
consolidated suit in the same jurisdiction'') (emphasis in original); 
IP Innovation L.L.C. v. Dell Computer Corp., 2004 WL 784792, at *2 
(N.D. Ill. Apr. 9, 2004); Watson Indus., Inc. v. Canon, Inc., 2003 WL 
23218401, at *1 (W.D. Wis. Nov. 24, 2003); Beck Sys., Inc. v. Marimba, 
Inc., 2001 WL 1502338, at *2 (N.D. Ill. Nov. 20, 2001) (``When all 
parties are joined in one simultaneous action, the same problems are 
not presented, and the rationale underlying the customer suit exception 
does not apply.''); Bingo Brain, Inc. v. California Concepts, Inc., 
2000 WL 690227, at *2 (N.D. Ill. May 24, 2000). Contra, In re Papst 
Licensing GmbH & Co. KG Litig., 767 F.Supp.2d 1 (D.D.C. 2011) (allowing 
a stay despite the manufacturer and customer's being sued in the same 
district).
    \37\See, e.g., Largan Precision Co., Ltd. v. Fujinon Corp., 2011 WL 
1226040, at *5 (N.D. Cal. Mar. 31, 2011); BBC Int'l Ltd. v. Lumino 
Designs, Inc., 441 F.Supp. 2d 438, 443 (E.D.N.Y. 2006) (``[T]he 
customer suit exception does not apply because BBC could have been sued 
for infringement in the Northern District of Illinois.''); Air Prods. 
and Chems., Inc. v. MG Nitrogen Servs., Inc., 133 F.Supp.2d 354, 356-57 
(D. Del. 2001); Emerson Elec. Co. v. The Black & Decker Mfg. Co., 606 
F.2d 234, 242 (8th Cir. 1979) (Markey, J).
---------------------------------------------------------------------------
    Another source of inconsistency in courts' application of 
customer-suit stays has been patent infringement actions that 
assert only method claims. In this scenario, the customer uses 
or sells the manufacturer's product, and that product is 
uniquely made to carry out the patented process. For example, 
if a patent claims the use of wireless Internet access, and the 
product is a router that enables such access, the router itself 
does not directly infringe under Sec. 271(a) because the patent 
does not claim the product. Instead, it is the customer who 
purchases the router and installs it at home who is the only 
direct infringer, because he is the one who is `using wireless 
Internet access.' The retailer is liable only ``indirectly,'' 
as a contributory infringer,\38\ because he sells a product 
that is specially made or adapted to implement the patented 
process and that lacks substantial noninfringing use.
---------------------------------------------------------------------------
    \38\See 35 U.S.C. Sec. 271(c).
---------------------------------------------------------------------------
    Although a customer who buys and uses a router is the only 
direct infringer of a method claim, the true infringer in this 
scenario is the manufacturer of the router. Typically, it is 
the manufacturer who understands the product and is in the best 
position to defend against allegations of infringement.
    A number of courts, unfortunately, have held that when the 
customer is sued as a direct infringer of a process patent, and 
the manufacturer could only be sued as an indirect infringer, 
the customer-suit exception is inapplicable and no stay of the 
customer suit is permitted. These cases effectively immunize 
almost all method patent claims against the customer-suit 
exception.\39\ Other courts, by contrast, have recognized that 
a customer accused of infringing a method claim by using a 
manufacturer's product is still a customer, and that a stay of 
the customer suit in favor of an action to which the 
manufacturer is a party is appropriate.\40\
---------------------------------------------------------------------------
    \39\See, e.g., Lodsys, LLC v. Brother Int'l Corp., 2013 WL 1338767, 
at *11 (E.D. Tex. Jan. 14, 2013); Teleconference Sys. v. Proctor & 
Gamble Pharm., Inc., 676 F.Supp.2d 321, 327 (D. Del. 2009) (customer-
suit exception inapplicable ``because plaintiff alleges that Cisco's 
customer are not mere resellers but are direct infringers''); Privasys, 
Inc. v. Visa Int'l, 2007 WL 3461761, at *4 (N.D. Cal. Nov. 14, 2007) 
(agreeing that parties ``are not mere customers'' if they are 
``involved in carrying out the infringement of the patented method''); 
In re Laughlin Prods., Inc., 265 F.Supp.2d 525, 537 (E.D. Pa. 2003) 
(``[W]here the patentee alleges that the customers themselves have 
directly infringed the method or process disclosed in the patent, the 
customer suit exception does not apply.''); Air Prods. and Chems., Inc. 
v. MG Nitrogen Servs., Inc., 133 F.Supp.2d 354, 357 (D. Del. 2001) 
(denying a stay where the customer's use of a product ``directly 
infringes the claims-in-suit, while [the manufacturer's] sale of the 
equipment only induces or contributes to infringement''); Am. Acad. of 
Sci. v. Novell, Inc., 1992 WL 313101, at *3 (N.D. Cal. July 9, 1992) 
(customer-suit exception inapplicable ``where the patent owner seeks to 
hold the manufacturer liable solely on a theory of inducement/
contributory infringement, claiming direct infringement only against 
the customer'').
    \40\See, e.g., Select Retrieval, LLC v. L.L. Bean, Inc., 2013 WL 
1099754, at *5 (D. Me. Mar. 15, 2013); Thermapure, Inc. v. Temp-Air, 
Inc., 2010 WL 5419090, at *9-10 (N.D. Ill. Dec. 22, 2010); Card 
Activation Techs. v. Pier 1 Imports, Inc., 2009 WL 2956926, at *4 (N.D. 
Ill. Sep. 14, 2009).
---------------------------------------------------------------------------
    Another scenario that has resulted in inconsistent 
application of the customer-suit exception involves a component 
that causes a larger product to infringe when the component is 
incorporated into the product. If patent claims are drafted 
broadly to cover the final product ``with'' the component, the 
component itself does not directly infringe the patent--only 
the final product incorporating the component directly 
infringes. Unfortunately, a line of cases holds that even if a 
component incorporated into the final product is the principal 
cause of infringement, and the manufacturer of the component is 
a party to a suit involving the patent, a customer-suit stay 
must be denied if the patent's claims are drawn to cover the 
larger product.\41\ Other courts, however, have recognized that 
a stay remains appropriate in such a scenario.\42\
---------------------------------------------------------------------------
    \41\See, e.g., GeoTag, Inc. v. Frontier Commc'ns Corp., 2013 WL 
693852, at *2 n.2 (E.D. Tex. Feb. 26, 2013) (customer-suit exception 
inapplicable where no evidence that ``Microsoft and Google supply the 
entire accused system''); Cadence Design Sys., Inc. v. OEA Int'l, Inc., 
2011 WL 4403619, at *2 (N.D. Cal. Sep. 20, 2011) (``The [customer suit] 
exception is . . . inapplicable when a manufacturer makes but a 
component of an end product, where the end product is accused of 
infringement''); Microsoft Corp. v. Commonwealth Scientific and Indus. 
Research Org., 2007 WL 4376104, at *2-3 (E.D. Tex. Dec. 13, 2007) (even 
though manufacturer's computer chip ``does the `inventive magic,''' 
customer-suit stay is denied because chip is ``only a component of the 
end product and therefore does not and cannot directly infringe''); 
Viking Injector Co., Inc. v. Chemtron, Inc., 1993 WL 625543, at *3 
(M.D. Pa. Nov. 9, 1993).
    \42\See, e.g., Pragmatus Telecom, LLC v. Advanced Store Co., Inc., 
2012 WL 2803695, at *3-4 (D.Del. July 10, 2012); Honeywell Int'l Inc. 
v. Audivox Commc'ns Corp., 2005 WL 2465898, at *1, 3 (D. Del. May 18, 
2005); Commissariat a L'Energie Atomique v. Dell Computer Corp., 2004 
WL 1554382 (D. Del. May 13, 2004); and Ricoh Co., Ltd. v. Aeroflex 
Inc., 279 F.Supp.2d 554 (D. Del. 2003).
---------------------------------------------------------------------------
    A final circumstance that has bedeviled the district courts 
is that of a customer who is also accused of inducement of 
infringement. As an illustrative example, consider again the 
case of the router and the patent that covers the process of 
using wireless Internet access. If the owner of such a patent 
sues a retailer under Sec. 271(c) for selling routers that 
infringe a claim to using wireless Internet access, the patent 
owner also could sue the retailer, per Sec. 271(b), for 
inducing infringement by purchasers of the router who install 
the router and directly infringe the patent by using wireless 
Internet service. Some district courts have held that when such 
a retailer-customer provides instructions to downstream 
customers (which would normally support an inducement claim), 
this creates a ``separate interest'' in proceeding against the 
retailer-customer that precludes a customer-suit stay.\43\ 
Other courts, however, have recognized that adding inducement 
claims to an action should not defeat the customer-suit 
exception with respect to a party that otherwise qualifies as a 
customer.\44\
---------------------------------------------------------------------------
    \43\See, e.g., Alloc, Inc. v. Unilin Decor N.V., 2005 WL 3448060, 
at *3 (E.D. Wis. Dec. 15, 2005).
    \44\See, e.g., Ultra Prods., Inc. v. Best Buy Co., Inc., 2009 WL 
2843888, at *4-6 (D.N.J. Sep. 1, 2009); Delphi Corp. v. Auto. Techs. 
Int'l, Inc., 2008 WL 2941116, at *5 (E.D. Mich. July 25, 2008); Beck 
Sys., Inc. v. Marimba, Inc., 2001 WL 1502338, at *1 (N.D. Ill. Nov. 20, 
2001) (customer-suit stay denied on other grounds); Tri-Tronics Co., 
Inc. v. MacGregor & Co., Inc., 1990 WL 114738, at *3 (N.D. Ill. July 
25, 1990).
---------------------------------------------------------------------------
    Finally, the Committee notes that although the Innovation 
Act's new Sec. 296 only stays, rather than terminates, suits 
against customers--and thus contemplates the possibility of 
subsequent actions against customers after the manufacturer 
suit is concluded--in the vast majority of cases, a suit 
involving the manufacturer will eliminate all potential 
infringement liability of the customer.
    First of all, if the patent is found invalid or not 
infringed by the manufacturer's goods in the suit between the 
patent owner and the manufacturer, no further cause of action 
lies against the customer with respect to the same patents and 
goods.\45\
---------------------------------------------------------------------------
    \45\See MGA, Inc. v. General Motors Corp., 827 F.2d 729, 734 (Fed. 
Cir. 1987) (``The Kessler doctrine bars a patent infringement action 
against a customer of a seller who has previously prevailed against the 
patentee because of invalidity or noninfringement of the patent'') 
(citing Kessler v. Eldred, 206 U.S. 285 (1907)); Blonder-Tongue Labs., 
Inc. v. Univ. of Ill. Found., 402 U.S. 313, 349-50 (1971).
---------------------------------------------------------------------------
    On the other hand, if the patent is found infringed and not 
invalid in the suit between the patent owner and the 
manufacturer, a cause of action still lies against the 
customer--but in the vast majority of cases, no further damages 
can be recovered from the customer. Principles of claim 
preclusion do not bar litigating a second action against the 
customer.\46\ Rather, while the patent owner who prevails in 
his action against the manufacturer may proceed with a suit 
against the customer,\47\ any such customer suit is sharply 
limited by the single-recovery rule. That rule provides that 
although ``a patentee is entitled to full compensation for 
related acts of infringement, . . . the patentee, like any tort 
victim, is not entitled to multiple recoveries for the same 
injury.''\48\ Therefore, ``a patentee may not sue users of an 
infringing product for damages if he has collected actual 
damages from a manufacturer or seller, and those damages fully 
compensate the patentee for infringement by users.''\49\
---------------------------------------------------------------------------
    \46\See Transclean Corp. v. Jiffy Lube Int'l, Inc., 474 F.3d 1298, 
1306 (Fed. Cir. 2007) (``[A] manufacturer or seller of a product who is 
sued for patent infringement typically is not in privity with a party, 
otherwise unrelated, who does no more than purchase and use the 
product. . . . [and therefore] a patentee's suit against one would 
[not] bar a second action against the other under the doctrine of claim 
preclusion.'').
    \47\See Shockley v. Arcan, Inc., 248 F.3d 1349, 1364 (Fed. Cir. 
2001).
    \48\Jerry R. Selinger & Jessica W. Young, Suing an Infringing 
Competitor's Customers: Or, Life under the Single Recovery Rule, 31 J. 
Marshall L.Rev. 19, 29 (1997).
    \49\Transclean, 474 F.3d at 1303.
---------------------------------------------------------------------------
    In almost all cases, a successful suit against the 
manufacturer will fully compensate the patent owner for 
infringing activity by the manufacturer's customers. This is 
true whether indirect-infringement claims\50\ or direct-
infringement claims were successfully litigated against the 
manufacturer.\51\
---------------------------------------------------------------------------
    \50\See Glenayre Elecs., Inc. v. Jackson, 443 F.3d 851, 858-59 
(Fed. Cir. 2006) (citing Selinger, supra) (``[W]here a patentee alleges 
that a manufacturer contributes to and induces infringement by its 
customers simply because it sells infringing products to its customers, 
damages assessed for indirect infringement normally will be the same as 
damages that would be assessed had the patentee sued and obtained a 
judgment against the customers.'').
    \51\See id. at 872 (``[W]here a patentee has enforced its patent 
against a direct infringer and collected damages sufficient to put him 
in the same position he would have been in had there not been 
infringement, the patentee cannot thereafter collect actual damages 
from an alleged indirect infringer.''); see also Selinger, supra, at 52 
(``In view of the modern theory of damages, it appears that efforts to 
procure recovery from different levels in the distribution (or user) 
chain will be difficult to accomplish, so long as the manufacturer is 
solvent.''); October hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *17-18 (``In many situations, the 
patent owner can be--and ultimately will be--made whole for any acts of 
infringement that have taken place, or will take place, by suing the 
manufacturer of an accused product. In this and like situations, 
separate infringement lawsuits brought against customers may serve no 
legitimate purpose--at least where the manufacturer is willing and able 
to stand in the shoes of its customers and the customer agrees that its 
interests would be served by having the manufacturer take over the 
defense of the patent.'').
---------------------------------------------------------------------------
    Therefore, although Sec. 296 only stays (rather than 
terminates) a separate cause of action against the customer, 
the Committee anticipates that in almost all cases, resolution 
of the manufacturer suit pending the stay will eliminate any 
possibility of further litigation against the customer.
Recommendations to the Judicial Conference
            1. Discovery
    An industry witness who testified at the Subcommittee on 
Courts, Intellectual Property, and the Internet's April 16 
hearing aptly summarized the problems posed by some discovery 
requests in patent-infringement litigation. He noted that 
plaintiffs who do not practice the claimed invention often lack 
reciprocal discovery burdens, and therefore feel unconstrained 
in their imposition of such burdens on defendants:

        The costs and burdens of discovery can be enormous in 
        any patent case. But in cases brought by [patent-
        assertion entities], the asymmetry of such costs and 
        burdens increases the risk of litigation abuse. Such 
        patent owners typically have few documents and 
        witnesses, so they may propound extremely burdensome 
        discovery to corporate defendants without fearing that 
        they will be on the receiving end of corresponding 
        burdens. Exacerbating that burden are frequently vague 
        and overreaching infringement allegations, making it 
        difficult for a defendant to determine the metes and 
        bounds of its obligation to preserve evidence, and 
        highly disruptive to comply with that obligation. 
        Coupled with the growth of electronically stored 
        information that is an easy target for burdensome 
        discovery requests, the costs of litigation can 
        mushroom out of control and force defendants to settle 
        simply to avoid intrusive discovery.\52\
---------------------------------------------------------------------------
    \52\April hearing at 32-33 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company).

    Another Subcommittee witness described the particular 
burden imposed by requests for electronic discovery--and again 
emphasized the lack of reciprocal burdens confronted by non-
---------------------------------------------------------------------------
practicing plaintiffs:

        In the case of my company, it is really not an 
        overstatement to say that we communicate almost 
        completely electronically--by email, text, IM, you name 
        it. So, when, in the context of patent litigation, we 
        must respond to an electronic discovery request, we are 
        instantly looking at legal and consulting bills that 
        will run into the millions of dollars if we choose not 
        to settle. In contrast, patent trolls have no 
        witnesses, they have no documents, they have no 
        evidence to discover. In short, there is an asymmetry 
        in the patent troll context.\53\ Patent trolls can and 
        do pursue litigation strategies that make the 
        litigation as expensive as possible because that same 
        tactic cannot be used against them. With no documents 
        to produce and no witnesses to depose, they have very 
        little cost associated with their obligation to respond 
        to discovery requests.\54\
---------------------------------------------------------------------------
    \53\Other witnesses appearing before the Subcommittee also 
emphasized the lack of reciprocal burdens borne by patent plaintiffs 
who do not practice the claimed technology. See, e.g., April hearing at 
114 (Statement of Russell W. Binns, Jr., Associate General Counsel, IP 
Law & Litigation, Avaya Inc.) (``A licensing entity typically doesn't 
have very many employees. It doesn't have a terribly large number of 
documents. It usually has all the documents prepared on a CD before 
they even start the suit . . .''); March hearing at 74-75 (Statement of 
Philip S. Johnson, Chief Intellectual Property Counsel, Johnson & 
Johnson, on behalf of the 21st Century Coalition for Patent Reform) 
(``[Patent plaintiffs who do not practice the invention] typically have 
few documents and little to disclose in discovery, so they may propound 
extremely burdensome discovery to corporations without fearing that 
they will be on the receiving end of corresponding burdens.''); March 
hearing at 86 (Statement of Dana Rao, Vice President of Intellectual 
Property and Litigation, Adobe Systems) (``Suits by [patent-assertion 
entities] take advantage of lopsidedness in our litigation system. . . 
. PAEs typically have very little in discovery costs but at the same 
time they have the ability to make defendants like Adobe spend a lot of 
resources responding to very broad discovery requests.'').
    \54\March hearing at 44-47 (statement of John Boswell, Senior Vice 
President and General Counsel, SAS).

    The same witness offered the following example of the 
massive costs imposed by wasteful and unnecessary discovery in 
a particular case--and the Hobson's choice that faces a company 
---------------------------------------------------------------------------
confronted with such costs:

        The number of electronic documents that we had to 
        collect exceeded 10 million. The cost to collect those 
        documents, before considering the attorney's fees to 
        review and make production determinations, was about 
        $1.5 million. Again, $1.5 million was just the cost to 
        collect; considering attorney's fees, the cost of the 
        collection was easily double that amount. Of those 
        documents, only 1,873 documents, or .000183%, appeared 
        on an evidence list as possibly being introduced at 
        trial. These are not documents that were actually used, 
        and it is debatable whether any of the 10 million 
        documents collected were even read by the 
        [plaintiff].\55\
---------------------------------------------------------------------------
    \55\See also October hearing, Statement of Kevin Kramer, Vice 
President and Deputy General Counsel for Intellectual Property, Yahoo! 
Inc., at *6 (``In a typical troll case, we are asked to provide 
hundreds of thousands of pages of documents, including emails from 
anyone with relevant information, their attachments to those emails, 
such as word processing documents, spreadsheets, and presentations. . . 
. [I]n my experience, less than 1 percent of the electronic documents 
that get produced actually get used at trial.'') (emphasis in 
original).

        SAS won summary judgment in this case and it is now on 
        appeal to the Federal Circuit. So far this case has 
        cost us in excess of $8 million. If SAS ultimately wins 
        this case, it will be a Pyrrhic victory at best. We 
        spent $8 million and huge amounts of developer time and 
        executive time, for what? This victory does not resolve 
        the other patent troll cases that we face, or will face 
        in the future. This $8 million and the millions more 
        that we are spending on other cases is money that SAS 
        no longer has to invest in people, facilities, 
        research, or product development; and we are a 
        relatively small player in this world. In short, the 
        cost to us, and to the economy as a whole, is simply 
---------------------------------------------------------------------------
        staggering.

        The dilemma here is that when a company like SAS 
        receives a complaint from a patent troll, it is faced 
        with a Hobson's choice: defend the litigation, which 
        will cost literally millions of dollars, or settle, for 
        a smaller, but not insignificant, amount of money. If 
        you do settle, then the company develops a reputation 
        for being an easy target, which just invites more 
        extortion attempts from the patent-troll community.\56\
---------------------------------------------------------------------------
    \56\March hearing at 44-47 (statement of John Boswell, Senior Vice 
President and General Counsel, SAS).

            2. LProtection of Intellectual Property Licenses in 
                    Bankruptcy
    Section 365(n) of title 11 prevents a bankruptcy trustee 
from terminating licenses to patents and other intellectual-
property of the debtor. When the 100th Congress enacted 
Sec. 365(n) in 1989, it recognized that allowing patent and 
other intellectual-property licenses to be revoked in 
bankruptcy would be extremely disruptive to the economy and 
damaging both to patent owners and licensing manufacturers.
    Manufacturers often invest billions of dollars in reliance 
on their right to practice a technology pursuant to a license. 
Allowing the license to be eliminated in bankruptcy would 
create commercial uncertainty and would undermine manufacturing 
investment. Also, under such a regime, inventors would be 
pressured to transfer their entire interest in a patent, rather 
than simply provide a license, because only a complete transfer 
would provide a secure right to practice the patented 
technology. Use of transfers rather than licensing would both 
reduce the inventor's return on a valuable patent, and would 
effectively limit who could practice the technology. For all of 
these reasons, the 100th Congress concluded that allowing 
intellectual-property licenses to be voided in bankruptcy ``is 
a fundamental threat to the creative process that has nurtured 
innovation in the United States,''\57\ and enacted Sec. 365(n) 
to put an end to such bankruptcy practices.
---------------------------------------------------------------------------
    \57\S. Rep. No. 100-505, at 3 (1989).
---------------------------------------------------------------------------
    In recent years, some parties have tried to subvert the 
protections of Sec. 365(n) by filing for bankruptcy in a 
foreign country, and requesting that U.S. courts extend 
``comity'' to the foreign court's termination of licenses to 
U.S. intellectual property. Chapter 15 of the Bankruptcy Code 
creates procedures for recognizing and extending comity to 
foreign bankruptcy proceedings. Foreign trustees have cited the 
fact that Chapter 15 does not list Sec. 365(n) among the 
mandatory provisions that must apply when a U.S. court 
recognizes a foreign proceeding as a reason to deny such 
protections to U.S. licensees when a patent owner files for 
bankruptcy abroad. They also have argued that Sec. 365(n) does 
not fall within Chapter 15's public-policy exception to 
recognizing foreign proceedings.\58\ This determination 
currently must be litigated on a case-by-case basis, and 
district courts are given discretion in applying the public-
policy exception. Such piecemeal litigation and its inherent 
risks create uncertainty that undermines intellectual-property 
licensees' ability to rely on their licenses--and, ultimately, 
undermines the fundamental purposes of Sec. 365(n).
---------------------------------------------------------------------------
    \58\See 11 U.S.C. Sec. 1506.
---------------------------------------------------------------------------
    U.S. law's failure to clearly protect intellectual-property 
licenses in Chapter 15 proceedings also creates disincentives 
for manufacturers to invest in the United States. If the right 
to practice a technology under a U.S. patent remains 
uncertain--while other nations provide firm guarantees that 
licenses to their patents will be protected in a bankruptcy 
proceeding, whether domestic or foreign to such nation--a 
manufacturer contemplating building a fabrication plant would 
face powerful incentives to invest his resources overseas 
rather than in the United States. U.S. bankruptcy law must not 
be permitted to deter investment in plants, equipment, and 
manufacturing jobs in the United States.
Corrections and Improvements to the America Invents Act
            1. Repeal of Section 145
    Section 145 of title 35 allows a patent applicant whose 
claims have been rejected, and who has appealed to the Patent 
Trial and Appeal Board and lost, to challenge the Board's 
decision in a Federal district court rather than appealing to 
the Federal Circuit. Section 145 was first authorized by the 
Patent Act of 1839,\59\ long before modern administrative law 
and procedure was developed. In the intervening years, 
administrative proceedings have expanded to allow applicants to 
present any relevant evidence of patentability to the Patent 
Office, and the district courts hearing Sec. 145 actions had 
adopted procedural rules that effectively (and reasonably) 
required applicants to exhaust those administrative remedies in 
the first instance.\60\
---------------------------------------------------------------------------
    \59\Patent Act of 1839, Ch. 88, 5 Stat. 353-355 (March 3, 1839). 
Previous Acts only authorized civil actions for interference. It is 
Sec. 10 of the 1839 Act that first provided that the action for 
interference ``shall extend to all cases where patents are refused for 
any reason whatever.''
    \60\See Hyatt v. Doll, 576 F.3d 1246, 1271, 1273-74 (Fed. Cir. 
2009), vacated, Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010).
---------------------------------------------------------------------------
    In its decision in Kappos v. Hyatt,\61\ however, the 
Supreme Court swept aside those understood limits on the 
presentation of new evidence under Sec. 145. Apparently 
constrained by its own 19th Century precedents, the Court 
determined that ``there are no limitations on a patent 
applicant's ability to introduce new evidence in a Sec. 145 
proceeding''--and ``[m]oreover, if new evidence is presented on 
a disputed question of fact, the district court must make de 
novo factual findings that take account of both the new 
evidence and the administrative record before the PTO.''\62\
---------------------------------------------------------------------------
    \61\132 S.Ct. 1690 (April 18, 2012).
    \62\Id. at 1700-01.
---------------------------------------------------------------------------
    Though perhaps well suited to antebellum America, the 
Supreme Court's revival of an unrestrained Sec. 145 action 
presents several problems in the present age. First and 
foremost, this version of Sec. 145 effectively allows 
applicants to withhold evidence from the PTO. It allows 
applicants to ignore the administrative process and present 
their evidence of patentability in the first instance to a 
district judge, who is required to review it de novo. This puts 
the judge, who rarely has relevant technical training, in the 
difficult position of evaluating a new technology and 
conducting a patent examination--all without the benefit of the 
views of the agency that Congress created and designated to 
conduct such reviews.
    Moreover, such an approach is unnecessary. Today, 
applicants have ample administrative routes provided by statute 
for offering new evidence, including testimony, if a claim is 
rejected. Even after a Board decision by an administrative 
patent judge affirming an examiner's rejections, an applicant 
can file a continuation application, and can introduce new 
evidence of patentability in that continuation.\63\
---------------------------------------------------------------------------
    \63\In the AIA's new contested proceedings--inter partes review and 
post-grant review--the petitioner may challenge a patent using expert 
evidence in the form of affidavits or declarations, and the patent 
owner therefore may need to depose such witnesses. These proceedings, 
however, authorize deposition of witnesses submitting affidavits or 
declarations. See 35 U.S.C. Sec. Sec. 316(a)(5)(A) and 326(a)(5).
---------------------------------------------------------------------------
    Finally, the wide-open authority to present any new 
evidence of patentability in district court is wasteful. By 
permitting an applicant to present his case for patentability 
for the first time in the district court, Sec. 145 makes PTO 
examination and Board proceedings irrelevant and consumes 
disproportionate PTO litigation resources.\64\ PTO has 
developed detailed procedural rules to encourage the timely 
presentation of evidence; Sec. 145 renders those rules 
meaningless.
---------------------------------------------------------------------------
    \64\See October hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *8 (``[T]he benefits to the few 
patent applicants who would seek [Sec. 145] relief does not seem . . . 
to justify the disproportionate burden placed upon the Office to build 
and maintain the capability to try these cases.'').
---------------------------------------------------------------------------
    Since applicants already have administrative avenues for 
presenting their evidence of patentability, and may seek 
appellate review at the U.S. Court of Appeals for the Federal 
Circuit under Sec. 141, Sec. 145 no longer serves any purpose. 
Section 145 has outlived its utility and should be repealed.
            2. Obviousness-Type Double Patenting
    The double-patenting doctrine was developed by the courts 
to control the effects of exceptions to prior art that permit a 
patentee to obtain multiple patents for obvious variations of 
the same invention.\65\ An inventor can obtain such obvious-
variant patents because his own unpublished patent applications 
are not prior art to his subsequent applications. As a result, 
absent the double-patenting doctrine, an inventor could obtain 
multiple patents for what is basically the same invention, and 
then sell those patents to different parties, requiring others 
to obtain multiple licenses from multiple parties in order to 
practice what is substantially the same invention.
---------------------------------------------------------------------------
    \65\The earliest appearance of the double-patenting doctrine--at 
least in the Supreme Court's opinions--appears to be in O'Reilly v. 
Morse, 56 U.S. 62 (1853). See id. at 114 (observing that if Morse's 
broad claim to ``the use of the motive power of . . . electro-
magnetism, however developed, for making or printing intelligible 
characters, letters, or signs, at any distance'' were valid, then a 
second, narrower improvement patent would necessarily be ``illegal and 
void'' as ``extend[ing] his monopoly beyond the period limited by 
law'').
---------------------------------------------------------------------------
    Also, under the pre-URAA\66\ system, in which a patent's 
term ran 17 years from its issuance, patents could expire 30, 
40, or even 50 years after the date that the patent was 
originally sought. Inventors, by filing a series of continuing 
applications, could delay prosecution. Without double-patenting 
rules, patent protection for essentially the same subject 
matter could remain in force for decades.
---------------------------------------------------------------------------
    \66\The Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 
Stat. 4809 (1994).
---------------------------------------------------------------------------
    The double-patenting doctrine precludes such practices by 
requiring patentees to disclaim the right to enforce any later-
issued obvious-variant patents separately, and to disclaim the 
right to enforce such later-issued patents beyond the term of 
the earliest-issuing (and therefore, earliest expiring) 
obvious-variant patent.
    As recently as the 1980's, double patenting was a 
relatively simple and straightforward doctrine, and was limited 
by several key principles. The first among these--which traces 
its origins to the Judge Taft's 1897 decision in Thomson-
Houston Elec. Co. v. Ohio Brass Co.\67\--is that the double-
patenting bar does not apply to an inventor's patents if the 
same patents could have validly issued to separate inventors. 
Ohio Brass recognized that if ``the personality of the owner of 
two different patents [were to] affect the validity of either, 
then the anomalous result would follow that the owner of one 
patent would avoid it by acquiring ownership of another.'' \68\ 
The court dismissed the notion that such a ``unity of title 
avoid[s] the main patent'' as a ``reductio ad absurdum.''\69\
---------------------------------------------------------------------------
    \67\80 F. 712 (6th Cir. 1897).
    \68\Id. at 727.
    \69\Id.
---------------------------------------------------------------------------
    Ohio Brass also recognized that it is ``well settled that a 
patent may issue for an improvement on an earlier invention 
either to the original inventor or a stranger''--and rejected 
the notion that ``if, by some chance, the application for the 
fundamental patent is delayed in its course through the patent 
office until a patent on the avowed improvement has issued, 
then the patent on the fundamental invention is void.''\70\ 
Noting that the ``the course of an application for a generic or 
broad invention may legitimately take longer in its course 
through the patent office than a comparatively unimportant 
improvement,''\71\ Ohio Brass established that the inventor had 
the right to rely on the order of invention (i.e., pre-AIA 
priority), rather than the order of issuance, to determine if 
the later-issued patent should be subject to a double-patenting 
limit.
---------------------------------------------------------------------------
    \70\Id. at 724.
    \71\Id. at 727.
---------------------------------------------------------------------------
    A final double-patenting principle, reflected in the PTO's 
1967 Official Gazette Notice, is that ``[t]he term `double 
patenting' is properly applicable only to cases involving two 
or more applications and/or patents of the same inventive 
entity.''\72\ The Notice emphasized that in cases involving 
different inventors, sections 102 and 103 of title 35 already 
operate to prevent the issuance of patents that are the same or 
obvious in view of one another, thus precluding the need to 
apply double-patenting principles.
---------------------------------------------------------------------------
    \72\Double Patenting, 834 O.G. 1615 (Jan. 31, 1967).
---------------------------------------------------------------------------
    These three fundamental principles--that double patenting 
is not a bar where the patents could have validly issued to 
separate inventors, does not apply where Sec. 103 already 
operates to prevent the issuance of obvious-variant patents, 
and that order of priority (rather than issuance) must be used 
to determine which patent is subject to a double-patenting 
limit--found expression in a series of CCPA decisions following 
the adoption of the 1952 Act, creating a relatively simple and 
rational double-patenting landscape.\73\
---------------------------------------------------------------------------
    \73\See Robert A. Armitage, Everything You Ever Wanted to Know 
About Double Patenting . . . But Never Realized that You Needed to Ask 
(From The Makers Of Prozac), 2001, at **8-17 [hereinafter Armitage ODP 
article]. This paper was presented at a conference of the Intellectual 
Property Owners Association but has not been published. A revised and 
updated version of the paper will be printed in the record of the 
October 29 hearing.
---------------------------------------------------------------------------
    The Patent Law Amendments Act of 1984,\74\ by enacting the 
common-ownership exception to prior art that now appears at 
Sec. 102(b)(1)(C), unsettled this landscape by requiring the 
courts to expand the double-patenting doctrine to encompass 
this new, broader exception to prior art.\75\ This resulted in 
a series of court decisions during the 1990's that drastically 
restricted access to the ``two-way'' test for double 
patenting--and that ultimately congealed into a rule that 
violates basic principles of the double-patenting doctrine that 
trace their origins to Ohio Brass.\76\
---------------------------------------------------------------------------
    \74\Pub. L. No. 98-622 (1984).
    \75\See Armitage ODP article at **18-19.
    \76\Id. at **19-28.
---------------------------------------------------------------------------
    Under the so-called one-way test, an earlier-filed but 
later-issuing commonly owned patent or application can be 
invalidated for double patenting even if the earlier-issued 
patent is nonobvious over the later-issuing patent as prior 
art.\77\ In other words, the related inventors of the two 
patents are punished for making two separate and nonobvious 
inventions that, had they been made separately by unrelated 
inventors, would have been entirely valid and separately 
enforceable for their full respective terms.
---------------------------------------------------------------------------
    \77\See, e.g., Eli Lilly and Co. v. Barr Labs., 251 F.3d 955, 967-
68 (Fed. Cir. 2001). Under the two-way test, the double-patenting bar 
does not apply unless the later-filed but earlier-issued patent also is 
obvious in view of the earlier-filed but later-issued patent. See In re 
Berg, 140 F.3d 1428, 1432 (Fed. Cir. 1998).
---------------------------------------------------------------------------
    Under current jurisprudence, the two-way test is available 
only in the ``unusual circumstance'' where the USPTO is 
``solely responsible for the delay in causing the second-filed 
application to issue prior to the first''\78\--it is a ``narrow 
exception'' that is rendered inapplicable even when the timing 
of two applications is driven not by ``nefarious intent,'' but 
rather by ordinary business decisions.\79\
---------------------------------------------------------------------------
    \78\Lilly v. Barr, 251 F.3d at 968 n.7 (emphasis in original).
    \79\In re Fallaux, 564 F.3d 1313, 1317 (Fed. Cir. 2009).
---------------------------------------------------------------------------
    By reversing Ohio Brass's allowance of an order-of-priority 
test, the recent jurisprudence also abandons the principle that 
double-patenting does not apply if the patents could have 
validly issued to separate inventors--embracing a principle 
that Ohio Brass itself had dismissed as a ``reductio ad 
absurdum.'' And finally, recent decisions also extend the 
double-patenting doctrine to cases where the patents did, in 
fact, issue to separate inventors, and thus already operated as 
prior art against one another.\80\ For example, the very recent 
decision of In re Hubbell applied the double-patenting doctrine 
to destroy the earlier-filed application of a university 
research team for a broad invention because two of its joint 
inventors later participated in another research team that 
filed a later, narrow improvement application that issued 
before the first application did.\81\ The court reached the 
absurd result of invalidating the earlier-sought basic 
invention because of a later-discovered improvement that 
already was required to be nonobvious over the basic invention.
---------------------------------------------------------------------------
    \80\See, e.g., Lilly v. Barr, 251 F.3d 955; In re Hubbell, 709 F.3d 
1140, 1146-48 (Fed. Cir. 2013); see also Armitage ODP article at *27 
(``[under these cases,] double patenting would now infect two patents 
even if the two patented inventions were patentably distinct because 
the non-obviousness test operated, i.e., one of the two patented 
inventions was prior art to the other.'').
    \81\In re Hubbell, 709 F.3d at 1142-43, 1146-48.
---------------------------------------------------------------------------
    The one-way test, when properly applied, serves the 
salutary purpose of allowing the courts to rein in the 
potential for abuse of rules that fail to limit the filing of 
continuing applications--even decades after an initial patent 
on an invention has issued.\82\ Some of the courts' decisions 
took note of this special justification for employing the one-
way test, suggesting that this approach might be confined to 
the pre-URAA patents.\83\
---------------------------------------------------------------------------
    \82\See, e.g., In re Basell Poliolefine Italia, S.P.A., 547 F.3d 
1371, 1373-74 (Fed. Cir. 2008) (invalidating for double patenting a 
patent that issued in 2002 from an application claiming priority to 
1954).
    \83\See Takeda Pharm. Co., Ltd. v. Doll, 561 F.3d 1372, 1377 n.1 
(Fed. Cir. 2009); Boehringer Ingelheim Int'l GmbH v. Barr Labs., Inc., 
592 F.3d 1340, 1346 (Fed. Cir. 2010).
---------------------------------------------------------------------------
    In 2009, however, the Federal Circuit made clear that it 
would not ``disregard'' its recent precedents--as opposed to 
the logic underpinning the double-patenting doctrine--and would 
continue to apply the one-way test's ``ad hoc nullification 
machine''\84\ to modern patents that run 20 years from their 
filing.\85\
---------------------------------------------------------------------------
    \84\Hill v. Colorado, 530 U.S. 703, 742 (2000) (Scalia, J., 
dissenting).
    \85\In re Fallaux, 564 F.3d at 1318-1319.
---------------------------------------------------------------------------
    The URAA makes it all but impossible for applicants to 
obtain the type of pre-URAA patent-term extensions that have 
been cited as justifying a liberal application of the one-way 
test. Given the unfairness of invalidating an earlier-filed 
patent because of a later-filed patent, especially in the case 
of first-inventor-to-file patents for which prior art is 
dictated by the order of patent filing, it is appropriate to 
eliminate continuing application of the one-way test in favor 
of a rule of law that is consistent with Ohio Brass and the 
double-patenting doctrine's foundational principles.
            3. LUse of District-Court Claim Construction in Inter 
                    Partes and Post-Grant Reviews
    In the course of the development of the Innovation Act, the 
Committee also considered proposals to require the PTAB to 
follow a district-court claim construction that has been 
entered with respect to a patent. Such an approach would have 
the virtue of ensuring that a patent is construed in the same 
way in all relevant fora. As a result, all risk would be 
eliminated that a patent might be subject to challenge in a 
PTAB proceeding for claiming subject matter than the patent 
owner already had been denied the right to enforce.
    Such an approach, however, poses problems of its own. 
District courts themselves are not bound by a previous district 
court's claim construction or a party's stipulation. Certainly, 
the second-deciding court does not follow a first-deciding 
court's claim construction if it believes the earlier 
construction to be clearly erroneous. Some inconsistency in 
claim construction is thus inevitable in the district courts 
themselves. A requirement to follow constructions entered into 
or stipulated to in a district court could also be subject to 
abuse. A party could enter into a self-serving stipulation to 
an unreasonably narrowed claim construction in a settlement 
with another party that is not concerned about obtaining a 
proper claim construction. Such a construction would not bind 
the patent owner or other courts in other infringement 
actions--but could insulate the patent from PTAB review. 
Finally, such an approach presents practical difficulties: 
district courts can and do adopt claim constructions during the 
pendency of PTAB proceedings. If the PTAB were required to 
always follow claim constructions entered by a district court, 
it would be forced to restart the case whenever a new claim 
construction were entered--and would effectively find it 
impossible to comply with the AIA's 12- to 18-month deadline 
for completing these proceedings.
    For the foregoing reasons, the Committee declines to 
mandate that the PTAB adopt district-court claim constructions 
in review proceedings under chapters 31 and 32. The Committee 
nevertheless expects that the PTO will implement the present 
amendments not only in their letter, but also in their spirit 
of narrowing the gap between what a patent is construed to 
claim when it is enforced, and what it claims when subject to 
challenge before the PTAB. To this end, the Committee expects 
that the PTAB will strongly consider adopting as its own any 
previously-entered district-court claim construction that it 
finds to be at least a reasonable interpretation of the claims 
in a patent.\86\
---------------------------------------------------------------------------
    \86\Conversely, the Committee expects that U.S. District Courts 
will give at least persuasive weight to claim constructions previously 
entered by the technically-trained jurists of the PTAB.
---------------------------------------------------------------------------
    Although covered business method reviews are a subspecies 
of post-grant review, the unique nature of those proceedings 
precludes a need to employ district-court standards of claim 
construction in them. Only business-method patents are eligible 
for CBM review. Because such patents are not directed at the 
application of scientific or mathematical principles,\87\ they 
are generally incapable of creating reproducible results, and 
are thus inherently unpatentably abstract, as that standard 
recently was clarified in Bilski v. Kappos.\88\ In light of 
Bilski's restoration of the historic bar on the patenting of 
business methods, the Committee finds it unnecessary to burden 
the Board with applying district courts' additional claim-
construction criteria in CBM proceedings to define the precise 
metes and bounds of the unpatentable subject matter claimed in 
such patents.
---------------------------------------------------------------------------
    \87\The Committee is aware of the Supreme Court's recent 
pronouncement that inventions relying on the application natural laws 
are unpatentable when ``the relation itself exists in principle apart 
from any human action.'' Mayo Collaborative Servs. v. Prometheus Labs., 
Inc., 132 S.Ct. 1289, 1297 (2012). The Court applied the ``laws of 
nature'' exception to subject-matter patentability to invalidate a 
patent that disclosed determining the appropriate dose of a drug to 
treat an autoimmune disease on the basis of measurements of the levels 
of metabolites in the patient's blood. See id. at 1295. Prometheus 
poses several quandaries, however. It is not entirely clear why the 
Court concluded that the discovery of a means of determining the amount 
of a drug that will cure--rather than kill--the patient is an invention 
inherently unworthy of a patent. The Court's reliance on the trio of 
Benson, Flook, and Diehr to guide its Sec. 101 analysis--despite the 
fact that the latter clearly overruled the first two, and that none of 
the three is particularly coherent--does not contribute to clarity in 
this area of law. But most fundamentally, were the Committee to take 
seriously the suggestion that an invention is unpatentable if it adds 
``nothing of significance'' to the natural laws that control its 
operation, id. at 1302, it must also conclude that the Patent Office 
should be deauthorized, for nothing would remain patentable other than 
whatever business methods survive Bilski. It is thus unsurprising that 
the patent bar, particularly in the life sciences, has greeted 
Prometheus as the jurisprudential equivalent of the bombing of Dresden. 
The Committee will continue to monitor developments in this area and 
evaluate whether corrective action is necessary.
    \88\130 S.Ct. 3218 (2010). The respondent in that case, during the 
Committee's October 29 hearing, described another problematic aspect of 
the patenting of business methods: ``patents covering methods of doing 
business . . . inherently cover all technology solving the affected 
business problem.'' October hearing, Statement of David J. Kappos, 
Former Under Secretary of Commerce for Intellectual Property and 
Director of the United States Patent and Trademark Office, at *5. Such 
patents inevitably are parasitic of the hard work and ingenuity of the 
inventor of the technological product or feature that implements the 
business-method ``invention.''
---------------------------------------------------------------------------
            4. PTO Patent Reviews
    During the course of the Committee's consideration of the 
present bill, a ``technical'' but serious defect in AIA Sec. 18 
was brought to the Committee's attention.\89\ AIA 
Sec. 18(a)(1)(C) delineates the types of prior art that may be 
employed in a covered business method patent review of a first-
to-invent business-method patent. Subparagraph (C) ensures that 
the Metallizing Engineering doctrine, and other discovery-
intensive pre-AIA loss-of-right rules, cannot be asserted in a 
CBM proceeding. Subparagraph (C) bases its definition of the 
prior art that may be cited against a first-to-invent patent on 
pre-AIA Sec. 102(a) and (b). The subparagraph neglects, 
however, to incorporate pre-AIA Sec. 102(e).
---------------------------------------------------------------------------
    \89\See Patents Post-Grant Blog, ``The Statutory Defect That May 
Doom Your CBM Petition,'' Sept. 23, 2013.
---------------------------------------------------------------------------
    This omission precludes using patents and published 
applications in a CBM proceeding as of their effective filing 
dates, rather than as of their publication or grant dates. The 
word ``patented,'' as used in pre-AIA Sec. 102(a) and (b), 
makes a patent effective as prior art only as of its 
publication or grant date, and in any event extends only to 
issued patents rather than published applications--the former 
are mere ``printed publications,'' and thus effective as prior 
art only as of their publication dates.\90\ Section 9(e) of the 
Innovation Act corrects this legislative oversight, ensuring 
that the swarm of business-method patents and abandoned-but-
published applications that followed the Federal Circuit's 
State Street decision can serve as prior art in a CBM 
proceeding as of the date that they were filed, rather than as 
of when they were published.
---------------------------------------------------------------------------
    \90\See MPEP Sec. 2126; In re Ekenstam, 256 F.2d 321, 325 (CCPA 
1958); 78 FR 11059, 11074 (Feb. 14, 2013).
---------------------------------------------------------------------------
    As the Committee noted in its report accompanying the AIA, 
a petition to initiate a CBM review may be granted if the 
petitioner is either sued for or accused of infringement.\91\ 
The Committee reaffirms that a demand letter or other pre-
litigation communication suggesting that infringement may have 
occurred constitutes an accusation of infringement and 
satisfies AIA Sec. 18(a)(1)(B)'s prerequisite for filing a 
petition for review.
---------------------------------------------------------------------------
    \91\See H.R. Rep. No. 112-98, at 54 (2011).
---------------------------------------------------------------------------
    As to other matters concerning CBM proceedings, the 
Committee has heeded the call of witnesses at the October 29 
hearing to ``let sleeping dogs lie,'' and allow further 
analysis of the operation of CBM review before determining 
whether the duration or scope of the proceedings should be 
modified.\92\ The Committee also has been persuaded that it is 
unnecessary to codify the PTAB's application of the definition 
of ``covered business method patent'' in SAP v. Versata, 
CBM2012-00001. Since the Board's decision appears to be 
entirely consistent with the statutory text, PTO's implementing 
regulations, and the clear and uncontradicted explanations of 
the language offered by its principal Senate sponsor, codifying 
it at this time would amount to little more than legislating 
for legislating's sake.\93\
---------------------------------------------------------------------------
    \92\October hearing, Statement of David J. Kappos, Former Under 
Secretary of Commerce for Intellectual Property and Director of the 
United States Patent and Trademark Office, at *6 (``[I]t is simply too 
early to say whether Section 18 needs to be made permanent.''); id., 
Statement of Robert A. Armitage, Former General Counsel, Eli Lilly & 
Co., at *10, n.13 (``[A]s to proposed changes to AIA Sec. 18, the 
Committee might conclude that sleeping dogs should be allowed to lie--
and the 2011 compromise on CBMP, IPR and PGR should be allowed to 
remain undisturbed absent some compelling justification for moving 
forward with a holistic reassessment of their operation and impact on 
the patent system.'').
    \93\See also Letter of Mr. Lamar Smith to Senator Schumer et al., 
September 8, 2011 (printed in 157 Cong. Rec. S7413-14 (daily ed. Nov. 
14, 2011).
---------------------------------------------------------------------------
            5. LClarification of Limits on Patent Term Adjustment
    Subparagraph (B) of Sec. 154(b)(1) of title 35 provides a 
day-for-day adjustment of the term of a patent for delays 
attributable to the PTO after an application has been pending 
for more than 3 years. Subparagraph (B) excludes certain events 
from that adjustment, including the time consumed by a request 
for continued examination (``RCE'') under Sec. 132(b). An RCE 
is like a continuation application, in that it allows an 
applicant to seek additional prosecution. For over a decade, 
the PTO has construed subparagraph (B) to provide that no 
patent term adjustment is awarded for time accrued as a result 
of an RCE filing, regardless of when the RCE was filed.\94\
---------------------------------------------------------------------------
    \94\See 37 CFR Sec. 1.702(b)(1) and 37 CFR Sec. 1.703(b)(1).
---------------------------------------------------------------------------
    Two recent court decisions, however, have called the PTO's 
interpretation into doubt. Exelixis, Inc. v. Kappos\95\ and 
Novartis v. Kappos\96\ have held that adjustments for RCE time 
must be provided under subparagraph (B) when the RCE is filed 
more than 3 years into the pendency of the application.
---------------------------------------------------------------------------
    \95\No. 1:12cv96 (E.D. Va. Nov. 1, 2012).
    \96\No. 1:10cv01138 (D.D.C. Nov. 15, 2012) (following Exelixis).
---------------------------------------------------------------------------
    These decisions create an unfortunate incentive for 
applicants to delay filing RCEs until after the 3-year mark. 
They also threaten to invite a return to the pre-URAA abuses 
that had been eliminated by the adoption of a patent term that 
runs from a patent's filing date rather than from its issuance. 
As Mr. Lamar Smith has noted with respect to the Exelixis 
decision:

        The district court's interpretation of subparagraph (B) 
        . . . would allow patent term adjustment to accrue for 
        any continued examination sought after the 3-year clock 
        has run. Such a result, of course, would allow 
        applicants to postpone their patent's expiration date 
        through dilatory prosecution, the very submarine-
        patenting tactic that Congress sought to preclude in 
        1994 when it adopted a 20-year patent term that runs 
        from an application's effective filing date.\97\
---------------------------------------------------------------------------
    \97\158 Cong. Rec. E2016 (daily ed. Dec. 31, 2012).

    Mr. Smith's concerns are well founded. Unless the Exelixis 
decision is corrected, its interpretation of subparagraph (B) 
would allow indefinite patent term adjustments for RCEs 
commenced after 3 years of prosecution. Because applicants can 
request multiple RCEs, Exelixis would potentially allow 
applicants to extend their patent terms by many years. This 
would effectively allow an unscrupulous applicant to pursue a 
submarine-patenting strategy.
    Moreover, when an applicant exhausts his nonfinal and final 
rejections, and files an RCE (rather than appealing the final 
rejection to the Board), the applicant effectively restarts 
prosecution of his application. While applicants are entitled 
to pursue this route, they should not receive patent-term 
adjustment for time accrued after they have requested an RCE. 
``Delays'' caused by the filing of an RCE are properly 
attributable to the applicant's failure to submit allowable 
claims in his first round of prosecution, and to his choice to 
pursue an RCE rather than appealing to the Board. As written, 
however, subparagraph (B) has led to litigation about what 
``consumed by continued examination'' means, and whether any of 
the time accrued after an RCE is requested can still create 
eligibility for B-delay adjustment.
    Section 9(f) of the Innovation Act clarifies that no B-
delay patent term adjustment accrues after an applicant elects 
to pursue an RCE. A witness at the Committee's October 
legislative hearing commented on subsection (f)'s amendments:

        These USPTO-proposed amendments appear on their face to 
        be unobjectionable. With the advent of first-inventor-
        to-file patents and the ability of patent applicants to 
        secure prompt action by the USPTO to get patents issued 
        through the Prioritized Patent Examination Program, the 
        original policy justification for Patent Term 
        Adjustment, never strong to begin with, has now all but 
        evaporated. If the USPTO were willing to grant 
        Prioritized Patent Examination to any patent applicant 
        meeting the current qualifications, the Committee ought 
        to consider whether the time has come to retire the PTA 
        statute in its entirety--most especially for first-
        inventor-to-file patents.\98\
---------------------------------------------------------------------------
    \98\October hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *10.

            6. L``Arising Under'' Jurisdiction and Gunn v. Minton
    Prior to this year, Federal Circuit and regional circuit 
caselaw recognized that certain causes of action, though 
created by state law, effectively determine the legal force or 
effect of the claims in a patent--and therefore ``arise under'' 
Federal patent law and are within the exclusive jurisdiction of 
the Federal district courts and the Federal Circuit.
    These causes of action include, for example, state-law 
actions for breach of a licensing agreement in which liability 
turns on whether a party has sold products that infringe a 
patent.\99\ Other such causes of action include state-law 
actions for business disparagement, unfair competition, 
injurious falsehood, or interference with prospective economic 
advantage in which liability depends on whether a patent is 
infringed by a product or whether the patent is invalid or 
unenforceable. Typically in such cases, a competitor sues the 
patentee because the patentee has informed the competitor's 
customers that the products that they have purchased from the 
competitor infringe the patentee's patent.\100\
---------------------------------------------------------------------------
    \99\See, e.g. Scherbatskoy v. Halliburton Co., 125 F.3d 288 (5th 
Cir. 1997) (transferring appeal to the Federal Circuit); U.S. Valves, 
Inc. v. Dray, 190 F.3d 811 (7th Cir. 1999) (same).
    \100\See, e.g., Additive Controls & Measurement Sys., Inc. v. 
Flowdata, Inc., 986 F.2d 476 (Fed. Cir. 1993); Hunter Douglas, Inc. v. 
Harmonic Design, Inc., 153 F.3d 1318 (Fed. Cir. 1998), overruled on 
other grounds, Midwest Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 
1356 (Fed. Cir. 1999).
---------------------------------------------------------------------------
    Because the Federal Circuit and regional circuits agreed 
that these types of state-law causes of action, which 
effectively assign legal liability based on a determination of 
the scope and the validity of the claims in a patent, ``arise 
under'' Federal patent law, the Federal district courts had 
original (and removal) jurisdiction over such actions, and the 
Federal Circuit had appellate jurisdiction over them.
    The Supreme Court's recent decision in Gunn v. Minton,\101\ 
however, has cast doubt over whether such actions continue to 
``arise under'' Federal patent law. The Court's opinion 
concluded that ``arising under'' jurisdiction exists when the 
validity or construction of a Federal statute is in question, 
when a case's resolution will affect numerous other Federal 
cases, or when a case affects the Federal Government.\102\
---------------------------------------------------------------------------
    \101\133 S.Ct. 1059 (Feb. 20, 2013).
    \102\See Gunn, 133 S.Ct. at 1066-67.
---------------------------------------------------------------------------
    None of these factors, however, necessarily captures the 
case of a state contract or tort action posing the possibility 
of inconsistent determinations regarding the legal effect of a 
patent's claims. Such a case does not typically turn on an 
interpretation of Federal law or affect numerous other cases or 
the Federal Government. If Gunn's enumeration of ``arising 
under'' factors is thus treated as an exclusive listing of such 
factors, ``arising under'' jurisdiction could be deemed to no 
longer extend to the case merely threatening inconsistent 
determinations as to the effect of a patent.
    The Federal Circuit recently has suggested that its past 
cases finding ``arising under'' jurisdiction for patent-related 
state-law business disparagement and injurious falsehood claims 
``may well have survived the Supreme Court's decision in 
Gunn.''\103\ That statement, however, is only dicta, and the 
matter remains unresolved in the Federal Circuit. Moreover, 
some regional courts of appeals have begun to apply Gunn 
broadly. They effectively have treated Gunn's partial 
enumeration of the factors that can render a patent issue 
``substantial'' for purposes of arising under jurisdiction as 
an exclusive list of such factors.\104\ Courts such as the 
Eleventh Circuit in MDS (Canada) Inc. have thus held that even 
a case in which liability turns on whether a particular product 
infringes a claim in a patent does not ``arise under'' the 
Federal patent laws.\105\
---------------------------------------------------------------------------
    \103\Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc., 
715 F.3d 1329, 1334 (Fed. Cir. 2013).
    \104\See MDS (Canada) Inc. v. Rad Source Technologies, Inc., 720 
F.3d 833, 842-43 (11th Cir. 2013) (``The substantiality inquiry under 
Grable looks [ ] to the importance of the issue to the Federal system 
as a whole,'' Gunn v. Minton, ___U.S.___, 133 S.Ct. 1059, 1066, 185 
L.Ed.2d 72 (2013), and the Supreme Court has identified three factors 
to assist in this inquiry. First, a pure question of law is more likely 
to be a substantial Federal question. Empire Healthchoice Assur., Inc. 
v. McVeigh, 547 U.S. 677, 700-01, 126 S.Ct. 2121, 2137, 165 L.Ed.2d 131 
(2006). Second, a question that will control many other cases is more 
likely to be a substantial Federal question. Id. Third, a question that 
the government has a strong interest in litigating in a Federal forum 
is more likely to be a substantial Federal question. Grable, 545 U.S. 
at 315-16, 125 S.Ct. at 2368-69. All of these factors establish that 
the issue of patent infringement here is not a substantial Federal 
question for the purpose of section 1338.'').
    \105\See id. at 846.
---------------------------------------------------------------------------
    It is important that ``arising under'' jurisdiction 
continue to extend to these types of cases. If it were 
otherwise, a patent owner could successfully prosecute an 
infringement action in Federal court with respect to a product, 
yet simultaneously be held liable for ``business 
disparagement'' in state court for asserting that the same 
product infringes the same patent. Similarly, a licensee 
manufacturer could successfully assert a defense of 
noninfringement in Federal court, yet be held liable for breach 
of contract in state court with respect to the same patent and 
the same product. One of the principal reasons for creating the 
Federal Circuit in 1982 was to prevent inconsistent 
adjudications as to the legal effect of a patent--that is, to 
avoid situations where one circuit finds a patent infringed by 
a product and valid and another circuit finds the opposite. But 
a broad reading of Gunn effectively threatens this very result.

                                Hearings

    The Committee on the Judiciary held a hearing on H.R. 3309. 
The hearing took place on October 29, 2013. Testimony was 
received from Mr. Krish Gupta, Senior Vice President and Deputy 
General Counsel, EMC Corporation; Mr. Kevin Kramer, Vice 
President and Deputy General Counsel for Intellectual Property, 
Yahoo! Inc.; Mr. David J. Kappos, Former Under Secretary of 
Commerce for Intellectual Property and Director of the United 
States Patent and Trademark Office; and Mr. Robert A. Armitage, 
Former General Counsel, Eli Lilly & Co.
    The Committee's Subcommittee on Courts, Intellectual 
Property, and the Internet also conducted two separate but 
related hearings on March 14, 2013 (``Abusive Patent 
Litigation: The Impact on American Innovation & Jobs, and 
Potential Solutions,'' Serial No. 113-13), and April 16, 2013 
(``Abusive Patent Litigation: The Issues Impacting American 
Competitiveness and Job Creation at the International Trade 
Commission and Beyond,'' Serial No. 113-24).

                        Committee Consideration

    On November 20, 2013, the Committee met in open session and 
ordered the bill H.R. 3309 favorably reported with an 
amendment, by a rollcall vote of 33-5, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following rollcall votes occurred during the Committee's 
consideration of H.R. 3309.
    1. The amendment to the amendment in the nature of a 
substitute offered by Mr. Conyers creates a revolving fund for 
PTO fees, requires disclosure of all parties with a financial 
interest in a party or the patent in a patent lawsuit, allows 
stays of suits against customers, instructs the PTO and others 
to prepare reports on several issues, and makes technical 
corrections. This amendment was defeated by a rollcall vote of 
14-19.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................
Mr. DeSantis (FL)..............................
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................      X
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................              X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     14      19
------------------------------------------------------------------------

    2. The amendment to the amendment in the nature of a 
substitute offered by Mr. Conyers creates a revolving fund for 
PTO fees. This amendment was defeated by a rollcall vote of 13-
17.

                             ROLLCALL NO. 2
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................
                                                ------------------------
    Total......................................     13      17
------------------------------------------------------------------------

    3. The amendment to the amendment in the nature of a 
substitute offered by Mr. Conyers strikes subsections (a) 
through (c) of section 6 of the bill and replaces them with a 
study. This amendment was defeated by a rollcall vote of 9-21.

                             ROLLCALL NO. 3
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................              X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................              X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................      9      21
------------------------------------------------------------------------

    4. The amendment to the amendment in the nature of a 
substitute offered by Mr. Jeffries strikes the bill's repeal of 
Sec. 145 of title 35. This amendment was defeated by a rollcall 
vote of 13-19.

                             ROLLCALL NO. 4
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     13      19
------------------------------------------------------------------------

    5. The amendment to the amendment in the nature of a 
substitute offered by Mr. Watt makes the provision-limiting 
discovery prior to claim construction discretionary. This 
amendment was defeated by a rollcall vote of 8-21.

                             ROLLCALL NO. 5
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................
Mr. Chabot (OH)................................
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................
Mr. Jeffries (NY)..............................
                                                ------------------------
    Total......................................      8      21
------------------------------------------------------------------------

    6. The amendment to the amendment in the nature of a 
substitute offered by Mr. Watt provides for the award of 
attorney's fees in ``appropriate cases.'' This amendment was 
defeated by a rollcall vote of 12-23.

                             ROLLCALL NO. 6
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              X
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     12      23
------------------------------------------------------------------------

    7. The amendment to the amendment in the nature of a 
substitute offered by Mr. Johnson strikes section 6 of the 
bill. This amendment was defeated by a rollcall vote of 9-25.

                             ROLLCALL NO. 7
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              X
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................              X
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................              X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................              X
Mr. Deutch (FL)................................              X
Mr. Gutierrez (IL).............................      X
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................              X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................      9      25
------------------------------------------------------------------------

    8. The amendment to the amendment in the nature of a 
substitute offered by Mr. Jeffries applies heightened standards 
to the pleading of defenses of noninfringement and invalidity. 
This amendment was defeated by a rollcall vote of 12-23.

                             ROLLCALL NO. 8
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              X
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................              X
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................              X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................      X
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................              X
Mr. Garcia (FL)................................
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     12      23
------------------------------------------------------------------------

    9. The amendment to the amendment in the nature of a 
substitute offered by Mr. Jeffries provides for the award of 
attorney's fees unless the position of the nonprevailing party 
was reasonably justified in law and fact, and clarifies that 
severe economic hardship to the inventor can qualify as a 
special circumstance allowing denial of a fee award. This 
amendment was adopted by a rollcall vote of 36-2.

                             ROLLCALL NO. 9
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................      X
Mr. Smith (TX).................................      X
Mr. Chabot (OH)................................      X
Mr. Bachus (AL)................................      X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................      X
Mr. King (IA)..................................      X
Mr. Franks (AZ)................................      X
Mr. Gohmert (TX)...............................      X
Mr. Jordan (OH)................................      X
Mr. Poe (TX)...................................      X
Mr. Chaffetz (UT)..............................      X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................      X
Mr. Amodei (NV)................................      X
Mr. Labrador (ID)..............................      X
Ms. Farenthold (TX)............................      X
Mr. Holding (NC)...............................      X
Mr. Collins (GA)...............................      X
Mr. DeSantis (FL)..............................      X
Mr. Smith (MO).................................      X

Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................              X
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................      X
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     36       2
------------------------------------------------------------------------

    10. The amendment to the amendment in the nature of a 
substitute offered by Mr. Watt provides for consideration of 
conduct that extended litigation in the award of attorney's 
fees. This amendment was defeated by a rollcall vote of 17-21.

                             ROLLCALL NO. 10
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................              X
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              X
Mr. Bachus (AL)................................              X
Mr. Issa (CA)..................................
Mr. Forbes (VA)................................              X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................              X
Mr. Poe (TX)...................................              X
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................              X
Mr. Gowdy (SC).................................              X
Mr. Amodei (NV)................................              X
Mr. Labrador (ID)..............................              X
Ms. Farenthold (TX)............................              X
Mr. Holding (NC)...............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Mr. Smith (MO).................................              X

Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................      X
Mr. Watt (NC)..................................      X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................      X
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     17      21
------------------------------------------------------------------------

    11. The bill was reported favorably, as amended, by a 
rollcall vote of 33-5.

                             ROLLCALL NO. 11
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Coble (NC).................................      X
Mr. Smith (TX).................................      X
Mr. Chabot (OH)................................      X
Mr. Bachus (AL)................................      X
Mr. Issa (CA)..................................      X
Mr. Forbes (VA)................................      X
Mr. King (IA)..................................      X
Mr. Franks (AZ)................................      X
Mr. Gohmert (TX)...............................
Mr. Jordan (OH)................................      X
Mr. Poe (TX)...................................      X
Mr. Chaffetz (UT)..............................      X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................      X
Mr. Amodei (NV)................................      X
Mr. Labrador (ID)..............................      X
Ms. Farenthold (TX)............................      X
Mr. Holding (NC)...............................      X
Mr. Collins (GA)...............................      X
Mr. DeSantis (FL)..............................      X
Mr. Smith (MO).................................      X

Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................      X
Mr. Scott (VA).................................              X
Mr. Watt (NC)..................................              X
Ms. Lofgren (CA)...............................      X
Ms. Jackson Lee (TX)...........................              X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................              X
Mr. Pierluisi (PR).............................      X
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................      X
Ms. Bass (CA)..................................      X
Mr. Richmond (LA)..............................      X
Ms. DelBene (WA)...............................      X
Mr. Garcia (FL)................................      X
Mr. Jeffries (NY)..............................      X
                                                ------------------------
    Total......................................     33       5
------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 3309, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 27, 2013.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3309, the 
``Innovation Act.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Martin von 
Gnechten and Susan Willie, who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member




                       H.R. 3309--Innovation Act.

      As ordered reported by the House Committee on the Judiciary 
                         on November 20, 2013.




    CBO estimates that implementing H.R. 3309 would cost $3 
million over the 2014-2018 period, assuming appropriation of 
the necessary amounts, mainly for reports to be prepared by the 
Administrative Office of the United States Courts (AOUSC) and 
the Government Accountability Office and administrative costs 
incurred by the AOUSC associated with new judicial procedures. 
Pay-as-you-go procedures do not apply to this legislation 
because it would not affect direct spending or revenues.
    Based on information from the Patent and Trademark Office 
(PTO), CBO also estimates that implementing H.R. 3309 would 
have a gross cost to PTO of about $30 million per year. 
However, PTO is authorized to collect fees sufficient to offset 
its operating expenses; therefore, CBO estimates that the net 
budgetary effect of PTO's activities undertaken to implement 
H.R. 3309 would not be significant, assuming appropriation 
actions consistent with the agency's authorities.
    H.R. 3309 would change administrative and judicial 
processes that support the protection of intellectual property 
rights. CBO expects that, by requiring inventors to be more 
specific in pleadings to the court, awarding attorney fees to 
the prevailing party, and limiting discovery early in an 
infringement proceeding, the bill would affect the decisions of 
inventors to initiate lawsuits for patent infringement.
    H.R. 3309 would make several adjustments to judicial 
procedures for patent infringement cases, including which 
parties may join a suit and when a court is required to grant a 
motion to stay an action. Further, the bill would require the 
courts to award the prevailing party reasonable fees and other 
expenses incurred in connection with such cases. The bill also 
would require the AOUSC to develop rules and procedures related 
to the discovery of evidence in lawsuits for patent 
infringement.
    The bill would change procedures that PTO has in place to 
examine patent applications, award patents, and determine the 
validity of a patent that has already been granted. Among other 
things, H.R. 3309 would specify that the agency use methods 
similar to those used in district courts to evaluate the 
validity of a patent. The bill also would require the agency to 
develop new databases to make information about patent 
ownership and litigation available on its website, perform an 
additional review of certain declarations made on original 
applications, and prepare several studies and reports on patent 
ownership and the behavior of certain patent owners.
    H.R. 3309 would impose a mandate as defined in the Unfunded 
Mandates Reform Act (UMRA) on both public and private entities 
because PTO would charge fees to offset the costs incurred to 
collect and make some information related to patents publicly 
available. Other provisions in the bill also would result in 
increased patent fees. The requirement to pay those fees would 
be a mandate because the Federal Government controls the patent 
and trademark system, and no reasonable alternatives to that 
system exist.
    Based on information from PTO, CBO estimates that the 
annual cost to comply with the mandate would be about $30 
million, with less than $1 million of those costs accruing to 
public entities and the rest accruing to private entities. 
Therefore, the cost for public and private entities to comply 
with the mandate would fall below the annual thresholds 
established in UMRA for intergovernmental and private-sector 
mandates ($75 million and $150 million in 2013, respectively, 
adjusted annually for inflation).
    The CBO contacts for this estimate are Susan Willie and 
Martin von Gnechten (for Federal costs), Melissa Merrell (for 
the impact on state and local governments), and Paige Piper/
Bach and Nathan Musick (for the private-sector impact). The 
estimate was approved by Peter H. Fontaine, Assistant Director 
for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 3309 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was in included in any 
report from the Government Accountability Office pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 3309 specifically directs 
to be completed one specific rule making within the meaning of 
5 U.S.C. 551.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
3309 amends title 35, United States Code, and the Leahy-Smith 
America Invents Act, to make improvements and technical 
corrections.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3309 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.

                      Section-by-Section Analysis

Section 1. Short title; table of contents.
    This Act may be cited as the ``Innovation Act.''
Section 2. Definitions.
    Section 2 defines the terms ``Director'' and ``Office.''
Section 3. Patent infringement actions.
            (a) Pleading requirements
    New Sec. 281A establishes heightened pleading requirements 
for claims of patent infringement, to the extent that the 
required information is reasonably accessible to the claimant.
            (b) Attorney's fees
    Subsection (a) of revised Sec. 285 provides that fees and 
expenses shall be awarded to a prevailing party unless the 
position and conduct of the nonprevailing party was reasonably 
justified in law and fact or special circumstances (such as 
economic hardship to the inventor) make a fee award unjust. 
This standard reflects the Supreme Court's clarification of the 
standard employed by the Equal Access to Justice Act 
(EAJA),\106\ which governs the award of fees against the 
Federal Government. Enacted over 30 years ago, EAJA offers a 
well-developed body of caselaw to guide application of revised 
Sec. 285, and sets a standard that is predictable and fair.
---------------------------------------------------------------------------
    \106\28 U.S.C. Sec. 2412(d)).
---------------------------------------------------------------------------
    Under this standard, there is no presumption that the 
nonprevailing party's position was not reasonably justified 
simply because it lost the case.\107\ Even if a plaintiff's 
complaint is rejected by the judge or jury, the plaintiff is 
immune from a fee award so long as its position had a 
reasonable basis in law and fact.\108\ Fees cannot be awarded 
if the nonprevailing party's case was justified to a degree 
that could satisfy a reasonable person,\109\ or there was at 
least a dispute over which reasonable minds could differ.\110\
---------------------------------------------------------------------------
    \107\Norris v. SEC, 695 F.3d 1261, 1265 (Fed. Cir. 2012).
    \108\Pierce v. Underwood, 487 U.S. 552, 565 (1988).
    \109\Id.
    \110\Norris v. SEC, 695 F.3d 1261, 1265 (Fed. Cir. 2012).
---------------------------------------------------------------------------
    When a case turns on a legal question, courts have looked 
to the clarity of the governing law--that is, whether judicial 
decision on the issue left the status of the law unsettled, and 
whether the legal issue was novel or difficult.\111\ On 
questions of statutory interpretation, for example, courts have 
asked whether the Federal courts were split on the matter,\112\ 
or whether the nonprevailing party interpreted a statute in a 
manner that is contrary to its plain language and unsupported 
by its legislative history.\113\
---------------------------------------------------------------------------
    \111\Id.
    \112\DGR Assocs., Inc. v. United States, 690 F.3d 1335, 1342 (Fed. 
Cir. 2012).
    \113\Patrick v. Shinseki, 668 F.3d 1325, 1330-31 (Fed. Cir. 2011).
---------------------------------------------------------------------------
    Subsection (a) has been modified to further clarify that 
the special circumstances that justify the denial of a fee 
award to a prevailing party may include situations involving 
severe economic hardship to the inventor.\114\ The courts have 
discretion in special circumstances to protect from a fee 
award, for example, the unsophisticated independent inventor 
who brought a lawsuit to protect what he may have understood to 
be his claimed invention but whose complaint was ultimately 
determined not to be reasonably justified.
---------------------------------------------------------------------------
    \114\The term ``inventor'' is defined at Sec. 100(f) of title 35.
---------------------------------------------------------------------------
    This analysis is not conducted issue by issue; rather, the 
nonprevailing party's litigation position is reviewed in the 
overall context.\115\ While the parties' postures on individual 
matters may be more or less justified, the reasonable-
justification test favors treating a case as an inclusive 
whole, rather than as atomized line-items.\116\ Also, when 
determining whether a party is prevailing party that is 
entitled to a fee award, courts consider the degree of success 
obtained by that party. A party whose ``success'' consists of a 
damage award that is only a very small fraction of what it 
originally sought is not entitled to a fee award.\117\
---------------------------------------------------------------------------
    \115\DGR Assocs., 690 F.3d at 1343.
    \116\Id. (quoting I.N.S. v. Jean, 496 U.S. 154, 161-62 (1990)).
    \117\See, e.g., Hubbard v. United States, 480 F.3d 1327 (Fed. Cir. 
2007).
---------------------------------------------------------------------------
    As under the EAJA, a district court's decision to grant or 
deny a fee award under Sec. 285(a) is reviewed for an abuse of 
discretion.\118\ This deferential standard, however, ``does not 
mean that a mistake of law is beyond appellate correction. A 
district court by definition abuses its discretion when it 
makes an error of law.''\119\
---------------------------------------------------------------------------
    \118\Pierce v. Underwood, 487 U.S. at 562-63.
    \119\Koon v. U.S., 518 U.S. 81, 100 (1996) (citation omitted); see 
also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 402 (1990). Plenary 
review of the reasonableness of a nonprevailing litigant's position on 
a legal question is particularly appropriate in the patents context, in 
light of the amounts likely to be at stake, the specialized nature of 
patent law and the Federal Circuit's familiarity with it, and the need 
to provide guidance to litigants as to, for example, what types of 
claim-construction and obviousness arguments, even if ultimately 
unsuccessful, are nevertheless reasonably justified.
---------------------------------------------------------------------------
    Subsection (b) of Sec. 285 provides that any party to the 
action may, upon motion, require another party to certify 
whether or not it will be able to satisfy a fee award in the 
event that such an award is made against such other party. This 
subsection also provides that a party joined in the action 
pursuant to Sec. 299(d) may be required to pay the unsatisfied 
portion of a fee award.
    Subsection (c) of Sec. 285 closes a potential loophole that 
an abusive litigant otherwise might be able to exploit to 
impose substantial costs on the opposing party with an 
unjustified complaint while evading accountability under 
subsection (a). Under the Supreme Court's Buckhannon decision, 
the ``prevailing party'' that is potentially entitled to a fee 
award includes only a party that has obtained from the court an 
``enforceable judgment on the merits'' or a ``court-ordered 
consent decree.''\120\ A defendant's ``voluntary change in 
conduct,'' even if spurred by the plaintiff's lawsuit, is 
insufficient to make the plaintiff a prevailing party.\121\
---------------------------------------------------------------------------
    \120\Buckhannon Bd. and Care Home, Inc. v. West Virginia Dep't of 
Health and Human Resources, 532 U.S. 598, 604 (2001).
    \121\Id. at 605.
---------------------------------------------------------------------------
    Under Federal Circuit precedent,\122\ moreover, a patent 
owner can deprive a court of Article III jurisdiction over an 
accused infringer's counterclaims for invalidity or 
noninfringement by giving the accused infringer a covenant not 
to sue for infringement--and thereby preclude the defendant 
from becoming a ``prevailing party'' on the basis of those 
counterclaims.\123\ Highway Equipment also held, however, that 
such a covenant does not deprive the court of jurisdiction over 
the patent owner's infringement complaint,\124\ and that fees 
may be awarded to the defendant if the covenant results in 
dismissal of the complaint with prejudice.\125\ Highway 
Equipment would thus appear to allow a defendant to obtain 
prevailing-party status and hold a plaintiff accountable for an 
unjustified litigation position.
---------------------------------------------------------------------------
    \122\Highway Equipment Co., Inc. v. FECO, Ltd, 469 F.3d 1027 (Fed. 
Cir. 2006).
    \123\Id. at 1033 n.1; see also Cisco Sys., Inc. v. Alberta 
Telecomms. Research Ctr., No. 2012-1687, 2013 WL 4563117, at *4 (Aug. 
29, 2013).
    \124\Highway Equip. Co., 469 F.3d at 1033 n.1.
    \125\Id. at 1035-36.
---------------------------------------------------------------------------
    Courts have also held, however, that a defendant is not a 
prevailing party if a complaint is dismissed without 
prejudice\126\--and district courts have discretion to 
determine whether a complaint is dismissed with or without 
prejudice.\127\ Moreover, Highway Equipment itself notes that 
the regional courts of appeals are divided as to whether even a 
dismissal with prejudice makes the defendant a prevailing party 
and potentially eligible for a fee award.\128\ And finally, 
several regional courts of appeals have held that when a case 
is dismissed as moot--which a covenant not to sue would appear 
to require--the defendant is not a prevailing party and no fees 
may be awarded.\129\
---------------------------------------------------------------------------
    \126\See Jeroski v. Federal Mine Safety and Health Review Comm'n, 
697 F.3d 651 (7th Cir. 2012); Newport News Holdings Corp. v. Virtual 
City Vision, Inc., 650 F.3d 423, 444 (4th Cir. 2011).
    \127\See Highway Equip. Co., 469 F.3d at 1034; Wright & Miller's 
Federal Practice and Procedure Sec. 2364.
    \128\See Highway Equip. Co., 469 F.3d at 1032, 1036.
    \129\Doe v. Nixon, 716 F.3d 1041, 1050-51 (8th Cir. 2013); Dionne 
v. Floormasters Enters., Inc., 667 F.3d 1199, 1205-06 (11th Cir. 2012); 
Demis v. Sniezek, 558 F.3d 508, 513 (6th Cir. 2009); Ma v. Chertoff, 
547 F.3d 342, 344 (2nd Cir. 2008); Biodiversity Conservation Alliance 
v. Stem, 519 F.3 1226, 1230 (10th Cir. 2008) (O'Connor, J.). A 
dismissal on account of the plaintiff's extension of a covenant not to 
sue--whether with or without prejudice--also appears to tread closely 
to mooting the action through a voluntary cessation of conduct--the 
scenario that Buckhannon found to make a party immune from a fee award.
---------------------------------------------------------------------------
    To avoid subjecting patent litigants to the uncertainty 
surrounding this still-developing area of the law, subsection 
(c) provides that an infringement claimant who unilaterally 
extends a covenant not to sue to the opposing party shall be 
deemed to be the nonprevailing party for purposes of subsection 
(a). Subsection (c) applies only if the plaintiff acts 
unilaterally--it does not apply if, for example, the parties 
jointly stipulate to dismissal of the case. Subsection (c) 
protects the rights of a defendant who believes that he has 
been the target of an abusive complaint, and who would have 
preferred to continue the litigation in order to hold the 
plaintiff accountable for his position or conduct under 
subsection (a). Subsection (c), by deeming the defendant the 
prevailing party, preserves only the possibility of a fee 
award. A plaintiff deemed nonprevailing under subsection (c) 
would not be subject to a fee award if its position and conduct 
were reasonably justified or special circumstances would make 
an award unjust.
    An exception is made to subsection (c) for a plaintiff who 
seeks dismissal of his claims early in the litigation, when he 
would be allowed to do so without a court order under Rule 41. 
A patentee who timely reconsiders the wisdom of his 
infringement claims, extends a covenant not to sue to the 
opposing party, and seeks such early dismissal of his complaint 
would remain immune from the possibility of an award of 
attorney's fees. The abusive litigant, however, who delays and 
forces the defendant to incur large costs--and who subsequently 
dismisses his complaint and unilaterally extends a covenant not 
to sue in order to moot the defendant's counterclaims--could be 
held to account under subsection (a).\130\
---------------------------------------------------------------------------
    \130\It is clear that a defendant in an infringement action whose 
success in a copending reexamination or review proceeding results in 
dismissal of the civil action is regarded as the prevailing party in 
the civil action. See, e.g., Inland Steel Co. v. LTV Steel Co., 364 
F.3d 1318, 1320-21 (Fed. Cir. 2004). This rule is legally well-grounded 
and is sound policy, given the extent to which such proceedings 
increasingly serve as an alternative to, and are statutorily 
intertwined with, district-court actions. See, e.g., 35 U.S.C. 
Sec. 315(b). The Committee thus declines to displace or disturb this 
rule.
---------------------------------------------------------------------------
    Section 3(b)(2)(B) of the Innovation Act strikes 
subsections (f) and (g) of Sec. 273 of title 35. Subsection (f) 
deems particular cases ``exceptional'' for purposes of 
Sec. 285--a standard that will no longer be employed by 
Sec. 285. Subsection (g) provides that a patent shall not be 
deemed invalid solely because a defense is established under 
Sec. 273. The subsection appears to have been enacted to 
address ``a point of uncertainty''\131\ regarding whether a 
secret use of an invention that established a Sec. 273 defense 
also would establish the invalidity of the patent at issue. 
Because it is now clear that the activities of an inventor who 
suppresses or conceals his invention cannot establish a pre-AIA 
Sec. 102(g) defense,\132\ however, Sec. 273(g) no longer serves 
any purpose.
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    \131\H.R. Rep. No. 106-287, at 49 (1999).
    \132\See Dow Chem. Co. v. Astro-Valcour, Inc., 267 F.3d 1334, 1342 
(Fed. Cir. 2001).
---------------------------------------------------------------------------
    Section 3(b)(3) of the Act applies revised Sec. 285 to 
cases filed on or after the date that is 6 months prior to the 
enactment of the Act. This is in accord with precedents 
applying new fee-shifting statutes to pending cases,\133\ and 
will preclude an unseemly rush to file cases in the period 
immediately prior to the enactment of the Act.
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    \133\See Bradley v. School Bd. of City of Richmond, 416 U.S. 696 
(1974); Hutto v. Finney, 437 U.S. 678, 694 n.23 (1978) (``this court's 
general practice'' is to apply newly enacted fee-shifting statutes to 
``all cases pending on the date of enactment'').
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            (c) Joinder
    New Sec. 299(d) of title 35 provides that if a plaintiff is 
unable to pay fees and expenses awarded pursuant to Sec. 285, 
the court may join in the action any interested party of that 
plaintiff. Joinder may be sought only if the plaintiff is a 
patent-assertion entity--i.e., a party that does not use, make, 
or sell the subject matter of the claimed invention, and that 
acquired the patent or patents at issue for the sole purpose of 
asserting them against alleged infringers.
            (d) Discovery prior to claim construction
    New Sec. 299A of title 35 provides that in a case in which 
the court determines that a claim construction is necessary, 
discovery shall be limited to issues concerning such claim 
construction until the construction is entered. This limit will 
not apply in all cases. In many cases, it will be clear that a 
claim construction is required early in the case in order to 
bring the dispute into focus, and Sec. 299A will limit 
discovery to information relevant to that construction. In 
other cases, however, a party may need broader discovery in 
order to sharpen its infringement or invalidity contentions and 
bring into relief which claim terms and interpretations are 
relevant, and thus an early construction is not required.
            (e) Effective date
    This subsection applies the amendments made by section 3 to 
cases filed on or after the enactment of the Innovation Act, 
except where the individual subsections of section 3 supply 
their own effective dates.
            (f) Sense of congress
    This subsection states the sense of congress regarding 
demand letters.
            (g) Demand letters
    This subsection adds an undesignated paragraph to the end 
of Sec. 284 of title 35 that provides that pre-suit 
notification of infringement may not be relied on to establish 
willfulness unless such notification identifies with 
particularity the patent and the accused products or process 
and explains why a claim is infringed to the extent possible 
following a reasonable inquiry.
Section 4. Transparency of patent ownership.
    New Sec. 290(b) of title 35 requires disclosure, upon the 
filing an infringement action, of the real-parties-in interest 
to the patent and its enforcement. In the event of 
noncompliance, awards of attorney's fees, and recovery of 
enhanced damages incurred during periods of non-compliance, are 
barred, and the adverse party may recover attorney's fees that 
it incurred in the course of uncovering correct ownership 
information.
Section 5. Customer-suit exception.
    Revised Sec. 296 of title 35 codifies and strengthens the 
common-law customer-suit exception to a patent plaintiff's 
presumptive entitlement to his choice of venue. It requires 
grant of a timely motion to stay the suit against the customer 
if the manufacturer and the customer agree to a stay, the 
manufacturer has joined the suit or filed a related suit, and 
the customer agrees to be bound by the final resolution of 
issues in the manufacturer's suit that the customer and 
manufacturer have in common.
    Section 296 is voluntary--it allows a stay only if the 
customer and manufacturer have agreed that the manufacturer 
most appropriately bears the burden of defending against the 
infringement suit. Section 296 also eliminates inconsistencies 
in current law's application of the customer-suit exception. It 
authorizes a stay whether the manufacturer is a party to the 
customer suit or to a separate related action, and it allows 
the customer and manufacturer to obtain a stay despite the fact 
that the customer is the only party accused of directly 
infringing a method claim, the customer is accused of 
infringing because of its incorporation of a component into its 
own product, or the customer has been accused of inducement of 
infringement.\134\
---------------------------------------------------------------------------
    \134\``[E]fficiency and judicial economy'' have been described as 
the ``guiding principles'' for interpreting and applying the common-law 
customer suit exception. Lonestar Inventions, L.P. v. Sony Elecs. Inc., 
2011 WL 3880550 (E.D. Tex. 2011). With the hope that a similar judicial 
solipsism will not infect the interpretation of Sec. 296, the Committee 
emphasizes that the purpose of the statutory customer-suit stay--as 
expressed by witnesses testifying before the Committee and 
Subcommittee--is to protect customers against the inherently coercive 
nature of infringement suits directed at products or processes that the 
defendant did not develop or design.
---------------------------------------------------------------------------
    Subsection (c)(1) creates a limited exception to the 
customer and manufacturer's entitlement to a stay. Subparagraph 
(A) allows an exception for situations in which the 
manufacturer's action will not resolve a major issue in the 
suit against the customer. This would include, for example, a 
suit involving only method claims in which the manufacturer 
does not contest the validity of the patent or its alleged 
infringement by the customer, and instead contends only that 
the manufacturer is not liable for infringement because its 
product has substantial noninfringing use. It would also 
include a case in which it is clear that the major dispute over 
infringement or invalidity will concern components or materials 
in the covered customer's product or process other than those 
supplied by the covered manufacturer.
    Subparagraph (B) allows an exception when a stay 
unreasonably prejudices and would be manifestly unjust to the 
patent plaintiff. This would include, for example, a case in 
which it is clear that the manufacturer would be unable to 
satisfy a substantial damages judgment and the patent owner's 
only true recourse is against infringing customers.
    Once a stay is imposed, the customer nevertheless remains a 
party to the suit, and limited discovery may be sought from the 
customer to the extent necessary to prove the case against the 
manufacturer. Thus, for example, when the manufacturer is sued 
for indirect infringement, discovery may be necessary to show 
that prerequisite direct infringement has, in fact, occurred. 
Customer discovery also may be necessary to identify all 
suppliers of allegedly infringing products, components, or 
materials.
    The original version of Sec. 296, which was enacted in 1992 
and attempted to address the Eleventh Amendment immunity of 
states, was voided in its entirety in 1999 by the Supreme Court 
in its decision in Florida Prepaid Postsecondary Education 
Expense Board v. College Savings Bank.\135\ The Innovation Act 
reclaims this long-dormant code section. To the extent that 
states and their subdivisions do not enjoy Eleventh Amendment 
immunity against patent-infringement actions, that liability is 
codified and preserved by Sec. 271(h) of title 35, which 
continues to provide that liability for patent infringement 
extends to ``any State, any instrumentality of a State, and any 
officer or employee of a State or instrumentality of a State 
acting in his official capacity.''
---------------------------------------------------------------------------
    \135\527 U.S. 627 (1999).
---------------------------------------------------------------------------
Section 6. Procedures and practices to implement and recommendations to 
        the Judicial Conference.
    Subsection (a) provides for an exchange of discovery of the 
core documents in a patent case. Costs of document discovery 
beyond the core documents would be shifted to the party that 
requests the discovery. In response to concerns expressed by 
witnesses at hearings before the Committee and 
Subcommittee,\136\ this provision has been modified to provide 
the Judicial Conference with the authority to make 
modifications to these rules.
---------------------------------------------------------------------------
    \136\See, e.g., October hearing, Statement of David J. Kappos, 
Former Under Secretary of Commerce for Intellectual Property and 
Director of the United States Patent and Trademark Office, at *4; id., 
Statement of Robert A. Armitage, Former General Counsel, Eli Lilly & 
Co., at *18.
---------------------------------------------------------------------------
    Subsection (b) requires the Judicial Conference to develop 
case-management procedures for patent cases. The Committee 
requests that the Conference, in the course of developing such 
procedures, address Rule 56(b), which relates to the time for 
filing a motion for summary judgment. Some district courts have 
declined to timely rule on or even allow early motions for 
summary judgment, thereby compounding the burden and expense of 
patent litigation. The Committee also suggests that Conference 
clarify that a litigant has an obligation under Rule 11 to 
withdraw a claim that has become frivolous.
    Subsection (c) requires the Supreme Court to eliminate its 
current short-form patent complaint--Form 18--from the Appendix 
of the Federal Rules of Civil Procedure, and provides that the 
Court may prescribe a new form that, at minimum, notifies 
accused infringers of the asserted claim or claims, the 
products or services accused of infringement, and the 
plaintiff's theory as to how an accused product or service 
meets each limitation of each asserted claim.
    Subsection (d), by adding 11 U.S.C. Sec. 365(n) to the 
mandatory provisions that must apply in a Chapter 15 bankruptcy 
proceeding when relevant, provides certainty to licensees of 
patents and other intellectual property by guaranteeing that 
such licenses cannot be terminated in the United States via a 
foreign bankruptcy proceeding. The amendment also clarifies 
that trademark licenses are protected against being voided in 
bankruptcy, effectively codifying the Seventh Circuit's 
approach in Sunbeam Prods., Inc. v. Chicago Am. Mfg., LLC.\137\ 
Because of the importance of providing certainty to 
manufacturers that they will be allowed to practice licensed 
technology in the United States, the amendment is made fully 
retroactive, applying to cases pending at any level of appeal 
or review.
---------------------------------------------------------------------------
    \137\686 F.3d 372 (7th Cir. 2012) (Easterbrook, J.).
---------------------------------------------------------------------------
Section 7. Small business education, outreach, and information access.
    Subsection (a) establishes a small business education and 
outreach program and directs the PTO to provide information to 
small businesses to address concerns arising from patent 
infringement. Subsection (b) directs the PTO to provide to the 
public on a website information about patent ownership that has 
been disclosed to the Office as a result of litigation.
Section 8. Studies on patent transactions, quality, and examination.
    Subsection (a) directs the PTO to conduct a study of the 
developing secondary market for patents in the United States, 
and to make recommendations as to how to promote transparency 
and fairness in such markets.
    Subsection (b) directs the PTO to conduct a study of 
patents owned by the United States, how such patents are 
licensed, and how different agencies maintain records of such 
licenses, and to provide recommendations as to whether 
restrictions should be imposed on the transfer of patents by 
the United States.
    Subsection (c) directs the Comptroller General to conduct a 
study of patent examination and relevant technology.
    Subsection (d) requires the Director of the Administrative 
Office of the United States Courts to conduct a study regarding 
proposals to create a patent small-claims court.
    Subsection (e) requires the PTO to conduct a study 
regarding demand letters.
    Subsection (f) directs the Comptroller General to conduct a 
study of litigation involving business-method patents.
Section 9. Improvements and corrections to the America Invents Act.
            (a) Repeal of section 145
    This subsection repeals the cause of action authorized by 
Sec. 145 of title 35. The repeal applies with respect to any 
proceeding in which the Patent Trial and Appeal Board has 
issued a decision, whether on appeal or on rehearing, after the 
date of enactment of this Act.
            (b) LRepeal of could-have-raised estoppel for civil 
                    litigation following post-grant review
    This subsection corrects the so-called scrivener's error in 
Sec. 325(e)(2) of title 35, repealing the could-have-raised 
estoppel that was inadvertently applied by the AIA to civil 
litigation following the completion of a post-grant review. 
Estoppel in civil litigation will henceforth be limited to 
those issues that were actually raised and decided in the post-
grant review. Could-have-raised estoppel will continue to apply 
to other PTO proceedings following the completion of a post-
grant review, and to all proceedings following completion of an 
inter partes review.
            (c) LUse of district-court claim construction in post-grant 
                    and inter partes reviews
    This subsection directs the PTO to follow civil-litigation 
standards of claim construction, currently authoritatively 
described in Phillips v. AWH Corp.,\138\ in all inter partes 
and post-grant reviews. The PTO will be permitted to continue 
to give claims their broadest reasonable interpretation during 
examination and in other administrative proceedings.\139\ This 
subsection also requires the PTAB to consider an existing 
district-court claim construction of relevant terms in a patent 
when the PTAB is construing those terms, but allows the Board 
to reject a district-court interpretation that it finds to be 
clearly erroneous.
---------------------------------------------------------------------------
    \138\415 F.3d 1303 (Fed. Cir. 2005).
    \139\Use of the broadest reasonable interpretation of claims is 
appropriate during prosecution and reexamination of a patent because, 
during such proceedings, ``a patent applicant has the opportunity and 
the responsibility to remove any ambiguity in claim term meaning by 
amending the application.'' In re Bigio, 381 F.3d 1320, 1324 (Fed. Cir. 
2004). ``Only in this way can uncertainties of claim scope be removed, 
as much as possible, during the administrative process.'' In re Zletz, 
893 F.2d 319, 321 (Fed. Cir. 1990). By requiring the patentee or 
applicant to address at least those ambiguities identified by the 
examiner during the administrative process, the PTO thus avoids leaving 
``the public to guess about which language the drafter deems necessary 
to his claimed invention and which language is merely superfluous, 
nonlimiting elaboration.'' Bicon, Inc. v. The Straumann Co., 441 F.3d 
945, 950 (Fed. Cir. 2006).
---------------------------------------------------------------------------
    Regulations implementing this subsection's amendments, like 
all regulations promulgated pursuant to Sec. Sec. 316 and 326 
of title 35, must, pursuant to subsection (b) of those 
sections, be implemented with consideration of ``the efficient 
administration of the Office'' and ``the ability of the Office 
to timely complete proceedings instituted under'' chapters 31 
and 32. District-court claim construction therefore must be 
adapted to the unique nature of inter partes and post-grant 
reviews, and should not be accompanied in those proceedings by 
unnecessary and time-consuming procedures such as a formal 
Markman hearing.
            (d) Obviousness-type double patenting
    This subsection codifies and reforms the doctrine of double 
patenting as it applies it to first-inventor-to-file 
patents.\140\ New Sec. 106 is anchored in the foundational 
principles of double-patenting law that are reflected in the 
Sixth Circuit's decision in Thomson-Houston Elec. Co. v. Ohio 
Brass Co.,\141\ and in the PTO's 1967 Official Gazette Notice 
on double patenting.\142\
---------------------------------------------------------------------------
    \140\Same-invention double patenting is based on Sec. 101's 
``whoever invents'' requirement and is thus already ``codified'' with 
respect to all patents.
    \141\80 F. 712 (6th Cir. 1897).
    \142\Double Patenting, 834 O.G. 1615 (Jan. 31, 1967).
---------------------------------------------------------------------------
    Section 106 adopts as a threshold requirement for double 
patenting to exist with respect to two patents that, for at 
least one claimed invention in each of the two patents, neither 
claimed invention represents prior art to the other under 
Sec. 102(a).\143\ Section 106 also adopts, at paragraph (1), 
the rule that a first patent's claimed invention can subject a 
second patent's claimed invention to the consequences from 
double patenting under Sec. 106 only if the first was 
effectively filed on or before the effective filing date of the 
second. A subsequently-filed patent or application will never 
be the basis for imposing double-patenting consequences on an 
earlier-filed application's claimed invention. Thus a broad 
patent for a basic invention cannot be invalidated for double 
patenting simply because a subsequently-filed improvement 
patent issued before the basic patent was granted.
---------------------------------------------------------------------------
    \143\Claimed inventions in respective patents can be prior art to 
one another under either Sec. 102(a)(1) or Sec. 102(a)(2).
---------------------------------------------------------------------------
    In the case of patents arising from patent filings on the 
same day that name the same inventor,\144\ each of the two 
patents will be considered as the ``second patent'' vis-a-vis 
the other, and both patents will be separately subject to the 
Sec. 106 consequences from double patenting. Similarly, each of 
two patents is separately subject to Sec. 106 double-patenting 
consequences vis-a-vis the other if the respective claimed 
inventions of the two patents have the same effective filing 
date and, had the effective filing dates not been the same, a 
claimed invention of one of the two patents nevertheless would 
have been subject to a Sec. 102(b)(2) prior art exception with 
respect to the other.
---------------------------------------------------------------------------
    \144\Section 106(2)(A) applies double-patenting limits to 
situations where the first and second patents name the same 
``inventor.'' The term ``inventor'' is defined by Sec. 100(f) to mean 
the entire inventive entity.
---------------------------------------------------------------------------
    Finally, Sec. 106 confines double patenting's reach to 
situations where Sec. 103 does not apply to limit the issuance 
of obvious-variant patents. Where Sec. 103 does apply of its 
own force--where no prior-art exception applies--then Sec. 106 
does not apply.\145\
---------------------------------------------------------------------------
    \145\Although Sec. 106(2) cites Sec. 102(b)(2), only the exclusions 
under subparagraphs (A) and (C) of Sec. 102(b)(2) can invoke the 
application of Sec. 106. Any application or patent that is excluded 
from prior art by subparagraph (B) also is necessarily anticipated by 
the prior public disclosure of the inventor or a joint inventor of the 
second patent, and thus cannot issue as a valid patent and cause the 
second patent to be a ``double patent.''
---------------------------------------------------------------------------
    The possible consequences of double patenting under 
Sec. 106 are that the claimed invention of the first patent 
that is not otherwise prior art to the claimed invention of the 
second patent will become prior art for Sec. 103 purposes,\146\ 
or that the second patent will need to contain a Sec. 106(3) 
disclaimer of the right to independently enforce the second 
patent.
---------------------------------------------------------------------------
    \146\Section 106 also applies the novelty analysis inherent in a 
Sec. 103 obviousness analysis, anticipation being ``the epitome of''--
and is necessarily embraced by--obviousness. In re McDaniel, 293 F.3d 
1379, 1385 (Fed. Cir. 2002).
---------------------------------------------------------------------------
    Section 106 also replaces recent caselaw's parallel 
universe of double-patenting obviousness analysis with an 
ordinary Sec. 103 analysis. The recent common law has an 
``export version'' quality, resembling, but lacking some of the 
precision of, conventional obviousness analysis.\147\ Section 
106 requires courts reviewing potential double patents to 
employ the conventional Sec. 103 analysis.
---------------------------------------------------------------------------
    \147\See, e.g., Takeda Pharm. Co., Ltd. v. Doll, 561 F.3d 1372, 
1375 (Fed. Cir. 2009); Amgen Inc. v. F. Hoffman-La Roche Ltd., 580 F.3d 
1340, 1355, 1358 (Fed. Cir. 2009).
---------------------------------------------------------------------------
    Some features of the common-law double-patenting doctrine 
are preserved in Sec. 106. Section 106 looks only to the 
``claimed invention'' as prior art. Also, the safe harbor of 
Sec. 121 continues to apply--as do the courts' byzantine 
consonance and other requirements for the application of that 
section. No change is made in the requirements or practices 
regarding the content and filing of terminal disclaimers, other 
than that Sec. 106 gives the Director the authority to 
promulgate regulations consistent with the statute. Thus in the 
case of a second patent that is commonly owned with a first 
patent, paragraph (3)'s requirement of a disclaimer of 
independent enforcement can be satisfied by disclaiming the 
enforcement of the second patent except for periods when the 
patents are commonly owned.
    Section 9(d)(4) of the Innovation Act makes common-law 
obviousness-type double-patenting rules inapplicable to any 
patent that is subject to Sec. 106. Whether a particular first-
inventor-to-file ``second patent'' is subject to Sec. 106 will 
depend, however, on whether the ``first patent'' that is 
asserted against the second patent is a first-to-invent patent 
or a first-inventor-to-file patent. In the case of a family of 
commonly-owned patents and applications whose effective-filing 
dates cross the first-inventor-to-file rule's March 16, 2013 
effective date, a first-inventor-to-file ``second patent'' may 
be subject both to Sec. 106 and to nonstatutory double 
patenting rules, depending on when the ``first patents'' at 
issue were effectively filed. In such a scenario, of course, 
the applicant could, pursuant to Sec. 3(n)(1) of the AIA, 
convert his first-to-invent applications into first-inventor-
to-file applications by amending them to claim subject matter 
with an effective filing date after March 16, 2013, thereby 
ensuring that any ``second patent'' is subject to Sec. 106 
alone.
    Section 9(d)(5) of the Innovation Act applies Sec. 106 to 
both patents and applications, thereby preserving PTO's 
authority to reject an application on double-patenting grounds 
if it would, once issued, contain a claim that is invalid under 
Sec. 106.
            (e) PTO patent reviews
    This subsection amends AIA Sec. 18(a)(1)(C) to allow 
patents and published applications to be effective as prior art 
against a first-to-invent business-method patent as of their 
effective filing dates.
            (f) LClarification of limits on patent term adjustment
    The amendments made by this subsection clarify that no B-
delay patent-term adjustment may be awarded for time consumed 
by a request for continued examination (RCE), regardless of 
when the RCE was requested. The amendments also clarify that B 
delay may not be awarded for any of the time accrued after the 
applicant has restarted prosecution by filing an RCE.
            (g) Clarification of jurisdiction
    To preclude a broad reading of Gunn v. Minton,\148\ this 
subsection establishes that avoiding inconsistent judgments as 
to the legal effect of the claims in a patent is a substantial 
Federal interest that is important to the Federal system--the 
test for ``arising under'' jurisdiction applied by Gunn--and 
that such cases therefore ``arise under'' Federal patent law. 
This subsection thus clarifies that it is not necessary to 
exclusive Federal patent jurisdiction that a case also require 
interpretation of a Federal statute or affect numerous parties 
or the Federal Government. This provision effectively codifies 
the Federal Circuit's recent dicta in Forrester Environmental 
Services,\149\ and ensures the continuing viability of the 
Federal Circuit and regional circuits' pre-Gunn precedents 
recognizing patents ``arising under'' jurisdiction over certain 
state-law business-disparagement and breach-of-contract 
actions.\150\
---------------------------------------------------------------------------
    \148\133 S.Ct. 1059 (Feb. 20, 2013).
    \149\715 F.3d 1329, 1334 (Fed. Cir. 2013) (noting that ``arising 
under'' jurisdiction over particular ``state law claims premised on 
allegedly false statements about patents . . . may well have survived 
the Supreme Court's decision in Gunn'').
    \150\See, e.g., Scherbatskoy v. Halliburton Co., 125 F.3d 288 (5th 
Cir. 1997); U.S. Valves, Inc. v. Dray, 190 F.3d 811 (7th Cir. 1999); 
Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 986 F.2d 
476 (Fed. Cir. 1993); Hunter Douglas, Inc. v. Harmonic Design, Inc., 
153 F.3d 1318 (Fed. Cir. 1998), overruled on other grounds, Midwest 
Indus., Inc. v. Karavan Trailers, Inc., 175 F.3d 1356 (Fed. Cir. 1999).
---------------------------------------------------------------------------
    This clarification is applied to all pending and future 
cases. It is applied to pending cases so that courts will not 
be required to determine whether Gunn's enumeration of 
``substantiality'' factors is intended to be exclusive, or what 
exactly Gunn means--in the absence of this subsection--with 
respect to state-law breach of contract and unfair competition 
cases that turn on whether a product or process infringes a 
patent. An exception is made, however, for cases in which a 
Federal court already has determined its ``arising under'' 
patents jurisdiction--those courts will not be required to 
revisit such determinations, despite the enactment of this 
provision.
            (h) Extension of patent pilot program
    This subsection extends by an additional 10 years the 
duration of the patent pilot program operating in certain 
district courts that was established by Public Law No. 111-349 
(2011).
            (i) Technical corrections
                  (1) Sec. 102
    This paragraph makes a nonsubstantive stylistic correction 
to the Patent Code. It amends Sec. 102 so that it consistently 
uses the term ``the inventor or a joint inventor or another,'' 
rather than alternating between that phrase and ``the inventor 
or joint inventor or by another.'' The change has no 
substantive effect, and creates linguistic uniformity and 
eliminates a potential ambiguity in the section.
                  (2) Inventor's oath or declaration
    Section 115 of title 35 was substantially revised by 
Sec. 4(a) of the AIA, and was further modified by the AIA 
technical amendments.\151\ This paragraph makes two further 
changes to Sec. 115. Section 115 currently represents a merely 
formal requirement that the inventor file an oath or 
declaration prior to the payment of the issue fee (i.e., the 
fee that is paid after the examination of a patent application 
has been completed). The amendment made by clause (i) 
eliminates the Sec. 115 requirement for applications that are 
filed by the inventor's assignee, rather than by the inventor. 
Section 4(b) of the AIA amended Sec. 118 of title 35 to permit 
the patent owner to seek a patent in cases where the inventor 
has assigned the right to seek a patent. For assignee-
applicants, the filing of the separate assignment of the 
invention from the inventor to the assignee renders any 
additional Sec. 115 requirement redundant. The amendment made 
by clause (ii) allows the Director to dispense with the filing 
of the Sec. 115 statement as he deems appropriate. This could 
include, for example, with respect to continuing applications 
for patent under Sec. Sec. 120 and121, where the separate 
Sec. 115 requirement can be a redundancy. The amendments thus 
remove unnecessary paperwork from the patent examination 
process.
---------------------------------------------------------------------------
    \151\Pub. L. No. 112-274 (2013).
---------------------------------------------------------------------------
                  (3) Assignee filers
    Section 4(b) of the AIA amended 35 U.S.C. Sec. 118 to 
broadly authorize assignees (rather than just inventors) to 
file their own patent applications. Per section 4(e) of the 
AIA, this authorization applies to all applications filed on or 
after the date that is 1 year after the enactment of the AIA 
(i.e., September 16, 2012).
    The AIA neglected, however, to make a conforming change to 
Sec. 119(e)(1) to allow the assignee filer to claim the benefit 
of the filing date of an earlier provisional application. That 
section still requires that the application claiming the 
earlier date be filed ``by an inventor or inventors named'' in 
the provisional application. Although the courts might overlook 
this legislative mistake (which would otherwise vitiate the 
effect of the AIA's changes to Sec. 118 for provisional 
filers), the Committee thinks it best to simply correct this 
oversight in the present bill.
    This paragraph also amends the language of Sec. 120 to make 
a stylistic change similar to that made by paragraph (1), while 
also reenacting AIA Sec. 3(f)'s conforming amendment for 
assignee filers and giving the new conforming amendment a 
proper effective date. The AIA amended Sec. 120 that authorize 
assignee applicants (rather than just inventor applicants) to 
claim the benefit of the filing date of a parent application in 
a continuation application. Unfortunately, however, this 
conforming change to Sec. 120 was included in Sec. 3(f) of the 
AIA. Per Sec. 3(n) of the AIA, the changes made by AIA 
Sec. 3(f) apply only to first-inventor-to-file patents. A large 
number of patents filed after September 16, 2012, however, will 
continue to be first-to-invent patents. Absent the revision 
made by this paragraph, there could be a substantial number of 
first-to-invent patents filed by assignees after September 16, 
2012 whose owners would later discovered that they are unable 
to claim the benefit of a parent application's priority date. 
The revisions made by this paragraph ensure that the conforming 
change accommodating assignee filers will apply to all patents 
(including first-to-invent patents) for which Sec. 4(b) of the 
AIA authorizes assignee filing.
    This paragraph also conforms Sec. 120 to the proper 
linguistic formulation: ``the inventor or a joint inventor.'' 
Sections 100(f) and (g) of title 35 now define ``inventor'' and 
``joint inventor.'' The former refers to the entire inventive 
entity (i.e., all of the joint inventors), and thus should 
always be preceded by the definite article. The latter (``a 
joint inventor'') is necessarily one of the several who 
invented the subject matter. This paragraph's edits, though 
nonsubstantive, ensure usage consistent with these meanings.
                  (4) Derived patents
    This paragraph makes the same nonsubstative stylistic 
change to Sec. 291(b) of title 35 that paragraph (1) makes to 
Sec. 102 of that title.
                  (5) Specification
    This paragraph amends the effective date of the AIA's 
addition of subsections and titles to Sec. 112 so that the new 
citation format will be used in all proceedings and matters 
after enactment of the present bill. This will simplify 
citation to Sec. 112, which currently is understood to be 
required to be cited by its pre-AIA, undesignated paragraphs 
for patents issuing from an application filed before September 
16, 2012: Biosig Instruments, Inc. v. Nautilus, Inc.,\152\ 
recently held that the AIA's addition of substructure to 
Sec. 112 applies only with respect to patents issued after 
September 16, 2012.\153\ The only rational purpose of adding 
substructure to Sec. 112, however, is to simplify citation to 
it--a purpose that is entirely defeated by the current 
approach. Under Biosig, the patent bar would be required, for 
the next quarter century, to first identify the issue date of a 
patent before it could determine whether to cite to the 
subsections of current Sec. 112 or to the undesignated 
paragraphs of pre-AIA Sec. 112. This paragraph avoids such 
absurdities by making the AIA's addition of subsections and 
titles to Sec. 112 immediately applicable in all proceedings 
and matters, and thereby eliminating the need to ever again 
cite to the undesignated paragraphs of pre-AIA Sec. 112.
---------------------------------------------------------------------------
    \152\715 F.3d 891 (Fed. Cir. 2013).
    \153\See id. at 897, n.3.
---------------------------------------------------------------------------
                  (6) Time limit for commencing misconduct proceedings
    This paragraph adds an additional year to the time by which 
the Director must commence a proceeding under 35 U.S.C. Sec. 32 
once the misconduct forming the basis for the proceeding is 
made known to an officer or employee of the Office. The 
amendment applies to all such proceedings commenced after the 
enactment of this Act.
                  (7) Patent owner response
    Sections 316(a)(8) and 326(a)(8) of title 35 each provide 
for ``the filing by the patent owner of a response to the 
petition under section 313 [or 323] after a . . . review has 
been instituted.'' The citation to Sec. Sec. 313 and 323 is 
incorrect--reviews are instituted under Sec. Sec. 311 and 321. 
Sections 313 and 323 only authorize the patent owner to file a 
preliminary response to the petition before the review is 
instituted. These amendments correct this miscitation.
                  (8) International applications
    Paragraph (7) of section 202(b) of the Patent Law Treaties 
Implementation Act (``PLTIA'') amends 35 U.S.C. Sec. 361(c) to 
``authorize'' the Director to allow the filing of a PCT 
application in a language other than English. The PCT and its 
regulations would require the USPTO to review such an 
application for errors and to process requests for 
incorporation by reference. The USPTO has indicated, however, 
that

        [t]he United States Receiving Office is simply not 
        currently capable of conducting the review and 
        processing required by the PCT for PCT applications 
        filed in a language other than English. Creating a 
        procedure under the PCT to provide for the initial 
        filing of a non-English-language PCT application and 
        later filing of an English-language translation for the 
        purpose of subsequent review and processing would, 
        under the provisions of the PCT and PCT Regulations, 
        result in the resetting of the International Filing 
        Date to the later date of submission of the English-
        language translation of the non-English-language PCT 
        application.\154\
---------------------------------------------------------------------------
    \154\Changes to Implement the Patent Law Treaty, 78 Fed. Reg. 
62368, 62390 (Oct. 21, 2013).

    This paragraph repeals PLTIA Sec. 202(b)(7)'s amendments to 
35 U.S.C. Sec. 361(c), thereby relieving the United States 
Receiving Office of its authority to review PCT applications 
for errors and process requests for incorporation by reference 
in a language other than English.
Section 10. Effective date.
    Except as otherwise provided in this Act, the amendments 
made by the Act shall be effective upon enactment of the Act, 
and shall apply to any patent issued or any action filed on or 
after such effective date.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 35, UNITED STATES CODE



           *       *       *       *       *       *       *
PART I--UNITED STATES PATENT AND TRADEMARK OFFICE

           *       *       *       *       *       *       *


CHAPTER 3--PRACTICE BEFORE PATENT AND TRADEMARK OFFICE

           *       *       *       *       *       *       *


Sec. 32. Suspension or exclusion from practice

    The Director may, after notice and opportunity for a 
hearing, suspend or exclude, either generally or in any 
particular case, from further practice before the Patent and 
Trademark Office, any person, agent, or attorney shown to be 
incompetent or disreputable, or guilty of gross misconduct, or 
who does not comply with the regulations established under 
section 2(b)(2)(D), or who shall, by word, circular, letter, or 
advertising, with intent to defraud in any manner, deceive, 
mislead, or threaten any applicant or prospective applicant, or 
other person having immediate or prospective business before 
the Office. The reasons for any such suspension or exclusion 
shall be duly recorded. The Director shall have the discretion 
to designate any attorney who is an officer or employee of the 
United States Patent and Trademark Office to conduct the 
hearing required by this section. A proceeding under this 
section shall be commenced not later than the earlier of either 
the date that is 10 years after the date on which the 
misconduct forming the basis for the proceeding occurred, or [1 
year] 2 years 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). The United States 
District Court for the Eastern District of Virginia, under such 
conditions and upon such proceedings as it by its rules 
determines, may review the action of the Director upon the 
petition of the person so refused recognition or so suspended 
or excluded.

           *       *       *       *       *       *       *


       PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS



           *       *       *       *       *       *       *


CHAPTER 10--PATENTABILITY OF INVENTIONS

           *       *       *       *       *       *       *


Sec.
100. Definitions.
     * * * * * * *
106. Prior art in cases of double patenting.
     * * * * * * *

Sec. 102. Conditions for patentability; novelty

    (a) * * *
    (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] 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

           *       *       *       *       *       *       *


Sec. 106. Prior art in cases of double patenting

    A claimed invention of a patent issued under section 151 
(referred to as the ``first patent'') that is not prior art to 
a claimed invention of another patent (referred to as the 
``second patent'') shall be considered prior art to the claimed 
invention of the second patent for the purpose of determining 
the nonobviousness of the claimed invention of the second 
patent under section 103 if--
            (1) the claimed invention of the first patent was 
        effectively filed under section 102(d) on or before the 
        effective filing date of the claimed invention of the 
        second patent;
            (2) either--
                    (A) the first patent and second patent name 
                the same inventor; or
                    (B) the claimed invention of the first 
                patent would constitute prior art to the 
                claimed invention of the second patent under 
                section 102(a)(2) if an exception under section 
                102(b)(2) were deemed to be inapplicable and 
                the claimed invention of the first patent was, 
                or were deemed to be, effectively filed under 
                section 102(d) before the effective filing date 
                of the claimed invention of the second patent; 
                and
            (3) the patentee of the second patent has not 
        disclaimed the rights to enforce the second patent 
        independently from, and beyond the statutory term of, 
        the first patent.

           *       *       *       *       *       *       *


CHAPTER 11--APPLICATION FOR PATENT

           *       *       *       *       *       *       *


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] Except for an application filed under section 118 or 
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] may be required by the 
Director to execute an oath or declaration in connection with 
the application.

           *       *       *       *       *       *       *


Sec. 119. Benefit of earlier filing date; right of priority

    (a) * * *

           *       *       *       *       *       *       *

    (e)(1) An application for patent filed under section 111(a) 
or section 363 for an invention disclosed in the manner 
provided by section 112(a) (other than the requirement to 
disclose the best mode) in a provisional application filed 
under section 111(b), [by an inventor or inventors named] that 
names the inventor or a joint inventor in the provisional 
application, shall have the same effect, as to such invention, 
as though filed on the date of the provisional application 
filed under section 111(b), if the application for patent filed 
under section 111(a) or section 363 is filed not later than 12 
months after the date on which the provisional application was 
filed and if it contains or is amended to contain a specific 
reference to the provisional application. No application shall 
be entitled to the benefit of an earlier filed provisional 
application under this subsection unless an amendment 
containing the specific reference to the earlier filed 
provisional application is submitted at such time during the 
pendency of the application as required by the Director. The 
Director may consider the failure to submit such an amendment 
within that time period as a waiver of any benefit under this 
subsection. The Director may establish procedures, including 
the payment of a surcharge, to accept an unintentionally 
delayed submission of an amendment under this subsection during 
the pendency of the application.

           *       *       *       *       *       *       *


Sec. 120. Benefit of earlier filing date in the United States

    An application for patent for an invention disclosed in the 
manner provided by section 112(a) (other than the requirement 
to disclose the best mode) in an application previously filed 
in the United States, or as provided by section 363, which 
[names an inventor or joint inventor] names the inventor or a 
joint inventor in the previously filed application shall have 
the same effect, as to such invention, as though filed on the 
date of the prior application, if filed before the patenting or 
abandonment of or termination of proceedings on the first 
application or on an application similarly entitled to the 
benefit of the filing date of the first application and if it 
contains or is amended to contain a specific reference to the 
earlier filed application. No application shall be entitled to 
the benefit of an earlier filed application under this section 
unless an amendment containing the specific reference to the 
earlier filed application is submitted at such time during the 
pendency of the application as required by the Director. The 
Director may consider the failure to submit such an amendment 
within that time period as a waiver of any benefit under this 
section. The Director may establish procedures, including the 
payment of a surcharge, to accept an unintentionally delayed 
submission of an amendment under this section.

           *       *       *       *       *       *       *


CHAPTER 13--REVIEW OF PATENT AND TRADEMARK OFFICE DECISIONS

           *       *       *       *       *       *       *


[145. Civil action to obtain patent.]

           *       *       *       *       *       *       *


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

    (a) Examinations.--An applicant who is dissatisfied with 
the final decision in an appeal to the Patent Trial and Appeal 
Board under section 134(a) [may appeal the Board's decision to] 
may appeal the Board's decision only to the United States Court 
of Appeals for the Federal Circuit. [By filing such an appeal, 
the applicant waives his or her right to proceed under section 
145.]

           *       *       *       *       *       *       *


[Sec. 145. Civil action to obtain patent

    [An applicant dissatisfied with the decision of the Patent 
Trial and Appeal Board in an appeal under section 134(a) may, 
unless appeal has been taken to the United States Court of 
Appeals for the Federal Circuit, have remedy by civil action 
against the Director in the United States District Court for 
the Eastern District of Virginia if commenced within such time 
after such decision, not less than sixty days, as the Director 
appoints. The court may adjudge that such applicant is entitled 
to receive a patent for his invention, as specified in any of 
his claims involved in the decision of the Patent Trial and 
Appeal Board, as the facts in the case may appear and such 
adjudication shall authorize the Director to issue such patent 
on compliance with the requirements of law. All the expenses of 
the proceedings shall be paid by the applicant.]

           *       *       *       *       *       *       *


CHAPTER 14--ISSUE OF PATENT

           *       *       *       *       *       *       *


Sec. 154. Contents and term of patent; provisional rights

    (a) * * *
    (b) Adjustment of Patent Term.--
            (1) Patent term guarantees.--
                    (A) Guarantee of prompt patent and 
                trademark office responses.--Subject to the 
                limitations under paragraph (2), if the issue 
                of an original patent is delayed due to the 
                failure of the Patent and Trademark Office to--
                            (i) * * *

           *       *       *       *       *       *       *

                            (iii) act on an application within 
                        4 months after the date of a decision 
                        by the Patent Trial and Appeal Board 
                        under section 134 or 135 or a decision 
                        by a Federal court under [section 141, 
                        145, or 146] section 141 or 146 in a 
                        case in which allowable claims remain 
                        in the application; or

           *       *       *       *       *       *       *

                    (B) Guarantee of no more than 3-year 
                application pendency.--Subject to the 
                limitations under paragraph (2), if the issue 
                of an original patent is delayed due to the 
                failure of the United States Patent and 
                Trademark Office to issue a patent within 3 
                years after the actual filing date of the 
                application under section 111(a) in the United 
                States or, in the case of an international 
                application, the date of commencement of the 
                national stage under section 371 in the 
                international application, [not including--] 
                the term of the patent shall be extended 1 day 
                for each day after the end of that 3-year 
                period until the patent is issued, not 
                including--
                            (i) any time [consumed by continued 
                        examination of the application 
                        requested by the applicant] consumed 
                        after continued examination of the 
                        application is requested by the 
                        applicant under section 132(b);

           *       *       *       *       *       *       *

                            (iii) any delay in the processing 
                        of the application by the United States 
                        Patent and Trademark Office requested 
                        by the applicant except as permitted by 
                        paragraph (3)(C)[,].
                [the term of the patent shall be extended 1 day 
                for each day after the end of that 3-year 
                period until the patent is issued.]

           *       *       *       *       *       *       *


PART III--PATENTS AND PROTECTION OF PATENT RIGHTS

           *       *       *       *       *       *       *


CHAPTER 28--INFRINGEMENT OF PATENTS

           *       *       *       *       *       *       *


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

    (a) * * *

           *       *       *       *       *       *       *

    [(f) Unreasonable Assertion of Defense.--If the defense 
under this section is pleaded by a person who is found to 
infringe the patent and who subsequently fails to demonstrate a 
reasonable basis for asserting the defense, the court shall 
find the case exceptional for the purpose of awarding attorney 
fees under section 285.
    [(g) Invalidity.--A patent shall not be deemed to be 
invalid under section 102 or 103 solely because a defense is 
raised or established under this section.]

           *       *       *       *       *       *       *


   CHAPTER 29--REMEDIES FOR INFRINGEMENT OF PATENT, AND OTHER ACTIONS

Sec.
281. Remedy for infringement of patent.
281A. Pleading requirements for patent infringement actions.
     * * * * * * *
[285. Attorney fees.]
285. Fees and other expenses.
     * * * * * * *
[290. Notice of patent suits.]
290. Notice of patent suits; disclosure of interests.
     * * * * * * *
[296. Liability of States, instrumentalities of States, and State 
          officials for infringement of patents.]
296. Stay of action against customer.
     * * * * * * *
299A. Discovery in patent infringement action.
     * * * * * * *

Sec. 281A. Pleading requirements for patent infringement actions

    (a) Pleading Requirements.--Except as provided in 
subsection (b), in a civil action in which a party asserts a 
claim for relief arising under any Act of Congress relating to 
patents, a party alleging infringement shall include in the 
initial complaint, counterclaim, or cross-claim for patent 
infringement, unless the information is not reasonably 
accessible to such party, the following:
            (1) An identification of each patent allegedly 
        infringed.
            (2) An identification of each claim of each patent 
        identified under paragraph (1) that is allegedly 
        infringed.
            (3) For each claim identified under paragraph (2), 
        an identification of each accused process, machine, 
        manufacture, or composition of matter (referred to in 
        this section as an ``accused instrumentality'') alleged 
        to infringe the claim.
            (4) For each accused instrumentality identified 
        under paragraph (3), an identification with 
        particularity, if known, of--
                    (A) the name or model number of each 
                accused instrumentality; or
                    (B) if there is no name or model number, a 
                description of each accused instrumentality.
            (5) For each accused instrumentality identified 
        under paragraph (3), a clear and concise statement of--
                    (A) where each element of each claim 
                identified under paragraph (2) is found within 
                the accused instrumentality; and
                    (B) with detailed specificity, how each 
                limitation of each claim identified under 
                paragraph (2) is met by the accused 
                instrumentality.
            (6) For each claim of indirect infringement, a 
        description of the acts of the alleged indirect 
        infringer that contribute to or are inducing the direct 
        infringement.
            (7) A description of the authority of the party 
        alleging infringement to assert each patent identified 
        under paragraph (1) and of the grounds for the court's 
        jurisdiction.
            (8) A clear and concise description of the 
        principal business, if any, of the party alleging 
        infringement.
            (9) A list of each complaint filed, of which the 
        party alleging infringement has knowledge, that asserts 
        or asserted any of the patents identified under 
        paragraph (1).
            (10) For each patent identified under paragraph 
        (1), whether a standard-setting body has specifically 
        declared such patent to be essential, potentially 
        essential, or having potential to become essential to 
        that standard-setting body, and whether the United 
        States Government or a foreign government has imposed 
        specific licensing requirements with respect to such 
        patent.
    (b) Information Not Readily Accessible.--If information 
required to be disclosed under subsection (a) is not readily 
accessible to a party, that information may instead be 
generally described, along with an explanation of why such 
undisclosed information was not readily accessible, and of any 
efforts made by such party to access such information.
    (c) Confidential Information.--A party required to disclose 
information described under subsection (a) may file, under 
seal, information believed to be confidential, with a motion 
setting forth good cause for such sealing. If such motion is 
denied by the court, the party may seek to file an amended 
complaint.
    (d) Exemption.--A civil action that includes a claim for 
relief arising under section 271(e)(2) shall not be subject to 
the requirements of subsection (a).

           *       *       *       *       *       *       *


Sec. 284. Damages

    (a) In General.--Upon finding for the claimant the court 
shall award the claimant damages adequate to compensate for the 
infringement, but in no event less than a reasonable royalty 
for the use made of the invention by the infringer, together 
with interest and costs as fixed by the court.
    (b) Assessment by Court; Treble Damages.--When the damages 
are not found by a jury, the court shall assess them. In either 
event the court may increase the damages up to three times the 
amount found or assessed. Increased damages under this 
paragraph shall not apply to provisional rights under section 
154(d).
    (c) Willful Infringement.--A claimant seeking to establish 
willful infringement may not rely on evidence of pre-suit 
notification of infringement unless that notification 
identifies with particularity the asserted patent, identifies 
the product or process accused, and explains with 
particularity, to the extent possible following a reasonable 
investigation or inquiry, how the product or process infringes 
one or more claims of the patent.
    (d) Expert Testimony.--The court may receive expert 
testimony as an aid to the determination of damages or of what 
royalty would be reasonable under the circumstances.

[Sec. 285. Attorney fees

    [The court in exceptional cases may award reasonable 
attorney fees to the prevailing party.]

Sec. 285. Fees and other expenses

    (a) Award.--The court shall award, to a prevailing party, 
reasonable fees and other expenses incurred by that party in 
connection with a civil action in which any party asserts a 
claim for relief arising under any Act of Congress relating to 
patents, unless the court finds that the position and conduct 
of the nonprevailing party or parties were reasonably justified 
in law and fact or that special circumstances (such as severe 
economic hardship to a named inventor) make an award unjust.
    (b) Certification and Recovery.--Upon motion of any party 
to the action, the court shall require another party to the 
action to certify whether or not the other party will be able 
to pay an award of fees and other expenses if such an award is 
made under subsection (a). If a nonprevailing party is unable 
to pay an award that is made against it under subsection (a), 
the court may make a party that has been joined under section 
299(d) with respect to such party liable for the unsatisfied 
portion of the award.
    (c) Covenant Not to Sue.--A party to a civil action that 
asserts a claim for relief arising under any Act of Congress 
relating to patents against another party, and that 
subsequently unilaterally extends to such other party a 
covenant not to sue for infringement with respect to the patent 
or patents at issue, shall be deemed to be a nonprevailing 
party (and the other party the prevailing party) for purposes 
of this section, unless the party asserting such claim would 
have been entitled, at the time that such covenant was 
extended, to voluntarily dismiss the action or claim without a 
court order under Rule 41 of the Federal Rules of Civil 
Procedure.

           *       *       *       *       *       *       *


Sec. 290. Notice of patent [suits] suits; disclosure of interests

    [The clerks] (a) Notice of Patent Suits._The clerks of the 
courts of the United States, within one month after the filing 
of an action under this title shall give notice thereof in 
writing to the Director, setting forth so far as known the 
names and addresses of the parties, name of the inventor, and 
the designating number of the patent upon which the action has 
been brought. If any other patent is subsequently included in 
the action he shall give like notice thereof. Within one month 
after the decision is rendered or a judgment issued the clerk 
of the court shall give notice thereof to the Director. The 
Director shall, on receipt of such notices, enter the same in 
the file of such patent.
    (b) Initial Disclosure.--
            (1) In general.--Except as provided in paragraph 
        (2), upon the filing of an initial complaint for patent 
        infringement, the plaintiff shall disclose to the 
        Patent and Trademark Office, the court, and each 
        adverse party the identity of each of the following:
                    (A) The assignee of the patent or patents 
                at issue.
                    (B) Any entity with a right to sublicense 
                or enforce the patent or patents at issue.
                    (C) Any entity, other than the plaintiff, 
                that the plaintiff knows to have a financial 
                interest in the patent or patents at issue or 
                the plaintiff.
                    (D) The ultimate parent entity of any 
                assignee identified under subparagraph (A) and 
                any entity identified under subparagraph (B) or 
                (C).
            (2) Exemption.--The requirements of paragraph (1) 
        shall not apply with respect to a civil action filed 
        under subsection (a) that includes a cause of action 
        described under section 271(e)(2).
    (c) Disclosure Compliance.--
            (1) Publicly traded.--For purposes of subsection 
        (b)(1)(C), if the financial interest is held by a 
        corporation traded on a public stock exchange, an 
        identification of the name of the corporation and the 
        public exchange listing shall satisfy the disclosure 
        requirement.
            (2) Not publicly traded.--For purposes of 
        subsection (b)(1)(C), if the financial interest is not 
        held by a publicly traded corporation, the disclosure 
        shall satisfy the disclosure requirement if the 
        information identifies--
                    (A) in the case of a partnership, the name 
                of the partnership and the name and 
                correspondence address of each partner or other 
                entity that holds more than a 5-percent share 
                of that partnership;
                    (B) in the case of a corporation, the name 
                of the corporation, the location of 
                incorporation, the address of the principal 
                place of business, and the name of each officer 
                of the corporation; and
                    (C) for each individual, the name and 
                correspondence address of that individual.
    (d) Ongoing Duty of Disclosure to the Patent and Trademark 
Office.--
            (1) In general.--A plaintiff required to submit 
        information under subsection (b) or a subsequent owner 
        of the patent or patents at issue shall, not later than 
        90 days after any change in the assignee of the patent 
        or patents at issue or an entity described under 
        subparagraph (B) or (D) of subsection (b)(1), submit to 
        the Patent and Trademark Office the updated 
        identification of such assignee or entity.
            (2) Failure to comply.--With respect to a patent 
        for which the requirement of paragraph (1) has not been 
        met--
                    (A) the plaintiff or subsequent owner shall 
                not be entitled to recover reasonable fees and 
                other expenses under section 285 or increased 
                damages under section 284 with respect to 
                infringing activities taking place during any 
                period of noncompliance with paragraph (1), 
                unless the denial of such damages or fees would 
                be manifestly unjust; and
                    (B) the court shall award to a prevailing 
                party accused of infringement reasonable fees 
                and other expenses under section 285 that are 
                incurred to discover the updated assignee or 
                entity described under paragraph (1), unless 
                such sanctions would be unjust.
    (e) Definitions.--In this section:
            (1) Financial interest.--The term ``financial 
        interest''--
                    (A) means--
                            (i) with regard to a patent or 
                        patents, the right of a person to 
                        receive proceeds related to the 
                        assertion of the patent or patents, 
                        including a fixed or variable portion 
                        of such proceeds; and
                            (ii) with regard to the plaintiff, 
                        direct or indirect ownership or control 
                        by a person of more than 5 percent of 
                        such plaintiff; and
                    (B) does not mean--
                            (i) ownership of shares or other 
                        interests in a mutual or common 
                        investment fund, unless the owner of 
                        such interest participates in the 
                        management of such fund; or
                            (ii) the proprietary interest of a 
                        policyholder in a mutual insurance 
                        company or of a depositor in a mutual 
                        savings association, or a similar 
                        proprietary interest, unless the 
                        outcome of the proceeding could 
                        substantially affect the value of such 
                        interest.
            (2) Proceeding.--The term ``proceeding'' means all 
        stages of a civil action, including pretrial and trial 
        proceedings and appellate review.
            (3) Ultimate parent entity.--
                    (A) In general.--Except as provided in 
                subparagraph (B), the term ``ultimate parent 
                entity'' has the meaning given such term in 
                section 801.1(a)(3) of title 16, Code of 
                Federal Regulations, or any successor 
                regulation.
                    (B) Modification of definition.--The 
                Director may modify the definition of 
                ``ultimate parent entity'' by regulation.

Sec. 291. Derived Patents

    (a) * * *
    (b) Filing Limitation.--An action under this section may be 
filed only before the end of the 1-year period beginning on the 
date of the issuance of the first patent containing a claim to 
the allegedly derived invention and naming an individual 
alleged to have derived such invention as the inventor [or 
joint inventor] or a joint inventor.

           *       *       *       *       *       *       *


[Sec. 296. Liability of States, instrumentalities of States, and State 
                    officials for infringement of patents

    [(a) In General.--Any State, any instrumentality of a 
State, and any officer or employee of a State or 
instrumentality of a State acting in his official capacity, 
shall not be immune, under the eleventh amendment of the 
Constitution of the United States or under any other doctrine 
of sovereign immunity, from suit in Federal court by any 
person, including any governmental or nongovernmental entity, 
for infringement of a patent under section 271, or for any 
other violation under this title.
    [(b) Remedies.--In a suit described in subsection (a) for a 
violation described in that subsection, remedies (including 
remedies both at law and in equity) are available for the 
violation to the same extent as such remedies are available for 
such a violation in a suit against any private entity. Such 
remedies include damages, interest, costs, and treble damages 
under section 284, attorney fees under section 285, and the 
additional remedy for infringement of design patents under 
section 289.]

Sec. 296. Stay of action against customer

    (a) Stay of Action against Customer.--Except as provided in 
subsection (d), in any civil action arising under any Act of 
Congress relating to patents, the court shall grant a motion to 
stay at least the portion of the action against a covered 
customer related to infringement of a patent involving a 
covered product or process if the following requirements are 
met:
            (1) The covered manufacturer and the covered 
        customer consent in writing to the stay.
            (2) The covered manufacturer is a party to the 
        action or to a separate action involving the same 
        patent or patents related to the same covered product 
        or process.
            (3) The covered customer agrees to be bound by any 
        issues that the covered customer has in common with the 
        covered manufacturer and are finally decided as to the 
        covered manufacturer in an action described in 
        paragraph (2).
            (4) The motion is filed after the first pleading in 
        the action but not later than the later of--
                    (A) the 120th day after the date on which 
                the first pleading in the action is served that 
                specifically identifies the covered product or 
                process as a basis for the covered customer's 
                alleged infringement of the patent and that 
                specifically identifies how the covered product 
                or process is alleged to infringe the patent; 
                or
                    (B) the date on which the first scheduling 
                order in the case is entered.
    (b) Applicability of Stay.--A stay issued under subsection 
(a) shall apply only to the patents, products, systems, or 
components accused of infringement in the action.
    (c) Lift of Stay.--
            (1) In general.--A stay entered under this section 
        may be lifted upon grant of a motion based on a showing 
        that--
                    (A) the action involving the covered 
                manufacturer will not resolve a major issue in 
                suit against the covered customer; or
                    (B) the stay unreasonably prejudices and 
                would be manifestly unjust to the party seeking 
                to lift the stay.
            (2) Separate manufacturer action involved.--In the 
        case of a stay entered based on the participation of 
        the covered manufacturer in a separate action involving 
        the same patent or patents related to the same covered 
        product or process, a motion under this subsection may 
        only be made if the court in such separate action 
        determines the showing required under paragraph (1) has 
        been met.
    (d) Exemption.--This section shall not apply to an action 
that includes a cause of action described under section 
271(e)(2).
    (e) Consent Judgment.--If, following the grant of a motion 
to stay under this section, the covered manufacturer seeks or 
consents to entry of a consent judgment relating to one or more 
of the common issues that gave rise to the stay, or declines to 
prosecute through appeal a final decision as to one or more of 
the common issues that gave rise to the stay, the court may, 
upon grant of a motion, determine that such consent judgment or 
unappealed final decision shall not be binding on the covered 
customer with respect to one or more of such common issues 
based on a showing that such an outcome would unreasonably 
prejudice and be manifestly unjust to the covered customer in 
light of the circumstances of the case.
    (f) Rule of Construction.--Nothing in this section shall be 
construed to limit the ability of a court to grant any stay, 
expand any stay granted under this section, or grant any motion 
to intervene, if otherwise permitted by law.
    (g) Definitions.--In this section:
            (1) Covered customer.--The term ``covered 
        customer'' means a party accused of infringing a patent 
        or patents in dispute based on a covered product or 
        process.
            (2) Covered manufacturer.--The term ``covered 
        manufacturer'' means a person that manufactures or 
        supplies, or causes the manufacture or supply of, a 
        covered product or process or a relevant part thereof.
            (3) Covered product or process.--The term ``covered 
        product or process'' means a product, process, system, 
        service, component, material, or apparatus, or relevant 
        part thereof, that--
                    (A) is alleged to infringe the patent or 
                patents in dispute; or
                    (B) implements a process alleged to 
                infringe the patent or patents in dispute.

           *       *       *       *       *       *       *


Sec. 299. Joinder of parties

    (a) * * *

           *       *       *       *       *       *       *

    (d) Joinder of Interested Parties.--
            (1) Joinder.--In a civil action arising under any 
        Act of Congress relating to patents in which fees and 
        other expenses have been awarded under section 285 to a 
        prevailing party defending against an allegation of 
        infringement of a patent claim, and in which the 
        nonprevailing party alleging infringement is unable to 
        pay the award of fees and other expenses, the court 
        shall grant a motion by the prevailing party to join an 
        interested party if such prevailing party shows that 
        the nonprevailing party has no substantial interest in 
        the subject matter at issue other than asserting such 
        patent claim in litigation.
            (2) Limitation on joinder.--
                    (A) Discretionary denial of motion.--The 
                court may deny a motion to join an interested 
                party under paragraph (1) if--
                            (i) the interested party is not 
                        subject to service of process; or
                            (ii) joinder under paragraph (1) 
                        would deprive the court of subject 
                        matter jurisdiction or make venue 
                        improper.
                    (B) Required denial of motion.--The court 
                shall deny a motion to join an interested party 
                under paragraph (1) if--
                            (i) the interested party did not 
                        timely receive the notice required by 
                        paragraph (3); or
                            (ii) within 30 days after receiving 
                        the notice required by paragraph (3), 
                        the interested party renounces, in 
                        writing and with notice to the court 
                        and the parties to the action, any 
                        ownership, right, or direct financial 
                        interest (as described in paragraph 
                        (4)) that the interested party has in 
                        the patent or patents at issue.
            (3) Notice requirement.--An interested party may 
        not be joined under paragraph (1) unless it has been 
        provided actual notice, within 30 days after the date 
        on which it has been identified in the initial 
        disclosure provided under section 290(b), that it has 
        been so identified and that such party may therefore be 
        an interested party subject to joinder under this 
        subsection. Such notice shall be provided by the party 
        who subsequently moves to join the interested party 
        under paragraph (1), and shall include language that--
                    (A) identifies the action, the parties 
                thereto, the patent or patents at issue, and 
                the pleading or other paper that identified the 
                party under section 290(b); and
                    (B) informs the party that it may be joined 
                in the action and made subject to paying an 
                award of fees and other expenses under section 
                285(b) if--
                            (i) fees and other expenses are 
                        awarded in the action against the party 
                        alleging infringement of the patent or 
                        patents at issue under section 285(a);
                            (ii) the party alleging 
                        infringement is unable to pay the award 
                        of fees and other expenses;
                            (iii) the party receiving notice 
                        under this paragraph is determined by 
                        the court to be an interested party; 
                        and
                            (iv) the party receiving notice 
                        under this paragraph has not, within 30 
                        days after receiving such notice, 
                        renounced in writing, and with notice 
                        to the court and the parties to the 
                        action, any ownership, right, or direct 
                        financial interest (as described in 
                        paragraph (4)) that the interested 
                        party has in the patent or patents at 
                        issue.
            (4) Interested party defined.--In this subsection, 
        the term ``interested party'' means a person, other 
        than the party alleging infringement, that--
                    (A) is an assignee of the patent or patents 
                at issue;
                    (B) has a right, including a contingent 
                right, to enforce or sublicense the patent or 
                patents at issue; or
                    (C) has a direct financial interest in the 
                patent or patents at issue, including the right 
                to any part of an award of damages or any part 
                of licensing revenue, except that a person with 
                a direct financial interest does not include--
                            (i) an attorney or law firm 
                        providing legal representation in the 
                        civil action described in paragraph (1) 
                        if the sole basis for the financial 
                        interest of the attorney or law firm in 
                        the patent or patents at issue arises 
                        from the attorney or law firm's receipt 
                        of compensation reasonably related to 
                        the provision of the legal 
                        representation; or
                            (ii) a person whose sole financial 
                        interest in the patent or patents at 
                        issue is ownership of an equity 
                        interest in the party alleging 
                        infringement, unless such person also 
                        has the right or ability to influence, 
                        direct, or control the civil action.

Sec. 299A. Discovery in patent infringement action

    (a) Discovery in Patent Infringement Action.--Except as 
provided in subsection (b), in a civil action arising under any 
Act of Congress relating to patents, if the court determines 
that a ruling relating to the construction of terms used in a 
patent claim asserted in the complaint is required, discovery 
shall be limited, until such ruling is issued, to information 
necessary for the court to determine the meaning of the terms 
used in the patent claim, including any interpretation of those 
terms used to support the claim of infringement.
    (b) Discretion To Expand Scope of Discovery.--
            (1) Timely resolution of actions.--If, under any 
        provision of Federal law (including the amendments made 
        by the Drug Price Competition and Patent Term 
        Restoration Act of 1984 (Public Law 98-417)), 
        resolution within a specified period of time of a civil 
        action arising under any Act of Congress relating to 
        patents will necessarily affect the rights of a party 
        with respect to the patent, the court shall permit 
        discovery, in addition to the discovery authorized 
        under subsection (a), before the ruling described in 
        subsection (a) is issued as necessary to ensure timely 
        resolution of the action.
            (2) Resolution of motions.--When necessary to 
        resolve a motion properly raised by a party before a 
        ruling relating to the construction of terms described 
        in subsection (a) is issued, the court may allow 
        limited discovery in addition to the discovery 
        authorized under subsection (a) as necessary to resolve 
        the motion.
            (3) Special circumstances.--In special 
        circumstances that would make denial of discovery a 
        manifest injustice, the court may permit discovery, in 
        addition to the discovery authorized under subsection 
        (a), as necessary to prevent the manifest injustice.

           *       *       *       *       *       *       *


CHAPTER 31--INTER PARTES REVIEW

           *       *       *       *       *       *       *


Sec. 316. Conduct of inter partes review

    (a) Regulations.--The Director shall prescribe 
regulations--
            (1) * * *

           *       *       *       *       *       *       *

            (8) providing for the filing by the patent owner of 
        a response to [the petition under section 313] the 
        petition under section 311 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;

           *       *       *       *       *       *       *

            (12) setting a time period for requesting joinder 
        under section 315(c)[; and];
            (13) providing the petitioner with at least 1 
        opportunity to file written comments within a time 
        period established by the Director[.]; and
            (14) providing that for all purposes under this 
        chapter--
                    (A) each claim of a patent shall be 
                construed as such claim would be in a civil 
                action to invalidate a patent under section 
                282(b), including construing each claim of the 
                patent in accordance with the ordinary and 
                customary meaning of such claim as understood 
                by one of ordinary skill in the art and the 
                prosecution history pertaining to the patent; 
                and
                    (B) if a court has previously construed the 
                claim or a claim term in a civil action in 
                which the patent owner was a party, the Office 
                shall consider such claim construction.

           *       *       *       *       *       *       *


CHAPTER 32--POST-GRANT REVIEW

           *       *       *       *       *       *       *


Sec. 325. Relation to other proceedings or actions

    (a) * * *

           *       *       *       *       *       *       *

    (e) Estoppel.--
            (1) * * *
            (2) Civil actions and other proceedings.--The 
        petitioner in a post-grant review of a claim in a 
        patent under this chapter that results in a final 
        written decision under section 328(a), or the real 
        party in interest or privy of the petitioner, may not 
        assert either in a civil action arising in whole or in 
        part under section 1338 of title 28 or in a proceeding 
        before the International Trade Commission under section 
        337 of the Tariff Act of 1930 that the claim is invalid 
        on any ground that the petitioner raised [or reasonably 
        could have raised] during that post-grant review.

           *       *       *       *       *       *       *


Sec. 326. Conduct of post-grant review

    (a) Regulations.--The Director shall prescribe 
regulations--
            (1) * * *

           *       *       *       *       *       *       *

            (8) providing for the filing by the patent owner of 
        a response to [the petition under section 323] the 
        petition under section 321 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;

           *       *       *       *       *       *       *

            (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)[; and];
            (12) providing the petitioner with at least 1 
        opportunity to file written comments within a time 
        period established by the Director[.]; and
            (13) providing that for all purposes under this 
        chapter--
                    (A) each claim of a patent shall be 
                construed as such claim would be in a civil 
                action to invalidate a patent under section 
                282(b), including construing each claim of the 
                patent in accordance with the ordinary and 
                customary meaning of such claim as understood 
                by one of ordinary skill in the art and the 
                prosecution history pertaining to the patent; 
                and
                    (B) if a court has previously construed the 
                claim or a claim term in a civil action in 
                which the patent owner was a party, the Office 
                shall consider such claim construction.

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 11, UNITED STATES CODE

                     CHAPTER 1--GENERAL PROVISIONS

Sec. 101. Definitions

    In this title the following definitions shall apply:
            (1) * * *

           *       *       *       *       *       *       *

            (35A) The term ``intellectual property'' means--
                    (A) * * *

           *       *       *       *       *       *       *

                    (E) work of authorship protected under 
                title 17; [or]
                    (F) mask work protected under chapter 9 of 
                [title 17;] title 17; or
                    (G) a trademark, service mark, or trade 
                name, as those terms are defined in section 45 
                of the Act of July 5, 1946 (commonly referred 
                to as the ``Trademark Act of 1946'') (15 U.S.C. 
                1127);
        to the extent protected by applicable nonbankruptcy 
        law.

           *       *       *       *       *       *       *


CHAPTER 3--CASE ADMINISTRATION

           *       *       *       *       *       *       *


SUBCHAPTER IV--ADMINISTRATIVE POWERS

           *       *       *       *       *       *       *


Sec. 365. Executory contracts and unexpired leases

    (a) * * *

           *       *       *       *       *       *       *

    (n)(1) * * *
    (2) If the licensee elects to retain its rights, as 
described in paragraph (1)(B) of this subsection, under such 
contract--
            (A) * * *
            (B) the licensee shall make all [royalty payments] 
        royalty or other payments due under such contract for 
        the duration of such contract and for any period 
        described in paragraph (1)(B) of this subsection for 
        which the licensee extends such contract; [and]
            (C) the licensee shall be deemed to waive--
                    (i) * * *
                    (ii) any claim allowable under section 
                503(b) of this title arising from the 
                performance of such contract[.]; and
            (D) in the case of a trademark, service mark, or 
        trade name, the trustee shall not be relieved of a 
        contractual obligation to monitor and control the 
        quality of a licensed product or service.

           *       *       *       *       *       *       *


CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES

           *       *       *       *       *       *       *


SUBCHAPTER III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

           *       *       *       *       *       *       *


Sec. 1520. Effects of recognition of a foreign main proceeding

    (a) Upon recognition of a foreign proceeding that is a 
foreign main proceeding--
            (1) * * *

           *       *       *       *       *       *       *

            (3) unless the court orders otherwise, the foreign 
        representative may operate the debtor's business and 
        may exercise the rights and powers of a trustee under 
        and to the extent provided by sections 363 and 552[; 
        and];
            (4) section 552 applies to property of the debtor 
        that is within the territorial jurisdiction of the 
        United States[.]; and
            (5) section 365(n) applies to intellectual property 
        of which the debtor is a licensor or which the debtor 
        has transferred.

           *       *       *       *       *       *       *

                              ----------                              


              SECTION 1295 OF TITLE 28, UNITED STATES CODE

Sec. 1295. Jurisdiction of the United States Court of Appeals for the 
                    Federal Circuit

    (a) The United States Court of Appeals for the Federal 
Circuit shall have exclusive jurisdiction--
            (1) * * *

           *       *       *       *       *       *       *

            (4) Of an appeal from a decision of--
                    (A) the Patent Trial and Appeal Board of 
                the United States Patent and Trademark Office 
                with respect to a patent application, 
                derivation proceeding, reexamination, post-
                grant review, or inter partes review under 
                title 35, at the instance of a party who 
                exercised that party's right to participate in 
                the applicable proceeding before or appeal to 
                the Board, [except that an applicant or a party 
                to a derivation proceeding may also have remedy 
                by civil action pursuant to section 145 or 146 
                of title 35; an appeal under this subparagraph 
                of a decision of the Board with respect to an 
                application or derivation proceeding shall 
                waive the right of such applicant or party to 
                proceed under section 145 or 146 of title 35;] 
                except that a party to a derivation proceeding 
                may also have remedy by civil action under 
                section 146 of title 35; an appeal under this 
                subparagraph of a decision of the Board with 
                respect to a derivation proceeding shall waive 
                the right of such party to proceed under 
                section 146 of title 35;

           *       *       *       *       *       *       *

                    (C) a district court to which a case was 
                directed pursuant to [section 145, 146, or] 
                section 146 or 154(b) of title 35;

           *       *       *       *       *       *       *

                              ----------                              


                    LEAHY-SMITH AMERICA INVENTS ACT



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

    (a) Transitional Program.--
            (1) Establishment.--Not later than the date that is 
        1 year after the date of the enactment of this Act, the 
        Director shall issue regulations establishing and 
        implementing a transitional post-grant review 
        proceeding for review of the validity of covered 
        business method patents. The transitional proceeding 
        implemented pursuant to this subsection shall be 
        regarded as, and shall employ the standards and 
        procedures of, a post-grant review under chapter 32 of 
        title 35, United States Code, subject to the following:
                    (A) [Section 321(c)] Sections 321(c) and 
                326(a)(13) of title 35, United States Code, and 
                subsections (b), (e)(2), and (f) of section 325 
                of such title shall not apply to a transitional 
                proceeding.

           *       *       *       *       *       *       *

                    (C) A petitioner in a transitional 
                proceeding who challenges the validity of 1 or 
                more claims in a covered business method patent 
                on a ground raised under section 102 or 103 of 
                title 35, United States Code, as in effect on 
                the day before the effective date set forth in 
                section 3(n)(1), may support such ground only 
                on the basis of--
                            (i) prior art that is described by 
                        [section 102(a)] subsection (a) or (e) 
                        of section 102 of such title (as in 
                        effect on the day before such effective 
                        date); or

           *       *       *       *       *       *       *

                              ----------                              


                         ACT OF JANUARY 4, 2011

                          (Public Law 111-349)

 AN ACT To establish a pilot program in certain United States district 
  courts to encourage enhancement of expertise in patent cases among 
                            district judges.

SECTION 1. PILOT PROGRAM IN CERTAIN DISTRICT COURTS.

    (a) * * *

           *       *       *       *       *       *       *

    [(c) Duration.--The program established under subsection 
(a) shall terminate 10 years after the end of the 6-month 
period described in subsection (b).]
    (c) Duration.--The program established under subsection (a) 
shall be maintained using existing resources, and shall 
terminate 20 years after the end of the 6-month period 
described in subsection (b).

           *       *       *       *       *       *       *

                              ----------                              


             PATENT LAW TREATIES IMPLEMENTATION ACT OF 2012



           *       *       *       *       *       *       *
TITLE II--PATENT LAW TREATY IMPLEMENTATION

           *       *       *       *       *       *       *


SEC. 202. CONFORMING AMENDMENTS.

    (a) * * *
    (b) Relief in Respect of Time Limits and Reinstatement of 
Right.--Title 35, United States Code, is amended--
            (1) * * *

           *       *       *       *       *       *       *

            [(7) in section 361, by striking subsection (c) and 
        inserting the following:
    [``(c) International applications filed in the Patent and 
Trademark Office shall be filed in the English language, or an 
English translation shall be filed within such later time as 
may be fixed by the Director.'';]
            [(8)] (7) in section 364, by striking subsection 
        (b) and inserting the following:
    ``(b) An applicant's failure to act within prescribed time 
limits in connection with requirements pertaining to an 
international application may be excused as provided in the 
treaty and the Regulations.''; and
            [(9)] (8) in section 371(d), in the third sentence, 
        by striking ``, unless it be shown to the satisfaction 
        of the Director that such failure to comply was 
        unavoidable''.

           *       *       *       *       *       *       *

                            Dissenting Views

    We strongly oppose H.R. 3309, the ``Innovation Act.'' 
Although we believe certain legislative changes are needed to 
respond to litigation asymmetries when so-called patent 
trolls--also referred to as non-practicing entities (NPE's) or 
patent assertion entities (PAE's)--unfairly target small 
businesses and end users,\1\ the overall legislation is 
unbalanced and will discourage innovation. In particular, we 
oppose the legislation because:
---------------------------------------------------------------------------
    \1\Because many NPEs do not manufacture or run businesses with a 
substantial number of employees, they do not experience the disruptive 
effect that litigation may impose on businesses that do. Whether NPEs 
assert valid or dubious patents, they are more likely to settle, both 
prior to and after filing a lawsuit, for sums less than the estimated 
cost of litigation, which gives them greater leverage over alleged 
infringers. Also, because NPEs generally do not have corporate 
customers or consumers, they do not face the same reputational harms 
that operating companies do. See generally Brian T. Yeh, An Overview of 
the ``Patent Troll'' Debate, CRS R42668 (April 16, 2013) (describing 
NPEs and subsets of such entities, and analyzing the debate on their 
effect on innovation and role in litigation).

        (i)
                it has been considered pursuant to a rushed and 
                unfair process;

        (ii)
                it excludes the single most important step we 
                can take to improve patent quality and protect 
                against abusive litigation--ending US Patent 
                and Trademark Office (PTO) fee diversion;

        (iii)
                it includes a number of one-sided changes to 
                our civil justice system that apply to limit 
                the rights of all patent holders, not just 
                cases involving ``trolls''; and
        (iv)
                it violates our system of separation of powers 
                by imposing unnecessary mandates on the Federal 
                courts.

    There are few economic issues Congress will face that are 
more important than our patent system. Intellectual property 
intensive industries account for over a third of our Nation's 
gross domestic product, about 5 trillion dollars, and 
contribute over 40 million jobs to the U.S. economy.\2\ Our 
patent system, while not perfect, is the envy of the world and 
a significant driver of growth in our economy. While we support 
common sense changes to improve and enhance the system, we 
cannot support the changes included in H.R. 3309 which taken as 
a whole will unbalance the patent system for all patent owners 
(not just patent ``trolls''), disrupt comity with our coequal 
judicial branch of government, and discourage the very 
innovation that is the lifeblood of our economy.
---------------------------------------------------------------------------
    \2\Economics and Statistics Administration and the U.S. Patent and 
Trademark Office, 2012, ``Intellectual Property and the U.S. Economy: 
Industries in Focus,'' at vii.
---------------------------------------------------------------------------
    Our concerns are shared by a wide and deep range of 
participants and stakeholders in the patent system who have 
issued letters opposing or expressing numerous serious concerns 
with the legislation, including the Federal Judicial 
Conference, the American Bar Association (ABA), the American 
Intellectual Property Law Association (AIPLA), the Patent 
Officers Professional Association (POPA), the American 
Association of Universities (AAU), the Biotechnology Industry 
Association (BIO), the Coalition for Twenty-First Century 
Patent Reform (21C), the Innovation Alliance, the American 
Association for Justice (AAJ), the Pharmaceutical Research and 
Manufacturers Association (PhRMA), the Eagle Forum, the 
Institute of Electrical and Electronics Engineers, the National 
Association of Patent Practitioners (NAPP), the National 
Venture Capital Association, and the National Bankruptcy 
Conference.\3\
---------------------------------------------------------------------------
    \3\These and numerous other well-regarded groups and individuals 
have cited similar concerns with the bill. The following materials are 
on file with the House of Representatives Committee on the Judiciary, 
Democratic Staff, and many are accessible on the minority website: 
Letter from Jeffrey S. Sutton, Chair of the Committee on Rules of 
Practice and Procedure of the Judicial Conference of the United States, 
and Jonathan C. Rose, Secretary of the Committee on Rules of Practice 
and Procedure of the Judicial Conference of the United States, to 
Representative John Conyers, Jr., Ranking Member of the House Committee 
on the Judiciary (Nov. 6, 2013) (noting that ``[b]y dictating the 
outcome of the Rules Enabling Act process with respect to potential 
rules, Section 6 of H.R. 3309 runs counter to that process.''); Letter 
from Thomas M. Susman, Director of the Governmental Affairs Office of 
the American Bar Association, to Representative Robert Goodlatte, 
Chairman of the House Committee on the Judiciary, and Representative 
John Conyers, Jr., Ranking Member of the House Committee on the 
Judiciary (Nov. 14, 2013) (noting that ``[o]ur primary concerns regard 
provisions of the bill that call for Congress, rather than the courts, 
to establish certain rules of procedure for the Federal courts, thereby 
circumventing a rulemaking process that has served our justice system 
well for almost 80 years.''); Letter from Wayne P. Sobon, President of 
the American Intellectual Property Law Association, to Representative 
Robert Goodlatte, Chairman of the House Committee on the Judiciary 
(Nov. 19, 2013) (noting that ``AIPLA is concerned that the bill will 
mandate inflexible rules, many of which may have unintended 
consequences including impeding access to the courts, and we further 
believe that the Judicial Conference in its own discretion is in a 
better position to work with the district courts to institute 
appropriate case management rules.''); Letter from Robert D. Budens, 
President of the Patent Office Professional Association, to 
Representative Robert Goodlatte, Chairman of the House Committee on the 
Judiciary, and Representative John Conyers, Jr., Ranking Member of the 
House Committee on the Judiciary (Nov. 18, 2013) (arguing that ``the 
Innovation Act appears skewed against small inventors.''); Letter from 
the Association of American Universities, American Council of 
Education, Association of American Medical Colleges, Association of 
Public and Land-grant Universities, Association of University 
Technology Managers, and Council on Governmental Relations to 
Representative Robert Goodlatte, Chairman of the House Committee on the 
Judiciary, and Representative John Conyers, Jr., Ranking Member of the 
House Committee on the Judiciary (Nov. 19, 2013) (arguing that ``a 
number of provisions in the Manager's Amendment are problematic, 
including the extremely broad scope of civil actions to which fee 
shifting would apply and the high, indefinite threshold for a court's 
waiver of that fee shifting, the extent of the heightened pleading 
requirements, the breadth of the information required in Sec. 4's 
transparency provisions, and the narrowing of the scope of the estoppel 
provisions in the AIA's new post-grant review procedure.''); Letter 
from James C. Greenwood, President and CEO of the Biotechnology 
Industry Organization, to Representative Robert Goodlatte, Chairman of 
the House Committee on the Judiciary (Nov. 14, 2013) (arguing that ``in 
an attempt to target abusive litigation practices by the few, the 
proposals impose unjustified burdens on too many legitimate patent 
owners seeking to enforce and defend their inventions in good 
faith.''); Letter from Carl B. Horton of the Coalition for 21st Century 
Patent Reform to Representative Robert Goodlatte, Chairman of the House 
Committee on the Judiciary, and Representative John Conyers, Jr., 
Ranking Member of the House Committee on the Judiciary (Nov. 18, 2013) 
(noting that ``we continue to have a serious concern that the provision 
related to stays of discovery pending claim construction would prolong 
all patent litigation by a year or more, substantially increase its 
cost, and deny parties with meritorious positions of the timely relief 
they deserve.''); Letter from Brian Pomper, Executive Director of the 
Innovation Alliance, to Representative Robert Goodlatte, Chairman of 
the House Committee on the Judiciary, and Representative John Conyers, 
Jr., Ranking Member of the House Committee on the Judiciary (Nov. 19, 
2013) (arguing that ``[o]verly detailed pleading requirements, 
inflexible discovery limits, and broad provisions permitting stays 
against certain parties have the potential to undermine the 
enforceability of all patent rights, no matter how valuable the patent, 
and thus potentially incentivize infringement.''); Letter from Linda 
Lipsen, CEO of The American Association for Justice, to Representative 
Robert Goodlatte, Chairman of the House Committee on the Judiciary, and 
Representative John Conyers, Jr., Ranking Member of the House Committee 
on the Judiciary (Nov. 19, 2013) (arguing that the ``Innovation Act 
makes radical and unnecessary changes to United States patent law that 
would close the courthouse door to individual inventors and small 
start-ups.''); Letter from Chester Davis, Jr., Executive Vice President 
of Advocacy and Member Relations for the Pharmaceutical Research and 
Manufacturers of America, to Representative Robert Goodlatte, Chairman 
of the House Committee on the Judiciary, and Representative John 
Conyers, Jr., Ranking Member of the House Committee on the Judiciary 
(Nov. 13, 2013) (noting that ``many of the provisions contained in the 
recently introduced Innovation Act (H.R. 3309) perhaps unintentionally 
undermine the ability of patent owners more broadly to enforce their 
rights by filing a patent suit and litigating it to completion.''); 
Letter from Marc T. Apter, President of The Institute of Electrical and 
Electronics Engineers, to Representative Robert Goodlatte, Chairman of 
the House Committee on the Judiciary, and Representative John Conyers, 
Jr., Ranking Member of the House Committee on the Judiciary (Nov. 19, 
2013) (arguing that ``provisions in the Bill are still not sufficiently 
narrowly crafted to target litigation abuse and therefore would reduce 
the value and enforceability of patents more broadly.''); Letter from 
Priya Sinha Cloutier, Chair of The National Association of Patent 
Practitioners Government Affairs Committee, to Representative Robert 
Goodlatte, Chairman of the House Committee on the Judiciary (Nov. 19, 
2013) (arguing that ``the provisions contained in the recently 
introduced Innovation Act (H.R.3309) are not narrowly crafted to 
address abusive practices, butinstead broadly undermine the ability of 
patent owners to enforce their constitutionally protected,government 
(USPTO) granted patent rights.''); Letter from Bobby Franklin, 
President and CEO of the National Venture Capital Association, to 
Representative Robert Goodlatte, Chairman of the House Committee on the 
Judiciary, and Representative John Conyers, Jr., Ranking Member of the 
House Committee on the Judiciary (Nov. 20, 2013) (noting that it is 
``critical that Congress balance the need for patent litigation reform 
with the needs of those start-ups that depend on strong patent 
protection and that believe the system is working. Congress must also 
take care to avoid any unintended consequences that could weaken strong 
patent protection.''); Letter from Phyllis Schlafly, President of the 
Eagle Forum, to Chairman Robert Goodlatte (Oct. 29, 2013); and 
Memoranda of the National Bankruptcy Conference (Nov. 11-12, 2013) 
(noting the National Bankruptcy Conference's opposition to the 
enactment of section 6(d) of H.R. 3309 as a matter of international 
bankruptcy policy.).
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    For these reasons, and those described below, we 
respectfully dissent and urge our colleagues to reject this 
legislation when it comes to the House floor.

                       DESCRIPTION AND BACKGROUND

                     I. BRIEF SUMMARY OF H.R. 3309

    H.R. 3309 includes several common sense proposals that as a 
general matter we believe would improve the patent system and 
respond to abuses and asymmetries in the patent system. These 
include:

        (i)
                Transparency of Patent Ownership (Sec. 4)--
                requiring patent litigants to disclose the real 
                parties in interest in the asserted patent.\4\
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    \4\We find the additional fee-shifting provision in this section 
unnecessary and duplicative. We supported the Conyers/Watt substitute 
that did not create an additional fee-shifting requirement associated 
with the transparency obligations.

        (ii)
                Customer Stay (Sec. 5)--limiting the practice 
                of suing downstream users of a patented product 
                or technology, such as retailers, restaurants 
                or supermarkets, for infringement by allowing 
                the manufacturer to step in to defend against 
                an infringement claim.\5\
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    \5\We would hope that the final language concerning the customer 
stay could be reviewed and fine tuned if necessary to insure that the 
language does not have any unintended consequences in terms of 
protecting culpable parties. See, e.g., testimony of David J. Kappos 
before the Committee on the Judiciary, H.R. 3309 Innovation Act, Oct. 
29, 2013.

        (iii)
                Small Business Assistance (Sec. 7)--
                facilitating coordination between the USPTO 
                patent ombudsman, the Small Business 
                Administration, and the Minority Business 
                Development Agency to provide educational 
                resources and outreach programs for small 
                business concerns arising from patent 
                infringement and abusive patent litigation 
                practices.

    At the same time, we strongly oppose a number of provisions 
that go well beyond the problem of patent trolls and would harm 
legitimate patent holders and independent inventors. These 
include:

        (i)
                Limits on Access to the Courts (Sec. 3)--
                imposing a series of limitations on the civil 
                justice system involving patents, including 
                heightened pleading requirements; mandatory fee 
                shifting in most cases; and limitations on 
                discovery.

        (ii)
                Encroachment on Judicial Authority (Sec. 6)--
                imposing a series of mandates and directives on 
                the Federal judiciary involving patent 
                litigation in contravention of the time-tested 
                Rules Enabling Act process.

         II. DETAILED SECTION-BY-SECTION ANALYSIS OF H.R. 3309

    Sec. 1. Short Title. Section 1 sets forth the short title 
of the bill as the ``Innovation Act.''
    Sec. 2. Definitions. Section 2 provides for the definitions 
of ``Director'' and ``Office''.
    Sec. 3. Patent Infringement Actions. Subsection (a) imposes 
heightened pleading requirements on parties asserting patent 
infringement whether in an initial complaint, counterclaim or 
cross-claim. Current law governing pleading in all civil 
actions, including patent infringement claims, is somewhat 
fluid following the decisions of the U.S. Supreme Court in Bell 
Atlantic v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 
556 U.S. 662 (2009). Those cases moved away from the 
traditional ``notice'' pleading regime and moved towards more 
fact-based pleading requirements. Section 3(a) imposes 
statutory heightened pleading requirements by requiring patent 
holders to identify the patents and claims infringed and to 
provide more specificity as to how they are infringed.
    Subsection (b) alters the fee-shifting scheme under 
existing law. Currently, a court ``in exceptional cases may 
award reasonable attorney fees to the prevailing party'' in a 
patent infringement lawsuit. There is pending litigation 
concerning the meaning of the term ``exceptional cases.'' The 
Federal Circuit is expected to address this issue within the 
next month in Sidense Corp. v. Kilopass Tech., Inc.\6\ And the 
Supreme Court has granted certiorari in two cases involving 
fee-shifting in patent litigation this term, including Octane 
Fitness v. Icon Health & Fitness Inc. in which the two-step 
test to meet the ``exceptional case'' standard has been 
challenged.\7\ Section 3(b) would replace the current 
discretionary statutory provision with a mandatory fee-shifting 
provision. As amended by Representative Hakeem Jeffries' 
amendment at markup, it requires that fees shift to the non-
prevailing party unless they can meet the burden of 
establishing that their position was ``reasonably justified'' 
or that ``special circumstances''\8\ make an award unjust. The 
provision also defines a non-prevailing party to include a 
plaintiff patentee who ``subsequently unilaterally extends . . 
. a covenant not to sue for infringement with respect to the 
patent or patents at issue.''
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    \6\See Sidense Corp. v. Kilopass Tech., Inc., (Fed. Cir. pending 
2013).
    \7\Octane Fitness v. Icon Health & Fitness, Inc., 496 Fed. Appx. 57 
(Fed. Cir. 2012), cert. granted, 81 USLW 3567 (U.S. Oct. 1, 2013) (No. 
12-1184). Octane Fitness will consider the Federal Circuit's two-part 
test for satisfying the ``exceptional case'' standard. According to the 
Federal Circuit ``[a]bsent misconduct in conduct of the litigation or 
in securing the patent, sanctions may be imposed . . . only if both (1) 
the litigation is brought in subjective bad faith, and (2) the 
litigation is objectively baseless.'' Brooks Furniture Mfg. Inc. v. 
Futailer Int'l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). The Court 
also granted certiorari in Highmark, Inc. v. Allcare Health Management 
Systems, Inc., 687 F.3d 1300 (Fed. Cir. 2012), cert. granted, 81 USLW 
3562 (U.S. Oct 1, 2013) (No. 12-1163, 12A763), in which it will 
consider to what extent a district court's determination whether the 
criteria for ``exceptional case'' status has been met is entitled to 
deference.
    \8\The Jeffries Amendment parenthetically explains that ``special 
circumstances'' includes ``severe economic hardship to a named 
inventor).''
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    Subsection (c) establishes an additional mechanism for 
joinder of additional plaintiffs notwithstanding Federal Rules 
of Civil Procedure 19 and 20, which already provide for the 
permissive and mandatory joinder of parties, respectively. 
Under section 3(c) defendants may join additional parties 
having a financial interest in the patents at issue for the 
purpose of satisfying any award of attorneys' fees and other 
expenses against a judgment-proof patentee.
    Subsection (d) requires a judge to limit discovery in any 
case where the court will hold a Markman hearing\9\ to construe 
the terms in the patent claim and determine the scope of the 
patent. Markman proceedings can occur early in the litigation 
or at the end of full-scale discovery but before the trial. 
Section 3(d) strips the court of discretion to manage 
proceedings before it by requiring that they limit discovery in 
all cases to only that information needed to construe the 
claims of the patent and render a Markman ruling. This section 
further restricts the discretion of the court to expand the 
scope of discovery prior to claim construction only in cases 
with a statutory deadline (specifically including cases where a 
pharmaceutical company submits an abbreviated application for 
approval of a new drug) ``when necessary to resolve a motion 
properly raised'' or ``as necessary to prevent the manifest 
injustice.''
---------------------------------------------------------------------------
    \9\Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996).
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    Sec. 4. Transparency of Patent Ownership. Section 4(a) 
requires a patent owner who asserts an infringement claim in 
court to provide detailed information about all persons or 
entities having an interest in the patent. Specifically, the 
patent owner has an ongoing duty to inform the parties, the 
court, and the USPTO of the identity of any: (1) assignee of 
the patent, (2) entity with the right to sublicense or enforce 
the patent, (3) entity with any financial interest in the 
patent or in the patentee, and (4) the ultimate parent entity 
of the assignee. The patent owner is encouraged to comply with 
this requirement by causing it to forfeit attorneys fees under 
section 285 or enhanced damages. In addition, the patent owner 
may also be required to pay the opposing party's costs and 
attorneys fees incurred to determine the identity of the real 
parties at interest in the patent if the patent owner fails to 
comply with this section. Fees may be shifted even if the 
identity of additional parties was immaterial to the 
proceedings and may only be avoided if the court determines 
they are ``unjust.''
    Sec. 5. Customer-suit Exception. Currently, manufacturers 
or suppliers may seek leave to intervene in patent infringement 
actions against their customers or end users. They may also 
seek a declaratory judgment where a case or controversy exists, 
or pursue administrative legal action against a patent owner. 
Section 5(a) goes further to require an action against a 
customer be stayed if: 1) both the manufacturer and customer 
agree, 2) the customer agrees to be bound by any judgment 
against the manufacturer, and 3) the motion for a stay is 
brought within 120 days of service of the first infringement 
pleading.
    Sec. 6. Procedures and Practices to Implement and 
Recommendations to the Judicial Conference. Section 6 includes 
a number of mandates that the Federal judiciary change its 
rules of procedure in several specified areas. Subsection (a) 
requires the Judicial Conference to promulgate rules and 
procedures on core document discovery, electronic communication 
production, fee-shifting for additional document discovery, and 
the sequence and scope of discovery. Subsection (b) requires 
the Judicial Conference to develop case management procedures 
for all patent cases, including procedures that will focus on 
early disposition of the case. Subsection (c) requires the 
Supreme Court to eliminate Form 18 (concerning patent 
pleadings) and authorizes the Court to replace Form 18 with 
specific minimum contents.
    Section 6(d) makes two substantive amendments to the 
Bankruptcy Code. The first concerns chapter 15 of the 
Bankruptcy Code, which codifies the Model Law on Cross-Border 
Insolvency promulgate by the United Nations Commission on 
International Trade Law (UNCITRAL). It reflects a very 
carefully crafted international agreement that guides 
bankruptcy courts throughout the world about how to manage 
transnational insolvencies implicating the laws of other 
nations.\10\ To achieve its goal of reciprocal international 
cooperation, chapter 15 requires ``each country to recognize a 
foreign main proceeding in the debtor's home country as the 
leader in the worldwide effort and that it cooperate with that 
jurisdiction to achieve the best results for all 
concerned.''\11\ Section 6(d) would alter a fundamental 
principal of chapter 15, namely, that it not favor a particular 
country's law. It does this by requiring a U.S. court to apply 
Bankruptcy Code section 365(n) (which gives certain rights to 
intellectual property licensees where the debtor has rejected 
the license agreement) to ``foreign main proceedings,'' a type 
of chapter 15 case ``pending in the country where the debtor 
has the center of its main interests.''\12\ This change 
effectively imposes U.S. law whether or not it should apply to 
a particular license. For example, a U.S. bankruptcy court 
would be required to apply U.S. law to a license owned by a 
foreign company and issued under another country's law even if 
the intellectual property that is the subject of the license 
agreement is not located in the U.S.
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    \10\Enacted in 2005, chapter 15 is intended to ``provide effective 
mechanisms for dealing with cases of cross-border insolvency'' through 
various statutorily mandated objectives. Bankruptcy Abuse Prevention 
and Consumer Protection Act of 2005, Pub. L. No. 109-8, 119 Stat. 23 
(2005). The text of the Model Law and the Report of UNCITRAL on its 
adoption are found at U.N. G.A., 52d Sess., Supp. No. 17 (A/52/17). 
These include promoting cooperation between U.S. courts and the courts 
of foreign nations and ensuring ``fair and efficient administration of 
cross-border insolvencies that protects the interests of all creditors, 
and other interested entities, including the debtor.'' 11 U.S.C. 
Sec. 1501(a)(1) & (3) (2013). As explained in this Committee's report 
that accompanied identical legislation that led to the enactment of 
chapter 15, ``[c]ases brought under chapter 15 are intended to be 
ancillary to cases brought in a debtor's home country, unless a full 
United States bankruptcy case is brought under another chapter.'' H. 
Rep. No. 109-31, at 105-06 (2005).
    \11\Id.
    \12\11 U.S.C. Sec. 1506 (2013).
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    In addition, section 6(d) amends the Bankruptcy Code's 
definition of intellectual property to include trademarks, 
service marks, and trade names\13\ and imposes an affirmative 
duty on the debtor-licensor that has rejected the license 
contract to monitor and control the quality of the licensed 
product or service. This provision would apply to all types of 
bankruptcy cases, namely, liquidating chapter 7 cases, 
reorganizing chapter 11 cases, and transnational chapter 15 
bankruptcy cases.
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    \13\11 U.S.C. Sec. 101(35A) (2013).
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    Sec. 7. Small Business Education, Outreach, and Information 
Access. Subsection (a) requires the USPTO to develop 
educational resources and outreach programs for small business 
concerns arising from patent infringement and abusive patent 
litigation practices. It requires the Patent Ombudsman Program, 
established under AIA, to coordinate with small and minority 
business initiatives. The Director of the PTO is required under 
section 7(b) to develop a website for small businesses that 
should include patent transparency information required under 
the bill whenever a patentee sues on a patent.
    Sec. 8. Studies on Patent Transactions, Quality, and 
Examination. Section 8 mandates a number of concurrent studies. 
Subsection (a) requires a study on the secondary market 
oversight for patent transactions to promote transparency and 
ethical business practices and is due within 1 year of 
enactment of the bill. Subsection (b) requires a study on 
patents owned by the U.S. government and is due within 6 months 
of enactment of the bill. Subsection (c) requires a study on 
patent quality and access to the best information during 
examination. The GAO is also directed to evaluate the patent 
examination process at the USPTO and to assess the available 
technologies. The GAO study is due within 6 months of enactment 
of the bill. The manager's amendment includes a new subsection 
(d) which requires an additional study by the Administrative 
Office of the U.S. Courts to examine the feasibility of 
developing a pilot program for patent small claims proceedings.
    Two additional studies were added during the markup. One 
imposes yet another obligation on the USPTO to study a very 
broadly defined ``demand letter'' and issue a report to 
Congress within 1 year of enactment of the bill. The other 
requires the GAO to produce a study within 6 months of the 
enactment of the bill on the quality of business method patents 
asserted in patent infringement lawsuits.
    Sec. 9. Improvements and Technical Corrections to the 
Leahy-Smith America Invents Act. Section 9 makes several 
changes to patent law, many of which are not technical and 
would have a significant impact on patent system. A summary of 
these provisions follows:
    Section 9(a) repeals section 145, which allows a de novo 
appeal of denial of a patent application by the USPTO to a 
district court. Currently, a patent applicant has the option of 
either appealing a decision by the USPTO denying a patent 
application directly to the Federal Circuit under 35 U.S.C. 
Sec. 141 or initiating an action against the USPTO in district 
court under 35 U.S.C. Sec. 145. The Federal Circuit reviews an 
appeal of a USPTO decision solely based on the record that was 
before the agency. In a district court proceeding, however, the 
applicant can introduce new evidence and subpoena witnesses. 
The Supreme Court recently affirmed the expansive breadth of 
evidence that a patent applicant may introduce in a Sec. 145 
proceeding.\14\
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    \14\See Kappos v. Hyatt. 566 U.S. __, 132 S.Ct. 1690 (2012).
---------------------------------------------------------------------------
    Section 9(b) deletes ``or reasonably could have raised'' 
from section 325(e)(2) in the AIA's Post Grant Review (PGR) 
procedure. The AIA established this new first window procedure 
to enable early challenge of patents. PGR is intended to weed 
out weak issued patents before they have an adverse effect on 
the market. Section 325(e)(2) of the AIA currently contains an 
estoppel provision that prohibits a participant in PGR from 
asserting claims ``on any ground that the petitioner raised or 
reasonably could have raised during that post-grant review'' in 
a subsequent civil action. The revision now estops a PGR 
participant from raising in a subsequent lawsuit only those 
claims the petitioner actually raised in the PGR.
    Section 9 (c) eliminates the ``Broadest Reasonable 
Interpretation'' (BRI) standard and requires that claims of 
issued patents be construed in PGR and inter partes review 
(IPR) proceedings under the same standard used in district 
court. Patents before the district courts are presumed valid 
and subject to a ``clear and convincing'' standard of proof to 
establish validity. BRI is an administrative rule that the 
USPTO has used and the courts have sanctioned since the 1930's. 
After enactment of the AIA, however, the USPTO issued a 
rulemaking proceeding to determine the rules of practice to 
implement the newly created IPR proceeding, the PGR proceeding, 
and the transitional post-grant review proceeding for covered 
business method patents (Section 18/CBM program). The final 
rule requires the USPTO to apply BRI to construe certain patent 
claims before the agency, including those in the new IPR and 
PGR proceedings.\15\ This subsection, in effect, repeals the 
agency rulemaking and replaces the BRI standard with the same 
standard used in the district courts.
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    \15\See Federal Register/Vol. 77, No. 157, Aug. 14, 2012.
---------------------------------------------------------------------------
    Section 9(d) codifies the judicial doctrine against double-
patenting and applies it to patents issued after AIA under the 
first to file system. Current law prohibits two types of double 
patenting. One type is based on 35 U.S.C. Sec. 101, which has 
been construed to disallow multiple patents for the ``same 
invention.'' The other type is judicially created. The judicial 
doctrine against double patenting prevents a patentee from 
prolonging the life of a patent by rejecting claims in a second 
patent that are obvious variations from claims in a first 
patent. The provision codifies the concept that ``unless two 
patents from the same inventor could have validly issued had 
they been sought by two different inventors, the two patents 
must be owned by the same entity, and must both terminate upon 
the earliest termination of either patent.''\16\
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    \16\Summary of 21C Position, at 11.
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    Section 9(e) of the manager's amendment dispensed with the 
controversial expansion of the reach and duration of the 
transitional Section 18/CPM program included in the introduced 
version of H.R. 3309. The manager's amendment, however, 
redefines and expands the scope of prior art under the 
transitional covered business method program, and retains the 
seemingly unencumbered authority of the Director to waive fees 
under this section.
    Section 9(f) extends the life of certain patents if there 
are delays in the issuance of those patents. There are often 
delays during the patent examination process and Congress 
enacted 35 U.S.C. Sec. 154(b)(1) to provide for an extension of 
a patent term for USPTO delays. Part B delay occurs when the 
USPTO fails to issue a patent within 3 years from the filing 
date of the patent application. For a ``B'' type delay there is 
an addition of one day for each day after the end of the 3-year 
period beginning on the date the patent application was filed. 
Judges on the U.S. District Court for the Eastern District of 
Virginia have disagreed about the meaning of section 
154(b)(1)(B) and how the filing of a Request for Continued 
Examination (RCE) impacts the ability to accrue ``B'' type 
Patent Term Adjustment. Section 9(f) would amend 
Sec. 154(b)(1)(B) to eliminate any patent term adjustment for 
``B delay'' occurring after an applicant files a RCE. The 
section would make the change effective with regards to any 
``patent application or patent'' pending on the Act's date of 
enactment. This section would codify the USPTO's current 
practice of excluding any time consumed by an RCE from the 
calculation of patent term adjustment under section 
154(b)(1)(B). This change would overturn the November 1, 2012 
decision in Exelixis, Inc. v. Kappos I\17\ and codify the 
January 28, 2013 decision in Exelixis, Inc. v. Kappos II.\18\
---------------------------------------------------------------------------
    \17\No. 1: 12cv96 (E.D. Va. Nov. 1, 2012).
    \18\No. 1: 12cv574 (LMB/TRJ) (E.D. Va. Jan. 28, 2013).
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    Section 9(g) clarifies Federal jurisdiction over cases in 
which a patent issue is not the primary issue in the case. This 
provision is presumed to be an attempt to override the Supreme 
Court decision in Gunn v. Minton\19\ in which the Court held 
that a legal malpractice claim did not ``arise under'' Federal 
patent law for purposes of section 1338(a). The Court applied a 
four-prong test: ``federal jurisdiction over a state law claim 
will lie if a federal issue is: (1) necessarily raised, (2) 
actually disputed, (3) substantial, and (4) capable of 
resolution in federal court without disrupting the federal-
state balance approved by Congress.'' Although the Court found 
that the first two prongs were satisfied, jurisdiction was 
absent because the patent question ``was not substantial in the 
relevant sense'' and therefore the third prong was not 
satisfied. This subsection focuses on the third of the four 
prongs without relating it to the first two.
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    \19\568 U.S. __ (2013).
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    Section 9(h) extends the life of the patent pilot program 
from 10 to 20 years.
    Section 9(i) makes a series of seven additional changes it 
classifies as ``technical,'' including one that extends the 
time limit for bringing disciplinary proceedings before the 
USPTO. Like several other technical changes, the rationale has 
never been explained and it does not appear to be supported by 
the USPTO.
    Sec. 10. Effective date. Section 10 provides that unless 
otherwise specified in the bill, the provisions shall become 
effective on the date of enactment and apply to any patent 
issued or any case filed on or after the date of enactment.

                        CONCERNS WITH H.R. 3309

    As noted above, we oppose the legislation for a number of 
reasons, including the rushed process; the failure to end USPTO 
fee diversion; the legislation's limitations imposed on the 
patent civil justice system in a manner that will harm all 
patent holders, not just ``trolls;'' and its general disregard 
for our system of mutual respect for the prerogatives of a 
coequal branch of government by imposing unnecessary and overly 
prescriptive mandates on the Federal courts. The following is a 
more detailed description of these concerns.

                I. RUSHED AND UNFAIR LEGISLATIVE PROCESS

    Legislation involving a subject matter as critical and 
sensitive as patent law should be reviewed and considered only 
under the most careful and deliberative process. The America 
Invents Act (AIA),\20\ was signed into law by President Barrack 
Obama in 2011 which was the most comprehensive overhaul of the 
U.S. patent system since 1952.\21\ That legislation was the 
subject of numerous hearings over more than three 
Congresses.\22\
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    \20\Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 
285, (2011).
    \21\The White House, ``President Obama Signs America Invents Act, 
Overhauling the Patent System to Stimulate Economic Growth, and 
Announces New Steps to Help Entrepreneurs Create Jobs'' (Sept. 16, 
2011).
    \22\The AIA was intended, in part, to provide American inventors 
and entrepreneurs with new or improved administrative alternatives to 
costly litigation regarding patent validity, freeing them to focus on 
innovation and job creation. Implementation of the various provisions 
of the AIA was staggered to allow the agency adequate time to comply 
with the new statutory mandates. ``America Invents Act: Effective 
Dates, United States Patent and Trademark Office (USPTO)'' (Oct. 5, 
2011) http://www.uspto.gov/aia_implementation/aia-effective-dates.pdf. 
In addition to modifying USPTO practice and procedures to provide 
alternatives to litigation, the AIA also sought to address allegations 
of patent litigation abuse head-on. For example, a provision was 
hastily added to the bill just prior to the markup to discourage the 
improper joinder of multiple, unrelated defendants in a single suit. 
David O. Taylor, ``Patent Misjoinder,'' 88 N.Y.U. L. Rev. 652, 655-656 
(2013). Companies argued that entities that do not manufacture any 
products would sue a large number of defendants in an inconvenient 
forum on distinct grounds of infringement. Section 299 of the AIA 
severely restricts this practice by imposing specific requirements that 
must be met before a court may allow numerous accused infringers to be 
sued together.
---------------------------------------------------------------------------
    Yet now, a little more than 2 years after the AIA was 
signed into law, and at a time when many important aspects of 
the new law are largely untested, we are again considering a 
significant patent overhaul. In this context, and given the 
stakes involved, it is all the more important that we proceed 
with caution and deliberation. This was the message strongly 
delivered to the Committee just a few weeks ago by David J. 
Kappos, the most recent Director of the USPTO:

        At the outset of considering further changes to our 
        patent system, we must recognize that the time constant 
        of the patent system--the period between new patent 
        application and court decision on patent infringement 
        claim--is very long. Many years. As such, the impact of 
        Congress' very recent major changes to our patent 
        system has barely begun to be felt. In such long time 
        constant situations, every engineering instinct and 
        every leadership instinct tells me to proceed with 
        caution.

        Moreover, in long time constant systems such as our 
        patent system, over-correction is a major danger. By 
        the time an over-correction is apparent, it will be 
        years after the system is badly damaged. And we are not 
        tinkering with just any system here; we are reworking 
        the greatest innovation engine the world has ever 
        known, almost instantly after it has been significantly 
        overhauled. If there were ever a case where caution is 
        called for, this is it.

        Caution in turn calls for a deliberative process that 
        takes the time to reach out and listen to all 
        stakeholders, including those who will be the fastest 
        ones off the mark. Many small innovators--today's 
        Edisons--have not had time to make their views heard. 
        Others having various levels of dependence on strong IP 
        rights are just now beginning to consider the prospect 
        of further changes to our patent system. We need to 
        allow these important stakeholders their time to 
        participate.

        Caution also calls for us to ask: is the building on 
        fire? Do we have an emergency that requires immediate 
        action? No. The building is not on fire.\23\
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    \23\Statement of David J. Kappos before the Committee on the 
Judiciary, H.R. 3309 Innovation Act, Oct. 29, 2013 (emphasis added). In 
this regard, it is useful to note the AIA required the Government 
Accountability Office (GAO) to conduct a study of the litigation and 
litigation practices of these ``non-practicing entities'' or NPEs. The 
GAO study made some key observations about NPEs, more pejoratively 
referred to as ``patent trolls,'' who engage in abusive litigation 
tactics to enforce patents of dubious validity or patent portfolios 
purchased for the sole purpose of monetizing through licensing or 
litigation. U.S. Government Accountability Office, 2013, ``Intellectual 
Property: Assessing Factors That Affect Patent Infringement Litigation 
Could Help Improve Patent Quality'', GAO-13-465, at 2-3, http://
www.gao.gov/assets/660/657103.pdf. Chief among its observations was 
that who or what qualifies as a ``patent troll'' cannot be determined 
solely based on the entity's characterization as a NPE. NPEs themselves 
defy precise definition and may include individual inventors who do not 
produce or have not yet produced a product associated with their 
patented invention; universities that partner with technology transfer 
companies; or research and development companies that license their 
patents to others in order to fund further research. NPEs may even 
consist of manufacturing or ``operating companies'' that claim 
infringement based upon patented products they no longer produce, or on 
patents for which they have never produced a product that uses the 
asserted invention. Due in part to this definition dilemma, the GAO's 
analysis suggested that focusing on the identity of the patent holder 
to assess the nature and scope of litigation abuses is likely 
misplaced. Id., at 45. Instead, the GAO thought it noteworthy that the 
vast majority of patent lawsuits regardless of the litigant, were based 
on software patents. Significantly, the GAO also found that, despite 
the arguments that abusive patent litigation by NPEs was pervasive, in 
fact, ``companies that make products brought most of the lawsuits and 
that nonpracticing entities (NPE) brought about a fifth of all 
lawsuits.'' Id., inside cover of report, ``What GAO Found''. Moreover, 
to the extent that there was an uptick in lawsuits by NPEs, the 
increase was likely a consequence of the AIA's strict joinder provision 
which led to plaintiffs suing more defendants separately, or due to a 
rush to the courthouse by plaintiffs seeking to avoid the restrictive 
joinder provision before the AIA was signed into law. Id, at 15. 
Finally, the GAO concluded that there was little difference in the rate 
of settlements of lawsuits whether brought by operating companies or 
NPEs. Id., at 25.

    Unfortunately, in this case the Committee on the Judiciary 
has proceeded with undue haste and with a bill that goes well 
beyond the issue of patent ``trolls'' and well beyond even the 
patent law. We have only had a single legislative hearing, with 
a single panel of four witnesses a mere 1 month ago.\24\ The 
Chair ignored a bipartisan request signed by six Members of the 
Committee seeking an additional hearing ``to further study the 
text and impact''\25\ of the legislation. Subcommittee markup 
was skipped and the bill proceeded to full committee where it 
was marked up for a single day. A deadline for floor amendments 
has been set by the Rules Committee on the very first day back 
after the Thanksgiving District Work period, making it 
difficult for Members of the full House to review the bill and 
the report and develop meaningful amendments. H.R. 3309 is 
scheduled for floor consideration the very first legislative 
week after markup. In essence, we are acting as if there is an 
emergency at a time when caution and deliberation are clearly 
required.
---------------------------------------------------------------------------
    \24\Although the Intellectual Property Subcommittee held a number 
of hearings to explore various aspects of the ``patent troll'' problem 
(Hearing on: ``The International Trade Commission and Patent 
Disputes,'' Wednesday 7/18/2012; Hearing on: ``Abusive Patent 
Litigation: The Issues Impacting American Competitiveness and Job 
Creation at the International Trade Commission and Beyond,'' Tuesday 4/
16/2013; Hearing on: ``Abusive Patent Litigation: The Impact on 
American Innovation & Jobs, and Potential Solutions,'' Thursday 3/14/
2013), the Committee held only a single legislative hearing on the 
proposed solutions consisting of a number of complex and overlapping 
measures that would affect procedures before both the courts and the 
USPTO.
    \25\Letter from Representatives Doug Collins & John Conyers, Jr., 
et al., to Chairman Bob Goodlatte (Nov. 7, 2013).
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                  II. FAILURE TO END PTO FEE DIVERSION

    A critical threshold failing of H.R. 3309 is its failure to 
respond to the single most important problem facing our patent 
system today--the continuing diversion of patent fees When the 
AIA was passed 2 years ago, there was consensus on both sides 
of the aisle that continuing fee diversion constituted a tax on 
innovation and undermined efforts of the USPTO to reduce its 
backlog. Unfortunately, loopholes in the final agreement and 
the onset of sequester have again resulted in user fees being 
diverted away from the USPTO.
    The result is that nearly $150 million in badly needed user 
fees have been diverted in Fiscal Year 2013. This loss is on 
top of the estimated $1 billion in fees diverted over the last 
two decades.\26\ By failing to provide patent examiners the 
resources they need to review and analyze effectively the 
hundreds of thousands of complex and interrelated patent 
applications they receive every year, ongoing efforts at the 
USPTO to keep pace with innovation and to continue to enhance 
patent quality will be stymied. This diversion prevented 
improvements to IT projects and resulted in the hiring of about 
1000 less patent examiners.\27\
---------------------------------------------------------------------------
    \26\See Letter from Herbert C. Wamsley, Executive Director of the 
Intellectual Property Owners Association to Ranking Members John 
Conyers, Jr. and Mel Watt and Representatives Darrell Issa and Doug 
Collins, (Oct. 29, 2013) (on file with House Committee on the Judiciary 
Democratic staff).
    \27\IPO Daily News for Friday, November 22, 2013, available at 
http://www.ipo.org.
---------------------------------------------------------------------------
    There is widespread agreement by observers of the system 
and stakeholders that this is an unacceptable and harmful 
situation. Former PTO Director Kappos has testified:

        Less than 2 years after the passage of the AIA and all 
        the accompanying focus on USPTO fee diversion, we found 
        ourselves again looking at an Agency having its 
        lifeblood, the user fees that come with the work asked 
        of USPTO by American innovators drained away. I simply 
        cannot overstate the destruction that is causing, as 
        the work remains without funding to handle it, creating 
        an innovation deficit that will require future 
        generations of innovators to pay into the Agency again 
        in hopes their fees are paid. Nor will it be possible 
        for the USPTO to accomplish the mandates of the AIA, 
        much less the added responsibilities contemplated by 
        parts of H.R. 3309, without access to the user fees 
        calculated to meet those challenges.\28\
---------------------------------------------------------------------------
    \28\Statement of David J. Kappos, before the House Judiciary 
Committee, Hearing on H.R. 3309, Innovation Act., October 29, 2013 
(emphasis addded).

    Similarly, the Coalition for Twenty First Century Patent 
Reform has written that ``The single most critical issue facing 
the U.S. Patent and Trademark Office (USPTO) is its inability 
to retain all of the fees paid by patent and trademark 
applicants and to use those fees to provide the services for 
which they were paid. Legislation to prevent USPTO user fees 
from being diverted or sequestered to support other government 
programs must be enacted.''\29\ This view is shared by the 
Patent Office Professional Association,\30\ the American 
Intellectual Property Law Association, \31\ and the Innovation 
Alliance.\32\ Failure to include language ending PTO fee 
diversion once and for all belies any serious effort to reform 
and update the patent system.\33\
---------------------------------------------------------------------------
    \29\Letter from 21C.
    \30\``The single most urgent problem facing the U.S. Patent System 
is not `patent trolls,' it is stable and adequate funding for the 
USPTO.'' Letter from POPA.
    \31\``Finally, and perhaps most importantly, AIPLA strongly 
believes that the single most important reform for improving the 
quality of patents is requiring a fully funded USPTO.'' Letter from 
AIPLA.
    \32\``We have long supported ensuring that USPTO has full access to 
the fee revenue that it collects. No other change would more 
effectively enhance patent quality in the United States.'' Letter from 
Innovation Alliance.
    \33\Representatives Conyers and Watt, along with a bipartisan group 
of 10 additional Members have introduced legislation, H.R. 3349, the 
``Innovation Protection Act,'' which would end the problem of fee 
diversion by creating a permanent funding mechanism to support the PTO. 
Unfortunately, when this language was offered at the Committee, it was 
rejected by the Majority in a party line vote.
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III. THE LEGISLATION LIMITS THE RIGHTS OF ALL PATENT HOLDERS, NOT JUST 
                           PATENT ``TROLLS''

A. LThe Bill's Heightened Pleading Requirements Will Deny Legitimate 
        Inventors Access to the Courts
    We oppose the heightened pleading requirements set forth in 
Section 3(a) because they will work an unfairness against 
patent holders across the board; are drafted in a one-sided 
manner; will prolong litigation; and the provision is 
unnecessary as the issue is already being dealt with by the 
courts.
    First, the information required by the heightened pleading 
standard will in many cases create an unfairness since the 
information may not be available to the patent holder at the 
time of the filing.\34\ It is for these reasons that so many 
key patent stakeholders oppose this provision of H.R. 3309. For 
example, PhRMA has written that the section ``increases 
pleading requirements in a way that raises questions about the 
balance between having information available in pleadings and 
providing for the prompt and effective access to the courts by 
patent owners more broadly.'' \35\
---------------------------------------------------------------------------
    \34\Often the specific information required under this section may 
only be obtained through discovery which typically cannot be obtained 
prior to filing a complaint or other pleading Even though the bill 
relieves a claimant of the obligation to provide the level of detail 
required if the information ``is not reasonably accessible'', there is 
no guidance for making that determination.
    \35\PhRMA letter.
---------------------------------------------------------------------------
    The American Association for Justice has noted that ``[t]he 
practical effect of this change is that many meritorious cases 
will face early dismissal because corporate defendants will 
simply refuse to provide the information necessary to plead the 
case.''\36\ And in a similar vein, the Coalition for Twenty-
First Century Patent Reform, representing many of the largest 
operating companies in America, has complained that ``[t]he 
pleading requirements in proposed Sec. 281A go well beyond this 
concept of fair notice of the basis for the allegation of 
infringement and well beyond the requirements of Rule 11 of the 
Federal Rules of Civil Procedure.''\37\ Likewise, several other 
key participants in the patent community have expressed serious 
concerns about the fairness and practicality of this provision, 
including the National Association of Patent Practitioners\38\ 
and the higher education community.\39\
---------------------------------------------------------------------------
    \36\AAJ letter.
    \37\21C letter.
    \38\Letter from Priya Sinha Cloutier, Chair of The National 
Association of Patent Practitioners Government Affairs Committee to 
Representative Robert Goodlatte, Chairman of the House Committee on the 
Judiciary (Nov. 19, 2013).
    \39\Letter from the Association of American Universities, American 
Council of Education, Association of American Medical Colleges, 
Association of Public and Land-grant Universities, Association of 
University Technology Managers, and Council on Governmental Relations 
to Representative Robert Goodlatte, Chairman of the House Committee on 
the Judiciary, and Representative John Conyers, Jr., Ranking Member of 
the House Committee on the Judiciary (Nov. 19, 2013).
---------------------------------------------------------------------------
    Second, section 3(c), is drafted in a one sided manner in 
that, as the ABA notes, it applies ``only to parties asserting 
patent infringement, either as a plaintiff or as a defendant 
counterclaimant [but] does not provide any corresponding 
heightened pleading standards for asserting non-infringement or 
invalidity in a complaint or counterclaim for Declaratory 
Judgment.''\40\ Under this provision, a small inventor will be 
required to provide detailed information in their complaint, 
however, an alleged infringer does not bear the same burden to 
explain with specificity to that inventor why they believe they 
have not infringed the patent or why they believe the patent is 
invalid. As the Institute of Electronics Engineers has written, 
``[s]ince most patent infringement complaints draw a counter-
claim of patent invalidity, any such counter-claim should also 
be pleaded with comparable particularity (e.g., citing applied 
prior art references to all claim terms) that would support the 
invalidity contention.''\41\
---------------------------------------------------------------------------
    \40\American Bar Association Section of Intellectual Property Law, 
2013 Fall Council Meeting, Innovation Act Task Force Resolutions and 
Reports, at 5, Nov. 8, 2013.
    \41\Letter from Marc T. Apter, President of The Institute of 
Electrical and Electronics Engineers to Representative Robert 
Goodlatte, Chairman of the House Committee on the Judiciary, and 
Representative John Conyers, Jr., Ranking Member of the House Committee 
on the Judiciary (Nov. 19, 2013) (hereinafter IEEE-USA letter).
---------------------------------------------------------------------------
    Third, although the stated goal of the legislation is to 
reduce and shorten litigation, the heightened pleading 
requirement may well have the opposite effect by fostering 
litigation over whether the patent owner has met the heightened 
pleading standard or had reasonable access to the required 
information if they admittedly did not comply.
    Finally, as with many other provisions in section 3, it is 
not necessary for Congress to enact a statutory change, as this 
very matter is being addressed by the Federal judiciary 
already. Indeed, in the patent context, courts have addressed 
whether emerging pleading standards in the aftermath of the 
Supreme Court's decisions in Bell Atlantic v. Twombly\42\ and 
Ashcroft v. Iqbal\43\ override Form 18\44\ of the Federal Rules 
of Civil Procedure.\45\ Courts have also considered the 
interrelationship of Form 18, pleading requirements for claims 
other than direct infringement,\46\ counterclaims,\47\ and 
affirmative defenses\48\ after Twombly and Iqbal. The Judicial 
Conference of the United States has issued its request under 
the Rules Enabling Act \49\ for comments to its proposed 
amendments to Federal Rules of Civil Procedure, including 
revision of forms and discovery rules.\50\
---------------------------------------------------------------------------
    \42\550 U.S. 544 (2007).
    \43\556 U.S. 662 (2009).
    \44\Fed. R. Civ. Pro. 84 provides: ``The forms in the Appendix 
suffice under these rules and illustrate the simplicity and brevity 
that these rules contemplate.'' Form 18 in the Appendix is the template 
for a complaint for patent infringement.
    \45\In McZeal v. Sprint Nextel Corp., 501 F.3d 1354 (Fed. Cir. 
2007), the Federal Circuit considered whether the bare allegations of 
the predecessor to Form 18, Form 16, were sufficient post-Twombly. The 
Court approved of the Form as sufficient for pleading direct 
infringement by a pro se litigant. See, 501 F. 3d at 1357. Courts have 
split about whether McZeal, decided before Iqbal and in the context of 
a direct infringement claim asserted by a pro se litigant, is valid 
post-Iqbal in other patent contexts. See, e.g., Ingeniador, LLC v. 
Interwoven, 874 F. Supp. 2d 56 (2012).
    \46\See, e.g., Selex Commc'ns, Inc. v. Google Inc., No. 1:09-CV-
2927-TWT, 2012 WL 1681824, at 4, 6 n.3 (N.D. Ga. May 11, 2012) 
(requiring specific facts to support a theory of joint infringement on 
ground that Form 18 provides sufficient complaint only for direct 
patent infringement, and observing that complaint may also support a 
claim for indirect infringement); DR Sys., Inc. v. Avreo, Inc., No 11-
CV-0932 BEN (WVG), 2012 WL 1068995, at 1 (S.D. Cal. Mar. 29, 2012) 
(noting that ``because Form 18 does not address induced infringement or 
contributory infringement, the heightened pleading standard of Twombly 
and Iqbal apply to allegations of induced
    infringement and contributory infringement.'' (citations omitted)).
    \47\See, e.g., Memory Control Enter., LLC v. Edmunds.com, Inc., No. 
CV 11-7658 PA (Jcx), 2012 WL 681765, at 2-3 (C.D. Cal. Feb. 8, 2012) 
(finding Twombly/Iqbal applicable to counterclaims for patent 
invalidity, even though infringement claims need only comply with Form 
18 under Rule 84, in part because ``[j]ust as
    Twombly and Iqbal did not rewrite the Federal Rules of Civil 
Procedure--thus, Rule 84 still applies, and Form 18 still suffices--a 
court cannot write into the Federal Rules a form for a claim for 
declaratory judgment of patent invalidity.'').
    \48\See, e.g.,Tyco Fire Prods. LP v. Victaulic Co., 777 F. Supp. 2d 
893 (E.D. Pa. 2011) (concluding that while patent counterclaim subject 
to Twombly's plausibility standard, the affirmative defense must only 
provide fair notice of the issue).
    \49\28 U.S.C. Sec. 2071-2077.
    \50\Preliminary Draft of Proposed Amendments to the Federal Rules 
of Bankruptcy and Civil Procedure: Request for Comment (Aug. 15, 2013), 
available at http://www.uscourts.gov/uscourts/rules/preliminary-draft-
proposed-amendments.pdf.
---------------------------------------------------------------------------
  An amendment offered by Rep. Jeffries during markup would have 
mandated pleading parity to ensure that the exchange of information in 
litigation was balanced and that specificity requirements applied to 
all parties in a dispute. The Chairman opposed the amendment which was 
defeated by a vote of 12-23.
B. LThe Bill's Fee Shifting Standard Will Favor Wealthy Parties and 
        will Chill Potential Meritorious Claims
    We oppose section 3(b)'s fee shifting requirement because 
it will favor wealthy corporate parties over individual 
inventors; is drafted in an over-broad manner to apply in 
beyond patent infringement actions; deprives courts of 
discretion; and is unnecessary as the issue is under 
consideration by the Federal courts. The related enforcement 
provision allowing for expanded joinder in fee shifting cases--
section 3(c)--also raises a host of problematic issues of law 
and equity.
    Our first concern is that fee-shifting always favors the 
party with greater financial resources, and thus could chill 
potential meritorious claims. Enacting a mandatory regime into 
our patent law would not only work an unfairness to independent 
inventors, it would constitute a very unfortunate precedent in 
our civil justice system generally. This concern was 
articulated by the American Association for Justice: ``A `loser 
pays' provision will deter patent holders from pursuing 
meritorious patent infringement claims and protects 
institutional defendants with enormous resources who can use 
the risk of fee shifting to force inventors into accepting 
unfair settlements or dismissing their legitimate claims.''\51\
---------------------------------------------------------------------------
    \51\AAJ Letter.
---------------------------------------------------------------------------
    Make no mistake, this provision is not a modest or 
temperate step, instead of requiring that fees be shifted in 
exceptional cases as set forth in current law, this provision 
would create a presumption of fee shifting in every single 
case, not just cases involving so-called ``trolls,'' with the 
burden of establishing that fees should not be imposed borne by 
the non-prevailing party. The dangerous nature of this 
provision was highlighted by a recent article by the American 
Enterprise Institute which noted:

        By shifting the burden of proof onto the losing party, 
        it will require courts to examine the justification of 
        each and every case . . . it won't just be patent 
        trolls who pay at times, but at times the legitimate 
        companies who occasionally are found to infringe PAE 
        patents . . . [O]ur unique justice system, dedicated as 
        it is to allowing every American person and company its 
        `day in court' would be immutably changed in the area 
        of patent litigation. We'd be one step closer to 
        adopting the loser-pays model.\52\
---------------------------------------------------------------------------
    \52\Patent troll legislation: a closer look (pt. 2)--fee shifting, 
Tech Policy Daily, November 26, 2013 (emphasis added).

    In this regard, we would dispute the Majority's assertion 
that section 3(b) is fairly based on the Equal Access to 
Justice Act.\53\ EAJA was developed as a means to allow private 
citizens to obtain legal fees when they prevail in litigation 
against the U.S. government, not to serve as a model for fee 
shifting in private lawsuits. Further, although the bill 
purports to align itself with EAJA, the fees and expenses 
scheme established by that Act is far more complex and balanced 
than section 3(b). For example, EAJA permits the court ``in its 
discretion [to] reduce . . . or deny an award, to the extent 
that the prevailing party . . . engaged in conduct which unduly 
and unreasonably protracted the final resolution of the matter 
in controversy.''\54\ No such balance or flexibility for the 
court is provided in this bill.\55\
---------------------------------------------------------------------------
    \53\See Section By Section, Innovation Act, available at http://
judiciary.house.gov/news/2013/
10232013%20%20Section%20by%20Section%20Patent%20Bill.pdf.
    \54\28 U.S.C. Sec. 2412(d)(1)(c).
    \55\During the markup, Ranking Member Melvin Watt offered an 
amendment that would have restored judicial discretion to the 
determination whether to shift fees by modifying the underlying statute 
to permit shifting in ``appropriate'' as opposed to ``exceptional'' 
cases. The amendment failed by a vote of 12-23. Mr. Jeffries offered an 
amendment that retains the mandatory character of the provision, but 
lowers the standard of justification from ``substantially justified'' 
to ``reasonably justified'' for the nonprevailing party's position in 
the case. The amendment passed by a vote of 36-2. Ranking Member Watt 
then offered an amendment that would more accurately align itself with 
EAJA and permit judges to consider the behavior of both the prevailing 
and nonprevailing parties in determining whether to depart from the 
American rule. Ranking Member Watt's amendment would have allowed the 
court ``in its discretion [to] reduce . . . or deny an award, to the 
extent that the prevailing party . . . engaged in conduct which unduly 
and unreasonably protracted the final resolution of the matter in 
controversy.'' The amendment failed by a vote of 17-21.

---------------------------------------------------------------------------
    Third, section 3(b) is drafted in an overly broad manner. 
The higher education community has noted that the language is 
so broad that it could potentially apply ``to any civil action 
in which any party asserts a claim for relief arising under any 
Act of Congress relating to patents. That scope sweeps in over 
25 statutes containing patent law clauses, including the Space 
Act, the Atomic Energy Act, the Non-Nuclear R&D Act as well as 
all titles of the omnibus bills in which the Bayh-Dole Act and 
amendments became law. The breadth of the proposed amendment 
will impair parties' ordinary enforcement procedures and 
litigation activities outside the scope of abusive patent 
litigation.''\56\ BIO opposes the fee-shifting provision for 
similar reasons, writing that it permits ``parties to seek 
reimbursement of their litigation costs from other parties 
under a vaguely-defined and potentially broad set of patent-
related cases.''\57\ The inclusion of language in the managers 
amendment defining a non-prevailing party as one who offers a 
``covenant not to sue'' may have the effect of increasing 
litigation, with the Coalition for Twenty First Century Patent 
Reform noting the provision may also have the unintended effect 
of discouraging early settlement and prolonging costly 
discovery.\58\
---------------------------------------------------------------------------
    \56\Statement from the Higher Education Community on H.R. 3309, The 
Innovation Act, at 1, Nov. 8, 2013 (hereinafter Universities' letter) 
(on file with Committee on the Judiciary Democratic staff).
    \57\Letter from James C. Greenwood, President and CEO of the 
Biotechnology Industry Organization to Representative Robert Goodlatte, 
Chairman of the House Committee on the Judiciary (Nov. 14, 2013) 
(hereinafter BIO letter).
    \58\Summary of 21C Position, at 3-4.
---------------------------------------------------------------------------
    Fourth, the fee shifting provision is again wholly 
unnecessary because both the Supreme Court and the Federal 
Circuit are preparing to rule on litigation concerning the 
phrase ``exceptional cases.'' The Supreme Court has granted 
certiorari in two cases that focus on fee shifting in patent 
cases.\59\ The Court of Appeals for the Federal Circuit, which 
is the appellate court for patent cases, is also preparing to 
issue an opinion in a case on fee shifting in patent cases.\60\
---------------------------------------------------------------------------
    \59\See Highmark v. Allcare Health Management, No. 12-1163 (cert. 
granted); Octane Fitness v. Icon Health & Fitness Inc., No. 12-1184 
(cert. granted); Sidense Corp. v. Kilopass Tech., Inc., No. 13-1193 
(Fed. Cir. argued Oct. 9, 2013).
    \60\See Sidense Corp. v. Kilopass Tech., Inc., No. 13-1193 (Fed. 
Cir. argued Oct. 9, 2013).
---------------------------------------------------------------------------
    Finally, we would also note that the joinder provision 
included in section 3(c) in order to help enforce the fee 
shifting provision raises a host of potential additional 
concerns. Among other things, it is drafted in a one-way manner 
that benefits alleged infringers. Deep pocketed defendants 
would be guaranteed satisfaction of fee awards but small 
companies, startups, and independent inventors would not be 
similarly protected when they prevail as plaintiffs against 
defendant infringers that hide their assets, file for 
bankruptcy, or otherwise evade payment of fee awards. This 
provision also raises constitutional concerns because it 
creates standing for parties that would otherwise not have it. 
In other words, a defendant may join a third-party at the end 
of the case for purposes of fee shifting, but the third-party 
had no standing to assert or defend themselves during the 
course of the legal proceedings. The joinder provision may 
allow defendants to ``bring higher education institutions and 
their inventors, non-profit technology transfer organizations 
associated with those institutions, federal laboratories, and 
federal agencies within the fee-shifting purview.''\61\ 
Defendants already have other avenues to join plaintiffs, 
including Federal Rules of Civil Procedure 19 and 20. As a 
result, a broad range of patent stakeholders, including 
21C,\62\ AIPLA,\63\ and BIO,\64\ have raised concerns with this 
new joinder provision.
---------------------------------------------------------------------------
    \61\Universities' letter, at 2.
    \62\Summary of 21C Position, at 5.
    \63\AIPLA letter.
    \64\BIO letter.
---------------------------------------------------------------------------
C. LThe Bill's Discovery Limitations Will Prolong Litigation and 
        Increase Costs
    The legislation's limitations on discovery prior to holding 
hearings to construe patent claims and determine their scope 
set forth in section 3(d) are objectionable because they will 
delay litigation and lead to greater expenses for the parties 
and can be more properly dealt with by the courts.
    First, the discovery provision is likely to extend 
litigation and increase costs.\65\ Numerous participants in the 
patent system, including many large patent holders have stated 
that the provision will be harmful and counterproductive. For 
example, PhRMA has written section 3(d) will ``impose 
restrictions on discovery that could serve to delay ultimate 
resolution of patent litigation and increase costs.''\66\ 
Similarly, BIO asserts the legislation creates ``opportunities 
for systematic delays in patent litigation by inviting 
piecemeal discovery and adjudication that would push back a 
determination of patent infringement liability until much later 
in the case.''\67\ The Coalition for Twenty-First Century 
Patent Reform agrees that ``under proposed sec. 299A, discovery 
that might otherwise be undertaken concurrently . . . will be 
postponed, thus delaying trial while the postponed discovery is 
completed, delaying the resolution of all patent cases. Such an 
. . . approach would be less efficient and likely more costly . 
. . The Innovation Act's approach to patent case discovery 
reflects a narrow and one-sided view of patent litigation, in 
essence legislating that each case be managed in the manner 
that a defendant in an action brought by a non-practicing 
entity would seek to have the case managed. This unbalanced and 
inflexible approach to all cases is reflected in the automatic 
stay of discovery pending claim construction.''\68\ The IP Law 
section of the ABA concurs, writing, the subsection will 
``further delay the resolution of patent litigation.''\69\
---------------------------------------------------------------------------
    \65\Further, the provision's rigidity in restricting judicial 
discretion only in cases with a statutory deadline (specifically 
including cases where a pharmaceutical company submits an abbreviated 
application for approval of a new drug), ``when necessary to resolve a 
motion properly raised,'' or ``as necessary to prevent the manifest 
injustice'' could also lead to the loss of evidence as witness 
recollection can fade over time, documents may be lost or destroyed, 
and witnesses may become unavailable.
    \66\PhRMA letter.
    \67\BIO letter.
    \68\21C letter.
    \69\American Bar Association Section of Intellectual Property Law, 
at 24.
---------------------------------------------------------------------------
    Second, these new limitations on discovery ignore the role 
of the courts in setting proper discovery time lines. It was 
recently opposed by Judicial Conference's Court Administration 
and Case Management Committee. In particular, they oppose this 
provision because it unnecessarily removes judicial discretion 
in setting discovery.
    The mandatory nature of the discovery limitation ignores 
the fact that Federal courts with the most experience and skill 
in managing patent infringement cases have adopted local rules 
that specify the timing and scope of discovery, but none have 
adopted rules automatically staying discovery pending claim 
construction.\70\ The Judicial Conference shares this concern 
and also observed that the proposed change will create 
confusion in relation to the local rules the patent pilot 
courts have developed to manage discovery. The Federal Circuit 
is also dealing with the precise issue of potentially excessive 
discovery cost, as their Advisory Council released a Model 
Order Regarding E-Discovery in Patent Cases to strike a 
``balance between the value of discovery and its costs.''\71\ 
Of note is that the Model Order Regarding E-Discovery specifies 
that both abusive or ``disproportionate'' requests and 
``nonresponsive or dilatory discovery tactics'' are relevant 
factors for ``cost-shifting considerations.''\72\
---------------------------------------------------------------------------
    \70\Summary of 21C Position, at 6.
    \71\See Federal Circuit Advisory Council's Model Order Limiting E-
Discovery, available at http://www.cafc.uscourts.gov/images/stories/
announcements/Ediscovery_Model_Order.pdf.
    \72\See id., at 6 para.3.
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           IV. THE MANDATE ON THE COURTS WILL UNDERMINE THE 
                           FEDERAL JUDICIARY

    We oppose section 6 of H.R. 3309, dictating that the 
Federal judiciary adopt a series of new rules and judicial 
changes, because the provision undermines the judiciary by 
intruding on the cherished principle of comity between coequal 
branches of government and ignores the very real expertise the 
courts are able to bring to the issue of developing rules and 
procedures for patent cases.
    First, the very idea of Congress dictating procedures to 
the Federal courts is an anathema to our system of government. 
As a matter of fact, the Obama Administration took a strong 
stand against such a mandate on November 12 when they opposed 
the H.R. 2655, Lawsuit Abuse Reduction Act, which would have 
also overridden the Rules Enabling Act.\73\ We believe the 
Administration's objections to LARA are applicable here, namely 
that the Innovation Act ``would circumvent the usual procedure 
for amending the Federal Rules of Civil Procedure . . . raise 
the amount and cost of civil litigation and provide more 
opportunity for unnecessary delay and harassment . . . could 
chill meritorious claims by deterring worthy plaintiffs from 
challenging existing laws or seeking novel interpretations of 
them . . . [and] is an attempt to amend the rules directly, 
over the objections of the Judicial Conference.''
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    \73\See Statement of Administration Policy, H.R. 2655, the Lawsuit 
Abuse Reduction Act, available at
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    This is also why Section 6 is so strongly opposed by the 
Federal judiciary and the American Bar Association. The 
Committee on Rules of Practice and Procedure of the Judicial 
Conference wrote to the Committee that ``legislation that 
mandates the contents of the Federal rules contravenes the 
longstanding Judicial Conference policy opposing direct 
amendment of the Federal rules by legislation instead of 
through the deliberative process Congress established in the 
Rules Enabling Act. . . . We worry that this kind of approach 
will undermine rather than further, the development of sound 
rules and practices.''\74\
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    \74\Judicial Conference Letter.
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    The ABA also objects, writing ``Our primary concerns regard 
provisions of the bill that call for Congress, rather than the 
courts, to establish certain rules of procedure for the Federal 
courts, thereby circumventing a rule making process that has 
served our justice system for almost 80 years . . . This 
unhealthy precedent could prompt calls to Congress to provide 
special rules of procedure in still other areas of the law, 
leading to the balakanization in the administration of 
justice--precisely the opposite result that the Rules Enabling 
Act process was designed by Congress to avoid.''\75\
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    \75\ABA letter.
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    Second, Congress' historic deference to the courts on 
matters involving judicial rules and procedures is not some 
arcane notion. It is based on the reality that the courts are 
far better equipped and less partial in making these intricate 
determinations. As the AIPLA wrote: ``We fear that . . . these 
[changes] would intrude on the established role of the Judicial 
Conference and would overly restrict the traditional discretion 
of district court judges to manage their cases. In this regard, 
AIPLA is concerned that the bill will mandate inflexible rules, 
many of which have unintended consequences including impeding 
access to the courts, and we further believe that the Judicial 
Conference in its own discretion is in a better position to 
work with the district courts to institute appropriate case 
management rules.''\76\
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    \76\AIPLA letter.
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    In this regard, the Rules Enabling Act provides for a 
deliberative process for the Judicial Conference to amend court 
rules and allows input from interested parties, including the 
public and Congress. Recently, the Judicial Conference issued a 
request for comments to its proposed amendments to the Federal 
rules, including revision of forms and discovery rules.\77\ 
Before the proposed amendments become final, Congress has the 
authority to reject, modify, or defer any final rule. Yet, this 
legislation ignores that reasonable process. A far more 
appropriate and traditional means of indicating Congress' 
interest in a rule making matter include describing specific 
concerns in a committee report.
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    \77\See Preliminary Draft of Proposed Amendments to the Federal 
Rules of Bankruptcy and Civil Procedure: Request for Comment (Aug. 15, 
2013), available at http://www.uscourts.gov/uscourts/rules/preliminary-
draft-proposed-amendments.pdf.
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    Though our fundamental concern with section 6 is that it 
undermines the independence of the Judiciary, it is important 
to note that section 6 includes two unrelated substantive 
amendments to the Bankruptcy Code. Section 6(d) of the 
Innovation Act makes two significant amendments to the 
Bankruptcy Code, first by requiring that U.S. law be applied to 
patent licenses in international bankruptcy cases, whether or 
not it should apply to that license, and second by requiring 
bankruptcy trustees to perform certain duties under trademark 
licenses even where it has no assets or ability to do so. Both 
of these changes are strongly opposed by the National 
Bankruptcy Conference, a leading group of non-partisan 
bankruptcy legal experts.
    The first change is an attempt to pre-empt an appeal 
currently pending in the 4th Circuit Court of Appeals.\78\ The 
issue before the court is whether the U.S. bankruptcy court 
erred in ruling that Bankruptcy Code section 365(n) may be 
applied to a German insolvency proceeding to constrain the 
application of German law. Given the gravity of this issue and 
its international ramifications, the United States filed an 
amicus brief in that case.
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    \78\In re Qimonda AG, 462 B.R. 165 (Bankr. E.D. Va. 2011) [give 
subsequent history].
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    The second change regarding the treatment of trademarks is 
also significant because it could result in an impossibility, 
i.e., requiring a debtor that essentially has gone out of 
business to perform certain affirmative duties, even where 
there are no assets available to fund the execution of such 
duties. In effect, section 6(d) imposes an affirmative duty on 
a debtor-licensor that has rejected a license contract to 
monitor and control the quality of the licensed product or 
service.\79\ This provision wold apply to all types of 
bankruptcy, including a chapter 7 case where the debtor has 
gone out of business, but would nonetheless be required to 
perform certain duties with respect to this form of trademark. 
As with the other aspect of section 6(d), this provision has 
nothing to do with the issue of abusive patent litigation. 
Obviously, careful consideration of the implications of a 
change is necessary if we are to avoid unintended consequences. 
Although we believe the issues presented by section 6(d) are 
worthy of further consideration, in the absence of any 
substantive analysis or deliberative process of these issues, 
we cannot support them.
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    \79\This provision would apply to all types of bankruptcy cases, 
that is, liquidating chapter 7 cases, reorganizing chapter 11 cases, 
and transnational chapter 15 bankruptcy cases. For example, in a 
chapter 7 case where the debtor has ceased to exist because it has gone 
out of business, this provision would require the bankruptcy trustee to 
perform certain duties even where there are no assets available to fund 
the execution of such duties.
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    There are numerous other provision in the bill which like 
the bankruptcy amendments are also unrelated to the issues of 
patent ``trolls'', yet they somehow made there way into the 
legislation. For example, section 9(a) repeals section 145 of 
the patent law, granting patent owners the right to a de novo 
review of the denial of a patent application.\80\ Section 9 (i) 
for some reason extends the time period for bringing judicial 
discipline proceedings, even though we understand the PTO does 
not need this authority, as they can use tolling agreements if 
time is running out in a disciplinary matter. These are just 
two examples, but the legislation includes numerous so-called 
``technical changes'' which clearly warrant further vetting.
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    \80\Currently, the patent applicant has an option to appeal an 
adverse decision by the USPTO on their patent application directly to 
the Federal Circuit under 35 U.S.C. Sec. 141 or to initiate an action 
against the USPTO in district court under 35 U.S.C. Sec. 145. While the 
scope of review on appeal to Federal Circuit is narrowly based upon the 
record that was before the USPTO, the district court considers the 
denial de novo. Therefore, proceedings before the district court may 
consider new evidence and subpoena witnesses that were unavailable or 
unwilling to appear before the USPTO. The Supreme Court in Kappos v. 
Hyatt recently affirmed the expansive breadth of evidence that a patent 
applicant may introduce in a Sec. 145. There the USPTO argued that a 
district court should only admit new evidence if the patent applicant 
had no reasonable opportunity to present it to the USPTO during its 
consideration of the application. The USPTO also argued that even when 
new evidence was permitted to be introduced, the district court should 
consider that evidence along with the findings of the agency under a 
deferential standard of review. The Supreme Court rejected both 
arguments finding instead that an applicant in a Sec. 145 proceeding 
was limited only by the Federal Rules of Evidence and the Federal Rules 
of Civil Procedure with respect to new evidence that could be 
introduced and that the district court's determinations of disputed 
questions of fact based on new evidence would be de novo.
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                               CONCLUSION

    We have stated repeatedly that we are willing to work with 
the Majority and any and all stakeholders and interested 
parties to develop a fair process to consider common sense 
solutions that would improve the patent system and respond to 
the problems posed by asymmetries in the patent litigation 
system. That is why we all voted for a Democratic Substitute 
that would have pursued such a reasonable legislative 
route.\81\ We also strongly believe that any serious reform of 
the patent laws must include once and for all an end to fee 
diversion from the USPTO to ensure adequate hiring, proper 
training of examiners, and sustained patent quality. However, 
we are unwilling to support changes that go well beyond the 
problems of patent ``trolls,'' would create an imbalance in the 
patent system skewed in favor of big corporate interests, 
negatively impact all patent owners thereby undermining 
innovation, and would encroach on our longstanding deference to 
the prerogatives of the Judiciary. For these reasons, we 
dissent from H.R. 3309.
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    \81\At the markup, Democratic Members of the Committee 
overwhelmingly supported a substitute that responded to the real 
problems of patent abuse without upsetting the entire patent law 
system. In addition to including provisions concerning real parties in 
interest, customer stays, and small business assistance, the 
substitute, offered by Ranking Members Conyers and Watt, included a 
revolving fund to end fee diversion, required a study on the practice 
of deceptive demand letters and a report with tailored recommendations 
on changes to laws and regulations that would deter the use of those 
letters. Unfortunately, the substitute failed 13-17 on a nearly party 
line vote. We believe that the substitute provides a better baseline 
legislative approach from which to begin to address abusive tactics by 
the ``patent trolls.''

                                   John Conyers, Jr.
                                   Robert C. ``Bobby'' Scott.
                                   Melvin L. Watt.
                                   Sheila Jackson Lee.
                                   Henry C. ``Hank'' Johnson, Jr.
                            Additional Views

    We support a reasonable and fair approach to address the 
issue of abusive patent litigation. Nevertheless, we continue 
to have concerns about how H.R. 3309, the ``Innovation Act,'' 
would impact the independence of the federal judiciary, impose 
limits on pleadings and discovery, and place intrusive mandates 
on the court system. We are also very concerned that the 
legislation, as currently drafted, is overly broad. We write 
separately to highlight some of the concerns that we continue 
to have with the bill.
    It is essential that we strike the appropriate balance 
between addressing the issue of abusive patent litigation and 
avoiding unintended consequences. Inventors, start-ups, and 
tech entrepreneurs must be protected. Although the process 
leading up to the markup was not perfect, we are encouraged 
that some of the bill's provisions have been improved. For 
example, we appreciate that the fee shifting provision was 
slightly improved. Accordingly, we look forward to working with 
our colleagues to further improve this bill so that the final 
version is one that we can continue to support.
    While many of the provisions currently in the bill are 
designed to limit patent litigation abuse, it is critical that 
these provisions do not harm inventors and small entrepreneurs. 
As the Government Accountability Office study on patent 
litigation found, the patent troll problem accounted for only 
19 percent of the cases between 2007 and 2011, demonstrating 
that the extent of the problem does not merit this rushed 
effort.\1\ This underscores why we should proceed with caution 
to ensure against unintended consequences and legislative 
overreach.
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    \1\Government Accountability Office, Assessing Factors That Affect 
Patent Infringement Litigation Could Help Improve Patent Quality, GAO-
13-465, at 17 (Aug. 22, 2013).
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    Several Democratic amendments that would have addressed 
many of these concerns were offered and defeated during the 
markup of the bill. We hope as the bill moves to the floor many 
of these recommended revisions will be made. In addition, we 
supported the substitute amendment that was offered by Ranking 
Member Conyers and Congressman Watt because it would respond to 
the real and identifiable problems without upsetting the entire 
patent law system. And, we agreed that the substitute addressed 
one of the most important issues, making sure that there is an 
end to fee diversion, so that the Patent and Trademark Office 
has access to all of its fees.
    We have traditionally been opponents of fee shifting for 
many years. Although there was a fee shifting amendment 
accepted at markup, which we view as an incremental 
improvement, we continue to have concerns that the language 
remains broad. While we agree that we should work to address 
abusive patent litigation, we do not believe that it should be 
addressed in a way that hurts honest inventors trying to 
enforce their patents. This legislation must be viewed from 
both the perspective of the small company that is sued and the 
small inventor who may have a valid case.
    We also have concerns that the provisions in section 3 
would unduly limit a patent holder's rights. In particular, 
section 3 could harm legitimate inventors who are seeking to 
defend their patents. Specifically, Section 3(d) would limit 
discovery in every patent infringement case until the court has 
construed the patent claims at issue. The language in the bill 
restricts the discretion of judges to manage cases in their 
courts, and presents the prospect of prolonging patent 
litigation and substantially increasing its already-high cost. 
This unbalanced approach limits a judge's discretion and could 
harm patent owners seeking to protect their patented 
technologies and products against infringement quickly and 
expeditiously.
    Section 6 of the bill also remains problematic. The 
Judicial Conference warns that it will ``undermine, rather than 
further, the development of sound rules and practices.''\2\ 
This provision is an unnecessary imposition on the independence 
of the judicial branch of government. The Conference explains:
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    \2\Letter from Jeffrey S. Sutton, Chair of the Committee on Rules 
of Practice and Procedure of the Judicial Conference of the United 
States, and Jonathan C. Rose, Secretary of the Committee on Rules of 
Practice and Procedure of the Judicial Conference of the United States 
to Representative John Conyers, Jr., Ranking Member of the House 
Committee on the Judiciary (Nov. 6, 2013).

        [L]egislation that mandates the contents of federal 
        rules contravenes the longstanding Judicial Conference 
        policy opposing direct amendments of the federal rules 
        by legislation instead of through the deliberative 
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        process in the Rules Enabling Act. . . .

        By dictating the outcome of the Rules Enabling Act 
        process with respect to potential rules, Section 6 of 
        H.R. 3309 runs counter to that process. . . . Instead 
        of mandating the outcome of the Rules Enabling Act 
        process, Congress may wish to urge the Judicial 
        Conference's Rules Committee to study whether certain 
        rules should be amended to address abusive patent 
        litigation tactics and/or to implement the provisions 
        of the Innovation Act. That approach would allow 
        Congress to express its interest in addressing these 
        problems and would respect the long-established virtues 
        of the deliberative process created by the Rules 
        Enabling Act.\3\
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    \3\Id. (original emphasis).

    We concur with the Conference's concerns. Section 6 will 
not further the development of sound rules and practices.
    For these reasons, we believe the bill should continue to 
be improved and we hope these changes are made as the bill 
progresses to the floor.
                                   Luis V. Gutierrez.
                                   Cedric Richmond.
                                   Joe Garcia.
                                   Steve Cohen.