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114th Congress   }                                     {        Report
                        HOUSE OF REPRESENTATIVES
 1st Session     }                                     {       114-235

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



 
                             INNOVATION ACT

                                _______
                                

 July 29, 2015.--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

                         [To accompany H.R. 9]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 9) 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..............................................    21
Background and Need for the Legislation..........................    23
Hearings.........................................................    53
Committee Consideration..........................................    54
Committee Votes..................................................    54
Committee Oversight Findings.....................................    58
New Budget Authority and Tax Expenditures........................    58
Congressional Budget Office Cost Estimate........................    58
Duplication of Federal Programs..................................    60
Disclosure of Directed Rule Makings..............................    60
Performance Goals and Objectives.................................    60
Advisory on Earmarks.............................................    61
Section-by-Section Analysis......................................    61
Agency Views.....................................................    81
Changes in Existing Law Made by the Bill, as Reported............    89
Dissenting Views.................................................   167

                             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 recommendations of 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 all claims necessary to produce 
        the identification (under paragraph (3)) of each process, 
        machine, manufacture, or composition of matter (referred to in 
        this section as an `accused instrumentality') that is alleged 
        to infringe any claim of each patent that is identified under 
        paragraph (1).
          ``(3) For each claim identified under paragraph (2), an 
        identification of each 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 (or a representative 
                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.
  ``(b) Information Not Readily Accessible.--If information required to 
be disclosed under subsection (a) is not readily accessible to a party 
after an inquiry reasonable under the circumstances, as required by 
Rule 11 of the Federal Rules of Civil Procedure, 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) Amendment of Pleadings.--Nothing in this section shall be 
construed to affect a party's ability to amend pleadings as specified 
in the Federal Rules of Civil Procedure. Amendments permitted by the 
court are subject to the pleading requirements set forth in this 
section.
  ``(d) 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.
  ``(e) 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 who asserts a 
claim for relief arising under any Act of Congress relating to patents 
against another party, and who subsequently unilaterally (i) seeks 
dismissal of the action without consent of the other party and (ii) 
extends to such other party a covenant not to sue for infringement with 
respect to the patent or patents at issue, may be the subject of a 
motion for attorneys fees under subsection (a) as if it were a non-
prevailing party, unless the party asserting such claim would have been 
entitled, at the time that such covenant was extended, to dismiss 
voluntarily the action without a court order under Rule 41 of the 
Federal Rules of Civil Procedure, or the interests of justice require 
otherwise.''.
          (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 subsection (f).
                  (C) Amendment.--
                          (i) In general.--Section 273 of title 35, 
                        United States Code, as amended by subparagraph 
                        (B), is further amended by striking subsection 
                        (g).
                          (ii) Effective date.--The amendment made by 
                        this subparagraph 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).
          (3) Effective date.--Except as otherwise provided in this 
        subsection, 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.--Except as otherwise provided under this 
        subsection, 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 expiration of the time period 
        during which a certification under paragraph (4)(B) is required 
        to be filed, that the interested party has been identified in 
        the initial disclosure under section 290(b) 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) Additional requirements for joinder.--
                  ``(A) Initial statement.--This subsection shall not 
                apply to an action unless a party defending against an 
                allegation of infringement of a patent claim files, not 
                later than 14 days before the date on which a 
                scheduling conference is held or the date on which a 
                scheduling order is due under Rule 16(b) of the Federal 
                Rules of Civil Procedure, a statement that such party 
                holds a good faith belief, based on publicly available 
                information and any other information known to such 
                party, that the party alleging infringement has no 
                substantial interest in the subject matter at issue 
                other than asserting the patent in litigation.
                  ``(B) Certification.--This subsection shall not apply 
                to an action if the party alleging infringement files, 
                not later than 45 days after the date on which such 
                party is served with the initial statement described 
                under subparagraph (A), a certification that--
                          ``(i) establishes and certifies to the court, 
                        under oath, that such party will have 
                        sufficient funds available to satisfy any award 
                        of reasonable attorney's fees and expenses 
                        under section 285 if an award is assessed;
                          ``(ii) demonstrates that such party has a 
                        substantial interest in the subject matter at 
                        issue other than asserting the patent in 
                        litigation; or
                          ``(iii) is made under oath that there are no 
                        other interested parties.
          ``(5) Exception for university technology transfer 
        organizations.--This subsection shall not apply to a technology 
        transfer organization whose primary purpose is to facilitate 
        the commercialization of technologies developed by one or more 
        institutions of higher education (as defined in section 101(a) 
        of the Higher Education Act of 1965 (20 U.S.C. 1001(a))) if 
        such technology transfer organization is alleging infringement 
        on behalf of an entity that would not be subject to this 
        subsection.
          ``(6) 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 employee of the party alleging 
                        infringement--
                                  ``(I) whose principal source of 
                                income or employment is employment with 
                                the party alleging infringement; or
                                  ``(II) whose sole financial interest 
                                in the patent or patents at issue is a 
                                salary or hourly wage paid by the party 
                                alleging infringement;
                          ``(ii) 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
                          ``(iii) a person whose sole financial 
                        interest in the patent or patents at issue is 
                        ownership of an equity or security interest in 
                        the party alleging infringement, unless such 
                        person also has the right or ability to direct 
                        or control (membership on the board of 
                        directors alone is not sufficient to 
                        demonstrate such right or ability) the civil 
                        action.
          ``(7) Substantial interest.--In this subsection, the term 
        `substantial interest' includes an interest in the subject 
        matter of a patent at issue if the party--
                  ``(A) invented the subject matter; or
                  ``(B) commercially practices or implements, made 
                substantial preparations directed particularly to 
                commercially practicing or implementing, or is engaged 
                in research and development in, technology in the field 
                of the subject matter.''.
  (d) Discovery Stay.--
          (1) Amendment.--Chapter 29 of title 35, United States Code, 
        as amended by subsection (a), is further amended by inserting 
        after section 281A (as added by such subsection) the following 
        new section:

``Sec. 281B. Stay of discovery pending a preliminary motion.

  ``(a) In General.--Except as provided in subsection (d), in an action 
for patent infringement under section 271 or an action for a 
declaratory judgement that a patent is invalid or not infringed, 
discovery shall be stayed if--
          ``(1) the defendant moves to--
                  ``(A) sever a claim or drop a party for misjoinder 
                under Rule 21 of the Federal Rules of Civil Procedure;
                  ``(B) transfer the action under section 1404(a) of 
                title 28;
                  ``(C) transfer or dismiss the action under section 
                1406(a) of title 28; or
                  ``(D) dismiss the action pursuant to Federal Rule of 
                Civil Procedure 12(b); and
          ``(2) such motion is filed within 90 days after service of 
        the complaint and includes a declaration or other evidence in 
        support of the motion.
  ``(b) Expiration of Stay.--A stay entered under subsection (a) shall 
expire when all motions that are the basis for the stay are decided by 
the court.
  ``(c) Priority of Decision.--In an action described in subsection 
(a), the court shall decide a motion to sever a claim or drop a party 
for misjoinder under Rule 21 of the Federal Rules of Civil Procedure, 
to transfer under section 1404(a) to title 28, to transfer or dismiss 
under 1406(a) of title 28, or to dismiss the action pursuant to Federal 
Rule of Civil Procedure 12(b) before the earlier of the date on which 
the court--
          ``(1) decides any other substantive motion, provided however 
        that the court may decide a question of its own jurisdiction at 
        any time; or
          ``(2) issues a scheduling order under Rule 16(b) of the 
        Federal Rules of Civil Procedure.
  ``(d) Exception.--
          ``(1) Discovery necessary to decide motion.--Notwithstanding 
        subsection (a), the court may allow such discovery as the court 
        determines to be necessary to decide a motion to sever, drop a 
        party, dismiss, or transfer.
          ``(2) Competitive harm.--Subsections (a) and (c) shall not 
        apply to an action in which the patentee is granted a 
        preliminary injunction to prevent harm arising from the 
        manufacture, use, sale, offer for sale, or importation of an 
        allegedly infringing product or process that competes with a 
        product or process made, sold, or offered for sale by the 
        patentee.
          ``(3) Consent of the parties.--The patentee and an opposing 
        party shall be excluded, in whole or in part, from the 
        limitations of subsections (a) and (c) upon such parties' 
        filing with the court a signed stipulation agreeing to such 
        exclusion.
          ``(4) FDA and biological product application.--Subsections 
        (a) and (c) shall not apply to an action that includes a cause 
        of action described under section 271(e)(2).''.
          (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 281A, as added by subsection 
        (a), the following new item:

``281B. Stay of discovery pending a preliminary motion.''.

  (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, identifies 
the ultimate parent entity of the claimant, 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) Venue.--
          (1) Amendment.--Subsection (b) of section 1400 of title 28, 
        United States Code, is amended to read as follows:
  ``(b) Venue for Action Relating to Patents.--Notwithstanding 
subsections (b) and (c) of section 1391 of this title, any civil action 
for patent infringement or any action for a declaratory judgment that a 
patent is invalid or not infringed may be brought only in a judicial 
district--
          ``(1) where the defendant has its principal place of business 
        or is incorporated;
          ``(2) where the defendant has committed an act of 
        infringement of a patent in suit and has a regular and 
        established physical facility that gives rise to the act of 
        infringement;
          ``(3) where the defendant has agreed or consented to be sued 
        in the instant action;
          ``(4) where an inventor named on the patent in suit conducted 
        research or development that led to the application for the 
        patent in suit;
          ``(5) where a party has a regular and established physical 
        facility that such party controls and operates, not primarily 
        for the purpose of creating venue, and has--
                  ``(A) engaged in management of significant research 
                and development of an invention claimed in a patent in 
                suit prior to the effective filing date of the patent;
                  ``(B) manufactured a tangible product that is alleged 
                to embody an invention claimed in a patent in suit; or
                  ``(C) implemented a manufacturing process for a 
                tangible good in which the process is alleged to embody 
                an invention claimed in a patent in suit; or
          ``(6) for foreign defendants that do not meet the 
        requirements of paragraphs (1) or (2), according to section 
        1391(d) of this title.''.
          (2) Mandamus relief.--For the purpose of determining whether 
        relief may issue under section 1651 of title 28, United States 
        Code, a clearly and indisputably erroneous denial of a motion 
        under section 1406(a) of such title to dismiss or transfer a 
        case on the basis of section 1400(b) of such title shall be 
        deemed to cause irremediable interim harm.
          (3) Retailers not eligible for customer stay.--If a defendant 
        does not meet the definition of a retailer under section 
        296(a)(6) of title 35, United States Code, as added by section 
        5, solely because the defendant manufacturers or causes the 
        manufacture of the covered product or process in suit, the 
        retail facilities of such defendant shall not constitute a 
        regular and established physical facility for purposes of 
        section 1400(b)(2) of title 28, United Code, as added by 
        paragraph (1).
          (4) Teleworkers.--The dwelling or residence of an employee or 
        contractor of a defendant who works at such dwelling or 
        residence shall not constitute a regular and established 
        physical facility of the defendant for purposes of section 
        1400(b)(2) of title 28, United Code, as added by paragraph (1).
  (h) 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).
                  ``(E) A clear and concise description of the 
                principal business, if any, of the party alleging 
                infringement.
                  ``(F) A list of each complaint filed, of which the 
                party alleging infringement has knowledge, that asserts 
                or asserted any of the patents identified under 
                subparagraph (A).
                  ``(G) For each patent identified under subparagraph 
                (A), 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.
          ``(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) Definitions.--In this section:
          ``(1) Covered customer.--The term `covered customer' means a 
        retailer or end user that is accused of infringing a patent or 
        patents in dispute based on--
                  ``(A) the sale, or offer for sale, of a covered 
                product or covered process without material 
                modification of the product or process in a manner that 
                is alleged to infringe a patent or patents in dispute; 
                or
                  ``(B) the use by such retailer, the retailer's end 
                user customer, or an end user of a covered product or 
                covered process without material modification of the 
                product or process in a manner that is alleged to 
                infringe a patent or patents in dispute.
          ``(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 covered process, 
        or a relevant part thereof.
          ``(3) Covered process.--The term `covered process' means a 
        process, method, or a relevant part thereof, that is alleged to 
        infringe a patent or patents in dispute where such process, 
        method, or relevant part thereof is implemented by an 
        apparatus, material, system, software, or other instrumentality 
        that is provided by the covered manufacturer.
          ``(4) Covered product.--The term `covered product' means a 
        product, system, service, component, material, or apparatus, or 
        relevant part thereof, that--
                  ``(A) is alleged to infringe a patent or patents in 
                dispute; or
                  ``(B) implements a process alleged to infringe the 
                patent or patents in dispute.
          ``(5) End user.--The term `end user' includes an affiliate of 
        an end user, but does not include an entity that manufacturers 
        or causes the manufacture of a covered product or covered 
        process, or a relevant part thereof.
          ``(6) Retailer.--The term `retailer' means an entity that 
        generates revenues predominately through the sale to the public 
        of consumer goods or services, or an affiliate of such entity, 
        but does not include an entity that manufacturers or causes the 
        manufacturer of a covered product or covered process, or a 
        relevant part thereof.
  ``(b) Stay of Action Against Customer.--Except as provided in 
subsection (d), in any civil action in which a party asserts a claim 
for relief 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 covered process if the following 
requirements are met:
          ``(1) Party to the action.--The covered manufacturer is a 
        party to the action or to a separate action (in which a party 
        asserts a claim for relief arising under any Act of Congress 
        relating to patents) involving the same patent or patents 
        related to the same covered product or covered process.
          ``(2) Agreement to be bound by issues determined.--The 
        covered customer agrees to be bound as to issues determined in 
        an action described in paragraph (1) without a full and fair 
        opportunity to separately litigate any such issue, but only as 
        to those issues for which all other elements of the common law 
        doctrine of issue preclusion are met.
          ``(3) Deadline to file motion.--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 or paper in the action is served that 
                specifically identifies the covered product or covered 
                process as a basis for the covered customer's alleged 
                infringement of the patent and that specifically 
                identifies how the covered product or covered process 
                is alleged to infringe the patent; or
                  ``(B) the date on which the first scheduling order in 
                the case is entered.
          ``(4) Manufacturer consent in certain cases.--In a case in 
        which the covered manufacturer has been made a party to the 
        action on motion by the covered customer, the covered 
        manufacturer and the covered customer consent in writing to the 
        stay.
  ``(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 the suit against the 
                covered customer (such as a covered product or covered 
                process identified in the motion to lift the stay is 
                not a material part of the claimed invention or 
                inventions in the patent or patents in dispute); or
                  ``(B) the stay unreasonably prejudices or would be 
                manifestly unjust to the party seeking to lift the 
                stay.
          ``(2) Separate manufacturer action involved.--In the case of 
        a stay entered under this section based on the participation of 
        the covered manufacturer in a separate action described in 
        subsection (b)(1), a motion under paragraph (1) may only be 
        granted if the court in such separate action determines that 
        the showing required under paragraph (1) has been made.
  ``(d) Exemption.--This section shall not apply to an action that 
includes a cause of action described under section 271(e)(2).
  ``(e) Waiver of Estoppel Effect.--The court may, upon motion, 
determine that a consent judgment or an unappealed final order shall 
not be binding on the covered customer with respect to one or more of 
the issues that gave rise to the stay based on a showing that such 
consent judgment or unappealed final order would unreasonably prejudice 
or be manifestly unjust to the covered customer in light of the 
circumstances of the case if, following the grant of a motion to stay 
under this section, the covered manufacturer described in subsection 
(b)(1)--
          ``(1) obtains or consents to entry of a consent judgment 
        relating to such issue that gave rise to the stay; or
          ``(2) fails to prosecute to a final, non-appealable judgment 
        such issue that gave rise to the stay.
  ``(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.''.
  (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) Pilot Program for Rules and Procedures on Discovery Burdens and 
Costs and Case Management.--
          (1) Definitions.--In this subsection, the term ``electronic 
        communication'' means any form of electronic communication, 
        including email, text message, and instant message.
          (2) Development of rules and procedures.--Not later than 3 
        months after the date of the enactment of this Act, the 
        Director of the Administrative Office of the United States 
        Courts shall designate not fewer than 6 of the district courts 
        of the United States that are participating in the patent cases 
        pilot program established under section 1 of Public Law 111-349 
        (28 U.S.C.137 note) to develop rules and procedures to 
        implement the proposals described in paragraphs (3) through (5) 
        to address the asymmetries in discovery burdens and costs, and 
        to establish case management procedures, in any civil action 
        arising under any Act of Congress relating to patents.
          (3) Types of discovery rules and procedures to be 
        considered.--The discovery rules and procedures required under 
        paragraph (2) shall address each of the following:
                  (A) Discovery of core documentary evidence.--Whether 
                and to what extent each party to the action is entitled 
                to receive core documentary evidence and should 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 may 
                seek non-core documentary discovery as otherwise 
                provided in the Federal Rules of Civil Procedure.
                  (B) Electronic communication.--If the parties request 
                discovery of electronic communication, how such 
                discovery should be phased to occur relative to the 
                exchange of initial disclosures and core documentary 
                evidence, and appropriate limitations to apply to such 
                discovery.
                  (C) Scope of documentary evidence.--The kinds of 
                evidence that should constitute ``core documentary 
                evidence''.
          (4) Specific discovery rules and procedures to be considered 
        for additional document discovery.--The discovery rules and 
        procedures required under paragraph (2) shall address whether 
        the following provisions, or variations on the following 
        provisions, should apply:
                  (A) In general.--Whether each party to the action may 
                seek any additional document discovery otherwise 
                permitted under the Federal Rules of Civil Procedure 
                beyond core documentary evidence, if such party bears 
                the reasonable costs, including reasonable attorney's 
                fees, of the additional document discovery.
                  (B) Requirements for additional document discovery.--
                Whether, 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.
                  (C) Good cause modification.--Whether a court, upon 
                motion and for good cause shown, may modify the 
                requirements of subparagraphs (A) and (B) and any 
                definition of core documentary evidence.
                  (D) Computer code.--Whether a court, upon motion and 
                for good cause shown, may determine that computer code 
                should be included in the discovery of core documentary 
                evidence, and whether the discovery of computer code 
                shall occur after the parties have exchanged initial 
                disclosures and other core documentary evidence.
                  (E) 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 
                        described in subparagraphs (A) and (B) will be 
                        sought.
                          (iii) Any issues about infringement, 
                        invalidity, or damages that, if resolved before 
                        the additional document discovery described in 
                        subparagraphs (A) and (B) commences, might 
                        simplify or streamline the case.
          (5) Case management rules and procedures to be considered.--
        The rules and procedures required under paragraph (2) shall 
        also address case management procedures for any civil action 
        arising under any Act of Congress relating to patents, 
        including initial disclosure and early case management 
        conference practices that--
                  (A) will identify any potential dispositive issues of 
                the case; and
                  (B) focus on early summary judgment motions when 
                resolution of issues may lead to expedited disposition 
                of the case.
  (b) Implementation of Rules and Procedures.--Within 18 months after 
the designation by the Director of the Administrative Office of the 6 
district courts to develop the rules and procedures pursuant to 
subsection (a), the 6 district courts shall complete the development of 
the rules and procedures, and begin to implement them.
  (c) Expansion of Pilot Program for Rules and Procedures on Discovery 
Burdens and Costs and Case Management.--After the rules and procedures 
developed by the pilot program pursuant to subsection (a) have been in 
effect for at least 2 years, the Judicial Conference of the United 
States, using existing resources, may expand the application of some or 
all of those rules and procedures to be implemented by all the district 
courts, and the United States Court of Federal Claims, for any civil 
action arising under any Act of Congress relating to patents.
  (d) 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.
  (e) Protection of Intellectual-Property Licenses in Bankruptcy.--
          (1) In general.--Section 1522 of title 11, United States 
        Code, is amended by adding at the end the following:
  ``(e) Section 365(n) shall apply to cases under this chapter. If the 
foreign representative rejects or repudiates a contract under which the 
debtor is a licensor of intellectual property, the licensee under such 
contract shall be entitled to make the election and exercise the rights 
described in section 365(n).''.
          (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 licensee shall not be relieved of any 
                of its obligations to maintain the quality of the 
                products and services offered under or in connection 
                with the licensed trademark, service mark, or trade 
                name, and the trustee shall retain the right to oversee 
                and enforce quality control for such products or 
                services, or both.''.
          (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.
  (f) In General.--Not later than 12 months after the date of the 
enactment of this Act, the Judicial Conference of the United States, 
with the assistance of the Director of the Federal Judicial Center and 
the Director of the Administrative Office of the United States Courts, 
shall prepare and transmit to the Committees on the Judiciary of the 
Senate and the House of Representatives a report on discovery 
proceedings in cases pertaining to litigation involving patent laws of 
the United States. The report shall contain, after looking at data 
compiled for the previous two years before the date of the enactment of 
this Act, the following:
          (1) The percentage of courts that have distinct phases of 
        discovery in the court rules.
          (2) A description of at least two of the definitions of such 
        phases.
          (3) Identify by name any court that does not have such 
        distinct phases and a description of why such courts have not 
        implemented such phases.
          (4) With regard to proceedings in courts that have phases, in 
        the case of a discovery proceeding that extends beyond the core 
        documents phase, a description of--
                  (A) what additional discovery was requested and any 
                consistent pattern or trend in the reasons or 
                justifications for the request;
                  (B) how much longer, on average, the proceedings 
                lasted than those settled within the first phase; and
                  (C) any patterns for the courts that repeatedly have 
                extended requests.
          (5) Looking at proceedings in the courts that do not have 
        phase rules, a description of--
                  (A) how long, on average, the discovery proceedings 
                last; and
                  (B) the scope of the requests.

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 outreach.--The existing small 
        business patent outreach programs of the Office, and the 
        relevant offices at the Small Business Administration and the 
        Minority Business Development Agency, shall 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 18 months 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 1 year 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, using existing resources, 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 1 year 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 procedures 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 necessary criteria for using small 
                        claims procedures;
                          (ii) the costs that would be incurred for 
                        establishing, maintaining, and operating such a 
                        pilot program; and
                          (iii) the steps that would be taken to ensure 
                        that the procedures used 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, using existing resources, 
        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, using existing resources, 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 1 year 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.
  (g) Study on Impact of Legislation on Ability of Individuals and 
Small Businesses To Protect Exclusive Rights to Inventions and 
Discoveries.--
          (1) Study required.--The Director, in consultation with the 
        Secretary of Commerce, the Director of the Administrative 
        Office of the United States Courts, the Director of the Federal 
        Judicial Center, the heads of other relevant agencies, and 
        interested parties, shall, using existing resources of the 
        Office, conduct a study to examine the economic impact of 
        sections 3, 4, and 5 of this Act, and any amendments made by 
        such sections, on the ability of individuals and small 
        businesses owned by women, veterans, and minorities to assert, 
        secure, and vindicate the constitutionally guaranteed exclusive 
        right to inventions and discoveries by such individuals and 
        small business.
          (2) Report on study.--Not later than 2 years 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).

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

  (a) Post-Grant Review Amendment.--Section 325(e)(2) of title 35, 
United States Code is amended by striking ``or reasonably could have 
raised''.
  (b) Reform of Patent Trial and Appeal Board Proceedings.--
          (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 a semicolon; and
                  (C) by adding at the end the following new 
                paragraphs:
          ``(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; and
          ``(15) providing that a review may not be instituted unless 
        the petitioner certifies that the petitioner and the real 
        parties in interest of the petitioner--
                  ``(A) do not own and will not acquire a financial 
                instrument (including a prepaid variable forward 
                contract, equity swap, collar, or exchange fund) that 
                is designed to hedge or offset any decrease in the 
                market value of an equity security of the patent owner 
                or an affiliate of the patent owner, during a period 
                following the filing of the petition to be determined 
                by the Director; and
                  ``(B) have not demanded payment, monetary or 
                otherwise, from the patent owner or an affiliate of the 
                patent owner in exchange for a commitment not to file a 
                petition under section 311 with respect to the patent 
                that is the subject of the petition, unless the 
                petitioner or the real party in interest of the 
                petitioner has been sued for or charged with 
                infringement of the patent, during a period to be 
                determined by the Director.''.
          (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 a semicolon; and
                  (C) by adding at the end the following new 
                paragraphs:
          ``(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; and
          ``(14) providing that a review may not be instituted unless 
        the petitioner certifies that the petitioner and the real 
        parties in interest of the petitioner--
                  ``(A) do not own and will not acquire a financial 
                instrument (including a prepaid variable forward 
                contract, equity swap, collar, or exchange fund) that 
                is designed to hedge or offset any decrease in the 
                market value of an equity security of the patent owner 
                or an affiliate of the patent owner, during a period 
                following the filing of the petition to be determined 
                by the Director; and
                  ``(B) have not demanded payment, monetary or 
                otherwise, from the patent owner or an affiliate of the 
                patent owner in exchange for a commitment not to file a 
                petition under section 311 with respect to the patent 
                that is the subject of the petition, unless the 
                petitioner or the real party in interest of the 
                petitioner has been sued for or charged with 
                infringement of the patent, during a period to be 
                determined by the Director.''.
          (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) Declaration evidence.--
                  (A) Preliminary response to petition for inter partes 
                review.--Section 313 of title 35, United States Code, 
                is amended by striking the period at the end and 
                inserting ``, including affidavits or declarations of 
                supporting evidence and opinions.''.
                  (B) Preliminary response to petition for post-grant 
                review.--Section 323 of title 35, United States Code, 
                is amended by striking the period at the end and 
                inserting ``, including affidavits or declarations of 
                supporting evidence and opinions.''.
          (5) Right of due process.--
                  (A) Inter partes review.--Section 316(b) of title 35, 
                United States Code, is amended by striking ``and the 
                ability'' and inserting ``the rights to due process of 
                the patent owner and the petitioner, and the ability''.
                  (B) Post-grant review.--Section 326(b) of title 35, 
                United States Code, is amended by striking ``and the 
                ability'' and inserting ``the rights to due process of 
                the patent owner and the petitioner, and the ability''.
          (6) Serial or redundant petitions.--The Director shall 
        designate as precedential (and may change the designation as 
        the Director determines to be appropriate), with respect to the 
        application of subsections (d) and (e) of section 325 of title 
        35, United States Code, the decisions of the Patent Trial and 
        Appeal Board in each of the following decisions:
                  (A) Dell Inc. v. Electronics and Telecomms. Research 
                Inst., IPR2015-00549, Paper 10 (PTAB Mar. 26, 2015).
                  (B) Zimmer Holdings, Inc. v. Bonutti Skeletal 
                Innovations LLC, IPR2014-01080, Paper 17 (PTAB Oct. 31, 
                2014).
                  (C) Prism Pharma Co., Ltd. v. Choongwae Pharma Corp., 
                IPR2014-00315, Paper 14 (PTAB July 8, 2014).
                  (D) Unilever, Inc. v. The Procter & Gamble Co., 
                IPR2014-00506, Paper 17 (PTAB July 7, 2014).
          (7) Preliminary response to inter partes review amendment.--
                  (A) Amendment.--Section 313 of title 35, United 
                States Code, is amended by adding at the end the 
                following new sentence: ``The Director may accept a 
                reply by the petitioner to new issues raised in the 
                preliminary response, upon request by the petitioner to 
                file such reply, within a time period set by the 
                Director.''
                  (B) Conforming amendments.--Section 314 of title 35, 
                United States Code, is amended--
                          (i) in subsection (a), by striking ``any 
                        response'' and inserting ``any response or 
                        reply''; and
                          (ii) in subsection (b)--
                                  (I) in paragraph (1), by striking 
                                ``receiving a preliminary response to 
                                the petition'' and inserting 
                                ``receiving the later of a preliminary 
                                response to the petition or a reply to 
                                such preliminary response''; and
                                  (II) by amending paragraph (2) to 
                                read as follows:
          ``(2) if--
                  ``(A) no such preliminary response is filed, the last 
                date on which such response may be filed; and
                  ``(B) such preliminary response is filed and no such 
                reply is requested, the last day on which such reply 
                may be requested.''.
          (8) Effective date, regulations, and transition for short 
        sales.--
                  (A) Effective date.--Sections 316(a)(15) and 
                326(a)(14) of title 35, United States Code, as added by 
                paragraphs (1) and (2) shall take effect on the date of 
                the enactment of this Act.
                  (B) Regulations required.--Not later than one year 
                after the date of the enactment of this Act, the 
                Director shall issue regulations to carry out sections 
                316(a)(15) and 326(a)(14) of title 35, United States 
                Code, as added by paragraphs (1) and (2).
                  (C) Transition.--During the period that begins on the 
                date of the enactment of this Act and ends on the date 
                of the issuance of the regulations required pursuant to 
                subparagraph (B), a petition filed under chapter 31 or 
                32 of title 35, United States Code, on or after the 
                date of the enactment of this Act may not be instituted 
                unless the petitioner certifies that the petitioner and 
                the real parties in interest of such petitioner--
                          (i) do not own a financial instrument 
                        described in sections 316(a)(15) and 326(a)(14) 
                        of title 35, United States Code, as added by 
                        paragraphs (1) and (2), during the one-week 
                        period following the date on which the petition 
                        is filed; and
                          (ii) have not demanded anything of value from 
                        the patent owner or an affiliate of the patent 
                        owner during the period between September 16, 
                        2012, and the date of the filing of the 
                        petition.
          (9) Effective date.--Except as otherwise provided, 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.
  (c) Codification of the Double-patenting Doctrine.--
          (1) Amendments.--
                  (A) Conditions for patentability; novelty.--Section 
                102 of title 35, United States Code, is amended by 
                inserting at the end the following new subsection:
  ``(e) Double-patenting Prior Art.--If a first claimed invention in a 
first patent was effectively filed on or before the effective filing 
date of a second claimed invention in a second patent or in the 
application on which the second patent issues, and the first claimed 
invention is not otherwise prior art to the second claimed invention 
under this section, then the first claimed invention shall, 
notwithstanding the other subsections of this section, constitute prior 
art to the second claimed invention under this subsection unless--
          ``(1) the second claimed invention is consonant with a 
        requirement for restriction under the first sentence of section 
        121 with respect to the claims issued in the first patent; or
          ``(2) an election has been recorded in the Office by the 
        owner of the second patent or the application on which the 
        second patent issues disclaiming the right to bring or maintain 
        a civil action under section 281 to enforce the second patent, 
        except that such disclaimer shall not apply if--
                  ``(A) the relief being sought in the civil action 
                would not constitute a cause of action barred by res 
                judicata had the asserted claims of the second patent 
                been issued in the first patent; and
                  ``(B) the owner of the first patent or the 
                application on which the first patent issues has 
                recorded an election limiting the enforcement of the 
                first patent relative to the second patent in the 
                manner described in this paragraph, the owner of the 
                first patent is a party to the civil action, or a 
                separate action under section 281 to enforce the first 
                patent can no longer be brought or maintained.''.
                  (B) Divisional applications.--Section 121 of title 
                35, United States Code, is amended by striking the 
                third sentence.
                  (C) Limitations.--Paragraph (2) of section 154(b) of 
                title 35, United States Code, is amended by inserting 
                at the end the following new subparagraph:
                  ``(D) Patents subject to election.--If a patent is 
                subject to an election as described in section 
                102(e)(2) with respect to one or more other patents, 
                the adjusted term of the patent under this subsection 
                may not exceed a period of 17 years from the date of 
                issuance of any of such other patents and the portion 
                of any adjustment of the term of the patent under this 
                subsection that extends beyond the expiration of such 
                17-year period years shall be void.''.
          (2) Effective date, implementation, and other transition 
        provisions.--
                  (A) In general.--The amendments made by paragraph (1) 
                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).
                  (B) Savings clause.--If a second claimed invention in 
                a second patent issued before the date of the enactment 
                of this Act is subject to the amendments made by 
                paragraph (1) and would not have been invalid had the 
                amendments made by paragraph (1) and the provisions of 
                this paragraph not been enacted, then, notwithstanding 
                section 102(e) of title 35, United States Code, as 
                added by paragraph (1), prior art under such section 
                102(e) may not be considered in determining the 
                validity of such second claimed invention.
                  (C) Provisional rejections to continue.--If a first 
                claimed invention in a first application for patent 
                subject to the amendments under paragraph (1) would, if 
                issued as a patent, constitute prior art under section 
                102(e) of title 35, United States Code, as added by 
                paragraph (1), with respect to a second claimed 
                invention in a second application, the first claimed 
                invention may be provisionally cited by the Office as 
                prior art in a notice under section 132 of title 35, 
                United States Code, in connection with the examination 
                of the second claimed invention.
                  (D) Patent term; rule of construction.--
                          (i) In general.--If the term of a patent is 
                        based upon the amendments made to subsection 
                        (a) of section 154, title 35, United States 
                        Code, by the Uruguay Round Agreements Act 
                        (Public Law 103-465; 108 Stat. 4809)--
                                  (I) the patent term as provided under 
                                subsection (a) of such section 154, any 
                                adjustment to said term as provided 
                                under subsection (b) of such section 
                                154, and any extension of such term as 
                                provided under section 156 of title 35, 
                                United States Code, shall not 
                                constitute, nor be deemed by the Office 
                                or the courts to constitute, an 
                                unjustified period of protection under 
                                the patent or an unjustified extension 
                                of the right to exclude under the 
                                patent relative to an earlier-expiring 
                                patent;
                                  (II) the Office shall not condition 
                                the issuance of such a patent on a 
                                disclaimer of any portion of the term 
                                of the patent; and
                                  (III) the Office may condition the 
                                issuance of such a patent on the making 
                                of an election as described in section 
                                102(e)(2) of title 35, United States 
                                Code, as added by paragraph (1) in lieu 
                                of the filing of a disclaimer with 
                                respect to the ownership or separate 
                                enforcement of the patent that would 
                                otherwise be required by the Office in 
                                cases of non-statutory double 
                                patenting.
                          (ii) Disclaimers in pending applications.--A 
                        terminal disclaimer made in connection with an 
                        application for patent with respect to one or 
                        more other applications or patents shall be 
                        given no effect and shall be treated as having 
                        never been made if--
                                  (I) within one year after the date of 
                                the enactment of this Act, an election 
                                as described in section 102(e)(2) of 
                                title 35, United State Code, as added 
                                by paragraph (1), has been made in 
                                connection with the application or any 
                                patent issuing thereon and has effect 
                                with respect to each such other 
                                application or patent with respect to 
                                which the disclaimer was made;
                                  (II) the application was pending 
                                before the Office on or after July 1, 
                                2015; and
                                  (III) the term of a patent issued on 
                                the application would be based upon the 
                                amendments made to subsection (a) of 
                                section 154 of title 35, United States 
                                Code, by the Uruguay Round Agreements 
                                Act.
                          (iii) Disclaimers otherwise unaffected.--
                        Except as provided in clause (ii), nothing in 
                        this subsection shall be construed to negate 
                        the effect of a terminal disclaimer limiting 
                        the enforcement of a patent issued on or before 
                        the date of the enactment of this Act.
                          (iv) Terminal disclaimer defined.--In this 
                        subparagraph, the term ``terminal disclaimer'' 
                        has the meaning as such term is described in 
                        section 1.321 of title 37, Code of Federal 
                        Regulations.
                  (E) Exclusive rules.--
                          (i) First-inventor-to-file patents.--A 
                        claimed invention of a patent described in 
                        section 3(n)(1) of the Leahy-Smith America 
                        Invents Act (35 U.S.C. 100 note) and issued 
                        before, on, or after the date of the enactment 
                        of this Act may not be held invalid on any 
                        nonstatutory double-patenting ground.
                          (ii) First-to-invent patents.--A claimed 
                        invention of a patent not described in section 
                        3(n)(1) of the Leahy-Smith America Invents Act 
                        and issued before, on, or after the date of the 
                        enactment of this Act may not be held invalid 
                        with respect to a claimed invention of another 
                        patent based on any nonstatutory double 
                        patenting ground if one of the claimed 
                        inventions is prior art to the other claimed 
                        invention under section 102 of title 35, United 
                        States Code, as in effect on the day prior to 
                        the effective date of the amendments made by 
                        section 3(b)(1) of the Leahy-Smith America 
                        Invents Act.
                  (F) Effect of rule of construction and exclusive 
                rules.--Subparagraphs (D) and (E) shall take effect on 
                the date of the enactment of this Act, except that they 
                shall not apply to any defense raised in a civil action 
                brought before such date.
  (d) 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).
          (3) Proceeding consolidation clarification.--Section 315(c) 
        of title 35, United States Code, is amended to read as follows:
  ``(c) Joinder.--
          ``(1) Joinder of party.--If the Director institutes an inter 
        partes review, the Director, in his or her discretion, may join 
        as a party to that inter partes review any person who meets the 
        requirement of properly filing a petition under section 311 
        that the Director, after receiving a preliminary response under 
        section 313 or the expiration of the time for filing such a 
        response, determines warrants the institution of an inter 
        partes review under section 314.
          ``(2) Joinder of later filed petition.--For good cause shown, 
        the Director may allow a party who files a petition that meets 
        the requirement described in paragraph (1) and concerns the 
        patent of a pending inter partes review to join the petition to 
        the pending review.''.
  (e) Clarification of Jurisdiction.--
          (1) In general.--An action or claim arises under an Act of 
        Congress relating to patents if such action or claim--
                  (A) necessarily requires resolution of a disputed 
                question as to the validity of a patent or the scope of 
                a patent claim; or
                  (B) is an action or claim for legal malpractice that 
                arises from an attorney's conduct in relation to an 
                action or claim arising under an Act of Congress 
                relating to patents (including as described in 
                paragraph (1)).
          (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.
  (f) 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.
  (g) Management of the United States Patent and Trademark Office.--
          (1) In general.--Section 3(b)(1) of title 35, United States 
        Code, is amended in the first sentence--
                  (A) by striking ``be vested with the authority to act 
                in the capacity of the'' and inserting ``serve as 
                Acting,''; and
                  (B) by inserting before the period ``or in the event 
                of a vacancy in the office of the Director''.
          (2) Effective date.--The amendments made by paragraph (1) 
        shall take effect on the date of the enactment of this Act and 
        shall apply with respect to appointments and vacancies 
        occurring before, on, or after the date of the enactment of 
        this Act.
  (h) 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 by striking 
                ``shall execute'' and inserting ``may be required to 
                execute''.
                  (B) Effective date.--The amendment 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 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.--Section 32 of title 35, United States 
                Code, is amended by striking the fourth sentence and 
                inserting the following new sentences: ``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 18 months after the date on 
                which the Director of the Office of Enrollment and 
                Discipline received a written grievance (as prescribed 
                in the regulations established under section 
                2(b)(2)(D)) about a specified individual that describes 
                the misconduct forming the basis for the proceeding. If 
                the misconduct that forms the basis for the proceeding 
                under this section is at issue in a court or 
                administrative-agency proceeding, the 18-month period 
                for commencing the proceeding under this section shall 
                be tolled until the court or agency's decision 
                regarding the misconduct becomes final and non-
                appealable. The 18-month period for commencing a 
                proceeding under this section also may be tolled by 
                agreement between the parties.''
                  (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).
          (9) Global worksharing.--
                  (A) Amendment.--Section 122 of title 35, United 
                States Code, is amended by adding at the end the 
                following new subsection:
  ``(f) Foreign or International Filing.--
          ``(1) Provision of information.--The Director may provide 
        information concerning an application for patent to a foreign 
        or international intellectual property office if a 
        corresponding application is filed with such foreign or 
        international intellectual property office. If the 
        corresponding application is an international application, such 
        information may also be provided to an International Searching 
        Authority, an International Preliminary Examining Authority, or 
        the International Bureau.
          ``(2) Definitions.--For purposes of this subsection, the 
        terms `international application', `International Searching 
        Authority', `International Preliminary Examining Authority', 
        and `International Bureau' have the same meaning given those 
        terms under section 351.''.
                  (B) Conforming amendment.--Section 122(a) of title 
                35, United States Code, is amended by striking 
                ``subsection (b)'' and inserting ``subsections (b) and 
                (f)''.
                  (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 applications 
                for patent that are pending on, or filed on or after, 
                such effective date.
          (10) Jurisdiction for appeals of trademark cases.--
                  (A) Court of appeals.--Section 1295(a)(4)(C) of title 
                28, United States Code, is amended by striking ``title 
                35'' and inserting ``title 35 or section 21(b) of the 
                Act of July 5, 1946 (commonly referred to as the 
                `Trademark Act of 1946') (15 U.S.C. 1071(b))'';
                  (B) Conforming amendment.--Section 39(a) of the Act 
                of July 5, 1946 (commonly referred to as the 
                ``Trademark Act of 1946'') (15 U.S.C. 1121(a)) is 
                amended by striking ``under this Act'' and inserting 
                ``under this Act (except as provided in section 
                1295(a)(4) of title 28, United States Code)''.
                  (C) Effective date.--The amendment made by 
                subparagraph (A) shall apply in any case in which a 
                final judgment is entered by the district court on or 
                after the date of enactment of this Act.
          (11) Officers and employees amendment.--
                  (A) Amendment.--Section 3(b)(3)(A) of title 35, 
                United States Code, is amended by striking ``appoint'' 
                and inserting ``appoint, or nominate for appointment by 
                the Secretary of Commerce,''.
                  (B) Applicability.--Section 3(b)(3)(B) of title 35, 
                United States Code, as added by subparagraph (A) shall 
                apply to all officers nominated for appointment by the 
                Secretary of Commerce before, on, or after the date of 
                the enactment of this Act.
  (i) Extension of Fee-setting Authority.--Section 10(i)(2) of the 
Leahy-Smith America Invents Act (Public Law 112-29; 125 Stat. 319; 35 
U.S.C. 41 note) is amended by striking ``7-year'' and inserting ``17-
year''.

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 3\1/2\ 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 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.
    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 in 
the House and Senate during this and the previous Congress,\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 2013 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 
2013 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 2013 hearing]; 
Protecting Small Businesses and Promoting Innovation by Limiting Patent 
Troll Abuse: Hearing Before the S. Comm. on the Judiciary, 113th Cong. 
(2013); Examining Recent Supreme Court Cases in the Patent Arena: 
Hearing Before the Subcomm. on Courts, Intellectual Property, and the 
Internet of the H. Comm. on the Judiciary, 114th Cong. (2015) 
[hereinafter February 2015 hearing]; The Impact of Abusive Patent 
Litigation Practices on the American Economy: Hearing Before the S. 
Comm. on the Judiciary, 114th Cong. (2015); Patent Reform: Protecting 
American Innovators and Job Creators from Abusive Patent Litigation: 
Hearing Before the Subcomm. on Courts, Intellectual Property, and the 
Internet of the H. Comm. on the Judiciary, 114th Cong. (2015) 
[hereinafter March 2015 hearing]; H.R. 9, the ``Innovation Act:'' 
Hearing Before the H. Comm. on the Judiciary, 114th Cong. (2015) 
[hereinafter April 2015 hearing]; S. 1137, the ``PATENT ACT:'' Finding 
Effective Solutions to Address Abusive Patent Practices: Hearing Before 
the S. Comm. on the Judiciary, 114th Cong. (2015) [hereinafter May 2015 
Senate 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 hearings, 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 2013 hearing at 61 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform); see also April 2015 hearing, 
Statement of the Honorable Michelle K. Lee, Under Secretary of Commerce 
for Intellectual Property and Director of the United States Patent and 
Trademark Office [hereinafter Director Lee's testimony], at *3 (``[A]ny 
legislative reform must preserve a patentee's ability to reliably and 
efficiently enforce its patent rights. Legislation must achieve a 
balance, preventing abuse while ensuring that any patent owner, large 
or small, will be able to enforce a patent that is valid and 
infringed.'') Because the record of the April 14, 2015 hearing has not 
been published as of the filing of this report, citations to the 
testimony in that record are to the material as submitted, rather than 
to the pages of the GPO print, and are identified by asterisks. 
Director Lee's responses to questions posed by members during the 
hearing are cited according to the time at which they were made during 
the webcast of the hearing. The webcast is available at http://
judiciary.house.gov/index.cfm/2015/4/hearing-hr-9-innovation-act.

    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 February 2015 hearing at 55 (Statement of Robert 
P. Taylor, on behalf of National Venture Capital Association) (``For 
thousands of . . . companies, . . . patents are the only way to insure 
a return on investment sufficient to justify the risks involved.); 
March 2013 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-up companies are 
protected against patent-enforcement abuse, while also ensuring 
that the patent system continues 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 that ensures 
that the Nation's patent system continues to drive 
technological innovation and economic growth.

                Background and Need for the Legislation

    Testimony before Senate and House Committees has 
established that misuse of various patent-enforcement 
mechanisms is a serious problem--and one that has grown worse 
in recent years. One witness described how the cost of patent 
litigation--driven by 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.\4\
---------------------------------------------------------------------------
    \4\March 2013 hearing at 64 (Statement of Philip S. Johnson, Chief 
Intellectual Property Counsel, Johnson & Johnson, on behalf of the 21st 
Century Coalition for Patent Reform).

    Another witness described how improper patent litigation 
tactics can negatively affect both accused infringers and 
---------------------------------------------------------------------------
patent owners:

        I have been involved in situations where a simple 
        reading of a patent was enough to establish an 
        overwhelming likelihood of ultimate success in 
        defeating a patent infringement claim, only to see the 
        accused infringer--sometimes after spending millions of 
        dollars in attorney fees--make a rational business 
        decision to abandon its defenses and seek a settlement.

        . . . I have also seen patent infringers use litigation 
        tactics calculated to inflict remarkable pain on patent 
        holders. Between pleading any conceivable defense to 
        validity or enforceability--and seeking any and all 
        possible discovery--the patent owner's time and expense 
        to vindication of its valid patent rights can be so 
        great that the patent owner can be forced to consider 
        stepping away from the fight and offering a settlement 
        that greatly undervalues the patent's intrinsic worth. 
        Litigation burdens can put the inventor holding a 
        strong patent in a weak position--just as litigation 
        burdens can convert a weak patent--or a portfolio of 
        weak patents--into an overvalued asset.\5\
---------------------------------------------------------------------------
    \5\April 2015 hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *4.

    This witness concluded by noting that ``it cannot be a good 
sign for any property rights system if the litigation/
enforcement regime often operates to weaken the strongest 
property rights and strengthen the negotiating hand of those 
holding the least meritorious property claims.''\6\
---------------------------------------------------------------------------
    \6\Id.
---------------------------------------------------------------------------
    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.\7\
---------------------------------------------------------------------------
    \7\October 2013 hearing at 27 (Statement of Kevin Kramer, Vice 
President and Deputy General Counsel for Intellectual Property, Yahoo! 
Inc.); see also id. at 28 (``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.\8\
---------------------------------------------------------------------------
    \8\March 2013 hearing at 39 (statement of Janet L. Dhillon, 
Executive Vice President, General Counsel and Corporate Secretary, J.C. 
Penney).

    The fact that a representative of a major retailer 
testified before a congressional Committee 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 would 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,\9\ 
the Food Marketing Institute (which conducts programs on food 
safety for food retailers and wholesalers),\10\ the National 
Association of Realtors,\11\ and the American Bankers 
Association.\12\
---------------------------------------------------------------------------
    \9\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.'').
    \10\Id. at 163.
    \11\March 2013 hearing at 160.
    \12\Id. at 220-221.
---------------------------------------------------------------------------
    During her recent testimony before the Committee, USPTO 
Director Michelle Lee confirmed the existence of problems with 
the current patent-enforcement system:

        the past several years have seen the growth of patent 
        litigation practices which have the potential to hurt 
        innovation. These abusive litigation practices can be 
        particularly harmful to new and small businesses, which 
        often lack the resources to defend themselves in these 
        often highly complex and expensive cases. There have 
        been reports of widespread mailing of ``demand 
        letters'' with vague allegations of patent infringement 
        to people otherwise unfamiliar with patents and patent 
        law. In addition, there is a continuing need to find 
        ways to strengthen the patent system by leveling the 
        playing field for innovators and increasing the 
        transparency of patent ownership information.\13\
---------------------------------------------------------------------------
    \13\Director Lee's testimony at *2; see also id. at 2:21:05 
(colloquy with Ms. DelBene).

    Other witnesses who appeared before the Committee 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.\14\
---------------------------------------------------------------------------
    \14\March 2013 hearing at 140-141 (statement of Janet L. Dhillon, 
Executive Vice President, General Counsel and Corporate Secretary, 
jcpenney); see also April 2013 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.'').

    Similarly, other witnesses 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.''\15\
---------------------------------------------------------------------------
    \15\April 2013 hearing at 42 (Statement of Colleen V. Chien, 
Assistant Professor, Santa Clara University Law School); see also 
February 2015 hearing at 30, 32 (Statement of Krish Gupta, Senior Vice 
President and Deputy General Counsel, EMC Corporation).
---------------------------------------------------------------------------
    Director Lee also addressed the argument made by some 
opponents of the Innovation Act that recent events have 
obviated the need for legislative reform. Director Lee 
acknowledged that ``[s]ince December 2013, when the House of 
Representatives passed the Innovation Act, H.R. 3309, . . . 
there have been a number of changes to the patent 
landscape.''\16\ She described actions undertaken by the USPTO, 
the courts, and others, but went on to note:
---------------------------------------------------------------------------
    \16\Director Lee's testimony at *2.

        Many of these actions have made progress in clarifying 
        patent rights and curtailing some patent litigation 
        abuses, but they are not a complete solution. The 
        recent judicial decisions are limited in their effect 
        because of the limitations of the statutes that those 
        cases interpret. And other actions--particularly the 
        passage of some state laws--have added to the need for 
        Federal legislation that provides a uniform national 
        approach. The USPTO also believes that legislation 
        remains necessary to realize the full potential of the 
        changes enacted in the AIA. Although the AIA made a 
        large number of important reforms to the patent system, 
        that law did not address all currently outstanding 
        problems--some of which have become more apparent since 
        the AIA's enactment.\17\
---------------------------------------------------------------------------
    \17\Id. at *2-3.

    Director Lee concluded that ``the USPTO believes that 
legislation to curtail abusive patent litigation is necessary 
and appropriate at this time.''\18\
---------------------------------------------------------------------------
    \18\Id. at *3.
---------------------------------------------------------------------------
    Finally, one witness with deep experience with the patent 
system offered the following stark warning about the risks 
posed by litigation abuses 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.\19\
---------------------------------------------------------------------------
    \19\October 2013 hearing at 61 (Statement of Robert A. Armitage, 
Former General Counsel, Eli Lilly & Co.).

    The inefficiencies and inequities currently afflicting the 
Nation's patent-enforcement system are a problem that calls for 
this Committee's attention.

                     I. PATENT INFRINGEMENT ACTIONS

1. Attorney's Fees
    Witnesses who appeared before the Committee have 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 a March 14, 2013 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.\20\
---------------------------------------------------------------------------
    \20\March 2013 hearing at 89 (Statement of Dana Rao, Vice President 
of Intellectual Property and Litigation, Adobe Systems); see also 
October 2013 hearing at 31 (Statement of Kevin Kramer, Vice President 
and Deputy General Counsel for Intellectual Property, Yahoo! Inc.) 
(``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 2013 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.''); April 2015 
hearing, Statement of Robert A. Armitage, Former General Counsel, Eli 
Lilly & Co., at *5 (``[Default fee shifting] could further discourage 
procuring bundles of low-quality patents--they would no longer be 
valued based upon the cost of defense if each accused infringer had a 
reasonable certainty of recovering defense costs. At its opposite pole, 
it could assure a well-conceived, high-quality patent would garner 
respect--and serve as a rock-solid asset for attracting investments to 
proceed with development and commercialization of the new technology it 
protects.''); id. at *4 (``[A] more uniformly applied ``loser-pays'' 
system for civil actions involving patents could be the single most 
important patent litigation reform that this Congress might enact at 
the present time.'').

    Witnesses 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.''\21\
---------------------------------------------------------------------------
    \21\April 2013 hearing at 14 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company); see 
also March 2013 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 entities] 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 has urged the Committee to adopt a 
clear standard for fee awards, rather than leaving such matters 
to the whim of district judges. 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.''\22\
---------------------------------------------------------------------------
    \22\March 2013 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).
---------------------------------------------------------------------------
    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.\23\ This 
is the standard that is employed by the Equal Access to Justice 
Act,\24\ which has been applied since 1980 to allow awards of 
attorney's fees against the Federal Government.
---------------------------------------------------------------------------
    \23\March 2013 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).''); see 
also April 2015 hearing, Statement of Hans Sauer, Ph.D., Deputy General 
Counsel for Intellectual Property, Biotechnology Industry Organization, 
at *9-10.
    \24\28 U.S.C. sec. 2412(d).
---------------------------------------------------------------------------
    Finally, the Committee is pleased to note that USPTO 
Director Michelle Lee testified at the April 14 hearing that 
``[t]he USPTO generally supports the approach taken in 
Sec. 3(b) of H.R. 9.''\25\ As Director Lee noted:
---------------------------------------------------------------------------
    \25\Director Lee's testimony at *3.

        This proposal would create a fault-based standard under 
        which fees and expenses would be awarded in appropriate 
        cases but would not be automatic. Rather, an award 
        would be made only if the court finds that the non-
        prevailing party's litigation position was one that no 
        reasonable litigant would have believed would succeed, 
        or that the non-prevailing party's conduct was 
        otherwise unreasonable.\26\
---------------------------------------------------------------------------
    \26\Id. The Committee is aware that legislation that was introduced 
in the Senate recently includes a provision that is similar to 
Sec. 3(b), but that would award fees on the basis of whether the losing 
party's conduct was ``objectively reasonable.'' See S. 1137, 114th 
Cong., Sec. 7(b). The Committee perceives no reason to adopt this 
approach, given that there is no substantive difference between 
``objectively reasonable'' and the standard imposed by EAJA. See Pierce 
v. Underwood, 487 U.S. 552, 565 (1988) (holding that a litigation 
position is substantially justified if it ``justified to a degree that 
could satisfy a reasonable person'') (citation omitted); Aqua Shield v. 
Inter Pool Cover Team, 774 F.3d 766, 774 (Fed. Cir. 2014) (holding that 
litigation positions are ``objectively unreasonable'' if ``no 
reasonable litigant could realistically expect them to succeed'') 
(citation omitted).

    Director Lee noted that Sec. 3(b)'s test ``is generally 
consistent with that already being applied in at least some 
district courts pursuant to the Supreme Court's recent decision 
in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. 
Ct. 1749 (April 29, 2014).''\27\ These courts ``have awarded 
fees on the basis that the non-prevailing litigant advanced 
legal and factual theories that no reasonable litigant would 
advance or that otherwise lacked a reasonable basis, or engaged 
in unreasonable litigation tactics and conduct.''\28\
---------------------------------------------------------------------------
    \27\Director Lee's testimony at *3.
    \28\Director Lee's testimony at *3; see, e.g., Home Gambling 
Network, Inc. v. Piche, No. 2:05-CV-610-DAE (D. Nev. May 22, 2014) 
(patentee's legal theory was clearly precluded by controlling law and 
his theory of infringement was based on claim scope that was clearly 
disclaimed during prosecution); Lumen View Tech., LLC v. 
Findthebest.com, Inc., No. 13 CIV. 3599 (DLC) (S.D.N.Y. May 30, 2014) 
(even under patentee's claim construction, no reasonable defendant 
would have found infringement); Kilopass Tech. Inc. v. Sidense Corp., 
No. 3:10-cv-02066-SI (N.D. Cal. Aug. 12, 2014) (patentee's doctrine-of-
equivalents theory was not supported by pre-suit investigation and 
lacked a reasonable basis); LendingTree, LLC v. Zillow, Inc., No. 3:10-
cv-00439-FDW-DCK (W.D.N.C. Oct. 9, 2014) (``The Court cannot help but 
construe LendingTree's pursuit of this case against NexTag after 
producing and reviewing the electronic discovery and witness testimony 
as an indication of at least a moderate level of unreasonableness.''); 
IPVX Patent Holdings, Inc. v. Voxernet LLC, Case No. 5:13-cv-01708 HRL 
(N.D. Cal. Nov. 5, 2014) (``It was unreasonable of IPVX to assert 
literal infringement without comparing the elements of the claim to the 
accused product in more than a wholly conclusory fashion.''); Bayer 
CropScience AG et al., v. Dow AgroSciences LLC, Civil No. 12-256 (RMB/
JS) (D. Del. Jan. 5, 2015) (patentee's suit was precluded by a license 
that was susceptible to only one reasonable interpretation); Lugus IP, 
LLC v. Volvo Car Corp., Civil Action No. 12-2906 (JEI/JS) (D.N.J. March 
26, 2015) (patentee's case was objectively unreasonable because ``the 
prosecution history of the patent . . . specifically distinguished [the 
patentee's] product from prior art . . . [that was] similar to 
Defendant's product''); Brilliant Optical Solutions, LLC v. Comcast 
Corp., Civil Action No. 13-cv-00886-REB (D. Colo. March 27, 2015) (``A 
careful reading of [the] agreement demonstrates that Comcast had a 
license to use the covered device. . . . Prosecution of an infringement 
claim in the fact of such a license is objectively unreasonable.''); 
Cognex Corp. v. Microscan Sys., Inc., No. 13-cv-2027 (JSR) (S.D.N.Y. 
June 30, 2014) (defenses offered were particularly weak and lacked 
support in the evidence, and defendant engaged in unreasonable 
litigation tactics).
---------------------------------------------------------------------------
    Director Lee emphasized that:

        under the current statutory regime as interpreted by 
        the Supreme Court, district courts retain wide 
        discretion to determine whether a case is exceptional. 
        In particular, district courts have discretion to deny 
        a fee award even after finding that a case is 
        exceptional. Accordingly, some courts may decline to 
        award fees in circumstances when other courts would do 
        so. This uncertainty makes it more difficult for 
        parties to decide whether to vindicate their rights 
        through to a final decision in cases where the other 
        side's position appears indefensible. Section 3(b) of 
        H.R. 9 would help bring consistency and predictability 
        to this area of the law by codifying a standard (namely 
        unreasonable conduct or unreasonable positions) for 
        when courts would be required to award fees.\29\
---------------------------------------------------------------------------
    \29\Id.; see also February 2015 hearing at 13 (Statement of Herbert 
C. Wamsley, Executive Director, Intellectual Property Owners 
Association) (``[Despite Octane and Highmark,] we conclude that 
legislation is still needed. The existing statute still requires a case 
to be `exceptional' for an attorney fee award. Octane fails to provide 
a clear, objective test for lower courts to apply. . . . Some judges 
will not be inclined to award fees despite this lower standard.''); id. 
at 39 (Statement of Dana Rao, Vice President of Intellectual Property 
and Litigation, Adobe Systems) (``[Under Octane], much is left to the 
discretion of district courts--discretion that is exercised very 
differently be different judges.'').

    Director Lee concluded by noting that ``[t]he USPTO . . . 
believes that the approach taken along the lines of Sec. 3(b) 
of H.R. 9 is needed and would help curtail litigation abuses 
committed by plaintiffs and defendants because it would 
encourage each side to prepare and analyze their cases 
responsibly.''\30\
---------------------------------------------------------------------------
    \30\Director Lee's testimony at *4; see also id. at 2:23:15 
(colloquy with Mr. Gohmert) (noting that fault-based fee shifting will 
lead to ``heightened discipline'' among the attorneys litigating patent 
cases).
---------------------------------------------------------------------------
2. Heightened Pleading Standards
    An industry witness described the burdens placed on patent-
infringement defendants by vague, uninformative complaints:

        Faced with a boilerplate pleading, the defendant has no 
        way of knowing which of potentially hundreds of claims 
        in the patent it is allegedly infringing. It will not 
        know which features among thousands of product features 
        in its offerings are alleged to infringe those claims. 
        And until the court forces the plaintiff to identify 
        which patent claims are infringed and why they are 
        infringed, the defendant will have no idea how the 
        plaintiff is construing the claims to read on the 
        accused products. As a result, the defendant upon being 
        served has to place expensive document retention holds 
        on employees relating to products that ultimately will 
        not be in the lawsuit, interview engineers and 
        scientists about products that will ultimately not be 
        in the lawsuit and search for prior art on patent 
        claims that will never be in the lawsuit. This only 
        serves to contribute to the already absurdly high cost 
        of defending a patent litigation.\31\
---------------------------------------------------------------------------
    \31\April 2015 hearing, Statement of David M. Simon, Senior Vice 
President of Intellectual Property, Salesforce.com, Inc., at *3; see 
also id., Statement of Kevin Kramer, Vice President and Deputy General 
Counsel for Intellectual Property, Yahoo! Inc., at *5; October 2013 
hearing at 32-33 (Statement of Kevin Kramer, Vice President and Deputy 
General Counsel for Intellectual Property, Yahoo! Inc.); March 2015 
hearing at 14 (Statement of Mark Griffin, General Counsel, 
Overstock.com, Inc.) (``Currently, courts do not require that a patent 
holder explain how a patent is infringed, or even identify the product 
involved, which makes it nearly impossible for someone who has been 
sued to evaluate the case and decide how to respond.'').

    The same witness cited as an example a recent patent 
complaint that had been filed against 132 different defendants 
and that broadly alleges that, ``alone and in conjunction with 
others, the defendant has in the past and continues to infringe 
and/or induce infringement of the `606 patent by using traffic 
information systems, software, products and/or services 
(`Accused Products') that alone or in combination with other 
devices or products are covered by at least one claim of the 
---------------------------------------------------------------------------
'606 patent.'' The witness noted:

        [T]he 132 hapless defendants--who include computer 
        companies, insurance companies, hotels, coffee shops, 
        pharmacies and banks--do not know which claims are 
        infringed. Nor do they know whether their ``Accused 
        Products'' infringe. They do not know if the 
        infringement is alone or in combination with a third 
        party product. And if a third party product is 
        involved, they do not know which third party is 
        involved. Nor do they know which third party's products 
        are involved so they cannot determine if they have the 
        right to an indemnity.\32\
---------------------------------------------------------------------------
    \32\April 2015 hearing, Statement of David M. Simon, Senior Vice 
President of Intellectual Property, Salesforce.com, Inc., at *3.

    The witness concluded by stating that ``[s]uch clear 
absence of notice pleading is to my knowledge not tolerated in 
any other area of the law.''\33\
---------------------------------------------------------------------------
    \33\Id. The Committee is aware that some have questioned Congress's 
authority to prescribe pleading standards and other aspects of Federal 
judicial procedure. The Committee notes, however, that ``[f]rom almost 
the founding days of this country, 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).
---------------------------------------------------------------------------
    Another industry witness 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 bill's 
        heightened pleading requirement, therefore, imposes no 
        new burden on diligent plaintiffs; they merely need to 
        disclose the results of their required analysis. But 
        [proposed 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.\34\
---------------------------------------------------------------------------
    \34\October 2013 hearing at 20 (Statement of Krish Gupta, Senior 
Vice President and Deputy General Counsel, EMC Corporation); see also 
April 2015 hearing, Statement of David M. Simon, Senior Vice President 
of Intellectual Property, Salesforce.com, Inc., at *4 (``[S]ection 281A 
would for the first time permit defendants who make complex products 
with billions of lines of computer software or billions of parts such 
as advanced semiconductors to be able to determine what portion of 
their offerings are infringed from the complaint. It is a question of 
due process. None of these requirements is unfair because the plaintiff 
would have to provide this information anyway to prove its case.'').

    Another witness described the expected ``salutary effects'' 
---------------------------------------------------------------------------
of proposed Sec. 281A's heightened pleading standards:

        Defendants would know which features of which offerings 
        are being accused and know what documents they need to 
        retain. They would not search for prior art needlessly 
        for hundreds of claims that will not be asserted. They 
        would not waste valuable engineers and scientists time 
        discussing products that are not actually in the 
        lawsuit.

        Also, Main Street customers who are often the target of 
        [abusive] lawsuits would know whether they have an 
        indemnity claim against their technology purveyors. 
        Providers of technology would know whether they owe a 
        duty to defend at the start of the litigation because 
        the complaint would make that readily apparent. Thus, 
        the providers would know whether they should intervene 
        in the lawsuit and not have to turn down claims until 
        after the patentee finally makes its infringement 
        allegations which could be years later. This benefits 
        both large and small defendants.\35\
---------------------------------------------------------------------------
    \35\April 2015 hearing, Statement of David M. Simon, Senior Vice 
President of Intellectual Property, Salesforce.com, Inc., at *4; see 
also Director Lee's testimony at *4 (``The USPTO supports heightening 
pleading requirements in patent infringement cases beyond what is 
currently required to ensure that defendants have--as soon as the case 
is filed in court--a basic understanding of why they are allegedly 
infringing a patent. Thus, the USPTO generally supports the requirement 
in Sec. 3(a) of H.R. 9 that a complaint explain how each element of a 
patent claim is met by an accused product or process, or address why 
such information is not readily accessible.'').

    The Committee is mindful that some witnesses, though 
generally supportive of Sec. 3(a)'s heightened pleading 
requirements, have noted that different claims in a patent may 
be substantially similar, and have questioned the utility of 
requiring heightened pleading of all such claims that infringe 
only the same accused products and processes.\36\ These 
concerns have been addressed in an amendment that was adopted 
during the Committee's executive session.
---------------------------------------------------------------------------
    \36\See, e.g., Director Lee's testimony at *4 (``Any requirement to 
plead additional claims in a patent at this early stage of litigation 
should be considered in light of the burdens that it would place on the 
patent owner, the potential that it creates for procedural motions that 
do not materially advance the case, and the incentive that it creates 
to `overplead' marginally relevant patent claims.''); id. at 1:07:50 
(colloquy with Mr. Nadler) (noting that in cases ``with multiple 
patents, . . . sometimes there are tens or hundreds of claims. That 
would be a voluminous complaint if you are going element by 
element.''); April 2015 hearing, Statement of Hans Sauer, Ph.D., Deputy 
General Counsel for Intellectual Property, Biotechnology Industry 
Organization, at *8-9 (``There is no need to additionally require the 
inclusion within the initial complaint itself of dozens of alternative 
grounds, or to litigate the sufficiency of such alternative grounds, 
when it is already clear that there is `enough' for a lawsuit to 
proceed.''); id., Statement of Robert A. Armitage, Former General 
Counsel, Eli Lilly & Co., at *11.
---------------------------------------------------------------------------
3. Joinder of Interested Parties
    A witness testifying before the Committee described how 
abusive litigants' ability to operate through limited-liability 
entities could undermine the effectiveness of the Innovation 
Act's fee-shifting provisions. He noted that such litigants 
often operate through a shell corporation whose only asset is 
the patent that was asserted--and if an award has been made 
against that litigant under Sec. 285, ``that sole asset 
[necessarily] has . . . been established to either not be 
infringed or to be invalid.'' \37\ As a result, an award of 
attorney's fees ``is truly a pyrrhic victory'' for the 
prevailing party.\38\ The witness went on to note that 
Sec. 3(c) of the Innovation Act:
---------------------------------------------------------------------------
    \37\April 2015 hearing, Statement of David M. Simon, Senior Vice 
President of Intellectual Property, Salesforce.com, Inc., at *5.
    \38\Id.

        would provide a new joinder process that permits 
        trolls' financiers to be put in harm's way for the 
        first time. Those who want to profit from patent 
        litigation would be joined to the litigation after a 
        defendant prevails and the court determines attorney's 
        fees are appropriate. The financiers of this 
        unjustified litigation could avoid this liability by 
        renouncing their financial interest. They will have 
        notice and an opportunity to determine whether they 
        really want to be at financial risk for those shell 
        entities who cannot pay for their litigation. If they 
        disclaim their interest, they suffer no harm. If they 
        decide to keep their interest and the defendant 
        ultimately establishes that the patentee's position is 
        unjustified, the defendant can be effectively 
        compensated.\39\
---------------------------------------------------------------------------
    \39\Id.

    Section 3(c) of the Innovation Act provides courts with a 
limited ability to pierce the corporate veil and assign 
liability for attorney's-fee awards to financiers who seek to 
profit from abusive patent litigation. The Committee 
acknowledges that the provision has been the subject of 
criticism. Some have suggested that it would apply to start-up 
companies, and thus would deter investment in such 
companies.\40\ Others have suggested that the provision would 
also assign personal liability to the employees of a start-up 
company.\41\ And it has been proposed that the provision be 
clarified to more clearly protect passive investors in an 
enterprise.\42\ It is not the intent of the Committee to allow 
proposed Sec. 299(d) to operate against start-up companies, or 
to ever extend personal liability to bona fide employees or 
passive investors in or lenders to an enterprise. Section 3(c) 
has been clarified in the Committee's executive session to 
address these and other concerns, and to ensure that the 
provision does not deter investment in small technology 
companies.
---------------------------------------------------------------------------
    \40\See Director Lee's testimony at *7 (``Overriding [the limited 
liability of corporate employees and shareholders] may serve as a 
substantial deterrent to investment in new enterprises and potentially 
job creation, particularly in a number of high-growth sectors. 
Individual investors, for example, may not be willing to invest in a 
start-up company if the risks of doing so included not just the loss of 
their initial investment, but also personal liability to the investor 
for the company's subsequent patent litigation decisions.''); April 
2015 hearing, Statement of Hans Sauer, Ph.D., Deputy General Counsel 
for Intellectual Property, Biotechnology Industry Organization, at *13 
(asserting that proposed Sec. 299(d) limitations ``do[] not clearly 
limit the provision to litigation that was brought by patent assertion 
entities, but could capture R&D; businesses that have to enforce patents 
they were not yet able to develop or commercialize.''); id. at *14 
(``the joinder provisions . . . have the potential for significant 
negative business impact on investment-intensive innovation, especially 
for smaller companies and non-profit and academic innovators.''); March 
2015 hearing at 38 (Statement of Bryan Pate, Co-Founder and CEO, 
ElliptiGO, Inc.) (``It's one thing to lose $50,000 in an investment. 
It's another thing to be on the hook personally for over a million 
dollars in legal fees. That's a huge shift in the risk profile of an 
already risky investment. There are many safer places to put that money 
and I doubt we would have landed our initial investors under those 
conditions.'').
    \41\March 2015 hearing at 38 (Statement of Bryan Pate, Co-Founder 
and CEO, ElliptiGO, Inc.) (``[O]ne of the first employees we hired had 
recently earned her MBA from Stanford's Graduate School of Business. 
She could have worked for any number of great companies. If she knew 
that one of the many risks of working for ElliptiGO included the 
potential loss of her house from a failed patent enforcement action, I 
doubt she would have come onboard.'').
    \42\Director Lee's testimony at *7 (``[T]o help ensure that the 
prospect of joinder does not chill investment in new companies, 
Sec. 3(c) should include . . . [a] clear exemption for passive 
investors--those who lack the ability to direct or control a company's 
litigation. Such an exemption would better allow an investor to know 
whether investing in a company may subject her to personal 
liability.''); id. at 1:03:02 (colloquy with Mr. Goodlatte), 1:23:05 
(colloquy with Mr. Conyers), 2:15:50 (colloquy with Mr. Deutch); April 
2015 hearing, Statement of Hans Sauer, Ph.D., Deputy General Counsel 
for Intellectual Property, Biotechnology Industry Organization, at *14 
(``Business partners, patent owners, financing companies, and others 
who engage only in arm's length business with the patentee should not 
be subjected to potential liability or forced to renounce all of their 
rights in a patent. . . . On the other hand, with proper safeguards it 
may be fair to permit liability of entities that directly benefit from 
and have the right to control the patentee's litigation conduct.'').
---------------------------------------------------------------------------
4. Venue
    During the Committee's April 14 hearing, several witnesses 
recommended that the Committee consider proposals to stay 
discovery in patent cases during the pendency of a motion to 
transfer venue, and suggested that current law's restrictions 
on venue for patent cases be clarified. In response to a 
question from Mr. Farenthold, USPTO Director Michelle Lee 
stated that staying discovery pending a motion to transfer 
venue:

        [Is] an idea worthy of consideration. . . . A motion to 
        transfer occurs early in a patent case. Often, it 
        doesn't take long for a judge to rule on it. And it 
        doesn't involve extensive discovery [on the merits of 
        the case]. . . . [Instead, the issue will be] where is 
        the [defendant's] principal place of business, do [the 
        parties] have an R&D; center [in the district], do they 
        have ties to the area? Staying discovery pending a 
        motion to transfer venue, in combination with [tighter] 
        venue restrictions, . . . will improve the system.\43\
---------------------------------------------------------------------------
    \43\Director Lee's testimony, at 1:47:55; see also id. at 1:04:56 
(colloquy with Mr. Goodlatte); id. at 2:28:27 (colloquy with Mr. 
Jeffries); id. at 2:33:55 (colloquy with Mr. Cicilline) (``[T]ightening 
venue requirements, . . . in combination with a stay of discovery 
pending a ruling on a motion to transfer, would encourage judges to 
rule quickly and promptly [on the motion and] get the litigation in the 
proper district.'').

    A leading industry witness also noted that the non-
enforcement of current law's venue restrictions allows 
litigants to file a large number of cases in particular 
districts, thereby ``plac[ing] undue burdens on those courts'' 
and the residents of those districts.\44\ Another witness noted 
that:
---------------------------------------------------------------------------
    \44\April 2015 hearing, Statement of David M. Simon, Senior Vice 
President of Intellectual Property, Salesforce.com, Inc., at *11.

        [A] mandatory discovery stay pending the resolution of 
        a venue transfer motion can be particularly important 
        in situations where the discovery burdens that might be 
        imposed on a defendant can render its continued patent 
        defense problematic. Since venue moves are done for 
        good reason--often convenience and availability of 
        evidence factors--they play into easing the burdens 
        that might otherwise impair the ability to defend.\45\
---------------------------------------------------------------------------
    \45\April 2015 hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *8-10.

    The Committee notes that existing statutory provisions 
already restrict the venue where a patent-infringement action 
may be brought. Indeed, such statutory limits have been in 
place since 1897. These limits were designed to protect parties 
from the burden and inconvenience of litigating patent actions 
in districts that are remote from any of the underlying events 
in the case. The 1897 Act is now codified at Sec. 1400(b) of 
title 28--it has never been repealed. In 1990, however, the 
U.S. Court of Appeals for the Federal Circuit ``reinterpreted'' 
the statute in a way that robbed it of all effect. In its 
infamous decision in VE Holding Corp. v. Johnson Gas Appliance 
Co.,\46\ the court construed Sec. 1400 to allow venue for a 
corporate defendant wherever personal jurisdiction is proper. 
In effect, the Federal Circuit collapsed the tests for personal 
jurisdiction and venue, rendering Sec. 1400 a nullity. It is 
long past time for Congress to restore Sec. 1400 to its role of 
protecting patent owners and accused infringers from the burden 
of being forced to litigate in remote locations, and ensuring 
that patent lawsuits do not unfairly burden particular courts. 
Congress must correct the Federal Circuit's mistake, and 
clarify that patent lawsuits may only be brought in districts 
with some reasonable connection to the dispute.
---------------------------------------------------------------------------
    \46\917 F.2d 1574 (Fed. Cir. 1990).
---------------------------------------------------------------------------

                  II. TRANSPARENCY OF PATENT OWNERSHIP

    A Committee witness catalogued the reasons why the patent 
law 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). \47\
---------------------------------------------------------------------------
    \47\March 2013 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.\48\
---------------------------------------------------------------------------
    \48\Id.

    Another Committee witness 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.\49\
---------------------------------------------------------------------------
    \49\October 2013 hearing at 34 (Statement of Kevin Kramer, Vice 
President and Deputy General Counsel for Intellectual Property, Yahoo! 
Inc.).

    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.\50\
---------------------------------------------------------------------------
    \50\Id.

                    III. THE CUSTOMER-SUIT EXCEPTION

    A leading industry witness 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 that 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.\51\
---------------------------------------------------------------------------
    \51\March 2013 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 2013 hearing at 45 (Statement of Colleen V. Chien, Assistant 
Professor, Santa Clara University Law School).

    Similarly, another witness 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.''\52\ 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.''\53\
---------------------------------------------------------------------------
    \52\April 2013 hearing at 36-38 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company); see 
also March 2013 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 2013 hearing at 21-22 
(Statement of Krish Gupta, Senior Vice President and Deputy General 
Counsel, EMC Corporation).
    \53\April 2013 hearing at 36-38 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company).
---------------------------------------------------------------------------
    Another 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.\54\
---------------------------------------------------------------------------
    \54\March 2013 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 2013 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 a 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 2013 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.\55\
---------------------------------------------------------------------------
    \55\March 2013 hearing at 86 (Statement of Dana Rao, Vice President 
of Intellectual Property and Litigation, Adobe Systems); see also March 
2013 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,\56\ a review of recent district court decisions 
confirms 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,\57\ 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.\58\ 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.\59\ Of course, these competing lines of cases could 
be alternately applied in every customer case to deny a stay 
regardless of whether the manufacturer filed suit in another 
district or intervened in the customer action.
---------------------------------------------------------------------------
    \56\See Katz v. Lear Siegler, Inc., 909 F.2d 1459 (Fed. Cir. 1990).
    \57\The customer is liable for infringement in such a situation 
under 35 U.S.C. Sec. 271(g).
    \58\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., No. 02-C-1266, 03-C-342, 
04-C-121, 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., 
No. 03-C-3245, at *2 (N.D. Ill. Apr. 9, 2004); Watson Indus., Inc. v. 
Canon, Inc., No. 03-C-422-C, at *1 (W.D. Wis. Nov. 24, 2003); Beck 
Sys., Inc. v. Marimba, Inc., No. 01-C-5207, 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., No. 99C6139, 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).
    \59\See, e.g., Largan Precision Co., Ltd. v. Fujinon Corp., No. C-
10-1318 SBA (JL), 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,\60\ because he sells a product 
that is specially made or adapted to implement the patented 
process and that lacks substantial noninfringing use.
---------------------------------------------------------------------------
    \60\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.\61\ 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.\62\
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    \61\See, e.g., Lodsys, LLC v. Brother Int'l Corp., No. 2:11-cv-90-
JRG, 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, No. C-07-03257 SI, 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., No. C-91-4300 EFL, 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'').
    \62\See, e.g., Select Retrieval, LLC v. L.L. Bean, Inc., Civil No. 
2:12-cv-00003-NT, at *5 (D. Me. Mar. 15, 2013); Thermapure, Inc. v. 
Temp-Air, Inc., No. 10-cv-4724, at *9-10 (N.D. Ill. Dec. 22, 2010); 
Card Activation Techs. v. Pier 1 Imports, Inc., No. 09-C-2021, 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.\63\ Other courts, however, have recognized that 
a stay remains appropriate in such a scenario.\64\
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    \63\See, e.g., GeoTag, Inc. v. Frontier Commc'ns Corp., No. 2:10-
CV-265-JRG, 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., No. CV11-0713 SBA, 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., No. 6:06-CV-549, 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., Civ. A. No. 
3:CV-93-0791, at *3 (M.D. Pa. Nov. 9, 1993).
    \64\See, e.g., Pragmatus Telecom, LLC v. Advanced Store Co., Inc., 
Civil Action No. 12-088-RGA, at *3-4 (D.Del. July 10, 2012); Honeywell 
Int'l Inc. v. Audivox Commc'ns Corp., No. Civ.A. 04-1337-KAJ, at *1, 3 
(D. Del. May 18, 2005); Commissariat a L'Energie Atomique v. Dell 
Computer Corp., No. Civ.A. 03-484-KAJ (D. Del. May 13, 2004); 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.\65\ 
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.\66\
---------------------------------------------------------------------------
    \65\See, e.g., Alloc, Inc. v. Unilin Decor N.V., No. 02-C-1266, at 
*3 (E.D. Wis. Dec. 15, 2005).
    \66\See, e.g., Ultra Prods., Inc. v. Best Buy Co., Inc., Civil 
Action No. 09-1095 (MLC), at *4-6 (D.N.J. Sep. 1, 2009); Delphi Corp. 
v. Auto. Techs. Int'l, Inc., No. 08-CV-11048, at *5 (E.D. Mich. July 
25, 2008); Beck Sys., Inc. v. Marimba, Inc., No. 01-C-5207, at *1 (N.D. 
Ill. Nov. 20, 2001) (customer-suit stay denied on other grounds); Tri-
Tronics Co., Inc. v. MacGregor & Co., Inc., No. 90-C-0630, 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, 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.\67\ 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.\68\ Rather, while the patent owner who prevails in 
his action against the manufacturer may proceed with a suit 
against the customer,\69\ any such customer suit is sharply 
limited by the single-recovery rule. That rule provides that 
while ``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.''\70\ 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.''\71\ And 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\72\ or direct-infringement claims were 
successfully litigated against the manufacturer.\73\
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    \67\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).
    \68\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.'').
    \69\See Shockley v. Arcan, Inc., 248 F.3d 1349, 1364 (Fed. Cir. 
2001).
    \70\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).
    \71\Transclean, 474 F.3d at 1303.
    \72\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.'').
    \73\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 2013 hearing at 66-67 (Statement of Robert A. 
Armitage, Former General Counsel, Eli Lilly & Co.) (``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 the 
possibility of any further litigation against the customer.

             IV. RECOMMENDATIONS TO THE JUDICIAL CONFERENCE

1. Discovery
    An industry witness 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.\74\
---------------------------------------------------------------------------
    \74\April 2013 hearing at 32-33 (Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company).

    Another 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.\75\ 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.\76\
---------------------------------------------------------------------------
    \75\Other witnesses also emphasized the lack of reciprocal burdens 
borne by patent plaintiffs who do not practice the claimed technology. 
See, e.g., April 2013 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 2013 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 2013 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.'').
    \76\March 2013 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].\77\
---------------------------------------------------------------------------
    \77\See also October 2013 hearing at 32 (Statement of Kevin Kramer, 
Vice President and Deputy General Counsel for Intellectual Property, 
Yahoo! Inc. (``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); April 2015 hearing, Statement of Kevin Kramer, Vice 
President and Deputy General Counsel for Intellectual Property, Yahoo! 
Inc., at *7 (``In the typical case, what is needed to assess whether a 
Yahoo product infringes a patent claim is the source code for the 
product or feature at issue. In fact, in each of the three trials we 
have had where our infringement was at issue . . . , our source code 
was a central part of the case.'').

        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.\78\
---------------------------------------------------------------------------
    \78\March 2013 hearing at 44-47 (statement of John Boswell, Senior 
Vice President and General Counsel, SAS).
---------------------------------------------------------------------------
2. Protection 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,''\79\ and enacted Sec. 365(n) 
to put an end to such bankruptcy practices.
---------------------------------------------------------------------------
    \79\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.\80\ 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).
---------------------------------------------------------------------------
    \80\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.\81\
---------------------------------------------------------------------------
    \81\Section 6(d) has received the support of the USPTO and industry 
leaders. See Director Lee's testimony at *7; April 2015 hearing, 
Statement of Robert A. Armitage, Former General Counsel, Eli Lilly & 
Co., at *16-17.
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       V. CORRECTIONS AND IMPROVEMENTS TO THE AMERICA INVENTS ACT

1. LRepeal of Could-have-raised Estoppel for Civil Actions Following 
        Post-grant Review
    The Committee remains persuaded that the AIA's 
authorization of post-grant review of patents should be amended 
to limit the estoppel that ensues from those proceedings in 
civil litigation to only those issues that were actually raised 
and decided in the post-grant review.\82\
---------------------------------------------------------------------------
    \82\See The Coalition for 21st Century Patent Reform, ```Reasonably 
Could Have Raised' Estoppel: A Technical Error that Should Be 
Corrected,'' and ``A `Reasonably Could Have Raised' Estoppel in 
Litigation Following Post-Grant Review Will Prevent the Envisioned 
Benefits of the New Procedure From Being Achieved.'' Both papers are 
printed in the record of the October 29 hearing, at pp. 203-211, and 
are currently available on the website www.patentsmatter.com.
---------------------------------------------------------------------------
    First, the overlap in the membership and staffing of this 
Committee between the present Congress and the 112th is too 
thorough to permit any doubt that the addition of the words 
``or reasonably could have raised'' to Sec. 325(e)(2) of title 
35, when the House Judiciary Committee-reported bill was 
engrossed in June 2011, was, indeed, a mistake.\83\ More 
fundamentally, however, the preservation of a civil-litigation 
could-have-raised estoppel following post-grant review 
threatens to fatally undermine the new proceeding. Unlike an 
inter partes review, a post-grant review must be sought within 
9 months of when the patent issues, and the proceeding extends 
to all potential defenses of invalidity. The issues that a 
petitioner ``reasonably could have raised'' in a post-grant 
review thus include all challenges to the validity of the 
patent (to the extent that they might later be deemed to have 
been reasonably accessible to the petitioner). This includes 
not only challenges to obviousness based on prior patents and 
printed publications, but evidence of uses and sales that made 
the invention accessible to the interested public and questions 
of the description and enablement of the invention and whether 
patentable subject matter has been claimed. Some of these 
issues likely will only become apparent with time, and may 
require some discovery to develop. But only limited time is 
available before a post-grant review petition must be filed, 
and petitioners are required to present a preponderance case at 
the outset of the proceeding. There is no pre-petition 
discovery before, or the opportunity to develop and expand 
challenges after, a post-grant review has been instituted.
---------------------------------------------------------------------------
    \83\Mr. Lamar Smith and Senator Leahy, the eponymous sponsors of 
the Leahy-Smith America Invents Act, each have stated that the addition 
of ``reasonably could have raised'' to the Sec. 325(e)(2) estoppel was 
an error. See 158 Cong. Rec. H6843 (daily ed. December 18, 2012) 
(Statement of Rep. Smith); 158 Cong.Rec. S8517 (daily ed. December 28, 
2012) (Statement of Sen. Leahy).
---------------------------------------------------------------------------
    Applying a litigation could-have-raised estoppel to post-
grant review thus would present petitioners with a daunting 
prospect: once such a review is instituted, the petitioner 
effectively would be barred from challenging the validity of 
the patent on any ground should he later be sued for its 
infringement, but he would be required to file his petition 
before he had more than a very limited time--and no discovery--
to identify the bases of his petition.
    For all these reasons, the Committee concurs with the views 
expressed by industry leaders and representatives of patent 
professional associations, who have broadly agreed--both during 
the development of the AIA and since--that limiting the 
litigation estoppel that follows a post-grant review to those 
issues that were actually raised and decided in the proceeding 
is the approach that ``strike[s] the right balance.''\84\
---------------------------------------------------------------------------
    \84\Patent Quality Improvement: Post-Grant Opposition: Hearing 
before the Subcomm. on Courts, the Internet, and Intellectual Prop. of 
the H. Comm. on the Judiciary, 108th Cong. (2004) at 32 (Statement of 
Michael Kirk, Executive Director, AIPLA); see also id. at 17 (Statement 
of Jeffrey Kushan, Sidley Austin Brown & Wood, on behalf of Genentech, 
Inc.); Patent Reform Act of 2007: Hearing on H.R. 1908 Before the 
Subcomm. on Courts, the Internet, and Intellectual Prop., 110th Cong. 
56 (2007) at 98 (Statement of Anthony Peterman, Director, Patent 
Counsel, Dell Inc.); Perspectives on Patents: Post-Grant Review 
Procedures and other Litigation Reforms: Hearing before the Subcomm. on 
Intellectual Prop. of the S. Comm. on the Judiciary, 109th Cong. (2006) 
at 45-46 (Statement of Mark Chandler, Senior Vice President and General 
Counsel, Cisco Systems); Director Lee's testimony at *7-8; April 2015 
hearing, Statement of Robert A. Armitage, Former General Counsel, Eli 
Lilly & Co., at *17-18; March 2013 hearing at 22 (Statement of Mark 
Chandler, Senior Vice President and General Counsel, Cisco Systems 
Inc.) (``If left uncorrected, this error will unfortunately greatly 
limit the utility and use of the new procedure to fulfill its intended 
purpose of pruning or narrowing newly issued patents that are in fact 
invalid. Because of the broad range of issues available, a potential 
patent challenger will have to weigh very heavy risks to later civil 
litigation on the same patent.'').
---------------------------------------------------------------------------
2. LUse of District Court Claim Construction in Inter Partes and Post-
        grant Reviews
    In its regulations implementing the AIA's new inter partes 
and post-grant reviews, the USPTO instructed the PTAB to read 
patent claims for their broadest reasonable interpretation 
(``BRI''),\85\ rather than use the district court's Phillips 
approach.\86\ The BRI approach is eminently reasonable in 
examination and reexamination, where the applicant or patentee 
has a broad right to amend after a rejection. In inter partes 
and post-grant reviews, however, the right to amend is much 
more limited. Also, amendments come at the cost of subjecting 
the patent to intervening rights and voidance of years of 
accrued damages. Moreover, these reviews can be invoked after 
the patent has been in force for years, and when its claims 
could be, or even have been, given a more limited construction 
in civil litigation.
---------------------------------------------------------------------------
    \85\See 37 C.F.R. Sec. 42.300(b); see generally SAP America, Inc. 
v. Versata Dev. Group, Inc., CBM2012-00001, Paper 70, at 7-19 (June 11, 
2013).
    \86\See Phillips v. AWH Corp., 415 F.3d 1303, 1328 (Fed. Cir. 
2005).
---------------------------------------------------------------------------
    Use of the BRI approach to claim construction in inter 
partes and post-grant review can thus potentially produce 
results that are unfair to patent owners. It could subject a 
patentee to a review, and even force him to amend his claims, 
by construing them to include matter that the claims would not 
be construed to include in a civil action. As a practical 
matter, however, the patentee has no more patent than what the 
courts will enforce. Applying the broadest reasonable 
interpretation of claims in inter partes and post-grant reviews 
could thus force the patent owner to amend claims to eliminate 
claim scope that effectively does not exist.\87\
---------------------------------------------------------------------------
    \87\An exhaustive explanation of the reasons why use of district 
court claim construction is better suited to inter partes and post-
grant review than is the broadest reasonable interpretation of claims 
is provided in a paper prepared by The Coalition for 21st Century 
Patent Reform, ``Why the PTO's Use of the Broadest Reasonable 
Interpretation of Patent Claims in Post-Grant and Inter Partes Review 
Is Inappropriate Under the America Invents Act.'' This paper is printed 
in the record of the October 29, 2013 hearing, at pp. 212-230, and is 
currently available on the website www.patentsmatter.com.
---------------------------------------------------------------------------
    The Committee acknowledges that, over the course of its 
consideration of this issue, it has become increasingly less 
apparent how the claim constructions that are produced under 
the BRI approach differ from those produced under the Phillips 
standard. The original prosecution history of a patent, for 
example, may be considered under either approach.\88\ And 
despite the fact that over a thousand IPRs have been instituted 
since the program was inaugurated in 2012, there is a paucity 
of examples where use of the BRI approach rather than district 
court claim construction appears to have affected either the 
Board's decision to institute or its final written 
decision.\89\ The Committee nevertheless concludes that 
discontinuation of the use of the BRI approach in AIA trials is 
warranted. Adoption of the Phillips standard will, at the 
least, protect patentees from attempts to institute review on 
the basis of claim constructions that already have been 
rejected by the Federal Circuit.\90\ And the Board's claim 
interpretations will more readily provide guidance to district 
courts if the Board and the courts employ the same approach to 
claim construction.
---------------------------------------------------------------------------
    \88\See Microsoft Corp. v. Proxyconn, Inc., No. 2014-1542 (Fed. 
Cir. June 16, 2015) (``The PTO should also consult the patent's 
prosecution history in proceedings in which the patent has been brought 
back to the agency for a second review''); Tempo Lighting, Inc. v. 
Tivoli, LLC, 742 F.3d 973, 977-78 (Fed. Cir. 2014) (applying 
prosecution history to construe claims under the BRI approach); 
Phillips v. AWH Corp., 415 F.3d 1303, 1317 (``[A] court should also 
consider the patent's prosecution history, if it is in evidence.'') 
(citation omitted).
    \89\See Patents Post-Grant Blog, ``PTAB Finds BRI Claim 
Construction No Different Under Phillips,'' July 15, 2014.
    \90\See May 2015 Senate hearing, Statement of Kevin H. Rhodes, Vice 
President and Chief Intellectual Property Counsel of 3M Company, on 
Behalf of the Coalition for 21st Century Patent Reform, at *25 
(discussing IPR2015-00858).
---------------------------------------------------------------------------
    Finally, although covered business method reviews are a 
subspecies of post-grant review, the Committee finds that the 
unique nature of those proceedings precludes a need to employ 
district court standards of claim construction there. Only 
business-method patents are eligible for CBM review. Because 
such patents are not directed to the application of scientific 
or mathematical principles,\91\ they are generally incapable of 
creating reproducible results, and are inherently unpatentably 
abstract, as that standard has been clarified in Bilski v. 
Kappos\92\ and Alice Corp. Pty. Ltd. v. CLS Bank Int'l.\93\ In 
light of these cases' restoration of the historic bar on the 
patenting of business methods, the Committee finds it 
unnecessary to burden the Board with applying the district 
courts' claim-construction approach to define the precise metes 
and bounds of the unpatentable subject matter claimed in such 
patents.
---------------------------------------------------------------------------
    \91\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. Mayo 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 the 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 Alice. It is thus unsurprising that 
the patent bar, particularly in the life sciences, has greeted Mayo as 
the jurisprudential equivalent of the bombing of Dresden. The Committee 
will continue to monitor developments in this area.
    \92\561 U.S. 593 (2010). The respondent in that case, during the 
October 29, 2013 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 2013 hearing at 43 (Statement of David J. 
Kappos, Former Under Secretary of Commerce for Intellectual Property 
and Director of the United States Patent and Trademark Office). 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.''
    \93\134 S.Ct. 2347 (June 19, 2014).
---------------------------------------------------------------------------
3. 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.\94\ An inventor can obtain such obvious-
variant patents because his own earlier-filed patent 
applications are not prior art to his subsequent applications 
until a year after the earlier-filed applications publish. 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.
---------------------------------------------------------------------------
    \94\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\95\ 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.
---------------------------------------------------------------------------
    \95\The Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 
Stat. 4809 (1994).
---------------------------------------------------------------------------
    The double-patenting doctrine has historically precluded 
such practices by requiring patentees to disclaim the right to 
enforce any later-issued obvious-variant patents separately 
through a common-ownership requirement, 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 Judge Taft's 1897 decision in Thomson-Houston 
Elec. Co. v. Ohio Brass Co.\96\--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.'' \97\ The 
court dismissed the notion that such a ``unity of title 
avoid[s] the main patent'' as a ``reductio ad absurdum.''\98\
---------------------------------------------------------------------------
    \96\80 F. 712 (6th Cir. 1897).
    \97\Id. at 727.
    \98\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.''\99\ 
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,''\100\ 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.
---------------------------------------------------------------------------
    \99\Id. at 724.
    \100\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.''\101\ 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.
---------------------------------------------------------------------------
    \101\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 the United States Court 
of Customs and Patent Appeals (``CCPA'') decisions following 
the adoption of the 1952 Act, creating a relatively simple and 
rational double-patenting landscape.\102\
---------------------------------------------------------------------------
    \102\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; a revised and updated version is printed 
in the record of the October 29 hearing at pp. 170-202.
---------------------------------------------------------------------------
    The Patent Law Amendments Act of 1984,\103\ 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.\104\ 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.\105\
---------------------------------------------------------------------------
    \103\Pub. L. No. 98-622 (1984).
    \104\See Armitage ODP article at *18-19.
    \105\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.\106\ 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.
---------------------------------------------------------------------------
    \106\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''\107\--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.\108\
---------------------------------------------------------------------------
    \107\Lilly v. Barr, 251 F.3d at 968 n.7 (emphasis in original).
    \108\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.'' In addition, a recent decision has 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.\109\ 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.\110\ 
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.
---------------------------------------------------------------------------
    \109\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.'').
    \110\In re Hubbell, 709 F.3d at 1142-43, 1146-48.
---------------------------------------------------------------------------
    In another recent decision--one issued since the House of 
Representative's passage of the Innovation Act in the 113th 
Congress on December 5, 2013--the Federal Circuit departed from 
more than 100 years of consistent jurisprudence that had 
applied double patenting consequences solely to invalidate the 
later-issuing of two patents granted on different dates. Gilead 
Sciences, Inc. v. Natco Pharma Ltd.\111\ determined that the 
first-issued patent's later expiration date produced an 
unjustified timewise extension of the right to exclude over the 
later-issued patent with an earlier expiration date. Where, 
however, such a first-issued patent can be valid only if it is 
non-obvious as of the filing (or priority) date that is used to 
determine its patent term, there is no policy justification for 
the application of double patenting principles to that patent.
---------------------------------------------------------------------------
    \111\753 F. 3d 1208 (Fed. Cir. 2014).
---------------------------------------------------------------------------
    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.\112\ 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.\113\
---------------------------------------------------------------------------
    \112\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).
    \113\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''\114\ to modern patents that run 20 years from their 
filing.\115\
---------------------------------------------------------------------------
    \114\Hill v. Colorado, 530 U.S. 703, 742 (2000) (Scalia, J., 
dissenting).
    \115\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.
    The Committee has been urged to revisit the provisions of 
the Innovation Act relating to double patenting to account for 
recent judicial developments. In particular, the Committee was 
asked to consider both broadening and simplifying the double-
patenting provisions that appeared in Innovation Act in the 
113th Congress.\116\ The amendments in section 9(c) of this 
bill reflect these recommendations.
---------------------------------------------------------------------------
    \116\See April 2014 Hearing, Statement of Robert A. Armitage, 
Former General Counsel, Eli Lilly & Co., at *21 (``I would urge the 
Committee to consider a simpler and more comprehensive statutory text . 
. . , as well as a separate statutory amendment limiting any `patent 
term adjustment' for a patent subject to double patenting constraints 
so that the adjusted term of the double patent could not extend the 
combined patent life of both patents beyond 17 years.'').
---------------------------------------------------------------------------
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.\117\ 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).
---------------------------------------------------------------------------
    \117\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.\118\ 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.
---------------------------------------------------------------------------
    \118\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.\119\ 
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.
---------------------------------------------------------------------------
    \119\See H.R. Rep. No. 112-98, at 54 (2011).
---------------------------------------------------------------------------
5. ``Arising Under'' Jurisdiction and Gunn v. Minton
    Prior to 2013, 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.\120\ 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.\121\
---------------------------------------------------------------------------
    \120\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).
    \121\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,\122\ 
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.\123\
---------------------------------------------------------------------------
    \122\133 S.Ct. 1059 (Feb. 20, 2013).
    \123\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.''\124\ 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.\125\ 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.\126\
---------------------------------------------------------------------------
    \124\Forrester Envtl. Servs., Inc. v. Wheelabrator Techs., Inc., 
715 F.3d 1329, 1334 (Fed. Cir. 2013).
    \125\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.'').
    \126\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.
    Finally, the Committee has become persuaded that the 
Supreme Court's holding in Gunn should be abrogated in its 
entirety, and that Federal courts' jurisdiction over legal 
malpractice suits that arise out of patent litigation or 
prosecution should be restored.\127\ The more difficult 
questions that are posed by such actions typically are ones of 
patent law, rather than legal-malpractice law. Some recent 
malpractice cases, for example, have involved questions of 
whether a patent application was directed to patent-eligible 
subject matter under the Supreme Court's decision in Alice 
Corp. Pty. Ltd. v. CLS Bank Int'l, 134 S.Ct. 2347 (June 19, 
2014).\128\ State judges, however, do not hear patent cases. 
Federal courts, particularly with review centralized in the 
U.S. Court of Appeals for the Federal Circuit, typically have 
more experience with patent law cases and therefore are a 
better forum for evaluating whether an attorney's patent 
litigation or prosecution practices were unreasonable.
---------------------------------------------------------------------------
    \127\April 2015 hearing, Statement of Robert A. Armitage, Former 
General Counsel, Eli Lilly & Co., at *25.
    \128\See, e.g., ``Antonelli Says Alice Kills Protostorm's $8M 
Malpractice Win,'' Law360, January 13, 2015; ``Dickstein Says Alice 
Shields It in IP Malpractice Case,'' Law360, March 30, 2015.
---------------------------------------------------------------------------

                                Hearings

    The House Committee on the Judiciary held a hearing on H.R. 
9 on April 14, 2015. Testimony was received from the Honorable 
Michelle K. Lee, Under Secretary of Commerce for Intellectual 
Property and Director of the United States Patent and Trademark 
Office; David M. Simon, Senior Vice President of Intellectual 
Property, Salesforce.com, Inc.; Hans Sauer, Ph.D., Deputy 
General Counsel for Intellectual Property, Biotechnology 
Industry Organization; Kevin Kramer, Vice President and Deputy 
General Counsel for Intellectual Property, Yahoo! Inc.; and 
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 February 12, 2015 (``Examining Recent 
Supreme Court Cases in the Patent Arena,'' Serial No. 114-2), 
and March 25, 2015 (``Patent Reform: Protecting American 
Innovators and Job Creators from Abusive Patent Litigation,'' 
Serial No. 114-17).
    In the previous Congress, the Committee held a hearing on 
patent reform: ``Innovation Act: Hearing on H.R. 3309'' 
(October 29, 2013, Serial No. 113-58). The Subcommittee also 
held two hearings: ``Abusive Patent Litigation: The Impact on 
American Innovation & Jobs, and Potential Solutions'' (March 
14, 2013, Serial No. 113-13); and ``Abusive Patent Litigation: 
The Issues Impacting American Competitiveness and Job Creation 
at the International Trade Commission and Beyond'' (April 16, 
2013, Serial No. 113-24).

                        Committee Consideration

    On June 11, 2015, the Committee met in open session and 
ordered the bill H.R. 9 favorably reported with an amendment, 
by a rollcall vote of 24 to 8, 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. 9.
    1. Amendment #3 to the Amendment in the Nature of a 
Substitute, offered by Mr. Conyers. This amendment creates a 
revolving fund for USPTO fees and extends the USPTO's authority 
to set its own fees by an additional 10 years. Failed by a 
rollcall vote of 11 to 16.

                             ROLLCALL NO. 1
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              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).................................
Mr. Labrador (ID)..............................
Mr. Farenthold (TX)............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................
Ms. Walters (CA)...............................              X
Mr. Buck (CO)..................................              X
Mr. Ratcliffe (TX).............................              X
Mr. Trott (MI).................................              X
Mr. Bishop (MI)................................              X
 
Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................      X
Mr. Jeffries (NY)..............................      X
Mr. Cicilline (RI).............................      X
Mr. Peters (CA)................................      X
                                                ------------------------
    Total......................................     11      16
------------------------------------------------------------------------


    2. Amendment #6 to the Amendment in the Nature of a 
Substitute, offered by Mr. Issa. This amendment extends the 
Transitional Program for Covered Business Method Patents by an 
additional 6 years. Failed by a rollcall vote of 13 to 18.

                             ROLLCALL NO. 2
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................      X
Mr. Chabot (OH)................................              X
Mr. Issa (CA)..................................      X
Mr. Forbes (VA)................................      X
Mr. King (IA)..................................              X
Mr. Franks (AZ)................................              X
Mr. Gohmert (TX)...............................      X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................              X
Mr. Chaffetz (UT)..............................              X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................
Mr. Labrador (ID)..............................              X
Mr. Farenthold (TX)............................      X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Ms. Walters (CA)...............................      X
Mr. Buck (CO)..................................              X
Mr. Ratcliffe (TX).............................              X
Mr. Trott (MI).................................
Mr. Bishop (MI)................................              X
 
Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................              X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................              X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................              X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................              X
Mr. Jeffries (NY)..............................              X
Mr. Cicilline (RI).............................      X
Mr. Peters (CA)................................      X
                                                ------------------------
    Total......................................     13      18
------------------------------------------------------------------------


    3. Amendment #5 to the Amendment in the Nature of a 
Substitute, offered by Mr. Johnson. This amendment requires a 
prevailing party seeking a fee award to show that the position 
or conduct of the nonprevailing party was not objectively 
reasonable, and precludes fee awards for positions or actions 
that are de minimis or are not material to the outcome of the 
case. Failed by a rollcall vote of 10 to 22.

                             ROLLCALL NO. 3
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................              X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................              X
Mr. Chabot (OH)................................              X
Mr. Issa (CA)..................................              X
Mr. Forbes (VA)................................
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).................................
Mr. Labrador (ID)..............................              X
Mr. Farenthold (TX)............................              X
Mr. Collins (GA)...............................              X
Mr. DeSantis (FL)..............................              X
Ms. Walters (CA)...............................              X
Mr. Buck (CO)..................................              X
Mr. Ratcliffe (TX).............................              X
Mr. Trott (MI).................................              X
Mr. Bishop (MI)................................              X
 
Mr. Conyers, Jr. (MI), Ranking Member..........      X
Mr. Nadler (NY)................................      X
Ms. Lofgren (CA)...............................              X
Ms. Jackson Lee (TX)...........................      X
Mr. Cohen (TN).................................      X
Mr. Johnson (GA)...............................      X
Mr. Pierluisi (PR).............................
Ms. Chu (CA)...................................      X
Mr. Deutch (FL)................................      X
Mr. Gutierrez (IL).............................
Ms. Bass (CA)..................................
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................              X
Mr. Jeffries (NY)..............................      X
Mr. Cicilline (RI).............................      X
Mr. Peters (CA)................................      X
                                                ------------------------
    Total......................................     10      22
------------------------------------------------------------------------


    4. Reporting H.R. 9 as amended. This bill makes 
improvements and technical corrections to title 35 and the 
Leahy-Smith America Invents Act. Reported by a rollcall vote of 
24 to 8.

                             ROLLCALL NO. 4
------------------------------------------------------------------------
                                                  Ayes    Nays   Present
------------------------------------------------------------------------
Mr. Goodlatte (VA), Chairman...................      X
Mr. Sensenbrenner, Jr. (WI)....................
Mr. Smith (TX).................................      X
Mr. Chabot (OH)................................      X
Mr. Issa (CA)..................................      X
Mr. Forbes (VA)................................      X
Mr. King (IA)..................................      X
Mr. Franks (AZ)................................      X
Mr. Gohmert (TX)...............................              X
Mr. Jordan (OH)................................
Mr. Poe (TX)...................................      X
Mr. Chaffetz (UT)..............................      X
Mr. Marino (PA)................................      X
Mr. Gowdy (SC).................................
Mr. Labrador (ID)..............................
Mr. Farenthold (TX)............................      X
Mr. Collins (GA)...............................      X
Mr. DeSantis (FL)..............................      X
Ms. Walters (CA)...............................      X
Mr. Buck (CO)..................................
Mr. Ratcliffe (TX).............................      X
Mr. Trott (MI).................................      X
Mr. Bishop (MI)................................      X
 
Mr. Conyers, Jr. (MI), Ranking Member..........              X
Mr. Nadler (NY)................................      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).............................
Ms. Bass (CA)..................................              X
Mr. Richmond (LA)..............................
Ms. DelBene (WA)...............................      X
Mr. Jeffries (NY)..............................      X
Mr. Cicilline (RI).............................              X
Mr. Peters (CA)................................              X
                                                ------------------------
    Total......................................     24       8
------------------------------------------------------------------------


                      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. 9, 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, July 10, 2015.
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. 9, the 
``Innovation Act.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Marin 
Burnett and Susan Willie who can be reached at 226-2860.
            Sincerely,
                                                Keith Hall,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member




                        H.R. 9--Innovation Act.

      As ordered reported by the House Committee on the Judiciary 
                           on June 11, 2015.




    H.R. 9 would change administrative and judicial processes 
that support the protection of intellectual property rights. 
The bill also would require reports by the Administrative 
Office of the United States Courts (AOUSC) and the Government 
Accountability Office.
    Assuming appropriation of the necessary amounts, CBO 
estimates that implementing H.R. 9 would cost $3 million over 
the 2016-2020 period, mainly for reports and administrative 
costs incurred by the AOUSC associated with new judicial 
procedures. Additionally, based on information from the Patent 
and Trademark Office (PTO), CBO estimates that implementing the 
bill would cost PTO about $7 million per year to comply with 
the bill's requirements. 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. 9 would not be significant, 
assuming appropriation actions consistent with the agency's 
authorities. Pay-as-you-go procedures do not apply to this 
legislation because it would not affect direct spending or 
revenues.
    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. 9 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. Finally, the 
bill would require PTO, the Government Accountability Office 
and the AOUSC to prepare several studies and reports on topics 
ranging from patent ownership to the behavior of certain patent 
owners.
    H.R. 9 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. 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. 9 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 patent ownership 
and litigation publically available. Other provisions in the 
bill that change administrative procedures related to patents 
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 the system exist.
    Based on information from PTO, CBO estimates that the 
average annual cost to comply with the mandate would be about 
$7 million, with less than $150,000 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 well below the annual thresholds 
established in UMRA for both intergovernmental and private-
sector mandates ($77 million and $154 million in 2015, 
respectively, adjusted annually for inflation).
    The CBO contacts for this estimate are Susan Willie and 
Marin Burnett (for Federal costs), Melissa Merrell (for the 
impact on state and local governments), and Logan Smith (for 
the private-sector impact). The estimate was approved by H. 
Samuel Papenfuss, Deputy Assistant Director for Budget 
Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 9 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
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. 9 specifically directs to 
be completed two specific rule makings 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. 9 
amends title 35, United States Code, and the Leahy-Smith 
America Invents Act, to curb abusive patent litigation 
practices, and 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. 9 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. Subsection (a) requires a 
party asserting a claim of patent infringement to identify all 
patents that are alleged to be infringed, each product or 
process that is alleged to infringe each patent, and provide a 
detailed and specific explanation of how each limitation of a 
claim is met by the product or process, per patent.\129\ For 
claims of indirect infringement, the complaint or claim must 
also describe the acts of indirect infringement that contribute 
to or induce the direct infringement. The complaint must also 
describe the authority of the party to assert the patent (i.e., 
facts establishing an ownership interest in the patent 
sufficient to support standing) and the grounds for the court's 
jurisdiction.
---------------------------------------------------------------------------
    \129\Section 281A was modified in the Committee's executive session 
to address the concerns noted in the background section of this report. 
The Committee amendment eliminates requirements, for a given patent, to 
plead additional claims when another claim is pleaded with detailed 
specificity with respect to the same product or process. It has become 
clear over the course of the Committee's consideration of this issue 
that an ``all claims'' pleading requirement would result in massively 
long complaints, would force the pleading of marginally relevant 
claims, and would inevitably lead to expensive and pointless motions 
practice. Paragraph (3)'s requirement to identify all accused 
instrumentalities, and paragraph (5)'s requirement to provide a 
detailed and specific explanation of how all claim limitations are met, 
is sufficient to identify which products, features, or components are 
accused of infringement and thus allow a defendant to determine whether 
it is already licensed to practice the asserted patents or is entitled 
to an indemnity from a supplier. Such information will effectively be 
disclosed because, for a given product or process, the complaint will 
make the defendant aware of all patents that such product or process 
allegedly infringes, and will provide a detailed, element-by-element 
explanation of why the product or process is alleged to infringe each 
such patent.
---------------------------------------------------------------------------
  Some have suggested that an all-claims pleading requirement is 
desirable because a defendant would not be able to challenge asserted 
claims in an IPR if it does not have notice of all potentially asserted 
claims early in the litigation, given Sec. 315(b)'s 1-year bar on 
seeking an IPR after being sued for infringement. The Innovation Act 
squarely addresses this concern in targeted and efficient fashion in 
its Sec. 9(d)(3), which amends Sec. 315(c) of title 35 to allow a 
defendant, upon receiving notice of newly-asserted patent claims later 
in the litigation, to challenge these claims in an IPR through joinder 
to an earlier petition. In contrast, a requirement to plead all claims 
in the complaint would incentivize plaintiffs to plead even marginally 
relevant patent claims, thereby forcing defendants to seek IPR against 
a long list of patent claims that ultimately will not be pursued in the 
litigation. Moreover, since some amendments to pleadings must be 
allowed, the patent owner would still have the opportunity to assert 
new patent claims outside of Sec. 315(b)'s 1-year bar, leaving a 
defendant with no sure recourse to an IPR. Section 9(c)(3)'s amendments 
to Sec. 315(c) are a better solution to this problem.
  Finally, it has become apparent--particularly since the since the 
House of Representative's passage of the Innovation Act in the 113th 
Congress on December 5, 2013--that a proper application of Ashcroft v. 
Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 
U.S. 544 (2007), does not require that all asserted patent claims be 
identified in a complaint. A patent claim is akin to a legal theory of 
liability, and the Supreme Court has made clear that the ``[f]ederal 
pleading rules . . . do not countenance dismissal of a complaint for 
imperfect statement of the legal theory supporting the claim 
asserted.'' Johnson v. City of Shelby, Mississippi, 135 S.Ct. 346 (Nov. 
10, 2014); see also Skinner v. Switzer, 562 U.S. 521, ___, 131 S.Ct. 
1289, 1296 (2011) (``under the Federal Rules of Civil Procedure, a 
complaint need not pin plaintiff's claim for relief to a precise legal 
theory''). The Supreme Court has particularly emphasized that ``[o]ur 
decisions in . . . Twombly and . . . Iqbal are not in point, for they 
concern the factual allegations a complaint must contain to survive a 
motion to dismiss.'' City of Shelby, 135 S.Ct. at 347 (emphasis in 
original). A patent claim, of course, is not a fact--it forms no part 
of the defendant's conduct. Rule 8 does not regulate which theories of 
liability are asserted or limit the parties to their ``theory of the 
pleadings,'' see 5 C. Wright & A. Miller, Federal Practice & Procedure 
Sec. 1219--and certainly does not require that all such possible 
theories be stated in a complaint.
    Subsection (b) allows a party to only generally describe 
information that is not readily accessible to it after a 
reasonable inquiry, though it must explain why the information 
is not accessible and describe what efforts it has made to 
obtain the information.
    Subsection (c) preserves the liberal right to amend 
pleadings under the Federal Rules of Civil Procedure.\130\
---------------------------------------------------------------------------
    \130\See Wright & Miller, supra, at Sec. 1219; City of Shelby, 
supra, at 347.
---------------------------------------------------------------------------
    Subsection (d) provides for the filing of confidential 
information under seal.
            (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),\131\ 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.
---------------------------------------------------------------------------
    \131\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.\132\ Even if a plaintiff's 
allegations are 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.\133\ Fees cannot be awarded 
if the nonprevailing party's case was justified to a degree 
that could satisfy a reasonable person,\134\ or there was at 
least a dispute over which reasonable minds could differ.\135\
---------------------------------------------------------------------------
    \132\Norris v. SEC, 695 F.3d 1261, 1265 (Fed. Cir. 2012).
    \133\Pierce v. Underwood, 487 U.S. 552, 565 (1988).
    \134\Id.
    \135\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 
decisions on the issue left the status of the law unsettled, 
and whether the legal issue was novel or difficult.\136\ On 
questions of statutory interpretation, for example, courts have 
asked whether the Federal courts were split on the matter,\137\ 
or whether the nonprevailing party interpreted a statute in a 
manner that is contrary to its plain language and unsupported 
by its legislative history.\138\
---------------------------------------------------------------------------
    \136\Id.
    \137\DGR Assocs., Inc. v. United States, 690 F.3d 1335, 1342 (Fed. 
Cir. 2012).
    \138\Patrick v. Shinseki, 668 F.3d 1325, 1330-31 (Fed. Cir. 2011).
---------------------------------------------------------------------------
    Subsection (a) clarifies 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.\139\ 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 allegations were ultimately determined not to be 
reasonably justified.
---------------------------------------------------------------------------
    \139\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.\140\ 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.\141\ Also, when 
determining whether a party is a 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.\142\
---------------------------------------------------------------------------
    \140\DGR Assocs., 690 F.3d at 1343.
    \141\Id. (quoting I.N.S. v. Jean, 496 U.S. 154, 161-62 (1990)).
    \142\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.\143\ 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.''\144\
---------------------------------------------------------------------------
    \143\Pierce v. Underwood, 487 U.S. at 562-63.
    \144\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 context of patent 
infringement litigation because 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, the types of claim-construction and obviousness 
arguments that, even if ultimately unsuccessful, are nevertheless 
objectively reasonable.
---------------------------------------------------------------------------
    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.''\145\ A defendant's ``voluntary change in 
conduct,'' even if spurred by the plaintiff's lawsuit, is 
insufficient to make the plaintiff a prevailing party.\146\
---------------------------------------------------------------------------
    \145\Buckhannon Bd. and Care Home, Inc. v. West Virginia Dep't of 
Health and Human Resources, 532 U.S. 598, 604 (2001).
    \146\Id. at 605.
---------------------------------------------------------------------------
    Under Federal Circuit precedent,\147\ 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.\148\ Highway Equipment also held, however, that 
such a covenant does not deprive the court of jurisdiction over 
the patent owner's infringement complaint,\149\ and that fees 
may be awarded to the defendant if the covenant results in 
dismissal of the complaint with prejudice.\150\ Highway 
Equipment would thus appear to allow a defendant to obtain 
prevailing-party status and hold a plaintiff accountable for an 
unjustified litigation position.
---------------------------------------------------------------------------
    \147\Highway Equipment Co., Inc. v. FECO, Ltd, 469 F.3d 1027 (Fed. 
Cir. 2006).
    \148\Id. at 1033 n.1; see also Cisco Sys., Inc. v. Alberta 
Telecomms. Research Ctr., 538 Fed. App'x 894, 898 (Fed. Cir. Aug. 29, 
2013).
    \149\Highway Equip. Co., 469 F.3d at 1033 n.1.
    \150\Id. at 1035-36.
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    Courts have also held, however, that a defendant is not a 
prevailing party if a complaint is dismissed without 
prejudice\151\--and district courts have discretion to 
determine whether a complaint is dismissed with or without 
prejudice.\152\ 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.\153\ 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.\154\
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    \151\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).
    \152\See Highway Equip. Co., 469 F.3d at 1034; Wright & Miller's 
Federal Practice and Procedure Sec. 2364.
    \153\See Highway Equip. Co., 469 F.3d at 1032, 1036.
    \154\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.
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    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), 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. 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).
    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).\155\
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    \155\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.
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    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 ensures that the fact that a patent 
owner or third party made secret use of an invention that 
qualifies as a prior commercial use within the meaning of 
Sec. 273 will not necessarily result in a loss of right to 
patent.\156\ Because such uses, however, are not invalidating 
under current law, subsection (g) no longer serves any purpose 
and is repealed.\157\
---------------------------------------------------------------------------
    \156\New Idea Farm Equip. Corp. v. Sperry Corp., 916 F.2d 1561, 
1566 (Fed. Cir. 1990); Woodland Trust v. Flowertree Nursery, Inc., 148 
F.3d 1370-71 (Fed. Cir. 1998).
    \157\See Examination Guidelines for Implementing the First Inventor 
To File Provisions of the Leahy-Smith America
    Invents Act, 78 Fed. Reg. 11059, 11062, 11075 (Feb. 14, 2013). 
Subsection (g) is preserved with respect to the limited universe of 
pre-AIA patents to which Sec. 273 applies.
---------------------------------------------------------------------------
    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,\158\ and 
will preclude an unseemly rush to file cases in the period 
immediately prior to the enactment of the Act.
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    \158\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 of interested parties
    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 and hold liable for fees any 
interested party of that plaintiff. The provision was modified 
in the Committee's executive session to make clear that it 
applies only to patent assertion entities, and does not apply 
to start-up companies or to named inventors or coinventors who 
are asserting their patents.\159\ Section 299(d) also does not 
extend liability to bona fide employees of the plaintiff, law 
firms compensated in relation to the legal services provided, 
or passive investors who lack the ability to direct or control 
the patentee's litigation. New paragraph (4) provides that the 
provision is not triggered unless the defendant files an 
initial statement indicating that the patentee is a patent 
assertion entity, and the patentee fails to certify and 
demonstrate that it is not a patent assertion entity or that it 
will be able to satisfy a fee award.
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    \159\Start-up companies and research universities are protected by 
paragraph (7)(B), which excludes from Sec. 299(d)'s reach those who 
commercially practice, make substantial preparations to commercially 
practice, or conduct research in ``technology in the field of the 
subject matter.'' ``Technology'' has the same meaning in paragraph 
(7)(B) as in Sec. 18 of the AIA, and does not include mere business 
methods. See Leahy-Smith America Invents Act, Pub. L. No. 112-29, 
Sec. 18(d)(1) (2011); Transitional Program for Covered Business Method 
Patents--Definitions of Covered Business Method Patent and 
Technological Invention, 77 Fed. Reg. 48,734, 48,735 (Aug. 14, 2012) 
(discussing 37 C.F.R. Sec. 42.301).
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            (d) stay of discovery pending preliminary motions
    New Sec. 281B stays discovery in patent cases during the 
pendency of certain preliminary motions. Such a stay only 
applies if the preliminary motion is filed within 90 days of 
the service of the complaint. The stay expires when all motions 
are decided, and the motions must be decided before a 
scheduling order is issued or other substantive motions are 
decided. An exception to the stay of discovery is allowed for 
discovery necessary to decide the preliminary motion, when 
necessary to prevent competitive harm to the patent owner, or 
when the parties consent to an exception.
            (e) sense of congress
    Subsection (e) expresses the sense of congress with respect 
to patent demand letters.
            (f) demand letters
    Subsection (f) 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.
            (g) venue
    Paragraph (1) establishes limits on the venue where a 
patent-infringement action or declaratory-judgment invalidity 
or non-infringement action may be brought. Amended Sec. 1400(b) 
limits patent venue to the district where the defendant is 
headquartered or incorporated, where it has a regular and 
established physical facility that gives rise to the acts of 
infringement, where the defendant has agreed or consented to be 
sued for the action in question, where the named inventor or a 
co-inventor conducted research and development that led to the 
patent in suit, or where a party has a regular and established 
physical facility that it controls and operates, not primarily 
for purposes of creating venue,\160\ and from which such party 
managed research and development that led to the patent or 
where it made a tangible product that embodies the patent in 
suit.\161\ For foreign defendants that are not headquartered or 
incorporated in the United States and who lack a regular and 
established physical facility in the United States, venue is 
provided under Sec. 1391(d) of title 28.
---------------------------------------------------------------------------
    \160\In assessing whether activities are undertaken primarily for 
purposes of establishing venue, courts should consider the nature of 
the plaintiff and the place where venue is sought. An operating company 
should be presumed to undertake its activities primarily in pursuit of 
those operations, and discovery into its motives for establishing its 
facilities in an area is unnecessary. For an entity that lacks a 
substantial interest in the patent other than asserting it in 
litigation, the court should consider the district where venue is 
sought. If the chosen venue is not one that is disproportionately 
burdened with patent litigation, and the plaintiff engages in 
significant research and development or manufacturing, the choice of 
venue should be presumed bona fide and discovery is unnecessary absent 
substantial initial evidence to the contrary. When, however, an entity 
that lacks a substantial non-litigation interest in the patent asserts 
that venue is present in a district that is disproportionately burdened 
with patent cases, the plaintiff should bear the burden of 
demonstrating that it satisfies all of paragraph (5)'s requirements, 
and some discovery may be appropriate.
    \161\Because such activities must be significant, bona fide, and 
result in the production of tangible goods, merely replicating software 
or running a website is not sufficient to satisfy subparagraphs (B) and 
(C).
---------------------------------------------------------------------------
    Paragraph (2) provides enhanced access to mandamus relief 
for a party whose motion to transfer on the basis of new 
Sec. 1400(b) has been improperly denied. Under Federal Circuit 
precedent, ``three conditions must be satisfied before 
[mandamus relief] may issue.'' In re Procter & Gamble Co., 749 
F.3d 1376 (Fed. Cir. 2014). ``The petitioner must show a clear 
and indisputable right to relief. The petitioner must lack 
adequate alternative means to obtain the relief it seeks. And 
even if the first two prerequisites have been met, the issuing 
court, in the exercise of its discretion, must be satisfied 
that the writ is appropriate under the circumstances.''\162\
---------------------------------------------------------------------------
    \162\Id. (citations omitted).
---------------------------------------------------------------------------
    The P&G; case involved a request by a patent owner for 
mandamus to prevent the USPTO from instituting an IPR for a 
patent. The court denied relief, partly on the basis that 
``this is not one of the rare situations in which irremediable 
interim harm can justify mandamus, which is unavailable simply 
to relieve P&G; of the burden of going through the inter partes 
review.'' In support of this proposition, the court cited In re 
Roche Molecular Sys., Inc.,\163\ which it characterized as 
holding that a mandamus ``petitioner's hardship and 
inconvenience in going through trial d[oes] not provide a basis 
for mandamus.''
---------------------------------------------------------------------------
    \163\516 F.3d 1003, 1004 (Fed. Cir. 2008).
---------------------------------------------------------------------------
    Paragraph (2) removes a barrier to mandamus review of 
denials of motions to transfer or dismiss on the basis of new 
Sec. 1400(b). It does so by stating that being subjected to 
trial in a district where venue is improper does constitute 
irremediable interim harm. To obtain relief, however, the 
mandamus petitioner still must show a clear and indisputable 
right to relief--this requirement is repeated in paragraph (2) 
in order to make clear that the paragraph does not displace 
this element of the P&G; test. The third prong of that test also 
remains in place: the issuing court must be satisfied that the 
writ is appropriate under the circumstances.\164\ This element 
of the P&G; test ensures that the Federal Circuit will retain 
the ability to control its docket and will not be forced to 
entertain an overwhelming number of petitions.\165\ By placing 
a proverbial thumb on the scale in favor of mandamus relief, 
however, paragraph (2) ensures that new Sec. 1400(b)'s writ 
will run in all judicial districts.\166\
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    \164\In assessing whether issuance of the writ is appropriate, the 
Court may consider, for example, whether relief is sought from a 
district that is burdened with a disproportionate number of patent 
infringement actions, and whether the passage of time and the 
development of caselaw applying amended Sec. 1400(b) has resulted in a 
proportionate distribution of patent litigation across judicial 
districts and thus rendered continued enhanced access to mandamus 
relief unnecessary.
    \165\To further conserve Federal appellate resources, the Court may 
dispose of mandamus petitions by remand for reconsideration in view of 
intervening authority, or by summary reversal.
    \166\The Committee is aware that some industry representatives have 
recommended that decisions on motions to transfer be made subject to 
interlocutory appeal. See May 2015 Senate hearing, Statement of Mark 
Chandler, Senior Vice President and General Counsel, Cisco Systems 
Inc., at *12. The Committee is at the present time persuaded that 
enhanced access to mandamus relief will be sufficient to ensure that 
the amended Sec. 1400(b) is consistently and effectively enforced. 
Should this prove not to be the case, however, the Committee will 
revisit the question of whether an interlocutory appeal should be 
authorized.
---------------------------------------------------------------------------
    Paragraph (3) provides that the retail facilities of a 
defendant who also manufactures the accused product--and who is 
thus ineligible for a customer stay under new Sec. 296--cannot 
serve as the basis for venue under new paragraph (2) of 
Sec. 1400(b). Amended Sec. 296 reflects a policy judgment that 
infringement suits against retailers are disfavored. Consistent 
with that principle, paragraph (3) provides that a 
manufacturer's retail facilities alone cannot serve as a basis 
for venue. Paragraph (3) also ensures that such retailer-
manufacturers are not deterred from establishing retail 
facilities in locations where they prefer not to be amenable to 
suit.
    Paragraph (4) clarifies that the presence of a defendant's 
teleworkers in a district cannot serve as a basis for patent-
infringement venue.
            (h) 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.
Section 4. Transparency of patent ownership.
    New Sec. 290(b) of title 35 requires disclosure, upon the 
filing of 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.
    New Sec. 296 codifies and strengthens the common-law 
customer-suit exception to a patent plaintiff's presumptive 
entitlement to her choice of venue. It requires grant of a 
timely motion to stay the suit against the customer if the 
manufacturer has joined the suit or filed a related suit and 
the customer agrees to be bound by the final resolution of 
common issues in the manufacturer's suit without the 
opportunity to separately litigate such issues.\167\ In 
addition, if the manufacturer was made a party to the action on 
motion by the customer, a stay is mandatory only if the 
manufacturer and customer agree in writing to the stay.
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    \167\Subsection (b)(2) limits the estoppel effect of the 
manufacturer's suit to those issues for which the other elements of the 
doctrine of issue preclusion are met. Issue preclusion bars an action 
when ``(1) the issue is identical to one decided in the first action; 
(2) the issue was actually litigated in the first action; (3) 
resolution of the issue was essential to a final judgment in the first 
action; and (4) the plaintiff had a full and fair opportunity to 
litigate the issue in the first action.'' Laguna Hermosa Corp. v. 
United States, 671 F.3d 1284, 1288 (Fed. Cir. 2012). Thus a customer 
who obtains a Sec. 296 stay will be bound as to identical and actually 
litigated issues whose resolution was essential to the final judgment 
in the manufacturer's suit.
---------------------------------------------------------------------------
    Section 296 was narrowed in the Committee's executive 
session to provide that only a retailer or consumer end user 
can qualify as the ``covered customer'' who may seek a 
mandatory stay. The definition of covered customer at paragraph 
(1) makes clear that the term does not include a party that has 
modified the accused product or process in a manner that is 
alleged to infringe the patent in suit, and the definitions of 
``retailer'' and ``end user'' at paragraphs (5) and (6) make 
clear that covered customers do not include those who make or 
cause the making of the infringing product.\168\ Paragraph 
(2)'s definition of the covered manufacturer does, however, 
include those who make or supply the covered product or a 
relevant part thereof. Thus a downstream manufacturer or 
wholesaler may not seek the stay, but the customer or retailer 
may obtain a stay based on the participation in the action or a 
separate action of the upstream supplier of the relevant 
part.\169\
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    \168\Because the reported version of Sec. 296 precludes 
intermediate manufacturers or distributors who supply retailers (rather 
than sell to the public) from obtaining a stay, it moots concerns that 
were raised by a witness at a Subcommittee hearing that the statutory 
customary stay would allow a series of successive stays to be obtained 
by distributors and manufacturers of the infringing product. See March 
2015 hearing at 33-35 (Statement of Bryan Pate, Co-Founder and CEO, 
ElliptiGO, Inc.). Because only retailers and customers can obtain the 
stay, the first stay will have been obtained in favor of an action 
involving a supplier that will not itself be able to seek a stay.
    \169\Per subsection (c)(1)(A), however, a stay may not be 
maintained if the part that was supplied by the manufacturer is not a 
material part of the claimed invention. A part is ``relevant'' only if 
it is what infringes the asserted claim.
---------------------------------------------------------------------------
    Section 296 eliminates the inconsistencies in current law's 
application of the customer-suit exception that are described 
in the background section of this report. It authorizes a stay, 
for example, 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 or the customer has been accused of 
inducement of infringement.\170\
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    \170\``[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., 
Civil Action No. 6:10-CV-588-LED-JDL (E.D. Tex. 2011). To ensure that 
this type of judicial solipsism does not infect the interpretation of 
Sec. 296, the Committee emphasizes that the guiding principles for 
interpreting and applying 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 limited exceptions 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 it 
is not liable for infringement because its product has 
substantial non-infringing 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 where a stay 
unreasonably prejudices or would be manifestly unjust to a 
party seeking to lift the stay. 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. A stay may also unreasonably prejudice a party if it 
is clear that the purported customer provided the infringing 
specifications, or the stay would be contrary to a negotiated 
agreement between the parties that is more than a mere contract 
of adhesion.
    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.
    Subsection (f) makes clear that Sec. 296 only prescribes 
the conditions for a mandatory stay, and that courts retain 
discretion to grant a customer stay in other circumstances, 
including under the authority of Sec. 296 itself. A court 
exercising its discretionary authority to grant a stay or 
expand a stay under Sec. 296 should disregard the arbitrary 
limitations on customer stays described in the background 
section of this report, such as rules followed by some courts 
that stays may not be entered in component cases or when the 
manufacturer only induces infringement. Rather, courts 
exercising the discretionary stay authority preserved by 
subsection (f) should be guided by the principles embodied by 
Sec. 296: that a customer stay is appropriate when it is clear 
that a manufacturer who is willing to litigate the case is in a 
better position to understand and defend against the 
allegations of infringement.\171\
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    \171\The pre-Innovation Act 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, 527 U.S. 627 (1999). 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.''
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Section 6. Procedures and practices to implement and recommendations to 
        the Judicial Conference.
    Subsection (a) requires six or more district courts that 
are currently participating in the patent pilot program to 
develop rules and procedures to address the asymmetries in 
discovery burdens and costs in patent cases and address case 
management procedures in patent cases. Subsection (b) requires 
the six courts to implement these rules as a pilot program. 
Subsection (c) authorizes the Judicial Conference to apply all 
or some of the rules and procedures to all district courts 
after they have been in effect for 2 years.
    Subsection (d) 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 (e), 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.\172\ 
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.
---------------------------------------------------------------------------
    \172\686 F.3d 372 (7th Cir. 2012) (Easterbrook, J.).
---------------------------------------------------------------------------
    Subsection (f) requires the Judicial Conference to prepare 
a report on discovery in patent cases.
Section 7. Small business education, outreach, and information access.
    Subsection (a) establishes a small business education and 
outreach program and directs the USPTO to provide information 
to small businesses to address concerns arising from patent 
infringement. Subsection (b) directs the USPTO 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 USPTO 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 USPTO 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 USPTO to conduct a study on 
patent demand letters.
    Subsection (f) directs the Comptroller General to conduct a 
study of litigation involving business-method patents.
    Subsection (g) requires the USPTO to conduct a study on the 
impact of the Innovation Act on individuals and small 
businesses owned by women, minorities, and veterans to secure 
and assert patents.
Section 9. Improvements and corrections to the America Invents Act.
            (a) 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 USPTO proceedings following the completion of a post-
grant review, and to all proceedings following completion of an 
inter partes review.
            (b) reform of PTAB proceedings
    Paragraphs (1) and (2) direct the USPTO to follow civil-
litigation standards of claim construction, currently 
authoritatively described in Phillips v. AWH Corp.,\173\ when 
construing claims in AIA trials. The USPTO will be permitted to 
continue to give claims their broadest reasonable 
interpretation during examination and in other administrative 
proceedings.\174\ 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.
---------------------------------------------------------------------------
    \173\415 F.3d 1303 (Fed. Cir. 2005).
    \174\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).
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    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.
    Paragraphs (1) and (2) also require a petitioner for an AIA 
trial to certify that she does not hold a short position in the 
stock of the patent owner, and has not demanded anything of 
value from the patent owner in exchange for not filing the 
petition. The Committee anticipates that the prospect of 
disciplinary proceedings under Sec. 32 and sanctions under 
Sec. Sec. 316(a)(6) and 326(a)(6) will be sufficient to ensure 
accurate certifications, and thus discovery into such matters 
under Sec. Sec. 316(a)(5) and 326(a)(5) will not be warranted.
    Paragraph (3) exempts CBM proceedings from the first of the 
new requirements applied by paragraph (2).
    Paragraph (4) requires the USPTO to allow patent owners to 
present the same type of declaration evidence in their 
preliminary responses under Sec. Sec. 313 and 323 that 
petitioners are permitted to include in a petition for an AIA 
trial.
    Paragraph (5) requires the USPTO to consider the rights of 
due process of patent owners and petitioners when promulgating 
and applying regulations implementing AIA trials.
    Paragraph (6) makes precedential several PTAB decisions 
applying Sec. Sec. 325(d) and 315(e)'s restrictions on serial 
or redundant petitions. Section 325(d) in particular is an 
important guarantee of ``patent peace''--it applies when the 
same or substantially the same prior art or arguments have been 
considered by the Office, and does not depend on an identity 
between the parties asserting such art or arguments. The more 
recent PTAB decisions made precedential by this paragraph 
signal a departure from early Board decisions that 
inappropriately relied on Sec. 325(d)'s discretionary nature to 
simply ignore its limitations without explanation,\175\ or that 
suggested that mere inclusion of a declaration or a new but 
cumulative secondary reference necessarily defeats application 
of Sec. 325(d)'s strictures regarding petitions presenting the 
same or substantially the same prior art.\176\
---------------------------------------------------------------------------
    \175\See, e.g., Research in Motion Corp. v. Multimedia Ideas LLC, 
IPR2013-00036, Paper 15 (PTAB Mar. 18, 2013).
    \176\See, e.g., Innolux Corp. v. Semiconductor Energy Lab. Co., 
Ltd., IPR2013-00064, Paper 11 (PTAB April 30, 2013).
---------------------------------------------------------------------------
    Paragraph (7) authorizes the Director to allow a 
petitioner's reply to the patent owner's preliminary response 
under Sec. 313, and adjusts other time limits to accommodate 
such a reply. Such a reply may only be allowed, however, if the 
preliminary response raises new issues--for example, if the 
patent owner alleges that the petition is barred by Sec. 315(b) 
or should be rejected because the petitioner has not disclosed 
all of its real parties in interest.
            (c) obviousness-type double patenting
    Section 9(c) codifies double patenting principles that 
heretofore have been almost entirely administered through non-
statutory, judicially imposed grounds for invalidating 
patents.\177\ This codification will supersede the entirety of 
the judge-made double patenting doctrine for first-inventor-to-
file patents.
---------------------------------------------------------------------------
    \177\Under Sec. 9(c)(2)(A), the new statutory double patenting 
provisions for first-inventor-to-file patents apply to the same extent 
as though these new provisions had been enacted as part of the America 
Invents Act. This effect for the amendments to 35 U.S.C. Sec. 102 
assures that all first-inventor-to-file patents will be subject to the 
same prior art provision within the patent statute.
---------------------------------------------------------------------------
    The new statutory provisions will implement a fundamental 
principle underlying all of U.S. patent law--specifically, that 
each of the valid claims of any one issued U.S. patent should 
be ``patentably distinct'' (i.e., differ in some inventive 
manner) from each of the valid claims of every other issued 
U.S. patent. When existing statutory prior art limitations 
would otherwise fail to ensure this result, the new double 
patenting prior art provisions for first-inventor-to-file 
patents will apply to require that any two such patents 
containing patentably indistinct claims cannot both be valid 
absent enforcement-related restrictions that operate to prevent 
the separate enforcement of the two patents.
    The new prior art provisions in 35 U.S.C. Sec. 102(e) apply 
to any pair of first-inventor-to-file patents that are not 
otherwise prior art to one another by rendering the claims from 
one (or both) of the respective patents prior art with respect 
to the claims of the other patent.\178\ This prior art effect 
is subject to two exceptions.
---------------------------------------------------------------------------
    \178\New 35 U.S.C. Sec. 102(e) establishes a claim-by-claim prior 
art relationship between each pair of claims of the two patents for 
which neither of the pair of claims was otherwise prior art to the 
other. It does so by making the claim (the ``first claim'') from the 
earlier-filed patent (the ``first patent'') prior art to the claim (the 
``second claim'') from the later-filed patent (the ``second patent''). 
If the pair of claims from the two patents were both effectively filed 
on the same day, then each is made prior art to the other (i.e., each 
claim becomes both a ``first claim'' from a ``first patent'' and a 
``second claim'' from a ``second patent'').
---------------------------------------------------------------------------
    First, under proposed Sec. 102(e)(1), if the issuance of 
separate patents resulted from a ``restriction requirement'' 
imposed by the Office,\179\ the prior art relationship under 
Sec. 102(e) is avoided to the extent that the claims of the two 
patents are limited in a manner consonant with a requirement 
for restriction. \180\ This ``restriction requirement'' 
exception supersedes a corresponding statutory ``safe harbor'' 
provision contained in the third sentence in 35 U.S.C. 
Sec. 121.\181\ Section 9(c)(1)(B) repeals that sentence in 
Sec. 121 for first-inventor-to-file patents. The repeal 
eliminates the possibility of any confusion that might 
otherwise arise as to the possible continued relevance of the 
repealed text or its possible inconsistency with the exception 
set forth in new Sec. 102(e)(1).\182\
---------------------------------------------------------------------------
    \179\A ``restriction requirement'' is an administrative finding by 
a patent examiner that the claims of a single patent application 
properly belong in separate patents. It is grounded on the examiner's 
determination that division of the claims into separate patents is 
appropriate because the respective claimed inventions that would issue 
in separate patents are independent and distinct. See 35 U.S.C. 
Sec. 121.
    \180\See St. Jude Medical, Inc. v. Access Closure, Inc., 729 F. 3d 
1369, 1377 (Fed. Cir. 2013).
    \181\Under 35 U.S.C. Sec. 121, third sentence, double patenting is 
made inapplicable to divisional applications where claims are consonant 
with a restriction requirement. This sentence is unnecessary given the 
codification contained in 35 U.S.C. Sec. 102(e)(1).
    \182\For example, the ``divisional application'' limitation 
contained in the 35 U.S.C. Sec. 121 (third sentence) ``safe harbor'' is 
not present in the 35 U.S.C. Sec. 102(e)(1) exception, and thus the 
holding in Pfizer, Inc. v. Teva Pharmaceuticals USA, Inc., 518 F. 3d 
1353, 1362 (Fed. Cir. 2008), that is based on this limitation is 
inapplicable to Sec. 102(e)(1).
---------------------------------------------------------------------------
    Second, when the owner of the later-sought of the two 
patents (or each of the respective owners of the two patents if 
their patents were effectively filed on the same day) has 
elected to limit the separate enforcement of its patent, the 
prior art relationship that would otherwise be imposed under 35 
U.S.C. Sec. 102(e) is removed. This election requirement is 
provided in proposed Sec. 102(e)(2) and has two separate 
components.
    Under the first component, the right to bring an action to 
enforce a patent for which the Sec. 102(e)(2) election has been 
made, i.e., an ``election patent,''\183\ is disclaimed to the 
extent that such an enforcement action would have been barred 
by res judicata had the asserted claims of the election patent 
instead been issued in the other patent involved in the double 
patenting.\184\ This requirement limits the ability to bring a 
separate enforcement action asserting the election patent where 
the other patent has already been enforced.
---------------------------------------------------------------------------
    \183\For convenience, a patent in which an election under 35 U.S.C. 
Sec. 102(e)(2) has been made is referred to as an ``election patent'' 
herein. As noted supra, it is described in 35 U.S.C. Sec. 102(e) itself 
as a ``second patent.''
    \184\See Sec. 102(e)(2)(A).
---------------------------------------------------------------------------
    The second component of the election establishes 
requirements that apply to the owner of the other patent 
involved in the double patenting. These requirements must be 
met by the owner of the other patent before the election patent 
can be enforced, and they apply to the owner of the other 
patent until it is no longer possible to bring or maintain an 
action to enforce that patent. This second component requires 
that the owner of the other patent either must have filed its 
own election to limit separate enforcement of the other patent 
under Sec. 102(e)(2), or it must be a party to the action to 
enforce the election patent.\185\
---------------------------------------------------------------------------
    \185\See Sec. 102(e)(2)(B). The second component of the election 
requirement is inherently satisfied when the two patents involved in 
the double patenting are owned by the same person. In double patenting 
situations, other than those arising under Sec. 102(c), common 
ownership of both patents involved in the double patenting is typically 
present.
---------------------------------------------------------------------------
    Any election patent is subject to a further limitation with 
respect to the term of the patent. Patents subject to the 20-
year patent term provision of the URAA may qualify for patent 
term adjustments that can move the expiration date of the 
patent beyond the end of the 20-year term measured from the 
priority date.\186\ Patent term adjustment can result in 
situations where the combined protection period for the two 
patents involved in the double patenting could exceed the 17-
year maximum term of protection that the patent term adjustment 
provisions were intended to secure.\187\
---------------------------------------------------------------------------
    \186\See 35 U.S.C. Sec. 154(b).
    \187\See 35 U.S.C. Sec. 154(b)(1)(B), setting forth a ``Guarantee 
of no more than 3-year application pendency,'' a provision designed to 
ensure that 17 years of the 20-year patent term would remain once the 
pending application issued as a patent. Nothing in the patent term 
adjustment provisions of 35 U.S.C. Sec. 154(b) operates to secure more 
than this 17-year period for any individual patent that might issue.
---------------------------------------------------------------------------
    Section 9(c)(1)(D) provides a limitation on patent term 
adjustment that voids any adjusted patent term for an election 
patent to the extent that the combined post-issuance patent 
term for both patents involved in the double patenting would 
exceed 17 years.\188\ This limitation can eliminate eligibility 
for patent term adjustment for an elected patent altogether in 
certain situations.\189\ Subparagraph (D) operates to remove 
the last vestige of the type of pre-URAA extensions of patent 
rights that justified limiting the patent terms of URAA patents 
in situations of double patenting.\190\
---------------------------------------------------------------------------
    \188\If the term of the election patent would be longer than 17 
years in the absence of any patent term adjustment, i.e., based upon 
the prompt issuance of the patent after the initial patent filing, 
Sec. 9(c)(1)(D)'s limitation on patent term adjustment would have no 
impact on the term of the election patent.
    \189\If one of two patents involved in double patenting issues 
within 3 years from its nonprovisional filing date, patent term 
adjustment would be unavailable for the election patent. In this 
situation, the limitation in Sec. 9(c)(1)(D) supersedes any other 
patent term adjustment for which the election patent might have 
qualified.
    \190\These policy justifications are discussed in the background 
section of this report.
---------------------------------------------------------------------------
    Because the new prior art provisions of Sec. 102(e) will 
apply to all first-inventor-to-file patents, including patents 
issued before the date of enactment, a ``savings clause'' in 
Sec. 9(c)(2)(B) of the Innovation Act makes new Sec. 102(e) 
inapplicable to any patent issued before the date of enactment 
that would not have been invalid absent the enactment of 
Sec. 102(e).
    Section 9(c)(2)(C) reaffirms the Office's practice of 
making provisional rejections for double patenting. This 
provision expressly authorizes the Office to continue to make 
provisional rejections for double patenting prior to the 
issuance of patents on applications containing patentably 
indistinct claims.
    Section 9(c)(2)(D) discontinues the Office's practice of 
requiring disclaimers of patent term in situations involving 
double patenting for patents subject to the 20-year URAA patent 
term.\191\ In lieu of the current ``terminal disclaimer''\192\ 
requirements, the Office is permitted to condition the issuance 
of a patent subject to the 20-year URAA patent term on the 
filing of an election under 35 U.S.C. Sec. 102(e)(2).\193\ 
Additionally, for terminal disclaimers filed in patent 
applications pending on or after July 1, 2015, the effect of 
such a disclaimer can be nullified if an election under 35 
U.S.C. Sec. 102(e)(2) is made with respect to the application 
or the patent issuing on the application within 1 year from the 
date of enactment.\194\ Terminal disclaimers currently in 
effect are otherwise unaffected.\195\
---------------------------------------------------------------------------
    \191\Gilead Sciences, Inc. v. Natco Pharma Ltd., 753 F. 3d 1208 
(Fed. Cir. 2014), is legislatively abrogated to the extent that the 
holding in that appeal was based on a finding that the 20-year URAA 
term of the invalidated patent constituted an unjustified timewise 
extension of the patent owner's exclusive rights.
    \192\See 37 C.F.R. Sec. 1.321.
    \193\See Sec. 9(c)(2)(D)(i)(III).
    \194\See Sec. 9(c)(2)(D)(ii).
    \195\See Sec. 9(c)(2)(D)(iii).
---------------------------------------------------------------------------
    Section 9(c)(E) provides further rules of 
construction.\196\ Under clause (i), all non-statutory double 
patenting grounds for invalidating first-inventor-to-file 
patents are barred. Under clause (ii), non-statutory double 
patenting grounds for invalidating first-to-invent patents are 
barred to the extent a prior art relationship exists between 
the claims of the respective patents. This limitation is 
imposed because such a prior art relationship assures that the 
respective claims of the two patents can be valid only if 
directed to patentably distinct subject matter.\197\
---------------------------------------------------------------------------
    \196\These rules of construction, like those in Sec. 9(C)(2)(D), 
take effect upon enactment, but do not apply to any invalidity defense 
raised in a patent infringement action brought before the date of 
enactment. See Sec. 9(c)(2)(F).
    \197\In re Hubbell, 709 F.3d 1140 (Fed. Cir. 2013), is 
legislatively abrogated given that the facts of the case indicate that 
the claims of the respective patents had a prior art relationship under 
pre-AIA Sec. 102(g).
---------------------------------------------------------------------------
            (d) PTO patent reviews
    Paragraph (1) 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.
    Paragraph (2) authorizes the Director to waive the fee for 
filing a CBM proceeding.
    Paragraph (3) allows a petitioner to employ Sec. 315(c) 
joinder to join a new petition to a pending inter partes review 
to which it is already a party. Such same party joinder, which 
is not subject to the Sec. 315(b) time limitation, may be 
exercised for good cause shown. Good cause would necessarily 
include situations where a patent owner has submitted 
contentions asserting additional claims of a patent in 
litigation only after the defendant has filed a petition under 
Sec. 311 challenging the claims that were initially asserted. 
This will allow an IPR petitioner to limit its petition to 
those claims asserted against it in litigation, without fear 
that Sec. 315(b) may preclude it from challenging additional 
patent claims that are asserted later.
            (e) clarification of jurisdiction
    This subsection abrogates Gunn v. Minton,\198\ restoring 
the Federal courts' jurisdiction over patent legal-malpractice 
cases. It also establishes that actions that necessarily 
require resolution of a disputed question as to the validity or 
scope of a patent ``arise under'' the patent laws. The 
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. The provision effectively codifies 
the Federal Circuit's recent dicta in Forrester Environmental 
Services,\199\ and ensures the continuing vitality 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.\200\
---------------------------------------------------------------------------
    \198\133 S.Ct. 1059 (Feb. 20, 2013).
    \199\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'').
    \200\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 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 for those cases, 
despite the enactment of this provision.
            (f) 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).
            (g) management of the USPTO
    This subsection clarifies the authority of the Deputy 
Director to serve as Acting Director.
            (h) 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
    This paragraph allows the Director to dispense with the 
filing of an oath or declaration under Sec. 115 of title 35 as 
she deems appropriate. This could include, for example, with 
respect to continuing applications for patent under 
Sec. Sec. 120 and 121, where the separate Sec. 115 requirement 
can be a redundancy. The amendments thus remove unnecessary 
paperwork from the patent examination process.
                  (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 authorized 
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 nonsubstantive 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.,\201\ 
recently held that the AIA's addition of substructure to 
Sec. 112 applies only with respect to patents issued after 
September 16, 2012.\202\ 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.
---------------------------------------------------------------------------
    \201\715 F.3d 891 (Fed. Cir. 2013).
    \202\See id. at 897, n.3.
---------------------------------------------------------------------------
                  (6) Ltime limit for commencing misconduct proceedings
    This paragraph addresses several problems that the USPTO's 
Office of Enrollment and Discipline has encountered under the 
AIA's new 1-year deadline for commencing misconduct 
proceedings. These amendments to Sec. 32 ensure that the 
deadline only runs from when the USPTO receives a written 
grievance about an attorney's misconduct, rather than from when 
the USPTO receives any knowledge of the misconduct (such as 
from a news story). The amendments also toll the deadline while 
a trial court's finding of misconduct is appealed, so that the 
USPTO is not required to commence a misconduct proceeding 
before an appeals court can review, for example, a trial 
court's finding that inequitable conduct has occurred. The 
amendments also allow the parties to agree to toll the 
deadline. Finally, these amendments add an additional 6 months 
to the time by which the Director must commence a misconduct 
proceeding once a written grievance has been received. These 
amendments apply to all misconduct proceedings commenced after 
the enactment of the Innovation 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.\203\
---------------------------------------------------------------------------
    \203\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.
                  (9) global worksharing
    This paragraph amends Sec. 122 to allow the USPTO to share 
information about a pending application with a foreign or 
international intellectual property office if a corresponding 
application has been filed with such office.
                  (10) jurisdiction for appeals of trademark cases
    This paragraph gives the U.S. Court of Appeals for the 
Federal Circuit exclusive jurisdiction over appeals of 
trademark registrability decisions under Sec. 21(b) of the 
Lanham Act. Inter partes trademark cases (i.e., challenges to 
trademarks brought by private parties) can still be brought in 
any appropriate district. While Federal Circuit law will govern 
the registrability determinations in such cases, if 
infringement or other claims are joined to the Sec. 21(b) 
claim, regional circuit law will continue to govern those 
additional claims and any equitable or monetary relief in such 
cases.\204\ Centralizing appeals of Sec. 21(b) actions in the 
Federal Circuit will end current law's practice of subjecting 
examiner's registrability decisions to the inconsistent and 
conflicting standards adopted by the regional circuits with 
regard to issues such as the relevance of evidence of 
marketplace conditions that may conflict with facts set forth 
on the application or registration involved, and what set of 
factors governs the likelihood-of-confusion analysis.
---------------------------------------------------------------------------
    \204\See Payless Shoesource, Inc. v. Reebok Int'l Ltd., 998 F.2d 
985, 988-89 (Fed. Cir. 1993).
---------------------------------------------------------------------------
                  (11) officers and employees
    This paragraph's amendment to Sec. 3 of title 35 clarifies 
that in addition to appointing officers to carry out the 
functions of the Office, the Director may nominate officers for 
appointment by the Secretary of Commerce to carry out such 
functions. By specifying that the Secretary of Commerce has 
statutory authority to appoint officers nominated by the 
Director, the amendment provides a clear mechanism for 
obtaining constitutional appointments for officers whose duties 
would make them ``inferior officers'' under the Constitution's 
Appointments Clause.
            (i) extension of fee-setting authority
    This subsection extends by an additional 10 years the 
USPTO's authority to adjust its own fees that was created by 
Sec. 10(a) of the Leahy-Smith America Invents Act, Pub. L. No. 
112-29 (2011).
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.

                              Agency Views

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                               __________

         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, and 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

           *       *       *       *       *       *       *


Sec. 3. Officers and employees

    (a) Under Secretary and Director.--
            (1) In general.--The powers and duties of the 
        United States Patent and Trademark Office shall be 
        vested in an Under Secretary of Commerce for 
        Intellectual Property and Director of the United States 
        Patent and Trademark Office (in this title referred to 
        as the ``Director''), who shall be a citizen of the 
        United States and who shall be appointed by the 
        President, by and with the advice and consent of the 
        Senate. The Director shall be a person who has a 
        professional background and experience in patent or 
        trademark law.
            (2) Duties.--
                    (A) In general.--The Director shall be 
                responsible for providing policy direction and 
                management supervision for the Office and for 
                the issuance of patents and the registration of 
                trademarks. The Director shall perform these 
                duties in a fair, impartial, and equitable 
                manner.
                    (B) Consulting with the public advisory 
                committees.--The Director shall consult with 
                the Patent Public Advisory Committee 
                established in section 5 on a regular basis on 
                matters relating to the patent operations of 
                the Office, shall consult with the Trademark 
                Public Advisory Committee established in 
                section 5 on a regular basis on matters 
                relating to the trademark operations of the 
                Office, and shall consult with the respective 
                Public Advisory Committee before submitting 
                budgetary proposals to the Office of Management 
                and Budget or changing or proposing to change 
                patent or trademark user fees or patent or 
                trademark regulations which are subject to the 
                requirement to provide notice and opportunity 
                for public comment under section 553 of title 
                5, as the case may be.
            (3) Oath.--The Director shall, before taking 
        office, take an oath to discharge faithfully the duties 
        of the Office.
            (4) Removal.--The Director may be removed from 
        office by the President. The President shall provide 
        notification of any such removal to both Houses of 
        Congress.
    (b) Officers and Employees of the Office.--
            (1) Deputy under secretary and deputy director.--
        The Secretary of Commerce, upon nomination by the 
        Director, shall appoint a Deputy Under Secretary of 
        Commerce for Intellectual Property and Deputy Director 
        of the United States Patent and Trademark Office who 
        shall [be vested with the authority to act in the 
        capacity of the] serve as Acting, Director in the event 
        of the absence or incapacity of the Director or in the 
        event of a vacancy in the office of the Director. The 
        Deputy Director shall be a citizen of the United States 
        who has a professional background and experience in 
        patent or trademark law.
            (2) Commissioners.--
                    (A) Appointment and duties.--The Secretary 
                of Commerce shall appoint a Commissioner for 
                Patents and a Commissioner for Trademarks, 
                without regard to chapter 33, 51, or 53 of 
                title 5. The Commissioner for Patents shall be 
                a citizen of the United States with 
                demonstrated management ability and 
                professional background and experience in 
                patent law and serve for a term of 5 years. The 
                Commissioner for Trademarks shall be a citizen 
                of the United States with demonstrated 
                management ability and professional background 
                and experience in trademark law and serve for a 
                term of 5 years. The Commissioner for Patents 
                and the Commissioner for Trademarks shall serve 
                as the chief operating officers for the 
                operations of the Office relating to patents 
                and trademarks, respectively, and shall be 
                responsible for the management and direction of 
                all aspects of the activities of the Office 
                that affect the administration of patent and 
                trademark operations, respectively. The 
                Secretary may reappoint a Commissioner to 
                subsequent terms of 5 years as long as the 
                performance of the Commissioner as set forth in 
                the performance agreement in subparagraph (B) 
                is satisfactory.
                    (B) Salary and performance agreement.--The 
                Commissioners shall be paid an annual rate of 
                basic pay not to exceed the maximum rate of 
                basic pay for the Senior Executive Service 
                established under section 5382 of title 5, 
                including any applicable locality-based 
                comparability payment that may be authorized 
                under section 5304(h)(2)(C) of title 5. The 
                compensation of the Commissioners shall be 
                considered, for purposes of section 
                207(c)(2)(A) of title 18, to be the equivalent 
                of that described under clause (ii) of section 
                207(c)(2)(A) of title 18. In addition, the 
                Commissioners may receive a bonus in an amount 
                of up to, but not in excess of, 50 percent of 
                the Commissioners' annual rate of basic pay, 
                based upon an evaluation by the Secretary of 
                Commerce, acting through the Director, of the 
                Commissioners' performance as defined in an 
                annual performance agreement between the 
                Commissioners and the Secretary. The annual 
                performance agreements shall incorporate 
                measurable organization and individual goals in 
                key operational areas as delineated in an 
                annual performance plan agreed to by the 
                Commissioners and the Secretary. Payment of a 
                bonus under this subparagraph may be made to 
                the Commissioners only to the extent that such 
                payment does not cause the Commissioners' total 
                aggregate compensation in a calendar year to 
                equal or exceed the amount of the salary of the 
                Vice President under section 104 of title 3.
                    (C) Removal.--The Commissioners may be 
                removed from office by the Secretary for 
                misconduct or nonsatisfactory performance under 
                the performance agreement described in 
                subparagraph (B), without regard to the 
                provisions of title 5. The Secretary shall 
                provide notification of any such removal to 
                both Houses of Congress.
            (3) Other officers and employees.--The Director 
        shall--
                    (A) [appoint] appoint, or nominate for 
                appointment by the Secretary of Commerce, such 
                officers, employees (including attorneys), and 
                agents of the Office as the Director considers 
                necessary to carry out the functions of the 
                Office; and
                    (B) define the title, authority, and duties 
                of such officers and employees and delegate to 
                them such of the powers vested in the Office as 
                the Director may determine.
        The Office shall not be subject to any administratively 
        or statutorily imposed limitation on positions or 
        personnel, and no positions or personnel of the Office 
        shall be taken into account for purposes of applying 
        any such limitation.
            (4) Training of examiners.--The Office shall submit 
        to the Congress a proposal to provide an incentive 
        program to retain as employees patent and trademark 
        examiners of the primary examiner grade or higher who 
        are eligible for retirement, for the sole purpose of 
        training patent and trademark examiners.
            (5) National security positions.--The Director, in 
        consultation with the Director of the Office of 
        Personnel Management, shall maintain a program for 
        identifying national security positions and providing 
        for appropriate security clearances, in order to 
        maintain the secrecy of certain inventions, as 
        described in section 181, and to prevent disclosure of 
        sensitive and strategic information in the interest of 
        national security.
            (6) Administrative patent judges and administrative 
        trademark judges.--The Director may fix the rate of 
        basic pay for the administrative patent judges 
        appointed pursuant to section 6 and the administrative 
        trademark judges appointed pursuant to section 17 of 
        the Trademark Act of 1946 (15 U.S.C. 1067) at not 
        greater than the rate of basic pay payable for level 
        III of the Executive Schedule under section 5314 of 
        title 5. The payment of a rate of basic pay under this 
        paragraph shall not be subject to the pay limitation 
        under section 5306(e) or 5373 of title 5.
    (c) Continued Applicability of Title 5.--Officers and 
employees of the Office shall be subject to the provisions of 
title 5, relating to Federal employees.
    (d) Adoption of Existing Labor Agreements.--The Office 
shall adopt all labor agreements which are in effect, as of the 
day before the effective date of the Patent and Trademark 
Office Efficiency Act, with respect to such Office (as then in 
effect).
    (e) Carryover of Personnel.--
            (1) From pto.--Effective as of the effective date 
        of the Patent and Trademark Office Efficiency Act, all 
        officers and employees of the Patent and Trademark 
        Office on the day before such effective date shall 
        become officers and employees of the Office, without a 
        break in service.
            (2) Other personnel.--Any individual who, on the 
        day before the effective date of the Patent and 
        Trademark Office Efficiency Act, is an officer or 
        employee of the Department of Commerce (other than an 
        officer or employee under paragraph (1)) shall be 
        transferred to the Office, as necessary to carry out 
        the purposes of that Act, if--
                    (A) such individual serves in a position 
                for which a major function is the performance 
                of work reimbursed by the Patent and Trademark 
                Office, as determined by the Secretary of 
                Commerce;
                    (B) such individual serves in a position 
                that performed work in support of the Patent 
                and Trademark Office during at least half of 
                the incumbent's work time, as determined by the 
                Secretary of Commerce; or
                    (C) such transfer would be in the interest 
                of the Office, as determined by the Secretary 
                of Commerce in consultation with the Director.
        Any transfer under this paragraph shall be effective as 
        of the same effective date as referred to in paragraph 
        (1), and shall be made without a break in service.
    (f) Transition Provisions.--
            (1) Interim appointment of director.--On or after 
        the effective date of the Patent and Trademark Office 
        Efficiency Act, the President shall appoint an 
        individual to serve as the Director until the date on 
        which a Director qualifies under subsection (a). The 
        President shall not make more than one such appointment 
        under this subsection.
            (2) Continuation in office of certain officers.--
        (A) The individual serving as the Assistant 
        Commissioner for Patents on the day before the 
        effective date of the Patent and Trademark Office 
        Efficiency Act may serve as the Commissioner for 
        Patents until the date on which a Commissioner for 
        Patents is appointed under subsection (b).
            (B) The individual serving as the Assistant 
        Commissioner for Trademarks on the day before the 
        effective date of the Patent and Trademark Office 
        Efficiency Act may serve as the Commissioner for 
        Trademarks until the date on which a Commissioner for 
        Trademarks is appointed under subsection (b).

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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 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).] 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 18 months after the date 
on which the Director of the Office of Enrollment and 
Discipline received a written grievance (as prescribed in the 
regulations established under section 2(b)(2)(D)) about a 
specified individual that describes the misconduct forming the 
basis for the proceeding. If the misconduct that forms the 
basis for the proceeding under this section is at issue in a 
court or administrative-agency proceeding, the 18-month period 
for commencing the proceeding under this section shall be 
tolled until the court or agency's decision regarding the 
misconduct becomes final and non-appealable. The 18-month 
period for commencing a proceeding under this section also may 
be tolled by agreement between the parties. 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.

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PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS

           *       *       *       *       *       *       *


CHAPTER 10--PATENTABILITY OF INVENTIONS

           *       *       *       *       *       *       *


Sec. 102. Conditions for patentability; novelty

    (a) Novelty; Prior Art.--A person shall be entitled to a 
patent unless--
            (1) the claimed invention was patented, described 
        in a printed publication, or in public use, on sale, or 
        otherwise available to the public before the effective 
        filing date of the claimed invention; or
            (2) the claimed invention was described in a patent 
        issued under section 151, or in an application for 
        patent published or deemed published under section 
        122(b), in which the patent or application, as the case 
        may be, names another inventor and was effectively 
        filed before the effective filing date of the claimed 
        invention.
    (b) Exceptions.--
            (1) Disclosures made 1 year or less before the 
        effective filing date of the claimed invention.--A 
        disclosure made 1 year or less before the effective 
        filing date of a claimed invention shall not be prior 
        art to the claimed invention under subsection (a)(1) 
        if--
                    (A) the disclosure was made by [the 
                inventor or joint inventor or by another] 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
                    (B) the subject matter disclosed had, 
                before such disclosure, been publicly disclosed 
                by the inventor or a joint inventor or another 
                who obtained the subject matter disclosed 
                directly or indirectly from the inventor or a 
                joint inventor.
            (2) Disclosures appearing in applications and 
        patents.--A disclosure shall not be prior art to a 
        claimed invention under subsection (a)(2) if--
                    (A) the subject matter disclosed was 
                obtained directly or indirectly from the 
                inventor or a joint inventor;
                    (B) the subject matter disclosed had, 
                before such subject matter was effectively 
                filed under subsection (a)(2), been publicly 
                disclosed by the inventor or a joint inventor 
                or another who obtained the subject matter 
                disclosed directly or indirectly from the 
                inventor or a joint inventor; or
                    (C) the subject matter disclosed and the 
                claimed invention, not later than the effective 
                filing date of the claimed invention, were 
                owned by the same person or subject to an 
                obligation of assignment to the same person.
    (c) Common Ownership Under Joint Research Agreements.--
Subject matter disclosed and a claimed invention shall be 
deemed to have been owned by the same person or subject to an 
obligation of assignment to the same person in applying the 
provisions of subsection (b)(2)(C) if--
            (1) the subject matter disclosed was developed and 
        the claimed invention was made by, or on behalf of, 1 
        or more parties to a joint research agreement that was 
        in effect on or before the effective filing date of the 
        claimed invention;
            (2) the claimed invention was made as a result of 
        activities undertaken within the scope of the joint 
        research agreement; and
            (3) the application for patent for the claimed 
        invention discloses or is amended to disclose the names 
        of the parties to the joint research agreement.
    (d) Patents and Published Applications Effective as Prior 
Art.--For purposes of determining whether a patent or 
application for patent is prior art to a claimed invention 
under subsection (a)(2), such patent or application shall be 
considered to have been effectively filed, with respect to any 
subject matter described in the patent or application--
            (1) if paragraph (2) does not apply, as of the 
        actual filing date of the patent or the application for 
        patent; or
            (2) if the patent or application for patent is 
        entitled to claim a right of priority under section 
        119, 365(a), or 365(b), or to claim the benefit of an 
        earlier filing date under section 120, 121, or 365(c), 
        based upon 1 or more prior filed applications for 
        patent, as of the filing date of the earliest such 
        application that describes the subject matter.
    (e) Double-patenting Prior Art.--If a first claimed 
invention in a first patent was effectively filed on or before 
the effective filing date of a second claimed invention in a 
second patent or in the application on which the second patent 
issues, and the first claimed invention is not otherwise prior 
art to the second claimed invention under this section, then 
the first claimed invention shall, notwithstanding the other 
subsections of this section, constitute prior art to the second 
claimed invention under this subsection unless--
            (1) the second claimed invention is consonant with 
        a requirement for restriction under the first sentence 
        of section 121 with respect to the claims issued in the 
        first patent; or
            (2) an election has been recorded in the Office by 
        the owner of the second patent or the application on 
        which the second patent issues disclaiming the right to 
        bring or maintain a civil action under section 281 to 
        enforce the second patent, except that such disclaimer 
        shall not apply if--
                    (A) the relief being sought in the civil 
                action would not constitute a cause of action 
                barred by res judicata had the asserted claims 
                of the second patent been issued in the first 
                patent; and
                    (B) the owner of the first patent or the 
                application on which the first patent issues 
                has recorded an election limiting the 
                enforcement of the first patent relative to the 
                second patent in the manner described in this 
                paragraph, the owner of the first patent is a 
                party to the civil action, or a separate action 
                under section 281 to enforce the first patent 
                can no longer be brought or maintained.

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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 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 to execute an oath 
or declaration in connection with the application.
    (b) Required Statements.--An oath or declaration under 
subsection (a) shall contain statements that--
            (1) the application was made or was authorized to 
        be made by the affiant or declarant; and
            (2) such individual believes himself or herself to 
        be the original inventor or an original joint inventor 
        of a claimed invention in the application.
    (c) Additional Requirements.--The Director may specify 
additional information relating to the inventor and the 
invention that is required to be included in an oath or 
declaration under subsection (a).
    (d) Substitute Statement.--
            (1) In general.--In lieu of executing an oath or 
        declaration under subsection (a), the applicant for 
        patent may provide a substitute statement under the 
        circumstances described in paragraph (2) and such 
        additional circumstances that the Director may specify 
        by regulation.
            (2) Permitted circumstances.--A substitute 
        statement under paragraph (1) is permitted with respect 
        to any individual who--
                    (A) is unable to file the oath or 
                declaration under subsection (a) because the 
                individual--
                            (i) is deceased;
                            (ii) is under legal incapacity; or
                            (iii) cannot be found or reached 
                        after diligent effort; or
                    (B) is under an obligation to assign the 
                invention but has refused to make the oath or 
                declaration required under subsection (a).
            (3) Contents.--A substitute statement under this 
        subsection shall--
                    (A) identify the individual with respect to 
                whom the statement applies;
                    (B) set forth the circumstances 
                representing the permitted basis for the filing 
                of the substitute statement in lieu of the oath 
                or declaration under subsection (a); and
                    (C) contain any additional information, 
                including any showing, required by the 
                Director.
    (e) Making Required Statements in Assignment of Record.--An 
individual who is under an obligation of assignment of an 
application for patent may include the required statements 
under subsections (b) and (c) in the assignment executed by the 
individual, in lieu of filing such statements separately.
    (f) Time for Filing.--The applicant for patent shall 
provide each required oath or declaration under subsection (a), 
substitute statement under subsection (d), or recorded 
assignment meeting the requirements of subsection (e) no later 
than the date on which the issue fee for the patent is paid.
    (g) Earlier-Filed Application Containing Required 
Statements or Substitute Statement.--
            (1) Exception.--The requirements under this section 
        shall not apply to an individual with respect to an 
        application for patent in which the individual is named 
        as the inventor or a joint inventor and that claims the 
        benefit under section 120, 121, or 365(c) of the filing 
        of an earlier-filed application, if--
                    (A) an oath or declaration meeting the 
                requirements of subsection (a) was executed by 
                the individual and was filed in connection with 
                the earlier-filed application;
                    (B) a substitute statement meeting the 
                requirements of subsection (d) was filed in 
                connection with the earlier filed application 
                with respect to the individual; or
                    (C) an assignment meeting the requirements 
                of subsection (e) was executed with respect to 
                the earlier-filed application by the individual 
                and was recorded in connection with the 
                earlier-filed application.
            (2) Copies of oaths, declarations, statements, or 
        assignments.--Notwithstanding paragraph (1), the 
        Director may require that a copy of the executed oath 
        or declaration, the substitute statement, or the 
        assignment filed in connection with the earlier-filed 
        application be included in the later-filed application.
    (h) Supplemental and Corrected Statements; Filing 
Additional Statements.--
            (1) In general.--Any person making a statement 
        required under this section may withdraw, replace, or 
        otherwise correct the statement at any time. If a 
        change is made in the naming of the inventor requiring 
        the filing of 1 or more additional statements under 
        this section, the Director shall establish regulations 
        under which such additional statements may be filed.
            (2) Supplemental statements not required.--If an 
        individual has executed an oath or declaration meeting 
        the requirements of subsection (a) or an assignment 
        meeting the requirements of subsection (e) with respect 
        to an application for patent, the Director may not 
        thereafter require that individual to make any 
        additional oath, declaration, or other statement 
        equivalent to those required by this section in 
        connection with the application for patent or any 
        patent issuing thereon.
            (3) Savings clause.--A patent shall not be invalid 
        or unenforceable based upon the failure to comply with 
        a requirement under this section if the failure is 
        remedied as provided under paragraph (1).
    (i) Acknowledgment of Penalties.--Any declaration or 
statement filed pursuant to this section shall contain an 
acknowledgment that any willful false statement made in such 
declaration or statement is punishable under section 1001 of 
title 18 by fine or imprisonment of not more than 5 years, or 
both.

           *       *       *       *       *       *       *


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

    (a) An application for patent for an invention filed in 
this country by any person who has, or whose legal 
representatives or assigns have, previously regularly filed an 
application for a patent for the same invention in a foreign 
country which affords similar privileges in the case of 
applications filed in the United States or to citizens of the 
United States, or in a WTO member country, shall have the same 
effect as the same application would have if filed in this 
country on the date on which the application for patent for the 
same invention was first filed in such foreign country, if the 
application in this country is filed within 12 months from the 
earliest date on which such foreign application was filed. The 
Director may prescribe regulations, including the requirement 
for payment of the fee specified in section 41(a)(7), pursuant 
to which the 12-month period set forth in this subsection may 
be extended by an additional 2 months if the delay in filing 
the application in this country within the 12-month period was 
unintentional.
    (b)(1) No application for patent shall be entitled to this 
right of priority unless a claim is filed in the Patent and 
Trademark Office, identifying the foreign application by 
specifying the application number on that foreign application, 
the intellectual property authority or country in or for which 
the application was filed, and the date of filing the 
application, at such time during the pendency of the 
application as required by the Director.
    (2) The Director may consider the failure of the applicant 
to file a timely claim for priority as a waiver of any such 
claim. The Director may establish procedures, including the 
payment of a surcharge, to accept an unintentionally delayed 
claim under this section.
    (3) The Director may require a certified copy of the 
original foreign application, specification, and drawings upon 
which it is based, a translation if not in the English 
language, and such other information as the Director considers 
necessary. Any such certification shall be made by the foreign 
intellectual property authority in which the foreign 
application was filed and show the date of the application and 
of the filing of the specification and other papers.
    (c) In like manner and subject to the same conditions and 
requirements, the right provided in this section may be based 
upon a subsequent regularly filed application in the same 
foreign country instead of the first filed foreign application, 
provided that any foreign application filed prior to such 
subsequent application has been withdrawn, abandoned, or 
otherwise disposed of, without having been laid open to public 
inspection and without leaving any rights outstanding, and has 
not served, nor thereafter shall serve, as a basis for claiming 
a right of priority.
    (d) Applications for inventors' certificates filed in a 
foreign country in which applicants have a right to apply, at 
their discretion, either for a patent or for an inventor's 
certificate shall be treated in this country in the same manner 
and have the same effect for purpose of the right of priority 
under this section as applications for patents, subject to the 
same conditions and requirements of this section as apply to 
applications for patents, provided such applicants are entitled 
to the benefits of the Stockholm Revision of the Paris 
Convention at the time of such filing.
    (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. The Director may 
prescribe regulations, including the requirement for payment of 
the fee specified in section 41(a)(7), pursuant to which the 
12-month period set forth in this subsection may be extended by 
an additional 2 months if the delay in filing the application 
under section 111(a) or section 363 within the 12-month period 
was unintentional. 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 the fee 
specified in section 41(a)(7), to accept an unintentionally 
delayed submission of an amendment under this subsection.
    (2) A provisional application filed under section 111(b) 
may not be relied upon in any proceeding in the Patent and 
Trademark Office unless the fee set forth in subparagraph (A) 
or (C) of section 41(a)(1) has been paid.
            (3) If the day that is 12 months after the filing 
        date of a provisional application falls on a Saturday, 
        Sunday, or Federal holiday within the District of 
        Columbia, the period of pendency of the provisional 
        application shall be extended to the next succeeding 
        secular or business day. For an application for patent 
        filed under section 363 in a Receiving Office other 
        than the Patent and Trademark Office, the 12-month and 
        additional 2-month period set forth in this subsection 
        shall be extended as provided under the treaty and 
        Regulations as defined in section 351.
    (f) Applications for plant breeder's rights filed in a WTO 
member country (or in a foreign UPOV Contracting Party) shall 
have the same effect for the purpose of the right of priority 
under subsections (a) through (c) of this section as 
applications for patents, subject to the same conditions and 
requirements of this section as apply to applications for 
patents.
    (g) As used in this section--
            (1) the term ``WTO member country'' has the same 
        meaning as the term is defined in section 104(b)(2); 
        and
            (2) the term ``UPOV Contracting Party'' means a 
        member of the International Convention for the 
        Protection of New Varieties of Plants.

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.

Sec. 121. Divisional applications

    If two or more independent and distinct inventions are 
claimed in one application, the Director may require the 
application to be restricted to one of the inventions. If the 
other invention is made the subject of a divisional application 
which complies with the requirements of section 120 it shall be 
entitled to the benefit of the filing date of the original 
application. [A patent issuing on an application with respect 
to which a requirement for restriction under this section has 
been made, or on an application filed as a result of such a 
requirement, shall not be used as a reference either in the 
Patent and Trademark Office or in the courts against a 
divisional application or against the original application or 
any patent issued on either of them, if the divisional 
application is filed before the issuance of the patent on the 
other application.] The validity of a patent shall not be 
questioned for failure of the Director to require the 
application to be restricted to one invention.

Sec. 122. Confidential status of applications; publication of patent 
                    applications

    (a) Confidentiality.--Except as provided in [subsection 
(b)] subsections (b) and (f), applications for patents shall be 
kept in confidence by the Patent and Trademark Office and no 
information concerning the same given without authority of the 
applicant or owner unless necessary to carry out the provisions 
of an Act of Congress or in such special circumstances as may 
be determined by the Director.
    (b) Publication.--
            (1) In general.--(A) Subject to paragraph (2), each 
        application for a patent shall be published, in 
        accordance with procedures determined by the Director, 
        promptly after the expiration of a period of 18 months 
        from the earliest filing date for which a benefit is 
        sought under this title. At the request of the 
        applicant, an application may be published earlier than 
        the end of such 18-month period.
            (B) No information concerning published patent 
        applications shall be made available to the public 
        except as the Director determines.
            (C) Notwithstanding any other provision of law, a 
        determination by the Director to release or not to 
        release information concerning a published patent 
        application shall be final and nonreviewable.
            (2) Exceptions.--(A) An application shall not be 
        published if that application is--
                    (i) no longer pending;
                    (ii) subject to a secrecy order under 
                section 181;
                    (iii) a provisional application filed under 
                section 111(b); or
                    (iv) an application for a design patent 
                filed under chapter 16.
            (B)(i) If an applicant makes a request upon filing, 
        certifying that the invention disclosed in the 
        application has not and will not be the subject of an 
        application filed in another country, or under a 
        multilateral international agreement, that requires 
        publication of applications 18 months after filing, the 
        application shall not be published as provided in 
        paragraph (1).
            (ii) An applicant may rescind a request made under 
        clause (i) at any time.
            (iii) An applicant who has made a request under 
        clause (i) but who subsequently files, in a foreign 
        country or under a multilateral international agreement 
        specified in clause (i), an application directed to the 
        invention disclosed in the application filed in the 
        Patent and Trademark Office, shall notify the Director 
        of such filing not later than 45 days after the date of 
        the filing of such foreign or international 
        application. A failure of the applicant to provide such 
        notice within the prescribed period shall result in the 
        application being regarded as abandoned, unless it is 
        shown to the satisfaction of the Director that the 
        delay in submitting the notice was unintentional.
            (iv) If an applicant rescinds a request made under 
        clause (i) or notifies the Director that an application 
        was filed in a foreign country or under a multilateral 
        international agreement specified in clause (i), the 
        application shall be published in accordance with the 
        provisions of paragraph (1) on or as soon as is 
        practical after the date that is specified in clause 
        (i).
            (v) If an applicant has filed applications in one 
        or more foreign countries, directly or through a 
        multilateral international agreement, and such foreign 
        filed applications corresponding to an application 
        filed in the Patent and Trademark Office or the 
        description of the invention in such foreign filed 
        applications is less extensive than the application or 
        description of the invention in the application filed 
        in the Patent and Trademark Office, the applicant may 
        submit a redacted copy of the application filed in the 
        Patent and Trademark Office eliminating any part or 
        description of the invention in such application that 
        is not also contained in any of the corresponding 
        applications filed in a foreign country. The Director 
        may only publish the redacted copy of the application 
        unless the redacted copy of the application is not 
        received within 16 months after the earliest effective 
        filing date for which a benefit is sought under this 
        title. The provisions of section 154(d) shall not apply 
        to a claim if the description of the invention 
        published in the redacted application filed under this 
        clause with respect to the claim does not enable a 
        person skilled in the art to make and use the subject 
        matter of the claim.
    (c) Protest and Pre-Issuance Opposition.--The Director 
shall establish appropriate procedures to ensure that no 
protest or other form of pre-issuance opposition to the grant 
of a patent on an application may be initiated after 
publication of the application without the express written 
consent of the applicant.
    (d) National Security.--No application for patent shall be 
published under subsection (b)(1) if the publication or 
disclosure of such invention would be detrimental to the 
national security. The Director shall establish appropriate 
procedures to ensure that such applications are promptly 
identified and the secrecy of such inventions is maintained in 
accordance with chapter 17.
    (e) Preissuance Submissions by Third Parties.--
            (1) In general.--Any third party may submit for 
        consideration and inclusion in the record of a patent 
        application, any patent, published patent application, 
        or other printed publication of potential relevance to 
        the examination of the application, if such submission 
        is made in writing before the earlier of--
                    (A) the date a notice of allowance under 
                section 151 is given or mailed in the 
                application for patent; or
                    (B) the later of--
                            (i) 6 months after the date on 
                        which the application for patent is 
                        first published under section 122 by 
                        the Office, or
                            (ii) the date of the first 
                        rejection under section 132 of any 
                        claim by the examiner during the 
                        examination of the application for 
                        patent.
            (2) Other requirements.--Any submission under 
        paragraph (1) shall--
                    (A) set forth a concise description of the 
                asserted relevance of each submitted document;
                    (B) be accompanied by such fee as the 
                Director may prescribe; and
                    (C) include a statement by the person 
                making such submission affirming that the 
                submission was made in compliance with this 
                section.
    (f) Foreign or International Filing.--
            (1) Provision of information.--The Director may 
        provide information concerning an application for 
        patent to a foreign or international intellectual 
        property office if a corresponding application is filed 
        with such foreign or international intellectual 
        property office. If the corresponding application is an 
        international application, such information may also be 
        provided to an International Searching Authority, an 
        International Preliminary Examining Authority, or the 
        International Bureau.
            (2) Definitions.--For purposes of this subsection, 
        the terms ``international application'', 
        ``International Searching Authority'', ``International 
        Preliminary Examining Authority'', and ``International 
        Bureau'' have the same meaning given those terms under 
        section 351.

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CHAPTER 14--ISSUE OF PATENT

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

    (a) In General.--
            (1) Contents.--Every patent shall contain a short 
        title of the invention and a grant to the patentee, his 
        heirs or assigns, of the right to exclude others from 
        making, using, offering for sale, or selling the 
        invention throughout the United States or importing the 
        invention into the United States, and, if the invention 
        is a process, of the right to exclude others from 
        using, offering for sale or selling throughout the 
        United States, or importing into the United States, 
        products made by that process, referring to the 
        specification for the particulars thereof.
            (2) Term.--Subject to the payment of fees under 
        this title, such grant shall be for a term beginning on 
        the date on which the patent issues and ending 20 years 
        from the date on which the application for the patent 
        was filed in the United States or, if the application 
        contains a specific reference to an earlier filed 
        application or applications under section 120, 121, or 
        365(c), from the date on which the earliest such 
        application was filed.
            (3) Priority.--Priority under section 119, 365(a), 
        or 365(b) shall not be taken into account in 
        determining the term of a patent.
            (4) Specification and drawing.--A copy of the 
        specification and drawing shall be annexed to the 
        patent and be a part of such patent.
    (b) Adjustment of Patent Term.--
            (1) Patent term guarantees.--
                    (A) Guarantee of prompt patent and 
                trademark office responses.--Subject to the 
                limitations under paragraph (2), if the issue 
                of an original patent is delayed due to the 
                failure of the Patent and Trademark Office to--
                            (i) provide at least one of the 
                        notifications under section 132 or a 
                        notice of allowance under section 151 
                        not later than 14 months after--
                                    (I) the date on which an 
                                application was filed under 
                                section 111(a); or
                                    (II) the date of 
                                commencement of the national 
                                stage under section 371 in an 
                                international application;
                            (ii) respond to a reply under 
                        section 132, or to an appeal taken 
                        under section 134, within 4 months 
                        after the date on which the reply was 
                        filed or the appeal was taken;
                            (iii) act on an application within 
                        4 months after the date of a decision 
                        by the Patent Trial and Appeal Board 
                        under section 134 or 135 or a decision 
                        by a Federal court under section 141, 
                        145, or 146 in a case in which 
                        allowable claims remain in the 
                        application; or
                            (iv) issue a patent within 4 months 
                        after the date on which the issue fee 
                        was paid under section 151 and all 
                        outstanding requirements were 
                        satisfied,
                the term of the patent shall be extended 1 day 
                for each day after the end of the period 
                specified in clause (i), (ii), (iii), or (iv), 
                as the case may be, until the action described 
                in such clause is taken.
                    (B) Guarantee of no more than 3-year 
                application pendency.--Subject to the 
                limitations under paragraph (2), if the issue 
                of an original patent is delayed due to the 
                failure of the United States Patent and 
                Trademark Office to issue a patent within 3 
                years after the actual filing date of the 
                application 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--
                            (i) any time consumed by continued 
                        examination of the application 
                        requested by the applicant under 
                        section 132(b);
                            (ii) any time consumed by a 
                        proceeding under section 135(a), any 
                        time consumed by the imposition of an 
                        order under section 181, or any time 
                        consumed by appellate review by the 
                        Patent Trial and Appeal Board or by a 
                        Federal court; or
                            (iii) any delay in the processing 
                        of the application by the United States 
                        Patent and Trademark Office requested 
                        by the applicant except as permitted by 
                        paragraph (3)(C),
                the term of the patent shall be extended 1 day 
                for each day after the end of that 3-year 
                period until the patent is issued.
                    (C) Guarantee of adjustments for delays due 
                to derivation proceedings, secrecy orders, and 
                appeals.--Subject to the limitations under 
                paragraph (2), if the issue of an original 
                patent is delayed due to--
                            (i) a proceeding under section 
                        135(a);
                            (ii) the imposition of an order 
                        under section 181; or
                            (iii) appellate review by the 
                        Patent Trial and Appeal Board or by a 
                        Federal court in a case in which the 
                        patent was issued under a decision in 
                        the review reversing an adverse 
                        determination of patentability,
                the term of the patent shall be extended 1 day 
                for each day of the pendency of the proceeding, 
                order, or review, as the case may be.
            (2) Limitations.--
                    (A) In general.--To the extent that periods 
                of delay attributable to grounds specified in 
                paragraph (1) overlap, the period of any 
                adjustment granted under this subsection shall 
                not exceed the actual number of days the 
                issuance of the patent was delayed.
                    (B) Disclaimed term.--No patent the term of 
                which has been disclaimed beyond a specified 
                date may be adjusted under this section beyond 
                the expiration date specified in the 
                disclaimer.
                    (C) Reduction of period of adjustment.--
                            (i) The period of adjustment of the 
                        term of a patent under paragraph (1) 
                        shall be reduced by a period equal to 
                        the period of time during which the 
                        applicant failed to engage in 
                        reasonable efforts to conclude 
                        prosecution of the application.
                            (ii) With respect to adjustments to 
                        patent term made under the authority of 
                        paragraph (1)(B), an applicant shall be 
                        deemed to have failed to engage in 
                        reasonable efforts to conclude 
                        processing or examination of an 
                        application for the cumulative total of 
                        any periods of time in excess of 3 
                        months that are taken to respond to a 
                        notice from the Office making any 
                        rejection, objection, argument, or 
                        other request, measuring such 3-month 
                        period from the date the notice was 
                        given or mailed to the applicant.
                            (iii) The Director shall prescribe 
                        regulations establishing the 
                        circumstances that constitute a failure 
                        of an applicant to engage in reasonable 
                        efforts to conclude processing or 
                        examination of an application.
                    (D) Patents subject to election.--If a 
                patent is subject to an election as described 
                in section 102(e)(2) with respect to one or 
                more other patents, the adjusted term of the 
                patent under this subsection may not exceed a 
                period of 17 years from the date of issuance of 
                any of such other patents and the portion of 
                any adjustment of the term of the patent under 
                this subsection that extends beyond the 
                expiration of such 17-year period years shall 
                be void.
            (3) Procedures for patent term adjustment 
        determination.--
                    (A) The Director shall prescribe 
                regulations establishing procedures for the 
                application for and determination of patent 
                term adjustments under this subsection.
                    (B) Under the procedures established under 
                subparagraph (A), the Director shall--
                            (i) make a determination of the 
                        period of any patent term adjustment 
                        under this subsection, and shall 
                        transmit a notice of that determination 
                        no later than the date of issuance of 
                        the patent; and
                            (ii) provide the applicant one 
                        opportunity to request reconsideration 
                        of any patent term adjustment 
                        determination made by the Director.
                    (C) The Director shall reinstate all or 
                part of the cumulative period of time of an 
                adjustment under paragraph (2)(C) if the 
                applicant, prior to the issuance of the patent, 
                makes a showing that, in spite of all due care, 
                the applicant was unable to respond within the 
                3-month period, but in no case shall more than 
                three additional months for each such response 
                beyond the original 3-month period be 
                reinstated.
                    (D) The Director shall proceed to grant the 
                patent after completion of the Director's 
                determination of a patent term adjustment under 
                the procedures established under this 
                subsection, notwithstanding any appeal taken by 
                the applicant of such determination.
            (4) Appeal of patent term adjustment 
        determination.--
                    (A) An applicant dissatisfied with the 
                Director's decision on the applicant's request 
                for reconsideration under paragraph (3)(B)(ii) 
                shall have exclusive remedy by a civil action 
                against the Director filed in the United States 
                District Court for the Eastern District of 
                Virginia within 180 days after the date of the 
                Director's decision on the applicant's request 
                for reconsideration. Chapter 7 of title 5 shall 
                apply to such action. Any final judgment 
                resulting in a change to the period of 
                adjustment of the patent term shall be served 
                on the Director, and the Director shall 
                thereafter alter the term of the patent to 
                reflect such change.
                    (B) The determination of a patent term 
                adjustment under this subsection shall not be 
                subject to appeal or challenge by a third party 
                prior to the grant of the patent.
    (c) Continuation.--
            (1) Determination.--The term of a patent that is in 
        force on or that results from an application filed 
        before the date that is 6 months after the date of the 
        enactment of the Uruguay Round Agreements Act shall be 
        the greater of the 20-year term as provided in 
        subsection (a), or 17 years from grant, subject to any 
        terminal disclaimers.
            (2) Remedies.--The remedies of sections 283, 284, 
        and 285 shall not apply to acts which--
                    (A) were commenced or for which substantial 
                investment was made before the date that is 6 
                months after the date of the enactment of the 
                Uruguay Round Agreements Act; and
                    (B) became infringing by reason of 
                paragraph (1).
            (3) Remuneration.--The acts referred to in 
        paragraph (2) may be continued only upon the payment of 
        an equitable remuneration to the patentee that is 
        determined in an action brought under chapter 28 and 
        chapter 29 (other than those provisions excluded by 
        paragraph (2)).
    (d) Provisional Rights.--.--
            (1) In general.--In addition to other rights 
        provided by this section, a patent shall include the 
        right to obtain a reasonable royalty from any person 
        who, during the period beginning on the date of 
        publication of the application for such patent under 
        section 122(b), or in the case of an international 
        application filed under the treaty defined in section 
        351(a) designating the United States under Article 
        21(2)(a) of such treaty, the date of publication of the 
        application, and ending on the date the patent is 
        issued--
                    (A)(i) makes, uses, offers for sale, or 
                sells in the United States the invention as 
                claimed in the published patent application or 
                imports such an invention into the United 
                States; or
                    (ii) if the invention as claimed in the 
                published patent application is a process, 
                uses, offers for sale, or sells in the United 
                States or imports into the United States 
                products made by that process as claimed in the 
                published patent application; and
                    (B) had actual notice of the published 
                patent application and, in a case in which the 
                right arising under this paragraph is based 
                upon an international application designating 
                the United States that is published in a 
                language other than English, had a translation 
                of the international application into the 
                English language.
            (2) Right based on substantially identical 
        inventions.--The right under paragraph (1) to obtain a 
        reasonable royalty shall not be available under this 
        subsection unless the invention as claimed in the 
        patent is substantially identical to the invention as 
        claimed in the published patent application.
            (3) Time limitation on obtaining a reasonable 
        royalty.--The right under paragraph (1) to obtain a 
        reasonable royalty shall be available only in an action 
        brought not later than 6 years after the patent is 
        issued. The right under paragraph (1) to obtain a 
        reasonable royalty shall not be affected by the 
        duration of the period described in paragraph (1).
            (4) Requirements for international applications.--
                    (A) Effective date.--The right under 
                paragraph (1) to obtain a reasonable royalty 
                based upon the publication under the treaty 
                defined in section 351(a) of an international 
                application designating the United States shall 
                commence on the date of publication under the 
                treaty of the international application, or, if 
                the publication under the treaty of the 
                international application is in a language 
                other than English, on the date on which the 
                Patent and Trademark Office receives a 
                translation of the publication in the English 
                language.
                    (B) Copies.--The Director may require the 
                applicant to provide a copy of the 
                international application and a translation 
                thereof.

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PART III--PATENTS AND PROTECTION OF PATENT RIGHTS

           *       *       *       *       *       *       *


CHAPTER 28--INFRINGEMENT OF PATENTS

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

    (a) In General.--A person shall be entitled to a defense 
under section 282(b) with respect to subject matter consisting 
of a process, or consisting of a machine, manufacture, or 
composition of matter used in a manufacturing or other 
commercial process, that would otherwise infringe a claimed 
invention being asserted against the person if--
            (1) such person, acting in good faith, commercially 
        used the subject matter in the United States, either in 
        connection with an internal commercial use or an actual 
        arm's length sale or other arm's length commercial 
        transfer of a useful end result of such commercial use; 
        and
            (2) such commercial use occurred at least 1 year 
        before the earlier of either--
                    (A) the effective filing date of the 
                claimed invention; or
                    (B) the date on which the claimed invention 
                was disclosed to the public in a manner that 
                qualified for the exception from prior art 
                under section 102(b).
    (b) Burden of Proof.--A person asserting a defense under 
this section shall have the burden of establishing the defense 
by clear and convincing evidence.
    (c) Additional Commercial Uses.--
            (1) Premarketing regulatory review.--Subject matter 
        for which commercial marketing or use is subject to a 
        premarketing regulatory review period during which the 
        safety or efficacy of the subject matter is 
        established, including any period specified in section 
        156(g), shall be deemed to be commercially used for 
        purposes of subsection (a)(1) during such regulatory 
        review period.
            (2) Nonprofit laboratory use.--A use of subject 
        matter by a nonprofit research laboratory or other 
        nonprofit entity, such as a university or hospital, for 
        which the public is the intended beneficiary, shall be 
        deemed to be a commercial use for purposes of 
        subsection (a)(1), except that a defense under this 
        section may be asserted pursuant to this paragraph only 
        for continued and noncommercial use by and in the 
        laboratory or other nonprofit entity.
    (d) Exhaustion of Rights.--Notwithstanding subsection 
(e)(1), the sale or other disposition of a useful end result by 
a person entitled to assert a defense under this section in 
connection with a patent with respect to that useful end result 
shall exhaust the patent owner's rights under the patent to the 
extent that such rights would have been exhausted had such sale 
or other disposition been made by the patent owner.
    (e) Limitations and Exceptions.--
            (1) Personal defense.--
                    (A) In general.--A defense under this 
                section may be asserted only by the person who 
                performed or directed the performance of the 
                commercial use described in subsection (a), or 
                by an entity that controls, is controlled by, 
                or is under common control with such person.
                    (B) Transfer of right.--Except for any 
                transfer to the patent owner, the right to 
                assert a defense under this section shall not 
                be licensed or assigned or transferred to 
                another person except as an ancillary and 
                subordinate part of a good-faith assignment or 
                transfer for other reasons of the entire 
                enterprise or line of business to which the 
                defense relates.
                    (C) Restriction on sites.--A defense under 
                this section, when acquired by a person as part 
                of an assignment or transfer described in 
                subparagraph (B), may only be asserted for uses 
                at sites where the subject matter that would 
                otherwise infringe a claimed invention is in 
                use before the later of the effective filing 
                date of the claimed invention or the date of 
                the assignment or transfer of such enterprise 
                or line of business.
            (2) Derivation.--A person may not assert a defense 
        under this section if the subject matter on which the 
        defense is based was derived from the patentee or 
        persons in privity with the patentee.
            (3) Not a general license.--The defense asserted by 
        a person under this section is not a general license 
        under all claims of the patent at issue, but extends 
        only to the specific subject matter for which it has 
        been established that a commercial use that qualifies 
        under this section occurred, except that the defense 
        shall also extend to variations in the quantity or 
        volume of use of the claimed subject matter, and to 
        improvements in the claimed subject matter that do not 
        infringe additional specifically claimed subject matter 
        of the patent.
            (4) Abandonment of use.--A person who has abandoned 
        commercial use (that qualifies under this section) of 
        subject matter may not rely on activities performed 
        before the date of such abandonment in establishing a 
        defense under this section with respect to actions 
        taken on or after the date of such abandonment.
            (5) University exception.--
                    (A) In general.--A person commercially 
                using subject matter to which subsection (a) 
                applies may not assert a defense under this 
                section if the claimed invention with respect 
                to which the defense is asserted was, at the 
                time the invention was made, owned or subject 
                to an obligation of assignment to either an 
                institution of higher education (as defined in 
                section 101(a) of the Higher Education Act of 
                1965 (20 U.S.C. 1001(a)), or a technology 
                transfer organization whose primary purpose is 
                to facilitate the commercialization of 
                technologies developed by one or more such 
                institutions of higher education.
                    (B) Exception.--Subparagraph (A) shall not 
                apply if any of the activities required to 
                reduce to practice the subject matter of the 
                claimed invention could not have been 
                undertaken using funds provided by the Federal 
                Government.
    [(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.]

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

Sec.
281. Remedy for infringement of patent.
281A. Pleading requirements for patent infringement actions.
281B. Stay of discovery pending a preliminary motion.
     * * * * * * *
[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.

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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 all claims necessary to 
        produce the identification (under paragraph (3)) of 
        each process, machine, manufacture, or composition of 
        matter (referred to in this section as an `accused 
        instrumentality') that is alleged to infringe any claim 
        of each patent that is identified under paragraph (1).
            (3) For each claim identified under paragraph (2), 
        an identification of each 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 (or a 
                representative 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.
    (b) Information Not Readily Accessible.--If information 
required to be disclosed under subsection (a) is not readily 
accessible to a party after an inquiry reasonable under the 
circumstances, as required by Rule 11 of the Federal Rules of 
Civil Procedure, 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) Amendment of Pleadings.--Nothing in this section shall 
be construed to affect a party's ability to amend pleadings as 
specified in the Federal Rules of Civil Procedure. Amendments 
permitted by the court are subject to the pleading requirements 
set forth in this section.
    (d) 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.
    (e) 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. 281B. Stay of discovery pending a preliminary motion.

    (a) In General.--Except as provided in subsection (d), in 
an action for patent infringement under section 271 or an 
action for a declaratory judgement that a patent is invalid or 
not infringed, discovery shall be stayed if--
            (1) the defendant moves to--
                    (A) sever a claim or drop a party for 
                misjoinder under Rule 21 of the Federal Rules 
                of Civil Procedure;
                    (B) transfer the action under section 
                1404(a) of title 28;
                    (C) transfer or dismiss the action under 
                section 1406(a) of title 28; or
                    (D) dismiss the action pursuant to Federal 
                Rule of Civil Procedure 12(b); and
            (2) such motion is filed within 90 days after 
        service of the complaint and includes a declaration or 
        other evidence in support of the motion.
    (b) Expiration of Stay.--A stay entered under subsection 
(a) shall expire when all motions that are the basis for the 
stay are decided by the court.
    (c) Priority of Decision.--In an action described in 
subsection (a), the court shall decide a motion to sever a 
claim or drop a party for misjoinder under Rule 21 of the 
Federal Rules of Civil Procedure, to transfer under section 
1404(a) to title 28, to transfer or dismiss under 1406(a) of 
title 28, or to dismiss the action pursuant to Federal Rule of 
Civil Procedure 12(b) before the earlier of the date on which 
the court--
            (1) decides any other substantive motion, provided 
        however that the court may decide a question of its own 
        jurisdiction at any time; or
            (2) issues a scheduling order under Rule 16(b) of 
        the Federal Rules of Civil Procedure.
    (d) Exception.--
            (1) Discovery necessary to decide motion.--
        Notwithstanding subsection (a), the court may allow 
        such discovery as the court determines to be necessary 
        to decide a motion to sever, drop a party, dismiss, or 
        transfer.
            (2) Competitive harm.--Subsections (a) and (c) 
        shall not apply to an action in which the patentee is 
        granted a preliminary injunction to prevent harm 
        arising from the manufacture, use, sale, offer for 
        sale, or importation of an allegedly infringing product 
        or process that competes with a product or process 
        made, sold, or offered for sale by the patentee.
            (3) Consent of the parties.--The patentee and an 
        opposing party shall be excluded, in whole or in part, 
        from the limitations of subsections (a) and (c) upon 
        such parties' filing with the court a signed 
        stipulation agreeing to such exclusion.
            (4) FDA and biological product application.--
        Subsections (a) and (c) shall not apply to an action 
        that includes a cause of action described under section 
        271(e)(2).

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Sec. 284. Damages

     [Upon finding] (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.
      [When the damages] (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, identifies the ultimate parent 
entity of the claimant, 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.
      [The court] (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 who 
asserts a claim for relief arising under any Act of Congress 
relating to patents against another party, and who subsequently 
unilaterally (i) seeks dismissal of the action without consent 
of the other party and (ii) extends to such other party a 
covenant not to sue for infringement with respect to the patent 
or patents at issue, may be the subject of a motion for 
attorneys fees under subsection (a) as if it were a non-
prevailing party, unless the party asserting such claim would 
have been entitled, at the time that such covenant was 
extended, to dismiss voluntarily the action without a court 
order under Rule 41 of the Federal Rules of Civil Procedure, or 
the interests of justice require otherwise.

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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).
                    (E) A clear and concise description of the 
                principal business, if any, of the party 
                alleging infringement.
                    (F) A list of each complaint filed, of 
                which the party alleging infringement has 
                knowledge, that asserts or asserted any of the 
                patents identified under subparagraph (A).
                    (G) For each patent identified under 
                subparagraph (A), 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.
            (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) In General.--The owner of a patent may have relief by 
civil action against the owner of another patent that claims 
the same invention and has an earlier effective filing date, if 
the invention claimed in such other patent was derived from the 
inventor of the invention claimed in the patent owned by the 
person seeking relief under this section.
    (b) Filing Limitation.--An action under this section may 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.

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[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) Definitions.--In this section:
            (1) Covered customer.--The term ``covered 
        customer'' means a retailer or end user that is accused 
        of infringing a patent or patents in dispute based on--
                    (A) the sale, or offer for sale, of a 
                covered product or covered process without 
                material modification of the product or process 
                in a manner that is alleged to infringe a 
                patent or patents in dispute; or
                    (B) the use by such retailer, the 
                retailer's end user customer, or an end user of 
                a covered product or covered process without 
                material modification of the product or process 
                in a manner that is alleged to infringe a 
                patent or patents in dispute.
            (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 covered process, or a relevant part 
        thereof.
            (3) Covered process.--The term ``covered process'' 
        means a process, method, or a relevant part thereof, 
        that is alleged to infringe a patent or patents in 
        dispute where such process, method, or relevant part 
        thereof is implemented by an apparatus, material, 
        system, software, or other instrumentality that is 
        provided by the covered manufacturer.
            (4) Covered product.--The term ``covered product'' 
        means a product, system, service, component, material, 
        or apparatus, or relevant part thereof, that--
                    (A) is alleged to infringe a patent or 
                patents in dispute; or
                    (B) implements a process alleged to 
                infringe the patent or patents in dispute.
            (5) End user.--The term ``end user'' includes an 
        affiliate of an end user, but does not include an 
        entity that manufacturers or causes the manufacture of 
        a covered product or covered process, or a relevant 
        part thereof.
            (6) Retailer.--The term ``retailer'' means an 
        entity that generates revenues predominately through 
        the sale to the public of consumer goods or services, 
        or an affiliate of such entity, but does not include an 
        entity that manufacturers or causes the manufacturer of 
        a covered product or covered process, or a relevant 
        part thereof.
    (b) Stay of Action Against Customer.--Except as provided in 
subsection (d), in any civil action in which a party asserts a 
claim for relief 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 covered 
process if the following requirements are met:
            (1) Party to the action.--The covered manufacturer 
        is a party to the action or to a separate action (in 
        which a party asserts a claim for relief arising under 
        any Act of Congress relating to patents) involving the 
        same patent or patents related to the same covered 
        product or covered process.
            (2) Agreement to be bound by issues determined.--
        The covered customer agrees to be bound as to issues 
        determined in an action described in paragraph (1) 
        without a full and fair opportunity to separately 
        litigate any such issue, but only as to those issues 
        for which all other elements of the common law doctrine 
        of issue preclusion are met.
            (3) Deadline to file motion.--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 or paper in the action is 
                served that specifically identifies the covered 
                product or covered process as a basis for the 
                covered customer's alleged infringement of the 
                patent and that specifically identifies how the 
                covered product or covered process is alleged 
                to infringe the patent; or
                    (B) the date on which the first scheduling 
                order in the case is entered.
            (4) Manufacturer consent in certain cases.--In a 
        case in which the covered manufacturer has been made a 
        party to the action on motion by the covered customer, 
        the covered manufacturer and the covered customer 
        consent in writing to the stay.
    (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 
                the suit against the covered customer (such as 
                a covered product or covered process identified 
                in the motion to lift the stay is not a 
                material part of the claimed invention or 
                inventions in the patent or patents in 
                dispute); or
                    (B) the stay unreasonably prejudices or 
                would be manifestly unjust to the party seeking 
                to lift the stay.
            (2) Separate manufacturer action involved.--In the 
        case of a stay entered under this section based on the 
        participation of the covered manufacturer in a separate 
        action described in subsection (b)(1), a motion under 
        paragraph (1) may only be granted if the court in such 
        separate action determines that the showing required 
        under paragraph (1) has been made.
    (d) Exemption.--This section shall not apply to an action 
that includes a cause of action described under section 
271(e)(2).
    (e) Waiver of Estoppel Effect.--The court may, upon motion, 
determine that a consent judgment or an unappealed final order 
shall not be binding on the covered customer with respect to 
one or more of the issues that gave rise to the stay based on a 
showing that such consent judgment or unappealed final order 
would unreasonably prejudice or be manifestly unjust to the 
covered customer in light of the circumstances of the case if, 
following the grant of a motion to stay under this section, the 
covered manufacturer described in subsection (b)(1)--
            (1) obtains or consents to entry of a consent 
        judgment relating to such issue that gave rise to the 
        stay; or
            (2) fails to prosecute to a final, non-appealable 
        judgment such issue that gave rise to the stay.
    (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.

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Sec. 299. Joinder of parties

    (a) Joinder of Accused Infringers.--With respect to any 
civil action arising under any Act of Congress relating to 
patents, other than an action or trial in which an act of 
infringement under section 271(e)(2) has been pled, parties 
that are accused infringers may be joined in one action as 
defendants or counterclaim defendants, or have their actions 
consolidated for trial, only if--
            (1) any right to relief is asserted against the 
        parties jointly, severally, or in the alternative with 
        respect to or arising out of the same transaction, 
        occurrence, or series of transactions or occurrences 
        relating to the making, using, importing into the 
        United States, offering for sale, or selling of the 
        same accused product or process; and
            (2) questions of fact common to all defendants or 
        counterclaim defendants will arise in the action.
    (b) Allegations Insufficient for Joinder.--For purposes of 
this subsection, accused infringers may not be joined in one 
action as defendants or counterclaim defendants, or have their 
actions consolidated for trial, based solely on allegations 
that they each have infringed the patent or patents in suit.
    (c) Waiver.--A party that is an accused infringer may waive 
the limitations set forth in this section with respect to that 
party.
    (d) Joinder of Interested Parties.--
            (1) Joinder.--Except as otherwise provided under 
        this subsection, 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 
        expiration of the time period during which a 
        certification under paragraph (4)(B) is required to be 
        filed, that the interested party has been identified in 
        the initial disclosure under section 290(b) 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) Additional requirements for joinder.--
                    (A) Initial statement.--This subsection 
                shall not apply to an action unless a party 
                defending against an allegation of infringement 
                of a patent claim files, not later than 14 days 
                before the date on which a scheduling 
                conference is held or the date on which a 
                scheduling order is due under Rule 16(b) of the 
                Federal Rules of Civil Procedure, a statement 
                that such party holds a good faith belief, 
                based on publicly available information and any 
                other information known to such party, that the 
                party alleging infringement has no substantial 
                interest in the subject matter at issue other 
                than asserting the patent in litigation.
                    (B) Certification.--This subsection shall 
                not apply to an action if the party alleging 
                infringement files, not later than 45 days 
                after the date on which such party is served 
                with the initial statement described under 
                subparagraph (A), a certification that--
                            (i) establishes and certifies to 
                        the court, under oath, that such party 
                        will have sufficient funds available to 
                        satisfy any award of reasonable 
                        attorney's fees and expenses under 
                        section 285 if an award is assessed;
                            (ii) demonstrates that such party 
                        has a substantial interest in the 
                        subject matter at issue other than 
                        asserting the patent in litigation; or
                            (iii) is made under oath that there 
                        are no other interested parties.
            (5) Exception for university technology transfer 
        organizations.--This subsection shall not apply to a 
        technology transfer organization whose primary purpose 
        is to facilitate the commercialization of technologies 
        developed by one or more institutions of higher 
        education (as defined in section 101(a) of the Higher 
        Education Act of 1965 (20 U.S.C. 1001(a))) if such 
        technology transfer organization is alleging 
        infringement on behalf of an entity that would not be 
        subject to this subsection.
            (6) 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 employee of the party 
                        alleging infringement--
                                    (I) whose principal source 
                                of income or employment is 
                                employment with the party 
                                alleging infringement; or
                                    (II) whose sole financial 
                                interest in the patent or 
                                patents at issue is a salary or 
                                hourly wage paid by the party 
                                alleging infringement;
                            (ii) 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
                            (iii) a person whose sole financial 
                        interest in the patent or patents at 
                        issue is ownership of an equity or 
                        security interest in the party alleging 
                        infringement, unless such person also 
                        has the right or ability to direct or 
                        control (membership on the board of 
                        directors alone is not sufficient to 
                        demonstrate such right or ability) the 
                        civil action.
            (7) Substantial interest.--In this subsection, the 
        term ``substantial interest'' includes an interest in 
        the subject matter of a patent at issue if the party--
                    (A) invented the subject matter; or
                    (B) commercially practices or implements, 
                made substantial preparations directed 
                particularly to commercially practicing or 
                implementing, or is engaged in research and 
                development in, technology in the field of the 
                subject matter.

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CHAPTER 31--INTER PARTES REVIEW

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Sec. 313. Preliminary response to petition

    If an inter partes review petition is filed under section 
311, the patent owner shall have the right to file a 
preliminary response to the petition, within a time period set 
by the Director, that sets forth reasons why no inter partes 
review should be instituted based upon the failure of the 
petition to meet any requirement of this chapter[.], including 
affidavits or declarations of supporting evidence and opinions. 
The Director may accept a reply by the petitioner to new issues 
raised in the preliminary response, upon request by the 
petitioner to file such reply, within a time period set by the 
Director.

Sec. 314. Institution of inter partes review

    (a) Threshold.--The Director may not authorize an inter 
partes review to be instituted unless the Director determines 
that the information presented in the petition filed under 
section 311 and [any response] any response or reply filed 
under section 313 shows that there is a reasonable likelihood 
that the petitioner would prevail with respect to at least 1 of 
the claims challenged in the petition.
    (b) Timing.--The Director shall determine whether to 
institute an inter partes review under this chapter pursuant to 
a petition filed under section 311 within 3 months after--
            (1) [receiving a preliminary response to the 
        petition] receiving the later of a preliminary response 
        to the petition or a reply to such preliminary response 
        under section 313; or
            [(2) if no such preliminary response is filed, the 
        last date on which such response may be filed.]
            (2) if--
                    (A) no such preliminary response is filed, 
                the last date on which such response may be 
                filed; and
                    (B) such preliminary response is filed and 
                no such reply is requested, the last day on 
                which such reply may be requested.
    (c) Notice.--The Director shall notify the petitioner and 
patent owner, in writing, of the Director's determination under 
subsection (a), and shall make such notice available to the 
public as soon as is practicable. Such notice shall include the 
date on which the review shall commence.
    (d) No Appeal.--The determination by the Director whether 
to institute an inter partes review under this section shall be 
final and nonappealable.

Sec. 315. Relation to other proceedings or actions

    (a) Infringer's Civil Action.--
            (1) Inter partes review barred by civil action.--An 
        inter partes review may not be instituted if, before 
        the date on which the petition for such a review is 
        filed, the petitioner or real party in interest filed a 
        civil action challenging the validity of a claim of the 
        patent.
            (2) Stay of civil action.--If the petitioner or 
        real party in interest files a civil action challenging 
        the validity of a claim of the patent on or after the 
        date on which the petitioner files a petition for inter 
        partes review of the patent, that civil action shall be 
        automatically stayed until either--
                    (A) the patent owner moves the court to 
                lift the stay;
                    (B) the patent owner files a civil action 
                or counterclaim alleging that the petitioner or 
                real party in interest has infringed the 
                patent; or
                    (C) the petitioner or real party in 
                interest moves the court to dismiss the civil 
                action.
            (3) Treatment of counterclaim.--A counterclaim 
        challenging the validity of a claim of a patent does 
        not constitute a civil action challenging the validity 
        of a claim of a patent for purposes of this subsection.
    (b) Patent Owner's Action.--An inter partes review may not 
be instituted if the petition requesting the proceeding is 
filed more than 1 year after the date on which the petitioner, 
real party in interest, or privy of the petitioner is served 
with a complaint alleging infringement of the patent. The time 
limitation set forth in the preceding sentence shall not apply 
to a request for joinder under subsection (c).
    [(c) Joinder.--If the Director institutes an inter partes 
review, the Director, in his or her discretion, may join as a 
party to that inter partes review any person who properly files 
a petition under section 311 that the Director, after receiving 
a preliminary response under section 313 or the expiration of 
the time for filing such a response, determines warrants the 
institution of an inter partes review under section 314.]
    (c) Joinder
            (1) Joinder of party If the Director institutes an 
        inter partes review, the Director, in his or her 
        discretion, may join as a party to that inter partes 
        review any person who meets the requirement of properly 
        filing a petition under section 311 that the Director, 
        after receiving a preliminary response under section 
        313 or the expiration of the time for filing such a 
        response, determines warrants the institution of an 
        inter partes review under section 314.
            (2) Joinder of later filed petition For good cause 
        shown, the Director may allow a party who files a 
        petition that meets the requirement described in 
        paragraph (1) and concerns the patent of a pending 
        inter partes review to join the petition to the pending 
        review.
    (d) Multiple Proceedings.--Notwithstanding sections 135(a), 
251, and 252, and chapter 30, during the pendency of an inter 
partes review, if another proceeding or matter involving the 
patent is before the Office, the Director may determine the 
manner in which the inter partes review or other proceeding or 
matter may proceed, including providing for stay, transfer, 
consolidation, or termination of any such matter or proceeding.
    (e) Estoppel.--
            (1) Proceedings before the office.--The petitioner 
        in an inter partes review of a claim in a patent under 
        this chapter that results in a final written decision 
        under section 318(a), or the real party in interest or 
        privy of the petitioner, may not request or maintain a 
        proceeding before the Office with respect to that claim 
        on any ground that the petitioner raised or reasonably 
        could have raised during that inter partes review.
            (2) Civil actions and other proceedings.--The 
        petitioner in an inter partes review of a claim in a 
        patent under this chapter that results in a final 
        written decision under section 318(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 inter partes review.

Sec. 316. Conduct of inter partes review

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

           *       *       *       *       *       *       *


CHAPTER 32--POST-GRANT REVIEW

           *       *       *       *       *       *       *


Sec. 323. Preliminary response to petition

    If a post-grant review petition is filed under section 321, 
the patent owner shall have the right to file a preliminary 
response to the petition, within a time period set by the 
Director, that sets forth reasons why no post-grant review 
should be instituted based upon the failure of the petition to 
meet any requirement of this chapter[.], including affidavits 
or declarations of supporting evidence and opinions.

           *       *       *       *       *       *       *


Sec. 325. Relation to other proceedings or actions

    (a) Infringer's Civil Action.--
            (1) Post-grant review barred by civil action.--A 
        post-grant review may not be instituted under this 
        chapter if, before the date on which the petition for 
        such a review is filed, the petitioner or real party in 
        interest filed a civil action challenging the validity 
        of a claim of the patent.
            (2) Stay of civil action.--If the petitioner or 
        real party in interest files a civil action challenging 
        the validity of a claim of the patent on or after the 
        date on which the petitioner files a petition for post-
        grant review of the patent, that civil action shall be 
        automatically stayed until either--
                    (A) the patent owner moves the court to 
                lift the stay;
                    (B) the patent owner files a civil action 
                or counterclaim alleging that the petitioner or 
                real party in interest has infringed the 
                patent; or
                    (C) the petitioner or real party in 
                interest moves the court to dismiss the civil 
                action.
            (3) Treatment of counterclaim.--A counterclaim 
        challenging the validity of a claim of a patent does 
        not constitute a civil action challenging the validity 
        of a claim of a patent for purposes of this subsection.
    (b) Preliminary Injunctions.--If a civil action alleging 
infringement of a patent is filed within 3 months after the 
date on which the patent is granted, the court may not stay its 
consideration of the patent owner's motion for a preliminary 
injunction against infringement of the patent on the basis that 
a petition for post-grant review has been filed under this 
chapter or that such a post-grant review has been instituted 
under this chapter.
    (c) Joinder.--If more than 1 petition for a post-grant 
review under this chapter is properly filed against the same 
patent and the Director determines that more than 1 of these 
petitions warrants the institution of a post-grant review under 
section 324, the Director may consolidate such reviews into a 
single post-grant review.
    (d) Multiple Proceedings.--Notwithstanding sections 135(a), 
251, and 252, and chapter 30, during the pendency of any post-
grant review under this chapter, if another proceeding or 
matter involving the patent is before the Office, the Director 
may determine the manner in which the post-grant review or 
other proceeding or matter may proceed, including providing for 
the stay, transfer, consolidation, or termination of any such 
matter or proceeding. In determining whether to institute or 
order a proceeding under this chapter, chapter 30, or chapter 
31, the Director may take into account whether, and reject the 
petition or request because, the same or substantially the same 
prior art or arguments previously were presented to the Office.
    (e) Estoppel.--
            (1) Proceedings before the office.--The petitioner 
        in a post-grant review 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 request or maintain a 
        proceeding before the Office with respect to that claim 
        on any ground that the petitioner raised or reasonably 
        could have raised during that post-grant review.
            (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.
    (f) Reissue Patents.--A post-grant review may not be 
instituted under this chapter if the petition requests 
cancellation of a claim in a reissue patent that is identical 
to or narrower than a claim in the original patent from which 
the reissue patent was issued, and the time limitations in 
section 321(c) would bar filing a petition for a post-grant 
review for such original patent.

Sec. 326. Conduct of post-grant review

    (a) Regulations.--The Director shall prescribe 
regulations--
            (1) providing that the file of any proceeding under 
        this chapter shall be made available to the public, 
        except that any petition or document filed with the 
        intent that it be sealed shall, if accompanied by a 
        motion to seal, be treated as sealed pending the 
        outcome of the ruling on the motion;
            (2) setting forth the standards for the showing of 
        sufficient grounds to institute a review under 
        subsections (a) and (b) of section 324;
            (3) establishing procedures for the submission of 
        supplemental information after the petition is filed;
            (4) establishing and governing a post-grant review 
        under this chapter and the relationship of such review 
        to other proceedings under this title;
            (5) setting forth standards and procedures for 
        discovery of relevant evidence, including that such 
        discovery shall be limited to evidence directly related 
        to factual assertions advanced by either party in the 
        proceeding;
            (6) prescribing sanctions for abuse of discovery, 
        abuse of process, or any other improper use of the 
        proceeding, such as to harass or to cause unnecessary 
        delay or an unnecessary increase in the cost of the 
        proceeding;
            (7) providing for protective orders governing the 
        exchange and submission of confidential information;
            (8) 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;
            (9) setting forth standards and procedures for 
        allowing the patent owner to move to amend the patent 
        under subsection (d) to cancel a challenged claim or 
        propose a reasonable number of substitute claims, and 
        ensuring that any information submitted by the patent 
        owner in support of any amendment entered under 
        subsection (d) is made available to the public as part 
        of the prosecution history of the patent;
            (10) providing either party with the right to an 
        oral hearing as part of the proceeding;
            (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[.];
            (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; and
            (14) providing that a review may not be instituted 
        unless the petitioner certifies that the petitioner and 
        the real parties in interest of the petitioner--
                    (A) do not own and will not acquire a 
                financial instrument (including a prepaid 
                variable forward contract, equity swap, collar, 
                or exchange fund) that is designed to hedge or 
                offset any decrease in the market value of an 
                equity security of the patent owner or an 
                affiliate of the patent owner, during a period 
                following the filing of the petition to be 
                determined by the Director; and
                    (B) have not demanded payment, monetary or 
                otherwise, from the patent owner or an 
                affiliate of the patent owner in exchange for a 
                commitment not to file a petition under section 
                311 with respect to the patent that is the 
                subject of the petition, unless the petitioner 
                or the real party in interest of the petitioner 
                has been sued for or charged with infringement 
                of the patent, during a period to be determined 
                by the Director.
    (b) Considerations.--In prescribing regulations under this 
section, the Director shall consider the effect of any such 
regulation on the economy, the integrity of the patent system, 
the efficient administration of the Office, [and the ability] 
the rights to due process of the patent owner and the 
petitioner, and the ability of the Office to timely complete 
proceedings instituted under this chapter.
    (c) Patent Trial and Appeal Board.--The Patent Trial and 
Appeal Board shall, in accordance with section 6, conduct each 
post-grant review instituted under this chapter.
    (d) Amendment of the Patent.--
            (1) In general.--During a post-grant review 
        instituted under this chapter, the patent owner may 
        file 1 motion to amend the patent in 1 or more of the 
        following ways:
                    (A) Cancel any challenged patent claim.
                    (B) For each challenged claim, propose a 
                reasonable number of substitute claims.
            (2) Additional motions.--Additional motions to 
        amend may be permitted upon the joint request of the 
        petitioner and the patent owner to materially advance 
        the settlement of a proceeding under section 327, or 
        upon the request of the patent owner for good cause 
        shown.
            (3) Scope of claims.--An amendment under this 
        subsection may not enlarge the scope of the claims of 
        the patent or introduce new matter.
    (e) Evidentiary Standards.--In a post-grant review 
instituted under this chapter, the petitioner shall have the 
burden of proving a proposition of unpatentability by a 
preponderance of the evidence.

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 28, UNITED STATES CODE



           *       *       *       *       *       *       *
PART IV--JURISDICTION AND VENUE

           *       *       *       *       *       *       *


CHAPTER 83--COURTS OF APPEALS

           *       *       *       *       *       *       *


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) of an appeal from a final decision of a 
        district court of the United States, the District Court 
        of Guam, the District Court of the Virgin Islands, or 
        the District Court of the Northern Mariana Islands, in 
        any civil action arising under, or in any civil action 
        in which a party has asserted a compulsory counterclaim 
        arising under, any Act of Congress relating to patents 
        or plant variety protection;
            (2) of an appeal from a final decision of a 
        district court of the United States, the United States 
        District Court for the District of the Canal Zone, the 
        District Court of Guam, the District Court of the 
        Virgin Islands, or the District Court for the Northern 
        Mariana Islands, if the jurisdiction of that court was 
        based, in whole or in part, on section 1346 of this 
        title, except that jurisdiction of an appeal in a case 
        brought in a district court under section 1346(a)(1), 
        1346(b), 1346(e), or 1346(f) of this title or under 
        section 1346(a)(2) when the claim is founded upon an 
        Act of Congress or a regulation of an executive 
        department providing for internal revenue shall be 
        governed by sections 1291, 1292, and 1294 of this 
        title;
            (3) of an appeal from a final decision of the 
        United States Court of Federal Claims;
            (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;
                    (B) the Under Secretary of Commerce for 
                Intellectual Property and Director of the 
                United States Patent and Trademark Office or 
                the Trademark Trial and Appeal Board with 
                respect to applications for registration of 
                marks and other proceedings as provided in 
                section 21 of the Trademark Act of 1946 (15 
                U.S.C. 1071); or
                    (C) a district court to which a case was 
                directed pursuant to section 145, 146, or 
                154(b) of [title 35] title 35 or section 21(b) 
                of the Act of July 5, 1946 (commonly referred 
                to as the ``Trademark Act of 1946'') (15 U.S.C. 
                1071(b));
            (5) of an appeal from a final decision of the 
        United States Court of International Trade;
            (6) to review the final determinations of the 
        United States International Trade Commission relating 
        to unfair practices in import trade, made under section 
        337 of the Tariff Act of 1930 (19 U.S.C. 1337);
            (7) to review, by appeal on questions of law only, 
        findings of the Secretary of Commerce under U.S. note 6 
        to subchapter X of chapter 98 of the Harmonized Tariff 
        Schedule of the United States (relating to importation 
        of instruments or apparatus);
            (8) of an appeal under section 71 of the Plant 
        Variety Protection Act (7 U.S.C. 2461);
            (9) of an appeal from a final order or final 
        decision of the Merit Systems Protection Board, 
        pursuant to sections 7703(b)(1) and 7703(d) of title 5;
            (10) of an appeal from a final decision of an 
        agency board of contract appeals pursuant to section 
        7107(a)(1) of title 41;
            (11) of an appeal under section 211 of the Economic 
        Stabilization Act of 1970;
            (12) of an appeal under section 5 of the Emergency 
        Petroleum Allocation Act of 1973;
            (13) of an appeal under section 506(c) of the 
        Natural Gas Policy Act of 1978; and
            (14) of an appeal under section 523 of the Energy 
        Policy and Conservation Act.
    (b) The head of any executive department or agency may, 
with the approval of the Attorney General, refer to the Court 
of Appeals for the Federal Circuit for judicial review any 
final decision rendered by a board of contract appeals pursuant 
to the terms of any contract with the United States awarded by 
that department or agency which the head of such department or 
agency has concluded is not entitled to finality pursuant to 
the review standards specified in section 7107(b) of title 41. 
The head of each executive department or agency shall make any 
referral under this section within one hundred and twenty days 
after the receipt of a copy of the final appeal decision.
    (c) The Court of Appeals for the Federal Circuit shall 
review the matter referred in accordance with the standards 
specified in section 7107(b) of title 41. The court shall 
proceed with judicial review on the administrative record made 
before the board of contract appeals on matters so referred as 
in other cases pending in such court, shall determine the issue 
of finality of the appeal decision, and shall, if appropriate, 
render judgment thereon, or remand the matter to any 
administrative or executive body or official with such 
direction as it may deem proper and just.

           *       *       *       *       *       *       *


CHAPTER 87--DISTRICT COURTS; VENUE

           *       *       *       *       *       *       *


Sec. 1400. Patents and copyrights, mask works, and designs

    (a) Civil actions, suits, or proceedings arising under any 
Act of Congress relating to copyrights or exclusive rights in 
mask works or designs may be instituted in the district in 
which the defendant or his agent resides or may be found.
    [(b) Any civil action for patent infringement may be 
brought in the judicial district where the defendant resides, 
or where the defendant has committed acts of infringement and 
has a regular and established place of business.]
    (b) Venue for Action Relating to Patents.--Notwithstanding 
subsections (b) and (c) of section 1391 of this title, any 
civil action for patent infringement or any action for a 
declaratory judgment that a patent is invalid or not infringed 
may be brought only in a judicial district--
            (1) where the defendant has its principal place of 
        business or is incorporated;
            (2) where the defendant has committed an act of 
        infringement of a patent in suit and has a regular and 
        established physical facility that gives rise to the 
        act of infringement;
            (3) where the defendant has agreed or consented to 
        be sued in the instant action;
            (4) where an inventor named on the patent in suit 
        conducted research or development that led to the 
        application for the patent in suit;
            (5) where a party has a regular and established 
        physical facility that such party controls and 
        operates, not primarily for the purpose of creating 
        venue, and has--
                    (A) engaged in management of significant 
                research and development of an invention 
                claimed in a patent in suit prior to the 
                effective filing date of the patent;
                    (B) manufactured a tangible product that is 
                alleged to embody an invention claimed in a 
                patent in suit; or
                    (C) implemented a manufacturing process for 
                a tangible good in which the process is alleged 
                to embody an invention claimed in a patent in 
                suit; or
            (6) for foreign defendants that do not meet the 
        requirements of paragraphs (1) or (2), according to 
        section 1391(d) of this title.

           *       *       *       *       *       *       *

                              ----------                              


                      TITLE 11, UNITED STATES CODE



           *       *       *       *       *       *       *
                     CHAPTER 1--GENERAL PROVISIONS

Sec. 101. Definitions

     In this title the following definitions shall apply:
            (1) The term ``accountant'' means accountant 
        authorized under applicable law to practice public 
        accounting, and includes professional accounting 
        association, corporation, or partnership, if so 
        authorized.
            (2) The term ``affiliate'' means--
                    (A) entity that directly or indirectly 
                owns, controls, or holds with power to vote, 20 
                percent or more of the outstanding voting 
                securities of the debtor, other than an entity 
                that holds such securities--
                            (i) in a fiduciary or agency 
                        capacity without sole discretionary 
                        power to vote such securities; or
                            (ii) solely to secure a debt, if 
                        such entity has not in fact exercised 
                        such power to vote;
                    (B) corporation 20 percent or more of whose 
                outstanding voting securities are directly or 
                indirectly owned, controlled, or held with 
                power to vote, by the debtor, or by an entity 
                that directly or indirectly owns, controls, or 
                holds with power to vote, 20 percent or more of 
                the outstanding voting securities of the 
                debtor, other than an entity that holds such 
                securities--
                            (i) in a fiduciary or agency 
                        capacity without sole discretionary 
                        power to vote such securities; or
                            (ii) solely to secure a debt, if 
                        such entity has not in fact exercised 
                        such power to vote;
                    (C) person whose business is operated under 
                a lease or operating agreement by a debtor, or 
                person substantially all of whose property is 
                operated under an operating agreement with the 
                debtor; or
                    (D) entity that operates the business or 
                substantially all of the property of the debtor 
                under a lease or operating agreement.
            (3) The term ``assisted person'' means any person 
        whose debts consist primarily of consumer debts and the 
        value of whose nonexempt property is less than 
        $150,000.
            (4) The term ``attorney'' means attorney, 
        professional law association, corporation, or 
        partnership, authorized under applicable law to 
        practice law.
            (4A) The term ``bankruptcy assistance'' means any 
        goods or services sold or otherwise provided to an 
        assisted person with the express or implied purpose of 
        providing information, advice, counsel, document 
        preparation, or filing, or attendance at a creditors' 
        meeting or appearing in a case or proceeding on behalf 
        of another or providing legal representation with 
        respect to a case or proceeding under this title.
            (5) The term ``claim'' means--
                    (A) right to payment, whether or not such 
                right is reduced to judgment, liquidated, 
                unliquidated, fixed, contingent, matured, 
                unmatured, disputed, undisputed, legal, 
                equitable, secured, or unsecured; or
                    (B) right to an equitable remedy for breach 
                of performance if such breach gives rise to a 
                right to payment, whether or not such right to 
                an equitable remedy is reduced to judgment, 
                fixed, contingent, matured, unmatured, 
                disputed, undisputed, secured, or unsecured.
            (6) The term ``commodity broker'' means futures 
        commission merchant, foreign futures commission 
        merchant, clearing organization, leverage transaction 
        merchant, or commodity options dealer, as defined in 
        section 761 of this title, with respect to which there 
        is a customer, as defined in section 761 of this title.
            (7) The term ``community claim'' means claim that 
        arose before the commencement of the case concerning 
        the debtor for which property of the kind specified in 
        section 541(a)(2) of this title is liable, whether or 
        not there is any such property at the time of the 
        commencement of the case.
            (7A) The term ``commercial fishing operation'' 
        means--
                    (A) the catching or harvesting of fish, 
                shrimp, lobsters, urchins, seaweed, shellfish, 
                or other aquatic species or products of such 
                species; or
                    (B) for purposes of section 109 and chapter 
                12, aquaculture activities consisting of 
                raising for market any species or product 
                described in subparagraph (A).
            (7B) The term ``commercial fishing vessel'' means a 
        vessel used by a family fisherman to carry out a 
        commercial fishing operation.
            (8) The term ``consumer debt'' means debt incurred 
        by an individual primarily for a personal, family, or 
        household purpose.
            (9) The term ``corporation''--
                    (A) includes--
                            (i) association having a power or 
                        privilege that a private corporation, 
                        but not an individual or a partnership, 
                        possesses;
                            (ii) partnership association 
                        organized under a law that makes only 
                        the capital subscribed responsible for 
                        the debts of such association;
                            (iii) joint-stock company;
                            (iv) unincorporated company or 
                        association; or
                            (v) business trust; but
                    (B) does not include limited partnership.
            (10) The term ``creditor'' means--
                    (A) entity that has a claim against the 
                debtor that arose at the time of or before the 
                order for relief concerning the debtor;
                    (B) entity that has a claim against the 
                estate of a kind specified in section 348(d), 
                502(f), 502(g), 502(h) or 502(i) of this title; 
                or
                    (C) entity that has a community claim.
            (10A) The term ``current monthly income''--
                    (A) means the average monthly income from 
                all sources that the debtor receives (or in a 
                joint case the debtor and the debtor's spouse 
                receive) without regard to whether such income 
                is taxable income, derived during the 6-month 
                period ending on--
                            (i) the last day of the calendar 
                        month immediately preceding the date of 
                        the commencement of the case if the 
                        debtor files the schedule of current 
                        income required by section 
                        521(a)(1)(B)(ii); or
                            (ii) the date on which current 
                        income is determined by the court for 
                        purposes of this title if the debtor 
                        does not file the schedule of current 
                        income required by section 
                        521(a)(1)(B)(ii); and
                    (B) includes any amount paid by any entity 
                other than the debtor (or in a joint case the 
                debtor and the debtor's spouse), on a regular 
                basis for the household expenses of the debtor 
                or the debtor's dependents (and in a joint case 
                the debtor's spouse if not otherwise a 
                dependent), but excludes benefits received 
                under the Social Security Act, payments to 
                victims of war crimes or crimes against 
                humanity on account of their status as victims 
                of such crimes, and payments to victims of 
                international terrorism (as defined in section 
                2331 of title 18) or domestic terrorism (as 
                defined in section 2331 of title 18) on account 
                of their status as victims of such terrorism.
            (11) The term ``custodian'' means--
                    (A) receiver or trustee of any of the 
                property of the debtor, appointed in a case or 
                proceeding not under this title;
                    (B) assignee under a general assignment for 
                the benefit of the debtor's creditors; or
                    (C) trustee, receiver, or agent under 
                applicable law, or under a contract, that is 
                appointed or authorized to take charge of 
                property of the debtor for the purpose of 
                enforcing a lien against such property, or for 
                the purpose of general administration of such 
                property for the benefit of the debtor's 
                creditors.
            (12) The term ``debt'' means liability on a claim.
            (12A) The term ``debt relief agency'' means any 
        person who provides any bankruptcy assistance to an 
        assisted person in return for the payment of money or 
        other valuable consideration, or who is a bankruptcy 
        petition preparer under section 110, but does not 
        include--
                    (A) any person who is an officer, director, 
                employee, or agent of a person who provides 
                such assistance or of the bankruptcy petition 
                preparer;
                    (B) a nonprofit organization that is exempt 
                from taxation under section 501(c)(3) of the 
                Internal Revenue Code of 1986;
                    (C) a creditor of such assisted person, to 
                the extent that the creditor is assisting such 
                assisted person to restructure any debt owed by 
                such assisted person to the creditor;
                    (D) a depository institution (as defined in 
                section 3 of the Federal Deposit Insurance Act) 
                or any Federal credit union or State credit 
                union (as those terms are defined in section 
                101 of the Federal Credit Union Act), or any 
                affiliate or subsidiary of such depository 
                institution or credit union; or
                    (E) an author, publisher, distributor, or 
                seller of works subject to copyright protection 
                under title 17, when acting in such capacity.
            (13) The term ``debtor'' means person or 
        municipality concerning which a case under this title 
        has been commenced.
            (13A) The term ``debtor's principal residence''--
                    (A) means a residential structure if used 
                as the principal residence by the debtor, 
                including incidental property, without regard 
                to whether that structure is attached to real 
                property; and
                    (B) includes an individual condominium or 
                cooperative unit, a mobile or manufactured 
                home, or trailer if used as the principal 
                residence by the debtor.
            (14) The term ``disinterested person'' means a 
        person that--
                    (A) is not a creditor, an equity security 
                holder, or an insider;
                    (B) is not and was not, within 2 years 
                before the date of the filing of the petition, 
                a director, officer, or employee of the debtor; 
                and
                    (C) does not have an interest materially 
                adverse to the interest of the estate or of any 
                class of creditors or equity security holders, 
                by reason of any direct or indirect 
                relationship to, connection with, or interest 
                in, the debtor, or for any other reason.
            (14A) The term ``domestic support obligation'' 
        means a debt that accrues before, on, or after the date 
        of the order for relief in a case under this title, 
        including interest that accrues on that debt as 
        provided under applicable nonbankruptcy law 
        notwithstanding any other provision of this title, that 
        is--
                    (A) owed to or recoverable by--
                            (i) a spouse, former spouse, or 
                        child of the debtor or such child's 
                        parent, legal guardian, or responsible 
                        relative; or
                            (ii) a governmental unit;
                    (B) in the nature of alimony, maintenance, 
                or support (including assistance provided by a 
                governmental unit) of such spouse, former 
                spouse, or child of the debtor or such child's 
                parent, without regard to whether such debt is 
                expressly so designated;
                    (C) established or subject to establishment 
                before, on, or after the date of the order for 
                relief in a case under this title, by reason of 
                applicable provisions of--
                            (i) a separation agreement, divorce 
                        decree, or property settlement 
                        agreement;
                            (ii) an order of a court of record; 
                        or
                            (iii) a determination made in 
                        accordance with applicable 
                        nonbankruptcy law by a governmental 
                        unit; and
                    (D) not assigned to a nongovernmental 
                entity, unless that obligation is assigned 
                voluntarily by the spouse, former spouse, child 
                of the debtor, or such child's parent, legal 
                guardian, or responsible relative for the 
                purpose of collecting the debt.
            (15) The term ``entity'' includes person, estate, 
        trust, governmental unit, and United States trustee.
            (16) The term ``equity security'' means--
                    (A) share in a corporation, whether or not 
                transferable or denominated ``stock'', or 
                similar security;
                    (B) interest of a limited partner in a 
                limited partnership; or
                    (C) warrant or right, other than a right to 
                convert, to purchase, sell, or subscribe to a 
                share, security, or interest of a kind 
                specified in subparagraph (A) or (B) of this 
                paragraph.
            (17) The term ``equity security holder'' means 
        holder of an equity security of the debtor.
            (18) The term ``family farmer'' means--
                    (A) individual or individual and spouse 
                engaged in a farming operation whose aggregate 
                debts do not exceed $3,237,000 and not less 
                than 50 percent of whose aggregate 
                noncontingent, liquidated debts (excluding a 
                debt for the principal residence of such 
                individual or such individual and spouse unless 
                such debt arises out of a farming operation), 
                on the date the case is filed, arise out of a 
                farming operation owned or operated by such 
                individual or such individual and spouse, and 
                such individual or such individual and spouse 
                receive from such farming operation more than 
                50 percent of such individual's or such 
                individual and spouse's gross income for--
                            (i) the taxable year preceding; or
                            (ii) each of the 2d and 3d taxable 
                        years preceding;
                the taxable year in which the case concerning 
                such individual or such individual and spouse 
                was filed; or
                    (B) corporation or partnership in which 
                more than 50 percent of the outstanding stock 
                or equity is held by one family, or by one 
                family and the relatives of the members of such 
                family, and such family or such relatives 
                conduct the farming operation, and
                            (i) more than 80 percent of the 
                        value of its assets consists of assets 
                        related to the farming operation;
                            (ii) its aggregate debts do not 
                        exceed $3,237,000 and not less than 50 
                        percent of its aggregate noncontingent, 
                        liquidated debts (excluding a debt for 
                        one dwelling which is owned by such 
                        corporation or partnership and which a 
                        shareholder or partner maintains as a 
                        principal residence, unless such debt 
                        arises out of a farming operation), on 
                        the date the case is filed, arise out 
                        of the farming operation owned or 
                        operated by such corporation or such 
                        partnership; and
                            (iii) if such corporation issues 
                        stock, such stock is not publicly 
                        traded.
            (19) The term ``family farmer with regular annual 
        income'' means family farmer whose annual income is 
        sufficiently stable and regular to enable such family 
        farmer to make payments under a plan under chapter 12 
        of this title.
            (19A) The term ``family fisherman'' means--
                    (A) an individual or individual and spouse 
                engaged in a commercial fishing operation--
                            (i) whose aggregate debts do not 
                        exceed $1,500,000 and not less than 80 
                        percent of whose aggregate 
                        noncontingent, liquidated debts 
                        (excluding a debt for the principal 
                        residence of such individual or such 
                        individual and spouse, unless such debt 
                        arises out of a commercial fishing 
                        operation), on the date the case is 
                        filed, arise out of a commercial 
                        fishing operation owned or operated by 
                        such individual or such individual and 
                        spouse; and
                            (ii) who receive from such 
                        commercial fishing operation more than 
                        50 percent of such individual's or such 
                        individual's and spouse's gross income 
                        for the taxable year preceding the 
                        taxable year in which the case 
                        concerning such individual or such 
                        individual and spouse was filed; or
                    (B) a corporation or partnership--
                            (i) in which more than 50 percent 
                        of the outstanding stock or equity is 
                        held by--
                                    (I) 1 family that conducts 
                                the commercial fishing 
                                operation; or
                                    (II) 1 family and the 
                                relatives of the members of 
                                such family, and such family or 
                                such relatives conduct the 
                                commercial fishing operation; 
                                and
                            (ii)(I) more than 80 percent of the 
                        value of its assets consists of assets 
                        related to the commercial fishing 
                        operation;
                            (II) its aggregate debts do not 
                        exceed $1,500,000 and not less than 80 
                        percent of its aggregate noncontingent, 
                        liquidated debts (excluding a debt for 
                        1 dwelling which is owned by such 
                        corporation or partnership and which a 
                        shareholder or partner maintains as a 
                        principal residence, unless such debt 
                        arises out of a commercial fishing 
                        operation), on the date the case is 
                        filed, arise out of a commercial 
                        fishing operation owned or operated by 
                        such corporation or such partnership; 
                        and
                            (III) if such corporation issues 
                        stock, such stock is not publicly 
                        traded.
            (19B) The term ``family fisherman with regular 
        annual income'' means a family fisherman whose annual 
        income is sufficiently stable and regular to enable 
        such family fisherman to make payments under a plan 
        under chapter 12 of this title.
            (20) The term ``farmer'' means (except when such 
        term appears in the term ``family farmer'') person that 
        received more than 80 percent of such person's gross 
        income during the taxable year of such person 
        immediately preceding the taxable year of such person 
        during which the case under this title concerning such 
        person was commenced from a farming operation owned or 
        operated by such person.
            (21) The term ``farming operation'' includes 
        farming, tillage of the soil, dairy farming, ranching, 
        production or raising of crops, poultry, or livestock, 
        and production of poultry or livestock products in an 
        unmanufactured state.
            (21A) The term ``farmout agreement'' means a 
        written agreement in which--
                    (A) the owner of a right to drill, produce, 
                or operate liquid or gaseous hydrocarbons on 
                property agrees or has agreed to transfer or 
                assign all or a part of such right to another 
                entity; and
                    (B) such other entity (either directly or 
                through its agents or its assigns), as 
                consideration, agrees to perform drilling, 
                reworking, recompleting, testing, or similar or 
                related operations, to develop or produce 
                liquid or gaseous hydrocarbons on the property.
            (21B) The term ``Federal depository institutions 
        regulatory agency'' means--
                    (A) with respect to an insured depository 
                institution (as defined in section 3(c)(2) of 
                the Federal Deposit Insurance Act) for which no 
                conservator or receiver has been appointed, the 
                appropriate Federal banking agency (as defined 
                in section 3(q) of such Act);
                    (B) with respect to an insured credit union 
                (including an insured credit union for which 
                the National Credit Union Administration has 
                been appointed conservator or liquidating 
                agent), the National Credit Union 
                Administration;
                    (C) with respect to any insured depository 
                institution for which the Resolution Trust 
                Corporation has been appointed conservator or 
                receiver, the Resolution Trust Corporation; and
                    (D) with respect to any insured depository 
                institution for which the Federal Deposit 
                Insurance Corporation has been appointed 
                conservator or receiver, the Federal Deposit 
                Insurance Corporation.
            (22) The term ``financial institution'' means--
                    (A) a Federal reserve bank, or an entity 
                that is a commercial or savings bank, 
                industrial savings bank, savings and loan 
                association, trust company, federally-insured 
                credit union, or receiver, liquidating agent, 
                or conservator for such entity and, when any 
                such Federal reserve bank, receiver, 
                liquidating agent, conservator or entity is 
                acting as agent or custodian for a customer 
                (whether or not a ``customer'', as defined in 
                section 741) in connection with a securities 
                contract (as defined in section 741) such 
                customer; or
                    (B) in connection with a securities 
                contract (as defined in section 741) an 
                investment company registered under the 
                Investment Company Act of 1940.
            (22A) The term ``financial participant'' means--
                    (A) an entity that, at the time it enters 
                into a securities contract, commodity contract, 
                swap agreement, repurchase agreement, or 
                forward contract, or at the time of the date of 
                the filing of the petition, has one or more 
                agreements or transactions described in 
                paragraph (1), (2), (3), (4), (5), or (6) of 
                section 561(a) with the debtor or any other 
                entity (other than an affiliate) of a total 
                gross dollar value of not less than 
                $1,000,000,000 in notional or actual principal 
                amount outstanding (aggregated across 
                counterparties) at such time or on any day 
                during the 15-month period preceding the date 
                of the filing of the petition, or has gross 
                mark-to-market positions of not less than 
                $100,000,000 (aggregated across counterparties) 
                in one or more such agreements or transactions 
                with the debtor or any other entity (other than 
                an affiliate) at such time or on any day during 
                the 15-month period preceding the date of the 
                filing of the petition; or
                    (B) a clearing organization (as defined in 
                section 402 of the Federal Deposit Insurance 
                Corporation Improvement Act of 1991).
            (23) The term ``foreign proceeding'' means a 
        collective judicial or administrative proceeding in a 
        foreign country, including an interim proceeding, under 
        a law relating to insolvency or adjustment of debt in 
        which proceeding the assets and affairs of the debtor 
        are subject to control or supervision by a foreign 
        court, for the purpose of reorganization or 
        liquidation.
            (24) The term ``foreign representative'' means a 
        person or body, including a person or body appointed on 
        an interim basis, authorized in a foreign proceeding to 
        administer the reorganization or the liquidation of the 
        debtor's assets or affairs or to act as a 
        representative of such foreign proceeding.
            (25) The term ``forward contract'' means--
                    (A) a contract (other than a commodity 
                contract, as defined in section 761) for the 
                purchase, sale, or transfer of a commodity, as 
                defined in section 761(8) of this title, or any 
                similar good, article, service, right, or 
                interest which is presently or in the future 
                becomes the subject of dealing in the forward 
                contract trade, or product or byproduct 
                thereof, with a maturity date more than two 
                days after the date the contract is entered 
                into, including, but not limited to, a 
                repurchase or reverse repurchase transaction 
                (whether or not such repurchase or reverse 
                repurchase transaction is a ``repurchase 
                agreement'', as defined in this section) 
                consignment, lease, swap, hedge transaction, 
                deposit, loan, option, allocated transaction, 
                unallocated transaction, or any other similar 
                agreement;
                    (B) any combination of agreements or 
                transactions referred to in subparagraphs (A) 
                and (C);
                    (C) any option to enter into an agreement 
                or transaction referred to in subparagraph (A) 
                or (B);
                    (D) a master agreement that provides for an 
                agreement or transaction referred to in 
                subparagraph (A), (B), or (C), together with 
                all supplements to any such master agreement, 
                without regard to whether such master agreement 
                provides for an agreement or transaction that 
                is not a forward contract under this paragraph, 
                except that such master agreement shall be 
                considered to be a forward contract under this 
                paragraph only with respect to each agreement 
                or transaction under such master agreement that 
                is referred to in subparagraph (A), (B), or 
                (C); or
                    (E) any security agreement or arrangement, 
                or other credit enhancement related to any 
                agreement or transaction referred to in 
                subparagraph (A), (B), (C), or (D), including 
                any guarantee or reimbursement obligation by or 
                to a forward contract merchant or financial 
                participant in connection with any agreement or 
                transaction referred to in any such 
                subparagraph, but not to exceed the damages in 
                connection with any such agreement or 
                transaction, measured in accordance with 
                section 562.
            (26) The term ``forward contract merchant'' means a 
        Federal reserve bank, or an entity the business of 
        which consists in whole or in part of entering into 
        forward contracts as or with merchants in a commodity 
        (as defined in section 761) or any similar good, 
        article, service, right, or interest which is presently 
        or in the future becomes the subject of dealing in the 
        forward contract trade.
            (27) The term ``governmental unit'' means United 
        States; State; Commonwealth; District; Territory; 
        municipality; foreign state; department, agency, or 
        instrumentality of the United States (but not a United 
        States trustee while serving as a trustee in a case 
        under this title), a State, a Commonwealth, a District, 
        a Territory, a municipality, or a foreign state; or 
        other foreign or domestic government.
            (27A) The term ``health care business''--
                    (A) means any public or private entity 
                (without regard to whether that entity is 
                organized for profit or not for profit) that is 
                primarily engaged in offering to the general 
                public facilities and services for--
                            (i) the diagnosis or treatment of 
                        injury, deformity, or disease; and
                            (ii) surgical, drug treatment, 
                        psychiatric, or obstetric care; and
                    (B) includes--
                            (i) any--
                                    (I) general or specialized 
                                hospital;
                                    (II) ancillary ambulatory, 
                                emergency, or surgical 
                                treatment facility;
                                    (III) hospice;
                                    (IV) home health agency; 
                                and
                                    (V) other health care 
                                institution that is similar to 
                                an entity referred to in 
                                subclause (I), (II), (III), or 
                                (IV); and
                            (ii) any long-term care facility, 
                        including any--
                                    (I) skilled nursing 
                                facility;
                                    (II) intermediate care 
                                facility;
                                    (III) assisted living 
                                facility;
                                    (IV) home for the aged;
                                    (V) domiciliary care 
                                facility; and
                                    (VI) health care 
                                institution that is related to 
                                a facility referred to in 
                                subclause (I), (II), (III), 
                                (IV), or (V), if that 
                                institution is primarily 
                                engaged in offering room, 
                                board, laundry, or personal 
                                assistance with activities of 
                                daily living and incidentals to 
                                activities of daily living.
            (27B) The term ``incidental property'' means, with 
        respect to a debtor's principal residence--
                    (A) property commonly conveyed with a 
                principal residence in the area where the real 
                property is located;
                    (B) all easements, rights, appurtenances, 
                fixtures, rents, royalties, mineral rights, oil 
                or gas rights or profits, water rights, escrow 
                funds, or insurance proceeds; and
                    (C) all replacements or additions.
            (28) The term ``indenture'' means mortgage, deed of 
        trust, or indenture, under which there is outstanding a 
        security, other than a voting-trust certificate, 
        constituting a claim against the debtor, a claim 
        secured by a lien on any of the debtor's property, or 
        an equity security of the debtor.
            (29) The term ``indenture trustee'' means trustee 
        under an indenture.
            (30) The term ``individual with regular income'' 
        means individual whose income is sufficiently stable 
        and regular to enable such individual to make payments 
        under a plan under chapter 13 of this title, other than 
        a stockbroker or a commodity broker.
            (31) The term ``insider'' includes--
                    (A) if the debtor is an individual--
                            (i) relative of the debtor or of a 
                        general partner of the debtor;
                            (ii) partnership in which the 
                        debtor is a general partner;
                            (iii) general partner of the 
                        debtor; or
                            (iv) corporation of which the 
                        debtor is a director, officer, or 
                        person in control;
                    (B) if the debtor is a corporation--
                            (i) director of the debtor;
                            (ii) officer of the debtor;
                            (iii) person in control of the 
                        debtor;
                            (iv) partnership in which the 
                        debtor is a general partner;
                            (v) general partner of the debtor; 
                        or
                            (vi) relative of a general partner, 
                        director, officer, or person in control 
                        of the debtor;
                    (C) if the debtor is a partnership--
                            (i) general partner in the debtor;
                            (ii) relative of a general partner 
                        in, general partner of, or person in 
                        control of the debtor;
                            (iii) partnership in which the 
                        debtor is a general partner;
                            (iv) general partner of the debtor; 
                        or
                            (v) person in control of the 
                        debtor;
                    (D) if the debtor is a municipality, 
                elected official of the debtor or relative of 
                an elected official of the debtor;
                    (E) affiliate, or insider of an affiliate 
                as if such affiliate were the debtor; and
                    (F) managing agent of the debtor.
            (32) The term ``insolvent'' means--
                    (A) with reference to an entity other than 
                a partnership and a municipality, financial 
                condition such that the sum of such entity's 
                debts is greater than all of such entity's 
                property, at a fair valuation, exclusive of--
                            (i) property transferred, 
                        concealed, or removed with intent to 
                        hinder, delay, or defraud such entity's 
                        creditors; and
                            (ii) property that may be exempted 
                        from property of the estate under 
                        section 522 of this title;
                    (B) with reference to a partnership, 
                financial condition such that the sum of such 
                partnership's debts is greater than the 
                aggregate of, at a fair valuation--
                            (i) all of such partnership's 
                        property, exclusive of property of the 
                        kind specified in subparagraph (A)(i) 
                        of this paragraph; and
                            (ii) the sum of the excess of the 
                        value of each general partner's 
                        nonpartnership property, exclusive of 
                        property of the kind specified in 
                        subparagraph (A) of this paragraph, 
                        over such partner's nonpartnership 
                        debts; and
                    (C) with reference to a municipality, 
                financial condition such that the municipality 
                is--
                            (i) generally not paying its debts 
                        as they become due unless such debts 
                        are the subject of a bona fide dispute; 
                        or
                            (ii) unable to pay its debts as 
                        they become due.
            (33) The term ``institution-affiliated party''--
                    (A) with respect to an insured depository 
                institution (as defined in section 3(c)(2) of 
                the Federal Deposit Insurance Act), has the 
                meaning given it in section 3(u) of the Federal 
                Deposit Insurance Act; and
                    (B) with respect to an insured credit 
                union, has the meaning given it in section 
                206(r) of the Federal Credit Union Act.
            (34) The term ``insured credit union'' has the 
        meaning given it in section 101(7) of the Federal 
        Credit Union Act.
            (35) The term ``insured depository institution''--
                    (A) has the meaning given it in section 
                3(c)(2) of the Federal Deposit Insurance Act; 
                and
                    (B) includes an insured credit union 
                (except in the case of paragraphs (21B) and 
                (33)(A) of this subsection).
            (35A) The term ``intellectual property'' means--
                    (A) trade secret;
                    (B) invention, process, design, or plant 
                protected under title 35;
                    (C) patent application;
                    (D) plant variety;
                    (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.
            (36) The term ``judicial lien'' means lien obtained 
        by judgment, levy, sequestration, or other legal or 
        equitable process or proceeding.
            (37) The term ``lien'' means charge against or 
        interest in property to secure payment of a debt or 
        performance of an obligation.
            (38) The term ``margin payment'' means, for 
        purposes of the forward contract provisions of this 
        title, payment or deposit of cash, a security or other 
        property, that is commonly known in the forward 
        contract trade as original margin, initial margin, 
        maintenance margin, or variation margin, including 
        mark-to-market payments, or variation payments.
            (38A) The term ``master netting agreement''--
                    (A) means an agreement providing for the 
                exercise of rights, including rights of 
                netting, setoff, liquidation, termination, 
                acceleration, or close out, under or in 
                connection with one or more contracts that are 
                described in any one or more of paragraphs (1) 
                through (5) of section 561(a), or any security 
                agreement or arrangement or other credit 
                enhancement related to one or more of the 
                foregoing, including any guarantee or 
                reimbursement obligation related to 1 or more 
                of the foregoing; and
                    (B) if the agreement contains provisions 
                relating to agreements or transactions that are 
                not contracts described in paragraphs (1) 
                through (5) of section 561(a), shall be deemed 
                to be a master netting agreement only with 
                respect to those agreements or transactions 
                that are described in any one or more of 
                paragraphs (1) through (5) of section 561(a).
            (38B) The term ``master netting agreement 
        participant'' means an entity that, at any time before 
        the date of the filing of the petition, is a party to 
        an outstanding master netting agreement with the 
        debtor.
            (39) The term ``mask work'' has the meaning given 
        it in section 901(a)(2) of title 17.
            (39A) The term ``median family income'' means for 
        any year--
                    (A) the median family income both 
                calculated and reported by the Bureau of the 
                Census in the then most recent year; and
                    (B) if not so calculated and reported in 
                the then current year, adjusted annually after 
                such most recent year until the next year in 
                which median family income is both calculated 
                and reported by the Bureau of the Census, to 
                reflect the percentage change in the Consumer 
                Price Index for All Urban Consumers during the 
                period of years occurring after such most 
                recent year and before such current year.
            (40) The term ``municipality'' means political 
        subdivision or public agency or instrumentality of a 
        State.
            (40A) The term ``patient'' means any individual who 
        obtains or receives services from a health care 
        business.
            (40B) The term ``patient records'' means any record 
        relating to a patient, including a written document or 
        a record recorded in a magnetic, optical, or other form 
        of electronic medium.
            (41) The term ``person'' includes individual, 
        partnership, and corporation, but does not include 
        governmental unit, except that a governmental unit 
        that--
                    (A) acquires an asset from a person--
                            (i) as a result of the operation of 
                        a loan guarantee agreement; or
                            (ii) as receiver or liquidating 
                        agent of a person;
                    (B) is a guarantor of a pension benefit 
                payable by or on behalf of the debtor or an 
                affiliate of the debtor; or
                    (C) is the legal or beneficial owner of an 
                asset of--
                            (i) an employee pension benefit 
                        plan that is a governmental plan, as 
                        defined in section 414(d) of the 
                        Internal Revenue Code of 1986; or
                            (ii) an eligible deferred 
                        compensation plan, as defined in 
                        section 457(b) of the Internal Revenue 
                        Code of 1986;
        shall be considered, for purposes of section 1102 of 
        this title, to be a person with respect to such asset 
        or such benefit.
            (41A) The term ``personally identifiable 
        information'' means--
                    (A) if provided by an individual to the 
                debtor in connection with obtaining a product 
                or a service from the debtor primarily for 
                personal, family, or household purposes--
                            (i) the first name (or initial) and 
                        last name of such individual, whether 
                        given at birth or time of adoption, or 
                        resulting from a lawful change of name;
                            (ii) the geographical address of a 
                        physical place of residence of such 
                        individual;
                            (iii) an electronic address 
                        (including an e-mail address) of such 
                        individual;
                            (iv) a telephone number dedicated 
                        to contacting such individual at such 
                        physical place of residence;
                            (v) a social security account 
                        number issued to such individual; or
                            (vi) the account number of a credit 
                        card issued to such individual; or
                    (B) if identified in connection with 1 or 
                more of the items of information specified in 
                subparagraph (A)--
                            (i) a birth date, the number of a 
                        certificate of birth or adoption, or a 
                        place of birth; or
                            (ii) any other information 
                        concerning an identified individual 
                        that, if disclosed, will result in 
                        contacting or identifying such 
                        individual physically or 
                        electronically.
            (42) The term ``petition'' means petition filed 
        under section 301, 302, 303 and 1504 of this title, as 
        the case may be, commencing a case under this title.
            (42A) The term ``production payment'' means a term 
        overriding royalty satisfiable in cash or in kind--
                    (A) contingent on the production of a 
                liquid or gaseous hydrocarbon from particular 
                real property; and
                    (B) from a specified volume, or a specified 
                value, from the liquid or gaseous hydrocarbon 
                produced from such property, and determined 
                without regard to production costs.
            (43) The term ``purchaser'' means transferee of a 
        voluntary transfer, and includes immediate or mediate 
        transferee of such a transferee.
            (44) The term ``railroad'' means common carrier by 
        railroad engaged in the transportation of individuals 
        or property or owner of trackage facilities leased by 
        such a common carrier.
            (45) The term ``relative'' means individual related 
        by affinity or consanguinity within the third degree as 
        determined by the common law, or individual in a step 
        or adoptive relationship within such third degree.
            (46) The term ``repo participant'' means an entity 
        that, at any time before the filing of the petition, 
        has an outstanding repurchase agreement with the 
        debtor.
            (47) The term ``repurchase agreement'' (which 
        definition also applies to a reverse repurchase 
        agreement)--
                    (A) means--
                            (i) an agreement, including related 
                        terms, which provides for the transfer 
                        of one or more certificates of deposit, 
                        mortgage related securities (as defined 
                        in section 3 of the Securities Exchange 
                        Act of 1934), mortgage loans, interests 
                        in mortgage related securities or 
                        mortgage loans, eligible bankers' 
                        acceptances, qualified foreign 
                        government securities (defined as a 
                        security that is a direct obligation 
                        of, or that is fully guaranteed by, the 
                        central government of a member of the 
                        Organization for Economic Cooperation 
                        and Development), or securities that 
                        are direct obligations of, or that are 
                        fully guaranteed by, the United States 
                        or any agency of the United States 
                        against the transfer of funds by the 
                        transferee of such certificates of 
                        deposit, eligible bankers' acceptances, 
                        securities, mortgage loans, or 
                        interests, with a simultaneous 
                        agreement by such transferee to 
                        transfer to the transferor thereof 
                        certificates of deposit, eligible 
                        bankers' acceptance, securities, 
                        mortgage loans, or interests of the 
                        kind described in this clause, at a 
                        date certain not later than 1 year 
                        after such transfer or on demand, 
                        against the transfer of funds;
                            (ii) any combination of agreements 
                        or transactions referred to in clauses 
                        (i) and (iii);
                            (iii) an option to enter into an 
                        agreement or transaction referred to in 
                        clause (i) or (ii);
                            (iv) a master agreement that 
                        provides for an agreement or 
                        transaction referred to in clause (i), 
                        (ii), or (iii), together with all 
                        supplements to any such master 
                        agreement, without regard to whether 
                        such master agreement provides for an 
                        agreement or transaction that is not a 
                        repurchase agreement under this 
                        paragraph, except that such master 
                        agreement shall be considered to be a 
                        repurchase agreement under this 
                        paragraph only with respect to each 
                        agreement or transaction under the 
                        master agreement that is referred to in 
                        clause (i), (ii), or (iii); or
                            (v) any security agreement or 
                        arrangement or other credit enhancement 
                        related to any agreement or transaction 
                        referred to in clause (i), (ii), (iii), 
                        or (iv), including any guarantee or 
                        reimbursement obligation by or to a 
                        repo participant or financial 
                        participant in connection with any 
                        agreement or transaction referred to in 
                        any such clause, but not to exceed the 
                        damages in connection with any such 
                        agreement or transaction, measured in 
                        accordance with section 562 of this 
                        title; and
                    (B) does not include a repurchase 
                obligation under a participation in a 
                commercial mortgage loan.
            (48) The term ``securities clearing agency'' means 
        person that is registered as a clearing agency under 
        section 17A of the Securities Exchange Act of 1934, or 
        exempt from such registration under such section 
        pursuant to an order of the Securities and Exchange 
        Commission, or whose business is confined to the 
        performance of functions of a clearing agency with 
        respect to exempted securities, as defined in section 
        3(a)(12) of such Act for the purposes of such section 
        17A.
            (48A) The term ``securities self regulatory 
        organization'' means either a securities association 
        registered with the Securities and Exchange Commission 
        under section 15A of the Securities Exchange Act of 
        1934 or a national securities exchange registered with 
        the Securities and Exchange Commission under section 6 
        of the Securities Exchange Act of 1934.
            (49) The term ``security''--
                    (A) includes--
                            (i) note;
                            (ii) stock;
                            (iii) treasury stock;
                            (iv) bond;
                            (v) debenture;
                            (vi) collateral trust certificate;
                            (vii) pre-organization certificate 
                        or subscription;
                            (viii) transferable share;
                            (ix) voting-trust certificate;
                            (x) certificate of deposit;
                            (xi) certificate of deposit for 
                        security;
                            (xii) investment contract or 
                        certificate of interest or 
                        participation in a profit-sharing 
                        agreement or in an oil, gas, or mineral 
                        royalty or lease, if such contract or 
                        interest is required to be the subject 
                        of a registration statement filed with 
                        the Securities and Exchange Commission 
                        under the provisions of the Securities 
                        Act of 1933, or is exempt under section 
                        3(b) of such Act from the requirement 
                        to file such a statement;
                            (xiii) interest of a limited 
                        partner in a limited partnership;
                            (xiv) other claim or interest 
                        commonly known as ``security''; and
                            (xv) certificate of interest or 
                        participation in, temporary or interim 
                        certificate for, receipt for, or 
                        warrant or right to subscribe to or 
                        purchase or sell, a security; but
                    (B) does not include--
                            (i) currency, check, draft, bill of 
                        exchange, or bank letter of credit;
                            (ii) leverage transaction, as 
                        defined in section 761 of this title;
                            (iii) commodity futures contract or 
                        forward contract;
                            (iv) option, warrant, or right to 
                        subscribe to or purchase or sell a 
                        commodity futures contract;
                            (v) option to purchase or sell a 
                        commodity;
                            (vi) contract or certificate of a 
                        kind specified in subparagraph (A)(xii) 
                        of this paragraph that is not required 
                        to be the subject of a registration 
                        statement filed with the Securities and 
                        Exchange Commission and is not exempt 
                        under section 3(b) of the Securities 
                        Act of 1933 from the requirement to 
                        file such a statement; or
                            (vii) debt or evidence of 
                        indebtedness for goods sold and 
                        delivered or services rendered.
            (50) The term ``security agreement'' means 
        agreement that creates or provides for a security 
        interest.
            (51) The term ``security interest'' means lien 
        created by an agreement.
            (51A) The term ``settlement payment'' means, for 
        purposes of the forward contract provisions of this 
        title, a preliminary settlement payment, a partial 
        settlement payment, an interim settlement payment, a 
        settlement payment on account, a final settlement 
        payment, a net settlement payment, or any other similar 
        payment commonly used in the forward contract trade.
            (51B) The term ``single asset real estate'' means 
        real property constituting a single property or 
        project, other than residential real property with 
        fewer than 4 residential units, which generates 
        substantially all of the gross income of a debtor who 
        is not a family farmer and on which no substantial 
        business is being conducted by a debtor other than the 
        business of operating the real property and activities 
        incidental thereto.
            (51C) The term ``small business case'' means a case 
        filed under chapter 11 of this title in which the 
        debtor is a small business debtor.
            (51D) The term ``small business debtor''--
                    (A) subject to subparagraph (B), means a 
                person engaged in commercial or business 
                activities (including any affiliate of such 
                person that is also a debtor under this title 
                and excluding a person whose primary activity 
                is the business of owning or operating real 
                property or activities incidental thereto) that 
                has aggregate noncontingent liquidated secured 
                and unsecured debts as of the date of the 
                filing of the petition or the date of the order 
                for relief in an amount not more than 
                $2,000,000 (excluding debts owed to 1 or more 
                affiliates or insiders) for a case in which the 
                United States trustee has not appointed under 
                section 1102(a)(1) a committee of unsecured 
                creditors or where the court has determined 
                that the committee of unsecured creditors is 
                not sufficiently active and representative to 
                provide effective oversight of the debtor; and
                    (B) does not include any member of a group 
                of affiliated debtors that has aggregate 
                noncontingent liquidated secured and unsecured 
                debts in an amount greater than $2,000,000 
                (excluding debt owed to 1 or more affiliates or 
                insiders).
            (52) The term ``State'' includes the District of 
        Columbia and Puerto Rico, except for the purpose of 
        defining who may be a debtor under chapter 9 of this 
        title.
            (53) The term ``statutory lien'' means lien arising 
        solely by force of a statute on specified circumstances 
        or conditions, or lien of distress for rent, whether or 
        not statutory, but does not include security interest 
        or judicial lien, whether or not such interest or lien 
        is provided by or is dependent on a statute and whether 
        or not such interest or lien is made fully effective by 
        statute.
            (53A) The term ``stockbroker'' means person--
                    (A) with respect to which there is a 
                customer, as defined in section 741 of this 
                title; and
                    (B) that is engaged in the business of 
                effecting transactions in securities--
                            (i) for the account of others; or
                            (ii) with members of the general 
                        public, from or for such person's own 
                        account.
            (53B) The term ``swap agreement''--
                    (A) means--
                            (i) any agreement, including the 
                        terms and conditions incorporated by 
                        reference in such agreement, which is--
                                    (I) an interest rate swap, 
                                option, future, or forward 
                                agreement, including a rate 
                                floor, rate cap, rate collar, 
                                cross-currency rate swap, and 
                                basis swap;
                                    (II) a spot, same day-
                                tomorrow, tomorrow-next, 
                                forward, or other foreign 
                                exchange, precious metals, or 
                                other commodity agreement;
                                    (III) a currency swap, 
                                option, future, or forward 
                                agreement;
                                    (IV) an equity index or 
                                equity swap, option, future, or 
                                forward agreement;
                                    (V) a debt index or debt 
                                swap, option, future, or 
                                forward agreement;
                                    (VI) a total return, credit 
                                spread or credit swap, option, 
                                future, or forward agreement;
                                    (VII) a commodity index or 
                                a commodity swap, option, 
                                future, or forward agreement;
                                    (VIII) a weather swap, 
                                option, future, or forward 
                                agreement;
                                    (IX) an emissions swap, 
                                option, future, or forward 
                                agreement; or
                                    (X) an inflation swap, 
                                option, future, or forward 
                                agreement;
                            (ii) any agreement or transaction 
                        that is similar to any other agreement 
                        or transaction referred to in this 
                        paragraph and that--
                                    (I) is of a type that has 
                                been, is presently, or in the 
                                future becomes, the subject of 
                                recurrent dealings in the swap 
                                or other derivatives markets 
                                (including terms and conditions 
                                incorporated by reference 
                                therein); and
                                    (II) is a forward, swap, 
                                future, option, or spot 
                                transaction on one or more 
                                rates, currencies, commodities, 
                                equity securities, or other 
                                equity instruments, debt 
                                securities or other debt 
                                instruments, quantitative 
                                measures associated with an 
                                occurrence, extent of an 
                                occurrence, or contingency 
                                associated with a financial, 
                                commercial, or economic 
                                consequence, or economic or 
                                financial indices or measures 
                                of economic or financial risk 
                                or value;
                            (iii) any combination of agreements 
                        or transactions referred to in this 
                        subparagraph;
                            (iv) any option to enter into an 
                        agreement or transaction referred to in 
                        this subparagraph;
                            (v) a master agreement that 
                        provides for an agreement or 
                        transaction referred to in clause (i), 
                        (ii), (iii), or (iv), together with all 
                        supplements to any such master 
                        agreement, and without regard to 
                        whether the master agreement contains 
                        an agreement or transaction that is not 
                        a swap agreement under this paragraph, 
                        except that the master agreement shall 
                        be considered to be a swap agreement 
                        under this paragraph only with respect 
                        to each agreement or transaction under 
                        the master agreement that is referred 
                        to in clause (i), (ii), (iii), or (iv); 
                        or
                            (vi) any security agreement or 
                        arrangement or other credit enhancement 
                        related to any agreements or 
                        transactions referred to in clause (i) 
                        through (v), including any guarantee or 
                        reimbursement obligation by or to a 
                        swap participant or financial 
                        participant in connection with any 
                        agreement or transaction referred to in 
                        any such clause, but not to exceed the 
                        damages in connection with any such 
                        agreement or transaction, measured in 
                        accordance with section 562; and
                    (B) is applicable for purposes of this 
                title only, and shall not be construed or 
                applied so as to challenge or affect the 
                characterization, definition, or treatment of 
                any swap agreement under any other statute, 
                regulation, or rule, including the Gramm-Leach-
                Bliley Act, the Legal Certainty for Bank 
                Products Act of 2000, the securities laws (as 
                such term is defined in section 3(a)(47) of the 
                Securities Exchange Act of 1934) and the 
                Commodity Exchange Act.
            (53C) The term ``swap participant'' means an entity 
        that, at any time before the filing of the petition, 
        has an outstanding swap agreement with the debtor.
            (56A) The term ``term overriding royalty'' means an 
        interest in liquid or gaseous hydrocarbons in place or 
        to be produced from particular real property that 
        entitles the owner thereof to a share of production, or 
        the value thereof, for a term limited by time, 
        quantity, or value realized.
            (53D) The term ``timeshare plan'' means and shall 
        include that interest purchased in any arrangement, 
        plan, scheme, or similar device, but not including 
        exchange programs, whether by membership, agreement, 
        tenancy in common, sale, lease, deed, rental agreement, 
        license, right to use agreement, or by any other means, 
        whereby a purchaser, in exchange for consideration, 
        receives a right to use accommodations, facilities, or 
        recreational sites, whether improved or unimproved, for 
        a specific period of time less than a full year during 
        any given year, but not necessarily for consecutive 
        years, and which extends for a period of more than 
        three years. A ``timeshare interest'' is that interest 
        purchased in a timeshare plan which grants the 
        purchaser the right to use and occupy accommodations, 
        facilities, or recreational sites, whether improved or 
        unimproved, pursuant to a timeshare plan.
            (54) The term ``transfer'' means--
                    (A) the creation of a lien;
                    (B) the retention of title as a security 
                interest;
                    (C) the foreclosure of a debtor's equity of 
                redemption; or
                    (D) each mode, direct or indirect, absolute 
                or conditional, voluntary or involuntary, of 
                disposing of or parting with--
                            (i) property; or
                            (ii) an interest in property.
            (54A) The term ``uninsured State member bank'' 
        means a State member bank (as defined in section 3 of 
        the Federal Deposit Insurance Act) the deposits of 
        which are not insured by the Federal Deposit Insurance 
        Corporation.
            (55) The term ``United States'', when used in a 
        geographical sense, includes all locations where the 
        judicial jurisdiction of the United States extends, 
        including territories and possessions of the United 
        States.

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CHAPTER 3--CASE ADMINISTRATION

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Subchapter IV--ADMINISTRATIVE POWERS

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Sec. 365. Executory contracts and unexpired leases

    (a) Except as provided in sections 765 and 766 of this 
title and in subsections (b), (c), and (d) of this section, the 
trustee, subject to the court's approval, may assume or reject 
any executory contract or unexpired lease of the debtor.
    (b)(1) If there has been a default in an executory contract 
or unexpired lease of the debtor, the trustee may not assume 
such contract or lease unless, at the time of assumption of 
such contract or lease, the trustee--
            (A) cures, or provides adequate assurance that the 
        trustee will promptly cure, such default other than a 
        default that is a breach of a provision relating to the 
        satisfaction of any provision (other than a penalty 
        rate or penalty provision) relating to a default 
        arising from any failure to perform nonmonetary 
        obligations under an unexpired lease of real property, 
        if it is impossible for the trustee to cure such 
        default by performing nonmonetary acts at and after the 
        time of assumption, except that if such default arises 
        from a failure to operate in accordance with a 
        nonresidential real property lease, then such default 
        shall be cured by performance at and after the time of 
        assumption in accordance with such lease, and pecuniary 
        losses resulting from such default shall be compensated 
        in accordance with the provisions of this paragraph;
            (B) compensates, or provides adequate assurance 
        that the trustee will promptly compensate, a party 
        other than the debtor to such contract or lease, for 
        any actual pecuniary loss to such party resulting from 
        such default; and
            (C) provides adequate assurance of future 
        performance under such contract or lease.
    (2) Paragraph (1) of this subsection does not apply to a 
default that is a breach of a provision relating to--
            (A) the insolvency or financial condition of the 
        debtor at any time before the closing of the case;
            (B) the commencement of a case under this title;
            (C) the appointment of or taking possession by a 
        trustee in a case under this title or a custodian 
        before such commencement; or
            (D) the satisfaction of any penalty rate or penalty 
        provision relating to a default arising from any 
        failure by the debtor to perform nonmonetary 
        obligations under the executory contract or unexpired 
        lease.
    (3) For the purposes of paragraph (1) of this subsection 
and paragraph (2)(B) of subsection (f), adequate assurance of 
future performance of a lease of real property in a shopping 
center includes adequate assurance--
            (A) of the source of rent and other consideration 
        due under such lease, and in the case of an assignment, 
        that the financial condition and operating performance 
        of the proposed assignee and its guarantors, if any, 
        shall be similar to the financial condition and 
        operating performance of the debtor and its guarantors, 
        if any, as of the time the debtor became the lessee 
        under the lease;
            (B) that any percentage rent due under such lease 
        will not decline substantially;
            (C) that assumption or assignment of such lease is 
        subject to all the provisions thereof, including (but 
        not limited to) provisions such as a radius, location, 
        use, or exclusivity provision, and will not breach any 
        such provision contained in any other lease, financing 
        agreement, or master agreement relating to such 
        shopping center; and
            (D) that assumption or assignment of such lease 
        will not disrupt any tenant mix or balance in such 
        shopping center.
    (4) Notwithstanding any other provision of this section, if 
there has been a default in an unexpired lease of the debtor, 
other than a default of a kind specified in paragraph (2) of 
this subsection, the trustee may not require a lessor to 
provide services or supplies incidental to such lease before 
assumption of such lease unless the lessor is compensated under 
the terms of such lease for any services and supplies provided 
under such lease before assumption of such lease.
    (c) The trustee may not assume or assign any executory 
contract or unexpired lease of the debtor, whether or not such 
contract or lease prohibits or restricts assignment of rights 
or delegation of duties, if--
            (1)(A) applicable law excuses a party, other than 
        the debtor, to such contract or lease from accepting 
        performance from or rendering performance to an entity 
        other than the debtor or the debtor in possession, 
        whether or not such contract or lease prohibits or 
        restricts assignment of rights or delegation of duties; 
        and
            (B) such party does not consent to such assumption 
        or assignment; or
            (2) such contract is a contract to make a loan, or 
        extend other debt financing or financial 
        accommodations, to or for the benefit of the debtor, or 
        to issue a security of the debtor; or
            (3) such lease is of nonresidential real property 
        and has been terminated under applicable nonbankruptcy 
        law prior to the order for relief.
    (d)(1) In a case under chapter 7 of this title, if the 
trustee does not assume or reject an executory contract or 
unexpired lease of residential real property or of personal 
property of the debtor within 60 days after the order for 
relief, or within such additional time as the court, for cause, 
within such 60-day period, fixes, then such contract or lease 
is deemed rejected.
    (2) In a case under chapter 9, 11, 12, or 13 of this title, 
the trustee may assume or reject an executory contract or 
unexpired lease of residential real property or of personal 
property of the debtor at any time before the confirmation of a 
plan but the court, on the request of any party to such 
contract or lease, may order the trustee to determine within a 
specified period of time whether to assume or reject such 
contract or lease.
    (3) The trustee shall timely perform all the obligations of 
the debtor, except those specified in section 365(b)(2), 
arising from and after the order for relief under any unexpired 
lease of nonresidential real property, until such lease is 
assumed or rejected, notwithstanding section 503(b)(1) of this 
title. The court may extend, for cause, the time for 
performance of any such obligation that arises within 60 days 
after the date of the order for relief, but the time for 
performance shall not be extended beyond such 60-day period. 
This subsection shall not be deemed to affect the trustee's 
obligations under the provisions of subsection (b) or (f) of 
this section. Acceptance of any such performance does not 
constitute waiver or relinquishment of the lessor's rights 
under such lease or under this title.
    (4)(A) Subject to subparagraph (B), an unexpired lease of 
nonresidential real property under which the debtor is the 
lessee shall be deemed rejected, and the trustee shall 
immediately surrender that nonresidential real property to the 
lessor, if the trustee does not assume or reject the unexpired 
lease by the earlier of--
            (i) the date that is 120 days after the date of the 
        order for relief; or
            (ii) the date of the entry of an order confirming a 
        plan.
    (B)(i) The court may extend the period determined under 
subparagraph (A), prior to the expiration of the 120-day 
period, for 90 days on the motion of the trustee or lessor for 
cause.
    (ii) If the court grants an extension under clause (i), the 
court may grant a subsequent extension only upon prior written 
consent of the lessor in each instance.
    (5) The trustee shall timely perform all of the obligations 
of the debtor, except those specified in section 365(b)(2), 
first arising from or after 60 days after the order for relief 
in a case under chapter 11 of this title under an unexpired 
lease of personal property (other than personal property leased 
to an individual primarily for personal, family, or household 
purposes), until such lease is assumed or rejected 
notwithstanding section 503(b)(1) of this title, unless the 
court, after notice and a hearing and based on the equities of 
the case, orders otherwise with respect to the obligations or 
timely performance thereof. This subsection shall not be deemed 
to affect the trustee's obligations under the provisions of 
subsection (b) or (f). Acceptance of any such performance does 
not constitute waiver or relinquishment of the lessor's rights 
under such lease or under this title.
    (e)(1) Notwithstanding a provision in an executory contract 
or unexpired lease, or in applicable law, an executory contract 
or unexpired lease of the debtor may not be terminated or 
modified, and any right or obligation under such contract or 
lease may not be terminated or modified, at any time after the 
commencement of the case solely because of a provision in such 
contract or lease that is conditioned on--
            (A) the insolvency or financial condition of the 
        debtor at any time before the closing of the case;
            (B) the commencement of a case under this title; or
            (C) the appointment of or taking possession by a 
        trustee in a case under this title or a custodian 
        before such commencement.
    (2) Paragraph (1) of this subsection does not apply to an 
executory contract or unexpired lease of the debtor, whether or 
not such contract or lease prohibits or restricts assignment of 
rights or delegation of duties, if--
            (A)(i) applicable law excuses a party, other than 
        the debtor, to such contract or lease from accepting 
        performance from or rendering performance to the 
        trustee or to an assignee of such contract or lease, 
        whether or not such contract or lease prohibits or 
        restricts assignment of rights or delegation of duties; 
        and
            (ii) such party does not consent to such assumption 
        or assignment; or
            (B) such contract is a contract to make a loan, or 
        extend other debt financing or financial 
        accommodations, to or for the benefit of the debtor, or 
        to issue a security of the debtor.
    (f)(1) Except as provided in subsections (b) and (c) of 
this section, notwithstanding a provision in an executory 
contract or unexpired lease of the debtor, or in applicable 
law, that prohibits, restricts, or conditions the assignment of 
such contract or lease, the trustee may assign such contract or 
lease under paragraph (2) of this subsection.
    (2) The trustee may assign an executory contract or 
unexpired lease of the debtor only if--
            (A) the trustee assumes such contract or lease in 
        accordance with the provisions of this section; and
            (B) adequate assurance of future performance by the 
        assignee of such contract or lease is provided, whether 
        or not there has been a default in such contract or 
        lease.
    (3) Notwithstanding a provision in an executory contract or 
unexpired lease of the debtor, or in applicable law that 
terminates or modifies, or permits a party other than the 
debtor to terminate or modify, such contract or lease or a 
right or obligation under such contract or lease on account of 
an assignment of such contract or lease, such contract, lease, 
right, or obligation may not be terminated or modified under 
such provision because of the assumption or assignment of such 
contract or lease by the trustee.
    (g) Except as provided in subsections (h)(2) and (i)(2) of 
this section, the rejection of an executory contract or 
unexpired lease of the debtor constitutes a breach of such 
contract or lease--
            (1) if such contract or lease has not been assumed 
        under this section or under a plan confirmed under 
        chapter 9, 11, 12, or 13 of this title, immediately 
        before the date of the filing of the petition; or
            (2) if such contract or lease has been assumed 
        under this section or under a plan confirmed under 
        chapter 9, 11, 12, or 13 of this title--
                    (A) if before such rejection the case has 
                not been converted under section 1112, 1208, or 
                1307 of this title, at the time of such 
                rejection; or
                    (B) if before such rejection the case has 
                been converted under section 1112, 1208, or 
                1307 of this title--
                            (i) immediately before the date of 
                        such conversion, if such contract or 
                        lease was assumed before such 
                        conversion; or
                            (ii) at the time of such rejection, 
                        if such contract or lease was assumed 
                        after such conversion.
    (h)(1)(A) If the trustee rejects an unexpired lease of real 
property under which the debtor is the lessor and--
            (i) if the rejection by the trustee amounts to such 
        a breach as would entitle the lessee to treat such 
        lease as terminated by virtue of its terms, applicable 
        nonbankruptcy law, or any agreement made by the lessee, 
        then the lessee under such lease may treat such lease 
        as terminated by the rejection; or
            (ii) if the term of such lease has commenced, the 
        lessee may retain its rights under such lease 
        (including rights such as those relating to the amount 
        and timing of payment of rent and other amounts payable 
        by the lessee and any right of use, possession, quiet 
        enjoyment, subletting, assignment, or hypothecation) 
        that are in or appurtenant to the real property for the 
        balance of the term of such lease and for any renewal 
        or extension of such rights to the extent that such 
        rights are enforceable under applicable nonbankruptcy 
        law.
    (B) If the lessee retains its rights under subparagraph 
(A)(ii), the lessee may offset against the rent reserved under 
such lease for the balance of the term after the date of the 
rejection of such lease and for the term of any renewal or 
extension of such lease, the value of any damage caused by the 
nonperformance after the date of such rejection, of any 
obligation of the debtor under such lease, but the lessee shall 
not have any other right against the estate or the debtor on 
account of any damage occurring after such date caused by such 
nonperformance.
    (C) The rejection of a lease of real property in a shopping 
center with respect to which the lessee elects to retain its 
rights under subparagraph (A)(ii) does not affect the 
enforceability under applicable nonbankruptcy law of any 
provision in the lease pertaining to radius, location, use, 
exclusivity, or tenant mix or balance.
    (D) In this paragraph, ``lessee'' includes any successor, 
assign, or mortgagee permitted under the terms of such lease.
    (2)(A) If the trustee rejects a timeshare interest under a 
timeshare plan under which the debtor is the timeshare interest 
seller and--
            (i) if the rejection amounts to such a breach as 
        would entitle the timeshare interest purchaser to treat 
        the timeshare plan as terminated under its terms, 
        applicable nonbankruptcy law, or any agreement made by 
        timeshare interest purchaser, the timeshare interest 
        purchaser under the timeshare plan may treat the 
        timeshare plan as terminated by such rejection; or
            (ii) if the term of such timeshare interest has 
        commenced, then the timeshare interest purchaser may 
        retain its rights in such timeshare interest for the 
        balance of such term and for any term of renewal or 
        extension of such timeshare interest to the extent that 
        such rights are enforceable under applicable 
        nonbankruptcy law.
    (B) If the timeshare interest purchaser retains its rights 
under subparagraph (A), such timeshare interest purchaser may 
offset against the moneys due for such timeshare interest for 
the balance of the term after the date of the rejection of such 
timeshare interest, and the term of any renewal or extension of 
such timeshare interest, the value of any damage caused by the 
nonperformance after the date of such rejection, of any 
obligation of the debtor under such timeshare plan, but the 
timeshare interest purchaser shall not have any right against 
the estate or the debtor on account of any damage occurring 
after such date caused by such nonperformance.
    (i)(1) If the trustee rejects an executory contract of the 
debtor for the sale of real property or for the sale of a 
timeshare interest under a timeshare plan, under which the 
purchaser is in possession, such purchaser may treat such 
contract as terminated, or, in the alternative, may remain in 
possession of such real property or timeshare interest.
    (2) If such purchaser remains in possession--
            (A) such purchaser shall continue to make all 
        payments due under such contract, but may, offset 
        against such payments any damages occurring after the 
        date of the rejection of such contract caused by the 
        nonperformance of any obligation of the debtor after 
        such date, but such purchaser does not have any rights 
        against the estate on account of any damages arising 
        after such date from such rejection, other than such 
        offset; and
            (B) the trustee shall deliver title to such 
        purchaser in accordance with the provisions of such 
        contract, but is relieved of all other obligations to 
        perform under such contract.
    (j) A purchaser that treats an executory contract as 
terminated under subsection (i) of this section, or a party 
whose executory contract to purchase real property from the 
debtor is rejected and under which such party is not in 
possession, has a lien on the interest of the debtor in such 
property for the recovery of any portion of the purchase price 
that such purchaser or party has paid.
    (k) Assignment by the trustee to an entity of a contract or 
lease assumed under this section relieves the trustee and the 
estate from any liability for any breach of such contract or 
lease occurring after such assignment.
    (l) If an unexpired lease under which the debtor is the 
lessee is assigned pursuant to this section, the lessor of the 
property may require a deposit or other security for the 
performance of the debtor's obligations under the lease 
substantially the same as would have been required by the 
landlord upon the initial leasing to a similar tenant.
    (m) For purposes of this section 365 and sections 541(b)(2) 
and 362(b)(10), leases of real property shall include any 
rental agreement to use real property.
    (n)(1) If the trustee rejects an executory contract under 
which the debtor is a licensor of a right to intellectual 
property, the licensee under such contract may elect--
            (A) to treat such contract as terminated by such 
        rejection if such rejection by the trustee amounts to 
        such a breach as would entitle the licensee to treat 
        such contract as terminated by virtue of its own terms, 
        applicable nonbankruptcy law, or an agreement made by 
        the licensee with another entity; or
            (B) to retain its rights (including a right to 
        enforce any exclusivity provision of such contract, but 
        excluding any other right under applicable 
        nonbankruptcy law to specific performance of such 
        contract) under such contract and under any agreement 
        supplementary to such contract, to such intellectual 
        property (including any embodiment of such intellectual 
        property to the extent protected by applicable 
        nonbankruptcy law), as such rights existed immediately 
        before the case commenced, for--
                    (i) the duration of such contract; and
                    (ii) any period for which such contract may 
                be extended by the licensee as of right under 
                applicable nonbankruptcy law.
    (2) If the licensee elects to retain its rights, as 
described in paragraph (1)(B) of this subsection, under such 
contract--
            (A) the trustee shall allow the licensee to 
        exercise such rights;
            (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) any right of setoff it may have with 
                respect to such contract under this title or 
                applicable nonbankruptcy law; and
                    (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 licensee shall not be relieved of any 
        of its obligations to maintain the quality of the 
        products and services offered under or in connection 
        with the licensed trademark, service mark, or trade 
        name, and the trustee shall retain the right to oversee 
        and enforce quality control for such products or 
        services, or both.
    (3) If the licensee elects to retain its rights, as 
described in paragraph (1)(B) of this subsection, then on the 
written request of the licensee the trustee shall--
            (A) to the extent provided in such contract, or any 
        agreement supplementary to such contract, provide to 
        the licensee any intellectual property (including such 
        embodiment) held by the trustee; and
            (B) not interfere with the rights of the licensee 
        as provided in such contract, or any agreement 
        supplementary to such contract, to such intellectual 
        property (including such embodiment) including any 
        right to obtain such intellectual property (or such 
        embodiment) from another entity.
    (4) Unless and until the trustee rejects such contract, on 
the written request of the licensee the trustee shall--
            (A) to the extent provided in such contract or any 
        agreement supplementary to such contract--
                    (i) perform such contract; or
                    (ii) provide to the licensee such 
                intellectual property (including any embodiment 
                of such intellectual property to the extent 
                protected by applicable nonbankruptcy law) held 
                by the trustee; and
            (B) not interfere with the rights of the licensee 
        as provided in such contract, or any agreement 
        supplementary to such contract, to such intellectual 
        property (including such embodiment), including any 
        right to obtain such intellectual property (or such 
        embodiment) from another entity.
    (o) In a case under chapter 11 of this title, the trustee 
shall be deemed to have assumed (consistent with the debtor's 
other obligations under section 507), and shall immediately 
cure any deficit under, any commitment by the debtor to a 
Federal depository institutions regulatory agency (or 
predecessor to such agency) to maintain the capital of an 
insured depository institution, and any claim for a subsequent 
breach of the obligations thereunder shall be entitled to 
priority under section 507. This subsection shall not extend 
any commitment that would otherwise be terminated by any act of 
such an agency.
    (p)(1) If a lease of personal property is rejected or not 
timely assumed by the trustee under subsection (d), the leased 
property is no longer property of the estate and the stay under 
section 362(a) is automatically terminated.
    (2)(A) If the debtor in a case under chapter 7 is an 
individual, the debtor may notify the creditor in writing that 
the debtor desires to assume the lease. Upon being so notified, 
the creditor may, at its option, notify the debtor that it is 
willing to have the lease assumed by the debtor and may 
condition such assumption on cure of any outstanding default on 
terms set by the contract.
    (B) If, not later than 30 days after notice is provided 
under subparagraph (A), the debtor notifies the lessor in 
writing that the lease is assumed, the liability under the 
lease will be assumed by the debtor and not by the estate.
    (C) The stay under section 362 and the injunction under 
section 524(a)(2) shall not be violated by notification of the 
debtor and negotiation of cure under this subsection.
    (3) In a case under chapter 11 in which the debtor is an 
individual and in a case under chapter 13, if the debtor is the 
lessee with respect to personal property and the lease is not 
assumed in the plan confirmed by the court, the lease is deemed 
rejected as of the conclusion of the hearing on confirmation. 
If the lease is rejected, the stay under section 362 and any 
stay under section 1301 is automatically terminated with 
respect to the property subject to the lease.

           *       *       *       *       *       *       *


CHAPTER 15--ANCILLARY AND OTHER CROSS-BORDER CASES

           *       *       *       *       *       *       *


Subchapter III--RECOGNITION OF A FOREIGN PROCEEDING AND RELIEF

           *       *       *       *       *       *       *


Sec. 1522. Protection of creditors and other interested persons

    (a) The court may grant relief under section 1519 or 1521, 
or may modify or terminate relief under subsection (c), only if 
the interests of the creditors and other interested entities, 
including the debtor, are sufficiently protected.
    (b) The court may subject relief granted under section 1519 
or 1521, or the operation of the debtor's business under 
section 1520(a)(3), to conditions it considers appropriate, 
including the giving of security or the filing of a bond.
    (c) The court may, at the request of the foreign 
representative or an entity affected by relief granted under 
section 1519 or 1521, or at its own motion, modify or terminate 
such relief.
    (d) Section 1104(d) shall apply to the appointment of an 
examiner under this chapter. Any examiner shall comply with the 
qualification requirements imposed on a trustee by section 322.
    (e) Section 365(n) shall apply to cases under this chapter. 
If the foreign representative rejects or repudiates a contract 
under which the debtor is a licensor of intellectual property, 
the licensee under such contract shall be entitled to make the 
election and exercise the rights described in section 365(n).

           *       *       *       *       *       *       *

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                    LEAHY-SMITH AMERICA INVENTS ACT



           *       *       *       *       *       *       *
SEC. 10. FEE SETTING AUTHORITY.

    (a) Fee Setting.--
            (1) In general.--The Director may set or adjust by 
        rule any fee established, authorized, or charged under 
        title 35, United States Code, or the Trademark Act of 
        1946 (15 U.S.C. 1051 et seq.), for any services 
        performed by or materials furnished by, the Office, 
        subject to paragraph (2).
            (2) Fees to recover costs.--Fees may be set or 
        adjusted under paragraph (1) only to recover the 
        aggregate estimated costs to the Office for processing, 
        activities, services, and materials relating to patents 
        (in the case of patent fees) and trademarks (in the 
        case of trademark fees), including administrative costs 
        of the Office with respect to such patent or trademark 
        fees (as the case may be).
    (b) Small and Micro Entities.--The fees set or adjusted 
under subsection (a) for filing, searching, examining, issuing, 
appealing, and maintaining patent applications and patents 
shall be reduced by 50 percent with respect to the application 
of such fees to any small entity that qualifies for reduced 
fees under section 41(h)(1) of title 35, United States Code, 
and shall be reduced by 75 percent with respect to the 
application of such fees to any micro entity as defined in 
section 123 of that title (as added by subsection (g) of this 
section).
    (c) Reduction of Fees in Certain Fiscal Years.--In each 
fiscal year, the Director--
            (1) shall consult with the Patent Public Advisory 
        Committee and the Trademark Public Advisory Committee 
        on the advisability of reducing any fees described in 
        subsection (a); and
            (2) after the consultation required under paragraph 
        (1), may reduce such fees.
    (d) Role of the Public Advisory Committee.--The Director 
shall--
            (1) not less than 45 days before publishing any 
        proposed fee under subsection (a) in the Federal 
        Register, submit the proposed fee to the Patent Public 
        Advisory Committee or the Trademark Public Advisory 
        Committee, or both, as appropriate;
            (2)(A) provide the relevant advisory committee 
        described in paragraph (1) a 30-day period following 
        the submission of any proposed fee, in which to 
        deliberate, consider, and comment on such proposal;
                    (B) require that, during that 30-day 
                period, the relevant advisory committee hold a 
                public hearing relating to such proposal; and
                    (C) assist the relevant advisory committee 
                in carrying out that public hearing, including 
                by offering the use of the resources of the 
                Office to notify and promote the hearing to the 
                public and interested stakeholders;
            (3) require the relevant advisory committee to make 
        available to the public a written report setting forth 
        in detail the comments, advice, and recommendations of 
        the committee regarding the proposed fee; and
            (4) consider and analyze any comments, advice, or 
        recommendations received from the relevant advisory 
        committee before setting or adjusting (as the case may 
        be) the fee.
    (e) Publication in the Federal Register.--
            (1) Publication and rationale.--The Director 
        shall--
                    (A) publish any proposed fee change under 
                this section in the Federal Register;
                    (B) include, in such publication, the 
                specific rationale and purpose for the 
                proposal, including the possible expectations 
                or benefits resulting from the proposed change; 
                and
                    (C) notify, through the Chair and Ranking 
                Member of the Committees on the Judiciary of 
                the Senate and the House of Representatives, 
                the Congress of the proposed change not later 
                than the date on which the proposed change is 
                published under subparagraph (A).
            (2) Public comment period.--The Director shall, in 
        the publication under paragraph (1), provide the public 
        a period of not less than 45 days in which to submit 
        comments on the proposed change in fees.
            (3) Publication of final rule.--The final rule 
        setting or adjusting a fee under this section shall be 
        published in the Federal Register and in the Official 
        Gazette of the Patent and Trademark Office.
            (4) Congressional comment period.--A fee set or 
        adjusted under subsection (a) may not become 
        effective--
                    (A) before the end of the 45-day period 
                beginning on the day after the date on which 
                the Director publishes the final rule adjusting 
                or setting the fee under paragraph (3); or
                    (B) if a law is enacted disapproving such 
                fee.
            (5) Rule of construction.--Rules prescribed under 
        this section shall not diminish--
                    (A) the rights of an applicant for a patent 
                under title 35, United States Code, or for a 
                mark under the Trademark Act of 1946; or
                    (B) any rights under a ratified treaty.
    (f) Retention of Authority.--The Director retains the 
authority under subsection (a) to set or adjust fees only 
during such period as the Patent and Trademark Office remains 
an agency within the Department of Commerce.
    (g) [omitted-amendatory]
    (h) Electronic Filing Incentive.--
            (1) In general.--Notwithstanding any other 
        provision of this section, an additional fee of $400 
        shall be established for each application for an 
        original patent, except for a design, plant, or 
        provisional application, that is not filed by 
        electronic means as prescribed by the Director. The fee 
        established by this subsection shall be reduced by 50 
        percent for small entities that qualify for reduced 
        fees under section 41(h)(1) of title 35, United States 
        Code. All fees paid under this subsection shall be 
        deposited in the Treasury as an offsetting receipt that 
        shall not be available for obligation or expenditure.
            (2) Effective date.--This subsection shall take 
        effect upon the expiration of the 60-day period 
        beginning on the date of the enactment of this Act.
    (i) Effective Date; Sunset.--
            (1) Effective date.--Except as provided in 
        subsection (h), this section and the amendments made by 
        this section shall take effect on the date of the 
        enactment of this Act.
            (2) Sunset.--The authority of the Director to set 
        or adjust any fee under subsection (a) shall terminate 
        upon the expiration of the [7-year] 17-year period 
        beginning on the date of the enactment of this Act.
            (3) Prior regulations not affected.--The 
        termination of authority under this subsection shall 
        not affect any regulations issued under this section 
        before the effective date of such termination or any 
        rulemaking proceeding for the issuance of regulations 
        under this section that is pending on such date.

           *       *       *       *       *       *       *


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.
                    (B) A person may not file a petition for a 
                transitional proceeding with respect to a 
                covered business method patent unless the 
                person or the person's real party in interest 
                or privy has been sued for infringement of the 
                patent or has been charged with infringement 
                under that patent.
                    (C) A petitioner in a transitional 
                proceeding who challenges the validity of 1 or 
                more claims in a covered business method patent 
                on a ground raised under section 102 or 103 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
                            (ii) prior art that--
                                    (I) discloses the invention 
                                more than 1 year before the 
                                date of the application for 
                                patent in the United States; 
                                and
                                    (II) would be described by 
                                section 102(a) of such title 
                                (as in effect on the day before 
                                the effective date set forth in 
                                section 3(n)(1)) if the 
                                disclosure had been made by 
                                another before the invention 
                                thereof by the applicant for 
                                patent.
                    (D) The petitioner in a transitional 
                proceeding that results in a final written 
                decision under section 328(a) of title 35, 
                United States Code, with respect to a claim in 
                a covered business method patent, or the 
                petitioner's real party in interest, may not 
                assert, either in a civil action arising in 
                whole or in part under section 1338 of title 
                28, United States Code, or in a proceeding 
                before the International Trade Commission under 
                section 337 of the Tariff Act of 1930 (19 
                U.S.C. 1337), that the claim is invalid on any 
                ground that the petitioner raised during that 
                transitional proceeding.
                    (E) The Director may institute a 
                transitional proceeding only for a patent that 
                is a covered business method patent.
            (2) Effective date.--The regulations issued under 
        paragraph (1) shall take effect upon the expiration of 
        the 1-year period beginning on the date of the 
        enactment of this Act and shall apply to any covered 
        business method patent issued before, on, or after that 
        effective date, except that the regulations shall not 
        apply to a patent described in section 6(f)(2)(A) of 
        this Act during the period in which a petition for 
        post-grant review of that patent would satisfy the 
        requirements of section 321(c) of title 35, United 
        States Code.
            (3) Sunset.--
                    (A) In general.--This subsection, and the 
                regulations issued under this subsection, are 
                repealed effective upon the expiration of the 
                8-year period beginning on the date that the 
                regulations issued under to paragraph (1) take 
                effect.
                    (B) Applicability.--Notwithstanding 
                subparagraph (A), this subsection and the 
                regulations issued under this subsection shall 
                continue to apply, after the date of the repeal 
                under subparagraph (A), to any petition for a 
                transitional proceeding that is filed before 
                the date of such repeal.
    (b) Request for Stay.--
            (1) In general.--If a party seeks a stay of a civil 
        action alleging infringement of a patent under section 
        281 of title 35, United States Code, relating to a 
        transitional proceeding for that patent, the court 
        shall decide whether to enter a stay based on--
                    (A) whether a stay, or the denial thereof, 
                will simplify the issues in question and 
                streamline the trial;
                    (B) whether discovery is complete and 
                whether a trial date has been set;
                    (C) whether a stay, or the denial thereof, 
                would unduly prejudice the nonmoving party or 
                present a clear tactical advantage for the 
                moving party; and
                    (D) whether a stay, or the denial thereof, 
                will reduce the burden of litigation on the 
                parties and on the court.
            (2) Review.--A party may take an immediate 
        interlocutory appeal from a district court's decision 
        under paragraph (1). The United States Court of Appeals 
        for the Federal Circuit shall review the district 
        court's decision to ensure consistent application of 
        established precedent, and such review may be de novo.
    (c) ATM Exemption for Venue Purposes.--In an action for 
infringement under section 281 of title 35, United States Code, 
of a covered business method patent, an automated teller 
machine shall not be deemed to be a regular and established 
place of business for purposes of section 1400(b) of title 28, 
United States Code.
    (d) Definition.--
            (1) In general.--For purposes of this section, the 
        term ``covered business method patent'' means a patent 
        that claims a method or corresponding apparatus for 
        performing data processing or other operations used in 
        the practice, administration, or management of a 
        financial product or service, except that the term does 
        not include patents for technological inventions.
            (2) Regulations.--To assist in implementing the 
        transitional proceeding authorized by this section, the 
        Director shall issue regulations for determining 
        whether a patent is for a technological invention.
    (e) Rule of Construction.--Nothing in this section shall be 
construed as amending or interpreting categories of patent-
eligible subject matter set forth under section 101 of title 
35, United States Code.

           *       *       *       *       *       *       *

                              ----------                              


                           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) Establishment.--
            (1) In general.--There is established a program, in 
        each of the United States district courts designated 
        under subsection (b), under which--
                    (A) those district judges of that district 
                court who request to hear cases under which 1 
                or more issues arising under any Act of 
                Congress relating to patents or plant variety 
                protection are required to be decided, are 
                designated by the chief judge of the court to 
                hear those cases;
                    (B) cases described in subparagraph (A) are 
                randomly assigned to the judges of the district 
                court, regardless of whether the judges are 
                designated under subparagraph (A);
                    (C) a judge not designated under 
                subparagraph (A) to whom a case is assigned 
                under subparagraph (B) may decline to accept 
                the case; and
                    (D) a case declined under subparagraph (C) 
                is randomly reassigned to 1 of those judges of 
                the court designated under subparagraph (A).
            (2) Senior judges.--Senior judges of a district 
        court may be designated under paragraph (1)(A) if at 
        least 1 judge of the court in regular active service is 
        also so designated.
            (3) Right to transfer cases preserved.--This 
        section shall not be construed to limit the ability of 
        a judge to request the reassignment of or otherwise 
        transfer a case to which the judge is assigned under 
        this section, in accordance with otherwise applicable 
        rules of the court.
    (b) Designation.--
            (1) In general.--Not later than 6 months after the 
        date of the enactment of this Act, the Director of the 
        Administrative Office of the United States Courts shall 
        designate not less than 6 United States district 
        courts, in at least 3 different judicial circuits, in 
        which the program established under subsection (a) will 
        be carried out.
            (2) Criteria for designations.--
                    (A) In general.--The Director shall make 
                designations under paragraph (1) from--
                            (i) the 15 district courts in which 
                        the largest number of patent and plant 
                        variety protection cases were filed in 
                        the most recent calendar year that has 
                        ended; or
                            (ii) the district courts that have 
                        adopted, or certified to the Director 
                        the intention to adopt, local rules for 
                        patent and plant variety protection 
                        cases.
                    (B) Selection of courts.--From amongst the 
                district courts that satisfy the criteria for 
                designation under this subsection, the Director 
                shall select--
                            (i) 3 district courts that each 
                        have at least 10 district judges 
                        authorized to be appointed by the 
                        President, whether under section 133(a) 
                        of title 28, United States Code, or on 
                        a temporary basis under any other 
                        provision of law, and at least 3 judges 
                        of the court have made the request 
                        under subsection (a)(1)(A); and
                            (ii) 3 district courts that each 
                        have fewer than 10 district judges 
                        authorized to be appointed by the 
                        President, whether under section 133(a) 
                        of title 28, United States Code, or on 
                        a temporary basis under any other 
                        provision of law, and at least 2 judges 
                        of the court have made the request 
                        under subsection (a)(1)(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).
    (d) Applicability.--The program established under 
subsection (a) shall apply in a district court designated under 
subsection (b) only to cases commenced on or after the date of 
such designation.
    (e) Reports to Congress.--
            (1) In general.--At the times specified in 
        paragraph (2), the Director of the Administrative 
        Office of the United States Courts, in consultation 
        with the chief judge of each of the district courts 
        designated under subsection (b) and the Director of the 
        Federal Judicial Center, 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 pilot program established under subsection (a). 
        The report shall include--
                    (A) an analysis of the extent to which the 
                program has succeeded in developing expertise 
                in patent and plant variety protection cases 
                among the district judges of the district 
                courts so designated;
                    (B) an analysis of the extent to which the 
                program has improved the efficiency of the 
                courts involved by reason of such expertise;
                    (C) with respect to patent cases handled by 
                the judges designated pursuant to subsection 
                (a)(1)(A) and judges not so designated, a 
                comparison between the 2 groups of judges with 
                respect to--
                            (i) the rate of reversal by the 
                        Court of Appeals for the Federal 
                        Circuit, of such cases on the issues of 
                        claim construction and substantive 
                        patent law; and
                            (ii) the period of time elapsed 
                        from the date on which a case is filed 
                        to the date on which trial begins or 
                        summary judgment is entered;
                    (D) a discussion of any evidence indicating 
                that litigants select certain of the judicial 
                districts designated under subsection (b) in an 
                attempt to ensure a given outcome; and
                    (E) an analysis of whether the pilot 
                program should be extended to other district 
                courts, or should be made permanent and apply 
                to all district courts.
            (2) Timetable for reports.--The times referred to 
        in paragraph (1) are--
                    (A) not later than the date that is 5 years 
                and 3 months after the end of the 6-month 
                period described in subsection (b); and
                    (B) not later than 5 years after the date 
                described in subparagraph (A).
            (3) Periodic reports.--The Director of the 
        Administrative Office of the United States Courts, in 
        consultation with the chief judge of each of the 
        district courts designated under subsection (b) and the 
        Director of the Federal Judicial Center, shall keep the 
        committees referred to in paragraph (1) informed, on a 
        periodic basis while the pilot program is in effect, 
        with respect to the matters referred to in 
        subparagraphs (A) through (E) of paragraph (1).

           *       *       *       *       *       *       *

                              ----------                              


             PATENT LAW TREATIES IMPLEMENTATION ACT OF 2012



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

           *       *       *       *       *       *       *


SEC. 202. CONFORMING AMENDMENTS.

    (a) In General.--Section 171 of title 35, United States 
Code, is amended--
            (1) by striking ``Whoever'' and inserting ``(a) In 
        General.--Whoever'';
            (2) by striking ``The provisions'' and inserting 
        ``(b) Applicability of This Title.--The provisions''; 
        and
            (3) by adding at the end the following:
    ``(c) Filing Date.--The filing date of an application for 
patent for design shall be the date on which the specification 
as prescribed by section 112 and any required drawings are 
filed.''.
    (b) Relief in Respect of Time Limits and Reinstatement of 
Right.--Title 35, United States Code, is amended--
            (1) in section 41--
                    (A) in subsection (a), by striking 
                paragraph (7) and inserting the following:
            ``(7) Revival fees.--On filing each petition for 
        the revival of an abandoned application for a patent, 
        for the delayed payment of the fee for issuing each 
        patent, for the delayed response by the patent owner in 
        any reexamination proceeding, for the delayed payment 
        of the fee for maintaining a patent in force, for the 
        delayed submission of a priority or benefit claim, or 
        for the extension of the 12-month period for filing a 
        subsequent application, $1,700.00. The Director may 
        refund any part of the fee specified in this paragraph, 
        in exceptional circumstances as determined by the 
        Director''; and
                    (B) in subsection (c), by striking 
                paragraph (1) and inserting the following:
            ``(1) Acceptance.--The Director may accept the 
        payment of any maintenance fee required by subsection 
        (b) after the 6-month grace period if the delay is 
        shown to the satisfaction of the Director to have been 
        unintentional. The Director may require the payment of 
        the fee specified in subsection (a)(7) as a condition 
        of accepting payment of any maintenance fee after the 
        6-month grace period. If the Director accepts payment 
        of a maintenance fee after the 6-month grace period, 
        the patent shall be considered as not having expired at 
        the end of the grace period.'';
            (2) in section 119(b)(2), in the second sentence, 
        by striking ``including the payment of a surcharge'' 
        and inserting ``including the requirement for payment 
        of the fee specified in section 41(a)(7)'';
            (3) in section 120, in the fourth sentence, by 
        striking ``including the payment of a surcharge'' and 
        inserting ``including the requirement for payment of 
        the fee specified in section 41(a)(7)'';
            (4) in section 122(b)(2)(B)(iii), in the second 
        sentence, by striking ``, unless it is shown'' and all 
        that follows through ``unintentional'';
            (5) in section 133, by striking ``, unless it be 
        shown'' and all that follows through ``unavoidable'';
            (6) by striking section 151 and inserting the 
        following:'';
            [(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''.

           *       *       *       *       *       *       *

                              ----------                              


                          ACT OF JULY 5, 1946



           *       *       *       *       *       *       *
TITLE VI--REMEDIES

           *       *       *       *       *       *       *


    Sec. 39. (a) The district and territorial courts of the 
United States shall have original jurisdiction, the courts of 
appeals of the United States (other than the United States 
Court of Appeals for the Federal Circuit) and the United States 
Court of Appeals for the District of Columbia shall have 
appellate jurisdiction, of all actions arising [under this Act] 
under this Act (except as provided in section 1295(a)(4) of 
title 28, United States Code), without regard to the amount in 
controversy or to diversity or lack of diversity of the 
citizenship of the parties.
    (b) No State or other jurisdiction of the United States or 
any political subdivision or any agency thereof may require 
alteration of a registered mark, or require that additional 
trademarks, service marks, trade names, or corporate names that 
may be associated with or incorporated into the registered mark 
be displayed in the mark in a manner differing from the display 
of such additional trademarks, service marks, trade names, or 
corporate names contemplated by the registered mark as 
exhibited in the certificate of registration issued by the 
United States Patent and Trademark Office.

           *       *       *       *       *       *       *


                            Dissenting Views

    While we support reasonable changes to improve and enhance 
the patent system, we cannot support the changes included in 
H.R. 9 which, taken as a whole, will undermine our Nation's 
patent system.
    Without question, the problem of abusive patent litigation 
and the exploitation of the patent process demand a solution. 
Congress should respond with an approach that is effective and 
that targets the sources of this problem. Unfortunately, H.R. 
9, the ``Innovation Act,'' is the wrong approach. The bill is 
overly broad, unbalanced, and will impede rather than promote 
innovation. In particular, we oppose the legislation because 
the bill: (1) includes one-sided changes to our civil justice 
system that limit the rights of all patent holders and fails to 
target so-called ``patent trolls;'' (2) fails to effectively 
address the extortionate use of demand letters; (3) does not 
fully address abuse of post grant proceedings at the U.S. 
Patent and Trademark Office (USPTO); (4) continues fee 
diversion from the USPTO; and (5) ignores the changing 
landscape in patent litigation.
    These concerns are shared by a broad cross-section of 
stakeholders in the patent system, representing a vast and 
diverse range of industry interests. These include 
organizations on behalf of the life sciences industries, the 
higher education community, agricultural interests, 
entrepreneurs, inventors, small businesses, venture 
capitalists, the patent law community, experts in civil 
litigation, the Federal judiciary, and constitutional and 
property rights advocates. Specifically, they include the 
Biotechnology Industry Organization (BIO), the Pharmaceutical 
Research and Manufacturers Association (PhRMA), the Medical 
Device Manufacturers Association (MDMA), the National Venture 
Capital Association (NVCA), the American Association for 
Justice (AAJ), the Association of American Universities (AAU), 
the American Council on Education (ACE), the Association of 
American Medical Colleges (AAMC), the Association of Public and 
Land-grant Universities (APLU), the Council of 1890 
Universities, the Association of University Technology Managers 
(AUTM), the Council on Governmental Relations (COGR), the 
Coalition for 21st Century Patent Reform (21C), the Innovation 
Alliance (IA), the American Intellectual Property Law 
Association (AIPLA), the Institute of Electrical and 
Electronics Engineers-USA (IEEE-USA), the National Small 
Business Association (NSBA), the Small Business Technology 
Council (SBTC), the Alliance for U.S. Startups and Inventors 
for Jobs (USIJ), the California Life Sciences Association 
(CLSA), Entrepreneurs for Growth, Research!America, the U.S. 
Business & Industry Council, VentureOhio, the Inventor's 
Project, the California Association of Wheat Growers, the 
California Farm Bureau Federation, the Western Agricultural 
Processors Association, the Judicial Conference of the United 
States, the American Bar Association (ABA), the Federal Bar 
Association, the Federal Circuit Bar Association, Heritage 
Action, the American Conservative Union, the Club for Growth, 
and the Eagle Forum, among many others.\1\
---------------------------------------------------------------------------
    \1\These and other well-regarded groups and individuals have 
expressed concerns with the bill. The following materials are on file 
with the House of Representatives Committee on the Judiciary, 
Democratic Staff, and are accessible on the minority website: Statement 
of PhRMA (June 11, 2015) (announcing its opposition to H.R. 9); News 
Release from BIO (June 11, 2015) (urging ``Members of Congress to 
oppose the Innovation Act''); Statement of Kevin Rhodes, Chairman of 
21C and Chief Intellectual Property Counsel of 3M Company (June 12, 
2015) (urging that ``H.R. 9 as reported by the House Judiciary 
Committee not be brought to the House Floor''); Letter from Brian 
Pomper, Exec. Dir. of IA, to Rep. Bob Goodlatte, Chairman, H. Comm. on 
the Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. Comm. on 
the Judiciary (June 10, 2015) (``The Innovation Alliance must continue 
to oppose the revised H.R. 9''); Letter from Sharon A. Israel, Pres. of 
AIPLA, to Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary, & 
Rep. John Conyers, Jr., Ranking Member, H. Comm. on the Judiciary (June 
10, 2015) (``the [manager's amendment does] not achieve the desired 
balance of interests or alleviate the concerns we raised in our April 
16, 2015 letter''); Letter from Linda Lipsen, CEO of AAJ, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (June 10, 2015) 
(submitting its ``letter in strong opposition to H.R. 9''); Letter from 
James A. Jefferies, Pres. of IEEE-USA, to Rep. Bob Goodlatte, Chairman, 
H. Comm. on the Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. 
Comm. on the Judiciary (June 10, 2015) (``H.R. 9 as introduced will 
have a significant negative impact on Americans' ability to continue 
unsurpassed innovation.''); Statement from Mark Leahey, Pres. and CEO 
of MDMA (June 10, 2015) (announcing its opposition to H.R. 9); Letter 
from Bobby Franklin, Pres. and CEO of NVCA, to Rep. Bob Goodlatte, 
Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, Jr., Ranking 
Member, H. Comm. on the Judiciary (June 10, 2015) (``On behalf of 
`NVCA', I am writing to express our opposition to H.R. 9, as it is 
currently written.''); Statement from AAU, ACE, AAMC, APLU, AUTM, and 
COGR (June 10, 2015) (``We unfortunately must oppose the 
legislation.''); Letter from Juliette Bell, Chair of the 1890 Council 
of Universities, and RoSusan D. Bartee, Interim Vice President of 
Access and Success, to Rep. G.K. Butterfield, Chairman of the 
Congressional Black Caucus (July 17, 2015) (``We urge your support for 
addressing patent troll abuses in a measured and balanced way and thus 
your opposition to H.R. 9''); Letter from Todd McCracken, Pres. and CEO 
of the NSBA, to Rep. Michael Burgess & Rep. Marcy Kaptur (May 26, 2015) 
(opposing the Innovation Act); Letter from Robert N. Schmidt, Co-Chair 
of SBTC to Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary 
(June 10, 2015) (``writing to oppose H.R. 9''); Letter from Charles 
Giancarlo, Chairman of the Board of Advisors for USIJ, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (June 10, 2015) 
(``Without specific reforms to sections of the Innovation Act . . . 
USIJ must continue to strongly oppose the bill.''); Statement from CLSA 
(June 12, 2015) (``CLSA must therefore strongly urge members of our 
California congressional delegation to oppose the legislation.''); 
Letter from Mary Woolley, President and CEO of Research!America, to 
Rep. Bob Goodlatte, Chairman, H. Comm. on the Judiciary, Rep. John 
Conyers, Jr., Ranking Member, H. Comm. on the Judiciary, Sen. Charles 
Grassley, Chairman, S. Comm. on the Judiciary, & Sen. Patrick Leahy, 
Ranking Member, S. Comm. on the Judiciary (July 15, 2015) (several 
issues ``merit further consideration and remedial action before 
legislation reaches the House or Senate floor.''); Letter from John 
McIlwraith, Chairman of VentureOhio, to Rep. John Boehner, Speaker of 
the House (May 20, 2015) (``VentureOhio does not support the current 
version of H.R. 9 and its overly broad provisions.''); Letter from 
California's agricultural community to Rep. Bob Goodlatte (May 21, 
2015) (``The Innovation Act/H.R. 9 actually reduces protections for 
patent holders and could ultimately weaken U.S. patents overall.''); 
Letter from James C. Duff, Secretary of the Judicial Conference of the 
United States, to Rep. John Conyers, Jr., Ranking Member, H. Comm. on 
the Judiciary (May 28, 2015) (listing concerns with proposed rules for 
patent cases and the proposed expansion and extension of the patent 
pilot program); Letter from Matthew B. Moreland, Pres. of the Federal 
Bar Association, to Rep. Bob Goodlatte, Chairman, H. Comm. on the 
Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. Comm. on the 
Judiciary (Mar. 26, 2015) (``[T]he necessity for legislation that 
overlaps with actions within the authority of the judiciary appears ill 
advised.''); Letter from James E. Brookshire, Exec. Dir. of the Federal 
Circuit Bar Association, to Rep. Bob Goodlatte, Chairman, H. Comm. on 
the Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. Comm. on 
the Judiciary (Feb. 20, 2015) (``H.R. 9 has now become both unnecessary 
and . . . problematic.''); Statement of Michael A. Needham, CEO of 
Heritage Action (July 20, 2015) (``Heritage Action opposes H.R. 9. The 
bill should not come to the floor.''); Letter from Phyllis Schlafly, 
Chair of the Eagle Forum, to Rep. Bob Goodlatte, Chairman, H. Comm. on 
the Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. Comm. on 
the Judiciary (June 10, 2015) (``Eagle Forum must oppose the 
`Innovation Act' and we urge Judiciary Committee members to vote 
against H.R. 9.''); General Letter from Dan Schneider, Exec. Dir. of 
the American Conservative Union (June 10, 2015) (urging Members to 
``[p]lease vote `NO' on H.R. 9''); and Letter from 25 conservative 
advocates to Rep. John Boehner, Speaker of the House, Rep. Nancy 
Pelosi, Minority Leader of the House, Sen. Mitch McConnell, Sen. 
Majority Leader, and Sen. Harry Reid, Sen. Minority Leader (Mar. 11, 
2015) (``We ask that you support innovation and a strong patent system 
by opposing the `Innovation Act' and stopping any such bill from 
reaching the floor.'').
---------------------------------------------------------------------------
    For these reasons, and those described below, we 
respectfully dissent and urge our colleagues to reject this 
flawed legislation.

                BACKGROUND OF ABUSIVE PATENT LITIGATION

    H.R. 9 attempts to respond to abuses and asymmetries in the 
patent system by changing court rules and procedures for patent 
cases. Bad actors in the patent system, often referred to as 
``patent trolls,'' own vague patents and use litigation, or the 
threat of litigation, to coerce a quick settlement from 
legitimate inventors.\2\ Their typical behavior includes 
sending out hundreds of vague patent infringement demand 
letters, offering a quick settlement, and when the recipients 
of the demand letters do not settle, the bad actors sometimes 
file lawsuits.\3\ Once in litigation, the so-called ``patent 
trolls'' generally seek to drive up costs through extensive 
discovery, hoping to encourage the defendant to settle even a 
frivolous claim early, rather than paying the significant costs 
that litigation may entail.\4\
---------------------------------------------------------------------------
    \2\See Patent Reform: Protecting American Innovators and Job 
Creators from Abusive Patent Litigation: Hearing Before the H. Comm. on 
the Judiciary, 114th Cong. 8 (2015) [hereinafter Mar. 25, 2015 Hearing] 
(testimony of Mark Griffin, General Counsel, Overstock.com).
    \3\See id. at 17 (testimony of Kathryn Underwood, Pres. and CEO, 
Ledyard National Bank).
    \4\See id. at 9 (testimony of Griffin).
---------------------------------------------------------------------------

                          CONCERNS WITH H.R. 9

I. THE INNOVATION ACT LIMITS THE RIGHTS OF ALL PATENT HOLDERS, NOT JUST 
    SO-CALLED ``PATENT TROLLS,'' AND PRESENTS OTHER POLICY CONCERNS

    We support a targeted approach to curbing abusive patent 
litigation practices. However, the Innovation Act is overly 
broad and goes well beyond the problem of abusive patent 
litigation. It could harm legitimate patent holders and 
individual inventors by potentially weakening every single 
patent in America. Among its most pernicious provisions, the 
bill would:

         LImpose burdensome pleading requirements for 
        plaintiffs that exceed what is required in other civil 
        cases and which demand details plaintiffs may not know 
        before conducting discovery (Section 3(a));

         LDiscourage, through a presumptive fee 
        shifting standard, small businesses and individual 
        inventors from bringing meritorious lawsuits because 
        the risk of having to pay the other side's court costs 
        may outweigh the benefits of winning (Section 3(b));

         LDeter investments by venture capitalists in 
        entrepreneurs, start-ups, and individual inventors 
        through harsh joinder rules that may make the investors 
        liable for paying attorneys' fees (Section 3(c));

         LLimit discovery for plaintiffs that will lead 
        to costly litigation and case delays (Section 3(d)); 
        and

         LImproperly shield some of the most culpable 
        infringers through an over-broad stay of litigation for 
        end users of infringing products (Section 5).

A. LThe Bill's Heightened Pleading Requirements Will Deny Legitimate 
        Inventors Access to the Courts
    We oppose the heightened pleading requirements established 
by section 3(a) of the bill because they are unfair to all 
patent holders; are drafted in a one-sided manner; will prolong 
litigation; and are unnecessary because the courts are already 
addressing the issue.
    Supporters of the Innovation Act contend that plaintiffs in 
patent cases are not required to provide sufficient detail in 
their complaints to give defendants fair notice of what patents 
the defendants are alleged to have infringed and how the 
patents have been infringed. However, the information required 
by the heightened pleading standards in H.R. 9 is unduly 
burdensome on patent owners because the information may not be 
available to the patent holders at the time of the filing.\5\ 
As the NSBA explains, the bill's heightened pleading standards 
``essentially requir[e] the inventor trying to protect her 
patent'' to ``prove her case before filing a case.''\6\ 
Furthermore, as MDMA points out, ``[t]he combination of 
heightened pleadings and limited discovery is a `double 
jeopardy' of sorts that requires a petitioner to guess at 
detailed facts that may not be in their possession (e.g., how a 
product is manufactured), and then be penalized by not being 
able to obtain the facts, even those that may establish clear 
infringement.''\7\ AIPLA expressed its concern about this 
provision as well, writing that ``statutorily imposing detailed 
pleading requirements, as in the current draft, may deter 
legitimate infringement actions.''\8\
---------------------------------------------------------------------------
    \5\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.
    \6\Letter from Todd McCracken, Pres. and CEO of NSBA to Rep. John 
Boehner, Speaker of the House, and Rep. Nancy Pelosi, Minority Leader 
of the House (May 18, 2015) (on file with the H. Comm. on the 
Judiciary, Democratic Staff).
    \7\Letter from Mark B. Leahey, Pres. and CEO of MDMA, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (Apr. 14, 2015) 
[hereinafter MDMA April 14, 2015 Letter] (on file with the H. Comm. on 
the Judiciary, Democratic Staff).
    \8\Letter from Sharon A. Israel, Pres. of AIPLA, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (Apr. 16, 2015) 
[hereinafter AIPLA April 16, 2015 Letter] (on file with the H. Comm. on 
the Judiciary, Democratic Staff).
---------------------------------------------------------------------------
    Second, section 3(a) is drafted in a one-sided manner. As 
the ABA noted in writing about H.R. 3309, the ``Innovation 
Act,'' upon which H.R. 9 is modeled, the subsection 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.''\9\ 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 IEEE-USA 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.''\10\ In addition, BIO has noted that the pleading 
requirements in H.R. 9, ``remain overly burdensome and will 
impede the ability of all patent owners to timely bring suit to 
protect against infringement. We believe that the new language 
regarding identification of claims is too ambiguous and does 
not provide sufficient guidance to parties or courts on what a 
sufficient complaint would require, creating too many 
opportunities for abusive motions by accused infringers 
challenging the sufficiency of complaints and delaying 
enforcement against them.''\11\
---------------------------------------------------------------------------
    \9\American Bar Association Section of Intellectual Property Law, 
2013 Fall Council Meeting, Innovation Act Task Force Resolutions and 
Reports, at 5, Nov. 8, 2013.
    \10\Letter from Marc T. Apter, Pres. of IEEE-USA to Rep. Robert 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (Nov. 19, 2013) (on file 
with the H. Comm. on the Judiciary, Democratic Staff).
    \11\Letter from James C. Greenwood, Pres. and CEO of BIO, to Rep. 
John Conyers, Jr., Ranking Member, H. Comm. on the Judiciary (June 19, 
2015) [hereinafter BIO June 19, 2015 Letter] (on file with the H. Comm. 
on the Judiciary, Democratic Staff).
---------------------------------------------------------------------------
    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. AAJ has noted 
that the ``excessively-detailed pleadings'' required under the 
bill ``would lead to additional litigation and challenges even 
before the case begins.''\12\ In addition, IA has warned that 
H.R. 9's ``overly broad and burdensome'' pleadings requirements 
will impose ``massive costs and delays in patent cases'' to 
both plaintiffs and defendants.\13\ In the same vein, AIPLA 
explained that ``[t]hese requirements could raise enforcement 
costs and prolong litigation by increasing preliminary motion 
practice, among other things.''\14\ Similarly, 21C contends 
that ``this provision is also likely to raise costs and prolong 
case resolutions by fostering more preliminary motion 
practice.''\15\ The ABA, commenting on similar provisions in S. 
1137, the ``Protecting American Talent and Entrepreneurship 
(PATENT) Act,'' suggested that heightened pleading requirements 
will ``generate extensive motion practice, resulting in 
increased delays and expenses of the proceedings.''\16\ 
Recognizing the particular burden that these requirements would 
place on individuals and small entities, Representative Scott 
Peters (D-CA) offered an amendment during the markup of H.R. 9 
to exempt small businesses, independent inventors, and non-
profit organizations from section 3(a), but it was rejected by 
voice vote.\17\
---------------------------------------------------------------------------
    \12\Letter from Linda Lipsen, CEO of AAJ, to Rep. Bob Goodlatte, 
Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, Jr., Ranking 
Member, H. Comm. on the Judiciary (June 10, 2015) [hereinafter AAJ June 
10, 2015 Letter] (on file with the H. Comm. on the Judiciary, 
Democratic Staff).
    \13\Letter from Brian Pomper, Exec. Dir. of IA, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (June 10, 2015) (on file 
with the H. Comm. on the Judiciary, Democratic Staff).
    \14\AIPLA April 16, 2015 Letter.
    \15\Summary of 21C's Positions on Provisions of the Innovation Act 
of 2015, at 5, available at http://patentsmatter.com/issue/pdfs/
20150316_21CKeyProvisionsChartTalkingPoints.pdf [hereinafter 21C 
Position Summary on H.R. 9].
    \16\Letter from William C. Hubbard, Pres. of the American Bar 
Assocation, to Sen. Chuck Grassley, Chairman, S. Comm. on the 
Judiciary, & Sen. Patrick Leahy, Ranking Member, S. Comm. on the 
Judiciary (June 1, 2015) (on file with the H. Comm. on the Judiciary, 
Democratic Staff).
    \17\Unofficial Tr. of Markup of H.R. 9, ``The Innovation Act,'' by 
the H. Comm on the Judiciary, 114th Cong. at 158 (June 11, 2015) 
[hereinafter H.R. 9 Markup Unofficial Transcript] (Amendment #15 by 
Representative Scott H. Peters) (failed by voice vote), available at 
http://
judiciary.house.gov/_cache/files/ec171c22-04d4-4c0f-91ac-8b6ecc5859f1/
06.11.15-markup-
transcript.pdf.
---------------------------------------------------------------------------
    Finally, as with many other provisions in section 3, it is 
unnecessary for Congress to change the pleadings requirements 
because the federal judiciary is already addressing the issue. 
The Supreme Court has approved the Judicial Conference's 
recommendation under the Rules Enabling Act\18\ to eliminate 
Form 18\19\ of the Federal Rules of Civil Procedure, which 
provides for very basic notice pleading in patent cases.\20\ 
This change will take effect on December 1, 2015, unless 
Congress acts to reject, modify, or defer it.\21\ When Form 18 
is eliminated, patent infringement suits will be subject to the 
already heightened pleading requirements provided for under the 
Supreme Court's decisions in Bell Atlantic v. Twombly\22\ and 
Ashcroft v. Iqbal.\23\ In these cases, the Court held that 
plaintiffs must include enough facts in their complaint to show 
that their claim is ``plausible on its face.''\24\ As the 
Federal Bar Association has explained, ``[f]reed from the 
strictures of Form 18, the judiciary will be able to develop a 
body of common law as to the proper pleading standard under the 
evolving Twombly/Iqbal standard. The federal judiciary should 
be given the chance to do so.''\25\
---------------------------------------------------------------------------
    \18\28 U.S.C. Sec. Sec. 2071-77 (2015).
    \19\Fed. R. Civ. P. 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.
    \20\See Amendments to the Federal Rules of Civil Procedure Adopted 
by the Supreme Court of the United States pursuant to Section 2072 of 
Title 28, United States Code (Apr. 29, 2015) [hereinafter Supreme Court 
Adopts Rules Changes], available at http://www.supremecourt.gov/orders/
courtorders/frcv15%28update%29_1823.pdf; Judicial Conference of the 
United States.
    \21\Id.
    \22\550 U.S. 544 (2007).
    \23\556 U.S. 662 (2009).
    \24\Leslie Gordon, For Federal Plaintiffs, Twombly and Iqbal Still 
Present a Catch-22, ABA Journal, Jan. 1, 2011, available at http://
abajournal.com/magazine/article/for_federal_plaintiffs_
twombly_and_iqbal_still_present_a_catch-22.
    \25\Letter from Matthew B. Moreland, Pres. of the Federal Bar 
Association, to Rep. Bob Goodlatte, Chairman, H. Comm. on the 
Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. Comm. on the 
Judiciary (Mar. 26, 2015) [hereinafter Federal Bar Association Mar. 26, 
2015 Letter] (on file with the H. Comm. on the Judiciary, Democratic 
Staff).
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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; deprives courts of discretion; is drafted in an 
over-broad manner to apply beyond patent infringement actions; 
would lead to increased litigation costs; and is unnecessary 
because the Federal courts have already made it easier for 
prevailing parties to be awarded fees.
    Supporters of the Innovation Act claim that abusive 
litigation can be deterred if bad actors face a significant 
risk that they will be forced to pay the other party's 
attorneys' fees and court costs if they are found to have 
brought a frivolous case. To the extent that fee shifting can, 
in fact, deter abusive litigation, H.R. 9's provision goes too 
far. 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 ``patent trolls.'' The non-prevailing 
party will carry the burden of establishing that fees should 
not be imposed.
    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 system is not only unfair to independent 
inventors and entrepreneurs, it would set a dangerous precedent 
in our civil justice system generally. AAJ calls section 3(b) a 
``drastic provision that would have a significant impact on who 
can bring a patent case. The parties who would be affected are 
the small inventors who would now be less likely to sue for 
patent infringement out of fear of losing and not being able to 
pay the vast attorney fees of the infringing party.''\26\ 
Similarly, MDMA has warned that ``[f]aced with the prospect of 
having to cover the legal expenses of larger companies, start-
up companies with limited capital either will not bring 
otherwise meritorious cases against infringers of their patents 
or will be forced into early settlements when defending against 
alleged infringement.''\27\
---------------------------------------------------------------------------
    \26\AAJ June 10, 2015 Letter.
    \27\MDMA April 14, 2015 Letter.
---------------------------------------------------------------------------
    The dangerous nature of this provision was highlighted in 
an article by the American Enterprise Institute discussing H.R. 
3309, upon which H.R. 9 is modeled. The article 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 be just patent 
        trolls who pay but, at times, the legitimate companies 
        who occasionally are found to infringe [patent trolls'] 
        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.\28\
---------------------------------------------------------------------------
    \28\Patent troll legislation: a closer look (pt. 2)--fee shifting, 
Tech Policy Daily, Nov. 26, 2013, available at http://
www.techpolicydaily.com/technology/patent-troll-legislation-closer-
look-pt-2-fee-shifting.

    In this regard, we would dispute the Majority's assertion 
that section 3(b) is fairly based on the Equal Access to 
Justice Act (EAJA).\29\ 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.
---------------------------------------------------------------------------
    \29\See H.R. 9 Markup Unofficial Transcript, at 88-89 (statement of 
Chairman Bob Goodlatte).
---------------------------------------------------------------------------
    Further, although the bill purports to align itself with 
EAJA, the fees and expenses scheme established by EAJA is far 
more 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.''\30\ H.R. 9 provides 
the court no such balance or flexibility.
---------------------------------------------------------------------------
    \30\28 U.S.C. Sec. 2412(d)(1)(c) (2015).
---------------------------------------------------------------------------
    During the markup of H.R. 9, Representative Henry C. 
``Hank'' Johnson, Jr. (D-GA) offered an amendment to substitute 
the more reasonable fee shifting provision contained in the 
Senate's PATENT Act, which would have required the prevailing 
party to bear the burden of demonstrating that it is entitled 
to fees. The amendment would have also adopted a more 
reasonable standard for determining whether fees are 
appropriate, i.e., whether the position and conduct of the non-
prevailing party were objectively reasonable. In addition, the 
amendment would have exempted positions or actions that are de 
minimus or are not material to the consideration or outcome of 
the litigation. Unfortunately, the amendment failed, by a vote 
of 10 to 22.\31\
---------------------------------------------------------------------------
    \31\See H.R. 9 Markup Unofficial Transcript, at 105 (Amendment #5 
by Rep. Henry C. ``Hank'' Johnson, Jr.).
---------------------------------------------------------------------------
    Third, section 3(b) is drafted in an overly broad manner. 
The higher education community, writing about H.R. 3309, upon 
which H.R. 9 is modeled, 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.\32\
---------------------------------------------------------------------------
    \32\Statement from the Higher Education Community on H.R. 3309, The 
Innovation Act (Nov. 8, 2013) (on file with the H. Comm. on the 
Judiciary, Democratic Staff).

    The higher education community has more recently warned 
that H.R. 9's fee shifting provision would ``substantially 
increase the financial risks associated with patent enforcement 
and consequently discourage universities and other patent 
holders lacking extensive litigation resources from 
legitimately defending their intellectual property.''\33\ 
Moreover, they note that ``[t]his amplified risk would deter 
potential licensees and venture capitalists from investing in 
university patents, reducing the number of research discoveries 
that advance to the marketplace.''\34\ This concern was echoed 
by a coalition of more than 140 universities.\35\ The 
universities comprising the Big Ten Conference also expressed 
concern, writing that the fee shifting and joinder provisions 
together ``would have the effect of making patent licensing 
negotiations more complex and likely discourage at least some 
of our members from licensing their inventions at all. In 
addition, these provisions would make litigation so potentially 
risky that few legitimate patent holders without deep pockets 
would dare risk doing so.''\36\ To ensure that universities are 
not unfairly burdened by H.R. 9's fee shifting requirements, 
Representative David Cicilline (D-RI) offered an amendment 
during the markup to clarify that the bill's exception for 
special circumstances that would make an award unjust should 
include severe economic hardship to an institution of higher 
education or a university technology transfer organization. 
Unfortunately, the amendment failed by a voice vote.\37\
---------------------------------------------------------------------------
    \33\Higher Education Association Statement on Scheduled House 
Judiciary Committee Markup of Innovation Act (H.R. 9) June 10, 2015.
    \34\Id.
    \35\Letter from American universities and associated technology 
transfer foundations and organizations to Sen. Chuck Grassley, 
Chairman, S. Comm. on the Judiciary, Sen. Patrick Leahy, Ranking 
Member, S. Comm. on the Judiciary, Rep. Bob Goodlatte, Chairman, H. 
Comm. on the Judiciary, & Rep. John Conyers, Jr., Ranking Member, H. 
Comm. on the Judiciary (Feb. 24, 2015) (on file with the H. Comm. on 
the Judiciary, Democratic Staff).
    \36\Letter from the Big Ten Conference to Rep. John Conyers, Jr. 
(Jan. 20, 2015) (on file with the H. Comm. on the Judiciary, Democratic 
Staff).
    \37\H.R. 9 Markup Unofficial Transcript, at 137 (Amendment #13 of 
Rep. David N. Cicilline) (failed by voice vote).
---------------------------------------------------------------------------
    Fourth, the mandatory nature of H.R. 9's fee shifting 
provision will lead to increased litigation costs for all 
parties. As AIPLA explains, ``requiring courts to make an 
attorneys' fees award determination in every case could 
unnecessarily prolong litigation and increase costs.''\38\ The 
Federal Bar Association also notes that ``[a] fee shifting 
presumption not only raises concerns about access to the 
courts, it encourages satellite disputes about fee-shifting 
because prevailing parties have a strong incentive to force the 
opposing party to rebut the presumption in situations where 
they would not otherwise seek a fee award.''\39\ In addition, 
the inclusion of language defining a non-prevailing party as 
one who offers a ``covenant not to sue'' may also have the 
effect of increasing litigation, with 21C stating that 
``[s]imply put, this provision would not advance the interests 
of prompt and efficient resolution of patent disputes.''\40\
---------------------------------------------------------------------------
    \38\AIPLA Apr. 16, 2015 Letter.
    \39\Federal Bar Association Mar. 26, 2015 Letter.
    \40\21C Position Summary on H.R. 9, at 7.
---------------------------------------------------------------------------
    Fifth, the fee shifting provision is again wholly 
unnecessary after the Supreme Court issued two decisions last 
year, Octane Fitness, LLC v. ICON Health & Fitness\41\ and 
Highmark Inc. v. Allcare Health Mgmt. Sys. Inc.,\42\ that 
significantly lowered the threshold for when courts should 
award fees. Since those decisions, lower courts have awarded 
fees at a dramatically higher rate\43\ and patent litigation 
filings have plummeted.\44\ Whatever deterrent effect fee 
shifting may have on abusive litigation has been adequately 
addressed by the courts, and any legislative action, 
particularly the drastic provisions contained in H.R. 9, are 
clearly unncessary.
---------------------------------------------------------------------------
    \41\134 S. Ct. 1749 (2014).
    \42\134 S. Ct. 1744 (2014).
    \43\See Mallun Yen, Fee Shifting Before and After the Supreme Court 
Decisions, Inside Counsel, Feb. 25, 2015 (reporting that in the 8 
months prior to Octane Fitness and Highmark fees were awarded in 6 of 
the 31 cases in which they were requested while in the 8 months after 
the decision fees were awarded in 21 of the 43 cases in which they were 
requested) [hereinafter Mallun Yen, Fee Shifting Before and After the 
Supreme Court Decisions]; Posting of Hannah Jiam to PatentlyO.com, 
Emerging Trends Post-Octane Fitness (May 13, 2015), available at http:/
/patentlyo.com/patent/2015/05/emerging-octane-fitness.html [hereinafter 
Hannah Jiam, Emerging Trends Post-Octane Fitness].
    \44\Some reports put the decrease in filings since 2013 as high as 
40%. See Letter from ACE, AAMC, AAU, APLU, AUTM, BIO, IA, MDMA, PhRMA, 
and USBIC Educational Forum to Rep. Bob Goodlatte, Chairman, H. Comm. 
on the Judiciary, Rep. John Conyers, Jr., Ranking Member, H. Comm. on 
the Judiciary, Sen. Patrick Leahy, Chairman, S. Comm. on the Judiciary, 
& Sen. Chuck Grassley, Ranking Member, S. Comm. on the Judiciary (Dec. 
10, 2014) [hereinafter Patent Protections Coalition Letter] (on file 
with the H. Comm. on the Judiciary, Democratic Staff); Letter from 
Charles Giancarlo, Chairman of the Board of Advisors for USIJ, to Rep. 
Bob Goodlatte, Chairman, H. Comm. on the Judiciary, Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary, Sen. Charles Grassley, 
Chairman, S. Comm. on the Judiciary, & Sen. Patrick Leahy, Ranking 
Member, S. Comm. On the Judiciary (Feb. 12, 2015) [hereinafter USIJ 
February 12, 2015 Letter] (on file with the H. Comm. on the Judiciary, 
Democratic Staff).
---------------------------------------------------------------------------
C. LThe Bill's Joinder Provision Will Deter Investments in 
        Entrepreneurs and Individual Inventors
    The joinder provision, included in section 3(c) to help 
enforce the fee shifting provision, although improved by the 
Manager's Amendment, still raises a host of potential 
additional concerns. Among other things, it is drafted in a 
one-way manner that only 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, even though the 
third-party had no standing to assert or defend themselves 
during the course of the legal proceedings. BIO notes that 
``the language is too vague in critical respects and could 
potentially sweep in many legitimate patent owners and their 
assignees, licensees, and investors'' and will ``chill 
investment in areas like biotechnology that require 
partnerships and collaborations among researchers, investors, 
and companies.''\45\
---------------------------------------------------------------------------
    \45\BIO June 19, 2015 Letter.
---------------------------------------------------------------------------
    Furthermore, defendants already have other avenues to join 
plaintiffs, including through Federal Rules of Civil Procedure 
19 and 20. Rule 19 mandates that the court join parties 
whenever feasible and Rule 20 permits, but does not require, a 
court to join parties.
    When combined with H.R. 9's overly expansive fee shifting 
provision, the joinder provision could devastate inventors and 
their investors, and should be rejected.
D. LThe Bill's Discovery Limitations Invite Abuse and Can be Better 
        Addressed by the Courts
    The legislation's limitations on discovery pending 
resolution of certain preliminary motions, as set forth in 
section 3(d), are objectionable because they will lead to abuse 
and gamesmanship by the parties and can be more properly dealt 
with by the courts.
    This provision, as modified by the Manager's Amendment, is 
an improvement over the bill as introduced, but is still 
seriously flawed. According to 21C, section 3(d) ``is a recipe 
for delay, gamesmanship and abuse'' because a stay may be 
granted based on motions filed a full 3 months after the case 
begins.\46\ Similarly, IA warns that the provision ``would 
still invite abuse by parties'' because it does not set a 
deadline to file preliminary motions or to lift the stay, which 
``would invite attorneys to manipulate the discovery stay by 
filing triggering motions back to back in order to prolong the 
stay.''\47\
---------------------------------------------------------------------------
    \46\Press Release, 21C, 21C Opposes H.R, 9, the Innovation Act, 
After Yesterday's Markup Tilted the Balance Against All Patent Owners 
(June 12, 2015) [hereinafter 21C June 12, 2015 Press Release] (on file 
with the H. Comm. on the Judiciary, Democratic Staff).
    \47\Fact Sheet from the Innovation Alliance, Other Provisions of 
the Managers' Amendment Remain Overbroad and Would Substantially 
Devalue Patent Rights [hereinafter Innovation Alliance Fact Sheet on 
H.R. 9] (on file with the H. Comm. on the Judiciary, Democratic Staff).
---------------------------------------------------------------------------
    BIO also expressed concerns with the discovery stay 
provision, especially with regard to the competitive harm 
exception, which ``only covers companies with products already 
on the market, failing to protect the thousands of start-up 
companies on the cusp of commercial marketing from being able 
to timely enforce their patents against infringers who are 
trying to destroy their businesses before they even make it to 
market.''\48\ Likewise, 21C writes that the competitive harm 
exception ``was rendered effectively meaningless by an 
amendment that requires a preliminary injunction be granted 
before discovery may proceed.''\49\
---------------------------------------------------------------------------
    \48\BIO June 19, 2015 Letter.
    \49\21C June 12, 2015 Press Release.
---------------------------------------------------------------------------
    Second, these new limitations on discovery ignore the role 
of the courts in setting proper discovery time lines. As IA 
notes, ``[j]udges already have significant discretion to manage 
discovery including through grant of stays.''\50\ Furthermore, 
``[a]dditional legislation is unnecessary and carries potential 
to increase costs and delays.''\51\ The Judicial Conference 
shares this concern and pointed out that ``the Supreme Court 
recently transmitted to Congress a package of revisions to the 
Federal Rules of Civil Procedure that aim to reduce discovery 
costs and burdens in all civil litigation, including patent 
litigation. In light of these pending rule changes, it is not 
clear that additional discovery reforms are necessary at this 
time.''\52\
---------------------------------------------------------------------------
    \50\Innovation Alliance Fact Sheet on H.R. 9.
    \51\Id.
    \52\Letter from James C. Duff, Secretary of the Judicial Conference 
of the United States, to Rep. John Conyers, Jr., Ranking Member, H. 
Comm. on the Judiciary (May 28, 2015).
---------------------------------------------------------------------------
E. LThe Bill's Customer Stay Provision Could Deprive Legitimate Patent 
        Owners of Meaningful Relief
    We support the concept of a true customer stay that enables 
end users and small businesses to have lawsuits against them 
stayed pending resolution of litigation against an upstream 
manufacturer who is better positioned to defend the lawsuit. 
However, some stakeholders have expressed serious concerns 
about section 5 of H.R. 9, as drafted, because it is over-broad 
and often would improperly shield the most culpable infringers 
from litigation, effectively denying patent owners a remedy for 
infringement.
    Rather than being targeted at true end users, section 5 
could sweep in many large companies and retailers who, as a 
matter of policy, should not receive a stay. For example, it 
would protect both sophisticated device makers that reap huge 
profits by incorporating infringing components into their 
products and large retailers who sell infringing knock-off 
products at the expense of the patent owner.\53\ In testimony 
before the Subcommittee on Courts, Intellectual Property, and 
the Internet, Bryan Pate, CEO of Elliptigo, stated that ``the 
stay begs to be abused by infringers and will have the 
unintended result of crippling the ability of American 
businesses to fight manufacturers that copy their patented 
products and flood U.S. markets with cheap, poor quality knock-
offs.''\54\
---------------------------------------------------------------------------
    \53\See Mar. 25, 2015 Hearing (testimony of Bryan Pate, CEO of 
Elliptigo).
    \54\See id.
---------------------------------------------------------------------------
    Although we think that protecting innocent end users from 
frivolous litigation is a worthy objective, IA warns that the 
provision would have ``unintended consequences''\55\ because it 
``fails to ensure that only truly `innocent' end users of 
products receive a stay, and that a stay will only be granted 
if the upstream manufacturer is directly infringing a 
patent.''\56\ IEEE-USA also opposes this provision because, as 
currently drafted, it ``creates an exemption for many points in 
a distribution chain and makes enforcement essentially 
impossible for some classes of infringing exports.''\57\
---------------------------------------------------------------------------
    \55\Fact Sheet, Innovation Alliance, Priority Concerns with H.R. 9 
Manager's Amendment [Innovation Alliance Priority Concerns] (on file 
with the H. Comm. on the Judiciary, Democratic Staff).
    \56\Id.
    \57\Letter from James A. Jefferies, Pres. of IEEE-USA, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (June 10, 2015).
---------------------------------------------------------------------------
    We also have concerns that where the manufacturer of an 
infringing component of a larger product is located overseas, 
it will be difficult, or even impossible, to enforce a U.S. 
judgment against it.\58\ Even where a patent owner could obtain 
jurisdiction over a ``covered manufacturer,'' courts in certain 
foreign jurisdictions are unlikely to recognize a U.S. 
judgment, and collection mechanisms could be ineffective or 
non-existent as a practical matter.
---------------------------------------------------------------------------
    \58\See Mar. 25, 2015 Hearing (testimony of Bryan Pate, CEO of 
Elliptigo).
---------------------------------------------------------------------------
    Patent owners' ability to obtain relief for infringement 
could also be impaired if they were forced to defend their 
rights against manufacturers upstream in a supply chain. A 
manufacturer of a component of a larger product is likely to be 
only an indirect infringer of a patent when the patent is not 
infringed until the component is incorporated into a larger 
system.\59\ The Supreme Court has made it extremely difficult 
to bring indirect infringement actions, including by adding 
knowledge requirements that are not required to prove direct 
infringement.\60\ Proving indirect infringement also requires 
proof of direct infringement.\61\ However, H.R. 9 would grant a 
stay to the direct infringer, thereby forcing patent owners to 
prove indirect infringement against upstream manufacturers 
while their real case of direct infringement by the covered 
customer is stayed. Ultimately, this could leave large 
companies that profit most from the infringement at issue free 
to continue infringing without consequences while their case is 
stayed, leaving patent owners without any recourse for the most 
damaging aspects of the ongoing infringement.
---------------------------------------------------------------------------
    \59\See, e.g., 35 U.S.C. Sec. 271(b), (c) (2015); Arris Group, Inc. 
v. British Telecomms. PLC, 639 F. 3d 1368, 1376 n.8 (Fed. Cir. 2011) 
(``Claims which recite a `system,' `apparatus,' `combination,' or the 
like are all analytically similar in the sense that their claim 
limitations include elements rather than method steps. All such claims 
can be contributorily infringed by a component supplier.''; SynQor, 
Inc. v. Artesyn Techs., Inc., 709 F.3d 1365, 1373 (Fed. Cir. 2013) 
(``SynQor asserted claims for induced and contributory infringement 
under 35 U.S.C. Sec. 271(b) and (c), alleging Defendants sold the power 
supply components with knowledge that they would be used in, or were 
especially made to be used in, infringing systems imported into the 
United States.''); see generally, TecSec, Inc. v. IBM, 731 F.3d 1336, 
1351 (Fed. Cir. 2013) (``An act of infringement occurs when all of the 
elements of a claimed product or method are met by the accused device 
or process. This is the familiar ``all elements'' rule.'').
    \60\See Global-Tech Appliances, Inc. v. SEB S.A., 131 S. Ct. 2060 
(2011).
    \61\Limelight Networks, Inc. v. Akamai Technologies, Inc., 134 S. 
Ct. 2111, 2117 (2014).
---------------------------------------------------------------------------
    We are eager to work with our colleagues to ensure that 
small businesses and true end users receive appropriate stays 
of litigation. Indeed, during the markup, we supported an 
amendment by Representative Scott Peters that would have 
limited the definition of covered customers under this 
provision to a small business concern, as defined by section 3 
of the Small Business Act, but the amendment was withdrawn.\62\ 
However, as drafted, the customer stay provision in H.R. 9 is 
over-broad. It goes far beyond protecting innocent end users at 
the end of a supply chain and could instead give large 
businesses--who profit most from the sale or incorporation of 
infringing products and inflict the most harm on patent 
owners--what is in effect a shield against meritorious 
litigation.\63\
---------------------------------------------------------------------------
    \62\H.R. 9 Markup Unofficial Transcript (Amendment #23 by 
Representative Scott H. Peters).
    \63\See Letter from Brian Pomper, Exec. Dir. of IA, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary (June 10, 2015).
---------------------------------------------------------------------------
F. LThe Bill Includes Extraneous Measures That Were Not Given Proper 
        Consideration
    H.R. 9 includes a number of provisions that are unrelated 
to the bill's goal of curbing abusive litigation, but which 
have important policy implications. These range from 
significant changes in the post-grant review (PGR) proceeding 
at the USPTO to a troubling change in bankruptcy law. None of 
these provisions were the subject of a hearing or any 
deliberative process, and demand more consideration before 
being included in any patent reform legislation.
            i. LH.R. 9 Makes a Controversial Change to the Estoppel 
                    Provision in Post-Grant Review Proceedings
    Section 9 of the bill sets forth technical corrections to 
the Leahy-Smith America Invents Act. Subsection (a) contains an 
amendment to 35 U.S.C. Sec. 325(e)(2), which relates to PGR, by 
striking the words ``or reasonably could have raised.'' This 
clause was added to the Patent Act by the Leahy-Smith America 
Invents Act (AIA).
    Currently, a participant in a PGR proceeding is prohibited 
from asserting in a subsequent civil action any claims that 
were ``raised or reasonably could have raised'' during the PGR 
proceeding. The striking of the clause by Section 9(a) would 
effectively prohibit only those claims that a participant 
actually raised in the PGR proceeding.
    Supporters of this change state that it is needed to 
correct a so-called ``scrivener's error'' in the drafting of 
the AIA.\64\ Setting aside aspersions of blame for the 
inclusion of the language in the AIA, section 9(a) is 
controversial and therefore not a mere technical change.\65\ 
Then-Ranking Member of the Senate Judiciary Committee Senator 
Chuck Grassley has indicated ``hopefully nobody will try to use 
technical or clarifying language to get something done that 
they couldn't get done during the 6 years that this process was 
being negotiated.''\66\ Former Senator Tom Coburn similarly 
stated that he supported ``a pure technical correction bill, 
but anything that significantly changes the estoppel provisions 
in the bill we passed needs to have the full consideration of 
all the stakeholders and all the members of this Committee 
before we would do that.''\67\ Further, a technical corrections 
bill to the AIA was enacted 16 months after enactment of the 
AIA, and it did not include language similar to H.R. 9's 
Section 9(a).\68\
---------------------------------------------------------------------------
    \64\H.R. 9 Markup Unofficial Transcript, at 167 (statement of 
Chairman Bob Goodlatte).
    \65\Robert L. Stoll, Maintaining Post-Grant Review Estoppel in the 
America Invents Act: A Call for Legislative Restraint, 2012 Patently-O 
Patent Law Review 23-25.
    \66\Oversight of the U.S. Patent and Trademark Office: Hearing on 
the Implementation of the Leahy-Smith America Invents Act and Int'l 
Harmonization Effort Before the S. Comm. on the Judiciary, 112th Cong. 
3 (June 20, 2012) (statement of Sen. Chuck Grassley, Ranking Member, S. 
Comm. on the Judiciary).
    \67\Id. at 17 (statement of Sen. Tom Coburn).
    \68\Leahy-Smith America Invents Technical Corrections, Pub. L. No. 
112-274 (2013).
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    Additional Congressional review of this issue is necessary 
before making such a controversial change through legislation.
            ii. LH.R. 9 Overrides Important Bankruptcy Policy
    Section 6(e) makes three substantive amendments to the 
Bankruptcy Code. Of particular concern is section 6(e)(1) which 
amends section 1522 of the Bankruptcy Code. Bankruptcy Code 
section 1522 specifies various protections for creditors and 
other interested persons in chapter 15 cross-border insolvency 
cases.\69\ By way of background, chapter 15 of the Bankruptcy 
Code\70\ codifies the Model Law on Cross-Border Insolvency 
(Model Law) promulgated by the United Nations Commission on 
International Trade Law.\71\ Chapter 15 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. To achieve the law's goal of reciprocal recognition, 
cooperation is fostered inter alia through ``fair and efficient 
administration of cross-border insolvencies that protects the 
interests of all creditors, and other interested entities, 
including the debtor.''\72\
---------------------------------------------------------------------------
    \69\11 U.S.C. Sec. 1522 (2015).
    \70\Enacted in 2005, chapter 15 is intended to ``provide effective 
mechanisms for dealing with cases of cross-border insolvency'' through 
various statutorily mandated objectives. 11 U.S.C. Sec. 1501(a) (2015).
    \71\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). As 
explained in this Committee's report that accompanied the legislation 
which 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).
    \72\11 U.S.C. Sec. 1501(a)(3) (2015).
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    Specifically, section 6(e)(1) would make section 365(n) of 
the Bankruptcy Code, which sets forth the rights of a licensee 
pursuant to an intellectual property executory contract that is 
rejected in a bankruptcy case, applicable to chapter 15 
cases.\73\ Pursuant to section 6(e)(1), a U.S. court would be 
required to apply Bankruptcy Code section 365(n) to ``foreign 
main proceedings,'' a type of chapter 15 case ``pending in the 
country where the debtor has the center of its main 
interests.''\74\
---------------------------------------------------------------------------
    \73\11 U.S.C. Sec. 365(n) (2015).
    \74\11 U.S.C. Sec. 1506 (2015).
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    Unfortunately, section 6(e), by adding a provision to 
chapter 15 that deals with a special situation, would alter a 
fundamental principle of chapter 15, namely, that it not favor 
a particular country's law. As the nonpartisan National 
Bankruptcy Conference observed with respect to a similar 
provision included in legislation considered in the last 
Congress, the provision ``violates the principle of uniformity 
that makes the Model Law a valuable mechanism for greater legal 
certainty for trade and investment.''\75\ 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.
---------------------------------------------------------------------------
    \75\Memorandum from the International Aspects Comm. to the National 
Bankruptcy Conference Exec. Comm. 2 (Nov. 12, 2013) (on file with the 
Judiciary Committee Democratic Staff).
---------------------------------------------------------------------------
    In addition, section 6(e)(2)(A) amends Bankruptcy Code 
section 101(35A), which defines the term ``intellectual 
property.''\76\ The bill expands this definition to include a 
trademark, service mark, and trade name, as those terms are 
defined in the Trademark Act of 1946.\77\ We note, however, 
that the Committee has not to any meaningful degree examined 
the policy ramifications of expanding the Bankruptcy Code's 
definition of intellectual property. As a result of the changes 
made by H.R. 9, such a definition would apply to all forms of 
bankruptcy relief, not just chapter 15. Thus, it would apply to 
chapter 7 (liquidation), chapter 9 (municipal), chapter 11 
(business reorganization), chapter 12 (family farmer 
reorganization), and chapter 13 (individual reorganization) 
bankruptcy cases.
---------------------------------------------------------------------------
    \76\11 U.S.C. Sec. 101(35A) (2015).
    \77\15 U.S.C. Sec. 1127 (2015).
---------------------------------------------------------------------------
    Finally, section 6(e)(2)(B) amends Bankruptcy Code section 
365(n)(2), to impose an affirmative duty on the licensee to 
maintain the quality of the products and services offered under 
or in connection with the licensed trademark, service mark, or 
trade name. And, it provides that the debtor-licensor retains 
its right to oversee and enforce quality control for such 
products or services. As with section 6(e)(1), this provision 
would apply to all types of bankruptcy cases.
    Congress should carefully consider the effects of these 
provisions on the Bankruptcy Code before including them in this 
legislation.

 II. THE INNOVATION ACT DOES NOT EFFECTIVELY ADDRESS THE DECEPTIVE USE 
 OF DEMAND LETTERS, STOP ABUSE OF POST-GRANT PROCEEDINGS AT THE USPTO, 
           OR IMPROVE PATENT EXAMINATION QUALITY AT THE USPTO

    To the extent there are asymmetries in the patent 
litigation system, H.R.9 does not effectively address the root 
causes of such problems.
    The Innovation Act fails to take an effective approach to 
curtail the problem of abusive demand letters based on vague 
patents. In addition, the bill does nothing to ensure that the 
USPTO has all of the resources it needs to train its examiners 
to stop issuing vague patents in the first place. And, H.R. 9 
does not prevent further abuses targeting the biopharmaceutical 
industries of post-grant proceedings at the USPTO.
A. LCongress Must Make a Serious Effort to Stop the Extortionate Use of 
        Demand Letters
    Because civil litigation can be costly, would-be plaintiffs 
often notify by letter would-be defendants of an issue that 
could be resolved outside of court amicably. In the context of 
the patent system, the patent holder's pre-suit notification 
letter typically includes details about the patent the 
recipient is alleged to be infringing and either requests the 
recipient to stop infringing the patent or offers the recipient 
a licensing arrangement. This process sometimes helps the 
parties avoid litigation.
    Nevertheless, some patent holders have abused the process 
by sending letters to end users having no knowledge that the 
off-the-shelf products they are using may be allegedly 
infringing a patent. And, these bad actors have no intent to 
litigate if a licensing arrangement cannot be completed.\78\ 
Their intent is only to intimidate and extort settlements from 
small and medium sized businesses such as credit unions,\79\ 
community banks,\80\ and retailers.\81\ These bad actors 
``target a settlement just under what it would cost for 
litigation, knowing that these businesses will want to avoid 
costly litigation and probably pay up.''\82\ Essentially, the 
``demand letters are in all reality thinly-veiled threat 
letters that use excessive legal jargon and litigation scare 
tactics to trick recipients into cutting big checks, even if no 
infringement has occurred.''\83\
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    \78\``Trolls also send deceptive patent infringement letters 
demanding a licensing fee with no intention to ever file a lawsuit.'' 
The Innovation Act: Hearing on H.R. 3309 Before the H. Comm. on the 
Judiciary, 113th Cong. 247 (Oct. 29, 2013) [hereinafter Innovation Act 
2013 Hearing] (letter for the record from David French, Senior Vice 
Pres. of Government Relations at the National Retail Federation).
    \79\``A growing number of credit unions are reporting receipt of 
demand letters from law firms representing `patent trollers' claiming 
patent infringement with an option to settle or face litigation.'' Id. 
at 266 (letter for the record from Brad Thaler, Vice Pres. of 
Legislative Affairs at the National Association of Federal Credit 
Unions).
    \80\``Vaguely-worded demand letters wreak havoc on small businesses 
where every dollar counts.'' Mar. 25, 2015 Hearing, at 17 (written 
statement of Underwood).
    \81\``As primary targets of the trolls, retailers seek an effective 
resolution to this abusive patent litigation strategy by trolls.'' 
Innovation Act 2013 Hearing, at 247 (letter for the record from David 
French, Senior Vice Pres. of Government Relations at the National 
Retail Federation).
    \82\Id. at 2 (statement of Chairman Bob Goodlatte).
    \83\H.R. 9 Markup Unofficial Transcript, at 126 (statement of 
Representative Tom Marino).
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    Several witnesses at Committee hearings, as well as other 
stakeholders, have called for Congress to legislate an end to 
the abusive use of deceptive demand letters.\84\ In response, 
several legislative proposals have been introduced that could 
effectively curtail the abuse.\85\
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    \84\Letter from James A. Jefferies, Pres. of IEEE-USA, to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary) (June 10, 2015) 
(``Abusive demand letters are the lynchpin of the entire troll business 
model. Enacting carefully targeted fixes provides time to carefully 
evaluate further targeted measures that may be needed.''); Letter from 
the Electronic Frontier Foundation, Engine Advocacy, Public Knowledge, 
and the R Street Institute, to Rep. Fred Upton, Chairman, H. Comm. on 
Energy & Commerce, & Rep. Frank Pallone, Jr., Ranking Member, H. Comm 
on Energy & Commerce (Apr. 28, 2015) (``Abusive patent demand letters 
are a major problem today, and we support legislation that curbs such 
abuses and strongly protects the public.''); Letter from Phyllis 
Schlafly, Chair, Eagle Forum, to Rep. Michael Burgess, Chairman, 
Subcomm. on Commerce, Manufacturing, & Trade of the H. Comm. on Energy 
& Commerce, & Rep. Jan Schakowsky, Ranking Member, Subcomm. on 
Commerce, Manufacturing, & Trade of the H. Comm. on Energy & Commerce 
(Apr. 22, 2015) (``We also favor relieving mom-and-pop retailers of the 
abusive use of demand letters that make false, misleading claims of 
patent infringement by components of off-the-shelf goods.''); Mar. 25, 
2015 Hearing, at 57 (testimony of Underwood) (``I think reforming the 
demand letter process is key to stopping most of these frivolous 
attempts to extort money from small businesses.''); Mar. 25, 2015 
Hearing at 59 (testimony of Mark Griffin, General Counsel of 
Overstock.com, Inc.) (``Demand letters are a problem, and that problem 
should be fixed.''); Mar. 25, 2015 Hearing, at 49 (testimony of Bryan 
Pate, CEO of ElliptiGO, Inc.) (``Well, I think the demand letter is a 
great place to focus just listening to the conversation and reading the 
testimony. It still seems to be the crux of where these extortion 
settlements come from, and it seems to be an unfair business 
practice.''); Innovation Act 2013 Hearing, at 247 (letter for the 
record from David French, Senior Vice Pres. of Government Relations at 
the National Retail Federation) (``It is important to the retail 
community that legislation addressing patent litigation reform also 
addresses the misleading correspondence trolls use.'').
    \85\H.R. 1896, the Demand Letter Transparency Act of 2015; H.R. 
2045, the Targeting Rogue and Opaque Letters Act of 2015; S. 632, the 
Support Technology and Research for Our Nation's Growth Patents Act of 
2015; and S. 1137, the Protecting American Talent and Entrepreneurship 
Act of 2015.
---------------------------------------------------------------------------
    Unfortunately, H.R. 9 is not one of those proposals. The 
bill contains three provisions targeting the use of demand 
letters: a sense of Congress that it is an abuse of the patent 
system to send out purposely evasive demand letters;\86\ new 
language barring plaintiffs from enhanced damages for willful 
infringement if preceded by a vague demand letter in the pre-
suit notification stage;\87\ and a requirement that the USPTO 
conduct a study on the prevalence of the sending of patent 
demand letters and their negative effect on the 
marketplace.\88\
---------------------------------------------------------------------------
    \86\H.R. 9, Sec. 3(e).
    \87\H.R. 9, Sec. 3(f). ``This provision is designed to make the 
award of enhanced damages more difficult in situations where 
`purposefully evasive demand letters' or other defective pre-suit 
notification efforts have been undertaken by the patent owner.'' The 
Innovation Act: Hearing on H.R. 9 Before the H. Comm. on the Judiciary, 
114th Cong. (Apr. 14, 2015) [hereinafter Innovation Act 2015 Hearing] 
(written statement of Robert A. Armitage, at 14).
    \88\H.R. 9, Sec. 8(e).
---------------------------------------------------------------------------
    These provisions are not serious efforts to address the 
demand letter issue. The bill will not deter the sending of the 
letters because it focuses on the litigation stage and many of 
the bad actors never intend to litigate.\89\ Congress should 
take a more thorough and effective approach than H.R. 9. Such 
an approach should carefully balance the needs of legitimate 
patent holders to protect their patents from infringement while 
stopping the prevalent use of deceptive demand letters.
---------------------------------------------------------------------------
    \89\``This [legislation] only refers to demand letters once we are 
in litigation.'' Mar. 25, 2015 Hearing, at 59 (statement of Rep. Ted 
Deutch).
---------------------------------------------------------------------------
B. LPatent Reform Legislation Should Effectively Rein in Abuses of 
        Post-grant Proceedings at the USPTO
    The AIA created new post-grant proceedings before the 
Patent Trial and Appeal Board (PTAB), including inter partes 
review (IPR) and PGR proceedings. They were intended to be 
efficient and fair for patent owners and challengers. And they 
``were designed to provide a quicker, cost-effective 
alternative to district court litigation.''\90\
---------------------------------------------------------------------------
    \90\BIO June 19, 2015 Letter.
---------------------------------------------------------------------------
    These proceedings, however, have turned out to be arguably 
unfair for many patent owners. Recent statistics reveal that 
the PTAB grants approximately 75% of petitions\91\ and finds at 
least some challenged claims unpatentable in nearly 85% of 
final written decisions.\92\ These one-sided statistics have 
drawn bad actors to abuse the proceedings. ``Litigants are 
subverting a well-intended but unfairly implemented system of 
adjudicating patents for their financial gain and to the 
detriment of innovation, investment and our economy.''\93\ For 
example, hedge funds have shorted the stock of 
biopharmaceuticals and then filed IPR petitions to drive down 
share prices.\94\ According to PhRMA, ``[i]f this abuse is not 
addressed, the end result will be to discourage the investment 
needed to develop new treatments and cures for patients.''\95\
---------------------------------------------------------------------------
    \91\Patent Trial and Appeal Board AIA Progress, Statistics, 
available at http://www.uspto.gov/sites/default/files/documents/
aia_statistics_06-18-2015.pdf.
    \92\Patent Public Adv. Comm. Quarterly Meeting, Patent Trial and 
Appeal Board Update, 
at 13, 15, available at http://www.uspto.gov/sites/default/files/
documents/20150219_PPAC_
PTAB_Update.pdf.
    \93\The PATENT Act: Finding Effective Solutions to Address Abusive 
Patent Practices: Hearing on S. 1137 Before the S. Comm. on the 
Judiciary, 114th Cong. (May 7, 2015) (written statement of Henry Hadad, 
Senior Vice Pres. and Deputy General Counsel-Intellectual Property for 
Bristol-Myers Squibb, at 4).
    \94\Innovation Act 2015 Hearing (written statement of Hans Sauer, 
Deputy General Counsel for Intellectual Property, at 1). The cases 
hedge funds have filed include: Coalition for Affordable Drugs 
(ADROCA), LLC. v. ACORDA Therapeutics, INC., Petition for Inter Partes 
Review of U.S. Patent No. 8,663,685 (February 11, 2015); Coalition for 
Affordable Drugs (ADROCA), LLC. v. ACORDA Therapeutics, INC., Petition 
for Inter Partes Review of U.S. Patent No. 8,007,826 (February 27, 
2015); Coalition for Affordable Drug (ADROCA), LLC. v. Shire, INC., 
Petition for Inter Partes Review of U.S. Patent No. 6,773,720 (April 1, 
2015); Coalition for Affordable Drugs II, LLC. v. NPS Pharmaceuticals, 
INC., Inter Partes Review of U.S. Patent No. 7,056,886 (April 1, 2015); 
Coalition for Affordable Drugs III, LLC. v. Jazz Pharmaceuticals, INC., 
Petition for Inter Partes Review of U.S. Patent No. 7,895,059 (April 6, 
2015); Coalition for Affordable Drugs IV, LLC. v. Pharmacyclics, INC., 
Petition for Inter Partes Review of U.S. Patent No. 8,754,090 (April 
20, 2015); Coalition for Affordable Drugs V, LLC. v. Biogen IDEC 
International GmbH, Petition for Inter Partes Review of U.S. Patent No. 
8,759,393 (April 22, 2015); Coalition for Affordable Drugs IV, LLC. v. 
Celgene Corporation, Petition for Inter Partes Review of U.S. Patent 
No. 6,045,501 (April 22, 2015); Coalition for Affordable Drugs II, LLC. 
v. NPS Pharmaceuticals, Petition for Inter Partes Review of U.S. Patent 
No. 7,056,886 (April 23, 2015); Coalition for Affordable Drugs VI, LLC. 
v. Celgene, Petition for Inter Partes Review of U.S. Patent No. 
6,315,720 (April 23, 2015); Coalition for Affordable Drugs VI, LLC. v. 
Celgene Corporation, Petition for Inter Partes Review of U.S. Patent 
No. 6,315,720 (April 23, 2015); Coalition for Affordable Drugs VI, LLC. 
v. Celgene Corporation, Petition for Inter Partes Review of U.S. Patent 
No. 6,315,720 (April 23, 2015); Coalition for Affordable Drugs V, LLC 
v. Biogen MA, Inc., Petition for Inter Partes Review of U.S. Patent 
No.8,399,514 (May 1, 2015).
    \95\Statement of PhRMA (June 11, 2015) [hereinafter PhRMA June 11, 
2015 Statement] (on file with the House Committee on the Judiciary, 
Democratic Staff).
---------------------------------------------------------------------------
    Unfortunately, H.R. 9 does not effectively prevent further 
abuse of the IPR and PGR proceedings. The bill requires that 
challengers in IPR and PGR proceedings certify that they ``do 
not own or will not require a financial instrument'' as a hedge 
against any decrease in the market value of the stock of the 
patent owner it is challenging.\96\ However, this language is 
too narrowly tailored to address what has actually been 
occurring: where a hedge fund sells or shorts the stock of the 
patent holder before filing for the IPR or PGR of the patent 
holder's patent. It also would not cover situations where the 
challenger ``tips off'' a friend, colleague, or family member 
to sell or short the stock of the patent holder before the 
hedge fund files for IPR or PGR.
---------------------------------------------------------------------------
    \96\H.R. 9, Sec. 9(b)(1) and 9(b)(2).
---------------------------------------------------------------------------
    21C states that the bill ``falls short in terms of 
meaningful reforms to the procedures used'' at the USPTO in IPR 
and PGR proceedings.\97\ BIO,\98\ PhRMA,\99\ 
Research!America,\100\ and more than 90 patient advocacy 
organizations\101\ concur.
---------------------------------------------------------------------------
    \97\21C June 12, 2015 Press Release.
    \98\``BIO appreciates the IPR reforms in the bill, but we believe 
they are insufficient to address the fundamental problems and abuses 
within the IPR system.'' BIO June 19, 2015 Letter.
    \99\``Unfortunately, the bill as approved fails to address the 
serious problems with the Inter Partes Review process (IPR) at the 
Patent and Trademark Office (PTO), which is a top priority of PhRMA and 
the entire biopharmaceutical industry.'' PhRMA June 11, 2015 Statement.
    \100\Letter from Mary Woolley, President and CEO of 
Research!America, to Rep. Bob Goodlatte, Chairman, H. Comm. on the 
Judiciary, Rep. John Conyers, Jr., Ranking Member, H. Comm. on the 
Judiciary, Sen. Charles Grassley, Chairman, S. Comm. on the Judiciary, 
& Sen. Patrick Leahy, Ranking Member, S. Comm. on the Judiciary (July 
15, 2015) (on file with the H. Comm. on the Judiciary, Democratic 
Staff).
    \101\Letter from over 90 patient advocacy organizations to Rep. Bob 
Goodlatte, Chairman, H. Comm. on the Judiciary, Rep. John Conyers, Jr., 
Ranking Member, H. Comm. on the Judiciary, Sen. Charles Grassley, 
Chairman, S. Comm. on the Judiciary, & Sen. Patrick Leahy, Ranking 
Member, S. Comm. on the Judiciary (May 21, 2015) (on file with the H. 
Comm. on the Judiciary, Democratic Staff).
---------------------------------------------------------------------------
    For those reasons, Representative Mimi Walters (R-CA) 
offered, but later withdrew, an amendment at the Committee 
markup of H.R. 9 to exclude biopharmaceutical patents covering 
approved drug and biological products from IPR 
proceedings.\102\ Several Members spoke in favor of the 
amendment\103\ and Chairman Bob Goodlatte assured them that 
this issue would be addressed.\104\ Since the Committee's 
markup of H.R. 9, 79 members have urged that Congress address 
the issue along the lines of Rep. Walters' amendment before the 
bill is considered on the floor.\105\ Until an effective 
solution is incorporated into H.R. 9, the legislation continues 
to fail at protecting patent holders from abuses in post-grant 
proceedings at the USPTO.
---------------------------------------------------------------------------
    \102\H.R. 9 Markup Unofficial Transcript, at 112 (Amendment #12 of 
Representative Mimi Walters).
    \103\Id. at 115-119, 171-175 (statements of Reps. Doug Collins, 
Henry C. ``Hank'' Johnson, Jr., Zoe Lofgren, & Scott H. Peters).
    \104\Id, at 114, 174-175 (statements of Chairman Bob Goodlatte).
    \105\Letter signed by 79 Representatives to Rep. John Boehner, 
Speaker of the House, Rep. Nancy Pelosi, Minority Leader of the House, 
Rep. Kevin McCarthy, Majority Leader of the House, & Rep. Steny Hoyer, 
Minority Whip of the House (July 24, 2015) (on file with the H. Comm. 
on the Judiciary, Democratic Staff).
---------------------------------------------------------------------------
C. LAny Legislation to Reform the Patent System Must Improve Patent 
        Examination Quality by Ending Fee Diversion
    H.R. 9 fails to improve patent examination quality because 
it does not prevent the continuing diversion of fees from the 
USPTO. When the Judiciary Committee reported the AIA in 2011, 
there was bipartisan consensus that diverting user fees from 
the USPTO to the Treasury to be used for purposes unrelated to 
the services and functions of the USPTO undermined the USPTO's 
efforts to reduce its backlog.\106\ For that reason, the AIA 
included a provision which created a permanent revolving fund 
for the USPTO.\107\ Unfortunately, the provision was 
substantially altered by replacing the permanent revolving fund 
with a much weaker reserve fund before the AIA was brought to 
the floor.\108\
---------------------------------------------------------------------------
    \106\Unofficial Tr. of Markup of H.R. 1249, ``The America Invents 
Act,'' by the H. Comm on the Judiciary, 112th Cong. at 45 (Apr. 14, 
2011) (statement of Representative Jim Sensenbrenner), available at 
http://judiciary.house.gov/_files/hearings/pdf/
04142011MarkupTranscript.pdf. See also H.R. Rep. No. 112-98, pt. 1, at 
55 (2011).
    \107\H.R. 1249, 112th Cong. Sec. 22 (2011).
    \108\Pub. L. No. 112-29, Sec. 22, 125 Stat. 326 (2011).
---------------------------------------------------------------------------
    The failure to end fee diversion after enactment of the AIA 
in 2011 led to nearly $150 million in badly needed user fees 
being diverted in Fiscal Year 2013 because of the sequester. 
This loss is on top of the estimated $1 billion in fees 
diverted over the last two decades.\109\ 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.\110\
---------------------------------------------------------------------------
    \109\``Over the last two decades the government has withheld, 
diverted or sequestered about $1 billion in USPTO user fee 
collections.'' Letter from Herbert C. Wamsley, Exec. Dir. of the 
Intellectual Property Owners Association (IPO), to Rep. John Conyers, 
Jr., Ranking Member, H. Comm. on the Judiciary, & Rep. Doug Collins, 
Vice Chair of the Subcomm. on Courts, Intellectual Property and the 
Internet of the H. Comm. on the Judiciary (April 16, 2015) [hereinafter 
IPO Apr. 16, 2015 Letter] (on file with the House Committee on the 
Judiciary, Democratic Staff).
    \110\IPO Daily News for Friday, Nov. 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. In 2013, former USPTO Director David Kappos 
testified at a hearing on the Innovation Act:

        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.\111\
---------------------------------------------------------------------------
    \111\Innovation Act 2013 Hearing, at 40 (written statement of David 
J. Kappos, Partner at Cravath, Swaine & Moore LLP) (emphasis added).

    AIPLA concurred: ``This denial of fund access had serious 
negative consequences, such as the cancellation of much-needed 
IT improvements, significant delays in the rollout of satellite 
offices, and a slowing down of examiner hiring, all of which 
are critical to improvements in quality and pendency.''\112\ 
Many witnesses at the Committee hearings on abusive patent 
litigation have agreed that fee diversion has had a serious 
adverse impact on the patent system.\113\
---------------------------------------------------------------------------
    \112\Letter from Lisa K. Jorgenson, Exec. Dir. of AIPLA, to House 
Committee on the Judiciary Representatives John Conyers, Jr. & Jim 
Sensenbrenner, Jr. (April 20, 2015) (on file with the House Committee 
on the Judiciary, Democratic Staff).
    \113\Innovation Act 2015 Hearing (written statement of Sauer, at 
22); Examining Recent Supreme Court Cases in the Patent Arena: Hearing 
Before the Subcomm. on Courts, Intellectual Property and the Internet 
of the H. Comm. on the Judiciary, 114th Cong. 70 (Feb. 12, 2015) 
(testimony of Herb C. Wamsley, Exec. Dir. of IPO; Andrew J. Pincus, 
Partner at Mayer Brown, LLP; Krish Gupta, Senior Vice Pres. and Deputy 
General Counsel of EMC Corp.).
---------------------------------------------------------------------------
    Similarly, 21C has written that there is a continuing need 
to prevent ``user fees from being sequestered or diverted to 
support other government programs.''\114\ This view is shared 
by the IEEE-USA,\115\ IA,\116\ and IPO.\117\
---------------------------------------------------------------------------
    \114\Letter from Kevin Rhodes, 21C, to Rep. John Conyers, Jr., 
Ranking Member, H. Comm. on the Judiciary, & Rep. F. James 
Sensenbrenner, Jr. (Apr. 16, 2015) (on file with the H. Comm. on the 
Judiciary, Democratic Staff).
    \115\``Our members have long felt that the diversion of revenues 
derived from intellectual property applications was a detriment to the 
quality of patents and trademarks.'' Letter from James Jefferies, Pres. 
of IEEE-USA, to Rep. John Conyers, Ranking Member, H. Comm. on the 
Judiciary (Apr. 16, 2015) (on file with the H. Comm. on the Judiciary, 
Democratic Staff).
    \116\``We have long maintained that ending fee diversion, and 
thereby giving the [USPTO] all of the fees it is paid by patent 
applicants, is the single most important change policymakers can make 
to improve the U.S. patent system.'' Letter from Brian Pomper, Exec. 
Dir. of IA, to to Rep. John Conyers, Jr., Ranking Member, H. Comm. on 
the Judiciary, & Rep. F. James Sensenbrenner, Jr. (Apr. 16, 2015) (on 
file with the H. Comm. on the Judiciary, Democratic Staff).
    \117\``The U.S. needs a fully funded USPTO to keep our nation 
competitive, encourage innovation, and create new jobs.'' IPO Apr. 16, 
2015 Letter.
---------------------------------------------------------------------------
    Further, ending fee diversion will help prevent so-called 
``patent trolls'' from obtaining vague patents to use as a 
threat in demand letters or in litigation. MDMA described the 
importance of ending fee diversion to combating abusive patent 
litigation:

        Many complaints about ``patent trolls'' include 
        allegations that these entities are asserting ``bad 
        patents'' that should never have been granted. The most 
        effective action that can be taken to improve patent 
        quality is to allow the USPTO to retain its revenues to 
        allow it to improve the examination process, hire more 
        and better-qualified examiners, increase examiner 
        training, and upgrade the USPTO's IT infrastructure. 
        This should be a core element of any legislation aimed 
        at addressing the ``troll'' problem.\118\
---------------------------------------------------------------------------
    \118\Letter from Mark B. Leahey, Pres. and CEO of MDMA, to Rep. 
John Conyers, Ranking Member, H. Comm. on the Judiciary (June 2, 2015) 
(on file with the H. Comm. on the Judiciary, Democratic Staff).

    For those reasons, Ranking Member John Conyers, Jr. (D-MI) 
offered an amendment at the Committee markup to prevent future 
fee diversion from the USPTO. The amendment would have 
established a revolving fund in the United States Treasury that 
would allow the USPTO to retain and use all of the user fees it 
collected by applicants and still provide for Congressional 
oversight of the USPTO.\119\ Even though the subject of the 
amendment received widespread support by the Members, the 
amendment failed because some Members posited that a point of 
order would be raised on the floor and hinder passage of the 
legislation.\120\
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    \119\The amendment is modeled after H.R. 1832, the ``Innovation 
Protection Act,'' which Ranking Member Conyers and Representative 
Sensenbrenner, along with an evenly divided bipartisan group of 6 
additional members, introduced on April 16, 2015. The legislation 
currently has 22 cosponsors.
    \120\H.R. 9 Markup Unofficial Transcript, at 54 (Amendment #20 of 
Ranking Member John Conyers, Jr.) (failed 11-16).
---------------------------------------------------------------------------
    Failure to include language ending USPTO fee diversion once 
and for all belies any serious and responsible effort to reform 
and update the patent system.

III. RECENT DEVELOPMENTS MAKE MANY OF THE PROVISIONS IN THE INNOVATION 
                            ACT UNNECESSARY

    When a substantially similar version of the Innovation Act 
was introduced in October 2013,\121\ the bill was rushed 
through the House of Representatives in a matter of weeks.\122\ 
Since then, the courts and the executive branch have taken a 
number of actions to reduce abusive patent litigation, 
rendering many of the provisions contained in H.R. 9 
unnecessary.
---------------------------------------------------------------------------
    \121\H.R. 3309, 113th Cong. (2013).
    \122\H.R. 3309 was introduced on October 23, 2013 and the House 
Committee on the Judiciary held a hearing on the bill on October 29, 
2013. Thereafter, the Committee marked up the bill on November 20, 2013 
and the House passed the bill on December 5, 2013.
---------------------------------------------------------------------------
    In addition, H.R. 9 is even more objectionable than the 
more deliberate and cautious approach in the Senate's PATENT 
Act, which the Senate Committee on the Judiciary recently 
reported.\123\ If the House chooses to pursue legislation to 
curb abusive patent litigation, it should consider some of the 
positive improvements reflected in the Senate's approach.
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    \123\The Protecting American Talent and Entrepreneurship (PATENT) 
Act: Markup of S. 1137 Before the S. Comm. on the Judiciary, 114th 
Cong. (June 4, 2015).
---------------------------------------------------------------------------
A. LCourts are Already Awarding Fees at a Much Higher Rate
    A centerpiece of H.R. 9 is its mandatory presumptive fee 
shifting provision, which will force a non-prevailing party to 
demonstrate that it should not bear the court costs and 
attorneys' fees of the prevailing party.\124\ Supporters of 
this legislation claim that a stronger fee shifting regime is 
necessary to deter litigation abuses.\125\ However, two recent 
Supreme Court cases make the need for H.R. 9's fee shifting 
provision moot.
---------------------------------------------------------------------------
    \124\H.R. 9, 114th Cong. Sec. 3(b) (2015).
    \125\See, e.g., Letter from United for Patent Reform to Sen. 
Charles Grassley, Chairman, S. Comm. on the Judiciary, Patrick Leahy, 
Ranking Member, S. Comm. on the Judiciary, Rep. Bob Goodlatte, 
Chairman, H. Comm. on the Judiciary, & Rep. John Conyers, Jr., Ranking 
Member, H. Comm. on the Judiciary (Jan. 15, 2015) (on file with the H. 
Comm. on the Judiciary, Democratic Staff).
---------------------------------------------------------------------------
    Under 35 U.S.C. Sec. 285, a court ``in exceptional cases'' 
may award reasonable attorneys' fees to a prevailing party in a 
patent case. Before 2014, courts rarely awarded fees because of 
a strict standard set by the U.S. Court of Appeals for the 
Federal Circuit, in Brooks Furniture Mfg., Inc. v. Dutailier 
Int'l, Inc.\126\ In its 2014 decision in Octane Fitness,\127\ 
the Supreme Court held that the standard was unduly rigid. The 
Court explained that an ``exceptional'' case is one that merely 
``stands out from others with respect to the substantive 
strength of a party's litigation position (considering both the 
governing law and the facts of the case) or unreasonable manner 
in which the case was litigated.''\128\ The decision makes it 
easier for a court to award fees.
---------------------------------------------------------------------------
    \126\393 F.3d 1378, 1381 (Fed. Cir. 2005).
    \127\134 S. Ct. 1749 (2014).
    \128\Id. at 1756.
---------------------------------------------------------------------------
    On the same day, the Court also ruled, in Highmark,\129\ 
that the Federal Circuit's review of a district court's fee 
award should be reviewed for abuse of discretion rather than de 
novo. The decision made it more difficult for the Federal 
Circuit to reverse district court decisions on fee awards.
---------------------------------------------------------------------------
    \129\134 S. Ct. 1744 (2014).
---------------------------------------------------------------------------
    Since the Supreme Court's decisions in these two cases, 
courts have been awarding fees at a substantially higher rate. 
According to one study, in the 8 months prior to these 
decisions, fees were awarded in almost 20% of the cases in 
which they were requested. In the 8 months following the 
decisions, however, fees were awarded in almost half the cases 
in which they were requested.\130\ Another study reported a 
jump in cases in which fees were awarded from 13% in the period 
analyzed prior to Octane Fitness and Highmark to 43% after 
those cases.\131\
---------------------------------------------------------------------------
    \130\Mallun Yen, Fee Shifting Before and After the Supreme Court 
Decisions, Inside Counsel, Feb. 25, 2015 (reporting that in the 8 
months prior to Octane Fitness and Highmark fees were awarded in 6 of 
the 31 cases in which they were requested while in the 8 months after 
the decision fees were awarded in 21 of the 43 cases in which they were 
requested).
    \131\Posting of Hannah Jiam to PatentlyO.com, Emerging Trends Post-
Octane Fitness (May 13, 2015), available at http://patentlyo.com/
patent/2015/05/emerging-octane-fitness.html.
---------------------------------------------------------------------------
    Although we have strong concerns about the impact of loser 
pays provisions on legitimate plaintiffs, to the extent that 
the threat of fee shifting acts as a deterrent to filing 
abusive litigation, the stringent provisions of the Innovation 
Act are clearly unnecessary. The Supreme Court loosened the 
standard for when fees should be awarded and district courts 
have responded, in short order, with a significant increase in 
the frequency of fee awards. There is no need for the mandatory 
presumptive fee shifting contained in H.R. 9, which would make 
fee awards the default rule and discourage inventors from 
enforcing their patent rights in court.
B. LPatent Case Filings Have Decreased Significantly Over the Last Year
    One of the primary arguments for supporters of H.R. 9 is 
that patent litigation rates have skyrocketed. However, 
statistics reveal that there has been a dramatic decrease in 
the number of patent cases filed, with some reports finding 
that infringement cases dropped by as much as 40% between 
September 2013 and September 2014.\132\
---------------------------------------------------------------------------
    \132\See Study by Lex Machina, available at https://lexmachina.com/
2014/10/september-2014-new-patent-case-filings-40-september-2013/
(showing that monthly patent filings decreased by 40% (549 to 329) 
between September 2013 and September 2014); Andrew S. Baluch, Esq. and 
Eoin Connolly, Attorney fee awards in patent cases after Octane 
Fitness, Westlaw Journal Intellectual Property, vol. 21, issue 17 at 14 
(Dec. 10, 2014) (finding that at least 40 motions for attorneys' fees 
were filed since the Supreme Court decided Octane Fitness and fees were 
awarded in 18 of those cases). See also Patent Protections Coalition 
Letter; USIJ February 12, 2015 Letter.
---------------------------------------------------------------------------
    Although a number of factors may be behind this trend, one 
important contributor was likely the Supreme Court's decision 
in Alice Corp. v. CLS Bank Int'l.\133\ In Alice, the Court held 
that simply implementing an abstract idea using a generic 
computer is not enough to turn that abstract idea into a 
patentable invention.\134\ As a result, the scope of patentable 
subject matter for many software-based inventions has been 
significantly narrowed.\135\
---------------------------------------------------------------------------
    \133\134 S. Ct. 2347 (2014).
    \134\Id.
    \135\USIJ February 12, 2015 Letter.
---------------------------------------------------------------------------
    Consequently, abusive litigants, who often hold this type 
of vague and over-broad patent, will have many of their suits 
dismissed at an early stage of litigation and the USPTO will 
issue fewer of these weak patents going forward.\136\
---------------------------------------------------------------------------
    \136\James Bessen, What the Courts Did to Curb Patent Trolling--For 
Now, The Atlantic (Dec. 1, 2014).
---------------------------------------------------------------------------
C. LPleading Standards are Already Set to Increase Due to the 
        Elimination of Form 18
    A central provision in H.R. 9 calls for heightened pleading 
requirements because defendants contend that plaintiffs in 
patent cases are not required to provide sufficient detail in 
their complaints to give defendants fair notice of what patents 
they are allegedly infringing and how the patents have been 
infringed. However, the Federal courts have taken 
administrative actions that render this provision in the 
Innovation Act unnecessary.
    Currently, patent holding plaintiffs merely need to file 
Form 18 of the Federal Rules of Civil Procedure as their 
complaint. That form requires plaintiffs to include minimal 
information. There is widespread agreement that this 
requirement provides insufficient notice to defendants. 
Fortunately, Form 18 should be eliminated by December 1 of this 
year.\137\ After Form 18 is eliminated, patent infringement 
suits will be subject to the already heightened pleading 
requirements provided for under the Supreme Court's decisions 
in Twombly\138\ and Iqbal\139\ that applies to all other civil 
actions. Under Twombly and Iqbal, plaintiffs must include 
enough facts to show that their claim is ``plausible on its 
face.''\140\
---------------------------------------------------------------------------
    \137\Supreme Court Adopts Rules Changes; ``Summary of the Report of 
the Judicial Conference Committee on Rules of Practice and Procedure 
14,'' (Sept. 2014), available at http://www.uscourts.gov/uscourts/
RulesAndPolicies/rules/Reports/ST09-2014.pdf.
    \138\550 U.S. 544 (2007).
    \139\556 U.S. 662 (2009).
    \140\Leslie Gordon, For Federal Plaintiffs, Twombly and Iqbal Still 
Present a Catch-22, 
ABA Journal, Jan. 1, 2011, available at http://abajournal.com/magazine/
article/for_federal_
plaintiffs_twombly_and_iqbal_still_present_a_catch-22.
---------------------------------------------------------------------------
    Once Form 18 is eliminated, the alleged need for H.R. 9's 
heightened pleading requirements will be unnecessary and if 
allowed to remain, would unfairly burden plaintiffs seeking to 
enforce their patent rights by requiring them to provide more 
details in their complaints beyond what is required under 
Twombly and Iqbal.
D. LDistrict Courts Have Developed Local Case Management Rules
    Supporters of H.R. 9 contend that courts hearing patent 
cases have not imposed structures to limit discovery and 
prevent abuse of the litigation system. However, individual 
district courts have taken steps in recent years to lower the 
costs and improve the efficiency of patent cases by 
establishing local case management rules.
    More than 30 courts currently have local case management 
rules for patent cases, up from just 12 in 2008, with more 
districts expected to follow.\141\ Rather than Congress 
legislating burdensome and heavy-handed rules governing patent 
litigation that will harm all plaintiffs, we should allow the 
courts, which have expertise in managing patent cases, to 
continue developing policies that will improve the litigation 
process.
---------------------------------------------------------------------------
    \141\Dina Hayes & James Lyons, Judges' Use of Case Management to 
Effect [sic] Patent Reform, Inside Counsel, Dec. 22, 2014.
---------------------------------------------------------------------------
E. LThe USPTO Has Begun an Enhanced Patent Quality Initiative
    Innovation Act proponents have expressed concerns that so-
called ``patent trolls'' rely on vague patents for the subjects 
of their demand letters and lawsuits. Recognizing that high 
quality patents bring certainty and clarity of rights, which 
reduces needless litigation and the issuance of vague patents, 
the USPTO recently announced an important initiative to enhance 
patent quality.\142\
---------------------------------------------------------------------------
    \142\Request for Comments on Enhancing Patent Quality, 80 Fed. Reg. 
6475 (proposed Feb. 5, 2015).
---------------------------------------------------------------------------
    Beginning with a ``Quality Summit'' that was held in March 
of this year, the USPTO has proposed a variety of measures, 
including increased training of its examiners, better customer 
service, and new technology that will significantly improve the 
quality of the patents it issues.\143\ These proposed 
initiatives join a host of other efforts already underway at 
the USPTO to enhance patent quality.\144\ As the agency 
continues to increase the quality of the patents it issues, 
fewer vague and over-broad patents will be available to bad 
actors that seek to abuse the litigation system. Over time, 
this will be far more effective than the unfair and unnecessary 
measures contained in H.R. 9.
---------------------------------------------------------------------------
    \143\Id.
    \144\Id.
---------------------------------------------------------------------------
F. LH.R. 9 Is More Objectionable than the Senate's PATENT Act
    Although S. 1137, the PATENT Act, which the Senate 
Judiciary Committee recently reported, still has room for 
improvement, we, along with many stakeholders, believe it 
provides much stronger protection for legitimate inventors than 
H.R. 9.\145\ In particular, S. 1137 requires a prevailing party 
to demonstrate that it is entitled to fees. In addition, the 
Senate bill would require a court to determine whether the non-
prevailing party's claim and conduct were objectively 
reasonable.\146\ H.R. 9, on the other hand, would require a 
court to award fees unless it found the non-prevailing party's 
position and conduct to be reasonably justified.\147\
---------------------------------------------------------------------------
    \145\See, e.g., Press Release, 21C, 21C Commends Senate 
Introduction of the PATENT Act (April 29, 2015), available at http://
patentsmatter.com/issue/pdfs/21CStatementon
IntroductionoftheSenateBill.pdf; Press Release, PhRMA, PhRMA Response 
to Introduction of Senate Patent Bill (April 29, 2015), available at 
http://www.phrma.org/media-releases/phrma-
response-to-introduction-of-senate-patent-bill; Press Release, United 
for Patent Reform, Bipartisan Senate Judiciary Bill Will Protect 
America's Businesses from Continued Patent Troll 
Extortion (April 29, 2015), available at http://
www.unitedforpatentreform.com/patent-reform-
news/65/
Press+Release+Bipartisan+Senate+Judiciary+Leadership+Bill+Will+Protect+A
merica+
s+Businesses+From; Press Release, Association of American Universities, 
American Council on Education, Association of American Medical 
Colleges, Association of Public and Land-grant Universities, 
Association of University Technology Managers, and Council on 
Government Relations, Higher Education Association Statement on 
Introduction of Patent Act (April 30, 2015), available at http://
www.aplu.org/news-and-media/News/higher-education-association-
statement-on-introduction-of-patent-act; Niels Lesniewski, Senate Bill 
Gets White House Plaudits, rollcall, May 1, 2015, available at http://
blogs.rollcall.com/white-house/senate-patent-bill-gets-white-house-
plaudits/?dcz=; Editorial, Curbing Abusive Patent Lawsuits, N.Y. Times, 
May 6, 2015.
    \146\S. 1137, 114th Cong. Sec. 7(b) (2015).
    \147\H.R. 9, 114th Cong. Sec. 3(b) (2015).
---------------------------------------------------------------------------
    On this and a few other issues, the Senate bill is 
preferable to the Innovation Act. Instead of pressing forward 
with H.R. 9, the House should take up and improve the Senate's 
PATENT Act.

             DETAILED SECTION-BY-SECTION ANALYSIS OF H.R. 9

    The following explains the pertinent provisions of H.R. 9.
    Section 3(a) imposes heightened pleading requirements on 
parties asserting patent infringement claims whether in an 
initial complaint, counterclaim or cross-claim. It requires 
patent holders to identify the patents and claims infringed and 
to provide more specificity as to how they are infringed. 
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 Twombly,\148\ and 
Iqbal.\149\ Those cases moved away from the traditional 
``notice'' pleading regime and moved towards more fact-based 
pleading requirements. In addition, Form 18, which calls for 
simple notice pleading in patent cases, is set to be eliminated 
on December 1 of this year.\150\
---------------------------------------------------------------------------
    \148\550 U.S. 544 (2007).
    \149\556 U.S. 662 (2009).
    \150\Supreme Court Adopts Rules Changes.
---------------------------------------------------------------------------
    Section 3(b) amends Section 285 of title 35 to provide that 
the court shall award reasonable fees and other expenses to a 
prevailing party, unless the court finds that the position and 
conduct of the non-prevailing 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. Section 3(b) would replace the current discretionary 
statutory provision with a mandatory fee-shifting provision. 
The language 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'' 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.''
    Section 3(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. This 
subsection provides that 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 defendant against an allegation of infringement of a 
patent claim, and in which the non-prevailing 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 non-prevailing party has no substantial interest 
in the subject matter at issue other than asserting such patent 
claim in litigation.
    The court may deny a motion to join an interested party if: 
(1) the interested party is not subject to service of process; 
or (2) joinder would deprive the court of subject matter 
jurisdiction or make venue improper. The court must deny a 
motion to join an interested party if: (1) the interested party 
did not timely receive the notice required; or (2) within 30 
days after receiving the notice required, 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 that the interested party has in the patent 
or patents at issue.
    An interested party may not be joined unless it has been 
provided actual notice, within 30 days after the expiration of 
the time period during which a certification is required to be 
filed, that the interested party has been identified in the 
initial disclosure. This subsection defines an interested party 
to mean a person other than the party alleging infringement 
that: (1) is an assignee of the patent or patents at issue; (2) 
has a right, including a contingent right, to enforce or 
sublicense the patent or patents at issue; or (3) 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 the 
licensing revenue, except that a person with a direct financial 
interest does not include: (i) an employee of the party 
alleging infringement--(I) whose principal source of income or 
employment is employment with the party alleging infringement; 
or (II) whose sole financial interest in the patent or patents 
at issue is a salary or hourly wage paid by the party alleging 
infringement; (ii) 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 (iii) 
a person whose sole financial interest in the patent or patents 
at issue is ownership of an equity or security interest in the 
party alleging infringement, unless such person also has the 
right or ability to direct or control (membership on the board 
of directors alone is not sufficient to demonstrate such right 
or ability) the civil action.
    The term substantial interest in the subsection includes an 
interest in the subject matter of a patent at issue if the 
party: (1) invented the subject matter; or (2) commercially 
practices or implements, made substantial preparations directed 
particularly to commercially practicing or implementing, or is 
engaged in research and development in, technology in the field 
of the subject matter.
    This subsection does not apply to an action if the party 
alleging infringement files, not later than 45 days after the 
date on which the party is served with the intial statement a 
certification that: (1) establishes and certifies to the court, 
under oath, that the party will have sufficient funds available 
to satisfy any award of reasonable attorneys' fees and expenses 
under section 285 if an award is assessed; (2) demonstrates 
that such party has a substantial interest in the subject 
matter at issue other than asserting the patent in the 
litigation; or (3) is made under oath that there are no other 
interested parties.
    Section 3(c) does not apply to a technology transfer 
organization whose primary purpose is to facilitate the 
commercialization of technologies developed by one or more 
institutions of higher education (as defined in section 101(a) 
of the Higher Education Act of 1965 (20 U.S.C. 1001 Sec. (a)) 
if such technology transfer organization is alleging 
infringement on behalf of an entity that would not be subject 
to this subsection.
    Section 3(d) requires a judge, with limited exceptions, to 
stay all discovery if the defendant moves within 90 after 
service of a complaint to: (1) sever or drop a party for 
misjoinder; (2) transfer or dismiss the action due to improper 
venue; or (3) dismiss the action pursuant to Federal Rule of 
Civil Procedure 12(b). A judge must decide a motion that is the 
basis for the stay before deciding any other substantive motion 
or issues a scheduling order. Section 3(d) permits discovery 
only when necessary for a court to decide a motion to sever, 
dismiss a party, or dismiss or transfer the action; when a 
preliminary injunction is granted to prevent competitive harm; 
or with the consent of the parties. This provision does not 
apply to an action that includes a cause of action described 
under section 271(e)(2).
    Section 3(e) expresses a sense of Congress that it is an 
abuse of the patent system and against public policy to send 
out evasive demand letters to end users alleging patent 
infringement.
    Section 3(f) adds a paragraph at the end of section 284 of 
title 35 providing 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 3(g)(1) amends section 1400 of title 28 to state 
that notwithstanding subsections (b) and (c) of section 1391, 
any civil action for patent infringement or any action for a 
declaratory judgment that a patent is invalid or not infringed 
may be brought only in a judicial district: (1) where the 
defendant has its principal place of business or is 
incorporated; (2) where the defendant has committed an act of 
infringement of a patent in suit and has a regular and 
established physical facility that gives rise to the act of 
infringement; (3) where the defendant has agreed or consented 
to be sued in the instant action; (4) where an inventor named 
on the patent in suit conducted research or development that 
led to the application for the patent in suit; (5) where a 
party has a regular and established physical facility that such 
party controls and operates, not primarily for the purpose of 
creating venue, and has: (A) engaged in management of 
significant research and development of an invention claimed in 
a patent in suit prior to the effective filing date of the 
patent; (B) manufactured a tangible product that is alleged to 
embody an invention claimed in a patent in suit; or (C) 
implemented a manufacturing process for a tangible good in 
which the process is alleged to embody an invention claimed in 
a patent in suit; or (6) for foreign defendants that do not 
meet the requirements of paragraphs (1) or (2), according to 
section 1391(d) of this title.
    Section 3(g)(2) provides that for the purpose of 
determining whether relief may issue under section 1651 of 
title 28, a clearly and indisputably erroneous denial of a 
motion under section 1406(a) to dismiss or transfer a case on 
the basis of section 1400(b) shall be deemed to cause 
irremediable interim harm.
    Section 3(g)(3) provides that if a defendant does not meet 
the definition of a retailer under section 296(a)(6) of title 
35, as added by section 5 of the bill, solely because the 
defendant manufactures or causes the manufacture of the covered 
product or process in suit, the retail facilities of such 
defendant shall not constitute a regular and established 
physical facility for purposes of section 1400(b)(2) of title 
28 as added by paragraph (1).
    Section 3(g)(4) provides that the dwelling or residence of 
an employee or contractor of a defendant who works at such 
dwelling or residence shall not constitute a regular and 
established physical facility of the defendant for purposes of 
section 1400(b)(2) of title 28, as added by paragraph (1).
    Section 3(h) applies the amendments made by section 3 to 
cases filed on or after the date of enactment of the Innovation 
Act, except where the individual subsections of section 3 
supply their own effective dates.
    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: (1) any assignee of 
the patent; (2) any entity with the right to sublicense or 
enforce the patent; (3) any entity with any financial interest 
in the patent or in the patentee; (4) the ultimate parent 
entity of the assignee; (5) a clear and concise description of 
the principal business, if any, of the party alleging 
infringement; (6) a list of each complaint filed, of which the 
party alleging infringement has knowledge; and (7) for each 
patent identified, whether a standard-setting body has 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 the patent. These requirements 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).
    The patent owner is encouraged to comply with these 
requirements because failure to do so will cause them to 
forfeit attorneys' fees under section 285 or pay enhanced 
damages. In addition, the patent owner may also be required to 
pay the opposing party's costs and attorney's 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.''
    Section 4(d) states that the amendments made by section 4 
shall take effect upon the expiration of the 6-month period 
beginning on the date of enactment of the bill and shall apply 
to any action for which a complaint is filed on or after such 
effective date.
    Section 5(a) requires the court to 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 covered process if: (1) the covered manufacturer is a party 
to the action or to a separate action (in which a party asserts 
a claim for relief arising under any Act of Congress relating 
to patents) involving the same patent or patent related to the 
same covered product or covered process; (2) the covered 
customer agrees to be bound as to the issues determined in an 
action described in paragraph (1) without a full and fair 
opportunity to separately litigate any such issue, but only as 
to those issues for which all other elements of the common law 
doctrine of issue preclusion are met; (3) the motion for a stay 
is brought within 120 days of service of the first infringement 
pleading; and (4) in a case where the covered manufacturer has 
been made a party to the action on motion by the covered 
customer, the covered manufacturer and the covered customer 
consent in writing to the stay. A stay entered into under this 
section may be lifted upon a grant of a motion based on a 
showing that: (1) the action involving the covered manufacturer 
will not resolve a major issue in the suit against the covered 
customer (such as a covered product or covered process 
identified in the motion to lift the stay is not a material 
part of the claimed invention or inventions in the patent or 
patents in dispute); or (2) the stay unreasonably prejudices or 
would be manifestly unjust to the party seeking to lift the 
stay.
    In the case of a stay entered under this section based on 
the participation of the covered manufacturer in a separate 
action in subsection (b)(1), a motion may only be granted if 
the court determines that the showing required under paragraph 
(1) has been made. This section shall not apply to an action 
that includes a cause of action described under section 
271(e)(2). The court may upon motion, determine that a consent 
judgment or an unappealed final order shall not be binding on 
the covered customer with respect to one or more of the issues 
that gave rise to the stay based on a showing that such consent 
judgment or unappealed final order would unreasonably prejudice 
or be manifestly unjust to the covered customer in light of the 
circumstances of the case if, following the grant of a motion 
to stay under this section, the covered manufacturer: (1) 
obtains or consents to entry of a consent judgment relating to 
such issue that gave rise to the stay; or (2) fails to 
prosecute to a final, non-appealable judgment such issue that 
gave rise to the stay. 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.
    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 exist, or pursue 
administrative legal action against a patent owner.
    Section 6(a) requires that not later than 3 months after 
the date of enactment of the bill the Director of the 
Administrative Office of the United States Courts 
(Administrative Office) shall designate not fewer than six of 
the district courts of the United States that are participating 
in the patent cases pilot program established under section 1 
of Public Law 111-349 to develop rules and procedures to 
implement proposals to address the asymmetries in discovery 
burdens and costs, and to establish case management procedures, 
in any civil actions arising under any Act of Congress relating 
to patents.
    Section 6(b) requires that within 18 months after the 
designation by the Director of the Administrative Office of the 
six district courts to develop the rules and procedures 
pursuant to subsection (a), the six district courts shall 
complete the development of the rules and procedures, and begin 
to implement them.
    Section 6(c) states that after the rules and procedures 
developed by the pilot program have been in effect for at least 
2 years, the Judicial Conference of the United States (Judicial 
Conference), using existing resources, may expand the 
application of some or all of those rules and procedures to be 
implemented by all the district courts, and the United States 
Court of Federal Claims, for any civil action arising under any 
Act of Congress relating to patents.
    Section 6(d) directs the Supreme Court to eliminate Form 18 
(concerning patent pleadings) and authorizes the Court to 
replace Form 18 with specific minimum contents.
    Section 6(e) makes three substantive amendments to the 
Bankruptcy Code. First, section 6(e)(1) amends section 1522 of 
the Bankruptcy Code, which specifies various protections for 
creditors and other interested persons in chapter 15 cross-
border insolvency cases.\151\ Specifically, section 6(e)(1) 
would make section 365(n) of the Bankruptcy Code, which sets 
forth the rights of a licensee pursuant to an intellectual 
property executory contract that is rejected in a bankruptcy 
case, applicable to chapter 15 cases.\152\ Pursuant to section 
6(e)(1), a U.S. court would be required to apply Bankruptcy 
Code section 365(n) to ``foreign main proceedings,'' a type of 
chapter 15 case ``pending in the country where the debtor has 
the center of its main interests.''\153\
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    \151\11 U.S.C. Sec. 1522 (2015).
    \152\11 U.S.C. Sec. 365(n) (2015).
    \153\11 U.S.C. Sec. 1506 (2015).
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    Section 6(e)(2)(A) amends Bankruptcy Code section 101(35A), 
which defines the term ``intellectual property.''\154\ The bill 
expands this definition to include a trademark, service mark, 
and trade name, as those terms are defined in the Trademark Act 
of 1946.\155\ In turn, section 6(e)(2)(B) amends Bankruptcy 
Code section 365(n)(2), to impose an affirmative duty on the 
licensee to maintain the quality of the products and services 
offered under or in connection with the licensed trademark, 
service mark, or trade name. And, it provides that the debtor-
licensor retains its right to oversee and enforce quality 
control for such products or services.
---------------------------------------------------------------------------
    \154\11 U.S.C. Sec. 101(35A) (2015).
    \155\15 U.S.C. Sec. 1127 (2015).
---------------------------------------------------------------------------
    Section 6(f) states that not later than 12 months after the 
date of enactment of the bill, the Judicial Conference, with 
assistance of the Director of the Federal Judicial Center and 
Director of the Administrative Office, must prepare and 
transmit to the Committees on the Judiciary of the Senate and 
House of Representatives a report on discovery proceedings in 
cases pertaining to litigation involving patent laws in the 
United States. The report shall: (1) provide the percentage of 
courts that have distinct phases of discovery in the court 
rules; (2) provide a description of at least two of the 
definitions of such phases; (3) identify by name any court that 
does not have such distinct phases and a description of why 
such courts have not implemented such phases; (4) provide with 
regard to proceedings in courts that have phases, in the cases 
of a discovery proceeding that extends beyond the core 
documents phases, a description of: (A) what additional 
discovery was requested and any consistent pattern or trend in 
the reasons or justifications for the request; (B) how much 
longer on average, the proceedings lasted than those settled 
within the first phase; and (C) any patterns for the courts 
that do not have phase rules; and (5) looking at proceedings in 
the courts that do not have phase rules, provide a description 
of how long, on average, the discovery proceedings last; and 
the scope of the requests.
    Section 7(a) requires the USPTO to develop educational 
resources and outreach programs for small business concerns 
arising from patent infringement and abusive patent litigation 
practices. The existing small business patent outreach programs 
of the office, and relevant offices at the Small Business 
Administration and the Minority Business Development Agency, 
shall 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.
    Section 7(b) requires the USPTO to develop a website for 
small businesses that includes patent transparency information 
required under the bill whenever a patentee sues on a patent.
    Section 8(a) requires the USPTO, in consultation with the 
Secretary of Commerce, the Secretary of Treasury, the Chairman 
of the Securities and Exchange Commission, the heads of other 
relevant agencies, and interested parties to conduct a study on 
oversight of the secondary market for patent transactions to 
promote transparency and ethical business practices. The study 
is due no later than 18 months after enactment of the bill.
    Section 8(b) requires the USPTO, in consultation with the 
heads of relevant agencies and interested parties to conduct a 
study on patents owned by the U.S. government. The study must 
examine how patents are licensed and sold, and any litigation 
relating to the licensing or sale of the patents. The study is 
due no later than 1 year after enactment of the bill.
    Section 8(c) requires the Government Accountability Office 
(GAO) to conduct 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 no 
later than 1 year after enactment of the bill.
    Section 8(d) requires an additional study by the 
Administrative Office, in consultation with the Director of the 
Federal Judicial Center and the Director of the USPTO to 
examine the feasibility of developing a pilot program for 
patent small claims proceedings in certain judicial districts 
within the existing patent pilot program mandated by Public Law 
111-349. The study is due no later than 1 year after enactment 
of the bill.
    Section 8(e) requires the USPTO, in consultation with the 
heads of other appropriate agencies, to conduct a study on the 
prevalence of the practice of sending patent demand letters in 
bad faith and the extent to which the practice may, through 
fundamental or deceptive practices, impose a negative impact on 
the marketplace. The report is due within 1 year of enactment 
of the bill.
    Section 8(f) requires the GAO to conduct a study to examine 
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. The report is due no later than 1 year after 
enactment of the bill.
    Section 8(g) requires the USPTO, in consultation with the 
Secretary of Commerce, the Director of the Administrative 
Office, the Director of the Federal Judicial Center, and the 
heads of other relevant agencies, to examine the economic 
impact of sections 3, 4, and 5 of the bill, and any amendments 
made by these sections on the ability of individuals and small 
businesses owned by women, veterans, and minorities to assert, 
secure, and vindicate the constitutionally guaranteed exclusive 
right to inventions and discoveries by such individuals and 
small businesses. The report must be submitted no later than 2 
years after enactment of the bill.
    Section 9(a) deletes ``or reasonably could have raised'' 
from section 325(e)(2) in the AIA's PGR procedure. The AIA 
established this new first window procedure to enable early 
challenge of patents. 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 would 
prevent a PGR petitioner from raising in a later lawsuit the 
claims the petitioner raised in the PGR.
    Subsection 9(b) amends section 316(a) of title 35 by 
stating that 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 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 USPTO shall 
consider such claim construction. This subsection eliminates 
the ``Broadest Reasonable Interpretation'' (BRI) standard and 
requires that claims of issued patents be construed in PGR and 
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. This subsection, in effect, repeals the agency 
rulemaking and replaces the BRI standard with the same standard 
used in the district courts.
    Subsection (b) also provides that an inter partes review 
and post grant review may not be instituted unless the 
petitioner certifies that the petitioner and the real parties 
in interest of the petitioner: (1) do not own and will not 
acquire a financial instrument (including a prepaid variable 
forward contract, equity swap, collar, or exchange fund) that 
is designed to hedge or offset any decrease in the market value 
of an equity security of the patent owner or an affiliate of 
the patent owner, during a period following the filing of the 
petition to be determined by the Director of the USPTO; and (2) 
have not demanded payment, monetary or otherwise from the 
patent owner or an affiliate of the patent owner in exchange 
for a commitment not to file a petition under section 311 with 
respect to the patent that is subject of the petition, unless 
the petitioner or the real party in interest of the petitioner 
has been sued for or charged with infringement of the patent, 
during a period to be determined by the Director of the USPTO.
    In addition, subsection (b) states that for serial or 
redundant petitions the Director shall designate as 
precedential (and may change the designation as the Director 
determines to be appropriate), with respect to the application 
of subsections (d) and (e) of section 325 of title 35, the 
decisions of the Patent Trial and Appeal Board in each of the 
following decisions: (A) Dell Inc. v. Electronics and 
Telecomms. Research Inst., IPR2015-00549, Paper 10 (PTAB Mar. 
26, 2015); (B) Zimmer Holdings, Inc. v. Bonutti Skeletal 
Innovations LLC, IPR2014-01080, Paper 17 (PTAB Oct. 31, 2014); 
(C) Prism Pharma Co., Ltd. v. Choongwae Pharma Corp., IPR2014-
00315, Paper 14 (PTAB July 8, 2014); (D) Unilever, Inc. v. The 
Procter & Gamble Co., IPR2014-00506, Paper 17 (PTAB July 7, 
2014).
    Further, subsection (b) provides that not later than 1 year 
after the date of enactment of the bill, the Director shall 
issue regulations to carry out sections 316(a)(15) and 
326(a)(14) of title 35, as added by paragraphs (1) and (2). 
During the period that begins on the date of the enactment of 
the bill and ends on the date of issuance of the regulations, a 
petition filed under chapter 31 or 32 of title 35 on or after 
the date of enactment of this bill may not be instituted unless 
the petitioner certifies that the petitioner and real parties 
in interest: (1) do not own a financial instrument described in 
sections 316(a)(15) and 326(a)(14) of title 35 as added by 
paragraphs (1) and (2), during the 1-week period following the 
date on which the petition is filed; and (2) have not demanded 
anything of value from the patent owner or an affiliate of the 
patent owner during the period between September 16, 2012, and 
the date of the filing of the petition.
    Subsection (b) also states that except as otherwise 
provided, 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 the bill, and shall apply to any 
proceeding under chapter 31 or 32 of title 35, as the case may 
be, for which the petition for review is filed on or after such 
effective date.
    Section 9(c) 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.
    Section 9(d) redefines and expands the scope of prior art 
under the transitional covered business method program and 
allows the Director of the USPTO to waive payment of a filing 
fee for a transitional proceeding as described under section 
18(a) of the AIA.
    Section 9(e) states that an action or claim arises under an 
Act of Congress relating to patents if such action or claim: 
(1) necessarily requires resolution of a disputed question as 
to the validity of a patent or the scope of a patent claim; or 
(2) is an action or claim for legal malpractice that arises 
from an attorney's conduct in relation to an action or claim 
arising under an Act of Congress relating to patents. This 
provision applies to all cases filed on or after, or pending 
on, the date of the enactment of this bill, but not to a case 
in which a Federal court has issued a ruling on whether the 
case or claim arises under any Act of Congress relating to 
patents or plant variety protection before the date of the 
enactment of this bill.
    Section 9(f) extends the life of the patent pilot program 
from 10 to 20 years.
    Section 9(g) amends section 3(b)(1) of title 35, to provide 
that the Secretary of Commerce, upon nomination by the Director 
of the USPTO, shall appoint a Deputy Under Secretary of 
Commerce for Intellectual Property and Deputy Director of the 
USPTO who shall serve as Acting Director in the event of the 
absence or incapacity of the Director or in the event of a 
vacancy in the office of the Director of the USPTO.
    Section 9(h) makes a series of 11 additional changes it 
classifies as ``technical,'' including one that extends the 
time limit for bringing disciplinary proceedings before the 
USPTO.
    Section 9(i) extends USPTO fee setting authority in section 
10(i)(2) of the Leahy-Smith America Invents Act for 10 years.
    Section 10 provides that, unless otherwise specified in the 
bill, the provisions become effective on the date of enactment 
and apply to any patent issued or any case filed on or after 
the date of enactment.

                               CONCLUSION

    Congress must respond to the problems of abusive patent 
litigation in the courts and the gaming of the patent process 
at the USPTO, and we are willing to work with any and all 
stakeholders and interested parties to develop a fair process 
to find common sense solutions. That is why we supported 
amendments at the Committee markup to make reasonable 
improvements that would protect patent rights, while still 
curtailing abusive patent litigation and exploitation of the 
patent process. We must take a targeted approach that includes 
deterring further abuses of IPR proceedings and ending fee 
diversion from the USPTO to ensure adequate hiring, proper 
training of examiners, and sustained patent quality. And, 
serious patent reform legislation must stop the extortionate 
use of deceptive demand letters. Unfortunately, we cannot 
support H.R. 9 because it includes changes that go well beyond 
the problems of so-called ``patent trolls;'' it creates an 
imbalance in the patent system tilted against individual 
inventors and small businesses; and it will have a chilling 
effect on innovation.
    Accordingly, we dissent from H.R. 9 for these reasons and 
urge our colleagues to oppose this flawed measure.

                                   Mr. Conyers, Jr.
                                   Ms. Jackson Lee.
                                   Mr. Johnson, Jr.
                                   Mr. Deutch.
                                   Ms. Bass.
                                   Mr. Cicilline.
                                   Mr. Peters.

                                 [all]