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115th Congress    }                                            {   Report
                           HOUSE OF REPRESENTATIVES
 2d Session       }                                            {  115-966

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



 
   STUDY OF UNDERREPRESENTED CLASSES CHASING ENGINEERING AND SCIENCE 
                          SUCCESS ACT OF 2018

                                _______
                                

 September 25, 2018.--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

                        [To accompany H.R. 6758]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 6758) to direct the Under Secretary of Commerce for 
Intellectual Property and Director of the United States Patent 
and Trademark Office, in consultation with the Administrator of 
the Small Business Administration, to study and provide 
recommendations to promote the participation of women and 
minorities in entrepreneurship activities and the patent 
system, to extend by 8 years the Patent and Trademark Office's 
authority to set the amounts for the fees it charges, and for 
other purposess, having considered the same, report favorably 
thereon with amendments and recommend that the bill as amended 
do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     3
Background and Need for the Legislation..........................     3
Hearings.........................................................     4
Committee Consideration..........................................     4
Committee Votes..................................................     4
Committee Oversight Findings.....................................     4
New Budget Authority and Tax Expenditures........................     5
Congressional Budget Office Cost Estimate........................     5
Duplication of Federal Programs..................................     6
Disclosure of Directed Rule Makings..............................     6
Performance Goals and Objectives.................................     6
Advisory on Earmarks.............................................     6
Section-by-Section Analysis......................................     7
Changes in Existing Law Made by the Bill, as Reported............     7

                             The Amendment

    The amendments are as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Study of Underrepresented Classes 
Chasing Engineering and Science Success Act of 2018'' or the ``SUCCESS 
Act''.

SEC. 2. FINDINGS; SENSE OF CONGRESS.

  (a) Findings.--Congress finds the following:
          (1) Patents and other forms of intellectual property are 
        important engines of innovation, invention, and economic 
        growth.
          (2) Many innovative small businesses, which create over 20 
        percent of the total number of new jobs created in the United 
        States each year, depend on patent protections to commercialize 
        new technologies.
          (3) Universities and their industry partners also rely on 
        patent protections to transfer innovative new technologies from 
        the laboratory or classroom to commercial use.
          (4) Recent studies have shown that there is a significant gap 
        in the number of patents applied for and obtained by women and 
        minorities.
  (b) Sense of Congress.--It is the sense of Congress that the United 
States has the responsibility to work with the private sector to close 
the gap in the number of patents applied for and obtained by women and 
minorities to harness the maximum innovative potential and continue to 
promote United States leadership in the global economy.

SEC. 3. REPORT.

  (a) Study.--The Director, in consultation with the Administrator and 
any other head of an appropriate agency, shall conduct a study that--
          (1) identifies publicly available data on the number of 
        patents annually applied for and obtained by, and the benefits 
        of increasing the number of patents applied for and obtained by 
        women, minorities, and veterans and small businesses owned by 
        women, minorities, and veterans; and
          (2) provides legislative recommendations for how to--
                  (A) promote the participation of women, minorities, 
                and veterans in entrepreneurship activities; and
                  (B) increase the number of women, minorities, and 
                veterans who apply for and obtain patents.
  (b) Report.--Not later than 1 year after the date of the enactment of 
this Act, the Director shall submit to the Committees on the Judiciary 
and Small Business of the House of Representatives and the Committees 
on the Judiciary and Small Business and Entrepreneurship of the Senate 
a report on the results of the study conducted under subsection (a).

SEC. 4. 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 ``15-year''.

SEC. 5. DEFINITIONS.

  In this Act:
          (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Small Business Administration.
          (2) Agency.--The term ``agency'' means a department, agency, 
        or instrumentality of the United States Government.
          (3) Director.--The term ``Director'' means the Under 
        Secretary of Commerce for Intellectual Property and Director of 
        the United States Patent and Trademark Office.

    Amend the title so as to read:
    A bill to direct the Under Secretary of Commerce for 
Intellectual Property and Director of the United States Patent 
and Trademark Office, in consultation with the Administrator of 
the Small Business Administration, to study and provide 
recommendations to promote the participation of women and 
minorities in entrepreneurship activities and the patent 
system, to extend by 8 years the Patent and Trademark Office's 
authority to set the amounts for the fees it charges, and for 
other purposes.

                          Purpose and Summary

    H.R. 6758, the ``Study of Underrepresented Classes Chasing 
Engineering and Science Success (SUCCESS) Act,'' is designed to 
help close the gender and race gap in patenting rates and 
entrepreneurship in the United States, and increase patenting 
and entrepreneurship by U.S. veterans. It directs the Director 
of the U.S. Patent and Trademark Office (PTO), in consultation 
with the Administrator of the Small Business Administration 
(SBA), to conduct a study on the number of patents annually 
applied for and obtained by U.S. women, minorities, and 
veterans, and requires a report that includes legislative 
recommendations for how to increase participation in 
entrepreneurial activities and patenting by U.S. women, 
minorities, and veterans. This study will be critical in 
developing policies to help these underrepresented groups 
further engage in the type of entrepreneurial activities that 
are the backbone of our American economy. The bill would also 
amend the Leahy-Smith America Invents Act (``AIA'') to extend 
by eight more years the authority granted to the PTO to set the 
amount it charges for each of the services it provides to 
patent and trademark applicants.

                Background and Need for the Legislation

    Patents are drivers of innovation and are critical to 
economic growth. Small businesses contribute over 20 percent of 
the total number of new jobs created in the United States each 
year. Many businesses depend on patents to protect the new 
technologies and innovative products they invent. Without 
patent protection, companies that invest in developing new 
technologies that distinguish their products from those of 
their competitors risk having their competitors copy those 
innovative features and steal sales and customer goodwill from 
the inventing company. Absent patent protection, businesses in 
some industries would have a much harder time securing the 
funding needed to grow. Small businesses with a single product 
would likely be driven out of business, if their invention is 
easily reverse engineered and copied. Securing patent 
protection is often very important to large companies but is 
just as important for the health and survival of a small 
business.
    In the United States, women earn almost half of all 
undergraduate degrees in science and engineering, and 39% of 
all new PhDs in those fields.\1\ But when it comes to patenting 
their inventions, they trail far behind men. Some estimates 
suggest that between 20% and 10% of all patent-holders are 
women.\2\ A 2016 study showed that racial minorities fair even 
worse.\3\
---------------------------------------------------------------------------
    \1\Jensen et al., Why Do Women Inventors Win Fewer Patents? Yale 
Insights, Yale School of Management (Apr. 9, 2018), https://
insights.som.yale.edu/insights/why-do-women-inventors-win-fewer-
patents.
    \2\Id.; see also, Milli et al, Equity in Innovation: Women 
Inventors and Patents, Institute for Women's Policy Research, at 7 
(Nov. 29, 2016), https://iwpr.org/wp-content/uploads/wpallimport/files/
iwpr-export/publications/C448%20Equity%20in%20Innovation.pdf.
    \3\Milli et al., at 5.
---------------------------------------------------------------------------
    We need full participation in our patent system by each 
American with a great new idea to realize the full potential of 
the American people. By encouraging every American to invent 
and innovate, the United States can maintain its position as 
the world's technology leader, and we can secure a brighter 
economic future for ourselves and our children. To realize our 
full scientific and economic potential, the SUCCESS Act 
requires the PTO, in collaboration with the SBA, to provide 
recommendations to Congress on how to increase the 
participation of American women, minorities, and veterans in 
entrepreneurship activities and the patent system.
    The PTO plays a critical role in the development of new 
technologies and the growth of the U.S. economy. The agency 
runs on fees it collects from patent and trademark applicants. 
To ensure that the PTO has all of the resources it needs to 
properly examine patent applications and register trademarks, 
and undertake such other efforts that are essential to 
maintaining America's competitiveness, Congress needs to 
reauthorize the PTO's authority to set its fees.
    The SUCCESS Act would extend for eight more years the PTO's 
authority to set the amounts it charges for the services it 
provides to patent and trademark applicants. The extension 
provided for in this bill will give the PTO the ability to 
conduct long-term planning, but because the authority will 
sunset unless reauthorized in eight years, the bill will also 
ensure effective Congressional oversight.

                                Hearings

    The Committee on the Judiciary held no hearings on H.R. 
6758; however, on May 22, 2018, the Committee held a PTO 
oversight hearing at which testimony was received from the 
Honorable Andrei Iancu, Director of the U.S. Patent and 
Trademark Office, Undersecretary of Commerce for Intellectual 
Property. During that hearing, Director Iancu spoke on the need 
for Congress to pass Section 4 of the bill, ``Extension of Fee-
Setting Authority,'' stating that when the PTO sets fees ``it 
is a multi-year process'' and that the authority is ``a 
critical factor in managing the agency's budget.'' Director 
Iancu stated that this authority ``has allowed the agency to 
efficiently and cautiously adjust user fees as needed to recoup 
operational costs and drive effective operations.''

                        Committee Consideration

    On September 13, 2018, the Committee met in open session 
and ordered the bill (H.R. 6758) favorably reported, with an 
amendment, by voice vote, 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 there 
were no recorded votes during the Committee's consideration of 
H.R. 6758.

                      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 H.R. 6758, the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act of 1974:

                                                September 21, 2018.
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. 6758, the SUCCESS 
Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                        Keith Hall.
    Enclosure.
        cc: Honorable Jerrold Nadler,
          Ranking Member.

0


                       H.R. 6758, the SUCCESS Act


    As ordered reported by the House Committee on the Judiciary on 
                           September 13, 2018



    H.R 6758 would extend the authority of the Patent and 
Trademark Office (PTO) to set and adjust the fees the agency 
charges to obtain and renew patents and trademarks that offset 
its operating costs. That authority expired on September 16, 
2018. The bill also would direct PTO to conduct a study and 
report on the number of patent filings applied for and obtained 
by women, minorities, and veterans and small businesses owned 
by women, minorities, and veterans. The report would include 
recommendations on ways to promote participation in 
entrepreneurship activities and increase patent filings by 
those groups.
    Under the bill, fees could be adjusted for changes in PTO's 
aggregate costs. CBO has no basis for determining how or 
whether PTO would adjust its fees in the future. Because any 
fee adjustments could increase or decrease the total amounts 
collected, CBO has not estimated any effects on those 
collections from enacting the bill.
    Using information from PTO, CBO estimates that it would 
cost less than $500,000 for the agency to complete the study 
and report. However, under the bill, PTO would be authorized to 
adjust its fees to offset any change in operating costs; 
therefore, CBO estimates that the net effect on discretionary 
spending would be negligible, assuming appropriation actions 
consistent with that authority.
    Enacting H.R. 6758 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 6758 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 6758 would impose a mandate as defined in the Unfunded 
Mandates Reform Act (UMRA) on both public and private entities 
by extending the authority of the PTO to set and adjust certain 
fees. The requirement to pay those fees would be a mandate 
because the federal government controls the patent and 
trademark system, and no reasonable alternatives to that system 
exist. If the PTO increases fees to offset the costs of 
conducting a study required by the bill, H.R. 6758 would 
increase the cost of an existing mandate on private and 
intergovernmental entities required to pay those fees. Using 
information from PTO, CBO estimates that the annual cost to 
offset the costs of the PTO would be less than $500,000. 
Therefore, the cost for public and private entities to comply 
with the mandate would fall below the annual thresholds 
established in UMRA for intergovernmental and private-sector 
mandates ($80 million and $160 million in 2018, respectively, 
adjusted annually for inflation).
    The CBO staff contacts for this estimate are Stephen Rabent 
(for federal costs) and Rachel Austin (for mandates). The 
estimate was reviewed by H. Samuel Papenfuss, Deputy Assistant 
Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 6758 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 finds that H.R. 6758 contains no directed 
rule making within the meaning of 5 U.S.C. Sec. 551.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee states that H.R. 6758 
will extend the authority for the PTO to set its fees for an 
additional eight years and requires a report to assess the 
rates of patenting by women, minorities, and veterans and to 
provide legislative recommendations on how to encourage 
patenting rates by these groups.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 6758 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

    The following discussion describes the bill as reported by 
the Committee.
    Section 1. Short title. Section 1 sets forth the short 
title of the bill as the ``Study of Underrepresented Classes 
Chasing Engineering and Science Success (SUCCESS) Act.''
    Sec 2. Findings; Sense of Congress. Provides the following 
findings and sense of Congress regarding the importance of 
patent protection to small business growth and the impact on 
job creation.
    (a) Findings.--Congress finds the following:
          (1) Patents and other forms of intellectual property 
        are important engines of innovation, invention, and 
        economic growth.
          (2) Many innovative small businesses, which create 
        over 20 percent of the total number of new jobs created 
        in the United States each year, depend on patent 
        protections to commercialize new technologies.
          (3) Universities and their industry partners also 
        rely on patent protections to transfer innovative new 
        technologies from the laboratory or classroom to 
        commercial use.
          (4) Recent studies have shown that there is a 
        significant gap in the number of patents applied for 
        and obtained by women and minorities and the number of 
        patents applied for and obtained by individuals from 
        other groups.
    (b) Sense of Congress.--It is the sense of Congress that 
the United States has the responsibility to work with the 
private sector to close the gap in the number of patents 
applied for and obtained by women and minorities to harness the 
maximum innovative potential and continue to promote United 
States leadership in the global economy.
    Sec 3. Report. Obligates the PTO Director, in consultation 
with the Administrator of the Small Business Administration, to 
submit a report to the Committees on the Judiciary and Small 
Business of the House of Representatives and the Committees on 
the Judiciary and Small Business and Entrepreneurship of the 
Senate on publicly available data on the number of patents 
annually applied for and obtained by women, minorities, and 
veterans; the benefits of increasing patenting by small 
businesses owned by women, minorities, and veterans; 
legislative recommendations for how to increase participation 
in entrepreneurial activities by women, minorities, and 
veterans; and increase the number of patents applied for by and 
granted to women, minorities, and veterans.
    Sec. 4. Extension of the USPTO's Fee Setting Authority. 
This section extends the PTO's authority to set its own fees, 
provided for in Section 10(i)(2) of the America Invents Act, by 
eight years.
    Sec. 5 Definitions. This section defines ``the 
Administrator'' of the SBA, ``the Director'' of the PTO, and 
federal ``agency.''

         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):

                    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) [Amends other law--omitted]
  (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] 15-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.

           *       *       *       *       *       *       *