**HR 1908 -- PATENT REFORM ACT OF 2007**

**Number range CHAPTERKEY CHANGES IN MANAGER'S AMENDMENT**

**SECTION 3: RIGHT OF THE FIRST INVENTOR TO FILE**

**1. Clarify the grace period language**

**Explanation:** One objective of the revised § 102 language is to
provide inventors with a one year grace period to submit a patent
application from the point they publicly disclose their invention. Each
paragraph under § 102(a) provides independent criteria that can defeat a
patent. While we provided grace period language that addressed §
102(a)(1) prior art, we did not provide an adequate exception to §
102(a)(2) prior art. Thus, we are adding (b)(2)(B) so that the grace
period also applies to § 102(a)(2) prior art.

**HR 1908 Change:** At page 4, line 14, § 102(b)(1) and (b)(2) will now
read as follows

**Manager's amendment cross reference:** Page 4, line 4

'(b) EXCEPTIONS.-'

> '(1) PRIOR INVENTOR DISCLOSURE EXCEPTION.-Subject matter that would
> otherwise qualify as prior art based upon a disclosure under
> subparagraph (B) of subsection (a)(1) shall not be prior art to a
> claimed invention under that subparagraph if the subject matter had,
> before such disclosure, been publicly disclosed by the inventor or a
> joint inventor or others who obtained the subject matter disclosed
> directly or indirectly from the inventor or a joint inventor.'
>
> \'(2) DERIVATION, PRIOR DISCLOSURE AND COMMON ASSIGNMENT
> EXCEP-TIONS.-Subject matter that would otherwise qualify as prior art
> only under subsection (a)(2), shall not be prior art to a claimed
> invention if-'
>
> \'(A) the subject matter was obtained directly or indirectly from the
> inventor or a joint inventor;'
>
> \'(B) the subject matter had been publicly disclosed by the inventor
> or a joint inventor or others who obtained the subject matter
> disclosed directly or indirectly from the inventor or a joint inventor
> before the date which the application or patent referred to in
> subsection (a)(2) was effectively filed, or'
>
> \'(C) the subject matter and the claimed invention, not later than the
> effective filing date of the claimed invention, were owned by the same
> person or subject to an obligation of assignment to the same person.'

**2. Clarify requirements to institute of derivation proceeding**

**Explanation:** This amendment to § 135 will allow either the senior or
junior applicant to request a derivation proceeding, such request may
now be made within 12 months of a patent on the claimed invention if
such patent is issued prior to 18 months publication (this is in
addition to the alternative of within 12 months after publication of an
application with the claimed invention), and the Director may initiate a
derivation proceeding only on the basis of a request. The purpose of
these amendments is to address circumstances not initially contemplated
in HR 1908.

**HR 1908 Change:** Page 10, line 13, § 135(a) will read as follows

**Manager's amendment cross reference:** page 10, line 8.

'(a) DISPUTE OVER RIGHT TO PATENT.---

'(1) INSTITUTION OF DERIVATION PROCEEDING.---

> '(A) REQUEST FOR PROCEEDING.---An applicant may request initiation of
> a derivation proceeding to determine the right of the applicant to a
> patent by filing a request that sets forth with particularity the
> basis for finding that another applicant derived the claimed invention
> from the applicant requesting the proceeding and, without
> authorization, filed an application claiming such invention. Any such
> request---
>
> '(i) may only be made within 12 months after the earlier of---
>
> '(I) the date on which a patent is issued containing a claim that is
> the same or substantially the same as the claimed invention; or
>
> '(II) the date of first publication of an application containing a
> claim that is the same or is substantially the same as the claimed
> invention; and
>
> '(ii) must be made under oath, and must be supported by substantial
> evidence.

**3. Strike a requirement to request a derivation proceeding**

**Explanation:** As written, § 135(a)(2) would require the inventor
whose invention has been misappropriated to have filed a patent
application prior to the publication of an application for a claimed
invention that was derived from the inventor. However, there are
legitimate cases where an inventor who has suffered misappropriation may
have not have chosen to file his own application during this period. So
that such inventors are not barred from filing a derivation proceeding,
§ 135(a)(2) will be deleted.

**HR 1908 Change:** Page 11, strike all text from line 9 through line 15

**Manager's amendment cross reference:** N/A

**4. Section 3 implementation will be contingent on European/Japanese
reciprocity**

**Explanation:** This change will delay the effective date of Section 3
(change in prior art language, the end of interferences and the creation
of derivation proceedings) until it is determined by the President that
the patent authorities in Europe and Japan have adopted a grace period
for prior art equivalent to those provided for in Section 3. Part of the
reason to switch to a First-Inventor-to-File system is to further
efforts to harmonize our patent law with the other major patent offices.
However, as part of the quid-pro-quo for the US switching to a
First-Inventor-to-File system, we want Europe and Japan to adopt our
grace period. This will give US negotiators leverage in discussions with
Europe and Japan in this regards.

**HR 1908 Change:** On page 14, after line 17, insert the following

**Manager's amendment cross reference:** Page 15, line 1

'(k) Effective date.\--

'(1) In general.\--The amendments made by this section---

> '(A) shall take effect 90 days after the date on which the President
> transmits to the Congress a finding that major patenting authorities
> have adopted a grace period having substantially the same effect as
> that contained under the amendments made by this section; and
>
> '(B) shall apply to all applications filed on or after the effective
> date under subparagraph (A).

'(2) Definitions.\--In this subsection:

> '(A) Major patenting authorities.\--The term \"major patenting
> authorities\" means at least the patenting authorities in Europe and
> Japan.
>
> '(B) Grace period.\--The term \"grace period\" means the 1-year period
> ending on the effective filing date of a claimed invention, during
> which disclosures of the subject matter by the inventor or a joint
> inventor, or by others who obtained the subject matter disclosed
> directly or indirectly from the inventor or a joint inventor, do not
> qualify as prior art to the claimed invention.
>
> '(C) Effective filing date.\--The term \"effective filing date of a
> claimed invention\" means, with respect to a patenting authority in
> another country, a date equivalent to the effective filing date of a
> claimed invention as defined in section 100(h) of title 35, United
> States Code, as added by subsection (a) of this section.

**SECTION 4: INVENTOR'S OATH OR DECLARATION**

**5. Strengthen honesty requirements in substitute statements**

**Explanation:** As currently written, notice is given that
intentionally false inventor\'s oaths and declarations are subject to
criminal punishment, but there is no notice that the substitute
statements that are called for in § 115 are not subject to this
requirement. To ensure honesty with the patent office, the following
amendment would provide notice that false substitute statements are
subject to the same penalties as false oaths and declarations.

**HR 1908 Change:** On page 19, after line 10, subsection (i) will be
added to § 115 as follows

**Manager's amendment cross reference:** Page 21, line 3

'(i) Any declaration or statement filed pursuant to this section must
contain an acknowledgment that any willful false statement is punishable
by fine or imprisonment, or both (18 U.S.C. 1001).

**SECTION 5: RIGHT OF THE INVNETOR TO OBTAIN DAMAGES**

**6. Clarify that convoyed sales may also be awarded when the entire
market value rule is used.**

**Explanation:** Under current law, when a plaintiff is able to
establish that the entire market value rule applies to a reasonable
royalty calculation, he may also seek a reasonable royalty on convoyed
sales. To maintain this rule, this amendment makes reference to convoyed
sales by stating that the entire market value rule also applies to the
products or processes that satisfy demand.

**HR 1908 Change:** On page 22, after line 20, paragraph 3 will now read
as follows

**Manager's amendment cross reference:** Page 25, line 5

'(3) Entire market value.\--Unless the claimant shows that the patent\'s
specific contribution over the prior art is the predominant basis for
market demand for an infringing product or process, damages may not be
based upon the entire market value of the products or processes involved
that satisfy that demand.

**7. Base a reasonable royalty on enhanced value of combination
inventions.**

**Explanation:** Combination inventions are inventions that are created
by combining elements found in the prior art to form a new, non-obvious
invention. If, as in the current language of HR 1908, the value of a
combination invention as a whole is based on the value of its non-prior
art elements, a combination invention may be deemed to have little or no
value despite it actually having substantial economic value. As such,
this amendment will allow the value of combination inventions to be
based on the enhanced function and/or the enhanced value over the prior
art that the combination provides.

**HR 1908 Change:** On page 22, after line 25, insert the following
paragraph

**Manager's amendment cross reference:** Page 25, line 12

'(4) Combination inventions.\--For purposes of paragraphs (2) and (3),
in the case of a combination invention the elements of which are present
individually in the prior art, the patentee may show that the
contribution over the prior art may include the value of the additional
function resulting from the combination, as well as the enhanced value,
if any, of some or all of the prior art elements resulting from the
combination.

**8. Strike possible reference to lost profits in reasonable royalty
language**

**Explanation:** To avoid any confusion that the language used in the
reasonable royalty paragraph applies only to reasonable royalties, this
amendment will change a reference to damages to reasonable royalty.

**HR 1908 Change:** On page 23, line 1, strike \"damages,\" and insert
\"a reasonable royalty\".

**Manager's amendment cross reference:** Page 25, line 21

**SECTION 6: POST-GRANT PROCEDURES AND OTHER QUALITY ENHANCEMENTS**

**9. Enhanced *inter partes* reexamination in lieu of a second window in
post grant review.**

**Explanation:** As a compromise between several industry groups, we
have elected to abolish the second window in post grant review in favor
of creating several enhancements to *inter partes* reexamination. The
key changes in this approach are as follows:

[301]{.underline} -- written statements by the patent holder used in a
court or USPTO proceeding may now be used in reexamination to establish
the scope of the patent's claims.

**HR 1908 Change:** On page 28, line 6, insert the following

**Manager's amendment cross reference:** Page 31, line 6

'(a) Citation of prior art.\--

'(1) In general.\--Section 301 is amended to read as follows:

'SEC. 301. CITATION OF PRIOR ART.

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

[314]{.underline} -- *inter partes* reexamination will be heard by an
administrative patent judge (instead of an examiner) and the third party
requester will have 60 days to file a response to either an office
action or patent owner response.

**HR 1908 Change:** On page 28, line 23, insert the following

**Manager's amendment cross reference:** Page 33, line 14

'(c) Conduct of *inter partes* proceedings.\--Section 314 is amended---

> '(1) in the first sentence of subsection (a), by striking \"conducted
> according to the procedures established for initial examination under
> the provisions of sections 132 and 133\" and inserting \"heard by an
> administrative patent judge in accordance with procedures which the
> Director shall establish\";

'(2) in subsection (b), by striking paragraph (2) and inserting the
following:

> '(2) The third-party requester shall have the opportunity to file
> written comments on any action on the merits by the Office in the
> *inter partes* reexamination proceeding, and on any response that the
> patent owner files to such an action, if those written comments are
> received by the Office within 60 days after the date of service on the
> third-party requester of the Office action or patent owner response,
> as the case may be.\"; and

'(3) by adding at the end the following:

> '(d) Oral hearing.\--At the request of a third party requestor or the
> patent owner, the administrative patent judge shall conduct an oral
> hearing, unless the judge finds cause lacking for such hearing. \".

[322]{.underline} -- language establishing post grant review beyond 12
months is removed

**HR 1908 Change:** On page 30, strike all text from line 19 through
line 3 of page 31.

**Manager's amendment cross reference:** N/A

**10. Ensure a petitioner has only one opportunity to make use of
post-grant review**

**Explanation:** Section 322 provides two opportunities to request a
post grant review proceeding; (1) within 12 months (for any reason) or
(2) by consent of the patent holder. As currently constructed, § 324
would allow a petitioner to make use of both provisions. This change
clarifies that a filing under any paragraph would preclude a second
petition.

**HR 1908 Change:** At page 32, line 7, strike \"the same\" and insert
\"either such\".

**Manager's amendment cross reference:** Page 37, line 6

**11. A threshold to institute a post-grant opposition is set, the
Director must decide to institute a post grant review proceeding in 60
days and the decision on whether to grant review may not be appealed.**

**Explanation:** This amendment clarifies that 1) the written statement
and evidence presented by the post grant review petitioner must
establish a substantial question of patentability before the Director
may institute a post grant review proceeding, 2) that the Director has
60 days to make the decision of whether to institute a post grant review
proceeding, and 3) the Director's decision of whether to institute a
post grant review proceeding is not appealable. These amendments are
necessary to ensure there are adequate grounds and no unnecessary delays
to instituting a post grant review proceeding.

**HR 1908 Change:** At page 32, line 8, § 325 will now read as follows.

**Manager's amendment cross reference:** Page 37, line 6

'SEC. 325. SUBMISSION OF ADDITIONAL INFORMATION; SHOWING OF SUFFICIENT
GROUNDS.

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

**12. Publication of post grant review proceedings**

**Explanation:** The Director is given authority to establish rules to
notice in the Federal Register post grant review proceedings, publish
documents related to post grant review proceedings and deal with
documents that must remain sealed. This will give the public and
potential patent challengers opportunity to see what challenges have
been made against patents.

**HR 1908 Change:** At page 33, line 1, insert the following paragraph.

**Manager's amendment cross reference:** Page 39, line 9

'(3) shall prescribe regulations for publication of notice in the
Federal Register of the filing of a petition for post-grant review under
this chapter, for publication of the petition, and documents, orders and
decisions relating to the petition, on the website of the Patent and
Trademark Office, and for filings under seal exempt from publication
requirements;

**13. Allow parties to settle as means to terminate post grant review
proceedings.**

**Explanation:** This amendment will allow parties to terminate a post
grant review proceeding through settlement. Such settlement must be in
writing and registered with the PTO. If settled, the proceeding will
have no estoppel effect on the petitioner.

**HR 1908 Change:** At page 36, line 22, insert the following paragraph.

**Manager's amendment cross reference:** Page 42, line 19

'SEC. 332. SETTLEMENT.

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

**14. Give the Director discretion on staying a post grant review when
the patent is challenged by petitioner in district court.**

**Explanation:** As currently written, the language of HR 1908 does not
discuss what should happen when a post grant review is filed prior to
the filing of a lawsuit where the post grant review petitioner
challenges the validity of the same patent. This amendment will allow
the Director to stay the post grant review if he finds that staying the
proceeding would be in the interests of justice.

**HR 1908 Change:** At page 37, line 7, insert the following paragraph.

**Manager's amendment cross reference:** Page 44, line 5

'(b) STAYS.---The Director may stay a post-grant review proceeding if a
pending civil action for infringement addresses the same or
substantially the same questions of patentability.

**15. Provide estoppel on post-grant review after a final decision by a
District Court**

**Explanation**: The Director may not institute a post-grant review
proceeding on the validity of a claim if the petitioner raised or "could
have raised" the question in a civil action and the district court has
entered a final decision on the matter. Federal district courts have
exclusive jurisdiction over patent cases, whether filed by a patent
holder or licensee (e.g., infringement actions) or by a person
contesting the validity of a patent or claims (declaratory relief
actions). If further agency review of patent claims were allowed after
they are upheld by a district court, there no longer would be
\"finality\" from judicial decisions and repetitive challenges to
patents would be invited.

**HR 1908 Change:** At page 37, line 19, strike "had actual knowledge
of" and insert "could have raised"

**Manager's amendment cross reference:** Page 44, line 20

**SECTION 10: VENUE AND JURISDICTION**

**16. Make declaratory judgments subject to the patent statute**

**Explanation:** As provided in HR 1908, declaratory judgments are not
subject to the patent venue statute. This amendment deletes the
exclusion of declaratory judgments from the patent venue statute.

**HR 1908 Change:** At page 45, line 2, strike "other than an action for
declaratory judgment or"

**Manager's amendment cross reference:** Page 52, line 21

**SECTION 11: ADDITIONAL INFORMATION; INEQUITABLE CONDUCT AS A DEFENSE
TO INFRINGEMENT**

**17. Allow PTO to require more information from applicants**

**Explanation:** Patent applicants have no obligation to perform a prior
art search but if they do, they are only obligated to share with the PTO
those prior art references that turn up which could affect the
patentability of the invention. This means that most applicants provide
either no information concerning prior art or substantial quantities of
information concerning prior art to make sure they fulfill PTO
disclosure obligations for prior art they know of (so they aren't
subject to a charge of inequitable conduct). This change will allow the
PTO to establish rules that require applicants to perform a prior art
search and provide any other documentation relevant to patentability --
i.e., explanations by the inventors on why the prior art submitted is
relevant to their patent application.

**HR 1908 Change:** At page 46, line 3, insert the following

**Manager's amendment cross reference:** Page 54, line 4

'SEC. 11. ADDITIONAL INFORMATION; INEQUITABLE CONDUCT AS DEFENSE TO
INFRINGEMENT.

'(a) Disclosure requirements for applicants.\-----

> '(1) In general.\--Chapter 11 is amended by adding at the end the
> following new section:
>
> 'SEC. 123. ADDITIONAL INFORMATION.
>
> '(a) In general.\--The Director shall, by regulation, require that
> applicants submit a search report and other information and analysis
> relevant to patentability. An application shall be regarded as
> abandoned if the applicant fails to submit the required search report,
> information, and analysis in the manner and within the time period
> prescribed by the Director.

**18. Micro entity is defined**

**Explanation:** A micro entity is defined as an individual or a company
with 5 or fewer people, who has not filed for 5 or more patents and is
below an income cap based on average national income. This amendment is
being made so that other changes that benefit micro entities can easily
reference this class of applicants.

**HR 1908 Change:** At page 46, line 3, after amendment 17, insert the
following

**Manager's amendment cross reference:** Page 54, line 21

'SEC. 124. MICRO ENTITIES.

> '(a) Definition.\--For purposes of this title, the term \"micro
> entity\" means an applicant for patent who makes a certification under
> either subsection (b) or (c).
>
> '(b) Unassigned application.\--A certification under this subsection
> is a certification by each inventor named in the application that the
> inventor---
>
> '(1) qualifies as a small entity as defined in regulations issued by
> the Director;
>
> '(2) has not been named on five or more previously filed patent
> applications;
>
> '(3) has not assigned, granted, or conveyed, and is not under an
> obligation by contract or law to assign, grant, or convey, a license
> or any other ownership interest in the application; and
>
> '(4) does not have a gross income, as defined in section 61(a) of the
> Internal Revenue Code of 1986, exceeding 2.5 times the Average Gross
> Income (AGI) as reported by Secretary of Labor in the calendar year
> immediately preceding the calendar year in which the examination fee
> is being paid.
>
> '(c) Assigned application.\--A certification under this subsection is
> a certification by each inventor named in the application that the
> inventor---
>
> '(1) qualifies as a small entity as defined in regulations issued by
> the Director and meets the requirements of subsection (b)(4);
>
> '(2) has not been named on five or more previously filed patent
> applications; and

' '(3) has assigned, granted, conveyed, or is under an obligation by
contract or law to assign, grant, or convey, a license or other
ownership interest in the application to an entity that has five or
fewer employees and has a gross taxable income, as defined in section
61(a) of the Internal Revenue Code of 1986, that does not exceed 2.5
times the Average Gross Income (AGI) as reported by Secretary of Labor
in the calendar year immediately preceding the calendar year in which
the examination fee is being paid.

> '(d) Income level adjustment.\--The income levels referred to in
> subsections (b) and (c) may be adjusted by the Director on October 1,
> 2009, and every year thereafter, to reflect any fluctuations occurring
> during the previous 12 months in the Consumer Price Index, as
> determined by the Secretary of Labor. \".

**19. Codify the defense of Inequitable Conduct**

**Explanation:** Inequitable conduct is an equitable remedy established
and defined by the courts. However, there are many definitions of
various components of inequitable conduct, which has led to uncertainty
on how it will be applied. This amendment codifies a single definition
of inequitable conduct. Under this definition inequitable conduct 1)
must be pled with particularity, 2) must be proven by clear and
convincing evidence, 3) materiality and intent must be separately
proven, 4) materiality is based on a "what is important" standard, and
5) intent may not be inferred solely from materiality.

**HR 1908 Change:** At page 46, line 3, after amendment 18, insert the
following

**Manager's amendment cross reference:** Page 56, line 21

'(c) Inequitable conduct.\--

> '(1) Defense.\--A patent may be held to be unenforceable for
> inequitable conduct if, by clear and convincing evidence, it is shown
> that the patentee, its agents, or another person with a duty of
> disclosure to the Office, with intent to mislead or deceive the patent
> examiner, failed to disclose material information or submitted
> materially false information concerning any claim during prosecution
> of the patent. Patents related to a patent with a claim that is found
> unenforceable due to inequitable conduct may also be held to be
> unenforceable.

'(2) Materiality and intent.\--

> '(A) Materiality.\--For purposes of paragraph (1), material
> information is any information that a reasonable patent examiner would
> consider important in deciding whether to allow the patent
> application. Information is material to patentability when it is not
> cumulative to information already of record in the application.
>
> '(B) Intent.\--In order to prove intent to mislead or deceive under
> paragraph (1), specific facts beyond materiality of the information
> submitted or not disclosed must be proven that support an inference of
> intent to mislead or deceive the Patent and Trademark Office. Facts
> support an inference of intent if they show circumstances that
> indicate conscious or deliberate behavior on the part of the patentee,
> its agents, or another person with a duty of disclosure to the Office,
> to not disclose material information or to submit materially false
> information.

**20. Referral of person to USPTO for disciplinary action in cases of
inequitable conduct.**

**Explanation:** This amendment requires a court, when inequitable
conduct is found and there is evidence that it can be attributed to a
person who is authorized to practice before the PTO, to refer the matter
to the PTO for appropriate disciplinary action. This also allows the
court to order parties to turn over evidence of inequitable conduct to
the PTO. Under current law, patent attorneys and agents rarely are
disciplined for their actions that lead to a finding of inequitable
conduct, no matter how egregious. This amendment will provide
practitioners a more direct disincentive to engage in inequitable
conduct.

**HR 1908 Change:** At page 46, line 3, after amendment 19, insert the
following

**Manager's amendment cross reference:** Page 59, line 8

'(3) Attorney misconduct.\--Upon a finding of inequitable conduct, if
there is evidence that the conduct can be attributable to a person or
persons authorized to practice before the Office, the court shall refer
the matter to the Office for appropriate disciplinary action under
section 32, and shall order the parties to preserve and make available
to the Office any materials that may be relevant to the determination
under section 32.\".

**SECTION 12: REGULATORY AUTHORITY**

**21. Repeals current language and provides a more limited scope of
regulatory authority**

**Explanation:** The objective of providing PTO broad regulatory
authority in HR 1908 was to ensure the PTO has the authority to pass
rules on such things as continuations and claim limitations. However,
due to certain precedent concerning continuations, a general grant of
regulatory authority may not be sufficient to enable PTO to pass
continuation rules. As such, this amendment is tailored to grant the
specific regulatory authority required to pass rules concerning
continuations as well as authority to pass rules that ensure the quality
and timeliness of applications (i.e., claim limitations).

**HR 1908 Change:** At page 46, strike lines 4 through 14 and insert the
following

**Manager's amendment cross reference:** Page 60, line 6

'(a) Regulatory authority.\--Section 2(c) is amended by adding at the
end the following:

> '(6) The powers granted under paragraph (2) of subsection (b) include
> the authority to promulgate regulations to ensure the quality and
> timeliness of applications and their examination, including specifying
> circumstances under which an application for patent may claim the
> benefit under sections 120, 121 and 365(c) of the filing date of a
> prior filed application for patent. \".

**SECTION 14: STUDY CONCERNING SPECIAL MASTERS**

**22. Study Concerning Special Masters**

**Explanation:** Special masters are sometimes used to assist district
court judges in claims construction and other technical matters in
patent litigation. There is anecdotal information to suggest that use of
special masters reduce the costs and length of litigation, and result in
better district court decisions. This section directs the Administrative
Offices of the US Courts, in association with the Federal Judicial
Center, to study the use of special masters in patent litigation so that
we have quantitative information concerning the benefits of using
special masters.

**HR 1908 Change:** At page 49, line 8, insert the following

**Manager's amendment cross reference:** Page 63, line 4

'SEC. 14. STUDY OF SPECIAL MASTERS IN PATENT CASES.

> '(a) In general.\--Not later than 180 days after the date of the
> enactment of this Act, the Director of the Administrative Office of
> the United States Courts shall conduct a study of, and 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 use of
> special masters in patent litigation who are appointed in accordance
> with Rule 53 of the Federal Rules of Civil Procedure.
>
> '(b) Objective.\-- In conducting the study under subsection (a), the
> Director shall consider whether the use of special masters has been
> beneficial in patent litigation and what, if any, program should be
> undertaken to facilitate the use by the judiciary of special masters
> in patent litigation.
>
> '(c) Factors to consider.\--In conducting the study under subsection
> (a), the Director, in consultation with the Federal Judicial Center,
> shall consider---
>
> '(1) the basis upon which courts appoint special masters under Rule
> 53(b) of the Federal Rules of Civil Procedure;
>
> '(2) the frequency with which special masters have been used by the
> courts;
>
> '(3) the role and powers special masters are given by the courts;
>
> '(4) the subject matter at issue in cases that use special masters;
>
> '(5) the impact on court time and costs in cases where a special
> master is used as compared to cases where no special master is used;
>
> '(6) the legal and technical training and experience of special
> masters;
>
> '(7) whether the use of special masters has an impact on the reversal
> rate of district court decisions at the Court of Appeals for the
> Federal Circuit; and
>
> '(8) any other factors that the Director believes would assist in
> gauging the effectiveness of special masters in patent litigation