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AMERICA INVENTS ACT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON

H.R. 1249 

MARCH 30, 2011 

Serial No. 112–35 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

BEN QUAYLE, Arizona, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

MARCH 30, 2011 

Page 

TEXT OF THE BILL 

H.R. 1249, the ‘‘America Invents Act’’ ................................................................... 3 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 39 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Committee on the Judiciary ..................................... 42 

WITNESSES 

The Honorable David J. Kappos, Under Secretary of Commerce for Intellectual Property and Director, the United States Patent and Trademark Office 

Oral Testimony ..................................................................................................... 44 

Prepared Statement ............................................................................................. 46 

The Honorable Steve Bartlett, President and Chief Executive Officer, The 

Financial Services Roundtable 

Oral Testimony ..................................................................................................... 56 

Prepared Statement ............................................................................................. 59 

Steven W. Miller, Vice President and General Counsel for Intellectual Property, Procter & Gamble Company 

Oral Testimony ..................................................................................................... 65 

Prepared Statement ............................................................................................. 67 

Mark Chandler, Senior Vice President, General Counsel, and Secretary, Cisco 

Systems, Inc. 

Oral Testimony ..................................................................................................... 79 

Prepared Statement ............................................................................................. 82 

John C. Vaughn, Executive Vice President, Association of American Universities 

Oral Testimony ..................................................................................................... 92 

Prepared Statement ............................................................................................. 94 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Melvin L. Watt, a Representative in 

Congress from the State of North Carolina, and Ranking Member, Subcommittee on Intellectual Property, Competition, and the Internet ............... 107 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee 

on the Judiciary, and Member, Subcommittee on Intellectual Property, 

Competition, and the Internet ............................................................................ 125 

Page

IV 

Response to Post-Hearing Questions from the Honorable David J. Kappos, 

Under Secretary of Commerce for Intellectual Property, Director of the 

United States Patent and Trademark Office ..................................................... 127 

Prepared Statement of the Generic Pharmaceutical Association (GPhA) ........... 132 

(1) 

AMERICA INVENTS ACT 

WEDNESDAY, MARCH 30, 2011 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 1:32 p.m., in room 

2141, Rayburn House Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Smith, Coble, Sensenbrenner, Chabot, Chaffetz, Reed, Griffin, Marino, Adams, Quayle, 

Watt, Conyers, Berman, Chu, Deutch, Sa ́nchez, Lofgren, and Waters. 

Staff Present: (Majority) Blaine Merritt, Subcommittee Chief 

Counsel; Vishal Amin, Counsel; Olivia Lee, Clerk; and Stephanie 

Moore, Minority Subcommittee Chief Counsel. 

Mr. GOODLATTE. Folks, we are going to just make an announcement. We will begin the hearing after this series of votes. We want 

to spend a little bit of time on our opening statements. So it is 

probably not enough time to get it in before the votes. 

Also, at 2:30 p.m., there is a briefing by some of our country’s 

leaders regarding the situation in Libya, and so that all Members 

can participate, we are going to recess the hearing at 2:30 p.m. And 

then we will come back later on. 

So this is going to be a herky-jerky afternoon, it sounds like. But 

we will get this hearing done, and we will welcome the testimony 

of all our witnesses. 

So the Committee will stand in recess. 

[Recess.] 

Mr. GOODLATTE. Take two. The Subcommittee will come to order, 

and I recognize myself for an opening statement. 

For the better part of the past decade, this Committee has been 

working to update our patent laws to ensure that the incentives 

our Framers envisioned when they wrote article 1, section 8 of our 

Constitution remain meaningful and effective. The U.S. patent system must work efficiently if America is to remain the world leader 

in innovation. 

It is only right that as more and more inventions with increasing 

complexity emerge, we examine our Nation’s patent laws to ensure 

that they still work efficiently and that they still encourage and not 

discourage innovation. 

2 

The core principles that have guided our efforts have been to ensure that quality patents are issued by the PTO in the first place 

and to ensure that our patent enforcement laws and procedures do 

not create incentives for opportunists with invalid claims to exploit, 

while maintaining strong laws that allow legitimate patent owners 

to enforce their patents effectively. H.R. 1249 addresses these principles. 

With regard to ensuring the issuance of quality patents, this legislation allows third parties to submit evidence of prior art prior to 

the examination process, which will help ensure examiners have 

the full record before them when making decisions. In addition, 

after the PTO issues a patent, this legislation creates a new post 

grant opposition system in which third parties can raise objections 

to a patent immediately after its issuance, which will both help 

screen out bad patents while bolstering valid ones. 

The bill also increases patent quality by eliminating fee diversion, which will allow the PTO to keep all the fees it collects from 

inventors. This fee diversion provision is crucial to allowing PTO 

to accomplish the mission we are asking it to do with this bill and 

will allow the PTO to allocate resources with certainty. 

H.R. 1249 also includes provisions to ensure that patent litigation benefits those with valid claims, but not those opportunists 

who seek to abuse the litigation process. Many innovative companies, including those in the technology and other sectors, have been 

forced to defend against patent infringement lawsuits of questionable legitimacy. 

When such a defendant company truly believes that the patent 

being asserted is invalid, it is important for it to have an avenue 

to request the PTO to take another look at the patent in order to 

better inform the district court of the patent’s validity. This legislation retains an inter partes re-exam process, which allows 

innovators to challenge the validity of a patent when they are sued 

for patent infringement. 

The Senate bill placed many restrictions on the use of the reexam procedure, and the House bill relaxes some of those restrictions in order to maintain the usefulness of the inter partes reexam process. 

H.R. 1249 is the culmination of years of work in both the House 

and the Senate from Democrats and Republicans, and it is important to note that the House and the Senate, over four Congresses, 

we have held dozens of hearings, met with numerous stakeholders 

from every industry sector, as well as small and large businesses 

and individual inventors, watched judicial decisions in the courts, 

and produced several pieces of legislation. 

By giving the necessary tools to the Patent Office to issue strong 

patents and procedures that will help ensure certainty for patentable inventions, we are paving the way for independent inventors 

as well as small, medium, and large-sized enterprises to raise capital and grow. I believe this legislation will spur innovation, economic growth, and jobs. 

However, I also believe some work still needs to be done on this 

bill. Specifically, I agree that the PTO needs to have more certainty 

with respect to its fee-setting authority. I want to ensure, however, 

3 

that Congress maintains strong oversight over the PTO as it uses 

that authority. 

I also have concerns about the supplemental exam provisions in 

the bill and believe further work may need to be done on the inter 

partes re-exam procedure to make sure we are striking the right 

balance there. 

I look forward to hearing from our experts today, many of whom 

have been working on this effort for a long, long time. 

It is now my pleasure to recognize the Ranking Member of the 

Committee, the gentleman from North Carolina, Mr. Watt. 

[The text of the bill, H.R. 1249, follows:] 

I 

112TH CONGRESS 

1ST SESSION H. R. 1249 

To amend title 35, United States Code, to provide for patent reform. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 30, 2011 

Mr. SMITH of Texas (for himself, Mr. GOODLATTE, and Mr. ISSA) introduced the following bill; which was referred to the Committee on the Judiciary, and in addition 

to the Committee on the Budget, for a period to be subsequently determined by 

the Speaker, in each case for consideration of such provisions as fall within the 

jurisdiction of the committee concerned 

A BILL 

To amend title 35, United States Code, to provide for patent reform. 

Be it enacted by the Senate and House of Representatives of the United States 

of America in Congress assembled, 

SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

(a) SHORT TITLE.—This Act may be cited as the ‘‘America Invents Act’’. 

(b) TABLE OF CONTENTS.—The table of contents for this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. First inventor to file. 

Sec. 3. Inventor’s oath or declaration. 

Sec. 4. Defense to infringement based on earlier inventor. 

Sec. 5. Post-grant review proceedings. 

Sec. 6. Patent Trial and Appeal Board. 

Sec. 7. Preissuance submissions by third parties. 

Sec. 8. Venue. 

Sec. 9. Fee setting authority. 

Sec. 10. Fees for patent services. 

Sec. 11. Supplemental examination. 

Sec. 12. Funding agreements. 

Sec. 13. Tax strategies deemed within the prior art. 

Sec. 14. Best mode requirement. 

Sec. 15. Marking. 

Sec. 16. Advice of counsel. 

Sec. 17. Ownership; assignment. 

Sec. 18. Transitional program for covered business method patents. 

Sec. 19. Clarification of jurisdiction. 

Sec. 20. Technical amendments. 

Sec. 21. Travel expenses and payment of administrative judges. 

4 

Sec. 22. Patent and Trademark Office funding. 

Sec. 23. Satellite offices. 

Sec. 24. Patent Ombudsman Program for small business concerns. 

Sec. 25. Priority examination for technologies important to American competitiveness. 

Sec. 26. Designation of Detroit satellite office. 

Sec. 27. Effective date. 

Sec. 28. Budgetary effects. 

SEC. 2. FIRST INVENTOR TO FILE. 

(a) DEFINITIONS.—Section 100 of title 35, United States Code, is amended by 

adding at the end the following: 

‘‘(f) The term ‘inventor’ means the individual or, if a joint invention, the individuals collectively who invented or discovered the subject matter of the invention. 

‘‘(g) The terms ‘joint inventor’ and ‘coinventor’ mean any 1 of the individuals 

who invented or discovered the subject matter of a joint invention. 

‘‘(h) The term ‘joint research agreement’ means a written contract, grant, or cooperative agreement entered into by 2 or more persons or entities for the performance of experimental, developmental, or research work in the field of the claimed 

invention. 

‘‘(i)(1) The term ‘effective filing date’ for a claimed invention in a patent or application for patent means— 

‘‘(A) if subparagraph (B) does not apply, the actual filing date of the patent 

or the application for the patent containing a claim to the invention; or 

‘‘(B) the filing date of the earliest application for which the patent or application is entitled, as to such invention, to a right of priority under section 119, 

365(a), or 365(b) or to the benefit of an earlier filing date under section 120, 

121, or 365(c). 

‘‘(2) The effective filing date for a claimed invention in an application for reissue 

or reissued patent shall be determined by deeming the claim to the invention to 

have been contained in the patent for which reissue was sought. 

‘‘(j) The term ‘claimed invention’ means the subject matter defined by a claim 

in a patent or an application for a patent.’’. 

(b) CONDITIONS FOR PATENTABILITY.— 

(1) IN GENERAL.—Section 102 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 102. Conditions for patentability; novelty 

‘‘(a) NOVELTY; PRIOR ART.—A person shall be entitled to a patent unless— 

‘‘(1) the claimed invention was patented, described in a printed publication, 

or in public use, on sale, or otherwise available to the public before the effective 

filing date of the claimed invention; or 

‘‘(2) the claimed invention was described in a patent issued under section 

151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the 

claimed invention. 

‘‘(b) EXCEPTIONS.— 

‘‘(1) DISCLOSURES MADE 1 YEAR OR LESS BEFORE THE EFFECTIVE FILING DATE

OF THE CLAIMED INVENTION.—A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if— 

‘‘(A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from 

the inventor or a joint inventor; or 

‘‘(B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained 

the subject matter disclosed directly or indirectly from the inventor or a 

joint inventor. 

‘‘(2) DISCLOSURES APPEARING IN APPLICATIONS AND PATENTS.—A disclosure 

shall not be prior art to a claimed invention under subsection (a)(2) if— 

‘‘(A) the subject matter disclosed was obtained directly or indirectly 

from the inventor or a joint inventor; 

‘‘(B) the subject matter disclosed had, before such subject matter was 

effectively filed under subsection (a)(2), been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or 

5 

‘‘(C) the subject matter disclosed and the claimed invention, not later 

than the effective filing date of the claimed invention, were owned by the 

same person or subject to an obligation of assignment to the same person. 

‘‘(c) COMMON OWNERSHIP UNDER JOINT RESEARCH AGREEMENTS.—Subject matter disclosed and a claimed invention shall be deemed to have been owned by the 

same person or subject to an obligation of assignment to the same person in applying the provisions of subsection (b)(2)(C) if— 

‘‘(1) the subject matter disclosed was developed and the claimed invention 

was made by, or on behalf of, 1 or more parties to a joint research agreement 

that was in effect on or before the effective filing date of the claimed invention; 

‘‘(2) the claimed invention was made as a result of activities undertaken 

within the scope of the joint research agreement; and 

‘‘(3) the application for patent for the claimed invention discloses or is 

amended to disclose the names of the parties to the joint research agreement. 

‘‘(d) PATENTS AND PUBLISHED APPLICATIONS EFFECTIVE AS PRIOR ART.—For purposes of determining whether a patent or application for patent is prior art to a 

claimed invention under subsection (a)(2), such patent or application shall be considered to have been effectively filed, with respect to any subject matter described in 

the patent or application— 

‘‘(1) if paragraph (2) does not apply, as of the actual filing date of the patent 

or the application for patent; or 

‘‘(2) if the patent or application for patent is entitled to claim a right of priority under section 119, 365(a), or 365(b), or to claim the benefit of an earlier 

filing date under section 120, 121, or 365(c), based upon 1 or more prior filed 

applications for patent, as of the filing date of the earliest such application that 

describes the subject matter.’’. 

(2) CONTINUITY OF INTENT UNDER THE CREATE ACT.—The enactment of section 102(c) of title 35, United States Code, under paragraph (1) of this subsection is done with the same intent to promote joint research activities that 

was expressed, including in the legislative history, through the enactment of the 

Cooperative Research and Technology Enhancement Act of 2004 (Public Law 

108–453; the ‘‘CREATE Act’’), the amendments of which are stricken by subsection (c) of this section. The United States Patent and Trademark Office shall 

administer section 102(c) of title 35, United States Code, in a manner consistent 

with the legislative history of the CREATE Act that was relevant to its administration by the United States Patent and Trademark Office. 

(3) CONFORMING AMENDMENT.—The item relating to section 102 in the table 

of sections for chapter 10 of title 35, United States Code, is amended to read 

as follows: 

‘‘102. Conditions for patentability; novelty.’’. 

(c) CONDITIONS FOR PATENTABILITY; NONOBVIOUS SUBJECT MATTER.—Section 

103 of title 35, United States Code, is amended to read as follows: 

‘‘§ 103. Conditions for patentability; nonobvious subject matter 

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

the claimed invention is not identically disclosed as set forth in section 102, if the 

differences between the claimed invention and the prior art are such that the 

claimed invention as a whole would have been obvious before the effective filing 

date of the claimed invention to a person having ordinary skill in the art to which 

the claimed invention pertains. Patentability shall not be negated by the manner 

in which the invention was made.’’. 

(d) REPEAL OF REQUIREMENTS FOR INVENTIONS MADE ABROAD.—Section 104 of 

title 35, United States Code, and the item relating to that section in the table of 

sections for chapter 10 of title 35, United States Code, are repealed. 

(e) REPEAL OF STATUTORY INVENTION REGISTRATION.— 

(1) IN GENERAL.—Section 157 of title 35, United States Code, and the item 

relating to that section in the table of sections for chapter 14 of title 35, United 

States Code, are repealed. 

(2) REMOVAL OF CROSS REFERENCES.—Section 111(b)(8) of title 35, United 

States Code, is amended by striking ‘‘sections 115, 131, 135, and 157’’ and inserting ‘‘sections 131 and 135’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall take 

effect upon the expiration of the 18-month period beginning on the date of the 

enactment of this Act, and shall apply to any request for a statutory invention 

registration filed on or after that effective date. 

6 

(f) EARLIER FILING DATE FOR INVENTOR AND JOINT INVENTOR.—Section 120 of 

title 35, United States Code, is amended by striking ‘‘which is filed by an inventor 

or inventors named’’ and inserting ‘‘which names an inventor or joint inventor’’. 

(g) CONFORMING AMENDMENTS.— 

(1) RIGHT OF PRIORITY.—Section 172 of title 35, United States Code, is 

amended by striking ‘‘and the time specified in section 102(d)’’. 

(2) LIMITATION ON REMEDIES.—Section 287(c)(4) of title 35, United States 

Code, is amended by striking ‘‘the earliest effective filing date of which is prior 

to’’ and inserting ‘‘which has an effective filing date before’’. 

(3) INTERNATIONAL APPLICATION DESIGNATING THE UNITED STATES: EFFECT.—Section 363 of title 35, United States Code, is amended by striking ‘‘except as otherwise provided in section 102(e) of this title’’. 

(4) PUBLICATION OF INTERNATIONAL APPLICATION: EFFECT.—Section 374 of 

title 35, United States Code, is amended by striking ‘‘sections 102(e) and 154(d)’’ 

and inserting ‘‘section 154(d)’’. 

(5) PATENT ISSUED ON INTERNATIONAL APPLICATION: EFFECT.—The second 

sentence of section 375(a) of title 35, United States Code, is amended by striking ‘‘Subject to section 102(e) of this title, such’’ and inserting ‘‘Such’’. 

(6) LIMIT ON RIGHT OF PRIORITY.—Section 119(a) of title 35, United States 

Code, is amended by striking ‘‘; but no patent shall be granted’’ and all that 

follows through ‘‘one year prior to such filing’’. 

(7) INVENTIONS MADE WITH FEDERAL ASSISTANCE.—Section 202(c) of title 35, 

United States Code, is amended— 

(A) in paragraph (2)— 

(i) by striking ‘‘publication, on sale, or public use,’’ and all that follows through ‘‘obtained in the United States’’ and inserting ‘‘the 1-year 

period referred to in section 102(b) would end before the end of that 

2-year period’’; and 

(ii) by striking ‘‘prior to the end of the statutory’’ and inserting ‘‘before the end of that 1-year’’; and 

(B) in paragraph (3), by striking ‘‘any statutory bar date that may occur 

under this title due to publication, on sale, or public use’’ and inserting ‘‘the 

expiration of the 1-year period referred to in section 102(b)’’. 

(h) DERIVED PATENTS.— 

(1) IN GENERAL.—Section 291 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 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.’’. 

(2) CONFORMING AMENDMENT.—The item relating to section 291 in the table 

of sections for chapter 29 of title 35, United States Code, is amended to read 

as follows: 

‘‘291. Derived patents.’’. 

(i) DERIVATION PROCEEDINGS.—Section 135 of title 35, United States Code, is 

amended to read as follows: 

‘‘§ 135. Derivation proceedings 

‘‘(a) INSTITUTION OF PROCEEDING.—An applicant for patent may file a petition 

to institute a derivation proceeding in the Office. The petition shall set forth with 

particularity the basis for finding that an inventor named in an earlier application 

derived the claimed invention from an inventor named in the petitioner’s application 

and, without authorization, the earlier application claiming such invention was 

filed. Any such petition may be filed only within the 1-year period beginning the 

date of the first publication of a claim to an invention that is the same or substantially the same as the earlier application’s claim to the invention, shall be made 

under oath, and shall be supported by substantial evidence. Whenever the Director 

determines that a petition filed under this subsection demonstrates that the standards for instituting a derivation proceeding are met, the Director may institute a 

7 

derivation proceeding. The determination by the Director whether to institute a derivation proceeding shall be final and nonappealable. 

‘‘(b) DETERMINATION BY PATENT TRIAL AND APPEAL BOARD.—In a derivation proceeding instituted under subsection (a), the Patent Trial and Appeal Board shall determine whether an inventor named in the earlier application derived the claimed 

invention from an inventor named in the petitioner’s application and, without authorization, the earlier application claiming such invention was filed. The Director 

shall prescribe regulations setting forth standards for the conduct of derivation proceedings. 

‘‘(c) DEFERRAL OF DECISION.—The Patent Trial and Appeal Board may defer action on a petition for a derivation proceeding until the expiration of the 3-month 

period beginning on the date on which the Director issues a patent that includes 

the claimed invention that is the subject of the petition. The Patent Trial and Appeal Board also may defer action on a petition for a derivation proceeding, or stay 

the proceeding after it has been instituted, until the termination of a proceeding 

under chapter 30, 31, or 32 involving the patent of the earlier applicant. 

‘‘(d) EFFECT OF FINAL DECISION.—The final decision of the Patent Trial and Appeal Board, if adverse to claims in an application for patent, shall constitute the 

final refusal by the Office on those claims. The final decision of the Patent Trial 

and Appeal Board, if adverse to claims in a patent, shall, if no appeal or other review of the decision has been or can be taken or had, constitute cancellation of those 

claims, and notice of such cancellation shall be endorsed on copies of the patent distributed after such cancellation. 

‘‘(e) SETTLEMENT.—Parties to a proceeding instituted under subsection (a) may 

terminate the proceeding by filing a written statement reflecting the agreement of 

the parties as to the correct inventors of the claimed invention in dispute. Unless 

the Patent Trial and Appeal Board finds the agreement to be inconsistent with the 

evidence of record, if any, it shall take action consistent with the agreement. Any 

written settlement or understanding of the parties shall be filed with the Director. 

At the request of a party to the proceeding, the agreement or understanding shall 

be treated as business confidential information, shall be kept separate from the file 

of the involved patents or applications, and shall be made available only to Government agencies on written request, or to any person on a showing of good cause. 

‘‘(f) ARBITRATION.—Parties to a proceeding instituted under subsection (a) may, 

within such time as may be specified by the Director by regulation, determine such 

contest or any aspect thereof by arbitration. Such arbitration shall be governed by 

the provisions of title 9, to the extent such title is not inconsistent with this section. 

The parties shall give notice of any arbitration award to the Director, and such 

award shall, as between the parties to the arbitration, be dispositive of the issues 

to which it relates. The arbitration award shall be unenforceable until such notice 

is given. Nothing in this subsection shall preclude the Director from determining the 

patentability of the claimed inventions involved in the proceeding.’’. 

(j) ELIMINATION OF REFERENCES TO INTERFERENCES.—(1) Sections 134, 145, 146, 

154, 305, and 314 of title 35, United States Code, are each amended by striking 

‘‘Board of Patent Appeals and Interferences’’ each place it appears and inserting 

‘‘Patent Trial and Appeal Board’’. 

(2)(A) Sections 146 and 157(a) of title 35, United States Code, are each amended— 

(i) by striking ‘‘an interference’’ each place it appears and inserting ‘‘a 

derivation proceeding’’; and 

(ii) by striking ‘‘interference’’ each additional place it appears and inserting ‘‘derivation proceeding’’. 

(B) The subparagraph heading for section 154(b)(1)(C) of title 35, United 

States Code, is amended to read as follows: 

‘‘(C) GUARANTEE OF ADJUSTMENTS FOR DELAYS DUE TO DERIVATION

PROCEEDINGS, SECRECY ORDERS, AND APPEALS.—’’. 

(3) The section heading for section 134 of title 35, United States Code, is 

amended to read as follows: 

‘‘§ 134. Appeal to the Patent Trial and Appeal Board’’. 

(4) The section heading for section 146 of title 35, United States Code, is 

amended to read as follows: 

‘‘§ 146. Civil action in case of derivation proceeding’’. 

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

‘‘134. Appeal to the Patent Trial and Appeal Board. 

8 

‘‘135. Derivation proceedings.’’. 

(6) The item relating to section 146 in the table of sections for chapter 13 of 

title 35, United States Code, is amended to read as follows: 

‘‘146. Civil action in case of derivation proceeding.’’. 

(k) STATUTE OF LIMITATIONS.— (1) IN GENERAL.—Section 32 of title 35, United States Code, is amended by 

inserting between the third and fourth sentences the following: ‘‘A proceeding 

under this section shall be commenced not later than the earlier of either 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).’’. 

(2) REPORT TO CONGRESS.—The Director shall provide on a biennial basis 

to the Judiciary Committees of the Senate and House of Representatives a report providing a short description of incidents made known to an officer or employee of the Office as prescribed in the regulations established under section 

2(b)(2)(D) of title 35, United States Code, that reflect substantial evidence of 

misconduct before the Office but for which the Office was barred from commencing a proceeding under section 32 of title 35, United States Code, by the 

time limitation established by the fourth sentence of that section. 

(3) EFFECTIVE DATE.—The amendment made by paragraph (1) shall apply 

in any case in which the time period for instituting a proceeding under section 

32 of title 35, United State Code, had not lapsed before the date of the enactment of this Act. 

(l) SMALL BUSINESS STUDY.— (1) DEFINITIONS.—In this subsection— 

(A) the term ‘‘Chief Counsel’’ means the Chief Counsel for Advocacy of 

the Small Business Administration; 

(B) the term ‘‘General Counsel’’ means the General Counsel of the 

United States Patent and Trademark Office; and 

(C) the term ‘‘small business concern’’ has the meaning given that term 

under section 3 of the Small Business Act (15 U.S.C. 632). 

(2) STUDY.— (A) IN GENERAL.—The Chief Counsel, in consultation with the General 

Counsel, shall conduct a study of the effects of eliminating the use of dates 

of invention in determining whether an applicant is entitled to a patent 

under title 35, United States Code. 

(B) AREAS OF STUDY.—The study conducted under subparagraph (A) 

shall include examination of the effects of eliminating the use of invention 

dates, including examining— 

(i) how the change would affect the ability of small business concerns to obtain patents and their costs of obtaining patents; 

(ii) whether the change would create, mitigate, or exacerbate any 

disadvantages for applicants for patents that are small business concerns relative to applicants for patents that are not small business concerns, and whether the change would create any advantages for applicants for patents that are small business concerns relative to applicants 

for patents that are not small business concerns; 

(iii) the cost savings and other potential benefits to small business 

concerns of the change; and 

(iv) the feasibility and costs and benefits to small business concerns 

of alternative means of determining whether an applicant is entitled to 

a patent under title 35, United States Code. 

(3) REPORT.—Not later than the date that is 1 year after the date of the 

enactment of this Act, the Chief Counsel shall submit to the Committee on 

Small Business and Entrepreneurship and the Committee on the Judiciary of 

the Senate and the Committee on Small Business and the Committee on the 

Judiciary of the House of Representatives a report regarding the results of the 

study under paragraph (2). 

(m) REPORT ON PRIOR USER RIGHTS.— 

(1) IN GENERAL.—Not later than the end of the 4-month period beginning 

on the date of the enactment of this Act, the Director shall report, to the Committee on the Judiciary of the Senate and the Committee on the Judiciary of 

the House of Representatives, the findings and recommendations of the Director 

on the operation of prior user rights in selected countries in the industrialized 

world. The report shall include the following: 

9 

(A) A comparison between patent laws of the United States and the 

laws of other industrialized countries, including members of the European 

Union and Japan, Canada, and Australia. 

(B) An analysis of the effect of prior user rights on innovation rates in 

the selected countries. 

(C) An analysis of the correlation, if any, between prior user rights and 

start-up enterprises and the ability to attract venture capital to start new 

companies. 

(D) An analysis of the effect of prior user rights, if any, on small businesses, universities, and individual inventors. 

(E) An analysis of legal and constitutional issues, if any, that arise 

from placing trade secret law in patent law. 

(F) An analysis of whether the change to a first-to-file patent system 

creates a particular need for prior user rights. 

(2) CONSULTATION WITH OTHER AGENCIES.—In preparing the report required 

under paragraph (1), the Director shall consult with the United States Trade 

Representative, the Secretary of State, and the Attorney General. 

(n) EFFECTIVE DATE.— 

(1) IN GENERAL.—Except as otherwise provided in this section, the amendments made by this section shall take effect upon the expiration of the 18- 

month period beginning on the date of the enactment of this Act, and shall 

apply to any application for patent, and to any patent issuing thereon, that contains or contained at any time— 

(A) a claim to a claimed invention that has an effective filing date as 

defined in section 100(i) of title 35, United States Code, that is on or after 

the effective date described in this paragraph; or 

(B) a specific reference under section 120, 121, or 365(c) of title 35, 

United States Code, to any patent or application that contains or contained 

at any time such a claim. 

(2) INTERFERING PATENTS.—The provisions of sections 102(g), 135, and 291 

of title 35, United States Code, as in effect on the day before the date of the 

enactment of this Act, shall apply to each claim of an application for patent, 

and any patent issued thereon, for which the amendments made by this section 

also apply, if such application or patent contains or contained at any time— 

(A) a claim to an invention having an effective filing date as defined 

in section 100(i) of title 35, United States Code, that occurs before the effective date set forth in paragraph (1) of this subsection; or 

(B) a specific reference under section 120, 121, or 365(c) of title 35, 

United States Code, to any patent or application that contains or contained 

at any time such a claim. 

SEC. 3. INVENTOR’S OATH OR DECLARATION. 

(a) INVENTOR’S OATH OR DECLARATION.— 

(1) IN GENERAL.—Section 115 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 115. Inventor’s oath or declaration 

‘‘(a) NAMING THE INVENTOR; INVENTOR’S OATH OR DECLARATION.—An application for patent that is filed under section 111(a) or commences the national stage 

under section 371 shall include, or be amended to include, the name of the inventor 

for any invention claimed in the application. Except as otherwise provided in this 

section, each individual who is the inventor or a joint inventor of a claimed invention in an application for patent shall execute an oath or declaration in connection 

with the application. 

‘‘(b) REQUIRED STATEMENTS.—An oath or declaration under subsection (a) shall 

contain statements that— 

‘‘(1) the application was made or was authorized to be made by the affiant 

or declarant; and 

‘‘(2) such individual believes himself or herself to be the original inventor 

or an original joint inventor of a claimed invention in the application. 

‘‘(c) ADDITIONAL REQUIREMENTS.—The Director may specify additional information relating to the inventor and the invention that is required to be included in 

an oath or declaration under subsection (a). 

‘‘(d) SUBSTITUTE STATEMENT.— 

‘‘(1) IN GENERAL.—In lieu of executing an oath or declaration under subsection (a), the applicant for patent may provide a substitute statement under 

the circumstances described in paragraph (2) and such additional circumstances 

that the Director may specify by regulation. 

10 

‘‘(2) PERMITTED CIRCUMSTANCES.—A substitute statement under paragraph 

(1) is permitted with respect to any individual who— 

‘‘(A) is unable to file the oath or declaration under subsection (a) because the individual— 

‘‘(i) is deceased; 

‘‘(ii) is under legal incapacity; or 

‘‘(iii) cannot be found or reached after diligent effort; or 

‘‘(B) is under an obligation to assign the invention but has refused to 

make the oath or declaration required under subsection (a). 

‘‘(3) CONTENTS.—A substitute statement under this subsection shall— 

‘‘(A) identify the individual with respect to whom the statement applies; 

‘‘(B) set forth the circumstances representing the permitted basis for 

the filing of the substitute statement in lieu of the oath or declaration 

under subsection (a); and 

‘‘(C) contain any additional information, including any showing, required by the Director. 

‘‘(e) MAKING REQUIRED STATEMENTS IN ASSIGNMENT OF RECORD.—An individual 

who is under an obligation of assignment of an application for patent may include 

the required statements under subsections (b) and (c) in the assignment executed 

by the individual, in lieu of filing such statements separately. 

‘‘(f) TIME FOR FILING.—A notice of allowance under section 151 may be provided 

to an applicant for patent only if the applicant for patent has filed each required 

oath or declaration under subsection (a) or has filed a substitute statement under 

subsection (d) or recorded an assignment meeting the requirements of subsection (e). 

‘‘(g) EARLIER-FILED APPLICATION CONTAINING REQUIRED STATEMENTS OR SUB- STITUTE 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 who claims the benefit under section 120, 121, or 365(c) of the filing of an earlier-filed application, if— 

‘‘(A) an oath or declaration meeting the requirements of subsection (a) 

was executed by the individual and was filed in connection with the earlierfiled application; 

‘‘(B) a substitute statement meeting the requirements of subsection (d) 

was filed in the earlier filed application with respect to the individual; or 

‘‘(C) an assignment meeting the requirements of subsection (e) was executed with respect to the earlier-filed application by the individual and was 

recorded in connection with the earlier-filed application. 

‘‘(2) COPIES OF OATHS, DECLARATIONS, STATEMENTS, OR ASSIGNMENTS.—Notwithstanding paragraph (1), the Director may require that a copy of the executed oath or declaration, the substitute statement, or the assignment filed in 

the earlier-filed application be included in the later-filed application. 

‘‘(h) SUPPLEMENTAL AND CORRECTED STATEMENTS; FILING ADDITIONAL STATEMENTS.— 

‘‘(1) IN GENERAL.—Any person making a statement required under this section may withdraw, replace, or otherwise correct the statement at any time. If 

a change is made in the naming of the inventor requiring the filing of 1 or more 

additional statements under this section, the Director shall establish regulations under which such additional statements may be filed. 

‘‘(2) SUPPLEMENTAL STATEMENTS NOT REQUIRED.—If an individual has executed an oath or declaration meeting the requirements of subsection (a) or an 

assignment meeting the requirements of subsection (e) with respect to an application for patent, the Director may not thereafter require that individual to 

make any additional oath, declaration, or other statement equivalent to those 

required by this section in connection with the application for patent or any patent issuing thereon. 

‘‘(3) SAVINGS CLAUSE.—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.’’. 

(2) RELATIONSHIP TO DIVISIONAL APPLICATIONS.—Section 121 of title 35, 

United States Code, is amended by striking ‘‘If a divisional application’’ and all 

that follows through ‘‘inventor.’’. 

(3) REQUIREMENTS FOR NONPROVISIONAL APPLICATIONS.—Section 111(a) of 

title 35, United States Code, is amended— 

11 

(A) in paragraph (2)(C), by striking ‘‘by the applicant’’ and inserting ‘‘or 

declaration’’; 

(B) in the heading for paragraph (3), by inserting ‘‘OR DECLARATION’’ 

after ‘‘AND OATH’’; and 

(C) by inserting ‘‘or declaration’’ after ‘‘and oath’’ each place it appears. 

(4) CONFORMING AMENDMENT.—The item relating to section 115 in the table 

of sections for chapter 11 of title 35, United States Code, is amended to read 

as follows: 

‘‘115. Inventor’s oath or declaration.’’. 

(b) FILING BY OTHER THAN INVENTOR.— 

(1) IN GENERAL.—Section 118 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 118. Filing by other than inventor 

‘‘A person to whom the inventor has assigned or is under an obligation to assign 

the invention may make an application for patent. A person who otherwise shows 

sufficient proprietary interest in the matter may make an application for patent on 

behalf of and as agent for the inventor on proof of the pertinent facts and a showing 

that such action is appropriate to preserve the rights of the parties. If the Director 

grants a patent on an application filed under this section by a person other than 

the inventor, the patent shall be granted to the real party in interest and upon such 

notice to the inventor as the Director considers to be sufficient.’’. 

(2) CONFORMING AMENDMENT.—Section 251 of title 35, United States Code, 

is amended in the third undesignated paragraph by inserting ‘‘or the application 

for the original patent was filed by the assignee of the entire interest’’ after 

‘‘claims of the original patent’’. 

(c) SPECIFICATION.—Section 112 of title 35, United States Code, is amended— 

(1) in the first undesignated paragraph— 

(A) by striking ‘‘The specification’’ and inserting ‘‘(a) IN GENERAL.—The 

specification’’; and 

(B) by striking ‘‘of carrying out his invention’’ and inserting ‘‘or joint 

inventor of carrying out the invention’’; 

(2) in the second undesignated paragraph— 

(A) by striking ‘‘The specification’’ and inserting ‘‘(b) CONCLUSION.—The 

specification’’; and 

(B) by striking ‘‘applicant regards as his invention’’ and inserting ‘‘inventor or a joint inventor regards as the invention’’; 

(3) in the third undesignated paragraph, by striking ‘‘A claim’’ and inserting 

‘‘(c) FORM.—A claim’’; 

(4) in the fourth undesignated paragraph, by striking ‘‘Subject to the following paragraph,’’ and inserting ‘‘(d) REFERENCE IN DEPENDENT FORMS.—Subject to subsection (e),’’; 

(5) in the fifth undesignated paragraph, by striking ‘‘A claim’’ and inserting 

‘‘(e) REFERENCE IN MULTIPLE DEPENDENT FORM.—A claim’’; and 

(6) in the last undesignated paragraph, by striking ‘‘An element’’ and inserting ‘‘(f) ELEMENT IN CLAIM FOR A COMBINATION.—An element’’. 

(d) CONFORMING AMENDMENTS.— 

(1) Sections 111(b)(1)(A) is amended by striking ‘‘the first paragraph of section 112 of this title’’ and inserting ‘‘section 112(a)’’. 

(2) Section 111(b)(2) is amended by striking ‘‘the second through fifth paragraphs of section 112,’’ and inserting ‘‘subsections (b) through (e) of section 

112,’’. 

(e) EFFECTIVE DATE.—The amendments made by this section shall take effect 

upon the expiration of the 1-year period beginning on the date of the enactment of 

this Act and shall apply to any patent application that is filed on or after that effective date. 

SEC. 4. DEFENSE TO INFRINGEMENT BASED ON EARLIER INVENTOR. 

Section 273 of title 35, United States Code, is amended as follows: 

(1) Subsection (a) is amended— 

(A) in paragraph (1), by striking ‘‘use of a method in’’ and inserting 

‘‘use of the subject matter of a patent in or outside’’ ; 

(B) by striking paragraph (3); and 

(C) by redesignating paragraph (4) as paragraph (3). 

(2) Subsection (b) is amended— 

(A) in paragraph (1), by striking ‘‘for a method’’; 

12 

(B) in paragraph (2), by striking ‘‘patented method’’ and inserting ‘‘patented process’’; 

(C) in paragraph (3)— 

(i) by striking subparagraph (A); 

(ii) by redesignating subparagraphs (B) and (C) as subparagraph 

(A) and (C), respectively; and 

(iii) by adding at the end the following: 

‘‘(D) FUNDING.— ‘‘(i) DEFENSE NOT AVAILABLE IN CERTAIN CASES.—A person may not 

assert the defense under this section if the subject matter of the patent 

on which the defense is based was developed pursuant to a funding 

agreement under chapter 18 of this title or by a nonprofit institution 

of higher education, or a technology transfer organization affiliated 

with such an institution, that did not receive funding from a private 

business enterprise in support of that development. 

‘‘(ii) DEFINITIONS.—In this subparagraph— 

‘‘(I) the term ‘institution of higher education’ has the meaning 

given that term in section 101(a) of the Higher Education Act of 

1965 (20 U.S.C. 1001(a)); and 

‘‘(II) the term ‘technology transfer organization’ means an organization the primary purpose of which is to facilitate the commercialization of technologies developed by one or more institutions of 

higher education.’’; and 

(D) by amending paragraph (6) to read as follows: 

‘‘(6) PERSONAL DEFENSE.— ‘‘(A) IN GENERAL.—The defense under this section may be asserted only 

by the person who performed or caused the performance of the acts necessary to establish the defense, as well as any other entity that controls, 

is controlled by, or is under common control with such person, and, except 

for any transfer to the patent owner, the right to assert the defense shall 

not be licensed or assigned or transferred to another person except as an 

ancillary and subordinate part of a good faith assignment or transfer for 

other reasons of the entire enterprise or line of business to which the defense relates. 

‘‘(B) EXCEPTION.—Notwithstanding subparagraph (A), any person may, 

on the person’s own behalf, assert a defense based on the exhaustion of 

rights provided under paragraph (2), including any necessary elements 

thereof.’’. 

SEC. 5. POST-GRANT REVIEW PROCEEDINGS. 

(a) INTER PARTES REVIEW.—Chapter 31 of title 35, United States Code, is 

amended to read as follows: 

‘‘CHAPTER 31—INTER PARTES REVIEW 

‘‘Sec. 

‘‘311. Inter partes review. 

‘‘312. Petitions. 

‘‘313. Preliminary response to petition. 

‘‘314. Institution of inter partes review. 

‘‘315. Relation to other proceedings or actions. 

‘‘316. Conduct of inter partes review. 

‘‘317. Settlement. 

‘‘318. Decision of the Board. 

‘‘319. Appeal. 

‘‘320. Request for stay of certain proceedings. 

‘‘§ 311. Inter partes review 

‘‘(a) IN GENERAL.—Subject to the provisions of this chapter, a person who is not 

the owner of a patent may file with the Office a petition to institute an inter partes 

review of the patent. The Director shall establish, by regulation, fees to be paid by 

the person requesting the review, in such amounts as the Director determines to 

be reasonable, considering the aggregate costs of the review. 

‘‘(b) SCOPE.—A petitioner in an inter partes review may request to cancel as 

unpatentable 1 or more claims of a patent only on a ground that could be raised 

under section 102 or 103 and only on the basis of prior art consisting of patents 

or printed publications. 

‘‘(c) FILING DEADLINE.—A petition for inter partes review shall be filed after the 

later of either— 

13 

‘‘(1) the date that is 12 months after the grant of a patent or issuance of 

a reissue of a patent; or 

‘‘(2) if a post-grant review is instituted under chapter 32, the date of the 

termination of such post-grant review. 

‘‘§ 312. Petitions 

‘‘(a) REQUIREMENTS OF PETITION.—A petition filed under section 311 may be 

considered only if— 

‘‘(1) the petition is accompanied by payment of the fee established by the 

Director under section 311; 

‘‘(2) the petition identifies all real parties in interest; 

‘‘(3) the petition identifies, in writing and with particularity, each claim 

challenged, the grounds on which the challenge to each claim is based, and the 

evidence that supports the grounds for the challenge to each claim, including— 

‘‘(A) copies of patents and printed publications that the petitioner relies 

upon in support of the petition; and 

‘‘(B) affidavits or declarations of supporting evidence and opinions, if 

the petitioner relies on expert opinions; 

‘‘(4) the petition provides such other information as the Director may require by regulation; and 

‘‘(5) the petitioner provides copies of any of the documents required under 

paragraphs (2), (3), and (4) to the patent owner or, if applicable, the designated 

representative of the patent owner. 

‘‘(b) PUBLIC AVAILABILITY.—As soon as practicable after the receipt of a petition 

under section 311, the Director shall make the petition available to the public. 

‘‘§ 313. Preliminary response to petition 

‘‘(a) PRELIMINARY RESPONSE.—If an inter partes review petition is filed under 

section 311, the patent owner shall have the right to file a preliminary response 

within a time period set by the Director. 

‘‘(b) CONTENT OF RESPONSE.—A preliminary response to a petition for inter 

partes review shall set forth reasons why no inter partes review should be instituted 

based upon the failure of the petition to meet any requirement of this chapter. 

‘‘§ 314. Institution of inter partes review 

‘‘(a) THRESHOLD.—The Director may not authorize an inter partes review to 

commence unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that 

a substantial new question of patentability exists. 

‘‘(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 under section 313; or 

‘‘(2) if no such preliminary response is filed, the last date on which such 

response may be filed. 

‘‘(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. 

‘‘§ 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, real party in interest, or privy of the petitioner filed a 

civil action challenging the validity of a claim of the patent. 

‘‘(2) STAY OF CIVIL ACTION.—If the petitioner, real party in interest, or privy 

of the petitioner 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 requests to lift the stay; 

‘‘(B) the patent owner files a civil action or counterclaim alleging that 

the petitioner, real party in interest, or privy of the petitioner has infringed 

the patent; or 

‘‘(C) the petitioner, real party in interest, or privy of the petitioner requests to dismiss the civil action. 

14 

‘‘(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 9 months 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. 

‘‘(d) MULTIPLE PROCEEDINGS.—Notwithstanding sections 135(a), 251, and 252, 

and chapter 30, during the pendency of an inter partes review, if another proceeding 

or matter involving the patent is before the Office, the Director may determine the 

manner in which the inter partes review or other proceeding or matter may proceed, 

including providing for stay, transfer, consolidation, or termination of any such matter or proceeding. 

‘‘(e) ESTOPPEL.— 

‘‘(1) PROCEEDINGS BEFORE THE OFFICE.—The petitioner in an inter partes 

review under this chapter, or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect 

to a claim on any ground that the petitioner raised or reasonably could have 

raised during an inter partes review of the claim that resulted in a final written 

decision under section 318(a). 

‘‘(2) CIVIL ACTIONS AND OTHER PROCEEDINGS.—The petitioner in an inter 

partes review under this chapter, or 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 a claim in a patent 

is invalid on any ground that the petitioner raised or reasonably could have 

raised during an inter partes review of the claim that resulted in a final written 

decision under section 318(a). 

‘‘§ 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) in accordance with section 2(b)(2), establishing and governing inter 

partes review under this chapter and the relationship of such review to other 

proceedings under this title; 

‘‘(5) setting a time period for requesting joinder under section 315(c); 

‘‘(6) setting forth standards and procedures for discovery of relevant evidence, including that such discovery shall be limited to— 

‘‘(A) the deposition of witnesses submitting affidavits or declarations; 

and 

‘‘(B) what is otherwise necessary in the interest of justice; 

‘‘(7) prescribing sanctions for abuse of discovery, abuse of process, or any 

other improper use of the proceeding, such as to harass or to cause unnecessary 

delay or an unnecessary increase in the cost of the proceeding; 

‘‘(8) providing for protective orders governing the exchange and submission 

of confidential information; 

‘‘(9) providing for the filing by the patent owner of a response to the petition 

under section 313 after an inter partes review has been instituted, and requiring that the patent owner file with such response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent 

owner relies in support of the response; 

‘‘(10) setting forth standards and procedures for allowing the patent owner 

to move to amend the patent under subsection (d) to cancel a challenged claim 

15 

or propose a reasonable number of substitute claims, and ensuring that any information submitted by the patent owner in support of any amendment entered 

under subsection (d) is made available to the public as part of the prosecution 

history of the patent; 

‘‘(11) providing either party with the right to an oral hearing as part of the 

proceeding; and 

‘‘(12) requiring that the final determination in an inter partes review be 

issued not later than 1 year after the date on which the Director notices the 

institution of a review under this chapter, except that the Director may, for 

good cause shown, extend the 1-year period by not more than 6 months, and 

may adjust the time periods in this paragraph in the case of joinder under section 315(c). 

‘‘(b) CONSIDERATIONS.—In prescribing regulations under this section, the Director shall consider the effect of any such regulation on the economy, the integrity of 

the patent system, the efficient administration of the Office, and the ability of the 

Office to timely complete proceedings instituted under this chapter. 

‘‘(c) PATENT TRIAL AND APPEAL BOARD.—The Patent Trial and Appeal Board 

shall, in accordance with section 6, conduct each proceeding authorized by the Director. 

‘‘(d) AMENDMENT OF THE PATENT.— 

‘‘(1) IN GENERAL.—During an inter partes review instituted under this chapter, the patent owner may file 1 motion to amend the patent in 1 or more of 

the following ways: 

‘‘(A) Cancel any challenged patent claim. 

‘‘(B) For each challenged claim, propose a reasonable number of substitute claims. 

‘‘(2) ADDITIONAL MOTIONS.—Additional motions to amend may be permitted 

upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 317, or as permitted by regulations prescribed by the Director. 

‘‘(3) SCOPE OF CLAIMS.—An amendment under this subsection may not enlarge the scope of the claims of the patent or introduce new matter. 

‘‘(e) EVIDENTIARY STANDARDS.—In an inter partes review instituted under this 

chapter, the petitioner shall have the burden of proving a proposition of 

unpatentability by a preponderance of the evidence. 

‘‘§ 317. Settlement 

‘‘(a) IN GENERAL.—An inter partes review instituted under this chapter shall be 

terminated with respect to any petitioner upon the joint request of the petitioner 

and the patent owner, unless the Office has decided the merits of the proceeding 

before the request for termination is filed. If the inter partes review is terminated 

with respect to a petitioner under this section, no estoppel under section 315(e) shall 

apply to that petitioner. If no petitioner remains in the inter partes review, the Office may terminate the review or proceed to a final written decision under section 

318(a). 

‘‘(b) AGREEMENTS IN WRITING.—Any agreement or understanding between the 

patent owner and a petitioner, including any collateral agreements referred to in 

such agreement or understanding, made in connection with, or in contemplation of, 

the termination of an inter partes review under this section shall be in writing and 

a true copy of such agreement or understanding shall be filed in the Office before 

the termination of the inter partes review as between the parties. If any party filing 

such agreement or understanding so requests, the copy shall be kept separate from 

the file of the inter partes review, and shall be made available only to Federal Government agencies upon written request, or to any other person on a showing of good 

cause. 

‘‘§ 318. Decision of the Board 

‘‘(a) FINAL WRITTEN DECISION.—If an inter partes review is instituted and not 

dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final 

written decision with respect to the patentability of any patent claim challenged by 

the petitioner and any new claim added under section 316(d). 

‘‘(b) CERTIFICATE.—If the Patent Trial and Appeal Board issues a final written 

decision under subsection (a) and the time for appeal has expired or any appeal has 

terminated, the Director shall issue and publish a certificate canceling any claim of 

the patent finally determined to be unpatentable, confirming any claim of the patent 

determined to be patentable, and incorporating in the patent by operation of the certificate any new or amended claim determined to be patentable. 

16 

‘‘(c) DATA ON LENGTH OF REVIEW.—The Office shall make available to the public 

data describing the length of time between the institution of, and the issuance of 

a final written decision under subsection (a) for, each inter partes review. 

‘‘§ 319. Appeal 

‘‘A party dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 318(a) may appeal the decision pursuant to sections 141 

through 144. Any party to the inter partes review shall have the right to be a party 

to the appeal. 

‘‘§ 320. Request for stay of certain proceedings 

‘‘If a party seeks a stay of a civil action alleging infringement of a patent under 

section 281, or a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930, relating to an inter partes review under this chapter, the court shall decide whether to enter a stay based on— 

‘‘(1) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; 

‘‘(2) whether discovery is complete and whether a trial date has been set; 

‘‘(3) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and 

‘‘(4) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.’’. 

(b) CONFORMING AMENDMENT.—The table of chapters for part III of title 35, 

United States Code, is amended by striking the item relating to chapter 31 and inserting the following: 

‘‘31. Inter Partes Review ....................................................................................... 311.’’ 

(c) REGULATIONS AND EFFECTIVE DATE.— 

(1) REGULATIONS.—The Director shall, not later than the date that is 1 year 

after the date of the enactment of this Act, issue regulations to carry out chapter 31 of title 35, United States Code, as amended by subsection (a) of this section. 

(2) APPLICABILITY.— 

(A) IN GENERAL.—The amendments made by subsection (a) shall take 

effect upon the expiration of the 1-year period beginning on the date of the 

enactment of this Act and shall apply to any patent issued before, on, or 

after that effective date. 

(B) GRADUATED IMPLEMENTATION.—The Director may impose a limit on 

the number of inter partes reviews that may be instituted under chapter 

31 of title 35, United States Code, during each of the first 4 1-year periods 

in which the amendments made by subsection (a) are in effect, if such number in each year equals or exceeds the number of such inter partes reexaminations that are ordered in the last fiscal year ending before the effective 

date of the amendments made by subsection (a). 

(d) POST-GRANT REVIEW.—Part III of title 35, United States Code, is amended 

by adding at the end the following: 

‘‘CHAPTER 32—POST-GRANT REVIEW 

‘‘Sec. 

‘‘321. Post-grant review. 

‘‘322. Petitions. 

‘‘323. Preliminary response to petition. 

‘‘324. Institution of post-grant review. 

‘‘325. Relation to other proceedings or actions. 

‘‘326. Conduct of post-grant review. 

‘‘327. Settlement. 

‘‘328. Decision of the Board. 

‘‘329. Appeal. 

‘‘330. Request for stay of certain proceedings. 

‘‘§ 321. Post-grant review 

‘‘(a) IN GENERAL.—Subject to the provisions of this chapter, a person who is not 

the patent owner may file with the Office a petition to institute a post-grant review 

of a patent. The Director shall establish, by regulation, fees to be paid by the person 

requesting the review, in such amounts as the Director determines to be reasonable, 

considering the aggregate costs of the post-grant review. 

17 

‘‘(b) SCOPE.—A petitioner in a post-grant review may request to cancel as 

unpatentable 1 or more claims of a patent on any ground that could be raised under 

paragraph (2) or (3) of section 282(b) (relating to invalidity of the patent or any 

claim). 

‘‘(c) FILING DEADLINE.—A petition for a post-grant review may only be filed not 

later than the date that is 12 months after the date of the grant of the patent or 

of the issuance of a reissue patent (as the case may be). 

‘‘§ 322. Petitions 

‘‘(a) REQUIREMENTS OF PETITION.—A petition filed under section 321 may be 

considered only if— 

‘‘(1) the petition is accompanied by payment of the fee established by the 

Director under section 321; 

‘‘(2) the petition identifies all real parties in interest; 

‘‘(3) the petition identifies, in writing and with particularity, each claim 

challenged, the grounds on which the challenge to each claim is based, and the 

evidence that supports the grounds for the challenge to each claim, including— 

‘‘(A) copies of patents and printed publications that the petitioner relies 

upon in support of the petition; and 

‘‘(B) affidavits or declarations of supporting evidence and opinions, if 

the petitioner relies on other factual evidence or on expert opinions; 

‘‘(4) the petition provides such other information as the Director may require by regulation; and 

‘‘(5) the petitioner provides copies of any of the documents required under 

paragraphs (2), (3), and (4) to the patent owner or, if applicable, the designated 

representative of the patent owner. 

‘‘(b) PUBLIC AVAILABILITY.—As soon as practicable after the receipt of a petition 

under section 321, the Director shall make the petition available to the public. 

‘‘§ 323. Preliminary response to petition 

‘‘(a) PRELIMINARY RESPONSE.—If a post-grant review petition is filed under section 321, the patent owner shall have the right to file a preliminary response to the 

petition within 2 months after the date on which the petition is filed. 

‘‘(b) CONTENT OF RESPONSE.—A preliminary response to a petition for post-grant 

review shall set forth reasons why no post-grant review should be instituted based 

upon the failure of the petition to meet any requirement of this chapter. 

‘‘§ 324. Institution of post-grant review 

‘‘(a) THRESHOLD.—The Director may not authorize a post-grant review to commence unless the Director determines that the information presented in the petition 

filed under section 321, if such information is not rebutted, would demonstrate that 

it is more likely than not that at least 1 of the claims challenged in the petition 

is unpatentable. 

‘‘(b) ADDITIONAL GROUNDS.—The determination required under subsection (a) 

may also be satisfied by a showing that the petition raises a novel or unsettled legal 

question that is important to other patents or patent applications. 

‘‘(c) TIMING.—The Director shall determine whether to institute a post-grant review under this chapter pursuant to a petition filed under section 321 within 3 

months after— 

‘‘(1) receiving a preliminary response to the petition under section 323; or 

‘‘(2) if no such preliminary response is filed, the last date on which such 

response may be filed. 

‘‘(d) NOTICE.—The Director shall notify the petitioner and patent owner, in writing, of the Director’s determination under subsection (a) or (b), and shall make such 

notice available to the public as soon as is practicable. The Director shall make each 

notice of the institution of a post-grant review available to the public. Such notice 

shall include the date on which the review shall commence. 

‘‘(e) NO APPEAL.—The determination by the Director whether to institute a postgrant review under this section shall be final and nonappealable. 

‘‘§ 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, real party in interest, or privy of 

the petitioner filed a civil action challenging the validity of a claim of the patent. 

‘‘(2) STAY OF CIVIL ACTION.—If the petitioner, real party in interest, or privy 

of the petitioner files a civil action challenging the validity of a claim of the patVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
18 

ent 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 requests to lift the stay; 

‘‘(B) the patent owner files a civil action or counterclaim alleging that 

the petitioner, real party in interest, or privy of the petitioner has infringed 

the patent; or 

‘‘(C) the petitioner, real party in interest, or privy of the petitioner requests to dismiss his 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 under this chapter, or the real party in interest or privy of the petitioner, 

may not request or maintain a proceeding before the Office with respect to a 

claim on any ground that the petitioner raised or reasonably could have raised 

during a post-grant review of the claim that resulted in a final written decision 

under section 328(a). 

‘‘(2) CIVIL ACTIONS AND OTHER PROCEEDINGS.—The petitioner in a postgrant review under this chapter, 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 a claim in a patent 

is invalid on any ground that the petitioner raised during a post-grant review 

of the claim that resulted in a final written decision under section 328(a). 

‘‘(f) REISSUE PATENTS.—A post-grant review may not be instituted 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. 

‘‘§ 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) in accordance with section 2(b)(2), establishing and governing a postgrant 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; 

19 

‘‘(6) prescribing sanctions for abuse of discovery, abuse of process, or any 

other improper use of the proceeding, such as to harass or to cause unnecessary 

delay or an unnecessary increase in the cost of the proceeding; 

‘‘(7) providing for protective orders governing the exchange and submission 

of confidential information; 

‘‘(8) allowing the patent owner to file a response to the petition after a postgrant review has been instituted, and requiring that the patent owner file with 

such response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the 

response; 

‘‘(9) setting forth standards and procedures for allowing the patent owner 

to move to amend the patent under subsection (d) to cancel a challenged claim 

or propose a reasonable number of substitute claims, and ensuring that any information submitted by the patent owner in support of any amendment entered 

under subsection (d) is made available to the public as part of the prosecution 

history of the patent; 

‘‘(10) providing either party with the right to an oral hearing as part of the 

proceeding; and 

‘‘(11) requiring that the final determination in any post-grant review be 

issued not later than 1 year after the date on which the Director notices the 

institution of a proceeding under this chapter, except that the Director may, for 

good cause shown, extend the 1-year period by not more than 6 months, and 

may adjust the time periods in this paragraph in the case of joinder under section 325(c). 

‘‘(b) CONSIDERATIONS.—In prescribing regulations under this section, the Director shall consider the effect of any such regulation on the economy, the integrity of 

the patent system, the efficient administration of the Office, and the ability of the 

Office to timely complete proceedings instituted under this chapter. 

‘‘(c) PATENT TRIAL AND APPEAL BOARD.—The Patent Trial and Appeal Board 

shall, in accordance with section 6, conduct each proceeding authorized by the Director. 

‘‘(d) AMENDMENT OF THE PATENT.— 

‘‘(1) IN GENERAL.—During a post-grant review instituted under this chapter, 

the patent owner may file 1 motion to amend the patent in 1 or more of the 

following ways: 

‘‘(A) Cancel any challenged patent claim. 

‘‘(B) For each challenged claim, propose a reasonable number of substitute claims. 

‘‘(2) ADDITIONAL MOTIONS.—Additional motions to amend may be permitted 

upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 327, or upon the request of 

the patent owner for good cause shown. 

‘‘(3) SCOPE OF CLAIMS.—An amendment under this subsection may not enlarge the scope of the claims of the patent or introduce new matter. 

‘‘(e) EVIDENTIARY STANDARDS.—In a post-grant review instituted under this 

chapter, the petitioner shall have the burden of proving a proposition of 

unpatentability by a preponderance of the evidence. 

‘‘§ 327. Settlement 

‘‘(a) IN GENERAL.—A post-grant review instituted under this chapter shall be 

terminated with respect to any petitioner upon the joint request of the petitioner 

and the patent owner, unless the Office has decided the merits of the proceeding 

before the request for termination is filed. If the post-grant review is terminated 

with respect to a petitioner under this section, no estoppel under section 325(e) shall 

apply to that petitioner. If no petitioner remains in the post-grant review, the Office 

may terminate the post-grant review or proceed to a final written decision under 

section 328(a). 

‘‘(b) AGREEMENTS IN WRITING.—Any agreement or understanding between the 

patent owner and a petitioner, including any collateral agreements referred to in 

such agreement or understanding, made in connection with, or in contemplation of, 

the termination of a post-grant review under this section shall be in writing, and 

a true copy of such agreement or understanding shall be filed in the Office before 

the termination of the post-grant review as between the parties. If any party filing 

such agreement or understanding so requests, the copy shall be kept separate from 

the file of the post-grant review, and shall be made available only to Federal Government agencies upon written request, or to any other person on a showing of good 

cause. 

20 

‘‘§ 328. Decision of the Board 

‘‘(a) FINAL WRITTEN DECISION.—If a post-grant review is instituted and not dismissed under this chapter, the Patent Trial and Appeal Board shall issue a final 

written decision with respect to the patentability of any patent claim challenged by 

the petitioner and any new claim added under section 326(d). 

‘‘(b) CERTIFICATE.—If the Patent Trial and Appeal Board issues a final written 

decision under subsection (a) and the time for appeal has expired or any appeal has 

terminated, the Director shall issue and publish a certificate canceling any claim of 

the patent finally determined to be unpatentable, confirming any claim of the patent 

determined to be patentable, and incorporating in the patent by operation of the certificate any new or amended claim determined to be patentable. 

‘‘(c) DATA ON LENGTH OF REVIEW.—The Office shall make available to the public 

data describing the length of time between the institution of, and the issuance of 

a final written decision under subsection (a) for, each post-grant review. 

‘‘§ 329. Appeal 

‘‘A party dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 328(a) may appeal the decision pursuant to sections 141 

through 144. Any party to the post-grant review shall have the right to be a party 

to the appeal. 

‘‘§ 330. Request for stay of certain proceedings 

‘‘If a party seeks a stay of a civil action alleging infringement of a patent under 

section 281, or a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930, relating to a post-grant review under this chapter, 

the court shall decide whether to enter a stay based on— 

‘‘(1) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial; 

‘‘(2) whether discovery is complete and whether a trial date has been set; 

‘‘(3) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and 

‘‘(4) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.’’. 

(e) CONFORMING AMENDMENT.—The table of chapters for part III of title 35, 

United States Code, is amended by adding at the end the following: 

‘‘32. Post-Grant Review ........................................................................................ 321.’’ 

(f) REGULATIONS AND EFFECTIVE DATE.— 

(1) REGULATIONS.—The Director shall, not later than the date that is 1 year 

after the date of the enactment of this Act, issue regulations to carry out chapter 32 of title 35, United States Code, as added by subsection (d) of this section. 

(2) APPLICABILITY.— 

(A) IN GENERAL.—The amendments made by subsection (d) shall take 

effect upon the expiration of the 1-year period beginning on the date of the 

enactment of this Act and, except as provided in section 18 and in paragraph (3), shall apply to any patent that is described in section 2(n)(1). 

(B) LIMITATION.—The Director may impose a limit on the number of 

post-grant reviews that may be instituted under chapter 32 of title 35, 

United States Code, during each of the 4 years following the effective date 

set forth in subparagraph (A). 

(3) PENDING INTERFERENCES.— 

(A) PROCEDURES IN GENERAL.—The Director shall determine, and include in the regulations issued under paragraph (1), the procedures under 

which an interference commenced before the effective date set forth in paragraph (2) is to proceed, including whether such interference— 

(i) is to be dismissed without prejudice to the filing of a petition 

for a post-grant review under chapter 32 of title 35, United States 

Code; or 

(ii) is to proceed as if this Act had not been enacted. 

(B) PROCEEDINGS BY PATENT TRIAL AND APPEAL BOARD.—For purposes 

of an interference that is commenced before the effective date set forth in 

paragraph (2), the Director may deem the Patent Trial and Appeal Board 

to be the Board of Patent Appeals and Interferences, and may allow the 

Patent Trial and Appeal Board to conduct any further proceedings in that 

interference. 

21 

(C) APPEALS.—The authorization to appeal or have remedy from derivation proceedings in sections 141(d) and 146 of title 35, United States Code, 

and the jurisdiction to entertain appeals from derivation proceedings in section 1295(a)(4)(A) of title 28, United States Code, shall be deemed to extend 

to any final decision in an interference that is commenced before the effective date set forth in paragraph (2) of this subsection and that is not dismissed pursuant to this paragraph. 

(g) CITATION OF PRIOR ART AND WRITTEN STATEMENTS.— 

(1) IN GENERAL.—Section 301 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 301. Citation of prior art and written statements 

‘‘(a) IN GENERAL.—Any person at any time may cite to the Office in writing— 

‘‘(1) prior art consisting of patents or printed publications which that person 

believes to have a bearing on the patentability of any claim of a particular patent; or 

‘‘(2) statements of the patent owner filed in a proceeding before a Federal 

court or the Office in which the patent owner took a position on the scope of 

any claim of a particular patent. 

‘‘(b) OFFICIAL FILE.—If the person citing prior art or written statements pursuant to subsection (a) explains in writing the pertinence and manner of applying the 

prior art or written statements to at least 1 claim of the patent, the citation of the 

prior art or written statements and the explanation thereof shall become a part of 

the official file of the patent. 

‘‘(c) ADDITIONAL INFORMATION.—A party that submits a written statement pursuant to subsection (a)(2) shall include any other documents, pleadings, or evidence 

from the proceeding in which the statement was filed that addresses the written 

statement. 

‘‘(d) LIMITATIONS.—A written statement submitted pursuant to subsection (a)(2), 

and additional information submitted pursuant to subsection (c), shall not be considered by the Office for any purpose other than to determine the proper meaning of 

a patent claim in a proceeding that is ordered or instituted pursuant to section 304, 

314, or 324. If any such written statement or additional information is subject to 

an applicable protective order, it shall be redacted to exclude information that is 

subject to that order. 

‘‘(e) CONFIDENTIALITY.—Upon the written request of the person citing prior art 

or written statements pursuant to subsection (a), that person’s identity shall be excluded from the patent file and kept confidential.’’. 

(2) CONFORMING AMENDMENT.—The item relating to section 301 in the table 

of sections for chapter 30 of title 35, United States Code, is amended to read 

as follows: 

‘‘301. Citation of prior art and written statements.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection 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 patent issued before, on, or after that 

effective date. 

(h) REEXAMINATION.— 

(1) DETERMINATION BY DIRECTOR.— 

(A) IN GENERAL.—Section 303(a) of title 35, United States Code, is 

amended by striking ‘‘section 301 of this title’’ and inserting ‘‘section 301 

or 302’’. 

(B) EFFECTIVE DATE.—The amendment made by this paragraph shall 

take effect upon the expiration of the 1-year period beginning on the date 

of the enactment of this Act and shall apply to any patent issued before, 

on, or after that effective date. 

(2) APPEAL.— 

(A) IN GENERAL.—Section 306 of title 35, United States Code, is amended by striking ‘‘145’’ and inserting ‘‘144’’. 

(B) EFFECTIVE DATE.—The amendment made by this paragraph shall 

take effect on the date of the enactment of this Act and shall apply to any 

appeal of a reexamination that is pending before the Board of Patent Appeals and Interferences or the Patent Trial and Appeal Board on or after 

the date of the enactment of this Act. 

SEC. 6. PATENT TRIAL AND APPEAL BOARD. 

(a) COMPOSITION AND DUTIES.— 

22 

(1) IN GENERAL.—Section 6 of title 35, United States Code, is amended to 

read as follows: 

‘‘§ 6. Patent Trial and Appeal Board 

‘‘(a) IN GENERAL.—There shall be in the Office a Patent Trial and Appeal Board. 

The Director, the Deputy Director, the Commissioner for Patents, the Commissioner 

for Trademarks, and the administrative patent judges shall constitute the Patent 

Trial and Appeal Board. The administrative patent judges shall be persons of competent legal knowledge and scientific ability who are appointed by the Secretary, in 

consultation with the Director. Any reference in any Federal law, Executive order, 

rule, regulation, or delegation of authority, or any document of or pertaining to the 

Board of Patent Appeals and Interferences is deemed to refer to the Patent Trial 

and Appeal Board. 

‘‘(b) DUTIES.—The Patent Trial and Appeal Board shall— 

‘‘(1) on written appeal of an applicant, review adverse decisions of examiners upon applications for patents pursuant to section 134(a); 

‘‘(2) review appeals of reexaminations pursuant to section 134(b); 

‘‘(3) conduct derivation proceedings pursuant to section 135; and 

‘‘(4) conduct inter partes reviews and post-grant reviews pursuant to chapters 31 and 32. 

‘‘(c) 3-MEMBER PANELS.—Each appeal, derivation proceeding, post-grant review, 

and inter partes review shall be heard by at least 3 members of the Patent Trial 

and Appeal Board, who shall be designated by the Director. Only the Patent Trial 

and Appeal Board may grant rehearings. 

‘‘(d) TREATMENT OF PRIOR APPOINTMENTS.—The Secretary of Commerce may, in 

the Secretary’s discretion, deem the appointment of an administrative patent judge 

who, before the date of the enactment of this subsection, held office pursuant to an 

appointment by the Director to take effect on the date on which the Director initially appointed the administrative patent judge. It shall be a defense to a challenge 

to the appointment of an administrative patent judge on the basis of the judge’s 

having been originally appointed by the Director that the administrative patent 

judge so appointed was acting as a de facto officer.’’. 

(2) CONFORMING AMENDMENT.—The item relating to section 6 in the table 

of sections for chapter 1 of title 35, United States Code, is amended to read as 

follows: 

‘‘6. Patent Trial and Appeal Board.’’. 

(b) ADMINISTRATIVE APPEALS.—Section 134 of title 35, United States Code, is 

amended— 

(1) in subsection (b), by striking ‘‘any reexamination proceeding’’ and inserting ‘‘a reexamination’’; and 

(2) by striking subsection (c). 

(c) CIRCUIT APPEALS.— 

(1) IN GENERAL.—Section 141 of title 35, United States Code, is amended 

to read as follows: 

‘‘§ 141. Appeal to the Court of Appeals for the Federal Circuit 

‘‘(a) EXAMINATIONS.—An applicant who is dissatisfied with the final decision in 

an appeal to the Patent Trial and Appeal Board under section 134(a) may appeal 

the Board’s decision to the United States Court of Appeals for the Federal Circuit. 

By filing such an appeal, the applicant waives his or her right to proceed under section 145. 

‘‘(b) REEXAMINATIONS.—A patent owner who is dissatisfied with the final decision in an appeal of a reexamination to the Patent Trial and Appeal Board under 

section 134(b) may appeal the Board’s decision only to the United States Court of 

Appeals for the Federal Circuit. 

‘‘(c) POST-GRANT AND INTER PARTES REVIEWS.—A party to a post-grant or inter 

partes review who is dissatisfied with the final written decision of the Patent Trial 

and Appeal Board under section 318(a) or 328(a) may appeal the Board’s decision 

only to the United States Court of Appeals for the Federal Circuit. 

‘‘(d) DERIVATION PROCEEDINGS.—A party to a derivation proceeding who is dissatisfied with the final decision of the Patent Trial and Appeal Board in the proceeding may appeal the decision to the United States Court of Appeals for the Federal Circuit, but such appeal shall be dismissed if any adverse party to such derivation proceeding, within 20 days after the appellant has filed notice of appeal in accordance with section 142, files notice with the Director that the party elects to have 

all further proceedings conducted as provided in section 146. If the appellant does 

not, within 30 days after the filing of such notice by the adverse party, file a civil 

23 

action under section 146, the Board’s decision shall govern the further proceedings 

in the case.’’. 

(2) JURISDICTION.—Section 1295(a)(4)(A) of title 28, United States Code, is 

amended to read as follows: 

‘‘(A) the Patent Trial and Appeal Board of the United States Patent and 

Trademark Office with respect to a patent application, derivation proceeding, reexamination, post-grant review, or inter partes review 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;’’. 

(3) PROCEEDINGS ON APPEAL.—Section 143 of title 35, United States Code, 

is amended— 

(A) by striking the third sentence and inserting the following: ‘‘In an 

ex parte case, the Director shall submit to the court in writing the grounds 

for the decision of the Patent and Trademark Office, addressing all of the 

issues raised in the appeal. The Director shall have the right to intervene 

in an appeal from a decision entered by the Patent Trial and Appeal Board 

in a derivation proceeding under section 135 or in an inter partes or postgrant review under chapter 31 or 32.’’; and 

(B) by striking the last sentence. 

(d) EFFECTIVE DATE.—The amendments made by this section 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 proceedings commenced on or after that effective date, 

except that— 

(1) the extension of jurisdiction to the United States Court of Appeals for 

the Federal Circuit to entertain appeals of decisions of the Patent Trial and Appeal Board in reexaminations under the amendment made by subsection (c)(2) 

shall be deemed to take effect on the date of enactment of this Act and shall 

extend to any decision of the Board of Patent Appeals and Interferences with 

respect to a reexamination that is entered before, on, or after the date of the 

enactment of this Act; 

(2) the provisions of sections 6, 134, and 141 of title 35, United States Code, 

as in effect on the day before the date of the enactment of this Act shall continue to apply to inter partes reexaminations that are requested under section 

311 of such title before the effective date of the amendments made by this section; 

(3) the Patent Trial and Appeal Board may be deemed to be the Board of 

Patent Appeals and Interferences for purposes of appeals of inter partes reexaminations that are requested under section 311 of title 35, United States Code, 

before the effective date of the amendments made by this section; and 

(4) the Director’s right under the fourth sentence of section 143 of title 35, 

United States Code, as amended by subsection (c)(3) of this section, to intervene 

in an appeal from a decision entered by the Patent Trial and Appeal Board 

shall be deemed to extend to inter partes reexaminations that are requested 

under section 311 of such title before the effective date of the amendments 

made by this section. 

SEC. 7. PREISSUANCE SUBMISSIONS BY THIRD PARTIES. 

(a) IN GENERAL.—Section 122 of title 35, United States Code, is amended by 

adding at the end the following: 

‘‘(e) PREISSUANCE SUBMISSIONS BY THIRD PARTIES.— 

‘‘(1) IN GENERAL.—Any third party may submit for consideration and inclusion in the record of a patent application, any patent, published patent application, or other printed publication of potential relevance to the examination of 

the application, if such submission is made in writing before the earlier of— 

‘‘(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— 

24 

‘‘(A) set forth a concise description of the asserted relevance of each 

submitted document; 

‘‘(B) be accompanied by such fee as the Director may prescribe; and 

‘‘(C) include a statement by the person making such submission affirming that the submission was made in compliance with this section.’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall take effect 

upon the expiration of the 1-year period beginning on the date of the enactment of 

this Act and shall apply to any patent application filed before, on, or after that effective date. 

SEC. 8. VENUE. 

(a) TECHNICAL AMENDMENTS RELATING TO VENUE.—Sections 32, 145, 146, 

154(b)(4)(A), and 293 of title 35, United States Code, and section 21(b)(4) of the 

Trademark Act of 1946 (15 U.S.C. 1071(b)(4)), are each amended by striking ‘‘United 

States District Court for the District of Columbia’’ each place that term appears and 

inserting ‘‘United States District Court for the Eastern District of Virginia’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall take effect 

on the date of the enactment of this Act and shall apply to any civil action commenced on or after that date. 

SEC. 9. 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 (f) 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; 

25 

(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 trademark 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) MICRO ENTITY DEFINED.— 

(1) IN GENERAL.—Chapter 11 of title 35, United States Code, is amended 

by adding at the end the following new section: 

‘‘§ 123. Micro entity defined. 

‘‘(a) IN GENERAL.—For purposes of this title, the term ‘micro entity’ means an 

applicant who makes a certification that the applicant— 

‘‘(1) qualifies as a small entity, as defined in regulations issued by the Director; 

‘‘(2) has not been named as an inventor on more than 4 previously filed patent applications, other than applications filed in another country, provisional 

applications under section 111(b), or international applications filed under the 

treaty defined in section 351(a) for which the basic national fee under section 

41(a) was not paid; 

‘‘(3) did not, in the calendar year preceding the calendar year in which the 

examination fee for the application is being paid, have a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding 3 times 

the median household income for that preceding calendar year, as reported by 

the Bureau of the Census; and 

‘‘(4) has not assigned, granted, or conveyed, and is not under an obligation 

by contract or law to assign, grant, or convey, a license or other ownership interest in the application concerned to an entity that, in the calendar year preceding the calendar year in which the examination fee for the application is 

being paid, had a gross income, as defined in section 61(a) of the Internal Revenue Code of 1986, exceeding 3 times the median household income for that preceding calendar year, as most recently reported by the Bureau of the Census. 

‘‘(b) APPLICATIONS RESULTING FROM PRIOR EMPLOYMENT.—An applicant is not 

considered to be named on a previously filed application for purposes of subsection 

(a)(2) if the applicant has assigned, or is under an obligation by contract or law to 

assign, all ownership rights in the application as the result of the applicant’s previous employment. 

‘‘(c) FOREIGN CURRENCY EXCHANGE RATE.—If an applicant’s or entity’s gross income in the preceding year is not in United States dollars, the average currency exchange rate, as reported by the Internal Revenue Service, during the preceding year 

shall be used to determine whether the applicant’s or entity’s gross income exceeds 

the threshold specified in paragraphs (3) or (4) of subsection (a). 

‘‘(d) PUBLIC INSTITUTIONS OF HIGHER EDUCATION.— 

‘‘(1) IN GENERAL.—For purposes of this section, a micro entity shall include 

an applicant who certifies that— 

‘‘(A) the applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education, as deVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6621 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
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fined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001), 

that is a public institution; or 

‘‘(B) the applicant has assigned, granted, conveyed, or is under an obligation by contract or law to assign, grant, or convey, a license or other ownership interest in the particular application to such State public institution. 

‘‘(2) DIRECTOR’S AUTHORITY.—The Director may, in the Director’s discretion, 

impose income limits, annual filing limits, or other limits on who may qualify 

as a micro entity pursuant to this subsection if the Director determines that 

such additional limits are reasonably necessary to avoid an undue impact on 

other patent applicants or owners or are otherwise reasonably necessary and 

appropriate. At least 3 months before any limits proposed to be imposed pursuant to this paragraph shall take effect, the Director shall inform the Committee 

on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate of any such proposed limits.’’. 

(2) CONFORMING AMENDMENT.—Chapter 11 of title 35, United States Code, 

is amended by adding at the end the following new item: 

‘‘123. Micro entity defined.’’. 

(h) ELECTRONIC FILING INCENTIVE.— (1) IN GENERAL.—Notwithstanding any other provision of this section, a fee of $400 shall be established for each application for an original patent, except 

for a design, plant, or provisional application, that is not filed by electronic 

means as prescribed by the Director. The fee established by this subsection 

shall be reduced 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.—This section and the amendments made by this section 

shall take effect on the date of the enactment of this Act. 

SEC. 10. FEES FOR PATENT SERVICES. 

(a) GENERAL PATENT SERVICES.—Subsections (a) and (b) of section 41 of title 35, 

United States Code, are amended to read as follows: 

‘‘(a) GENERAL FEES.—The Director shall charge the following fees: 

‘‘(1) FILING AND BASIC NATIONAL FEES.— 

‘‘(A) On filing each application for an original patent, except for design, 

plant, or provisional applications, $330. 

‘‘(B) On filing each application for an original design patent, $220. 

‘‘(C) On filing each application for an original plant patent, $220. 

‘‘(D) On filing each provisional application for an original patent, $220. 

‘‘(E) On filing each application for the reissue of a patent, $330. 

‘‘(F) The basic national fee for each international application filed 

under the treaty defined in section 351(a) entering the national stage under 

section 371, $330. 

‘‘(G) In addition, excluding any sequence listing or computer program 

listing filed in an electronic medium as prescribed by the Director, for any 

application the specification and drawings of which exceed 100 sheets of 

paper (or equivalent as prescribed by the Director if filed in an electronic 

medium), $270 for each additional 50 sheets of paper (or equivalent as prescribed by the Director if filed in an electronic medium) or fraction thereof. 

‘‘(2) EXCESS CLAIMS FEES.— 

‘‘(A) IN GENERAL.—In addition to the fee specified in paragraph (1)— 

‘‘(i) on filing or on presentation at any other time, $220 for each 

claim in independent form in excess of 3; 

‘‘(ii) on filing or on presentation at any other time, $52 for each 

claim (whether dependent or independent) in excess of 20; and 

‘‘(iii) for each application containing a multiple dependent claim, 

$390. 

‘‘(B) MULTIPLE DEPENDENT CLAIMS.—For the purpose of computing fees 

under subparagraph (A), a multiple dependent claim referred to in section 

112 or any claim depending therefrom shall be considered as separate dependent claims in accordance with the number of claims to which reference 

is made. 

‘‘(C) REFUNDS; ERRORS IN PAYMENT.—The Director may by regulation 

provide for a refund of any part of the fee specified in subparagraph (A) 

for any claim that is canceled before an examination on the merits, as preVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6621 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
27 

scribed by the Director, has been made of the application under section 131. 

Errors in payment of the additional fees under this paragraph may be rectified in accordance with regulations prescribed by the Director. 

‘‘(3) EXAMINATION FEES.— 

‘‘(A) IN GENERAL.— 

‘‘(i) For examination of each application for an original patent, except for design, plant, provisional, or international applications, $220. 

‘‘(ii) For examination of each application for an original design patent, $140. 

‘‘(iii) For examination of each application for an original plant patent, $170. 

‘‘(iv) For examination of the national stage of each international 

application, $220. 

‘‘(v) For examination of each application for the reissue of a patent, 

$650. 

‘‘(B) APPLICABILITY OF OTHER FEE PROVISIONS.—The provisions of paragraphs (3) and (4) of section 111(a) relating to the payment of the fee for 

filing the application shall apply to the payment of the fee specified in subparagraph (A) with respect to an application filed under section 111(a). The 

provisions of section 371(d) relating to the payment of the national fee shall 

apply to the payment of the fee specified in subparagraph (A) with respect 

to an international application. 

‘‘(4) ISSUE FEES.— 

‘‘(A) For issuing each original patent, except for design or plant patents, 

$1,510. 

‘‘(B) For issuing each original design patent, $860. 

‘‘(C) For issuing each original plant patent, $1,190. 

‘‘(D) For issuing each reissue patent, $1,510. 

‘‘(5) DISCLAIMER FEE.—On filing each disclaimer, $140. 

‘‘(6) APPEAL FEES.— 

‘‘(A) On filing an appeal from the examiner to the Patent Trial and Appeal Board, $540. 

‘‘(B) In addition, on filing a brief in support of the appeal, $540, and 

on requesting an oral hearing in the appeal before the Patent Trial and Appeal Board, $1,080. 

‘‘(7) REVIVAL FEES.—On filing each petition for the revival of an unintentionally abandoned application for a patent, for the unintentionally delayed payment of the fee for issuing each patent, or for an unintentionally delayed response by the patent owner in any reexamination proceeding, $1,620, unless the 

petition is filed under section 133 or 151, in which case the fee shall be $540. 

‘‘(8) EXTENSION FEES.—For petitions for 1-month extensions of time to take 

actions required by the Director in an application— 

‘‘(A) on filing a first petition, $130; 

‘‘(B) on filing a second petition, $360; and 

‘‘(C) on filing a third or subsequent petition, $620. 

‘‘(b) MAINTENANCE FEES.— 

‘‘(1) IN GENERAL.—The Director shall charge the following fees for maintaining in force all patents based on applications filed on or after December 12, 

1980: 

‘‘(A) Three years and 6 months after grant, $980. 

‘‘(B) Seven years and 6 months after grant, $2,480. 

‘‘(C) Eleven years and 6 months after grant, $4,110. 

‘‘(2) GRACE PERIOD; SURCHARGE.—Unless payment of the applicable maintenance fee under paragraph (1) is received in the Office on or before the date 

the fee is due or within a grace period of 6 months thereafter, the patent shall 

expire as of the end of such grace period. The Director may require the payment 

of a surcharge as a condition of accepting within such 6-month grace period the 

payment of an applicable maintenance fee. 

‘‘(3) NO MAINTENANCE FEE FOR DESIGN OR PLANT PATENT.—No fee may be 

established for maintaining a design or plant patent in force.’’. 

(b) DELAYS IN PAYMENT.—Subsection (c) of section 41 of title 35, United States 

Code, is amended— 

(1) by striking ‘‘(c)(1) The Director’’ and inserting: 

‘‘(c) DELAYS IN PAYMENT OF MAINTENANCE FEES.— 

‘‘(1) ACCEPTANCE.—The Director’’; and 

(2) by striking ‘‘(2) A patent’’ and inserting ‘‘(2) EFFECT ON RIGHTS OF OTHERS.—A patent’’. 

28 

(c) PATENT SEARCH FEES.—Subsection (d) of section 41 of title 35, United States 

Code, is amended to read as follows: 

‘‘(d) PATENT SEARCH AND OTHER FEES.— ‘‘(1) PATENT SEARCH FEES.— ‘‘(A) IN GENERAL.—The Director shall charge the fees specified under 

subparagraph (B) for the search of each application for a patent, except for 

provisional applications. The Director shall adjust the fees charged under 

this paragraph to ensure that the fees recover an amount not to exceed the 

estimated average cost to the Office of searching applications for patent either by acquiring a search report from a qualified search authority, or by 

causing a search by Office personnel to be made, of each application for patent. 

‘‘(B) SPECIFIC FEES.—The fees referred to in subparagraph (A) are— ‘‘(i) $540 for each application for an original patent, except for design, plant, provisional, or international applications; ‘‘(ii) $100 for each application for an original design patent; 

‘‘(iii) $330 for each application for an original plant patent; 

‘‘(iv) $540 for the national stage of each international application; 

and 

‘‘(v) $540 for each application for the reissue of a patent. 

‘‘(C) APPLICABILITY OF OTHER PROVISIONS.—The provisions of paragraphs (3) and (4) of section 111(a) relating to the payment of the fee for 

filing the application shall apply to the payment of the fee specified in this 

paragraph with respect to an application filed under section 111(a). The 

provisions of section 371(d) relating to the payment of the national fee shall 

apply to the payment of the fee specified in this paragraph with respect to 

an international application. 

‘‘(D) REFUNDS.—The Director may by regulation provide for a refund of 

any part of the fee specified in this paragraph for any applicant who files 

a written declaration of express abandonment as prescribed by the Director 

before an examination has been made of the application under section 131. 

‘‘(E) APPLICATIONS SUBJECT TO SECRECY ORDER.—A search of an application that is the subject of a secrecy order under section 181 or otherwise 

involves classified information may be conducted only by Office personnel. 

‘‘(F) CONFLICTS OF INTEREST.—A qualified search authority that is a 

commercial entity may not conduct a search of a patent application if the 

entity has any direct or indirect financial interest in any patent or in any 

pending or imminent application for patent filed or to be filed in the Office. 

‘‘(2) OTHER FEES.— ‘‘(A) IN GENERAL.—The Director shall establish fees for all other processing, services, or materials relating to patents not specified in this section 

to recover the estimated average cost to the Office of such processing, services, or materials, except that the Director shall charge the following fees 

for the following services: 

‘‘(i) For recording a document affecting title, $40 per property. 

‘‘(ii) For each photocopy, $.25 per page. 

‘‘(iii) For each black and white copy of a patent, $3. 

‘‘(B) COPIES FOR LIBRARIES.—The yearly fee for providing a library specified in section 12 with uncertified printed copies of the specifications and 

drawings for all patents in that year shall be $50.’’. 

(d) FEES FOR SMALL ENTITIES.—Subsection (h) of section 41 of title 35, United 

States Code, is amended to read as follows: 

‘‘(h) FEES FOR SMALL ENTITIES.— 

‘‘(1) REDUCTIONS IN FEES.—Subject to paragraph (3), fees charged under 

subsections (a), (b), and (d)(1) shall be reduced by 50 percent with respect to 

their application to any small business concern as defined under section 3 of 

the Small Business Act, and to any independent inventor or nonprofit organization as defined in regulations issued by the Director. 

‘‘(2) SURCHARGES AND OTHER FEES.—With respect to its application to any 

entity described in paragraph (1), any surcharge or fee charged under subsection (c) or (d) shall not be higher than the surcharge or fee required of any 

other entity under the same or substantially similar circumstances. 

‘‘(3) REDUCTION FOR ELECTRONIC FILING.—The fee charged under subsection 

(a)(1)(A) shall be reduced by 75 percent with respect to its application to any 

entity to which paragraph (1) applies, if the application is filed by electronic 

means as prescribed by the Director.’’. 

(e) TECHNICAL AMENDMENTS.—Section 41 of title 35, United States Code, is 

amended— 

29 

(1) in subsection (e), in the first sentence, by striking ‘‘The Director’’ and 

inserting ‘‘WAIVER OF FEES; COPIES REGARDING NOTICE.—The Director’’; 

(2) in subsection (f), by striking ‘‘The fees’’ and inserting ‘‘ADJUSTMENT OF

FEES.—The fees’’; 

(3) by repealing subsection (g); and 

(4) in subsection (i)— 

(A) by striking ‘‘(i)(1) The Director’’ and inserting the following: 

‘‘(i) ELECTRONIC PATENT AND TRADEMARK DATA.— 

‘‘(1) MAINTENANCE OF COLLECTIONS.—The Director’’; 

(B) by striking ‘‘(2) The Director’’ and inserting the following: 

‘‘(2) AVAILABILITY OF AUTOMATED SEARCH SYSTEMS.—The Director’’; 

(C) by striking ‘‘(3) The Director’’ and inserting the following: 

‘‘(3) ACCESS FEES.—The Director’’; and 

(D) by striking ‘‘(4) The Director’’ and inserting the following: 

‘‘(4) ANNUAL REPORT TO CONGRESS.—The Director’’. 

(f) ADJUSTMENT OF TRADEMARK FEES.—Section 802(a) of division B of the Consolidated Appropriations Act, 2005 (Public Law 108–447) is amended— 

(1) in the first sentence, by striking ‘‘During fiscal years 2005, 2006 and 

2007,’’, and inserting ‘‘Until such time as the Director sets or adjusts the fees 

otherwise,’’; and 

(2) in the second sentence, by striking ‘‘During fiscal years 2005, 2006, and 

2007, the’’ and inserting ‘‘The’’. 

(g) EFFECTIVE DATE, APPLICABILITY, AND TRANSITION PROVISIONS.—Section 

803(a) of division B of the Consolidated Appropriations Act, 2005 (Public Law 108– 

447) Division B of Public Law 108–447 is amended by striking ‘‘and shall apply only 

with respect to the remaining portion of fiscal year 2005 and fiscal year 2006’’. 

(h) ELECTRONIC FILING INCENTIVE.— 

(1) IN GENERAL.—Notwithstanding any other provision of this section, a fee 

of $400 shall be established for each application for an original patent, except 

for a design, plant, or provisional application, that is not filed by electronic 

means as prescribed by the Director. The fee established by this subsection 

shall be reduced 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) REDUCTION IN FEES FOR SMALL ENTITY PATENTS.—The Director shall reduce 

fees for providing prioritized examination of utility and plant patent applications by 

50 percent for small entities that qualify for reduced fees under section 41(h)(1) of 

title 35, United States Code, so long as the fees of the prioritized examination program are set to recover the estimated cost of the program. 

(j) EFFECTIVE DATE.—Except as provided in subsection (h), this section and the 

amendments made by this section shall take effect on the date of the enactment of 

this Act. 

SEC. 11. SUPPLEMENTAL EXAMINATION. 

(a) IN GENERAL.—Chapter 25 of title 35, United States Code, is amended by 

adding at the end the following: 

‘‘§ 257. Supplemental examinations to consider, reconsider, or correct information 

‘‘(a) REQUEST FOR SUPPLEMENTAL EXAMINATION.—A patent owner may request 

supplemental examination of a patent in the Office to consider, reconsider, or correct information believed to be relevant to the patent, in accordance with such requirements as the Director may establish. Within 3 months after the date a request 

for supplemental examination meeting the requirements of this section is received, 

the Director shall conduct the supplemental examination and shall conclude such 

examination by issuing a certificate indicating whether the information presented 

in the request raises a substantial new question of patentability. 

‘‘(b) REEXAMINATION ORDERED.—If the certificate issued under subsection (a) indicates that a substantial new question of patentability is raised by 1 or more items 

of information in the request, the Director shall order reexamination of the patent. 

The reexamination shall be conducted according to procedures established by chapter 30, except that the patent owner shall not have the right to file a statement pursuant to section 304. During the reexamination, the Director shall address each substantial new question of patentability identified during the supplemental examinaVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6621 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
30 

tion, notwithstanding the limitations in chapter 30 relating to patents and printed 

publication or any other provision of such chapter. 

‘‘(c) EFFECT.— 

‘‘(1) IN GENERAL.—A patent shall not be held unenforceable on the basis of 

conduct relating to information that had not been considered, was inadequately 

considered, or was incorrect in a prior examination of the patent if the information was considered, reconsidered, or corrected during a supplemental examination of the patent. The making of a request under subsection (a), or the absence 

thereof, shall not be relevant to enforceability of the patent under section 282. 

‘‘(2) EXCEPTIONS.— 

‘‘(A) PRIOR ALLEGATIONS.—Paragraph (1) shall not apply to an allegation pled with particularity, or set forth with particularity in a notice received by the patent owner under section 505(j)(2)(B)(iv)(II) of the Federal 

Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)(2)(B)(iv)(II)), before the date 

of a supplemental examination request under subsection (a) to consider, reconsider, or correct information forming the basis for the allegation. 

‘‘(B) PATENT ENFORCEMENT ACTIONS.—In an action brought under section 337(a) of the Tariff Act of 1930 (19 U.S.C. 1337(a)), or section 281 of 

this title, paragraph (1) shall not apply to any defense raised in the action 

that is based upon information that was considered, reconsidered, or corrected pursuant to a supplemental examination request under subsection 

(a), unless the supplemental examination, and any reexamination ordered 

pursuant to the request, are concluded before the date on which the action 

is brought. 

‘‘(d) FEES AND REGULATIONS.— 

‘‘(1) FEES.—The Director shall, by regulation, establish fees for the submission of a request for supplemental examination of a patent, and to consider each 

item of information submitted in the request. If reexamination is ordered under 

subsection (b), fees established and applicable to ex parte reexamination proceedings under chapter 30 shall be paid, in addition to fees applicable to supplemental examination. 

‘‘(2) REGULATIONS.—The Director shall issue regulations governing the 

form, content, and other requirements of requests for supplemental examination, and establishing procedures for reviewing information submitted in such 

requests. 

‘‘(e) RULE OF CONSTRUCTION.—Nothing in this section shall be construed— 

‘‘(1) to preclude the imposition of sanctions based upon criminal or antitrust 

laws (including section 1001(a) of title 18, the first section of the Clayton Act, 

and section 5 of the Federal Trade Commission Act to the extent that section 

relates to unfair methods of competition); 

‘‘(2) to limit the authority of the Director to investigate issues of possible 

misconduct and impose sanctions for misconduct in connection with matters or 

proceedings before the Office; or 

‘‘(3) to limit the authority of the Director to issue regulations under chapter 

3 relating to sanctions for misconduct by representatives practicing before the 

Office.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for chapter 25 of title 35, 

United States Code, is amended by adding at the end the following new item: 

‘‘257. Supplemental examinations to consider, reconsider, or correct information.’’. 

(c) EFFECTIVE DATE.—The amendments made by this section 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 patent issued before, on, or after that effective date. 

SEC. 12. FUNDING AGREEMENTS. 

(a) IN GENERAL.—Section 202(c)(7)(E)(i) of title 35, United States Code, is 

amended— 

(1) by striking ‘‘75 percent’’ and inserting ‘‘15 percent’’; and 

(2) by striking ‘‘25 percent’’ and inserting ‘‘85 percent’’. 

(b) EFFECTIVE DATE.—The amendments made by this section shall take effect 

on the date of enactment of this Act and shall apply to any patent issued before, 

on, or after that date. 

SEC. 13. TAX STRATEGIES DEEMED WITHIN THE PRIOR ART. 

(a) IN GENERAL.—For purposes of evaluating an invention under section 102 or 

103 of title 35, United States Code, any strategy for reducing, avoiding, or deferring 

tax liability, whether known or unknown at the time of the invention or application 

31 

for patent, shall be deemed insufficient to differentiate a claimed invention from the 

prior art. 

(b) DEFINITION.—For purposes of this section, the term ‘‘tax liability’’ refers to 

any liability for a tax under any Federal, State, or local law, or the law of any foreign jurisdiction, including any statute, rule, regulation, or ordinance that levies, 

imposes, or assesses such tax liability. 

(c) EXCLUSIONS.—This section does not apply to that part of an invention that— 

(1) is a method, apparatus, technology, computer program product, or system, that is used solely for preparing a tax or information return or other tax 

filing, including one that records, transmits, transfers, or organizes data related 

to such filing; or 

(2) is a method, apparatus, technology, computer program product, or system used solely for financial management, to the extent that it is severable 

from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax advisor. 

(d) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to 

imply that other business methods are patentable or that other business-method 

patents are valid. 

(e) EFFECTIVE DATE; APPLICABILITY.—This section shall take effect on the date 

of enactment of this Act and shall apply to any patent application pending, and any 

patent issued, on or after that date. 

SEC. 14. BEST MODE REQUIREMENT. 

(a) IN GENERAL.—Section 282 of title 35, United State Code, is amended in its 

second undesignated paragraph by striking paragraph (3) and inserting the following: 

‘‘(3) Invalidity of the patent or any claim in suit for failure to comply with— 

‘‘(A) any requirement of section 112, except that the failure to disclose 

the best mode shall not be a basis on which any claim of a patent may be 

canceled or held invalid or otherwise unenforceable; or 

‘‘(B) any requirement of section 251.’’. 

(b) CONFORMING AMENDMENT.—Sections 119(e)(1) and 120 of title 35, United 

States Code, are each amended by striking ‘‘the first paragraph of section 112 of 

this title’’ and inserting ‘‘section 112(a) (other than the requirement to disclose the 

best mode)’’. 

(c) EFFECTIVE DATE.—The amendments made by this section shall take effect 

upon the date of the enactment of this Act and shall apply to proceedings commenced on or after that date. 

SEC. 15. MARKING. 

(a) VIRTUAL MARKING.— 

(1) IN GENERAL.—Section 287(a) of title 35, United States Code, is amended 

by striking ‘‘or when,’’ and inserting ‘‘or by fixing thereon the word ‘patent’ or 

the abbreviation ‘pat.’ together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates 

the patented article with the number of the patent, or when,’’. 

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply 

to any case that is pending on, or commenced on or after, the date of the enactment of this Act. 

(b) FALSE MARKING.— 

(1) CIVIL PENALTY.—Section 292(a) of title 35, United States, Code, is 

amended by adding at the end the following: ‘‘Only the United States may sue 

for the penalty authorized by this subsection.’’. 

(2) CIVIL ACTION FOR DAMAGES.—Subsection (b) of section 292 of title 35, 

United States Code, is amended to read as follows: 

‘‘(b) A person who has suffered a competitive injury as a result of a violation 

of this section may file a civil action in a district court of the United States for recovery of damages adequate to compensate for the injury.’’. 

(3) EFFECTIVE DATE.—The amendments made by this subsection shall apply 

to any case that is pending on, or commenced on or after, the date of the enactment of this Act. 

SEC. 16. ADVICE OF COUNSEL. 

(a) IN GENERAL.—Chapter 29 of title 35, United States Code, is amended by 

adding at the end the following: 

‘‘§ 298. Advice of counsel 

‘‘The failure of an infringer to obtain the advice of counsel with respect to any 

allegedly infringed patent, or the failure of the infringer to present such advice to 

32 

the court or jury, may not be used to prove that the accused infringer willfully infringed the patent or that the infringer intended to induce infringement of the patent.’’. 

(b) CONFORMING AMENDMENT.—The table of sections for chapter 29 of title 35, 

United States Code, is amended by adding at the end the following: 

‘‘298. Advice of counsel.’’. 

SEC. 17. OWNERSHIP; ASSIGNMENT. 

The fourth undesignated paragraph of section 261 of title 35, United States 

Code, is amended by inserting before the period the following: ‘‘and identifies all 

real parties in interest and those entities that control, directly or indirectly, such 

real parties in interest’’. 

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

(a) REFERENCES.—Except as otherwise expressly provided, wherever in this section language is expressed in terms of a section or chapter, the reference shall be 

considered to be made to that section or chapter in title 35, United States Code. 

(b) TRANSITIONAL PROGRAM.— 

(1) ESTABLISHMENT.—Not later than 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, subject to 

the following: 

(A) Section 321(c) and subsections (b), (e)(2), and (f) of section 325 shall 

not apply to a transitional proceeding. 

(B) A person may not file a petition for a transitional proceeding with 

respect to a covered business method patent unless the person or the person’s real party in interest has been sued for infringement of the patent or 

has been charged with infringement under that patent. 

(C) A petitioner in a transitional proceeding who challenges the validity 

of 1 or more claims in a covered business method patent on a ground raised 

under section 102 or 103, as in effect on the day before the date of the enactment of this Act, may support such ground only on the basis of— 

(i) prior art that is described by section 102(a) (as in effect on the 

day before the date of the enactment of this Act); 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) (as in effect on the 

day before the date of the enactment of this Act) if the disclosure 

had been made by another before the invention thereof by the applicant for patent. 

(D) The petitioner in a transitional proceeding, or 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, that a claim in a patent is invalid on any ground that the petitioner raised during a transitional 

proceeding that resulted in a final written decision. 

(E) The Director may institute a transitional proceeding only for a patent that is a covered business method patent. 

(2) EFFECTIVE DATE.—The regulations issued 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 such effective date, except that the regulations shall 

not apply to a patent described in the first sentence of section 5(f)(2) of this Act 

during the period that a petition for post-grant review of that patent would satisfy the requirements of section 321(c). 

(3) SUNSET.— 

(A) IN GENERAL.—This subsection, and the regulations issued under 

this subsection, are repealed effective upon the expiration of the 4-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, 

33 

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. 

(c) REQUEST FOR STAY.— 

(1) IN GENERAL.—If a party seeks a stay of a civil action alleging infringement of a patent under section 281 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 de novo the district court’s decision 

to ensure consistent application of established precedent. 

(d) VENUE OF INFRINGEMENT ACTIONS.—Notwithstanding section 1400(b) of title 

28, United States Code, an action for infringement under section 281 of title 35, 

United States Code, of a covered business method patent 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 acts of infringement and has a regular and established place of business; 

(3) where the defendant has agreed or consented to be sued; or 

(4) for foreign defendants that do not meet the requirements of paragraphs 

(1) or (2), in accordance with section 1391(d) of title 28, United States Code. 

(e) ATTORNEY’S FEES AND COSTS.—In an action for infringement under section 

281 of title 35, United States Code, of a covered business method patent, the prevailing party shall be entitled to reasonable attorney’s fees and costs. 

(f) 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 physical facility for 

purposes of section 1400(b)(2) of title 28, United States Code. 

(g) 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 subsection, the Director shall issue regulations for determining whether a patent is for a technological invention. 

(h) RULE OF CONSTRUCTION.—Nothing in this section shall be construed as 

amending or interpreting categories of patent-eligible subject matter set forth under 

section 101. 

SEC. 19. CLARIFICATION OF JURISDICTION. 

(a) STATE COURT JURISDICTION.—Section 1338(a) of title 28, United States Code, 

is amended by striking the second sentence and inserting the following: ‘‘No State 

court shall have jurisdiction over any claim for relief arising under any Act of Congress relating to patents, plant variety protection, or copyrights.’’. 

(b) COURT OF APPEALS FOR THE FEDERAL CIRCUIT.—Section 1295(a)(1) of title 

28, United States Code, is amended to read as follows: 

‘‘(1) of an appeal from a final decision of a district court of the United 

States, the District Court of Guam, the District Court of the Virgin Islands, or 

the District Court of the Northern Mariana Islands, in any civil action arising 

under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents or plant variety 

protection;’’. 

(c) REMOVAL.— 

(1) IN GENERAL.—Chapter 89 of title 28, United States Code, is amended 

by adding at the end the following new section: 

34 

‘‘§ 1454. Patent, plant variety protection, and copyright cases 

‘‘(a) IN GENERAL.—A civil action in which any party asserts a claim for relief 

arising under any Act of Congress relating to patents, plant variety protection, or 

copyrights may be removed to the district court of the United States for the district 

and division embracing the place where the action is pending. 

‘‘(b) SPECIAL RULES.—The removal of an action under this section shall be made 

in accordance with section 1446 of this chapter, except that if the removal is based 

solely on this section— 

‘‘(1) the action may be removed by any party; and 

‘‘(2) the time limitations contained in section 1446(b) may be extended at 

any time for cause shown. 

‘‘(c) CLARIFICATION OF JURISDICTION IN CERTAIN CASES.—The court to which a 

civil action is removed under this section is not precluded from hearing and determining any claim in the civil action because the State court from which the civil 

action is removed did not have jurisdiction over that claim. 

‘‘(d) REMAND.—If a civil action is removed solely under this section, the district 

court— 

‘‘(1) shall remand all claims that are neither a basis for removal under subsection (a) nor within the original or supplemental jurisdiction of the district 

court under any Act of Congress; and 

‘‘(2) may, under the circumstances specified in section 1367(c), remand any 

claims within the supplemental jurisdiction of the district court under section 

1367.’’. 

(2) CONFORMING AMENDMENT.—The table of sections for chapter 89 of title 

28, United States Code, is amended by adding at the end the following new 

item: 

‘‘1454. Patent, plant variety protection, and copyright cases.’’. 

(d) TRANSFER BY COURT OF APPEALS FOR THE FEDERAL CIRCUIT.— 

(1) IN GENERAL.—Chapter 99 of title 28, United States Code, is amended 

by adding at the end the following new section: 

‘‘§ 1632. Transfer by the Court of Appeals for the Federal Circuit 

‘‘When a case is appealed to the Court of Appeals for the Federal Circuit under 

section 1295(a)(1), and no claim for relief arising under any Act of Congress relating 

to patents or plant variety protection is the subject of the appeal by any party, the 

Court of Appeals for the Federal Circuit shall transfer the appeal to the court of 

appeals for the regional circuit embracing the district from which the appeal has 

been taken.’’. 

(2) CONFORMING AMENDMENT.—The table of sections for chapter 99 of title 

28, United States Code, is amended by adding at the end the following new 

item: 

‘‘1632. Transfer by the Court of Appeals for the Federal Circuit.’’. 

(e) EFFECTIVE DATE.—The amendments made by this section shall apply to any 

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

SEC. 20. TECHNICAL AMENDMENTS. 

(a) JOINT INVENTIONS.—Section 116 of title 35, United States Code, is amended— 

(1) in the first undesignated paragraph, by striking ‘‘When’’ and inserting ‘‘(a) JOINT INVENTIONS.—When’’; 

(2) in the second undesignated paragraph, by striking ‘‘If a joint inventor’’ and inserting ‘‘(b) OMITTED INVENTOR.—If a joint inventor’’; and 

(3) in the third undesignated paragraph— 

(A) by striking ‘‘Whenever’’ and inserting ‘‘(c) CORRECTION OF ERRORS IN APPLICATION.—Whenever’’; and 

(B) by striking ‘‘and such error arose without any deceptive intent 

on his part,’’. 

(b) FILING OF APPLICATION IN FOREIGN COUNTRY.—Section 184 of title 35, 

United States Code, is amended— 

(1) in the first undesignated paragraph— 

(A) by striking ‘‘Except when’’ and inserting ‘‘(a) FILING IN FOREIGN

COUNTRY.—Except when’’; and 

(B) by striking ‘‘and without deceptive intent’’; 

(2) in the second undesignated paragraph, by striking ‘‘The term’’ and inserting ‘‘(b) APPLICATION.—The term’’; and 

35 

(3) in the third undesignated paragraph, by striking ‘‘The scope’’ and inserting ‘‘(c) SUBSEQUENT MODIFICATIONS, AMENDMENTS, AND SUPPLEMENTS.—The 

scope’’. 

(c) FILING WITHOUT A LICENSE.—Section 185 of title 35, United States Code, is 

amended by striking ‘‘and without deceptive intent’’. 

(d) REISSUE OF DEFECTIVE PATENTS.—Section 251 of title 35, United States 

Code, is amended— 

(1) in the first undesignated paragraph— 

(A) by striking ‘‘Whenever’’ and inserting ‘‘(a) IN GENERAL.—Whenever’’; and 

(B) by striking ‘‘without any deceptive intention’’; 

(2) in the second undesignated paragraph, by striking ‘‘The Director’’ and 

inserting ‘‘(b) MULTIPLE REISSUED PATENTS.—The Director’’; 

(3) in the third undesignated paragraph, by striking ‘‘The provisions’’ and 

inserting ‘‘(c) APPLICABILITY OF THIS TITLE.—The provisions’’; and 

(4) in the last undesignated paragraph, by striking ‘‘No reissued patent’’ 

and inserting ‘‘(d) REISSUE PATENT ENLARGING SCOPE OF CLAIMS.—No reissued 

patent’’. 

(e) EFFECT OF REISSUE.—Section 253 of title 35, United States Code, is amended— 

(1) in the first undesignated paragraph, by striking ‘‘Whenever, without any 

deceptive intention,’’ and inserting ‘‘(a) IN GENERAL.—Whenever’’; and 

(2) in the second undesignated paragraph, by striking ‘‘In like manner’’ and 

inserting ‘‘(b) ADDITIONAL DISCLAIMER OR DEDICATION.—In the manner set forth 

in subsection (a),’’. 

(f) CORRECTION OF NAMED INVENTOR.—Section 256 of title 35, United States 

Code, is amended— 

(1) in the first undesignated paragraph— 

(A) by striking ‘‘Whenever’’ and inserting ‘‘(a) CORRECTION.—Whenever’’; and 

(B) by striking ‘‘and such error arose without any deceptive intention 

on his part’’; and 

(2) in the second undesignated paragraph, by striking ‘‘The error’’ and inserting ‘‘(b) PATENT VALID IF ERROR CORRECTED.—The error’’. 

(g) OWNERSHIP; ASSIGNMENT.—The fourth undesignated paragraph of section 

261 of title 35, United States Code, is amended by inserting before the period the 

following: ‘‘and identifies all real parties in interest’’. 

(h) PRESUMPTION OF VALIDITY.—Section 282 of title 35, United States Code, is 

amended— 

(1) in the first undesignated paragraph— 

(A) by striking ‘‘A patent’’ and inserting ‘‘(a) IN GENERAL.—A patent’’; 

and 

(B) by striking the third sentence; 

(2) in the second undesignated paragraph, by striking ‘‘The following’’ and 

inserting ‘‘(b) DEFENSES.—The following’’; and 

(3) in the third undesignated paragraph— 

(A) by striking ‘‘In actions involving the validity or infringement of a 

patent’’ and inserting ‘‘(c) NOTICE OF ACTIONS; ACTIONS DURING EXTENSION

OF PATENT TERM.—In an action involving the validity or infringement of 

patent, the party asserting infringement shall identify, in the pleadings or 

otherwise in writing to the adverse party, all of its real parties in interest, 

and’’; and 

(B) by striking ‘‘Claims Court’’ and inserting ‘‘Court of Federal Claims’’. 

(i) ACTION FOR INFRINGEMENT.—Section 288 of title 35, United States Code, is 

amended by striking ‘‘, without deceptive intention,’’. 

(j) REVISER’S NOTES.— 

(1) Section 3(e)(2) of title 35, United States Code, is amended by striking 

‘‘this Act,’’ and inserting ‘‘that Act,’’. 

(2) Section 202 of title 35, United States Code, is amended— 

(A) in subsection (b)(3), by striking ‘‘the section 203(b)’’ and inserting 

‘‘section 203(b)’’; and 

(B) in subsection (c)(7)— 

(i) in subparagraph (D), by striking ‘‘except where it proves’’ and 

all that follows through ‘‘small business firms; and’’ and inserting: ‘‘except where it is determined to be infeasible following a reasonable inquiry, a preference in the licensing of subject inventions shall be given 

to small business firms; and’’; and 

36 

(ii) in subparagraph (E)(i), by striking ‘‘as described above in this 

clause (D);’’ and inserting ‘‘described above in this clause;’’. 

(3) Section 209(d)(1) of title 35, United States Code, is amended by striking 

‘‘nontransferrable’’ and inserting ‘‘nontransferable’’. 

(4) Section 287(c)(2)(G) of title 35, United States Code, is amended by striking ‘‘any state’’ and inserting ‘‘any State’’. 

(5) Section 371(b) of title 35, United States Code, is amended by striking 

‘‘of the treaty’’ and inserting ‘‘of the treaty.’’. 

(k) UNNECESSARY REFERENCES.— (1) IN GENERAL.—Title 35, United States Code, is amended by striking ‘‘of 

this title’’ each place that term appears. 

(2) EXCEPTION.—The amendment made by paragraph (1) shall not apply to 

the use of such term in the following sections of title 35, United States Code: 

(A) Section 1(c). 

(B) Section 100. 

(C) Section 101. 

(D) Subsections (a) and (b) of section 105. 

(E) The first instance of the use of such term in section 111(b)(8). 

(F) Section 157(a), in the matter preceding paragraph (1). 

(G) Section 161. 

(H) Section 164. 

(I) Section 171. 

(J) Section 251(c), as so designated by this section. 

(K) Section 261. 

(L) Subsections (a), (g), and (h) of section 271. 

(M) Section 287(b)(1). 

(N) Section 289. 

(O) The first instance of the use of such term in section 375(a). 

(l) EFFECTIVE DATE.—The amendments made by this section 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 proceedings commenced on or after that effective date. 

SEC. 21. TRAVEL EXPENSES AND PAYMENT OF ADMINISTRATIVE JUDGES. 

(a) AUTHORITY TO COVER CERTAIN TRAVEL RELATED EXPENSES.—Section 

2(b)(11) of title 35, United States Code, is amended by inserting ‘‘, and the Office 

is authorized to expend funds to cover the subsistence expenses and travel-related 

expenses, including per diem, lodging costs, and transportation costs, of non-federal 

employees attending such programs’’ after ‘‘world’’. 

(b) PAYMENT OF ADMINISTRATIVE JUDGES.—Section 3(b) of title 35, United 

States Code, is amended by adding at the end the following: 

‘‘(6) ADMINISTRATIVE PATENT JUDGES AND ADMINISTRATIVE TRADEMARK

JUDGES.—The Director has the authority to fix the rate of basic pay for the administrative patent judges appointed pursuant to section 6 of this title and the 

administrative trademark judges appointed pursuant to section 17 of the Trademark Act of 1946 (15 U.S.C. 1067) at not greater than the rate of basic pay payable for Level III of the Executive Schedule. The payment of a rate of basic pay 

under this paragraph shall not be subject to the pay limitation of section 

5306(e) or 5373 of title 5.’’. 

SEC. 22. PATENT AND TRADEMARK OFFICE FUNDING. 

(a) DEFINITION.—In this section, the term ‘‘Fund’’ means the United States Patent and Trademark Office Public Enterprise Fund established under subsection (c). 

(b) FUNDING.— (1) IN GENERAL.—Section 42 of title 35, United States Code, is amended— 

(A) in subsection (b), by striking ‘‘Patent and Trademark Office Appropriation Account’’ and inserting ‘‘United States Patent and Trademark Office Public Enterprise Fund’’; and 

(B) in subsection (c), in the first sentence— 

(i) by striking ‘‘To the extent’’ and all that follows through ‘‘fees’’ 

and inserting ‘‘Fees’’; and 

(ii) by striking ‘‘shall be collected by and shall be available to the 

Director’’ and inserting ‘‘shall be collected by the Director and shall be 

available until expended’’. 

(2) EFFECTIVE DATE.—The amendments made by paragraph (1) shall take 

effect on the later of— 

(A) October 1, 2011; or 

(B) the first day of the first fiscal year that begins after the date of the 

enactment of this Act. 

(c) USPTO REVOLVING FUND.— 

37 

(1) ESTABLISHMENT.—There is established in the Treasury of the United 

States a revolving fund to be known as the ‘‘United States Patent and Trademark Office Public Enterprise Fund’’. Amounts shall be deposited in the Fund 

as an offsetting receipt and shall be available for use by the Director without 

fiscal year limitation. 

(2) DERIVATION OF RESOURCES.—There shall be deposited into the Fund, on 

and after the effective date set forth in subsection (b)(2)— 

(A) any fees collected under sections 41, 42, and 376 of title 35, United 

States Code, except that— 

(i) notwithstanding any other provision of law, if such fees are collected by, and payable to, the Director, the Director shall transfer such 

amounts to the Fund; and 

(ii) no funds collected pursuant to section 9(h) of this Act or section 

1(a)(2) of Public Law 111–45 shall be deposited in the Fund; and 

(B) any fees collected under section 31 of the Trademark Act of 1946 

(15 U.S.C. 1113). 

(3) EXPENSES.—Amounts deposited into the Fund under paragraph (2) shall 

be available, without fiscal year limitation, to cover— 

(A) all expenses to the extent consistent with the limitation on the use 

of fees set forth in section 42(c) of title 35, United States Code, including 

all administrative and operating expenses, determined in the discretion of 

the Director to be ordinary and reasonable, incurred by the Director for the 

continued operation of all services, programs, activities, and duties of the 

Office relating to patents and trademarks, as such services, programs, activities, and duties are described under— 

(i) title 35, United States Code; and 

(ii) the Trademark Act of 1946; and 

(B) all expenses incurred pursuant to any obligation, representation, or 

other commitment of the Office. 

(d) ANNUAL REPORT.—Not later than 60 days after the end of each fiscal year, 

the Director shall submit a report to Congress which shall— 

(1) summarize the operations of the Office for the preceding fiscal year, including financial details and staff levels broken down by each major activity of 

the Office; 

(2) detail the operating plan of the Office, including specific expense and 

staff needs for the upcoming fiscal year; 

(3) describe the long-term modernization plans of the Office; 

(4) set forth details of any progress towards such modernization plans made 

in the previous fiscal year; and 

(5) include the results of the most recent audit carried out under subsection 

(f). 

(e) ANNUAL SPENDING PLAN.— 

(1) IN GENERAL.—Not later than 30 days after the beginning of each fiscal 

year, the Director shall notify the Committees on Appropriations of both Houses 

of Congress of the plan for the obligation and expenditure of the total amount 

of the funds for that fiscal year in accordance with section 605 of the Science, 

State, Justice, Commerce, and Related Agencies Appropriations Act, 2006 (Public Law 109–108; 119 Stat. 2334). 

(2) CONTENTS.—Each plan under paragraph (1) shall— 

(A) summarize the operations of the Office for the current fiscal year, 

including financial details and staff levels with respect to major activities; 

and 

(B) detail the operating plan of the Office, including specific expense 

and staff needs, for the current fiscal year. 

(f) AUDIT.—The Director shall, on an annual basis, provide for an independent 

audit of the financial statements of the Office. Such audit shall be conducted in accordance with generally acceptable accounting procedures. 

(g) BUDGET.—The Fund shall prepare and submit each year to the President a 

business-type budget in a manner, and before a date, as the President prescribes 

by regulation for the budget program. 

SEC. 23. SATELLITE OFFICES. 

(a) ESTABLISHMENT.—Subject to available resources, the Director shall, by not 

later than the date that is 3 years after the date of the enactment of this Act establish 3 or more satellite offices in the United States to carry out the responsibilities 

of the Patent and Trademark Office. 

(b) PURPOSE.—The purpose of the satellite offices established under subsection 

(a) are to— 

38 

(1) increase outreach activities to better connect patent filers and 

innovators with the Patent and Trademark Office; 

(2) enhance patent examiner retention; 

(3) improve recruitment of patent examiners; and 

(4) decrease the number of patent applications waiting for examination and 

improve the quality of patent examination. 

(c) REQUIRED CONSIDERATIONS.— 

(1) IN GENERAL.—In selecting the location of each satellite office to be established under subsection (a), the Director— 

(A) shall ensure geographic diversity among the offices, including by 

ensuring that such offices are established in different States and regions 

throughout the Nation; 

(B) may rely upon any previous evaluations by the Patent and Trademark Office of potential locales for satellite offices, including any evaluations prepared as part of the Office’s Nationwide Workforce Program that 

resulted in the 2010 selection of Detroit, Michigan, as the first ever satellite 

office of the Office. 

(2) OPEN SELECTION PROCESS.—Nothing in paragraph (1) shall constrain the 

Patent and Trademark Office to only consider its evaluations in selecting the 

Detroit, Michigan, satellite office. 

(d) REPORT TO CONGRESS.—Not later than the end of the first 3 fiscal years that 

begin after the date of the enactment of this Act, the Director shall submit a report 

to Congress on— 

(1) the rationale of the Director in selecting the location of any satellite office required under subsection (a); 

(2) the progress of the Director in establishing all such satellite offices; and 

(3) whether the operation of existing satellite offices is achieving the purposes required under subsection (b). 

SEC. 24. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS CONCERNS. 

Subject to available resources, the Director may establish in the Office a Patent 

Ombudsman Program. The duties of the Program’s staff shall include providing support and services relating to patent filings to small business concerns. 

SEC. 25. PRIORITY EXAMINATION FOR TECHNOLOGIES IMPORTANT TO AMERICAN COMPETITIVENESS. 

Section 2(b)(2) of title 35, United States Code, is amended— 

(1) in subparagraph (E), by striking ‘‘and’’ after the semicolon; 

(2) in subparagraph (F), by inserting ‘‘and’’ after the semicolon; and 

(3) by adding at the end the following: 

‘‘(G) may, subject to any conditions prescribed by the Director and at 

the request of the patent applicant, provide for prioritization of examination 

of applications for products, processes, or technologies that are important 

to the national economy or national competitiveness without recovering the 

aggregate extra cost of providing such prioritization, notwithstanding section 41 or any other provision of law;’’. 

SEC. 26. DESIGNATION OF DETROIT SATELLITE OFFICE. 

(a) DESIGNATION.—The satellite office of the United States Patent and Trademark Office to be located in Detroit, Michigan, shall be known and designated as 

the ‘‘Elijah J. McCoy United States Patent and Trademark Office’’. 

(b) REFERENCES.—Any reference in a law, map, regulation, document, paper, or 

other record of the United States to the satellite office of the United States Patent 

and Trademark Office to be located in Detroit, Michigan, referred to in subsection 

(a) shall be deemed to be a reference to the ‘‘Elijah J. McCoy United States Patent 

and Trademark Office’’. 

SEC. 27. EFFECTIVE DATE. 

Except as otherwise provided in this Act, the provisions of this Act shall take 

effect 1 year after the date of the enactment of this Act and shall apply to any patent issued on or after that effective date. 

SEC. 28. BUDGETARY EFFECTS. 

The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled ‘‘Budgetary Effects of PAYGO Legislation’’ for this Act, submitted for 

printing in the Congressional Record by the Chairman of the House Budget ComVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6621 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
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mittee, provided that such statement has been submitted prior to the vote on passage. 

Æ 

Mr. WATT. Thank you, Mr. Chairman. 

And at the outset, I am going to ask the Chairman for a little 

indulgence today to give a slightly longer statement than I usually 

do. 

As late as yesterday afternoon, I had hoped to start this opening 

statement by proudly proclaiming that I was one of the many cosponsors of a broadly bipartisan, widely supported patent reform 

bill, which, while perhaps not perfected to the point of deserving 

final passage, the legislative counterpart to receiving an A rating 

on a first patent application review, would surely lead us ultimately to the long-awaited patent reform promised land. 

I had hoped that making that broad-based bipartisan start would 

put us well on the way to our inter partes dispute resolution process with the Senate and ultimately to the President of the United 

States granting our patent. I mean, signing our legislation into 

law. 

Unfortunately, we are not there yet. So I need to begin this opening statement at a much more basic place, with reminders of where 

this all starts and why it is so important. 

I start with the Constitution. The Constitution gives Congress 

the power to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive 

right to their respective writings and discoveries. 

The objective of the Patent Act is to implement this constitutional authority by encouraging, supporting, and rewarding the ingenuity of our inventors by providing them exclusionary rights to 

their creation for a period of 20 years. In exchange, the inventor 

discloses to the public the details of his or her invention, setting 

off a ripple effect of further creativity and development. 

This simple concept embedded in our Constitution—congressional 

promotion of innovation—finds itself in yet another term of Congress in search of a modern-day viable patent reform bill. Today, 

Chairman Smith introduced the America Invents Act to begin that 

process. I applaud him for his efforts. 

And while I am encouraged by discussions with Chairmen Smith 

and Goodlatte and other Members of this Subcommittee, and the 

full Committee, to borrow a phrase from one of our earlier hearings, there is still work ahead of us to get comprehensive reform 

‘‘across the finish line.’’ 

During the past debates on comprehensive patent reform, I don’t 

need to tell most people in this room there have been numerous 

declarations to the effect that ‘‘the time is now for true patent reform.’’ And yet the finish line has proven elusive, and reform efforts have dissipated or certainly failed to cross the finish line. 

But we now have a unique opportunity to accomplish that goal 

and get across the finish line. Past debates have provided a solid 

foundation for optimism. Chairman Smith, Chairman Goodlatte, 

Mr. Conyers, Mr. Coble, Mr. Berman, and many other Members of 

40 

this Committee, past and present, have cosponsored bills over the 

years aimed at transforming our patent system into an efficient 

forum for America’s inventors. 

Their steadfast leadership has no doubt contributed to the widespread recognition of the importance of the patent system to our 

economy, job creation, and prominence in intellectual property advancement in the world. 

Today, we find all three branches of Government taking an active interest and energetic role in modernizing the patent system. 

Both the Supreme Court and the Federal Circuit have taken on 

and resolved many of the litigation-related issues that animated 

earlier calls for legislative relief. 

President Obama has made patent reform, along with education 

and intellectual property protection and enforcement activities, the 

centerpieces of his innovation agenda. Director Kappos has played 

a vital role in that agenda, convening special sessions with key 

stakeholders to mediate some of the competing concerns. 

The Senate has passed a bill, and we have initiated the process 

of establishing a robust statutory framework that will stimulate innovation and growth, provide adequate safeguards against abuses, 

and shore up the PTO to meet its crucial responsibilities. 

The question each participant in this process should now be asking is, ‘‘Will I allow all that hard work and momentum to dissipate 

because I don’t get exactly what I want on every issue that impacts 

me?’’ If your personal answer to that question is yes, let me say unequivocally that I think you are in the wrong place. 

The bill introduced by Chairman Smith definitively provides the 

resources the PTO earns and deserves by permanently ending the 

practice of fee diversion and by guaranteeing to the PTO access to 

all the user-generated fees it collects. This provision has universal 

support, and I thank the Chairman for accepting some language 

that we offered to ensure compliance with new House CUTGO 

rules. This provision will go a long way toward helping the PTO 

to stabilize and eventually eliminate its 700,000 backlog of applications. 

Other provisions in the America Invents Act and some that have 

not been included I believe require further examination and, at this 

juncture, have less than universal support. But despite the appearance that may be projected by the failure to have a broad bipartisan bill at this point, these divisions are not partisan. I repeat, 

they are not partisan. 

Rather, they consist of legitimate substantive differences and approaches based on a variety of factors. For example, conversion 

from a first-to-invent to a first-to-file system has been portrayed by 

some as necessary to harmonize U.S. practice with the international community. Others argue that true harmonization and, indeed, balancing the interest of first filers, who may not actually be 

first inventors, with real first inventors, who may not be first filers, 

requires that expansion of prior use rights comparable to that employed by the rest of the patent-issuing countries, with some exceptions, still needs to be implemented. 

Still others have expressed the view that prior user rights have 

no place in our country that has a public university system unlike 

any other that engages in valuable public-private collaborative reVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
41 

search and development. Patent law currently affords first inventors a 1-year grace period during which an inventor can disclose, 

publish, or use his invention without fear of forfeiting his right to 

a patent, provided he applies before the expiration of the grace period. 

The grace period is uncommon in the rest of the world and yet 

has become an integral part of the PTO patenting process and is 

coveted by most innovators. How the grace period will operate in 

a first-to-file system, i.e., whether the duration of the grace period 

should be adjusted upward or downward, is a legitimate, substantive question. 

Finally, what mechanisms are necessary to afford effective and 

affordable post grant review procedures? Under current law, there 

are two tracks available to challenge a patent after it has been 

issued, each with its own limitations. Is a third track similar to the 

post grant reviews in other countries a necessary tool, or will it pile 

onto the already overburdened, understaffed PTO or add further 

unwarranted delays to getting final court determinations? 

Again, I believe these are not frivolous questions. Many of these 

issues have been central to the debate in past Congresses, and yet 

we have already seen that a sea change in the judicial approach 

to patent law dispense with the need for the litigation-related reform proposals of old. 

We should not allow this debate to become a missed opportunity 

to effectuate genuine, long-lasting, effective reform of what most 

consider an antiquated system by holding onto our selfish, sometimes myopic views and refusing to compromise. 

Over the past few decades, our economy has shifted from a manufacturing economy to one rooted in intellectual property rights. It 

is extremely important that our patent system continue to 

incentivize ideas and protect engines of growth. Innovation will no 

doubt continue despite a sluggish patent system, as evidenced by 

the ongoing backlog and intake of applications. 

But I believe we need to get this right. Unless we are prepared 

to relinquish our positions at the forefront of innovation, invention, 

and ingenuity, we must produce a bill that at a minimum exceeds 

even the best components of patent systems around the world. 

I believe this Subcommittee, with an infusion of new blood on 

both sides of the aisle and the invaluable experience of our veterans, stands ready to negotiate a bipartisan product that we can 

all be proud of, one that embodies core features that will produce 

quality patents, efficient procedures, effective reviews, affordable 

processes, and safeguards against abuse and harassment. 

In closing, Mr. Chairman, a little anecdote. In my district, I engage in a project called Trading Places. Maybe some of you are 

more familiar with the television show Undercover Boss. Both operate on the premise that you can acquire a deep appreciation of the 

other guy when you are required to experience life in his perspective. 

If there is one important lesson that has been reinforced for me 

throughout my time in Congress is that progress requires compromise, simple give and take on everyone’s views. In the practice 

of law, we always said that the definition of a good compromise 

was one that made all parties unhappy. 

42 

So I would encourage all of the stakeholders involved to optimize 

the results of this process by concentrating their efforts on the genuine, universal changes essential to making the patent process 

work for everybody. The alternative is, in the words of Yogi Berra, 

‘‘deja vu all over again.’’ 

I thank the Chairman for his indulgence and yield back. 

Mr. GOODLATTE. I thank the gentleman. 

The Chair now recognizes the Chairman of the Judiciary Committee and the sponsor of this legislation, the gentleman from 

Texas, Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

And also, Mr. Chairman, I appreciated your opening statement 

and also appreciated Mr. Watt’s opening remarks as well. While 

lengthy, he raised a number of good points, and I would only add 

to Mr. Watt’s comment or his definition of compromise is that 

maybe we can come up with a compromise plus. Rather than making everybody equally unhappy, maybe we can make everybody just 

a little bit happy and come up with a good product in the end. 

Mr. Chairman, the foresight of the Founders in creating an intellectual property system in the Constitution demonstrates their understanding of how patent rights ultimately benefit the American 

people. Technological innovation derived from our intellectual property is linked to three-quarters of America’s economic growth, and 

American IP industries now account for over half of all U.S. exports. These industries also provide millions of Americans with 

well-paying jobs. 

Our patent laws, which provide a time-limited monopoly to inventors in exchange for their creative talents, perpetuate this prosperity. The last major patent reform was nearly 60 years ago. Since 

then, American inventors have helped to put a man on the Moon, 

developed cell phones, and created the Internet. 

But we cannot protect the technologies of today with the tools of 

the past. The current patent system is outdated and bogged down 

by frivolous lawsuits and uncertainty regarding patent ownership. 

Frivolous lawsuits that typically cost $5 million to defend prevent 

legitimate inventors and industrious companies from creating 

amazing products and generating high-paying jobs. 

We must work with the Senate to enact a bill that enhances patent quality, discourages frivolous litigation, harmonizes international patent principles, and enforces core rights. The major 

problem plaguing the patent system is the lack of resources available to the PTO. The bill allows the director to adjust the fee 

schedule with appropriate congressional oversight and authorizes 

the agency to keep all the revenue it raises. 

This will enable PTO to become more efficient and productive. 

Patent quality will improve on the front end, which will reduce litigation on the back end. 

And while we are pleased with the Senate’s action, the Senate 

bill doesn’t make inter partes re-examination as user friendly as it 

might be. Every industry affected by patents, including finance, 

automotive, manufacturing, high tech, and pharmaceuticals, will 

benefit from these reforms. 

The purpose of today’s hearing is to identify common ground and 

establish priorities. For example, given the political context in 

43 

which we must legislate, I think we have been very fair to high 

tech. Also, the bill doesn’t address many litigation reform issues because the courts are handing down decisions on damages, venue, 

and other subjects. 

And we lengthened the filing deadlines for post grant opposition 

and inter partes re-exam, lowered the threshold trigger for inter 

partes, and enhanced prior user rights in response to tech request. 

Also, the bill includes a clear exclusion for the university community to prior user rights and a Bayh-Dole provision that allows universities to keep a greater share of their patent licensing revenue. 

It is a good deal for many in the university community. 

However, it disappoints me that some stakeholders are only concentrating on what they don’t have. Ultimately, this patent reform 

must strike a delicate balance. There is a reason why patent reform bills have not been enacted over the last four Congresses. It 

is impossible for any one group to get everything that they want. 

This bill represents a fair compromise and creates a better patent system than exists today for inventors in our innovative industries. All of us should maintain a broader perspective if we want 

to enact a bipartisan, bicameral bill, and we must keep our common goal in mind. 

Better patents increase productivity and lead to economic prosperity. A modernized patent system will rev the engine of American 

competitiveness, put inventors and innovators in gear, and drive 

economic growth and job creation. 

Thank you, Mr. Chairman. Yield back. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

We are improvising as we move along here. As we announced 

earlier, the Committee is going to stand in recess for the briefing 

on Libya by some of our country’s leaders. 

However, I have just learned that Mr. Kappos has to be leaving 

the country shortly. So what I would like to do is I will stay, and 

anyone is invited to stay as well, to hear his testimony. 

And then we will recess, and we will submit any questions we 

have in writing to you. When we return, we will begin with the second panel. 

So, briefly, I will introduce the Honorable David J. Kappos, the 

Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office. In this role, 

he advises the President, the Secretary of Commerce, and the Administration on intellectual property matters. 

Before joining the PTO, Mr. Kappos led the intellectual property 

law department at IBM. He has served on the Board of Directors 

of the American Intellectual Property Law Association, the Intellectual Property Owners Association, and the International Intellectual Property Society. He has held various other leadership positions in intellectual property law associations in Asia and the 

United States and has spoken on intellectual property topics 

around the world. 

Mr. Kappos received his Bachelor of Science degree in electrical 

and computer engineering from the University of California-Davis 

in 1983 and his law degree from the University of California at 

Berkeley in 1990. 

Welcome, Mr. Kappos. 

44 

Mr. SENSENBRENNER. Mr. Chairman? If the Chairman will yield 

for a bit? Is Mr. Kappos going to be able to answer questions after 

his testimony, or is he just going to split? 

Mr. GOODLATTE. He is going to have to leave, and we are going 

to submit questions to him in writing, which we will ask him to 

answer promptly. 

Mr. SENSENBRENNER. Well, I hope he comes back because that is 

not acceptable. 

Mr. GOODLATTE. I thank the gentleman. 

Mr. Kappos, welcome. 

TESTIMONY OF THE HONORABLE DAVID J. KAPPOS, UNDER 

SECRETARY OF COMMERCE FOR INTELLECTUAL PROPERTY 

AND DIRECTOR, THE UNITED STATES PATENT AND TRADEMARK OFFICE 

Mr. KAPPOS. Well, thank you, Chairman Goodlatte, Ranking 

Member Watt, and Chairman Smith, Members of the Subcommittee. Thank you for this opportunity to discuss the Department of Commerce’s and the USPTO’S views on patent reform 

today. 

Mr. Chairman, we commend you and your colleagues for introducing H.R. 1249. Reforming our patent system will support and 

encourage innovation that improves American competitiveness, economic prosperity, and job growth. It is past due. 

We believe that enactment of the legislation now under consideration will significantly improve our patent processes, reduce litigation uncertainties and costs, and increase the value of patent rights 

for American innovators. 

There are several critical proposals under consideration. We view 

the proposed transition to a first-inventor-to-file system as an essential feature of any final bill. The transition will simplify the 

process of acquiring rights while maintaining a 1-year grace period 

that protects innovators. It will reduce legal costs, improve fairness, objectivity, and transparency, and support U.S. innovators 

doing business abroad. 

Some contend that the proposed transition will only benefit large 

patent owners to the disadvantage of independent inventors. This 

fear is unfounded and inconsistent with the facts. 

In the past 7 years of over three million patent applications filed 

in the USPTO, only 25 patents were granted to small entities that 

were the second inventor to file but were able to prove they were 

first to invent. And of those 25, only one patent was granted to an 

independent inventor. 

Thus, in the last 7 years, only one independent inventor’s filing 

would have received a different outcome under the first-inventorto-file system. That is 1 in 3 million. 

Further, the cost of proving who is a first to invent under the 

current system is prohibitive. It costs an average of $400,000 to 

$500,000 in legal fees to engage in interference proceedings. Most 

independent inventors simply do not have the resources for these 

proceedings. 

Mr. Chairman, the facts demonstrate that the current system actually favors those with deep pockets and works to the disadvantage of small companies and independent inventors with limited reVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6601 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
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sources. The new first-to-file system will instead benefit small entity filers by giving them a transparent, objective, simple system 

with no hidden traps or costs. 

With respect to funding, we are pleased that the proposed legislation includes authority for the USPTO to establish and adjust its 

fees. Fee-setting authority would be accompanied by strong oversight and input from our advisory committees, by stakeholders, and 

by Congress, in addition to the oversight we receive from OMB and 

from the Department of Commerce. 

Fee-setting authority, coupled with full availability of fee collections through a revolving fund, will permit the USPTO to achieve 

a stable funding model that supports long-term improvements in 

operations. 

Mr. Chairman, we also support establishment of a new post 

grant review proceeding and the retooling of our existing post grant 

re-examination procedure. These review proceedings will minimize 

costs and increase certainty by offering efficient alternatives to litigation as a means of reviewing questions of patent validity. Several 

factors provided in this legislation will ensure manageable implementation, including the delayed effective dates, the authority to 

set fees and issue administrative and procedural regulations, and 

the authority to impose limits on the number of reviews during the 

first 4 years. 

Also, we are confident that the provisions will prevent delay and 

abusive challenges while enabling challenges based on meritorious 

grounds. 

Mr. Chairman, as a quality-focused measure, we support provisions that increase the opportunity for third parties to submit relevant prior art after publication and before examination. We are 

pleased to see that the legislative process has refocused to specifically address patent quality and patent operations improvements 

that can be implemented by the USPTO. 

In light of recent court decisions relating to damages assessments, willfulness, and venue considerations, we support removal 

of related provisions in patent reform legislation. The House bill 

would also expand current prior user defense to all areas of technology and includes an exemption when this defense is raised in 

litigation against a university. 

Expanding the prior user defense is pro-manufacturer, pro-small 

business, and on balance, good policy. But I am aware of university 

community concerns and would like to help address them. 

Mr. Chairman, again, we commend you for introducing H.R. 

1249. We look forward to working with you toward enactment of 

patent reform legislation that supports America’s innovators and 

spurs economic growth and job creation. 

Thank you. 

[The prepared statement of Mr. Kappos follows:] 

46 


Kappos-1.eps
47 


Kappos-2.eps
48 


Kappos-3.eps
49 


Kappos-4.eps
50 

Mr. GOODLATTE. Thank you, Mr. Kappos. 

The Ranking Member and I have consulted. And in order to accommodate the concerns of the Chairman emeritus, I am going to 

ask him to take the Chair and ask the questions that he would like 

to ask. And then ask him to recognize the gentlewoman from California, Ms. Lofgren, who will ask some questions. 

I believe that will just about use up your time and keep you on 

schedule, and the rest of us will submit our questions in writing. 

We may want to defer to the Chairman of the Committee as well. 

Mr. SENSENBRENNER [presiding]. Well, I thank the Chair of the 

Subcommittee for this minor modification of what is not acceptable. 

This is a pretty important bill. And simply to have Mr. Kappos 

here and answer questions from two or three Members of the Subcommittee and not have another shot at you, you know, I think 

gets this bill off to a very, very wrong foot. 

And it is my hope that we do a little bit better job in terms of 

scheduling things so that we can get the issues on the table, which, 

in my opinion, is a necessary precondition in order to get the support to pass this bill. 

Now, Mr. Kappos, I have got a big concern about prior user 

rights and the changes this bill proposes and which apparently the 

Administration supports. During my tenure as Chairman of both 

the Science and Judiciary Committees, I have learned firsthand the 

importance of publication and disclosure in the patent law. 

And in 2007, I coauthored with Ms. Baldwin an amendment on 

the House floor to remove the prior user rights expansion from the 

patent reform bill then under consideration, and now it is back on 

the table. I fear that expanding prior user rights will harm inventors who share their knowledge and discovery and reward those 

who choose to stay silent, keep innovation secret, and don’t contribute to the products of science. 

Now the Obama administration has given an indication of support for section 4 of the America COMPETES Act, which significantly increases prior user rights, which goes directly opposite to 

the amendment that Ms. Baldwin and I offered. And that effectively puts trade secrecy in the patent law with a powerful incentive—a royalty-free statutory license. 

Section 4 also confers its benefits outside the United States. So, 

for example, can the Chinese simply raise a prior user rights defense against a patent infringement claim, and how does that help 

America compete? 

Mr. KAPPOS. Well, thank you very much, Representative Sensenbrenner. Thank you for giving me an opportunity to respond on 

prior user rights. 

So, first of all, I want to point out there is no Administration position on prior user rights yet, with the bill just having been introduced. 

Mr. SENSENBRENNER. When will there be because this is not a 

new issue to be debated? 

Mr. KAPPOS. Well, now that the bill is introduced, we will be putting together a position here as quickly as possible. I would offer 

a few observations of my own, if that is okay? And those include, 

number one, that we are very concerned about university concerns 

51 

and university issues. We are listening to the universities and 

want to continue to work with them. 

We want to have a prior user rights provision that meets the 

needs of America’s important university community. So we stand 

very much with you on that point. 

I believe there are, however, many incentives to file patent applications in front of the USPTO. We will receive more than 500,000 

patent applications this year. And so, I do not view a prior user 

provision as being in conflict with all of the good reasons to file 

patent applications and with the disclosure incentive of the patent 

system. 

I also think that prior user rights have the advantage of being 

very pro-American manufacturing. Currently, there is actually an 

incentive for American businesses to locate their factories overseas, 

whether it be China or any other country. And the reason is because all of those other countries have prior user rights. 

And that means that if a patent is registered, if a patent is enforced in that country, it cannot be used against your manufacturing if your manufacturing facility qualifies for the prior user 

rights in those countries. The U.S., not having a prior user rights 

system, is at a comparative disadvantage with those other countries, and the message that we are sending to our manufacturers, 

especially small manufacturers, is that you are in jeopardy. 

Even if you set up a manufacturing plant in this country and 

have it running for several years, you are in jeopardy of being attacked with a patent that is potentially filed much later than your 

manufacturing. And so, you can avoid that dilemma by locating 

your factory overseas. I would like to see that competitive advantage—— 

Mr. SENSENBRENNER. Well, I strongly disagree with you. I think 

that the prior user rights expansion is going to end up giving 

China a ‘‘get out of jail free’’ card. And I have spent a good part 

of the last 15 years yelling about Chinese piracy of intellectual 

property rights, and I am afraid that we are just legalizing that 

with the prior user rights expansion that is contained in the draft 

bill, and this very well could be a poison pill. 

Now the other point that I want to make is I think that it would 

be very wise to separate out the ban on fee diversion so that can 

be passed independently of the base patent bill, which I think is 

going to become very controversial. I think everybody here agrees 

that getting rid of the fee diversion is a step in the right direction. 

And there might be those that want to use that as a way to boost 

a bad bill to the goal line. I think that the thing to do is to free 

the fee diversion and let it be passed and signed, and then let the 

rest of the bill sink or swim. 

My time is up. The gentlewoman from California, Ms. Lofgren? 

Ms. LOFGREN. Thank you, Mr. Sensenbrenner. 

And I agree that it would be terrific to have more time to discuss 

this with the director. I would like to say that this is the first time 

I have walked in on a patent hearing when we had to have an 

overflow room. So that was exciting. 

You know, I have a number of questions. First, on the re-exam, 

inter partes re-exam. It is my understanding that from 1999 to the 

end of last year that the office issued decisions in the total of 221 

52 

re-exams. And that of those cases, 90 percent resulted in invalidation of at least one claim of the patent that was being challenged. 

Is that correct? 

Mr. KAPPOS. Right offhand, that sounds like it is correct. 

Ms. LOFGREN. So that would seem to say that in the overwhelming majority of these matters, the re-exams have some 

merit? 

Mr. KAPPOS. Yes. 

Ms. LOFGREN. And that allegations that the current system is 

being abused might be off the mark. Would you say that is correct? 

Mr. KAPPOS. I would agree with that. 

Ms. LOFGREN. Some have said that the current standard for initiation is too low. Now it seems to me that you should be able to require at least a prima facie showing of invalidity to move something forward. On the other hand, we don’t want you, as the director, to make the decision before everything has been made. What 

is your thought on that issue? 

Mr. KAPPOS. Right. Well, your statistics are, indeed, consistent 

with what we are seeing continuing into this year. We have processed now hundreds of inter partes re-examinations, and what we 

are finding is that our rate of what is called ‘‘false positives,’’ or 

cases that get over the SNQ threshold, is relatively low. 

Now that is new factual information that we have over the last 

few years that puts us in a position to be comfortable with the SNQ 

standard, both because we have become successful at implementing 

it, and because we have shown statistically that we don’t have a 

high level of these false positives. 

We also are cognizant, though, of the higher standard that has 

been proposed on the Senate side of a reasonable likelihood, and 

that standard does have an advantage built into it of enabling us 

to filter out more cases at the threshold and compress our 

timescale. 

Ms. LOFGREN. Well, it might be easier on the office, but it is 

going to be harder on the system, and we will see more matters 

litigated at more expense to the American economy. It might be 

better to give you the resources to deal with it, wouldn’t you say? 

Mr. KAPPOS. Right. That is a fair point. My view is that, on balance, it is more costly to our economy to have false negatives. 

Ms. LOFGREN. Right. 

Mr. KAPPOS. Those are cases where we should be taking a substantive look at the patent, but we didn’t because the threshold 

was set too high. 

Ms. LOFGREN. Right. Well, and right now, I mean, there is significant disincentive to bring an action because in the litigation, 

anything that could have been raised can’t be used. And therefore, 

I am assuming, just you have got 90 percent there is a problem, 

and yet this major disincentive to even using the system. That if 

we were to make this more accessible and give your office the resources to deal with it, that we would divert a lot of matters that 

could be dealt with successfully in this process. Wouldn’t you say 

that is true? 

Mr. KAPPOS. Well, that is right. If I can say that in my own 

words also, that I believe there are significant advantages for patentees who successfully go through the post grant system—in this 

53 

case, inter partes review—because of those estoppel provisions. 

Those estoppel provisions mean that your patent is largely unchallengeable again by the same party. 

Ms. LOFGREN. Right. 

Mr. KAPPOS. And so, there is a tremendous disincentive already 

built in against bringing frivolous inter parte—— 

Ms. LOFGREN. I am going to interrupt because I am almost out 

of time, and I want to ask you just one final question. The engineers have talked to me about third-party submission of prior art. 

A lot of them think that may be the most important part of this 

bill. It is an open-sourcing patent information. 

But it looks like there is evidence that patent examiners already 

ignore a lot of information except what they find through their own 

search. If we have third-party submission of prior art that is vigorous and reenergized, how are you going to get your examiners to 

actually accept that information, take it seriously, and utilize it in 

a way that would optimize the submissions? 

Mr. KAPPOS. Right. Well, that is a question of training, coaching, 

and incentives, and we are engaged in those very processes because 

we want our examiners to use the best art, no matter whether it 

is art they found or whether it is art that came in from some other 

source. 

We have found, however, in the pilot that we are currently running on this third-party review system that the examiners really 

enjoy using it and that they are using the prior art that is coming 

in. So it may be that having this commentary and additional help 

from third parties that they are getting through the pilot gives examiners that kind of—— 

Ms. LOFGREN. My time is off, and maybe you could send us some 

more information on that pilot after the hearing? I would be very 

interested. 

And I thank you, Mr. Chairman. 

Mr. SENSENBRENNER. The gentleman from Texas, the Chairman 

of the Committee, Mr. Smith is recognized for 5 minutes. 

Mr. SMITH. Thank you, Mr. Chairman. 

Director Kappos, thank you for being here and also thank you for 

your good work at the PTO. It is appreciated by everybody who 

knows what you do. 

I have two short questions. And if you could give me brief responses, I am going to yield the balance of my time to the gentleman from North Carolina, Mr. Watt. And then we will be able 

to get you to the airport on time. 

First question is this. How do independent inventors and the 

smaller entities benefit specifically from this bill? The independent 

inventors and the smaller entities, how do they benefit specifically 

from this bill? 

You talked in general terms. I just wondered if you could go into 

more detail? 

Mr. KAPPOS. Sure. Yes, I would be happy to mention that. 

Well, first and foremost—well, first anyway, independent inventors and small entities will benefit, micro entities will benefit from 

a new 75 percent discount on the fees that they pay. Secondly, 

independent inventors and small entities will benefit from the 

USPTO then being able to extend, or the legislation now extending, 

54 

50 percent discounts to new areas that we are implementing like 

our Track I examination system, which will provide 3-month turnaround to first office action and 1 year to completion of a patent 

application, which is something that the independent inventor and 

small entity community has been asking us for repeatedly. 

We applaud the introduction in this legislation of a 50 percent 

discount. This gives USPTO the ability to give those kinds of discounts when we put in place new helpful measures for that community in the future. 

Mr. SMITH. Okay. And second question is why should we give the 

PTO authority to set the patent fees? 

Mr. KAPPOS. Well, you know, the processes of innovation are 

moving so fast, and the different ways that the innovation community is using our services are changing so fast that we need, at the 

USPTO, the ability to adjust our fees to keep up with what is going 

on. 

Our cost to implement the various services that we perform 

change over time and sometimes change rather rapidly. The 

amount of demand for services changes, which requires us to put 

new infrastructure in place. All of that reflects itself in for us the 

cost of doing business, the cost of providing services. 

And if we had the ability to adjust our fees, we would be able 

to meet the timeframes of the American innovation community 

and—— 

Mr. SMITH. The end result is better patents more quickly approved, I suspect. Okay. 

Thank you. I will yield the balance of my time to Mr. Watt. 

Mr. WATT. I think I have agreed to submit my questions in writing in the interest of Mr. Kappos’s time. I understand, you know, 

he was the first witness. We had to recess for votes, and so he has 

got time problems. So I am content with that. 

I will yield back, Mr. Chairman. 

Mr. SENSENBRENNER. The classified briefing is supposed to end 

at 3:30 p.m., but usually they don’t. So with that in mind, the 

Chair is going to recess the Committee, subject to the call of the 

Chair for the second panel. 

Bon voyage and safe travels, Mr. Kappos. And without objection, 

the Committee is recessed, subject to the call of the Chair. 

[Recess.] 

Mr. GOODLATTE [presiding]. Take three. We have a very distinguished second panel of witnesses today, and each of the witnesses’ 

written statements will be entered into the record in its entirety. 

I ask that each witness summarize his testimony in 5 minutes 

or less. To help you stay within that time, there is a timing light 

on your table. When the light switches from green to yellow, you 

will have 1 minute to conclude your testimony. When the light 

turns red, it signals that the witness’s 5 minutes have expired. 

Before I introduce our first witness, I would like all of them to 

stand and be sworn. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you, and be seated. 

Our first witness is the Honorable Steve Bartlett. He will be testifying on behalf of the Financial Services Roundtable in his capacVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00058 Fmt 6633 Sfmt 6601 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
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ity as president and CEO. The roundtable is comprised of 100 integrated financial services companies in the United States. 

Mr. Bartlett has also served as a member of the Dallas City 

Council, a Member of Congress, and the Mayor of Dallas. He founded Meridian Products Corporation, a manufacturer of injectionmolded plastics in 1976, divesting his interest in 1999. 

Mr. Bartlett is a graduate of the University of Texas at Austin, 

later serving as adjunct professor at the LBJ School of Public Affairs. 

Our next witness is Steven Miller, Procter & Gamble’s vice president and general counsel for intellectual property. He has worked 

in a variety of positions for P&G since joining the company in 1984. 

Mr. Miller has authored numerous P&G patents and patent applications and has participated in interferences, arbitrations, and 

litigation in the United States and abroad. He is a member of 

many intellectual property organizations and bar groups. Mr. Miller received his undergraduate and law degrees from the Ohio 

State University. 

Our next witness is Mark Chandler, senior vice president, general counsel, and secretary for Cisco. He joined Cisco in 1996 after 

the company acquired StrataCom, where he served as general 

counsel. Earlier in his career, Mr. Chandler was vice president for 

corporate development and general counsel for Maxtor Corporation. 

Mr. Chandler was educated at Harvard and Stanford School of 

Law. 

Our final witness is John Vaughn, executive vice president of the 

Association of American Universities, whose membership includes 

60 U.S. and 2 Canadian universities with strong programs of research and graduate and professional education. Dr. Vaughn has 

responsibility for association activities in the area of intellectual 

property, information technology, research libraries, and scholarly 

communication. 

Dr. Vaughn received his undergraduate degree from Eastern 

Washington State College and his Doctorate in Experimental Psychology from Minnesota. He was also awarded an NIH Post Doctoral Traineeship and served as a post doctoral fellow at Duke. 

And I would now like to yield to the gentleman from Ohio, Mr. 

Chabot, who would like to also say something about the witness 

from Ohio. 

Mr. CHABOT. Thank you very much, Mr. Chairman. 

I would like to expound upon the great words that the Chairman 

already expressed relative to Mr. Miller. It is definitely a great 

honor to introduce one of the witnesses, Steve Miller. 

He is here as vice president and general counsel of intellectual 

property for the Procter & Gamble Company, P&G, which is 

headquartered in Cincinnati, Ohio. And Procter & Gamble has an 

outstanding record, both locally and globally. Two small businessmen, William Procter and James Gamble, founded this company in 

Cincinnati all the way back in 1837 to sell candles and soap. 

Today, the company has grown to include 23 different brand 

names, with over $1 billion in annual sales in each. 

Procter & Gamble employs 35,000 people throughout the United States, paying $4 billion in domestic wages annually. Additionally, 

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poration, donating approximately $100 million to charitable organizations every year. 

Steve Miller has had a successful career as in-house counsel with 

P&G for over 25 years. He is now vice president and general counsel on intellectual property, where he oversees approximately 150 

patent and trademark attorneys worldwide and advises P&G’s senior management on IP issues. 

Mr. Miller has also authored numerous P&G patents and patent 

applications and has also been involved in a number of license 

agreements, acquisitions, interferences, arbitrations, and litigation 

both in the U.S. and abroad. 

Mr. Miller is also the current president of the Intellectual Property Owners Association Education Foundation, on the Board of Directors and past president of the Intellectual Property Association, 

and on the Board of Directors for the National Inventors Hall of 

Fame. 

I know we look forward to learning more as we hear from Mr. 

Miller on patent reform this afternoon and the other witnesses as 

well. 

And I thank the Chairman greatly for yielding. 

Mr. GOODLATTE. I thank the gentleman. 

Welcome to all of our witnesses, and we will begin with Mr. Bartlett. 

TESTIMONY OF THE HONORABLE STEVE BARTLETT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, THE FINANCIAL 

SERVICES ROUNDTABLE 

Mr. BARTLETT. Thank you, Mr. Chairman. 

Mr. Chairman, Ranking Member Watt, Mr. Coble, Mr. Chabot, 

it’s good to be here. 

This is a very important piece of legislation. It’s a legislation that 

in some ways is long overdue. I commend the Committee and the 

present draft, and we’re here—I’m here to support the present 

draft language of the House version in its current form. 

I’m here to speak on behalf of the Financial Services Roundtable, 

as you noted, Mr. Chairman. But I should note up front that the 

roundtable has worked closely with other groups—the American 

Bankers Association, the Clearing House, credit unions, the ICBA, 

the community bankers, NAFCU, SIFMA, and others—to address 

this problem of nonpracticing entities that we believe exploit flaws 

in the current patent system. 

My testimony today is consistent with the views of these other 

trades. These nonpracticing entities, Mr. Chairman, or NPEs, as 

they’re called, have built an industry based on filing onerous lawsuits involving low-quality business method patents with the expectation of securing large settlements. These are widely described as 

meritless lawsuits and settlements—and the settlements then help 

to distort the marketplace. 

Fundamental to the operation of the financial services sector is 

the interoperability of complex financial systems that facilitate the 

movement of data relating to every type of financial transaction. So 

it is this network of financial technology infrastructure that is so 

fundamental that it has been designated as a critical national infrastructure by the Department of Defense. 

57 

So given the importance of the financial services sector to the 

Nation’s economy and infrastructure, it’s important that the patent 

system work for everyone, and currently, it does not. 

So, instead, the confluence of interoperability, forum shopping, 

and a lack of quality prior art, particularly in the area of business 

method patents, has conspired to leave financial firms, from the 

smallest community banks or local credit union or insurance agent 

to the largest global company, mired in what we believe are 

meritless litigation over patents of dubious quality. This litigation 

has a direct impact on consumers, as capital that could otherwise 

be deployed for business lending in our communities is tied up with 

court costs and settlements. 

Historically, Mr. Chairman, business methods had not been patented in any significant quantity. This was profoundly changed in 

1998 by the State Street decision. So between 1997 and 1998, new 

applications for business method patents tripled and have tripled 

again. So by the end of 2009, some 11,000 new applications for patents on business methods were being filed each and every year, 

with 40,000 pending in 2010. 

According to a study by Harvard University, the proliferation of 

business method patents has resulted in a flood of patent litigation 

in the financial services industry, occurring at a rate of 39 times 

greater than the patents as a whole. Now, Mr. Chairman, other 

than NPEs, there’s no reasonable explanation for a 39 times greater rate of patent litigation in the financial services industry. 

These nonpracticing entities then are increasingly exploiting the 

current system to hold hostage entire classes of industry players in 

a single lawsuit, and thus, interoperability comes into play. Neither 

90—nearly 90 percent of infringement cases against the top 20 

banks, just as one data point, name multiple financial services 

companies as defendants, often including 20, 40, or even 60 institutions in a single action. 

Now business method patents are not bad, per se, but they do 

lend themselves to abuse, given the current system. I could cite a 

number of examples. You’ve probably heard multiple examples. 

One case, scores of banks and insurance companies were sued in 

the Eastern District of Texas for infringing on a business method 

patent related to marketing. The patents in this suit covered the 

printing of marketing materials at the bottom of the back of billing 

statements instead of on a separate statement stuffer. Now it’s difficult to see anything novel or nonobvious in where you print the 

statement information that would have merited a patent with a 20- 

year property right. 

The cost to all the sectors of the financial services industry and 

our customers continue to grow at an alarming rate. So, therefore, 

we support the House draft establishing an opposition proceeding 

at the PTO to review qualified business method patents against a 

best prior art. 

Under this draft legislation, the PTO would determine whether 

a patent is qualified, would undertake a review for a maximum of 

no more than 1 year, and then, critically, examine the patent 

against the best available prior art, including the evidence of prior 

use, sale, or offer for sale. 

58 

The House bill improves the language related to a stay also of 

district court litigation by requiring the Federal Circuit to review 

the decision of the lower court de novo. It’s our belief that this stay 

should be mandatory, but short of it being mandatory, this de novo 

language is essential to ensure that neither plaintiffs nor dependents—nor defendants bear the cost of parallel proceedings. 

Mr. Chairman, with this provision included, we support the draft 

bill before the Committee. We would, as an industry, strongly oppose any efforts to weaken it. 

I thank you, Mr. Chairman. 

[The prepared statement of Mr. Bartlett follows:] 

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Mr. GOODLATTE. I thank the gentleman. 

Mr. Miller, welcome. 

TESTIMONY OF STEVEN W. MILLER, VICE PRESIDENT AND 

GENERAL COUNSEL FOR INTELLECTUAL PROPERTY, PROCTER & GAMBLE COMPANY 

Mr. MILLER. Thank you, Mr. Chairman and Members of the Subcommittee. I thank you for the opportunity to—- 

Mr. GOODLATTE. Mr. Miller, you may want to turn on your microphone. 

Mr. MILLER. Sorry about that. 

Thank you, Mr. Chairman. I thank you for opportunity to testify 

on various aspects of patent law reform. 

Although I am active in a number of professional organizations, 

I’m appearing today in my capacity as vice president and general 

counsel for intellectual property for the Procter & Gamble Company and its affiliates. 

I’m a registered patent attorney with 26 years of patent law experience, including patent prosecution and litigation. I’ve negotiated with individual inventors, universities, startups, and companies of all sizes. 

An essential reform for significantly simplifying the patent laws 

is the first inventor to file principle that is included in H.R. 1249. 

The adoption of the first inventor to file principle would make patentability determinations more transparent, based on objective criteria using publicly available information. It will benefit all American inventors and improve their global competitiveness. 

H.R. 1249 would also make a number of other improvements in 

our patent law and the operation of the patent system. Curtailing 

the plague of false marking litigation, providing adequate funding 

for the USPTO, limiting the consequences of the subjective best 

mode requirement, expanding the opportunities for the public to 

submit relevant information to patent examiners, adding a robust 

time-limited opportunity to promptly challenge patents after grant, 

and providing for supplemental examination are among the many 

significant improvements H.R. 1249 would bring to our patent system. 

There are, however, some features of H.R. 1249 that move in the 

opposite direction. P&G is concerned that the delicate compromises 

reached by numerous stakeholders after years of negotiations may 

be upset by a handful of the new provisions in the bill. 

In particular, the following provisions are of such significance 

that they may cause stakeholders to withdraw the support for the 

bill. First is retaining their threshold for initiating reviews in second window proceedings. 

Under this threshold, 95 percent of all requests are granted, resulting in a waste of limited USPTO resources. A higher threshold, 

a reasonable likelihood that the petitioner would prevail with respect to at least one claim, is far preferable. 

Second is the addition of a new stay provision to both the first 

window and second window post grant procedures. Not only does 

listing such stay factors improperly constrain a court’s and the 

International Trade Commission’s freedom to decide the issue, it 

overly emphasizes the possibility that a stay should be granted. 

66 

P&G believes a stay should be granted only where it is clearly 

appropriate under existing case law as it evolves. Moreover, the 

ITC proceedings are designed to be expeditious and should not be 

stayed. 

Third are three new provisions that have been added to the transitional program related to financial business method patents. The 

transitional program is very controversial and was agreed among 

stakeholders only after extensive negotiations. These new provisions unduly limit venue where an action may be brought, mandate 

de novo interlocutory appeals, and impose a loser pays regime involving such patents. 

The injection of a controversial venue provision reintroduces a 

debate settled by the Federal Circuit. By also mandating de novo 

reviews of stayed decisions and introducing the highly charged 

issue of loser pays, H.R. 1249 could very well change what is at 

best reluctant acceptance of the transitional program into outright 

opposition. 

Fourth is the expansion of prior user rights to all inventions. 

P&G is concerned that the opposition among various stakeholders 

to expanding prior user rights could place in jeopardy the passage 

of comprehensive patent reform. 

Fifth is the change in time during which the new law issues post 

grant review procedure could be initiated. This procedure was conceived to allow patents to be promptly challenged after grant on 

any of the grounds of validity. This procedure should be as expeditious as possible. 

Notwithstanding a growing consensus that 9 months is more 

than adequate time, the bill would extend this period by an additional 3 months to a total of 12 months, adding further unnecessary delay and uncertainty. 

Thank you for the opportunity to present P&G’s views. I’d be 

pleased to answer any questions. 

[The prepared statement of Mr. Miller follows:] 

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Mr. GOODLATTE. Thank you, Mr. Miller. 

Mr. Chandler, welcome. 

TESTIMONY OF MARK CHANDLER, SENIOR VICE PRESIDENT, 

GENERAL COUNSEL, AND SECRETARY, CISCO SYSTEMS, INC. 

Mr. CHANDLER. Thank you, Chairman Goodlatte, Ranking Member Watt, Members of the Subcommittee. 


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I’m Mark Chandler, senior vice president and general counsel of 

Cisco Systems. 

I’m here representing technology companies with hundreds of 

thousands of employees in the United States and more than 75,000 

U.S. patents and patent applications. 

I’m here because I believe passionately that our patent system 

must not go astray in ways that will weaken our companies or 

weaken our country’s technology leadership. I have four specific 

suggestions to offer regarding the bill before you. I’ve also provided 

a written statement. I’m grateful that that’s being included in the 

record. 

My company is the world’s largest manufacturer of telecommunications equipment that powers the Internet, with over $40 billion 

in annual sales and more than 70,000 employees. Three-quarters 

of our engineers, more than half of all our employees are here in 

the United States. 

The Coalition for Patent Fairness, for whom I speak today, includes hundreds of members, such as Apple, Autodesk, Dell, 

Google, Intel, Micron, Oracle, RIM, SAP, and Symantec. Our companies invest tens of billions of dollars in research and development, and we believe in the patent system. 

We understand that the scope for action is limited, given the passage of S. 23. We also understand that this process is one of a combination of interests with diverse goals. We appreciate the work 

that Senator Leahy did in the Senate in driving toward patent legislation, though we were unable to support S. 23 in its final form. 

With the suggestions we make today, we hope to be supporters, 

rather than opponents, of legislation and to see a law enacted. 

Our four suggestions are as follows. First, hold your ground on 

the proposed prior user rights in conjunction with the move to a 

first-to-file system. Every developed country on Earth with a firstto-file system includes prior user rights. 

Among U.S. industrial groups, support for prior user rights is 

virtually uniform. The AIPLA has testified in favor of prior user 

rights, and Gary Griswold, who’s with us today, is chair of the 21st 

Century Patent Coalition, which sees many issues differently from 

the way we do, wrote an article entitled, ‘‘Prior User Rights: A Necessary Part of a First-to-File System.’’ Here is why. 

It’s not practical to file a patent application on every change we 

make to a product. Where we enhance our products in a way which 

is unlikely to be copied by a competitor because the change is specific to our designs, the traditional view is that a patent makes no 

sense. 

In the current first-to-invent system, no one else could get a patent that would be valid for those changes either. The patent would 

be invalid under 102(g). In a first-to-file system without prior user 

rights, however, we can expect patent mills and competitors here 

and abroad to file patent applications on unpatented inventions 

which they find in our products in order to hold us hostage, and 

there’s nothing we could do about it. This is just not fair. 

The alternative for us is to rush to massively increase our patent 

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tions against us in court. That would be a totally unproductive distraction of ours and the PTO’s resources. 

Director Kappos, in his written testimony, while supporting prior 

user rights, states there was no rush to increase filings in Canada 

after the switch to a first-to-file system. Of course, there wasn’t. 

For over a century, Canada has had a robust prior user rights system. Commend you to section 56 of the Canadian Patent Act in 

that regard. 

It would be a tragedy if, in a rush to harmonize with the European and Chinese systems in the wake of the TRIPS accords, we 

ignored key protections for manufacturers that virtually every 

other country has. 

We understand some groups oppose first-to-file in general. Absent prior user rights, we would join them. We believe the interests 

of universities are adequately met by exemptions for Bayh-Dole 

and other patents, which you thoughtfully included in the House 

legislation. So we strongly support what you’ve done in the legislation in that respect. 

Second, some changes are needed to the inter partes review proposals to mitigate aspects of the Senate bill particularly that are 

a step backward from current law. The extension of the time period 

from 6 months to 9 months after service of litigation for introducing an inter partes re-exam is laudable. But a better approach 

would be to tie the deadline to the Markman ruling so that the review could reflect the claims interpretation that the district court 

made. 

Also, if there isn’t a mandatory stay, which we would support, as 

does the Financial Services Roundtable, we think that in the four 

factor test in the bill, the reference to clear tactical advantage to 

the moving party as the basis for denying a stay should be removed. The patent holder’s interests are sufficiently addressed by 

the requirement that there be no undue burden. 

And also, initiation of a declaratory judgment action on matters 

unrelated to an inter partes re-exam should not make it impossible 

to introduce an exam. 

Our third suggestion is many stakeholders across the spectrum— 

and I believe you referred to this, Mr. Chairman—believe judicial 

action will obviate the need for the proposed supplemental review 

system for cases where patent applicants have been, shall we say, 

less than forthcoming with the Patent Office. We agree. 

Nonetheless, if there is to be such a system, we think minor 

modifications would immeasurably improve it, and I’m happy to 

elaborate on that. 

Fourth and finally, this bill presents an appropriate opportunity 

to coordinate better between the ITC and the courts. The bill 

should require the ITC to follow the Supreme Court’s eBay holding 

in determining whether to grant an exclusion order. 

With these changes, the bill would meet our minimum needs. It 

won’t meet all our aspirations. It will reflect what’s possible, given 

stakeholders with different interests and a patent system that desperately needs rejuvenation. 

Thank you. 

[The prepared statement of Mr. Chandler follows:] 

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Mr. GOODLATTE. Mr. Vaughn, welcome. 

TESTIMONY OF JOHN C. VAUGHN, EXECUTIVE VICE 

PRESIDENT, ASSOCIATION OF AMERICAN UNIVERSITIES 

Mr. VAUGHN. Chairman Goodlatte, Ranking Member Watt, Members of the Subcommittee, thank you for this opportunity to present 

the views of the university community on H.R. 1249. 

Let me begin by saying how much the university community appreciates the dedication that you and your Judiciary colleagues 

have devoted to this extremely important issue. After more than 6 

years, the collective effort is making great progress toward a balanced set of proposals that, indeed, will strengthen our present patent system to create jobs at home and strengthen our economic 

competitiveness abroad. 

Universities use the patent system to license our inventions to a 

wide range of private sector companies. In order for this university 

technology transfer system to work, we need a level of patent certainty that will allow our licensees to develop these discoveries in 

confidence. 

H.R. 1249 includes a number of key provisions that strengthen 

patent certainty. Among these are adoption of a first-inventor-tofile system, which will harmonize the U.S. patent system with that 

of our major trading partners; a new post grant opposition proceeding to challenge patents immediately after their issuance, 

eliminating patents that should not have been granted and 

strengthening those that survive the challenge; providing increased 

resources to the PTO through expanded fee-setting authority and 

provisions allowing the office to retain those fees that it collects; allowing third parties to submit prior art to the PTO concerning patents under examination. 

However, we have two major concerns with the draft bill. First, 

we are very concerned about the broad expansion of prior user 

rights. From its origins in the Constitution, the U.S. patent system 

has effectively promoted the progress of science and the useful arts 

by establishing a quid pro quo of granting monopoly rights for an 

invention in return for disclosure to the public of information about 

that invention. 

Universities believe that expanding prior user rights is an unwise expansion of immunity from the assertion of patent rights. 

Such expansion would reduce patent certainty, and that reduction 

in patent certainty would impair university technology transfer. 

We are also concerned about the impact of expanding prior user 

rights on academic publishing. While the effective grace period included in H.R. 1249 would encourage publication by protecting inventors from others patenting their inventions, expanding prior 

user rights would have exactly the opposite effect. 

Early publication would permit others to prepare a competing 

trade secret product that could be immune from a charge of infringement of a patented product or process emerging from that 

published research. 

We do acknowledge and appreciate the attempt to address university concerns by providing a legislative carve-out for university 

patents under which the prior use defense could not be applied to 

university patents arising from Federal or university funding. 

93 

While such a carve-out could mitigate the harmful impact on university licensing, clear problems would remain. 

Many companies to which universities license their patents intermingle university patents with their own in developing new products. The commercial prospects for those products would be at risk 

with the expansion of prior user rights since it would increase the 

vulnerability of nonexempt patents to a prior use defense by a competitor. 

This problem would be especially acute for the small, often 

undercapitalized startup companies to which universities frequently license their inventions. 

The second area which we believe needs to be addressed is the 

threshold by which an inter partes review can be initiated. The 

Senate bill, S. 23, includes two provisions that reduce the prospect 

of using the inter partes procedure to mount harassing serial challenges—first, by expanding the estoppel provisions to include 

issues that reasonably could have been raised and, second, by raising the threshold for initiating an inter partes review. 

The House bill reduces the threshold to the lower current law 

standard. We appreciate the retention in the House bill of the 

broadened estoppel language, but urge the Judiciary Committee to 

reinstate the higher threshold for initiating an inter partes review. 

Universities applaud the many strong provisions that are contained in H.R. 1249. We hope that we can work with the House Judiciary Committee and with relevant stakeholders to address the 

two concerns raised here so that the recent progress continues toward a successful completion of this extraordinarily important endeavor to enact comprehensive patent reform. 

[The prepared statement of Mr. Vaughn follows:] 

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Mr. GOODLATTE. Thank you, Mr. Vaughn. 

As everyone can observe, we have 4 minutes and 45 seconds, now 

36 seconds left in this vote. So the Committee will stand in recess, 


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and we will begin when we return with a brief opening statement, 

well into the hearing, from the Ranking Member of the full Committee and then immediately go into questions for the witnesses. 

If you all can remain, we appreciate your forbearance. 

The Committee will stand in recess. 

[Recess.] 

Mr. GOODLATTE [presiding]. The Committee will reconvene for 

take four, and we hope this is the last stretch here. 

We thank all of you for your patience all afternoon, and I will 

recognize myself for questions. 

When Ranking Member Conyers gets here, we will allow him to 

give his opening statement a little late into the program. But still 

welcome. 

Let me start with a question for you, Mr. Chandler. How would 

you address the concerns of those who argue that an overexpansion 

of inter partes would be used to harass independent inventors and 

small businesses? 

Mr. CHANDLER. I’m sensitive to that concern. I think it’s extremely important in the inter partes process to strike a balance 

between the need to ensure that there is a review process by which 

patents that shouldn’t have been granted are looked at and, at the 

same time, not create undue cost or burdens or delay for patent 

holders, whether independent inventors or otherwise, who have the 

right to enforce their patents against those who are infringing. 

And striking that balance is not easy, as we’ve seen in the process of putting this legislation together. I think there are several 

principles that are useful to keep in mind. 

First, in the case of litigation, we—there should be a time period 

within which an inter partes review is initiated so that one does 

not litigate for years, try to get to a conclusion, and then, all of a 

sudden, find oneself in another forum back at the Patent Office. 

It’s our view that while moving from 6 months to 9 months in 

the legislation that’s before you today was a move in the right direction, it’s conceptually better to tie it to the Markman exam because then you have the claims construction as part of the review. 

At the same time—— 

Mr. GOODLATTE. Is that in your testimony, when you said you 

had ideas for improving the supplemental exam provision in the 

bill, is that some other ideas you have there as well? 

Mr. CHANDLER. Yes, on supplemental exam, I understand the 

concerns you raise about the process as a whole, given judicial action. But right now, it says that if supplemental—you can’t use the 

results of a supplemental exam in pending litigation. We think that 

a supplemental exam procedure that also said you can’t use a supplemental exam to cure a problem if you’ve been actively pursuing 

nonexclusive licensees in a way that would allow the potential licensee to file a DJ against you, you shouldn’t be able to seek the 

supplemental exam in that case either. 

So that people don’t go out and start licensing programs to collect 

money on a patent where they know they weren’t forthcoming, and 

then only when they’re faced with litigation do they go in and cure 

the problem. But with that kind of modification, I think we could 

move forward with that supplemental exam. 

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Mr. GOODLATTE. Mr. Vaughn, can you speak to the universities’ 

perspective on the prior user rights provision that includes an absolute exemption for universities and technology transfer organizations? And what changes would you make? 

Mr. VAUGHN. Well, I—changes—there are some changes I think 

that could be made that—— 

Voice. Push your microphone button. 

Mr. VAUGHN [continuing]. Would improve it. But I think our 

broader concern is just the impact on the system overall, independent of a university carve-out. The concern we have about a 

carve-out is that it would not cover, say, privately funded university patents, and frequently, funding for research projects includes 

a mix of Federal, university, and private funds. 

We are also very concerned about the issue I mentioned of the 

intermingling of patents that would be exempt in a carve-out with 

patents in a product that wouldn’t be exempt. And particularly, the 

concern about the impact of expanded prior user rights on the 

startups that often emerge out of university research that wouldn’t 

be touched by in their own IP with—with a university carve-out. 

So I mean, I think I want to be clear that—— 

Mr. GOODLATTE. You are clear, and I need to get one more question in here with my time. 

Is the shift from first-to-invent to first inventor to file constitutional? And I will ask any of you this question. Is it true that our 

current filing system was created through the 1952 act and has not 

necessarily been the same since our Nation’s founding? 

Anybody want to take a stab at that? Mr. Miller? 

Mr. MILLER. I’ll be happy to, Mr. Chairman. 

The Constitution says that the Congress shall grant to inventors, 

and a first-inventor-to-file system also includes that that person is 

an inventor. They are an inventor of the technology, and so it 

would be within the Constitution. 

In fact, all of the studies that we’ve had since 1965 on haven’t 

questioned the constitutionality of a first inventor to file provision. 

So I don’t think that there’s a real issue here at all because it’s just 

a procedural mechanism as to determine who gets the rights as an 

inventor. 

Mr. GOODLATTE. Thank you. 

The gentleman from North Carolina, Mr. Watt, is recognized. 

Mr. WATT. Thank you, Mr. Chairman. 

Mr. Miller, I identified several issues that you and Mr. Bartlett 

and Mr. Chandler were at odds about, and I probably have forgotten some of them. But I do remember this whole stay provision was 

one of them. 

I just wanted to give you the opportunity to give us your perspective on it, and then I would ask Mr. Chandler and Mr. Bartlett to 

do the same and see if there is some way we can reconcile what 

the three of you all are saying. I am in the reconciliation business, 

as you have probably gathered by now. 

Mr. MILLER. Thank you, Mr. Watt. 

You know, I think we’re in the reconciliation business, too, and 

we’ve done a lot to try to get there. My concerns are by both lowering the standard for getting into an inter partes re-exam and 

really putting these stay provisions that a court has to look at, that 

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we allow abuse by serial infringers to come in and try to delay proceedings by taking the lower threshold, finding a new question of 

patentability, and then slowing down the litigation process as much 

as possible so that we don’t get a quick resolution that Mr. Chandler was mentioning. 

So that’s my concern is that the combination of those two are 

going to give an advantage to an infringer to the detriment of patentees that need to quickly assert their patent rights. 

Mr. WATT. And Mr. Chandler, and then I want to go back to Mr. 

Miller to see whether there is—well, you tell me what you have to 

say on this, and then I will listen to Mr. Bartlett. But at the end 

of this, my ultimate question is, is there a way to reconcile where 

the three of you are on this issue? 

Mr. CHANDLER. Well, first of all, one of the key provisions in the 

currently considered legislation is—and this goes along with the 

funding for the Patent Office and the ability to keep the fees that 

we users of the system pay—is a commitment that re-exams will 

be completed within 12 months. And that’s a very important part 

of the Administration of the re-exam process that is covered here. 

So we’re not talking about a long delay. We’re talking about coordinating processes between different bodies that have responsibility 

here. 

Our view of the stay provision is four factors is the right number 

of factors if you don’t make it an automatic stay. The provision bill 

is for a short-term stay to begin with, only through the period of 

the re-exam anyway. 

If we were going to have four factors, we’d keep four factors. But 

on one of them, it says that there has to be a finding there is no 

undue burden to the patent holder and no clear tactical advantage 

to the movant. We simply want to say no undue burden to the patent holder because we think that standard of clear tactical advantage can be used by any judge to deny a stay since, obviously, there 

is an advantage to having a stay because you avoid getting a district court making a finding that’s inconsistent with what the Patent Office is doing. That’s why you’re seeking the stay, and that’s 

why you’ve sought the re-exam. 

So that’s mine. 

Mr. WATT. All right. We are going to come back and reconcile 

this in a little bit. 

Mr. Bartlett? 

Mr. BARTLETT. Mr. Watt, in the efforts—— 

Mr. WATT. I am so used to seeing you over in Financial Services, 

I am feeling like you are out of place over here. 

Mr. BARTLETT. I’ve been all over. It’s my hope at the conclusion 

of the hearing that we will—we will see you as an original cosponsor of the legislation, Mr. Watt, as you started off at the beginning. 

In an attempt to reconcile, first of all, it’s my opinion, it’s my belief that what we’re talking about, which is the business method 

patent, is not applied to the topic of—the other topic of the mandatory stay. So this is carved out specifically for this. 

The reason I think it is reconciled is that at least we had believed and still believe that the right answer would be a mandatory 

stay, an automatic stay, and we were not able to convince the bill’s 

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sponsors of that. So, absent that, then a stay that is a de novo stay 

would make it work. 

Without a de novo stay, it would be a meaningless right. Our attorneys have looked through the records, and without a de novo 

stay, it would revert to an abuse of discretion standard, and we can 

find no civil litigation which an abuse of discretion standard has 

been applied to apply for a stay. So we think that the—that the 

de novo stay is essential to make this work. Otherwise, it just 

doesn’t work. 

Mr. WATT. Why did I think the whole financial services community would be on the opposite side of business methods stuff? I 

thought the financial institutions would be the ones that would be 

developing business methods rather than the ones that were being 

attacked by these business methods patents, and I was just absolutely off base on that, I found out after I started studying this 

issue. 

Mr. BARTLETT. Mr. Watt, this is a serious, serious issue for the 

financial services industry. It’s overwhelmingly—— 

Mr. WATT. I shouldn’t have gone there. That is all right. I ran 

out of time. I need to get this reconciled. That is another issue. I 

will talk to you about that one off record. 

Reconcile you all’s positions for me. Is there some way to reconcile? 

Mr. MILLER. I’m not sure. We’re going to have to sit down, and 

maybe you can help us with that, Mr. Watt. 

Mr. WATT. All right. 

Mr. CHANDLER. I think you might ask Mr. Kappos as well. I 

spent a good part of February locked in a room with Under Secretary Kappos, with the general counsel of the Commerce Department, and with one of my counterparts who is the general counsel 

of a large pharmaceutical company. And some of the language that 

Under Secretary Kappos has circulated was a reflection of those 

discussions, where we tried to be very, very reasonable in coming 

up with an approach that would—— 

Mr. WATT. I take it that is not in the Chairman’s bill? That is 

not the language that is in the—— 

Mr. CHANDLER. It’s not precisely, but we’re happy to work further on that. 

Mr. WATT. Thank you, Mr. Chairman. I’m sorry—— 

Mr. GOODLATTE. No problem. I thank the gentleman. 

I now recognize the gentlewoman from Florida, Mrs. Adams, who 

does not have a question. We now yield to the Chairman of the full 

Committee, Mr. Smith. 

Mr. SMITH. Thank you, Mr. Chairman. 

Mr. Chairman, first of all, I would like to thank all of our witnesses because they directly or indirectly had an impact and a positive impact on this bill. And we sat down, either with you all individually or with the organizations you represented, and appreciate 

your being willing to work with us. 

Mr. Bartlett, let me direct my first question to you, which is 

going to be an easy question. I appreciate a former colleague being 

with us today as well. 

You touched upon this in your opening statement. But basically, 

I just would like for you to say specifically how some provisions in 

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this bill positively impact financial institutions. And since I wasn’t 

here for all of Mr. Watt’s questions, maybe he already asked you 

that. And if so, we can fast forward to the next one. 

But if you could be specific about how you find this bill helpful, 

that would be good. 

Mr. BARTLETT. Thank you, Mr. Chairman. 

Because the current law gums up the system particularly because it’s interoperable. It involves multiple institutions all engaged in answering a telephone or check imaging or—so it’s all 

interoperable. So they all get sued, basically, and the system just 

kind of stops without some kind of protection for a post grant review. 

So what this draft legislation does is it provides a post grant review based on these new factors as a way of reviewing prior art to 

determine if it should be a valid patent or not. And without that, 

then, in essence, our companies end up just settling because of the 

enormous cost of litigation and the threat of losing because the 

odds are stacked against them. They can’t get a review as to 

whether it’s a valid patent in the first place. 

So this legislation for our section of it allows a valid—a review 

that’s a valid review of whether it’s a valid patent. 

Mr. SMITH. Okay. Thank you, Mr. Bartlett. 

Mr. Miller, let me ask you a question. You are with Procter & 

Gamble, and you represent a certain segment of companies in 

America, in fact, a very large segment of companies in America. 

How does the bill positively impact you all? And if you could be 

specific, that would be helpful, too. 

Mr. MILLER. Sure. Absolutely, Mr. Chairman, thank you. 

The bill positively affects us because we deal with a lot of small 

inventors. We deal with universities. We have an open innovation 

program that I’d referred to my written testimony. And the firstinventor-to-file system is going to make our system more transparent, able for us to make better decisions on whether we’re going 

to be willing to invest capital. 

It also lets us get rid of the poorer patents, the poorer-quality 

patents that come out of the Patent Office, through a post grant 

review proceeding and even, if necessary, an inter partes review 

proceeding. It fixes the false marking problem that many of our 

companies have been subjected to, and it also allows the Patent Office to get full funding. 

The Patent Office needs full funding to do its job, but it also 

needs these other tools. And so, I think those are the key provisions of this bill that are going to help all of us throughout the 

United States spur innovation and create more jobs. 

Mr. SMITH. Okay. Thank you, Mr. Miller. 

Mr. Vaughn, let me jump to you and say as a preliminary statement that the goal in drafting this bill—during the entire process 

of researching, talking, negotiating, and developing—was not to get 

a bill that is going to make people necessarily 100 percent happy. 

Because if you do that, you also have a lot of people who are zero 

percent happy. 

Now the goal to me was to try to get most people about 60 to 

70 percent happy and have them emphasize the positive rather 

than the 30 percent where they were unhappy. 

105 

We have done a lot in this legislation that I think is beneficial 

to the university communities, and I understand that they are not 

entirely happy. But they certainly should be appreciative of the 

carve-out that they received, which might be looked upon as benefitting them more than some others might benefit. 

But I would like to ask you a similar question, which is in what 

ways do you see the university community benefited by this bill? 

And even though you may not approve of it 100 percent, I would 

like to suggest that at least it is about 70 percent helpful to the 

communities. 

And I did hear your opening statement. I understand the three 

or four points that you would like for us to take a further look at. 

But if you would, in this instance, tell me the positive aspects of 

the bill? 

Mr. VAUGHN. I’d be happy to, Mr. Smith. 

I think, first of all, that universities will benefit—— 

Mr. GOODLATTE. Mr. Vaughn, you need to turn your microphone 

on. 

Mr. VAUGHN [continuing]. Directly or indirectly from provisions 

that strengthen the system overall. So even though it is not directly to the universities, increasing resources to the PTO is going 

to be enormously helpful to everybody. 

In 2005 when the decision was made to incorporate first inventor 

to file, we spent a lot of time working with this Committee, working with other stakeholders to adjust the grace period, which is so 

critical to university publishing, and that has been fit perfectly to 

a first inventor to file. That will be an enormous benefit for universities. 

We think that the new post grant opposition procedure will be 

very useful. We won’t use it. Universities don’t very often get into 

court, litigate their own patents. But I think it’s going to be very 

helpful to our startups. Sometimes it will be that their patents will 

be challenged, but if they’re solid patents, coming through that is 

going to give them a strengthened patent going forward. 

And we think that the—the third-party input of information during a patent examination is going to be helpful. We’ve actually 

been working with IBM on trying to find ways to organize the 

graduate students, engineers, law students to organize systematic 

input to the patent system for providing better information. That’s 

going to improve the quality of patents, and that will help as well. 

Mr. SMITH. Thank you, Mr. Vaughn. 

To me, the standard against which this bill is measured is the 

status quo, not necessarily the ideal. And to the extent that it is 

better than the status quo, then I would argue that it deserves support. So I appreciate your comments. 

Thank you, Mr. Chairman. 

Mr. GOODLATTE. I thank the Chairman, and I am now pleased 

to recognize the gentlewoman from California, Ms. Lofgren. 

Ms. LOFGREN. Thank you, Mr. Chairman. 

Mr. GOODLATTE. Oh, I am sorry. If you would suspend, I have 

forgotten I promised the Ranking Member that he could make a 

unanimous consent request. 

Mr. WATT. Mr. Chairman, I ask unanimous consent to submit for 

the record a letter from our former colleague Steve Largent, dated 

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March 29, 2011. He is now the president and CEO of the CTIA 

Wireless Association. A statement of Brian Fontes, dated March 30, 

2011, and a 3-page statement from Claudio Ballard. 

Mr. GOODLATTE. Without objection, it will be made a part of the 

record. 

[The information referred to follows:] 

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Prepared Statement of Claudio Ballard, Inventor and Entrepreneur 


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Mr. GOODLATTE. And the gentlewoman is recognized. 

Ms. LOFGREN. Thank you, Mr. Chairman. 

And I will be brief, as this is the end of a long day, but not the 

end of a very long process that goes back. I think I first started 


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working on this in 1997, and I think all of us here have been working on this for—well, except for the new parties, but really this has 

been more than a decade’s work. And we have made tremendous 

progress. 

As the Chairman knows, I am not yet a cosponsor of this bill because I think there are a few areas where we could improve it even 

further. And I say that certainly without criticism of the Chairman 

of the Committee, who has worked tirelessly with me and the others for over a decade to get to where we are today. 

I believe, listening to Mr. Chandler and the work that Mr. 

Kappos has put into this, I would like to see what kind of resolution was reached. Obviously, you don’t bind anybody else. You are 

just one general counsel and general counsel for some company and 

the patent commissioner. 

But I sense that the defects here could be resolved by the stakeholders in a way that would work for everyone. And so, I am really 

eager to work with Mr. Smith and Mr. Goodlatte to see if we can’t 

take that one step further. 

I also think that—and nobody has really mentioned the inequitable conduct provisions here, but I think we need a little more 

work there, honestly. I certainly don’t want to give a broad grant 

of immunity to people, license to lie to the Patent Office. And I 

think that we could tweak the provisions here and make some improvements, and I think we would all be satisfied if we did that. 

On the first-to-file, I realize there are other challenges that we 

will face in the House on the whole first-to-file issue. Not every 

person in America thinks it is a good idea. But if we are going to 

have first-to-file, clearly we have to have adequate prior user 

rights, and I think someone mentioned that the only country that 

doesn’t have prior user rights with first-to-file is Cyprus, hardly a 

role model for the United States. 

As you know, I come from Silicon Valley, and I got an email this 

morning. And I won’t read the whole thing, but it is from the general counsel of Stanford University. And she says, ‘‘Universities in 

general are very supportive of the bill, appreciating the comprehensive reform with first-to-file. We know that some universities are 

opposed to any expansion of prior user rights, even with the carveout for university inventions derived from federally sponsored research. However, Stanford is satisfied with the current language. 

The most important thing is to get the reform bill passed with the 

first-to-file and not have the bill die because of a dispute with hightech companies over prior user rights, which would leave us with 

the status quo.’’ 

So I think it is very significant that Stanford, with its enormous 

patent portfolio, has been willing to step forward and say let’s do 

this, understanding that, as the Chairman has said, nothing is necessarily perfect. But I am satisfied with this statement from Stanford that we have struck the right balance there. 

I was a little bit concerned, Mr. Vaughn, about your testimony 

about publishing, and I am having a hard time understanding the 

point that you have made. I don’t see how prior user rights could 

create problems for academic publishing. 

Publication within the 1-year grace period for the filing would be 

protected from any prior use during that period, and a company 

116 

could not get a prior use right for something that was started in 

response to a publication in the grace period. And if the publisher 

published outside of the 1-year grace period, then the publication 

would become prior art that would prevent the idea from being patented in the first place. 

So I am seeking to understand your point. And because if it were 

a chill on publication, obviously that would be of concern to all of 

us. Can you explain? 

Mr. VAUGHN. Well, I think, Congresswoman, that, absent a 

carve-out, there is concern that the timing could be such and with 

the murky sort of records of trade secret processes that you could 

publish something that would give somebody an idea, and they 

could develop that based on work that they had already started—— 

Ms. LOFGREN. I see. 

Mr. VAUGHN [continuing]. And be able to show that they had developed the product within the time period. Having a carve-out 

would help that, although it wouldn’t account for privately funded. 

Ms. LOFGREN. I see that my time has expired, Mr. Chairman. I 

think, if I would just ask—I don’t want to get in a debate. But I 

think the terms of the bill itself protect against the concern that 

you have expressed and would urge a further review of the language. 

And I would yield back with my intention to work further with 

the Chairman of the Committee. I think that we can get to where 

we need to be, and I, for one, am willing to continue to work on 

it. 

Thank you very much. 

Mr. GOODLATTE. The Chair thanks the gentlewoman and thanks 

her for her commitment to this legislation. 

And I am now pleased to recognize the gentleman from Pennsylvania, Mr. Marino, for 5 minutes. 

Mr. MARINO. Thank you, Chairman. 

Congressman, knowing that I have 5 minutes, my colleague, the 

Ranking Member, started to ask a question, and I am going to ask 

my question and perhaps you can elaborate on it and expand on 

it for a minute or two because I have another follow-up. 

I notice a small, but significant difference between the House 

and the Senate bills that I would like for you to discuss. Under section 18 of the House bill, the standard of review for the interlocutory appeals is stronger, providing that the Federal Circuit shall 

review de novo the district court’s decision to ensure consistent application of the established precedent. 

Can you describe the significance of this and why it is important? 

Mr. BARTLETT. Well, the reason—first of all, the fundamental 

reason it’s important why the stay can be granted is because, otherwise, you’re in two venues at once, and it gums up the whole 

works. So the post grant review becomes meaningless or at least 

more costly. 

There have been several iterations. The iteration that came from 

the other body in the Committee, the Senate Judiciary Committee, 

was a mandatory stay of litigation, which was what we think ought 

to happen. That didn’t survive the full body, and the draft legislation in front of you has a satisfactory solution, not as good as a 

mandatory stay, but it does have a solution that is, as I said earVerDate Aug 31 2005 10:12 Jul 07, 2011 Jkt 000000 PO 00000 Frm 00120 Fmt 6633 Sfmt 6601 H:\WORK\IP\033011\65487.000 HJUD1 PsN: 65487
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lier, that is a de novo appeal. So we think if it’s a de novo appeal, 

then a stay will be granted when it’s warranted. 

Without a de novo appeal, though, then it reverts to what’s called 

an abuse of discretion, where to get a stay, you have to prove an 

abuse of discretion, and we find that to be—I find that to be, in 

my terms, a meaningless standard. It just simply cannot be 

achieved, and we haven’t found it achieved anywhere else. 

So we think that mandatory would be better. But with four factors and a de novo appeal, we think that works just fine. 

Mr. MARINO. And my last question, I understand and support the 

goals of section 18 of the bill, which establishes a transitional review proceeding at PTO where certain financial service business 

methods, method patents can be examined. I also understand that 

the point of the transitional review program is to weed out spurious or invalid patents at an early stage. 

My concern is in regards to certain patents that have, one, already been litigated to a jury verdict and found to be valid and/or, 

two, if the Patent Office has already completed a full re-examination of that particular patent and found it to be valid. Can you explain to me why it would be either fair or good policy to subject 

the transitional program in section 18 to a patent that has been 

found valid through ex parte re-examination or a full jury trial? 

Is there room for some sort of limits on how far back or which 

patents this transitional program can reach so that we aren’t relitigating and reevaluating patents that have been found again and 

again to be valid? 

Mr. BARTLETT. In layman’s terms, because this—this post grant 

review process would be the first—would be the first review under 

these terms, and the other processes that occurred didn’t occur 

under these terms. So we think that this is a program to be administered by the Patent Office, and the Patent Office would do a post 

grant review based on prior art for 1 year, and we think it would 

help to clear out the system, as well as establish these new valid 

reviews. 

So we don’t think in those cases where there’s been a prior review that it would obviate the need for this review. 

Mr. MARINO. Mr. Miller, could you add anything to that? 

Mr. MILLER. Well, I think it’s just one more delay. If a court’s 

already adjudicated the issue, I don’t know why we’d want to go 

back to the Patent Office under this transitional provision and subject that person to another round of review. It seems like a waste 

of time and effort on both parties’ side. You know, this isn’t a good 

use of resources of the PTO or of the court. 

Mr. MARINO. Thank you, and I yield my time, Chairman. 

Mr. GOODLATTE. Thank the gentlemen, and the Chair yields to 

the gentleman from Florida, Mr. Deutch for 5 minutes. 

Mr. DEUTCH. Thank you. Thank you, Mr. Chairman. 

I would like to just continue that line of questions. I appreciate 

the hearing very much, Mr. Chairman, and there were a number 

of questions I wanted to ask. But since this last exchange reminds 

me of a specific situation with a Floridian, I would like to actually 

walk through, and I always find it helpful if there is some detail, 

some real-life experiences to draw on instead of speaking only in 

the abstract. 

118 

So, if I may, Mr. Chairman, let me just share the story of 

Claudio Ballard, who, in the mid 1990’s, Claudio, who is a Floridian, had an invaluable idea that would improve businesses in 

the United States by replacing paper with electronic images. The 

change would save business money by being more efficient, promote faster processing. 

He built a prototype of the computer system that would put his 

idea into effect. He showed the prototype to investors, began raising money to put the idea into effect, and filed patent applications 

to protect his idea and the invention. 

Once the patent applications were filed, numerous companies 

began expressing interest in the invention. One industry that 

showed particularly strong interest in the product was the banking 

industry, which, Mr. Bartlett, is why I would like to focus on this 

particular example. 

Claudio met with the industry and demonstrated that his invention could remove paper checks from the payment process and replace them with electronic images, change that could potentially 

save the industry billions of dollars. In an effort to protect his invention, he signed contracts that he thought would prevent his 

products that were still pending for patents from being taken without his permission. 

As time went on, he was unable to sell his invention to any 

banks. He founded a company to raise capital, attempt to sell his 

invention. However, he became aware that the reason he couldn’t 

sell the invention was because many banks had already decided to 

use the invention themselves without paying his company even one 

penny. 

Now because Claudio had patents on his product, he filed lawsuits in Federal court against the banks for infringing on his patents. In response to the lawsuits, there was an effort made by the 

banks to invalidate the patents. First, a request that the Patent Office conduct a re-examination and strike the patents. The courts 

delayed the litigation during the 2 years that the Patent Office reexamined them, and ultimately, they found the patents were validated. 

Next, one bank decided to continue to pursue the litigation, and 

last year, a jury verdict, after reviewing all of the evidence in the 

case, rendered a decision that the patents were valid. Jury also 

found the patents were being willfully infringed by the banks. And 

so, after 8 years, when the first lawsuit was filed, many of the 

banks have licensed his patents. They are using the technology he 

invented, and they are paying his company royalties for the use of 

the product. 

So now, drawing back to today’s hearing, section 18 of the legislation is a transitional program for business method patents. And 

again, this is following up on the last line of questioning. And while 

I fully support, Mr. Chairman, the purpose of section 18 and the 

creation of a transitional program to weed out invalid and poorquality patents from the old system, I have got real concerns that 

the scope of the section could, in effect, invalidate patents that 

have been found valid by a jury in our court system. 

And so, Mr. Bartlett, just now having added some specificity to 

this line of questions, if the purpose of the section, section 18 is to 

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target invalid patents, why is it—and I wasn’t clear in your response, your last response—why is it that in cases in which a patent has already been re-examined by the Patent Office and found 

to be valid, and that it has been found valid by a jury, why should 

these patents be included within the scope specifically of this section 18 review? 

And aren’t we invalidating Federal court decisions and giving 

losing litigants—in the case of Claudio, the banking industry—another try at invalidating patents that have already been found 

valid by a jury and by the Patent Office? 

Mr. BARTLETT. Well, first, this section only applies to business 

method patents and not to other patents, and it could well be that 

that was not a business method patent. But secondly—— 

Mr. DEUTCH. Let us assume that it is. 

Mr. BARTLETT. Then for the record, I might be able to offer additional for the record on that. But, and the answer is because without this, then there has not been a post grant review based on best 

prior art. So perhaps a lot of other things were taken into account 

by the court or by the Patent Office, but there was never an authorization to examine it against best prior art. 

So we think that what is needed here to clear out the system and 

to stop what is clearly to us the abuse is a review against best 

prior art. And that has not been permitted in prior cases. 

Mr. DEUTCH. Mr. Chairman, if I could ask the other witnesses, 

if there is in a situation like this where the patent has been reexamined, a thorough examination by the Patent Office, are they 

precluded from looking at prior? Is there anything in that review 

that is problematic in a system that has existed now and has provided for this sort of thorough review? If someone else could speak 

to this? 

Mr. MILLER. I’ll be happy to try, Congressman. 

I think this is the whole balancing issue that we have to really 

address with these provisions. We don’t want to have legitimate inventions given to infringers to have second, third, and fourth bites 

at the apple. And unfortunately, this transitional provision, even 

though it’s limited to narrow business method patents for financial 

institutions, in essence, gives a second or third bite at the apple to 

folks that have had to go through other processes. 

And I think it’s a good idea perhaps to look at building an estoppel, just like we built an estoppel into the post grant review and 

inter partes re-exam procedure. 

Mr. DEUTCH. Mr. Chairman, I just would hope, as we move forward, that we look at different ways to create some sort of estoppel 

system for patents that have already been through re-examination 

by the office, found to be valid, and found to be valid by a court 

of law as well. 

I yield back. Thank you, Mr. Chairman. 

Mr. GOODLATTE. Good point. Thank you, Mr. Deutch. 

The gentleman from New York, Mr. Reed, is recognized for his 

questions. 

Mr. REED. Thank you, Mr. Chairman. 

Thank you, gentlemen, for your testimony today. 

I just want to focus on one area in particular. I have looked at 

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cerns. When we see that inter partes reviews are successful 90 percent of the time either invalidating or narrowing the patents, ex 

parte reviews are successful 77 percent of the time, you know, that 

begs the question to me why are we adding an additional administrative proceeding when it comes to post grant review? 

But I think that has already come and gone, and that battle 

seems to be behind us, and we are moving forward on it. So I guess 

I raise the question about whenever we add a proceeding that can 

be utilized by litigation tactics and things like that, I am very sensitive to frivolous, exposing it to frivolous claims. 

I am familiar with one that was sent to our office. One group 

called the ‘‘patent assassins,’’ I have shared that information with 

Members of the Committee and others, where they market, in my 

opinion, their business model is to attack patents on a frivolous nature to essentially, my opinion, shake people down and corporations 

down for financial purposes. 

But could you, I guess, Mr. Miller, I will direct the question to 

you. Could you just clarify or add your experience or testimony as 

to abuses you have seen with the existing inter partes system? It 

may be helpful to the—— 

Mr. MILLER. Yes, we had one particular—thank you for the question, Congressman Reed. 

We had one particular case that we brought that was a pretty 

egregious infringement on a packaging for our Folger’s coffee can, 

and we asked for a preliminary injunction. And the response was 

by the alleged infringer to immediately run to the Patent Office 

and ask for an inter partes re-exam and then ask for a stay in the 

proceeding in the district court. 

And so, the whole litigation tactic was let’s open a second front, 

where we can have a second bite at the apple against this, get the 

original litigation stayed, try to avoid a preliminary injunction, and 

then move forward. 

Well, we took an appeal to that to the Federal Circuit. The Federal Circuit reversed and said you have to decide the preliminary 

injunction motion. You can’t just stay the proceedings, and that’s 

one of my concerns with stays. And lo and behold, the case settled 

after the court said that they had—we had to have a preliminary 

injunction hearing because the other party knew that they would 

probably be enjoined from further using the invention. 

So, you know, I think that there are litigation abuses and litigation tactics that we have to control and have to be sensitive as we 

develop the procedures in this bill. 

Mr. REED. Well, and that is where I look at the Senate bill, and 

I see higher thresholds for the post grant review and inter partes 

review language in those bills. I guess from your experience, would 

you see those helping to reduce that higher threshold, reducing 

those frivolous actions and abuses that you may have described 

there? 

Mr. MILLER. I do. I do. I think that—— 

Mr. REED. And why is that? Why would that work? 

Mr. MILLER. Well, I think that we see a lot of times where—and 

I say any good patent attorney worth its salt can find a new question of patentability by finding some reference that wasn’t cited at 

the Patent Office. We ought to hold folks to the standard that there 

121 

is a reasonable likelihood that one claim is going to be invalid in 

the patent, and that ensures that there is actually something amiss 

with the patent, that there needs to be a correction that needs to 

be made. 

And so, that we can go forward with the assurance of using all 

the resources that the PTO is going to use within this quick 1-year 

timeframe with all the estoppels to get this through and make sure 

that that problem is fixed. If we go to the lower standard, we may 

get to the point where we’ve gone through this whole procedure, 

and there are no problems. And that’s wasting not only PTO resources, but both of the parties’ time. 

And that’s why I think the higher threshold is extremely important in these. 

Mr. REED. I understand, Mr. Chandler, you may have a different 

opinion on this issue. But do you see any risk to the post grant review process being opened up, if we lower the threshold or even 

went lower? I think in your testimony, you wanted to go lower on 

the threshold. Do you see any risk of that frivolous abuse that Mr. 

Miller is referring to? 

Mr. CHANDLER. No, we—we’re actually not in favor of lowering 

the threshold. We’re in favor of maintaining current law, which 

is—— 

Mr. REED. Okay. 

Mr. CHANDLER [continuing]. The question of patentability. 

Mr. REED. Which is a lower threshold than what the Senate bill 

has? 

Mr. CHANDLER. It is. But under the current threshold, the—there 

have been 1,115 inter partes re-exams since 1999, when the procedure was implemented. In 89 percent of the cases, at least one 

claim was invalidated. In 47 percent of the cases—that’s almost 

half of them—the patent itself was thrown out completely. 

So when you have 89 percent subject to change, and Mr. Miller 

advised me during the recess that about a quarter of those may 

have been more administrative fixes to patents, even if a quarter 

of them were that, when you get that level of result, it would seem 

that the threshold doesn’t need to be raised. 

And I think Director Kappos spoke directly to the question of 

whether it would be a use of resources, distraction of resources to 

leave the threshold where it is, and he seemed comfortable with 

that, given those percentages. 

Mr. REED. So, essentially, you are saying the existing system 

works. Why go to the post grant review, if I am understanding your 

testimony correctly? 

Mr. CHANDLER. And this, actually, is very relevant to the question Mr. Deutch posed a moment ago because the types of information that are allowed in as part of the re-exam are different under 

the post grant review, which is only available in the first year after 

issuance. 

Mr. REED. Okay. 

Mr. CHANDLER. Once you get past that, inter partes is a very 

narrowly constrained type of information that can be looked at related to other patents and published prior art. So they are different. 

122 

I would suggest coordinating them so that if someone wanted to 

start an inter partes review immediately after the patent granted, 

if litigation, for instance, was brought at that point, that the director could consolidate post grant and inter partes requests so that 

you don’t have duplicative proceedings on the same patent. I think 

that would be a procedural improvement to the structure of what’s 

in the legislation today. 

Mr. REED. Thank you. 

I see my time has expired. I will yield back. Thank you, Mr. 

Chairman. 

Mr. GOODLATTE. Thank you, Mr. Reed. 

The gentlewoman from California, Ms. Chu, is recognized for her 

questions. 

Ms. CHU. Thank you. 

Mr. Chandler, in his testimony, Mr. Miller characterized the 

changes to the inter partes process in the Senate bill as ‘‘safeguards.’’ Do you agree with his characterization, and do you think 

the changes actually make the inter partes process more fair and 

less burdensome? 

Mr. CHANDLER. Actually, I think that the Senate bill’s provisions 

on inter partes are a step backward compared to current law. As 

Chairman Smith alluded to in his opening statement, there is an 

issue that affects technology community, particularly related to 

frivolous lawsuits. And that inter partes review is a major step 

that is used in order to have the Patent Office look at unmeritorious patents and invalidate them where required with the very 

high statistics that I cited. 

So I don’t think it makes it more fair, and I think certainly some 

of the changes that are reflected in the draft legislation today fix 

some of that, don’t go quite far enough, and that’s why I suggested 

a couple of other modifications that could move us to the position 

of being enthusiastic supporters of the bill. 

I would say that the opportunity provided by the unusual schedule this afternoon facilitated a number of sidebar conversations 

during the recesses, and I think we’re making progress on some of 

these issues. 

Ms. CHU. Mr. Chandler, under the House bill, defendants would 

have only 9 months to file a request for inter partes re-exam after 

getting sued. What is the deadline under current law? Do you believe a deadline is necessary or actually improves the inter partes 

process? 

Mr. CHANDLER. There is no deadline under current law, but I’m 

sensitive to the fact that patent holders ought to get some certainty 

with respect to their patents and be able to proceed with litigation. 

The commitment in the legislation having a 1-year period for inter 

partes review is very important for patent holders, and we’re supportive of that requirement and the funding that facilitates it. 

I think a time limit is a good idea. I think it is better calculated 

by the Markman examination, Markman determination by the 

judge rather than by an arbitrary time period. We have some litigation that involved tens of defendants, 61 patents, 1,975 different 

claims, this past litigation which you may be familiar with. And in 

those cases, it is very, very hard prior to Markman to figure out 

how to initiate an inter partes review. 

123 

And that would, I think, cause the patent holder as well to want 

to speed up the Markman so that there would be a clear claim interpretation. But we do not object to the idea that there should be 

a limiting event or time. 

Ms. CHU. Mr. Miller? 

Mr. MILLER. I’d just like to comment on one thing Mr. Chandler 

said. Waiting to a Markman hearing can be way too late. Some 

courts don’t even hold a Markman hearing until maybe a week or 

so before the trial, and so you’ve already gone through discovery. 

You’ve already gone through getting ready for the trial, and then 

to file for an inter partes re-exam that late in the game just isn’t 

fair to some patentees. 

And so, our district courts vary on the times when Markman 

hearings are held. So I think it’s a better policy to have a date certain as to when these have to be filed. 

Ms. CHU. Mr. Chandler, how do you respond to that? 

Mr. CHANDLER. As someone who is most often a defendant in 

these litigations, we do not find it advantageous to have the 

Markman hearing wait to before trial for exactly the judicial inefficiency aspects that Mr. Miller alluded to. And I think that with a 

change such as I proposed, both plaintiff and defendant would have 

an interest in pushing for a faster Markman proceeding, and that 

would have an impact then on the pace with which the district 

courts handle that. 

Ms. CHU. Okay. And just switching topics, Mr. Vaughn, as you 

know, some startup companies, small businesses and independent 

inventors and universities are concerned that the grace period in 

the House and Senate bills may force them to publicly disclose 

their technology before they are ready to enter the marketplace. 

Do you agree with this concern? Do you have recommendations 

for ways to improve the grace period to ensure that the patent system works for all inventors? 

Mr. VAUGHN. Well, I’ve heard a lot of expressions about the grace 

period that suggest to me that there may not be a full understand 

of the changes that have been made. Because the grace—the grace 

period that is in the current legislation is fit to move to a first inventor to file, such that the publications of an inventor provide a 

12-month period for that person to file a patent application, and 

that person’s publication is not prior art. But it would be prior art 

for someone else trying to file a patent. 

So I think you’ve kind of carved out a space to give yourself time, 

if you’re a startup company, to explore the marketability of your 

patent, and the grace period protects that time. 

Ms. CHU. Okay. Thank you, and I yield back. 

Mr. GOODLATTE. Thank you, Ms. Chu. 

I think that concludes our questions today, which also brings the 

hearing to an end. 

And want to thank you all for your very helpful testimony. It has 

been very instructive. Who knows? We may have even made some 

progress. 

And Mr. Chandler, if we can’t make everybody enthusiastic, 

maybe we can at least make everybody feel better, and we will take 

that as a victory as well. 

124 

So thank you again very much. I appreciate your testimony, appreciate your being here. 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witnesses, 

which we will forward and ask the witnesses to respond to as 

promptly as they can so that their answers may be made part of 

the record. 

Without objection, all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

We stand adjourned. 

[Whereupon, at 6:04 p.m., the Subcommittee was adjourned.] 

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