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(2) in the second sentence, by striking ‘‘During 
fiscal years 2005, 2006, and 2007, the’’ and insert-
ing ‘‘The’’. 
(g) EFFECTIVE DATE, APPLICABILITY, AND TRANSI-
TION PROVISIONS.—Section 803(a) of division B of the 
Consolidated Appropriations Act, 2005 (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) PRIORITIZED EXAMINATION FEE.— 
(1) IN GENERAL.— 
(A) FEE.— 
(i) 
PRIORITIZED
EXAMINATION 
FEE.—A fee of $4,800 shall be established 
for filing a request, pursuant to section 
2(b)(2)(G) of title 35, United States Code, 
for prioritized examination of a nonprovi-
sional application for an original utility or 
plant patent. 
(ii) ADDITIONAL
FEES.—In addition 
to the prioritized examination fee under 
clause (i), the fees due on an application 
for which prioritized examination is being 
sought are the filing, search, and examina-
tion fees (including any applicable excess 
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claims and application size fees), proc-
essing fee, and publication fee for that ap-
plication. 
(B) REGULATIONS; LIMITATIONS.— 
(i) REGULATIONS.—The Director may 
by regulation prescribe conditions for ac-
ceptance of a request under subparagraph 
(A) and a limit on the number of filings 
for prioritized examination that may be ac-
cepted. 
(ii) LIMITATION
ON
CLAIMS.—Until 
regulations are prescribed under clause (i), 
no application for which prioritized exam-
ination is requested may contain or be 
amended to contain more than 4 inde-
pendent claims or more than 30 total 
claims. 
(iii) LIMITATION ON TOTAL NUMBER 
OF REQUESTS.—The Director may not ac-
cept in any fiscal year more than 10,000 
requests for prioritization until regulations 
are prescribed under this subparagraph 
setting another limit. 
(2) REDUCTION
IN
FEES
FOR
SMALL
ENTI-
TIES.—The Director shall reduce fees for providing 
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prioritized examination of nonprovisional applica-
tions for original utility and plant patents by 50 per-
cent for small entities that qualify for reduced fees 
under section 41(h)(1) of title 35, United States 
Code. 
(3) DEPOSIT
OF
FEES.—All fees paid under 
this subsection shall be credited to the United States 
Patent and Trademark Office Appropriation Ac-
count, shall remain available until expended, and 
may be used only for the purposes specified in sec-
tion 42(c)(3)(A) of title 35, United States Code. 
(4) EFFECTIVE DATE AND TERMINATION.— 
(A) EFFECTIVE
DATE.—This subsection 
shall take effect on the date that is 10 days 
after the date of the enactment of this Act. 
(B) 
TERMINATION.—The 
fee 
imposed 
under paragraph (1)(A)(i), and the reduced fee 
under paragraph (2), shall terminate on the ef-
fective date of the setting or adjustment of the 
fee under paragraph (1)(A)(i) pursuant to the 
exercise of the authority under section 10 for 
the first time with respect to that fee. 
(i) APPROPRIATION ACCOUNT TRANSITION FEES.— 
(1) SURCHARGE.— 
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(A) IN GENERAL.—There shall be a sur-
charge of 15 percent, rounded by standard 
arithmetic rules, on all fees charged or author-
ized by subsections (a), (b), and (d)(1) of sec-
tion 41, and section 132(b), of title 35, United 
States Code. Any surcharge imposed under this 
subsection is, and shall be construed to be, sep-
arate from and in addition to any other sur-
charge imposed under this Act or any other 
provision of law. 
(B) DEPOSIT OF AMOUNTS.—Amounts col-
lected pursuant to the surcharge imposed under 
subparagraph (A) shall be credited to the 
United States Patent and Trademark Appro-
priation Account, shall remain available until 
expended, and may be used only for the pur-
poses specified in section 42(c)(3)(A) of title 
35, United States Code. 
(2) EFFECTIVE
DATE
AND
TERMINATION
OF 
SURCHARGE.—The surcharge provided for in para-
graph (1)— 
(A) shall take effect on the date that is 10 
days after the date of the enactment of this 
Act; and 
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(B) shall terminate, with respect to a fee 
to which paragraph (1)(A) applies, on the effec-
tive date of the setting or adjustment of that 
fee pursuant to the exercise of the authority 
under section 10 for the first time with respect 
to that fee. 
(j) EFFECTIVE DATE.—Except as otherwise provided 
in this section, this section and the amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 12. SUPPLEMENTAL EXAMINATION. 
(a) IN GENERAL.—Chapter 25 of title 35, United 
States Code, is amended by adding at the end the fol-
lowing: 
‘‘§ 257. Supplemental examinations to consider, re-
consider, or correct information 
‘‘(a) REQUEST
FOR
SUPPLEMENTAL
EXAMINA-
TION.—A patent owner may request supplemental exam-
ination of a patent in the Office to consider, reconsider, 
or correct information believed to be relevant to the pat-
ent, 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 sup-
plemental examination and shall conclude such examina-
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tion by issuing a certificate indicating whether the infor-
mation 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 re-
examination 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 supple-
mental examination, 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 in-
formation that had not been considered, was inad-
equately considered, or was incorrect in a prior ex-
amination of the patent if the information was con-
sidered, reconsidered, or corrected during a supple-
mental examination of the patent. The making of a 
request under subsection (a), or the absence thereof, 
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‘‘(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 con-
sider each item of information submitted in the re-
quest. If reexamination is ordered under subsection 
(b), fees established and applicable to ex parte reex-
amination 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 examina-
tion, and establishing procedures for reviewing infor-
mation submitted in such requests. 
‘‘(e) FRAUD.—If the Director becomes aware, during 
the course of a supplemental examination or reexamina-
tion proceeding ordered under this section, that a material 
fraud on the Office may have been committed in connec-
tion with the patent that is the subject of the supplemental 
examination, then in addition to any other actions the Di-
rector is authorized to take, including the cancellation of 
any claims found to be invalid under section 307 as a re-
sult of a reexamination ordered under this section, the Di-
rector shall also refer the matter to the Attorney General 
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for such further action as the Attorney General may deem 
appropriate. Any such referral shall be treated as con-
fidential, shall not be included in the file of the patent, 
and shall not be disclosed to the public unless the United 
States charges a person with a criminal offense in connec-
tion with such referral. 
‘‘(f) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed— 
‘‘(1) to preclude the imposition of sanctions 
based upon criminal or antitrust laws (including sec-
tion 1001(a) of title 18, the first section of the Clay-
ton Act, and section 5 of the Federal Trade Com-
mission Act to the extent that section relates to un-
fair methods of competition); 
‘‘(2) to limit the authority of the Director to in-
vestigate 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 sanc-
tions for misconduct by representatives practicing 
before the Office.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for chapter 25 of title 35, United States Code, is 
amended by adding at the end the following new item: 
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‘‘257. Supplemental examinations to consider, reconsider, or correct informa-
tion.’’. 
(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. 13. 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’’; 
(2) by striking ‘‘25 percent’’ and inserting ‘‘85 
percent’’; and 
(3) by striking ‘‘as described above in this 
clause (D);’’ and inserting ‘‘described above in this 
clause;’’. 
(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 patent issued before, 
on, or after that date. 
SEC. 14. TAX STRATEGIES DEEMED WITHIN THE PRIOR 
ART. 
(a) IN GENERAL.—For purposes of evaluating an in-
vention under section 102 or 103 of title 35, United States 
Code, any strategy for reducing, avoiding, or deferring tax 
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liability, whether known or unknown at the time of the 
invention or application for patent, shall be deemed insuf-
ficient 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 or-
dinance 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, com-
puter program product, or system, that is used sole-
ly 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, com-
puter program product, or system used solely for fi-
nancial management, to the extent that it is sever-
able 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 sec-
tion shall be construed to imply that other business meth-
ods are patentable or that other business method patents 
are valid. 
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(e) EFFECTIVE DATE; APPLICABILITY.—This section 
shall take effect on the date of the enactment of this Act 
and shall apply to any patent application that is pending 
on, or filed on or after, that date, and to any patent that 
is issued on or after that date. 
SEC. 15. BEST MODE REQUIREMENT. 
(a) IN GENERAL.—Section 282 of title 35, United 
States Code, is amended in the second undesignated para-
graph by striking paragraph (3) and inserting the fol-
lowing: 
‘‘(3) Invalidity of the patent or any claim in 
suit for failure to comply with— 
‘‘(A) any requirement of section 112, ex-
cept 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 other-
wise 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 re-
quirement to disclose the best mode)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect upon the date of the enact-
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ment of this Act and shall apply to proceedings com-
menced on or after that date. 
SEC. 16. 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. 
(3) REPORT.—Not later than the date that is 
3 years after the date of the enactment of this Act, 
the Director shall submit a report to Congress that 
provides— 
(A) an analysis of the effectiveness of ‘‘vir-
tual marking’’, as provided in the amendment 
made by paragraph (1) of this subsection, as an 
alternative to the physical marking of articles; 
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(B) an analysis of whether such virtual 
marking has limited or improved the ability of 
the general public to access information about 
patents; 
(C) an analysis of the legal issues, if any, 
that arise from such virtual marking; and 
(D) an analysis of the deficiencies, if any, 
of such virtual marking. 
(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) EXPIRED PATENTS.—Section 292 of title 
35, United States Code, is amended by adding at 
the end the following: 
‘‘(c) The marking of a product, in a manner described 
in subsection (a), with matter relating to a patent that 
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covered that product but has expired is not a violation of 
this section.’’. 
(4) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to all cases, without 
exception, that are pending on, or commenced on or 
after, the date of the enactment of this Act. 
SEC. 17. ADVICE OF COUNSEL. 
(a) IN GENERAL.—Chapter 29 of title 35, United 
States Code, is amended by adding at the end the fol-
lowing: 
‘‘§ 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 the 
court or jury, may not be used to prove that the accused 
infringer willfully infringed the patent or that the in-
fringer intended to induce infringement of the patent.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for chapter 29 of title 35, United States Code, is 
amended by adding at the end the following: 
‘‘298. Advice of counsel.’’. 
SEC. 18. TRANSITIONAL PROGRAM FOR COVERED BUSI-
NESS METHOD PATENTS. 
(a) TRANSITIONAL PROGRAM.— 
(1) ESTABLISHMENT.—Not later than the date 
that is 1 year after the date of the enactment of this 
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Act, the Director shall issue regulations establishing 
and implementing a transitional post-grant review 
proceeding for review of the validity of covered busi-
ness method patents. The transitional proceeding 
implemented pursuant to this subsection shall be re-
garded as, and shall employ the standards and pro-
cedures of, a post-grant review under chapter 32 of 
title 35, United States Code, subject to the fol-
lowing: 
(A) Section 321(c) of title 35, United 
States Code, and subsections (b), (e)(2), and (f) 
of section 325 of such title shall not apply to 
a transitional proceeding. 
(B) A person may not file a petition for a 
transitional proceeding with respect to a cov-
ered business method patent unless the person 
or the person’s real party in interest or privy 
has been sued for infringement of the patent or 
has been charged with infringement under that 
patent. 
(C) A petitioner in a transitional pro-
ceeding who challenges the validity of 1 or more 
claims in a covered business method patent on 
a ground raised under section 102 or 103 of 
title 35, United States Code, as in effect on the 
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day before the effective date set forth in section 
3(n)(1), may support such ground only on the 
basis of— 
(i) prior art that is described by sec-
tion 102(a) of such title of such title (as 
in effect on the day before such effective 
date); or 
(ii) prior art that— 
(I) discloses the invention more 
than 1 year before the date of the ap-
plication for patent in the United 
States; and 
(II) would be described by section 
102(a) of such title (as in effect on 
the day before the effective date set 
forth in section 3(n)(1)) if the disclo-
sure had been made by another before 
the invention thereof by the applicant 
for patent. 
(D) The petitioner in a transitional pro-
ceeding that results in a final written decision 
under section 328(a) of title 35, United States 
Code, with respect to a claim in a covered busi-
ness method patent, or the petitioner’s real 
party in interest, may not assert, either in a 
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civil action arising in whole or in part under 
section 1338 of title 28, United States Code, or 
in a proceeding before the International Trade 
Commission under section 337 of the Tariff Act 
of 1930 (19 U.S.C. 1337), that the claim is in-
valid on any ground that the petitioner raised 
during that transitional proceeding. 
(E) The Director may institute a transi-
tional 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 expi-
ration of the 1-year period beginning on the date of 
the enactment of this Act and shall apply to any 
covered business method patent issued before, on, or 
after that effective date, except that the regulations 
shall not apply to a patent described in section 
6(f)(2)(A) of this Act during the period in which a 
petition for post-grant review of that patent would 
satisfy the requirements of section 321(c) of title 35, 
United States Code. 
(3) SUNSET.— 
(A) IN
GENERAL.—This subsection, and 
the regulations issued under this subsection, are 
repealed effective upon the expiration of the 8- 
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year period beginning on the date that the reg-
ulations issued under to paragraph (1) take ef-
fect. 
(B) 
APPLICABILITY.—Notwithstanding 
subparagraph (A), this subsection and the regu-
lations issued under this subsection shall con-
tinue to apply, after the date of the repeal 
under subparagraph (A), to any petition for a 
transitional proceeding that is filed before the 
date of such repeal. 
(b) REQUEST FOR STAY.— 
(1) IN GENERAL.—If a party seeks a stay of a 
civil action alleging infringement of a patent under 
section 281 of title 35, United States Code, relating 
to a transitional proceeding for that patent, the 
court shall decide whether to enter a stay based 
on— 
(A) whether a stay, or the denial thereof, 
will simplify the issues in question and stream-
line 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 
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present a clear tactical advantage for the mov-
ing party; and 
(D) whether a stay, or the denial thereof, 
will reduce the burden of litigation on the par-
ties and on the court. 
(2) REVIEW.—A party may take an immediate 
interlocutory appeal from a district court’s decision 
under paragraph (1). The United States Court of 
Appeals for the Federal Circuit shall review the dis-
trict court’s decision to ensure consistent application 
of established precedent, and such review may be de 
novo. 
(c) ATM EXEMPTION FOR VENUE PURPOSES.—In 
an action for infringement under section 281 of title 35, 
United States Code, of a covered business method patent, 
an automated teller machine shall not be deemed to be 
a regular and established place of business for purposes 
of section 1400(b) of title 28, United States Code. 
(d) DEFINITION.— 
(1) IN GENERAL.—For purposes of this section, 
the term ‘‘covered business method patent’’ means a 
patent that claims a method or corresponding appa-
ratus for performing data processing or other oper-
ations used in the practice, administration, or man-
agement of a financial product or service, except 
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that the term does not include patents for techno-
logical inventions. 
(2) REGULATIONS.—To assist in implementing 
the transitional proceeding authorized by this sub-
section, the Director shall issue regulations for de-
termining whether a patent is for a technological in-
vention. 
(e) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed as amending or interpreting cat-
egories of patent-eligible subject matter set forth under 
section 101 of title 35, United States Code. 
SEC. 19. JURISDICTION AND PROCEDURAL MATTERS. 
(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 aris-
ing under any Act of Congress relating to patents, plant 
variety protection, or copyrights. For purposes of this sub-
section, the term ‘State’ includes any State of the United 
States, the District of Columbia, the Commonwealth of 
Puerto Rico, the United States Virgin Islands, American 
Samoa, Guam, and the Northern Mariana Islands.’’. 
(b) COURT OF APPEALS FOR THE FEDERAL CIR-
CUIT.—Section 1295(a)(1) of title 28, United States Code, 
is amended to read as follows: 
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‘‘(1) of an appeal from a final decision of a dis-
trict 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 Is-
lands, in any civil action arising under, or in any 
civil action in which a party has asserted a compul-
sory counterclaim arising under, any Act of Con-
gress relating to patents or plant variety protec-
tion;’’. 
(c) REMOVAL.— 
(1) IN
GENERAL.—Chapter 89 of title 28, 
United States Code, is amended by adding at the 
end the following new section: 
‘‘§ 1454. Patent, plant variety protection, and copy-
right cases 
‘‘(a) IN GENERAL.—A civil action in which any party 
asserts a claim for relief arising under any Act of Con-
gress relating to patents, plant variety protection, or copy-
rights 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 sec-
tion 1446, except that if the removal is based solely on 
this section— 
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‘‘(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 de-
termining 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 dis-
trict court under any Act of Congress; and 
‘‘(2) may, under the circumstances specified in 
section 1367(c), remand any claims within the sup-
plemental jurisdiction of the district court under sec-
tion 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.’’. 
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(d) PROCEDURAL MATTERS IN PATENT CASES.— 
(1) JOINDER OF PARTIES AND STAY OF AC-
TIONS.—Chapter 29 of title 35, United States Code, 
as amended by this Act, is further amended by add-
ing at the end the following new section: 
‘‘§ 299. Joinder of parties 
‘‘(a) JOINDER OF ACCUSED INFRINGERS.—With re-
spect to any civil action arising under any Act of Congress 
relating to patents, other than an action or trial in which 
an act of infringement under section 271(e)(2) has been 
pled, parties that are accused infringers may be joined in 
one action as defendants or counterclaim defendants, or 
have their actions consolidated for trial, or counterclaim 
defendants only if— 
‘‘(1) any right to relief is asserted against the 
parties jointly, severally, or in the alternative with 
respect to or arising out of the same transaction, oc-
currence, or series of transactions or occurrences re-
lating to the making, using, importing into the 
United States, offering for sale, or selling of the 
same accused product or process; and 
‘‘(2) questions of fact common to all defendants 
or counterclaim defendants will arise in the action. 
‘‘(b) ALLEGATIONS INSUFFICIENT FOR JOINDER.— 
For purposes of this subsection, accused infringers may 
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