CBT’s Patent No 6,587,550 covers a system of charging an “advertising fee in return for allowing” e-mail from an authorized sender to pass through an ISP. Return Path’s Bonded Sender program (developed by Cisco) is very similar, except that the program has no advertising fee but rather charges an annual license fee.
On summary judgment, the N.D. Georgia District Court held the asserted claim 13 invalid as indefinite based upon what the court characterized as a “drafting error” made during prosecution. The claim reads as follows:
13. An apparatus for determining whether a sending party sending an electronic mail communication directed to an intended receiving party is an authorized sending party, the apparatus comprising:
a computer in communication with a network, the computer being programmed to detect analyze the electronic mail communication sent by the sending party to determine whether or not the sending party is an authorized sending party or an unauthorized sending party, and
wherein authorized sending parties are parties for whom an agreement to pay an advertising fee in return for allowing an electronic mail communication sent by the sending party to be forwarded over the network to an electronic mail address associated with the intended receiving party has been made.
The claim indicates that the computer is programmed to “detect analyze the electronic mail” and the district court could not determine the meaning of “detect analyze” and therefore held the claim indefinite under 35 U.S.C. § 112.
On appeal, the Federal Circuit has reversed — holding that there is an obvious and correctable drafting error in the claim and that the district court has the power and obligation to correct that error in the claim construction process.
Correcting Drafting Errors in Court: The common law allows district courts to correct obvious errors in patent claims. However, that correction can only apply where “the correction is not subject to reasonable debate based on consideration of the claim language and the specification and (2) the prosecution history does not suggest a different interpretation of the claims.” Novo Industries L.P. v. Micro Molds Corp., 350 F.3d 1348, 1354 (Fed. Cir. 2003). Here, the court goes on to hold that this correction process must be done as part of the claim construction and must take into account how the correction impacts the scope of the claim.
As a claim construction issue, the Federal Circuit reviewed the District Court’s analysis de novo and held that the error was not problematic. In particular, because “detect” and “analyze” are such synonyms in this context that the particular correction made did not make much of a difference, but that the best correction is to add an “and” between the two limiting words.
Certificates of Correction: The patentee could have corrected this by filing a request for a certificate of correction with the USPTO. The chart below shows the number of certificates of correction issued by the USPTO each year since 1995. I include an estimate for the rest of 2011.
Eon-Net LP v. Flagstar Bancorp (Fed. Cir. 2011) Download 09-1308 Panel: Lourie (author), Mayer and O'Malley
This decision is an important opinion in the area of litigation sanctions entered against a patentee, and should be read in conjunction with two cases issued earlier this year, iLor v. Google, 631 F.3d 1372 (Fed. Cir. 2011), and Old Reliable v. Cornell, 635 F.3d 539 (Fed. Cir. 2011). Patently-O commentary on those cases can be found here and here.
Background Eon-Net is a patent holding company formed to enforce the three patents in suit, which it did with vigor. While most of its lawsuits resulted in early settlements or dismissals, Eon-Net's suit against Flagstar took a different turn. The district court initially entered summary judgment of non-infringement on the sua sponte ground "that the written description limited the claims to processing information originating from a hard copy document and Eon-Net's position that the claims covered the processing of information entered on a website was baseless," and awarded Rule 11 sanctions. Slip Op. at 7. However, that decision was vacated by the Federal Circuit because Eon-Net had not been given an opportunity to respond, and thus "it was impossible to determine if Eon-Net's claim construction and infringement positions were without merit." Id. at 8.
On remand, the case was reassigned to a new judge and the parties engaged in the claim construction process, after which the court again limited the disputed elements to information originating from a hard copy document. Eon-Net stipulated to non-infringement. Upon motion by Flagstar, the district court found the case exceptional under 35 U.S.C. 285 and in violation of Rule 11 of the Federal Rules of Civil Procedure. On appeal, the CAFC first affirmed the district court's claim construction before turning to the exceptional case finding.
Many Varieties of Misconduct Can Support an Exceptional Case Finding Before engaging in analysis of the specific bases for the district court's exceptional case finding, the CAFC first noted that many varieties of misconduct can support an exceptional case finding under 35 U.S.C. § 285: lodging frivolous filings, engaging in vexatious or unjustified litigation, and litigation misconduct and unprofessional behavior. The court reiterated, however, that absent litigation misconduct or misconduct in securing the patent, "sanctions under § 285 may be imposed against the patentee only if both (1) the patentee brought the litigation in bad faith; and (2) the litigation is objectively baseless." Slip Op. at 17.
Eon-Net Filed Objectively Baseless Litigation in Bad Faith Affirming the district court's exceptional case finding, the Federal Circuit agreed that this lawsuit was objectively baseless, filed in bad faith and for an improper purpose. After distinguishing iLor v. Google, in which the CAFC also addressed the issue of whether a claim construction was objectively baseless, the court turned to the question of whether Eon-Net had filed the lawsuit in bad faith and for an improper purpose, concluding that it had:
In particular, the district court found that Eon-Net’s case against Flagstar had “indicia of extortion” because it was part of Eon-Net’s history of filing nearly identical patent infringement complaints against a plethora of diverse defendants, where Eon-Net followed each filing with a demand for a quick settlement at a price far lower than the cost to defend the litigation.
Slip Op. at 22. This strategy of exploiting the high cost to defend complex patent litigation in order to extract nuisance value settlements constituted bad faith. The court pointed to Eon-Net's pattern of filing complaints, then demanding quick settlements at a price far lower than the cost of litigation. Parties must either expend significant resources to defend against the suit – as Flagstar did in this case – or give in to the nuissance settlement demand. FIling such a meritless lawsuit also is also a waste of judicial resources, as it "unnecessarily require[s] the district court to engage in excessive claim construction analysis before it is able to see the lack of merit of the patentee's infringement allegations." Slip Op. at 23.
Of course, patentees should be able to enforce their patent rights or offer licensing terms. Nevertheless, "the appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably based in law and fact and to litigate those cases in good faith." Slip Op. at 24.
Comment: although the CAFC affirmed the district court's finding that Eon-Net had acted with an improper purpose, it did not suggest that that requirement should be grafted onto the "bad faith" element.
The CAFC also affirmed the district court's finding that Eon-Net and Zimmerman had engaged in litigation misconduct and its imposition of Rule 11 sanctions.
The following list provides the most-often cited cases in BPAI decisions thus-far in 2011.
The vast majority of BPAI decisions involve a patent applicant appealing an examiner's final rejection and the most common patentability issue on appeal is obviousness. Thus, it is not surprising that many of the cited cases involve obviousness and claim construction issues. These cases have influenced the court in the past and are likely to continue to do so.
KSR v. Teleflex, 550 U.S. 398 (2007) (Standard for obviousness);
In re KAHN, 441 F.3d 977 (Fed. Cir. 2006) (Reasons for obviousness determination must be articulated);
In re AMERICAN ACADEMY OF SCIENCE TECH CENTER., 367 F.3d 1359 (Fed. Cir. 2004) (Claims should be given their broadest reasonable interpretation);
In re OETIKER, 977 F.2d 1443 (Fed. Cir. 1992) (The examiner has the burden of presenting a prima facie case for rejection);
Graham v. John Deere, 383 U.S. 1 (1966) (Methodology for determining obviousness);
In re Keller, 642 F.2d 413 (C.C.P.A. 1981) (A rejection premised upon a combination of references cannot be overcome by attacking the references individually);
In re Morris, 127 F.3d 1048 (Fed. Cir. 1997) (Claims should be given their broadest reasonable interpretation consistent with the specification);
Phillips v. AWH Corp., 415 F.3d 1303 (Fed. Cir. 2005) (ordinary meaning of claim);
In re Merck, 800 F.2d 1091 (Fed. Cir. 1986) (Non-obviousness cannot be established by attacking references individually where the rejection is based upon the teachings of a combination of references);
In re Best, 562 F.2d 1252 (C.C.P.A. 1977) (When the PTO identifies prior art that is the same or substantially the same as claimed subject matter, the burden shifts to the applicant to come forward with evidence and argument showing that the prior art products do not necessarily or inherently possess the characteristics of the claimed product);
In re Zletz, 893 F.2d 319 (Fed. Cir. 1989) (Claims must be interpreted as broadly as their terms reasonably allow but limitations should not be read into claims);
In re Schreiber, 128 F.3d 1473 (Fed. Cir. 1997) (claim structure form primary claim limitations; elements of anticipation);
In re Spada, 911 F.2d 705 (Fed. Cir. 1990) (process of proving anticipation);
In re Gurley, 27 F.3d 551 (Fed. Cir. 1994) (Teaching away; A known or obvious composition does not become patentable simply because it has been described as somewhat inferior to some other product for the same use); and
In re Warner, 379 F.2d 1011 (C.C.P.A. 1967) (The PTO must produce factual basis for its decisions).
To create the table, I first parsed all of the BPAI decisions that have been released thus far in 2011 in order to create a table of authority for each case. I then ranked the cited cases to find those that were most-often cited.
As an interesting tidbit, I also looked for correlation between the citation of a particular case and the outcome of the BPAI decision. As you might expect, some cases are better for patent applicants. Two examples of this are In re Warner and In re Gurley. In cases citing Warner, the examiner's rejections are affirmed less than 10% of time. On the flip side – cases citing Gurley affirm the examiner rejection in more than 80% of cases.
James Brookshire of the Federal Circuit Bar Association (FCBA) sent me a note today that Judge Glenn Archer has died. Judge Archer first joined the Court of Appeals for the Federal Circuit in 1985 after a career as a JAG lawyer, a private practitioner, and an Assistant Attorney General of the Department of Justice Tax Division. Judge Archer was born in my home state of Kansas and left to attend Yale in the late 1940’s. After Yale, he attended law school at George Washington in DC.
Judge Archer was Chief Judge of the Federal Circuit from 1994-1997 when he took senior status at the age of 68. His line on the court was not filled until 2000 when Judge Dyk was confirmed by the Senate. Judge Archer’s last opinion for the court was in January 2011 in a case captioned Wiley v. Merit Systems Protection Bd. Chief Judge Rader and Judge Gajarsa joined Judge Archer’s opinion holding that the MSPB had failed to properly follow the procedural requirements concerning a retired federal employee’s survivor annuity. As a senior judge in 1998, Judge Archer was tasked with drafting the majority opinion in the en banc case of Cybor Corp. v. FAS Technologies, Inc., 138 F.3d 1448 (Fed. Cir. 1998). His opinion, written in the wake of the Supreme Court’s Markman decision, held that claim construction was a “purely legal issue” subject to “de novo review on appeal.” That still-controversial decision has now been cited more than 8,000 times.
A 2008 IP Law & Business article discussed the close connection between Judge Archer’s former clerks. These clerks include Judge Kimberly Moore, Professor Tim Holbrook, Frank Angileri, and Teresa Lavenue.
In a four-page Federal Register notice of proposed rulemaking of proposed rulemaking, the US Patent Office has indicated its intent to revise its duty-to-disclose standards based upon the recent Federal Circuit en banc decision in Therasense, Inc. v. Becton, Dickinson & Co., — F.3d — (Fed. Cir. 2011).
In Therasense, the Federal Circuit held that, apart from potentially affirmative egregious misconduct, inequitable conduct in patent prosecution should not be found unless it is proven that the misconduct was a “but for” cause of the patent issuing. Focusing specifically on the failure to disclose prior art, the court wrote: “[w]hen an applicant fails to disclose prior art to the PTO, that prior art is but-for material if the PTO would not have allowed a claim had it been aware of the undisclosed prior art.” The office introduces its proposal as follows:
Specifically, the Office is proposing to revise the materiality standard for the duty to disclose to match the materiality standard, as defined in Therasense, for the inequitable conduct doctrine. While Therasense does not require the Office to harmonize the materiality standards underlying the duty of disclosure and the inequitable conduct doctrine, the Office believes that there are important reasons to do so. The materiality standard set forth in Therasense should reduce the frequency with which applicants and practitioners are being charged with inequitable conduct, consequently reducing the incentive to submit information disclosure statements containing marginally relevant information and enabling applicants to be more forthcoming and helpful to the Office. At the same time, it should also continue to prevent fraud on the Office and other egregious forms of misconduct. Additionally, harmonization of the materiality standards is simpler for the patent system as a whole.
The newly proposed Rule 56(b) (37 C.F.R. 1.56(b)) would read as follows:
Sec. 1.56 Duty to disclose information material to patentability.
* * * * *
(b) Information is material to patentability if it is material under the standard set forth in Therasense, Inc. v. Becton, Dickinson & Co., — F.3d — (Fed. Cir. 2011). Information is material to patentability under Therasense if:
(1) The Office would not allow a claim if it were aware of the information, applying the preponderance of the evidence standard and giving the claim its broadest reasonable construction; or
(2) The applicant engages in affirmative egregious misconduct before the Office as to the information.
* * * * *
Under the new rule, the mere failure to disclose information will never be considered material to patentability if the pending claim is allowable. A parallel change would be made to the disclosure rules governing reexaminations.
The current Rule 56(b) defines material information as non-cumulative information that either (1) “by itself or in combination with other information…compels a conclusion that a claim is unpatentable under the preponderance of evidence, burden-of-proof standard” or (2) is inconsistent with “a position the applicant takes” arguing that the claim is patentable. The current rule implemented in 1992 and was itself an attempt by the USPTO to limit the scope of materiality. The pre-1992 rule required submission of information whenever there was a “substantial likelihood that a reasonable examiner would consider [the information] important in deciding whether to allow the application to issue a patent.”
Thus far in 2011, the average issued patent cites 42 prior art references. This number is highly skewed because of a minority of patents that cite to an excessively large number of prior art references. The median patent in 2011 cites 17 references. Only 8% of the 2011 patents cite more than 100 references, but those patents collectively cite more references than the other 92% combined.
The USPTO is also seeking comment on other actions that “may provide an incentive for applicants to assist the Office by explaining/clarifying the relationship of prior art to the claimed invention.”
Written comments regarding the proposed rule change should be submitted to AC58.comments@uspto.gov within the next 60 days (by September 19, 2011).
For patent applications filed since 1995, the patent term is calculated by adding twenty years to the filing date. US applicants can add up to one year to the term by first filing a provisional application and then, after a one-year delay, filing a regular (non-provisional) application. This is because the filing of the provisional application does not trigger the beginning of the twenty year term. Provisional applications have the additional benefit of delaying some prosecution costs. However, the total application cost may well be greater because of the added fees and attorney oversight.
Shifted Term: Although the patent term with a provisional application can be up to twenty-one years from the provisional filing (not counting other term adjustments), the effective term (issue date to expiry date) is not really changed. Rather, because the USPTO does not examine (or even queue) provisional applications, the extra year on the end of the term is balanced by an extra year in prosecution. Thus, the trade-off is a question of whether the additional enforceable time is more valuable in three years from filing or in twenty years.
Taking Advantage of Provisional Patent: The chart below shows the percent of US originated patents issued in 2010–2011 that claim priority to one or more provisional patent applications, grouped by USPTO technology center. Provisional applications have become popular across all technology areas. However, when compared with other areas of technology, the patents examined in Technology Center 1600 (Biotechnology and Organic Chemistry) are much more likely to claim priority to provisional applications and gain the year of delay. In that area, research competition and a norm of academic publication requires that applications be filed early in the development process to avoid loss-of-rights. Yet, products are typically not ready or approved for market by the time of issuance. It is unclear at this point how many applicants will take advantage of the USPTO’s two-year delay program.
USPTO Technology Centers:
1600 – Biotechnology and Organic Chemistry 1700 – Chemical and Materials Engineering 2100 – Computer Architecture, Software, and Information Security 2400 – Computer Networks, Multiplex communication, Video Distribution, and Security 2600 – Communications 2800 – Semiconductors, Electrical and Optical Systems and Components 2900 – Designs 3600 – Transportation,Construction, Electronic Commerce, Agriculture, National Security and License & Review 3700 – Mechanical Engineering, Manufacturing, Products
Over the past several years, the percent of patents that claim priority to a provisional application has continued to rise. I expect that trend to continue.
Retractable Technologies v. Becton, Dickinson and Company (BD) (Fed. Cir. 2011)
In 2010, Judge Folsom of the Eastern District of Texas confirmed the jury finding that BD was liable for infringing three of RTI’s retractable syringe patents and that BD’s invalidity arguments were not convincing. On appeal a two-member majority (Judges Lourie and Plager) reversed-in-part — finding that the district court had erred in its construing of the term “body” too broadly by not limiting the term to a “one piece body.” The majority opinion was written by Judge Lourie. Judge Plager filed a concurring opinion asking courts to focus on the “actual invention” when construing claims. Chief Judge Rader wrote in dissent that the majority’s construction improperly imported limitations from the specification into the claims.
I begin with Judge Plager’s minority view of focusing attention on the actual invention (rather than solely on the written claim language) that has been a recent topic for discussion in the legal academy.
Plager writes:
However much desired by the claim drafters, who want claims that serve as business weapons and litigation threats, the claims cannot go beyond the actual invention that entitles the inventor to a patent. For that we look to the written description. I have written elsewhere about the curse of indefinite and ambiguous claims, divorced from the written description, that we regularly are asked to construe, and the need for more stringent rules to control the curse.
I understand how a perfectly competent trial judge can be persuaded by the siren song of litigation counsel to give the jury wide scope regarding what is claimed. But it is a song to which courts should turn a deaf ear if patents are to serve the purposes for which they exist, including the obligation to make full disclosure of what is actually invented, and to claim that and nothing more.
Although the written description and enablement requirements are intended to ensure that the claim scope is commensurate with the disclosure, Plager’s approach has some merit as a mechanism for allowing courts to adjust patent scope based on disclosure problems rather than the binary valid/invalid choice available under Section 112 p1 defenses.
The Majority Claim Construction: The meaning of a patent claim is considered a question of law that is reviewed de novo on appeal. That is, on appeal, no deference is to be given to the lower court’s opinion. In the 2005 en banc decision of Phillips v. AWH, 415 F.3d 1303, the Federal Circuit wrote that claim meaning should be determined by looking at the words of the claims themselves; the patent specification; the prosecution history; and any relevant extrinsic evidence. Phillips changed the law of claim construction by requiring that clams always be construed “in view of the written description.”
One-Piece Body: The claimed syringe includes a limitation to “a hollow syringe body comprising a barrel and having a front end portion and a back end portion, the back end portion further comprising at least one radially extending member providing finger grips for the syringe body.” The district court looked primarily to the claim language in ruling that the claimed “body” is not limited to a one-piece structure (except for dependent claim 25 that did explicitly limit the body to “one piece”).
Claim Differentiation: On appeal, the Federal Circuit first addressed the claim differentiation argument and found a weak implication that a claimed “body” should be broader than a claimed “one piece body.”
While the patents contain an independent claim that recites a “body,” with a dependent claim that limits the “body” to a “one-piece body,” none of the claims expressly recite a body that contains multiple pieces. Thus, while the claims can be read to imply that a “body” is not limited to a one-piece structure, that implication is not a strong one.
The decision suggests that the claim differentiation would have been a much stronger argument if a separate dependant claim had been limited to “a multiple-piece body” or “a non-one-piece body.”
Specification: In several decisions, the Federal Circuit has ruled that claim differentiation arguments will be outweighed by a contrary construction “dictated by the written description or prosecution history.” Here, the court found that the specification’s background section discussing the prior dictated the a narrow construction. In particular, the background section of one of the asserted patents included the following line:
The prior art has not recognized that such a structure can be molded as a one piece outer body
And, the Summary of the Invention stated that the invented syringe “features a one piece hollow outer body.” The specification discusses several embodiments of a one piece body and never discloses a body that consists of anything other than a one-piece body (except in disparaging the prior art).
In considering these competing arguments, the court noted that there is a very “fine line between construing the claims in light of the specification and improperly importing a limitation from the specification into the claims.” Here, the court ruled the one piece body is necessary “to tether the claims to what the specifications indicate the inventor actually invented.”
Chief Judge Rader’s dissent evokes the pre-Phillips notion that a patent claim can often be read in a vacuum unless scope is disclaimed during prosecution or terms specially defined in the specification.
He writes:
[Under Phillips] Claim language is to be given its ordinary and customary meaning, as understood by a person of ordinary skill in the art at the time of the invention. In this case, neither party contends that “body” has a special, technical meaning in the field of art, and thus claim construction requires “little more than the application of the widely accepted meaning of commonly understood words.” (quoting Phillips). The ordinary and customary meaning of “body” does not inherently contain a one-piece structural limitation. Moreover, neither the claim language nor the written description evinces intent by the patentee to limit the scope of “body” to one-piece bodies.
. . .
Certainly, the claims do not stand alone and must be read in light of the specifications. Nothing in the specifications, however, rebuts the strong presumption created by the claim language that “body” does not contain a one-piece structural limitation. The specifications do not reveal a special definition given by the inventor to the word “body.” Nor do the specifications contain an intentional disclaimer or disavowal of claim scope by the inventor.
This opinion serves as evidence that the court continues to struggle with claim construction and that there continues to be some amount of panel dependence in the results.
(1) DIRECTOR.—The term “Director” means the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office.
(2) OFFICE.—The term “Office” means the United States Patent and Trademark Office.
(3) PATENT PUBLIC ADVISORY COMMITTEE.—The term “Patent Public Advisory Committee” means the Patent Public Advisory Committee established under section 5(a) of title 35, United States Code.
(4) TRADEMARK ACT OF 1946.—The term “Trademark Act of 1946” means the Act entitled “An Act to provide for the registration and protection of trademarks used in commerce, to carry out the provisions of certain international conventions, and for other purposes”, approved July 5, 1946 (15 U.S.C. 1051 et seq.) (commonly referred to as the “Trademark Act of 1946” or the “Lanham Act”).
(5) TRADEMARK PUBLIC ADVISORY COMMITTEE.—The term “Trademark Public Advisory Committee” means the Trademark Public Advisory Committee established under section 5(a) of title 35, United States Code.
SEC. 3. FIRST INVENTOR TO FILE.
(a) Definitions.—Section 100 of title 35, United States Code, is amended—
(1) in subsection (e), by striking “or inter partes reexamination under section 311”; and
(2) 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:
Ҥ 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
“(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:
Ҥ 103. Conditions for patentability; non-obvious 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.
(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:
Ҥ 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:
Ҥ 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 on 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 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. In appropriate circumstances, the Patent Trial and Appeal Board may correct the naming of the inventor in any application or patent at issue. The Director shall prescribe regulations setting forth standards for the conduct of derivation proceedings, including requiring parties to provide sufficient evidence to prove and rebut a claim of derivation.
“(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, and 305 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) Section 146 of title 35, United States Code, is amended—
(i) by striking “an interference” and inserting “a derivation proceeding”; and
(ii) by striking “the interference” and inserting “the 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.
“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 States 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 on 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:
(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 effective date set forth in paragraph (1) of this subsection, 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.
(o) Sense Of Congress.—It is the sense of the Congress that converting the United States patent system from “first to invent” to a system of “first inventor to file” will promote the progress of science and the useful arts by securing for limited times to inventors the exclusive rights to their discoveries and provide inventors with greater certainty regarding the scope of protection provided by the grant of exclusive rights to their discoveries.
(p) Sense Of Congress.—It is the sense of the Congress that converting the United States patent system from “first to invent” to a system of “first inventor to file” will improve the United States patent system and promote harmonization of the United States patent system with the patent systems commonly used in nearly all other countries throughout the world with whom the United States conducts trade and thereby promote greater international uniformity and certainty in the procedures used for securing the exclusive rights of inventors to their discoveries.
SEC. 4. 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.
“(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 Substitute Statement.—
“(1) EXCEPTION.—The requirements under this section shall not apply to an individual with respect to an application for patent in which the individual is named as the inventor or a joint inventor and 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 earlier-filed application;
“(B) a substitute statement meeting the requirements of subsection (d) was filed in connection with the earlier filed application with respect to the individual; or
“(C) an assignment meeting the requirements of subsection (e) was executed with respect to the earlier-filed application by the individual and was recorded in connection with the earlier-filed application.
“(2) COPIES OF OATHS, DECLARATIONS, STATEMENTS, OR ASSIGNMENTS.—Notwithstanding paragraph (1), the Director may require that a copy of the executed oath or declaration, the substitute statement, or the assignment filed in connection with the earlier-filed application be included in the later-filed application.
“(h) Supplemental And Corrected Statements; Filing Additional Statements.—
“(1) IN GENERAL.—Any person making a statement required under this section may withdraw, replace, or otherwise correct the statement at any time. If a change is made in the naming of the inventor requiring the filing of 1 or more additional statements under this section, the Director shall establish regulations under which such additional statements may be filed.
“(2) SUPPLEMENTAL STATEMENTS NOT REQUIRED.—If an individual has executed an oath or declaration meeting the requirements of subsection (a) or an assignment meeting the requirements of subsection (e) with respect to an application for patent, the Director may not thereafter require that individual to make any additional oath, declaration, or other statement equivalent to those required by this section in connection with the application for patent or any patent issuing thereon.
“(3) SAVINGS CLAUSE.—A patent shall not be invalid or unenforceable based upon the failure to comply with a requirement under this section if the failure is remedied as provided under paragraph (1).
“(i) Acknowledgment Of Penalties.—Any declaration or statement filed pursuant to this section shall contain an acknowledgment that any willful false statement made in such declaration or statement is punishable under section 1001 of title 18 by fine or imprisonment of not more than 5 years, or both.”.
(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—
(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:
Ҥ 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) of title 35, United States Code, is amended by striking “the first paragraph of section 112 of this title” and inserting “section 112(a)”.
(2) Section 111(b)(2) of title 35, United States Code, 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. 5. DEFENSE TO INFRINGEMENT BASED ON PRIOR COMMERCIAL USE.
(a) In General.—Section 273 of title 35, United States Code, is amended to read as follows:
Ҥ 273. Defense to infringement based on prior commercial use
“(a) In General.—A person shall be entitled to a defense under section 282(b) with respect to subject matter consisting of a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process, that would otherwise infringe a claimed invention being asserted against the person if—
“(1) such person, acting in good faith, commercially used the subject matter in the United States, either in connection with an internal commercial use or an actual arm’s length sale or other arm’s length commercial transfer of a useful end result of such commercial use; and
“(2) such commercial use occurred at least 1 year before the earlier of either—
“(A) the effective filing date of the claimed invention; or
“(B) the date on which the claimed invention was disclosed to the public in a manner that qualified for the exception from prior art under section 102(b).
“(b) Burden Of Proof.—A person asserting a defense under this section shall have the burden of establishing the defense by clear and convincing evidence.
“(c) Additional Commercial Uses.—
“(1) PREMARKETING REGULATORY REVIEW.—Subject matter for which commercial marketing or use is subject to a premarketing regulatory review period during which the safety or efficacy of the subject matter is established, including any period specified in section 156(g), shall be deemed to be commercially used for purposes of subsection (a)(1) during such regulatory review period.
“(2) NONPROFIT LABORATORY USE.—A use of subject matter by a nonprofit research laboratory or other nonprofit entity, such as a university or hospital, for which the public is the intended beneficiary, shall be deemed to be a commercial use for purposes of subsection (a)(1), except that a defense under this section may be asserted pursuant to this paragraph only for continued and noncommercial use by and in the laboratory or other nonprofit entity.
“(d) Exhaustion Of Rights.—Notwithstanding subsection (e)(1), the sale or other disposition of a useful end result by a person entitled to assert a defense under this section in connection with a patent with respect to that useful end result shall exhaust the patent owner’s rights under the patent to the extent that such rights would have been exhausted had such sale or other disposition been made by the patent owner.
“(e) Limitations And Exceptions.—
“(1) PERSONAL DEFENSE.—
“(A) IN GENERAL.—A defense under this section may be asserted only by the person who performed or directed the performance of the commercial use described in subsection (a), or by an entity that controls, is controlled by, or is under common control with such person.
“(B) TRANSFER OF RIGHT.—Except for any transfer to the patent owner, the right to assert a defense under this section shall not be licensed or assigned or transferred to another person except as an ancillary and subordinate part of a good-faith assignment or transfer for other reasons of the entire enterprise or line of business to which the defense relates.
“(C) RESTRICTION ON SITES.—A defense under this section, when acquired by a person as part of an assignment or transfer described in subparagraph (B), may only be asserted for uses at sites where the subject matter that would otherwise infringe a claimed invention is in use before the later of the effective filing date of the claimed invention or the date of the assignment or transfer of such enterprise or line of business.
“(2) DERIVATION.—A person may not assert a defense under this section if the subject matter on which the defense is based was derived from the patentee or persons in privity with the patentee.
“(3) NOT A GENERAL LICENSE.—The defense asserted by a person under this section is not a general license under all claims of the patent at issue, but extends only to the specific subject matter for which it has been established that a commercial use that qualifies under this section occurred, except that the defense shall also extend to variations in the quantity or volume of use of the claimed subject matter, and to improvements in the claimed subject matter that do not infringe additional specifically claimed subject matter of the patent.
“(4) ABANDONMENT OF USE.—A person who has abandoned commercial use (that qualifies under this section) of subject matter may not rely on activities performed before the date of such abandonment in establishing a defense under this section with respect to actions taken on or after the date of such abandonment.
“(5) UNIVERSITY EXCEPTION.—
“(A) IN GENERAL.—A person commercially using subject matter to which subsection (a) applies may not assert a defense under this section if the claimed invention with respect to which the defense is asserted was, at the time the invention was made, owned or subject to an obligation of assignment to either an institution of higher education (as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), or a technology transfer organization whose primary purpose is to facilitate the commercialization of technologies developed by one or more such institutions of higher education.
“(B) EXCEPTION.—Subparagraph (A) shall not apply if any of the activities required to reduce to practice the subject matter of the claimed invention could not have been undertaken using funds provided by the Federal Government.
“(f) Unreasonable Assertion Of Defense.—If the defense under this section is pleaded by a person who is found to infringe the patent and who subsequently fails to demonstrate a reasonable basis for asserting the defense, the court shall find the case exceptional for the purpose of awarding attorney fees under section 285.
“(g) Invalidity.—A patent shall not be deemed to be invalid under section 102 or 103 solely because a defense is raised or established under this section.”.
(b) Conforming Amendment.—The item relating to section 273 in the table of sections for chapter 28 of title 35, United States Code, is amended to read as follows:
“273. Defense to infringement based on prior commercial use.”.
(c) Effective Date.—The amendments made by this section shall apply to any patent issued on or after the date of the enactment of this Act.
SEC. 6. POST-GRANT REVIEW PROCEEDINGS.
(a) Inter Partes Review.—Chapter 31 of title 35, United States Code, is amended to read as follows:
“(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—
“(1) the date that is 9 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.
Ҥ 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.
Ҥ 313. Preliminary response to petition
“If an inter partes review petition is filed under section 311, the patent owner shall have the right to file a preliminary response to the petition, within a time period set by the Director, that sets forth reasons why no inter partes review should be instituted based upon the failure of the petition to meet any requirement of this chapter.
Ҥ 314. Institution of inter partes review
“(a) Threshold.—The Director may not authorize an inter partes review to be instituted unless the Director determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition.
“(b) Timing.—The Director shall determine whether to institute an inter partes review under this chapter pursuant to a petition filed under section 311 within 3 months after—
“(1) receiving a preliminary response to the petition 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.
Ҥ 315. Relation to other proceedings or actions
“(a) Infringer’s Civil Action.—
“(1) INTER PARTES REVIEW BARRED BY CIVIL ACTION.—An inter partes review may not be instituted if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.
“(2) STAY OF CIVIL ACTION.—If the petitioner or real party in interest files a civil action challenging the validity of a claim of the patent on or after the date on which the petitioner files a petition for inter partes review of the patent, that civil action shall be automatically stayed until either—
“(A) the patent owner moves the court to lift the stay;
“(B) the patent owner files a civil action or counterclaim alleging that the petitioner or real party in interest has infringed the patent; or
“(C) the petitioner or real party in interest moves the court to dismiss the civil action.
“(3) TREATMENT OF COUNTERCLAIM.—A counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of a patent for purposes of this subsection.
“(b) Patent Owner’s Action.—An inter partes review may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent. The time limitation set forth in the preceding sentence shall not apply to a request for joinder under subsection (c).
“(c) Joinder.—If the Director institutes an inter partes review, the Director, in his or her discretion, may join as a party to that inter partes review any person who properly files a petition under section 311 that the Director, after receiving a preliminary response under section 313 or the expiration of the time for filing such a response, determines warrants the institution of an inter partes review under section 314.
“(d) Multiple Proceedings.—Notwithstanding sections 135(a), 251, and 252, and chapter 30, during the pendency of an inter partes review, if another proceeding or matter involving the patent is before the Office, the Director may determine the manner in which the inter partes review or other proceeding or matter may proceed, including providing for stay, transfer, consolidation, or termination of any such matter or proceeding.
“(e) Estoppel.—
“(1) PROCEEDINGS BEFORE THE OFFICE.—The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
“(2) CIVIL ACTIONS AND OTHER PROCEEDINGS.—The petitioner in an inter partes review of a claim in a patent under this chapter that results in a final written decision under section 318(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that inter partes review.
Ҥ 316. Conduct of inter partes review
“(a) Regulations.—The Director shall prescribe regulations—
“(1) providing that the file of any proceeding under this chapter shall be made available to the public, except that any petition or document filed with the intent that it be sealed shall, if accompanied by a motion to seal, be treated as sealed pending the outcome of the ruling on the motion;
“(2) setting forth the standards for the showing of sufficient grounds to institute a review under section 314(a);
“(3) establishing procedures for the submission of supplemental information after the petition is filed;
“(4) establishing and governing inter partes review under this chapter and the relationship of such review to other proceedings under this title;
“(5) setting forth standards and procedures for discovery of relevant evidence, including that such discovery shall be limited to—
“(A) the deposition of witnesses submitting affidavits or declarations; and
“(B) what is otherwise necessary in the interest of justice;
“(6) prescribing sanctions for abuse of discovery, abuse of process, or any other improper use of the proceeding, such as to harass or to cause unnecessary delay or an unnecessary increase in the cost of the proceeding;
“(7) providing for protective orders governing the exchange and submission of confidential information;
“(8) providing for the filing by the patent owner of a response to the petition under section 313 after an inter partes review has been instituted, and requiring that the patent owner file with such response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the response;
“(9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d) to cancel a challenged claim or propose a reasonable number of substitute claims, and ensuring that any information submitted by the patent owner in support of any amendment entered under subsection (d) is made available to the public as part of the prosecution history of the patent;
“(10) providing either party with the right to an oral hearing as part of the proceeding;
“(11) requiring that the final determination in an inter partes review be issued not later than 1 year after the date on which the Director notices the institution of a review under this chapter, except that the Director may, for good cause shown, extend the 1-year period by not more than 6 months, and may adjust the time periods in this paragraph in the case of joinder under section 315(c);
“(12) setting a time period for requesting joinder under section 315(c); and
“(13) providing the petitioner with at least 1 opportunity to file written comments within a time period established by the Director.
“(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 inter partes review instituted under this chapter.
“(d) Amendment Of The Patent.—
“(1) IN GENERAL.—During an inter partes review instituted under this chapter, the patent owner may file 1 motion to amend the patent in 1 or more of the following ways:
“(A) Cancel any challenged patent claim.
“(B) For each challenged claim, propose a reasonable number of substitute claims.
“(2) ADDITIONAL MOTIONS.—Additional motions to amend may be permitted upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 317, or as permitted by regulations prescribed by the Director.
“(3) SCOPE OF CLAIMS.—An amendment under this subsection may not enlarge the scope of the claims of the patent or introduce new matter.
“(e) Evidentiary Standards.—In an inter partes review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.
Ҥ 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 attach to the petitioner, or to the real party in interest or privy of the petitioner, on the basis of that petitioner’s institution of that inter partes review. 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. 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, and shall be made available only to Federal Government agencies on written request, or to any person on a showing of good cause.
Ҥ 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.
“(c) Intervening Rights.—Any proposed amended or new claim determined to be patentable and incorporated into a patent following an inter partes review under this chapter shall have the same effect as that specified in section 252 for reissued patents on the right of any person who made, purchased, or used within the United States, or imported into the United States, anything patented by such proposed amended or new claim, or who made substantial preparation therefor, before the issuance of a certificate under subsection (b).
“(d) 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.
Ҥ 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.”.
(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 underchapter 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 inter partes reexaminations that are ordered under chapter 31 of title 35, United States Code, in the last fiscal year ending before the effective date of the amendments made by subsection (a).
(3) TRANSITION.—
(A) IN GENERAL.—Chapter 31 of title 35, United States Code, is amended—
(i) in section 312—
(I) in subsection (a)—
(aa) in the first sentence, by striking “a substantial new question of patentability affecting any claim of the patent concerned is raised by the request,” and inserting “the information presented in the request shows that there is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request,”; and
(bb) in the second sentence, by striking “The existence of a substantial new question of patentability” and inserting “A showing that there is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request”; and
(II) in subsection (c), in the second sentence, by striking “no substantial new question of patentability has been raised,” and inserting “the showing required by subsection (a) has not been made,”; and
(ii) in section 313, by striking “a substantial new question of patentability affecting a claim of the patent is raised” and inserting “it has been shown that there is a reasonable likelihood that the requester would prevail with respect to at least 1 of the claims challenged in the request”.
(B) APPLICATION.—The amendments made by this paragraph—
(i) shall take effect on the date of the enactment of this Act; and
(ii) shall apply to requests for inter partes reexamination that are filed on or after such date of enactment, but before the effective date set forth in paragraph (2)(A) of this subsection.
(C) CONTINUED APPLICABILITY OF PRIOR PROVISIONS.—The provisions of chapter 31 of title 35, United States Code, as amended by this paragraph, shall continue to apply to requests for inter partes reexamination that are filed before the effective date set forth in paragraph (2)(A) as if subsection (a) had not been enacted.
(d) Post-Grant Review.—Part III of title 35, United States Code, is amended by adding at the end the following:
“(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 a post-grant 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 post-grant review.
“(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 9 months after the date of the grant of the patent or of the issuance of a reissue patent (as the case may be).
Ҥ 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.
Ҥ 323. Preliminary response to petition
“If a post-grant review petition is filed under section 321, the patent owner shall have the right to file a preliminary response to the petition, within a time period set by the Director, that sets forth reasons why no post-grant review should be instituted based upon the failure of the petition to meet any requirement of this chapter.
Ҥ 324. Institution of post-grant review
“(a) Threshold.—The Director may not authorize a post-grant review to be instituted 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. Such notice shall include the date on which the review shall commence.
“(e) No Appeal.—The determination by the Director whether to institute a post-grant review under this section shall be final and nonappealable.
Ҥ 325. Relation to other proceedings or actions
“(a) Infringer’s Civil Action.—
“(1) POST-GRANT REVIEW BARRED BY CIVIL ACTION.—A post-grant review may not be instituted under this chapter if, before the date on which the petition for such a review is filed, the petitioner or real party in interest filed a civil action challenging the validity of a claim of the patent.
“(2) STAY OF CIVIL ACTION.—If the petitioner or real party in interest files a civil action challenging the validity of a claim of the patent on or after the date on which the petitioner files a petition for post-grant review of the patent, that civil action shall be automatically stayed until either—
“(A) the patent owner moves the court to lift the stay;
“(B) the patent owner files a civil action or counterclaim alleging that the petitioner or real party in interest has infringed the patent; or
“(C) the petitioner or real party in interest moves the court to dismiss the civil action.
“(3) TREATMENT OF COUNTERCLAIM.—A counterclaim challenging the validity of a claim of a patent does not constitute a civil action challenging the validity of a claim of a patent for purposes of this subsection.
“(b) Preliminary Injunctions.—If a civil action alleging infringement of a patent is filed within 3 months after the date on which the patent is granted, the court may not stay its consideration of the patent owner’s motion for a preliminary injunction against infringement of the patent on the basis that a petition for post-grant review has been filed under this chapter or that such a post-grant review has been instituted under this chapter.
“(c) Joinder.—If more than 1 petition for a post-grant review under this chapter is properly filed against the same patent and the Director determines that more than 1 of these petitions warrants the institution of a post-grant review under section 324, the Director may consolidate such reviews into a single post-grant review.
“(d) Multiple Proceedings.—Notwithstanding sections 135(a), 251, and 252, and chapter 30, during the pendency of any post-grant review under this chapter, if another proceeding or matter involving the patent is before the Office, the Director may determine the manner in which the post-grant review or other proceeding or matter may proceed, including providing for the stay, transfer, consolidation, or termination of any such matter or proceeding. In determining whether to institute or order a proceeding under this chapter, chapter 30, or chapter 31, the Director may take into account whether, and reject the petition or request because, the same or substantially the same prior art or arguments previously were presented to the Office.
“(e) Estoppel.—
“(1) PROCEEDINGS BEFORE THE OFFICE.—The petitioner in a post-grant review of a claim in a patent under this chapter that results in a final written decision under section 328(a), or the real party in interest or privy of the petitioner, may not request or maintain a proceeding before the Office with respect to that claim on any ground that the petitioner raised or reasonably could have raised during that post-grant review.
“(2) CIVIL ACTIONS AND OTHER PROCEEDINGS.—The petitioner in a post-grant review of a claim in a patent under this chapter that results in a final written decision under section 328(a), or the real party in interest or privy of the petitioner, may not assert either in a civil action arising in whole or in part under section 1338 of title 28 or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 that the claim is invalid on any ground that the petitioner raised or reasonably could have raised during that post-grant review.
“(f) Reissue Patents.—A post-grant review may not be instituted under this chapter if the petition requests cancellation of a claim in a reissue patent that is identical to or narrower than a claim in the original patent from which the reissue patent was issued, and the time limitations in section 321(c) would bar filing a petition for a post-grant review for such original patent.
Ҥ 326. Conduct of post-grant review
“(a) Regulations.—The Director shall prescribe regulations—
“(1) providing that the file of any proceeding under this chapter shall be made available to the public, except that any petition or document filed with the intent that it be sealed shall, if accompanied by a motion to seal, be treated as sealed pending the outcome of the ruling on the motion;
“(2) setting forth the standards for the showing of sufficient grounds to institute a review under subsections (a) and (b) of section 324;
“(3) establishing procedures for the submission of supplemental information after the petition is filed;
“(4) establishing and governing a post-grant review under this chapter and the relationship of such review to other proceedings under this title;
“(5) setting forth standards and procedures for discovery of relevant evidence, including that such discovery shall be limited to evidence directly related to factual assertions advanced by either party in the proceeding;
“(6) prescribing sanctions for abuse of discovery, abuse of process, or any other improper use of the proceeding, such as to harass or to cause unnecessary delay or an unnecessary increase in the cost of the proceeding;
“(7) providing for protective orders governing the exchange and submission of confidential information;
“(8) providing for the filing by the patent owner of a response to the petition under section 323 after a post-grant review has been instituted, and requiring that the patent owner file with such response, through affidavits or declarations, any additional factual evidence and expert opinions on which the patent owner relies in support of the response;
“(9) setting forth standards and procedures for allowing the patent owner to move to amend the patent under subsection (d) to cancel a challenged claim or propose a reasonable number of substitute claims, and ensuring that any information submitted by the patent owner in support of any amendment entered under subsection (d) is made available to the public as part of the prosecution history of the patent;
“(10) providing either party with the right to an oral hearing as part of the proceeding;
“(11) requiring that the final determination in any post-grant review be issued not later than 1 year after the date on which the Director notices the institution of a proceeding under this chapter, except that the Director may, for good cause shown, extend the 1-year period by not more than 6 months, and may adjust the time periods in this paragraph in the case of joinder under section 325(c); and
“(12) providing the petitioner with at least 1 opportunity to file written comments within a time period established by the Director.
“(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 post-grant review instituted under this chapter.
“(d) Amendment Of The Patent.—
“(1) IN GENERAL.—During a post-grant review instituted under this chapter, the patent owner may file 1 motion to amend the patent in 1 or more of the following ways:
“(A) Cancel any challenged patent claim.
“(B) For each challenged claim, propose a reasonable number of substitute claims.
“(2) ADDITIONAL MOTIONS.—Additional motions to amend may be permitted upon the joint request of the petitioner and the patent owner to materially advance the settlement of a proceeding under section 327, or upon the request of the patent owner for good cause shown.
“(3) SCOPE OF CLAIMS.—An amendment under this subsection may not enlarge the scope of the claims of the patent or introduce new matter.
“(e) Evidentiary Standards.—In a post-grant review instituted under this chapter, the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence.
Ҥ 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 attach to the petitioner, or to the real party in interest or privy of the petitioner, on the basis of that petitioner’s institution of that post-grant review. 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. 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, and shall be made available only to Federal Government agencies on written request, or to any person on a showing of good cause.
Ҥ 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) Intervening Rights.—Any proposed amended or new claim determined to be patentable and incorporated into a patent following a post-grant review under this chapter shall have the same effect as that specified in section 252 of this title for reissued patents on the right of any person who made, purchased, or used within the United States, or imported into the United States, anything patented by such proposed amended or new claim, or who made substantial preparation therefor, before the issuance of a certificate under subsection (b).
“(d) 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.
Ҥ 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.”.
(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:
(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 only to patents described in section 3(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 first 4 1-year periods in which the amendments made by subsection (d) are in effect.
(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)(A) 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)(A), 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.
(C) APPEALS.—The authorization to appeal or have remedy from derivation proceedings in sections 141(d) and 146 of title 35, United States Code, as amended by this Act, and the jurisdiction to entertain appeals from derivation proceedings in section 1295(a)(4)(A) of title 28, United States Code, as amended by this Act, shall be deemed to extend to any final decision in an interference that is commenced before the effective date set forth in paragraph (2)(A) 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:
Ҥ 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, such statement or information 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 before the Board of Patent Appeals and Interferences or the Patent Trial and Appeal Board that is pending on, or brought on or after, the date of the enactment of this Act.
SEC. 7. PATENT TRIAL AND APPEAL BOARD.
(a) Composition And Duties.—
(1) IN GENERAL.—Section 6 of title 35, United States Code, is amended to read as follows:
Ҥ 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:
Ҥ 141. Appeal to 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 an inter partes review or a post-grant review who is dissatisfied with the final written decision of the Patent Trial and Appeal Board under section 318(a) or 328(a) (as the case may be) 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 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 under title 35, at the instance of a party who exercised that party’s right to participate in the applicable proceeding before or appeal to the Board, except that an applicant or a party to a derivation proceeding may also have remedy by civil action pursuant to section 145 or 146 of title 35; an appeal under this subparagraph of a decision of the Board with respect to an application or derivation proceeding shall waive the right of such applicant or party to proceed under section 145 or 146 of title 35;”.
(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 post-grant review under chapter 31 or 32.”; and
(B) by striking the last sentence.
(d) Conforming Amendments.—
(1) ATOMIC ENERGY ACT OF 1954.—Section 152 of the Atomic Energy Act of 1954 (42 U.S.C. 2182) is amended in the third undesignated paragraph—
(A) by striking “Board of Patent Appeals and Interferences” each place it appears and inserting “Patent Trial and Appeal Board”; and
(B) by inserting “and derivation” after “established for interference”.
(2) TITLE 51.—Section 20135 of title 51, United States Code, is amended—
(A) in subsections (e) and (f), by striking “Board of Patent Appeals and Interferences” each place it appears and inserting “Patent Trial and Appeal Board”; and
(B) in subsection (e), by inserting “and derivation” after “established for interference”.
(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 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 the 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 effective date of the amendments made by this section shall continue to apply to inter partes reexaminations that are requested under section 311 of such title before such effective date;
(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. 8. 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—
“(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. 9. 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. 10. FEE SETTING AUTHORITY.
(a) Fee Setting.—
(1) IN GENERAL.—The Director may set or adjust by rule any fee established, authorized, or charged under title 35, United States Code, or the Trademark Act of 1946 (15 U.S.C. 1051 et seq.), for any services performed by or materials furnished by, the Office, subject to paragraph (2).
(2) FEES TO RECOVER COSTS.—Fees may be set or adjusted under paragraph (1) only to recover the aggregate estimated costs to the Office for processing, activities, services, and materials relating to patents (in the case of patent fees) and trademarks (in the case of trademark fees), including administrative costs of the Office with respect to such patent or trademark fees (as the case may be).
(b) Small And Micro Entities.—The fees set or adjusted under subsection (a) for filing, searching, examining, issuing, appealing, and maintaining patent applications and patents shall be reduced by 50 percent with respect to the application of such fees to any small entity that qualifies for reduced fees under section 41(h)(1) of title 35, United States Code, and shall be reduced by 75 percent with respect to the application of such fees to any micro entity as defined in section 123 of that title (as added by subsection (g) of this section).
(c) Reduction Of Fees In Certain Fiscal Years.—In each fiscal year, the Director—
(1) shall consult with the Patent Public Advisory Committee and the Trademark Public Advisory Committee on the advisability of reducing any fees described in subsection (a); and
(2) after the consultation required under paragraph (1), may reduce such fees.
(d) Role Of The Public Advisory Committee.—The Director shall—
(1) not less than 45 days before publishing any proposed fee under subsection (a) in the Federal Register, submit the proposed fee to the Patent Public Advisory Committee or the Trademark Public Advisory Committee, or both, as appropriate;
(2)(A) provide the relevant advisory committee described in paragraph (1) a 30-day period following the submission of any proposed fee, in which to deliberate, consider, and comment on such proposal;
(B) require that, during that 30-day period, the relevant advisory committee hold a public hearing relating to such proposal; and
(C) assist the relevant advisory committee in carrying out that public hearing, including by offering the use of the resources of the Office to notify and promote the hearing to the public and interested stakeholders;
(3) require the relevant advisory committee to make available to the public a written report setting forth in detail the comments, advice, and recommendations of the committee regarding the proposed fee; and
(4) consider and analyze any comments, advice, or recommendations received from the relevant advisory committee before setting or adjusting (as the case may be) the fee.
(e) Publication In The Federal Register.—
(1) PUBLICATION AND RATIONALE.—The Director shall—
(A) publish any proposed fee change under this section in the Federal Register;
(B) include, in such publication, the specific rationale and purpose for the proposal, including the possible expectations or benefits resulting from the proposed change; and
(C) notify, through the Chair and Ranking Member of the Committees on the Judiciary of the Senate and the House of Representatives, the Congress of the proposed change not later than the date on which the proposed change is published under subparagraph (A).
(2) PUBLIC COMMENT PERIOD.—The Director shall, in the publication under paragraph (1), provide the public a period of not less than 45 days in which to submit comments on the proposed change in fees.
(3) PUBLICATION OF FINAL RULE.—The final rule setting or adjusting a fee under this section shall be published in the Federal Register and in the Official Gazette of the Patent and Trademark Office.
(4) CONGRESSIONAL COMMENT PERIOD.—A fee set or adjusted under subsection (a) may not become effective—
(A) before the end of the 45-day period beginning on the day after the date on which the Director publishes the final rule adjusting or setting the fee under paragraph (3); or
(B) if a law is enacted disapproving such fee.
(5) RULE OF CONSTRUCTION.—Rules prescribed under this section shall not diminish—
(A) the rights of an applicant for a patent under title 35, United States Code, or for a mark under the Trademark Act of 1946; or
(B) any rights under a ratified treaty.
(f) Retention Of Authority.—The Director retains the authority under subsection (a) to set or adjust fees only during such period as the Patent and Trademark Office remains an agency within the Department of Commerce.
(g) 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:
Ҥ 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 applicable fee 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 most recently 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 applicable fee 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 calendar year is not in United States dollars, the average currency exchange rate, as reported by the Internal Revenue Service, during that calendar 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) Institutions Of Higher Education.—For purposes of this section, a micro entity shall include an applicant who certifies that—
“(1) the applicant’s employer, from which the applicant obtains the majority of the applicant’s income, is an institution of higher education as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)); or
“(2) 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 applications to such an institution of higher education.
“(e) Director’s Authority.—In addition to the limits imposed by this section, 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 section 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 subsection 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, an additional fee of $400 shall be established for each application for an original patent, except for a design, plant, or provisional application, that is not filed by electronic means as prescribed by the Director. The fee established by this subsection shall be reduced by 50 percent for small entities that qualify for reduced fees under section 41(h)(1) of title 35, United States Code. All fees paid under this subsection shall be deposited in the Treasury as an offsetting receipt that shall not be available for obligation or expenditure.
(2) EFFECTIVE DATE.—This subsection shall take effect upon the expiration of the 60-day period beginning on the date of the enactment of this Act.
(i) Effective Date; Sunset.—
(1) EFFECTIVE DATE.—Except as provided in subsection (h), this section and the amendments made by this section shall take effect on the date of the enactment of this Act.
(2) SUNSET.—The authority of the Director to set or adjust any fee under subsection (a) shall terminate upon the expiration of the 7-year period beginning on the date of the enactment of this Act.
(3) PRIOR REGULATIONS NOT AFFECTED.—The termination of authority under this subsection shall not affect any regulations issued under this section before the effective date of such termination or any rulemaking proceeding for the issuance of regulations under this section that is pending on such date.
SEC. 11. 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 prescribed 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”.
(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 by Office personnel.
“(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.
“(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—
(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) 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 nonprovisional 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 examination fees (including any applicable excess claims and application size fees), processing fee, and publication fee for that application.
(B) REGULATIONS; LIMITATIONS.—
(i) REGULATIONS.—The Director may by regulation prescribe conditions for acceptance of a request under subparagraph (A) and a limit on the number of filings for prioritized examination that may be accepted.
(ii) LIMITATION ON CLAIMS.—Until regulations are prescribed under clause (i), no application for which prioritized examination is requested may contain or be amended to contain more than 4 independent claims or more than 30 total claims.
(iii) LIMITATION ON TOTAL NUMBER OF REQUESTS.—The Director may not accept 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 ENTITIES.—The Director shall reduce fees for providing prioritized examination of nonprovisional applications for original utility and plant patents by 50 percent 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 Account, shall remain available until expended, and may be used only for the purposes specified in section 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 effective 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.—
(A) IN GENERAL.—There shall be a surcharge of 15 percent, rounded by standard arithmetic rules, on all fees charged or authorized by subsections (a), (b), and (d)(1) of section 41, and section 132(b), of title 35, United States Code. Any surcharge imposed under this subsection is, and shall be construed to be, separate from and in addition to any other surcharge imposed under this Act or any other provision of law.
(B) DEPOSIT OF AMOUNTS.—Amounts collected pursuant to the surcharge imposed under subparagraph (A) shall be credited to the United States Patent and Trademark Appropriation Account, shall remain available until expended, and may be used only for the purposes 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 paragraph (1)—
(A) shall take effect on the date that is 10 days after the date of the enactment of this Act; and
(B) shall terminate, with respect to a fee to which paragraph (1)(A) applies, on the effective 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 following:
Ҥ 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 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 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 in a civil action, 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) Fraud.—If the Director becomes aware, during the course of a supplemental examination or reexamination proceeding ordered under this section, that a material fraud on the Office may have been committed in connection with the patent that is the subject of the supplemental examination, then in addition to any other actions the Director is authorized to take, including the cancellation of any claims found to be invalid under section 307 as a result of a reexamination ordered under this section, the Director shall also refer the matter to the Attorney General for such further action as the Attorney General may deem appropriate. Any such referral shall be treated as confidential, 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 connection with such referral.
“(f) 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.
(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 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 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 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 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. 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 “virtual marking”, as provided in the amendment made by paragraph (1) of this subsection, as an alternative to the physical marking of articles;
(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 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 following:
Ҥ 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 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. 18. TRANSITIONAL PROGRAM FOR COVERED BUSINESS METHOD PATENTS.
(a) Transitional Program.—
(1) ESTABLISHMENT.—Not later than the date that is 1 year after the date of the enactment of this Act, the Director shall issue regulations establishing and implementing a transitional post-grant review proceeding for review of the validity of covered business method patents. The transitional proceeding implemented pursuant to this subsection shall be regarded as, and shall employ the standards and procedures of, a post-grant review under chapter 32 of title 35, United States Code, subject to the following:
(A) Section 321(c) of title 35, United States Code, and subsections (b), (e)(2), and (f) of section 325 of such title shall not apply to a transitional proceeding.
(B) A person may not file a petition for a transitional proceeding with respect to a covered business method patent unless the person or the person’s real party in interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent.
(C) A petitioner in a transitional proceeding who challenges the validity of 1 or more claims in a covered business method patent on a ground raised under section 102 or 103 of title 35, United States Code, as in effect on the day before the effective date set forth in section 3(n)(1), may support such ground only on the basis of—
(i) prior art that is described by section 102(a) 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 application for patent in the United States; and
(II) would be described by section 102(a) of such title (as in effect on the day before the effective date set forth in section 3(n)(1)) if the disclosure had been made by another before the invention thereof by the applicant for patent.
(D) The petitioner in a transitional proceeding that results in a final written decision under section 328(a) of title 35, United States Code, with respect to a claim in a covered business method patent, or the petitioner’s real party in interest, may not assert, either in a civil action arising in whole or in part under section 1338 of title 28, United States Code, or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), that the claim is invalid on any ground that the petitioner raised during that transitional proceeding.
(E) The Director may institute a transitional proceeding only for a patent that is a covered business method patent.
(2) EFFECTIVE DATE.—The regulations issued under paragraph (1) shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act and shall apply to any covered business method patent issued before, on, or after that effective date, except that the regulations shall not apply to a patent described in section 6(f)(2)(A) of this Act during the period in which a petition for post-grant review of that patent would satisfy the requirements of section 321(c) of title 35, United States Code.
(3) SUNSET.—
(A) IN GENERAL.—This subsection, and the regulations issued under this subsection, are repealed effective upon the expiration of the 8-year period beginning on the date that the regulations issued under to paragraph (1) take effect.
(B) APPLICABILITY.—Notwithstanding subparagraph (A), this subsection and the regulations issued under this subsection shall continue to apply, after the date of the repeal under subparagraph (A), to any petition for a transitional proceeding that is filed before the date of such repeal.
(b) Request For Stay.—
(1) IN GENERAL.—If a party seeks a stay of a civil action alleging infringement of a patent under section 281 of title 35, United States Code, relating to a transitional proceeding for that patent, the court shall decide whether to enter a stay based on—
(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
(2) REVIEW.—A party may take an immediate interlocutory appeal from a district court’s decision under paragraph (1). The United States Court of Appeals for the Federal Circuit shall review the district court’s decision to ensure consistent application of established precedent, and such review may be de novo.
(c) ATM Exemption For Venue Purposes.—In an action for infringement under section 281 of title 35, United States Code, of a covered business method patent, an automated teller machine shall not be deemed to be a regular and established place of business for purposes of section 1400(b) of title 28, United States Code.
(d) Definition.—
(1) IN GENERAL.—For purposes of this section, the term “covered business method patent” means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.
(2) REGULATIONS.—To assist in implementing the transitional proceeding authorized by this subsection, the Director shall issue regulations for determining whether a patent is for a technological invention.
(e) Rule Of Construction.—Nothing in this section shall be construed as amending or interpreting categories of patent-eligible subject matter set forth under section 101 of title 35, United States Code.
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 arising under any Act of Congress relating to patents, plant variety protection, or copyrights. For purposes of this subsection, 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 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:
Ҥ 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, 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) Procedural Matters In Patent Cases.—
(1) JOINDER OF PARTIES AND STAY OF ACTIONS.—Chapter 29 of title 35, United States Code, as amended by this Act, is further amended by adding at the end the following new section:
Ҥ 299. Joinder of parties
“(a) Joinder Of Accused Infringers.—With respect to any civil action arising under any Act of Congress relating to patents, other than an action or trial in which an act of infringement under section 271(e)(2) has been pled, parties that are accused infringers may be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, 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, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process; and
“(2) questions of fact common to all defendants or counterclaim defendants will arise in the action.
“(b) Allegations Insufficient For Joinder.—For purposes of this subsection, accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.
“(c) Waiver.—A party that is an accused infringer may waive the limitations set forth in this section with respect to that party.”.
(2) CONFORMING AMENDMENT.—The table of sections for chapter 29 of title 35, United States Code, as amended by this Act, is further amended by adding at the end the following new item:
“299. Joinder of parties.”.
(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 intention 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
(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) 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—
(A) by striking “The following” and inserting “(b) Defenses.—The following”;
(B) in paragraph (1), by striking “uneforceability,” and inserting “unenforceability.”; and
(C) in paragraph (2), by striking “patentability,” and inserting “patentability.” ; 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 a patent”; and
(B) by striking “Claims Court” and inserting “Court of Federal Claims”.
(h) Action For Infringement.—Section 288 of title 35, United States Code, is amended by striking “, without deceptive intention,”.
(i) 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)(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”.
(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.”.
(j) 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 101.
(C) Subsections (a) and (b) of section 105.
(D) The first instance of the use of such term in section 111(b)(8).
(E) Section 161.
(F) Section 164.
(G) Section 171.
(H) Section 251(c), as so designated by this section.
(I) Section 261.
(J) Subsections (g) and (h) of section 271.
(K) Section 287(b)(1).
(L) Section 289.
(M) The first instance of the use of such term in section 375(a).
(k) Additional Technical Amendments.—Sections 155 and 155A of title 35, United States Code, and the items relating to those sections in the table of sections for chapter 14 of such title, are repealed.
(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 persons attending such programs who are not Federal employees” 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 may fix the rate of basic pay for the administrative patent judges appointed pursuant to section 6 and the administrative trademark judges appointed pursuant to section 17 of the Trademark Act of 1946 (15 U.S.C. 1067) at not greater than the rate of basic pay payable for level III of the Executive Schedule under section 5314 of title 5. The payment of a rate of basic pay under this paragraph shall not be subject to the pay limitation under section 5306(e) or 5373 of title 5.”.
SEC. 22. PATENT AND TRADEMARK OFFICE FUNDING.
(a) In General.—Section 42(c) of title 35, United States Code, is amended—
(1) by striking “(c)” and inserting “(c)(1)”;
(2) in the first sentence, by striking “shall be available” and inserting “shall, subject to paragraph (3), be available”;
(3) by striking the second sentence; and
(4) by adding at the end the following:
“(2) There is established in the Treasury a Patent and Trademark Fee Reserve Fund. If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be deposited in the Patent and Trademark Fee Reserve Fund. To the extent and in the amounts provided in appropriations Acts, amounts in the Fund shall be made available until expended only for obligation and expenditure by the Office in accordance with paragraph (3).
“(3)(A) Any fees that are collected under sections 41, 42, and 376, and any surcharges on such fees, may only be used for expenses of the Office relating to the processing of patent applications and for other activities, services, and materials relating to patents and to cover a share of the administrative costs of the Office relating to patents.
“(B) Any fees that are collected under section 31 of the Trademark Act of 1946, and any surcharges on such fees, may only be used for expenses of the Office relating to the processing of trademark registrations and for other activities, services, and materials relating to trademarks and to cover a share of the administrative costs of the Office relating to trademarks.”.
(b) Effective Date.—The amendments made by this section shall take effect on October 1, 2011.
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 Office.
(b) Purposes.—The purposes of the satellite offices established under subsection (a) are to—
(1) increase outreach activities to better connect patent filers and innovators with the Office;
(2) enhance patent examiner retention;
(3) improve recruitment of patent examiners;
(4) decrease the number of patent applications waiting for examination; and
(5) 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 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 satellite office of the Office;
(C) shall evaluate and consider the extent to which the purposes of satellite offices listed under subsection (b) will be achieved;
(D) shall consider the availability of scientific and technically knowledgeable personnel in the region from which to draw new patent examiners at minimal recruitment cost; and
(E) shall consider the economic impact to the region.
(2) OPEN SELECTION PROCESS.—Nothing in paragraph (1) shall constrain the Office to only consider its evaluations in selecting the Detroit, Michigan, satellite office.
(d) Report To Congress.—Not later than the end of the third fiscal year that begins 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), including an explanation of how the selected location will achieve the purposes of satellite offices listed under subsection (b) and how the required considerations listed under subsection (c) were met;
(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 under subsection (b).
SEC. 24. 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. 25. PRIORITY EXAMINATION FOR IMPORTANT TECHNOLOGIES.
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. STUDY ON IMPLEMENTATION.
(a) PTO Study.—The Director shall conduct a study on the manner in which this Act and the amendments made by this Act are being implemented by the Office, and on such other aspects of the patent policies and practices of the Federal Government with respect to patent rights, innovation in the United States, competitiveness of United States markets, access by small businesses to capital for investment, and such other issues, as the Director considers appropriate.
(b) Report To Congress.—The Director shall, not later than the date that is 4 years after the date of the enactment of this Act, submit to the Committees on the Judiciary of the House of Representatives and the Senate a report on the results of the study conducted under subsection (a), including recommendations for any changes to laws and regulations that the Director considers appropriate.
SEC. 27. STUDY ON GENETIC TESTING.
(a) In General.—The Director shall conduct a study on effective ways to provide independent, confirming genetic diagnostic test activity where gene patents and exclusive licensing for primary genetic diagnostic tests exist.
(b) Items Included In Study.—The study shall include an examination of at least the following:
(1) The impact that the current lack of independent second opinion testing has had on the ability to provide the highest level of medical care to patients and recipients of genetic diagnostic testing, and on inhibiting innovation to existing testing and diagnoses.
(2) The effect that providing independent second opinion genetic diagnostic testing would have on the existing patent and license holders of an exclusive genetic test.
(3) The impact that current exclusive licensing and patents on genetic testing activity has on the practice of medicine, including but not limited to: the interpretation of testing results and performance of testing procedures.
(4) The role that cost and insurance coverage have on access to and provision of genetic diagnostic tests.
(c) Confirming Genetic Diagnostic Test Activity Defined.—For purposes of this section, the term “confirming genetic diagnostic test activity” means the performance of a genetic diagnostic test, by a genetic diagnostic test provider, on an individual solely for the purpose of providing the individual with an independent confirmation of results obtained from another test provider’s prior performance of the test on the individual.
(d) Report.—Not later than 9 months after the date of 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 on the findings of the study and provide recommendations for establishing the availability of such independent confirming genetic diagnostic test activity.
SEC. 28. PATENT OMBUDSMAN PROGRAM FOR SMALL BUSINESS CONCERNS.
Using available resources, the Director shall establish and maintain 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 and independent inventors.
SEC. 29. ESTABLISHMENT OF METHODS FOR STUDYING THE DIVERSITY OF APPLICANTS.
The Director shall, not later than the end of the 6-month period beginning on the date of the enactment of this Act, establish methods for studying the diversity of patent applicants, including those applicants who are minorities, women, or veterans. The Director shall not use the results of such study to provide any preferential treatment to patent applicants.
SEC. 30. SENSE OF CONGRESS.
It is the sense of Congress that the patent system should promote industries to continue to develop new technologies that spur growth and create jobs across the country which includes protecting the rights of small businesses and inventors from predatory behavior that could result in the cutting off of innovation.
SEC. 31. USPTO STUDY ON INTERNATIONAL PATENT PROTECTIONS FOR SMALL BUSINESSES.
(a) Study Required.—The Director, in consultation with the Secretary of Commerce and the Administrator of the Small Business Administration, shall, using the existing resources of the Office, carry out a study—
(1) to determine how the Office, in coordination with other Federal departments and agencies, can best help small businesses with international patent protection; and
(2) whether, in order to help small businesses pay for the costs of filing, maintaining, and enforcing international patent applications, there should be established either—
(A) a revolving fund loan program to make loans to small businesses to defray the costs of such applications, maintenance, and enforcement and related technical assistance; or
(B) a grant program to defray the costs of such applications, maintenance, and enforcement and related technical assistance.
(b) Report.—Not later than 120 days after the date of the enactment of this Act, the Director shall issue a report to the Congress containing—
(1) all findings and determinations made in carrying out the study required under subsection (a);
(2) a statement of whether the determination was made that—
(A) a revolving fund loan program described under subsection (a)(2)(A) should be established;
(B) a grant program described under subsection (a)(2)(B) should be established; or
(C) neither such program should be established; and
(3) any legislative recommendations the Director may have developed in carrying out such study.
SEC. 32. PRO BONO PROGRAM.
(a) In General.—The Director shall work with and support intellectual property law associations across the country in the establishment of pro bono programs designed to assist financially under-resourced independent inventors and small businesses.
(b) Effective Date.—This section shall take effect on the date of the enactment of this Act.
SEC. 33. LIMITATION ON ISSUANCE OF PATENTS.
(a) Limitation.—Notwithstanding any other provision of law, no patent may issue on a claim directed to or encompassing a human organism.
(b) Effective Date.—
(1) IN GENERAL.—Subsection (a) shall apply to any application for patent that is pending on, or filed on or after, the date of the enactment of this Act.
(2) PRIOR APPLICATIONS.—Subsection (a) shall not affect the validity of any patent issued on an application to which paragraph (1) does not apply.
SEC. 34. STUDY OF PATENT LITIGATION.
(a) GAO Study.—The Comptroller General of the United States shall conduct a study of the consequences of litigation by non-practicing entities, or by patent assertion entities, related to patent claims made under title 35, United States Code, and regulations authorized by that title.
(b) Contents Of Study.—The study conducted under this section shall include the following:
(1) The annual volume of litigation described in subsection (a) over the 20-year period ending on the date of the enactment of this Act.
(2) The volume of cases comprising such litigation that are found to be without merit after judicial review.
(3) The impacts of such litigation on the time required to resolve patent claims.
(4) The estimated costs, including the estimated cost of defense, associated with such litigation for patent holders, patent licensors, patent licensees, and inventors, and for users of alternate or competing innovations.
(5) The economic impact of such litigation on the economy of the United States, including the impact on inventors, job creation, employers, employees, and consumers.
(6) The benefit to commerce, if any, supplied by non-practicing entities or patent assertion entities that prosecute such litigation.
(c) Report To Congress.—The Comptroller General shall, not later than the date that is 1 year after the date of the enactment of this Act, submit to the Committee on the Judiciary of the House of Representatives and the Committee on the Judiciary of the Senate a report on the results of the study required under this section, including recommendations for any changes to laws and regulations that will minimize any negative impact of patent litigation that was the subject of such study.
SEC. 35. EFFECTIVE DATE.
Except as otherwise provided in this Act, the provisions of this Act 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 on or after that effective date.
SEC. 36. 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 Committee, provided that such statement has been submitted prior to the vote on passage.
SEC. 37. CALCULATION OF 60-DAY PERIOD FOR APPLICATION OF PATENT TERM EXTENSION.
(a) In General.—Section 156(d)(1) of title 35, United States Code, is amended by adding at the end the following flush sentence:
“For purposes of determining the date on which a product receives permission under the second sentence of this paragraph, if such permission is transmitted after 4:30 P.M., Eastern Time, on a business day, or is transmitted on a day that is not a business day, the product shall be deemed to receive such permission on the next business day. For purposes of the preceding sentence, the term ‘business day’ means any Monday, Tuesday, Wednesday, Thursday, or Friday, excluding any legal holiday under section 6103 of title 5.”.
(b) Applicability.—The amendment made by subsection (a) shall apply to any application for extension of a patent term under section 156 of title 35, United States Code, that is pending on, that is filed after, or as to which a decision regarding the application is subject to judicial review on, the date of the enactment of this Act.
Passed the House of Representatives June 23, 2011.
Attest:
Karen L. Haas,
Clerk.
Calendar No. 87
112th CONGRESS 1st Session
H. R. 1249
AN ACT
To amend title 35, United States Code, to provide for patent reform.
SEC. 18.TRANSITIONAL PROGRAM FOR COVERED BUSINESS METHOD PATENTS.
(a)Transitional Program.—
(1)ESTABLISHMENT.—Not later than the date that is 1 year after the date of the enactment of this Act, the Director shall issue regulations establishing and implementing a transitional post-grant review proceeding for review of the validity of covered business method patents. The transitional proceeding implemented pursuant to this subsection shall be regarded as, and shall employ the standards and procedures of, a post-grant review underchapter 32of title 35, United States Code, subject to the following:
(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 covered business method patent unless the person or the person’s real party in interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent.
(C) A petitioner in a transitional proceeding who challenges the validity of 1 or more claims in a covered business method patent on a ground raised under section 102 or 103 of title 35, United States Code, as in effect on the day before the effective date set forth in section 3(n)(1), may support such ground only on the basis of—
(i) prior art that is described by section 102(a) 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 application for patent in the United States; and
(II) would be described by section 102(a) of such title (as in effect on the day before the effective date set forth in section 3(n)(1)) if the disclosure had been made by another before the invention thereof by the applicant for patent.
(D) The petitioner in a transitional proceeding that results in a final written decision under section 328(a) of title 35, United States Code, with respect to a claim in a covered business method patent, or the petitioner’s real party in interest, may not assert, either in a civil action arising in whole or in part under section 1338 of title 28, United States Code, or in a proceeding before the International Trade Commission under section 337 of the Tariff Act of 1930 (19 U.S.C. 1337), that the claim is invalid on any ground that the petitioner raised during that transitional proceeding.
(E) The Director may institute a transitional proceeding only for a patent that is a covered business method patent.
(2)EFFECTIVE DATE.—The regulations issued under paragraph (1) shall take effect upon the expiration of the 1-year period beginning on the date of the enactment of this Act and shall apply to any covered business method patent issued before, on, or after that effective date, except that the regulations shall not apply to a patent described in section 6(f)(2)(A) of this Act during the period in which a petition for post-grant review of that patent would satisfy the requirements ofsection 321(c)of title 35, United States Code.
(3)SUNSET.—
(A)IN GENERAL.—This subsection, and the regulations issued under this subsection, are repealed effective upon the expiration of the 8-year period beginning on the date that the regulations issued under to paragraph (1) take effect.
(B)APPLICABILITY.—Notwithstanding subparagraph (A), this subsection and the regulations issued under this subsection shall continue to apply, after the date of the repeal under subparagraph (A), to any petition for a transitional proceeding that is filed before the date of such repeal.
(b)Request For Stay.—
(1)IN GENERAL.—If a party seeks a stay of a civil action alleging infringement of a patent under section 281 of title 35, United States Code, relating to a transitional proceeding for that patent, the court shall decide whether to enter a stay based on—
(A) whether a stay, or the denial thereof, will simplify the issues in question and streamline the trial;
(B) whether discovery is complete and whether a trial date has been set;
(C) whether a stay, or the denial thereof, would unduly prejudice the nonmoving party or present a clear tactical advantage for the moving party; and
(D) whether a stay, or the denial thereof, will reduce the burden of litigation on the parties and on the court.
(2)REVIEW.—A party may take an immediate interlocutory appeal from a district court’s decision under paragraph (1). The United States Court of Appeals for the Federal Circuit shall review the district court’s decision to ensure consistent application of established precedent, and such review may be de novo.
(c)ATM Exemption For Venue Purposes.—In an action for infringement under section 281 of title 35, United States Code, of a covered business method patent, an automated teller machine shall not be deemed to be a regular and established place of business for purposes of section 1400(b) of title 28, United States Code.
(d)Definition.—
(1)IN GENERAL.—For purposes of this section, the term “covered business method patent” means a patent that claims a method or corresponding apparatus for performing data processing or other operations used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.
(2)REGULATIONS.—To assist in implementing the transitional proceeding authorized by this subsection, the Director shall issue regulations for determining whether a patent is for a technological invention.
(e)Rule Of Construction.—Nothing in this section shall be construed as amending or interpreting categories of patent-eligible subject matter set forth under section 101 of title 35, United States Code.
American Calcar, Inc. v. American Honda Motor Co., Inc. (Fed. Cir. 2011) Download 09-1503-1567 Panel: Lourie (author), Bryson, and Gajarsa
In its first decision addressing the issue of inequitable conduct since Therasense v. Becton Dickinson, the Federal Circuit affirmed the district court's finding of materiality with respect to one patent, but remanded for further findings on materiality (in connection with the two remaining patents) and intent (with respect to all three patents).
The inequitable conduct issues in this case revolve around a family of patents sharing a common specification. One of the patents, No. 6,330,497 ("the Three-Status patent"), relates to "a system that allows a user to select an option from a list, to be shown a preview of information about it, and then to activate it." Slip Op. at 12. Two other patents, Nos. 6,438,465 and 6,542,795 ("the Search patents") claim a system for performing searches on a system in a vehicle.
Prior to the filing of the patent application, the inventors closely examined an Acura 96RL that contained a navigation system with features similar to those later claimed in the Three-Status and Search patents. Although the 96RL system is described in the background section of the patent application, that description is limited to the navigation aspect of the system, not the user interface aspects. Thus, the inventors "never disclosed to the PTO the aspects of the 96RL system relating to the three-status feature or the search feature." Slip Op. at 14.This failure to disclose formed the basis of the district court's finding of inequitable conduct, which Calcar sought to overturn on appeal.
Jury Verdict Merely Advisory In reaching its conclusion of inequitable conduct, the district court disregarded an advisory jury verdict of no inequitable conduct. The CAFC rejected Calcar's argument that this constituted error. "Inequitable conduct is equitable in nature, with no right to a jury, and the trial court has the obligation to resolve the underlying facts of materiality and intent…Where a court submits the question to a jury, and both parties agree that the jury findings will be advisory, the court shall treat them as such. [] That is the universal rule." Slip Op. at 23 (internal citations omitted).
Appliation of Therasense The CAFC next turned to the substance of the district court's findings. With respect to the Three-Status patent, the panel concluded that, even under the "but-for" standard of Therasense, the district court had correctly found materiality. "We agree with Honda that the undisclosed 96RL information was material to the Three-Status patent because the jury found, and the court upheld, the asserted claims as anticipated by the 96RL system, and ACI has not appealed that decision to us." Slip Op. at 25.
The materiality of the Search patents was more questionable, given that the jury had rejected Honda's invalidity arguments based on the 96RL system. Nevertheless, "the withheld information may be material if it would have blocked patent issuance under the PTO's preponderance of the evidence standard, giving those patents' claims their broadest reasonable construction." Id. As a result the CAFC remanded to the district court to assess materiality under a "but-for" standard, applying the evidentiary standard and claim scope used by the PTO. The CAFC did not give any guidance as to how the latter might differ from the scope previously applied by the district court.
The CAFC reached a similar result on intent, concluding that the district court had relied on a sliding scale standard, "basing its finding of intent significantly on the materiality of the 96RL system to the claimed invention." Slip Op. at 26. That approach was rejected in Therasense, and the CAFC remanded for further consideration in light of that opinion.
Note: The court also affirmed the district court's rulings of noninfringement as to several other patents and reversed its denial of judgment as a matter of law that another patents was invalid.
For those who find this information noteworthy, the panel in this case included two members of the dissent in Therasense. Judge Lourie, the author of this opinion, was a member of the Therasense majority.
Inventio AG v. ThyssenKrupp Elevator Americas Corporation (Fed. Cir. 2011) Download 10-1525 Panel: Lourie (author), Prost, Moore
Patent claims may be indefinite due to their use of functional language untethered to any structure. Prevailing on such an argument, however, can be quite difficult, as Inventio v. ThyssenKrupp illustrates.
The patents in this case relate to a device that allows elevator passengers to enter their floor destination as they call for the elevator. Central to the claimed invention are two components: a "computing unit," which processes the passenger's input, and a "modernizing device," which acts as an intermediary between the computing unit and the elevator control. During claim construction, the district court concluded that both claim terms "lacked sufficient structure to avoid § 112 ¶ 6," slip op. at 7, further holding that they were indefinite because the written description failed to disclose corresponding structure to perform the recited functions. Inventio appealed.
Strong Presumption Against Means Plus Function Construction Patentees are permitted to include purely functional language in their claims under § 112 ¶ 6. Under that provision, such limitations "shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof." Slip Op. at 9. Whether § 112 ¶ 6 applies depends principally on whether the limitation uses the term "means." When that term is not used, "we presume that the limitation does not invoke § 112 ¶ 6." Id. The presumption "is a strong one that is not readily overcome." Id. at 10.
Presumption Not Overcome Given the absence of the term "means" in the disputed limitations, the court focused its analysis on whether ThyssenKrupp had overcome the "strong presumption" against application of § 112 ¶ 6, concluding that it had not. In reaching this conclusion, the court agreed with Inventio that it should consider the written description in determining whether the claims recite sufficient structure. "[I]t is proper to consult the intrinsic record, including the written description, when determining if a challenger has rebutted the presumption that a claim lacking the term "means" recites sufficiently definite structure." Slip Op. at 12. Applying this rule, the court found that the terms "modernizing device" and "computing unit" provided, at least in the context of the two patents at issue, sufficient structure:
"In this case [] the claims recite a “modernizing device,” delineate the components that the modernizing device is connected to, describe how the modernizing device interacts with those components, and describe the processing that the modern-izing device performs. The written descriptions addition-ally show that the modernizing device conveys structure to skilled artisans. Thus, this is not a case where a claim nakedly recites a “device” and the written description fails to place clear structural limitations on the “device.”"
Slip Op. at 15. The CAFC applied similar reasoning to "computing unit."
Is The Court Effectively Applying a Presumption Against Indefiniteness of Functional Claim Elements? Under Supreme Court precedent, a claim may be invalid for indefiniteness if it contains functional claim limitations. See General Electric Co. v. Wabash Appliance Corporation, 304 U.S. 364, 371 (1938); United Carbon Co. v. Binney & Smith Co., 317 U.S. 228, 234 (1942); c.f. Halliburton Energy Services, Inc. v. M-I LLC, 514 F.3d 1244, 1255 (Fed. Cir. 2008). Section 112 ¶ 6 provides the exception discussed above.
I question how viable this aspect of the indefiniteness doctrine is in practice, however, at least under the Federal Circuit's current approach. Under cases such as Inventio, the CAFC's framework for analyzing indefiniteness based on functional claiming operates like this: (Question One) Is this a means-plus-function claim element? If No, then it is not indefinite. If Yes, (Step Two) Does the written description recite sufficient structure? If No, the claim is indefinite; if Yes, it is not. Since there is a strong presumption in favor of answering "No" to Question One unless the term "means" is used, the effective result is a strong presumption against indefiniteness unless the patent drafter elects otherwise. This makes it extremely difficult for a party challenging the definiteness of a functional claim element to prevail, and seems somewhat inconsistent with the broader ideas of General Electric and United Carbon.
I could see the CAFC's rule as perhaps being justified on the ground that patents are entitled to a presumption of validity, and the indefiniteness issue is, after all, one type of validity analysis. But that does not appear to be how the court has justified its rule thus far. Instead, it has treated it solely as a claim construction question in which deference is given to the patent drafter's choice of language.
ThyssenKrupp's Motion to Strike Following the completion of merits briefing, ThyssenKrupp filed a motion to strike portions of Inventio's reply brief on various grounds, including that it contained new and misleading arguments about the disclosure of the '861 and '465 patents. Unimpressed by ThyssenKrupp's motion, the court rejected it. "ThyssenKrupp simply disagrees with Inventio's legal arguments, and its motion seems to us to be an improper attempt to obtain the final word in the appeal, a practice that we strongly discourage." Slip Op. at 3. FIling such a motion, the court commented, "borders on the type of frivolous and wasteful litigation tactics that we have previously frowned upon." Id.
Update: For those interested in reading the offending brief, a copy can be downloaded here: Download SchmitMotionToStrike. Thanks to Hal Wegner for circulating a copy in his email newsletter.
Guest Post by Professor Paul Cole, Bournemouth University; European Patent Attorney, Lucas & Co, UK.
The above decision has been comprehensively reviewed in yesterday’s posting by Dennis Crouch, but it is of interest because it provides a sign that the analogous art tests in Europe and in the US may not be as different as previously believed
For a primary reference, the black-letter law of the EPO as explained in the Case Law of the Boards of Appeal is that it is normally a prior art document should be selected disclosing subject-matter conceived for the same purpose or aiming at the same objective as the claimed invention and having the most relevant technical features in common, i.e. requiring the minimum of structural modifications. As regards selection of a secondary reference, T 176/84 MÖBIUS/Pencil sharpener is a widely followed appeal board decision. The primary reference concerned a known pencil sharpener and the question was whether that disclosure should be considered in combination with a second reference disclosing a securing mechanism for the slot of a savings box. It was held that a skilled person would, as well as considering the state of the art in the specific technical field of the invention, look for suggestions in neighbouring fields and/or in a broader general technical field of which the specific field was part, i.e. any field in which the same technical problem or one similar to it arose and of which the person skilled in the art should be expected to be aware.
The US analogous art test as explained in In re Bigio 381 F.3d 1320 would be accepted by most European practitioners as no more and no less than a summary of the test adopted by the EPO Appeal Boards:
Two separate tests define the scope of analogous prior art: (1) whether the art is from the same field of endeavor, regardless of the problem addressed and, (2) if the reference is not within the field of the inventor’s endeavor, whether the reference still is reasonably pertinent to the particular problem with which the inventor is involved.
With this similarity in their underlying legal tests it is surprising how far the EPO and the USPTO have diverged in practice. A classic example is found in the Bigio case itself i.e. that toothbrush references are analogous art to hairbrushes, both being brushes having a handle segment and a bristle substrate segment. Judge Newman was more appreciative of the difference between a hairbrush and a toothbrush but she was in the minority. The more recent decision in Innovention Toys v MGA Entertainment (Fed Cir., Mar 21 2011) though perhaps less factually clear-cut also ruled that the art there cited was analogous.
As regards field of endeavour Klein nailed his colours firmly to the mast of nectar feeding with no less than four references to nectar in his main claim and two references to the hummingbirds, orioles and butterflies that were to receive the nectar:
21. A convenience nectarmixing device for use in preparation of sugar-water nectar for feeding hummingbirds, orioles or butterflies, said device comprising: a container that is adapted to receive water, receiving means fixed to said container, and a divider movably held by said receiving means for forming a compartment within said container, wherein said compartment has a volume that is proportionately less than a volume of said container, by a ratio established for the formulation of sugar-water nectar for hummingbirds, orioles or butterflies, wherein said compartment is adapted to receive sugar, and wherein removal of said divider from said receiving means allows mixing of said sugar and water to occur to provide said sugar-water nectar.
The objection as set out in the government’s appeal brief was that the art taught multiple examples of containers with compartments separated by removable dividers, that Mr Klein was not entitled to a patent just because he sought to put these containers to a particular use to which these prior art containers had not been put and that substantial evidence supported the Board’s conclusion that the prior art containers would have commended themselves to someone like Klein who faced the problem of finding a container capable of being divided into separate compartments. However, the government’s contention that the problem was simply one of “compartment separation” did not resonate with the CAFC. They dismissed this broadening from the narrower nectar-related formulation of the problem found by the Board for procedural reasons. It is difficult to see what basis there could be for broadening the problem in this way except for wilful blindness as to the nature of the invention and creation of an improper hindsight mosaic of prior art. However, it seems doubtful that Klein would have succeeded on this issue but for the forthright way in which he had defined his field of endeavour in his claim.
In the previous posting it has been noted that Klein’s narrow “purpose” of the invention goes against common patent attorney practice because the narrow purpose can also lead courts to narrow the claim scope during claim construction and in their analysis of infringement under the doctrine of equivalents. Attorneys may want to rethink that approach in light of this case. A European practitioner would say “amen” to that. Klein was in the business of jugs for nectar mixing and nothing else. There was no mileage for him in extending his claim scope into unrelated and wholly speculative fields from which he could not expect ever to receive revenue, but which would expose him to unknown and potentially fatal prior art.
The USPTO’s decision to select e.g. an accounting drawer as starting point prior art seems to a European practitioner to be putting the cart before the horse. European practice follows the approach of the Irish farmer asked by an English visitor lost in the back roads of Kerry: “Can you direct me to Dublin?” He replied: “If I wanted to go to Dublin, I definitely wouldn’t start from here!” Arguably the natural starting point for development of the invention was the nectar and how to dispense its ingredients accurately. That the drawer was an unnatural starting point is supported by the reasoning in EPO Appeal Board in T 570/91 AE PLC/Pistons which with modification to follow the facts in the present case would read as follows:
“If … a person skilled in the art prefers and decides to start from a specific accounting drawer, he can further develop that drawer but at the end of that development the normal result will still be an accounting drawer and not a nectar mixing device.”
In its opinion the CAFC adopted a similar approach to AE PLC, following a dictum in In re Clay 966 F.2d 659 that “If [a reference]is directed to a different purpose the inventor would accordingly have had less motivation or occasion to consider it.” None of the references of this type showed a partitioned container that was adapted to receive water or contain it long enough to be able to prepare different ratios in the different compartments, and the Board’s finding that the five references at issue were analogous art was not supported by substantial evidence.
As to the merits of the case, useful guidance is given in the opinion of Jacob L.J. in Schlumberger v Electromagnetic Geoservices [2010] EWCA Civ 819 where he was grappling with the same problem of a combination of prior art A and B in dissimilar arts and asked in what circumstances a marriage of skills in dissimilar arts could be obvious to either notional partner. He observed:
“In the case of obviousness in view of the state of the art, a key question is generally “what problem was the patentee trying to solve?” That leads one in turn to consider the art in which the problem in fact lay. It is the notional team in that art which is the relevant team making up the person skilled in the art. If it would be obvious to that team to bring in different expertise, then the invention will nonetheless be obvious. Likewise if the possessor of the “extra expertise” would himself know of the other team’s problem. But if it would not be obvious to either of the notional persons or teams alone and not obvious to either sort of team to bring in the other, then the invention cannot fairly be said to be obvious. As it was put in argument before us the possessors of the different skills need to be in the same room and the team with the problem must have some reason for telling the team who could solve it what the problem is.”
The value of the insight in Schlumberger is amply demonstrated by the fact pattern in the present case, although admittedly the invention discussed in Schlumberger lies at the opposite end of the scale in terms of commercial importance and technical difficulty. In the present case the state of the art had not progressed beyond retailers selling nectar feeding equipment and giving advice as to the ratio of sugar to water for the various creatures that it was desired to feed. On the evidence of what was said in the specification customers had been confused and forgetful for years, but until Mr Klein’s invention nobody had identified this as a technical problem, still less thought of looking in the receptacle art for a potential solution. In the words of Jacob L.J. in Schlumberger:
“They did not say: “this is our problem. If only we had a solution to it.” Instead they simply put up with things as they were. Then the essence of the invention is the insight that there was a solvable problem at all.”
If the less plausible starting point in the receptacle art is taken as the starting point, what realistic prospect was there of a designer of receptacles with removable dividers e.g. for business or accounting purposes realising that there was a problem associated with nectar feeding that could be solved by making the receptacle water-tight and adapting the divider positions for sugar and water to make nectar?
On either view the objection sustained by the Board was based on impermissible hindsight and was correctly reversed by the CAFC. The nectar feeding people and the receptacle designers would never have got engaged, still less married, if they had not somehow been introduced, and there was no straightforward mechanism in the prior art for such an introduction to have been made.
The mechanical examples in the MPEP at 2141.01(a) all reflect cases where the government view as to how the analogous art test should be applied succeeded. Klein provides a counter-example of applicant success that it is hoped will soon find its way into MPEP. As regards Bigio, while that decision can usefully be cited for the rule that it affirms, it is submitted that it is an outlier which while possibly correct on its special facts should not be held up to examiners as a good way of arguing the normal run of cases.
In re Klein, ___ F.3d ___ (Fed. Cir. 2011) (Judges Newman, Schall, and Linn)
by Dennis Crouch
In an important nonobviousness decision the Federal Circuit has sided with the patent applicant, Arnold Klein and rejected the USPTO’s obviousness conclusions. In its opinion, the court held that none of the five cited prior art references could be considered “analogous art.” Under the Federal Circuit’s exclusionary test, as non-analogous art the references were then entirely excluded from consideration in the nonobviousness analysis.
A prior references is considered analogous if it is either (1) in the same field of endeavor as the invention or (2) “reasonably pertinent” to the problem with which the inventor is involved. In turn, a reference is reasonably pertinent if it logically would have commended itself to an inventor’s attention in considering his problem.
Simple Invention; Powerful Opinion: The power of the opinion is amplified by the fact that Klein’s invention is an extremely simple mechanical device.
Klein’s patent application is directed toward a device for measuring and mixing sugar and water for bird feeders. Ornithologists have discovered that different species of birds prefer different sugar-water ratios. One embodiment of Klein’s device looks like a measuring cup with a movable divider that separates the space into an area for sugar and another area for water. The placement of the divider is set according to the bird species being fed. With the divider in place, sugar and water can then be added to their respective areas. The proper ratio is guaranteed so long as water and sugar are added to the same level or “line of sight.”
The figures below show the invention fairly well. The basic embodiment has three slots for Hummingbirds, Orioles, and Butterflies. (Hummingbirds prefer more sugar). The divider can be inserted and held in place by the chosen slot. Sugar & water would then be added to same level or line of sight. Once the ingredients are added, the divider can be removed and the solution mixed together.
Of importance to this case, Klein’s broadest independent claim is fairly narrow in terms of both the claim elements and in reciting a purpose of the invention.
21. A convenience nectar mixing device for use in preparation of sugar-water nectar for feeding hummingbirds, orioles or butterflies, said device comprising:
a container that is adapted to receive water,
receiving means fixed to said container, and
a divider movably held by said receiving means for forming a compartment within said container, wherein said compartment has a volume that is proportionately less than a volume of said container, by a ratio established for the formulation of sugar-water nectar for hummingbirds, orioles or butterflies, wherein said compartment is adapted to receive sugar, and wherein removal of said divider from said receiving means allows mixing of said sugar and water to occur to provide said sugar-water nectar.
Rejecting the Five Rejections: In the application, Klein admitted that the ratios for the various species were known in the prior art. Based on that admission, the USPTO issued five separate obviousness rejections of Claim 21 — each using a different prior art reference in combination with the admitted ratios.
Three of the references were directed toward containers with movable dividers used to separate solid items such as screws or bolts. (See figure). In determining that those references were non-analogous, the court first considered the problem being solved by Klein and arrived upon a somewhat narrowly defined single problem of: “making a nectar feeder with a movable divider to prepare different ratios of sugar and water for different animals.” The court then quickly concluded that the three solid item separators were not pertinent to Klein’s problem “since none of these three references shows a partitioned container that is adapted to receive water or contain it long enough to be able to prepare different ratios in the different compartments.”
The two remaining references were directed at dividing liquids that would be later mixed. The court found neither of these pertinent to Klein’s invention because they did not address the multiple ratio problem and did not have movable dividers.
Because none of the references were pertinent the obviousness conclusion had no basis.
(As a note, the Federal Circuit did not address whether any of the references were in the same field of endeavor because the USPTO had based its rejection only on the reasonably pertinent test for analogous art.)
Singular Narrow Purpose of the Invention: One explanation for Klein’s success on appeal is the singular narrow purpose of his invention. The narrow purpose then allowed him to argue that the cited references were well outside of that purpose. On appeal, the USPTO Solicitor had argued that the problem being solved was really a broader “compartment separation problem.” However, the Federal Circuit rejected that argument as untimely because it had not been raised before the Board of Patent Appeals, citing Sec. & Exch. Comm’n v. Chenery Corp., 318 U.S. 80, 94 (1943) (“[A]n administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained.”). Going forward, a savvy Board of Patent Appeals may alter its approach and more broadly define the problem being solved.
Prior Art Addressing only Portions of Purpose: The most important aspect of the decision is likely the implicit holding that a prior art reference in a separate field of endeavor will not be analogous unless it is pertinent to the entire problem being solved. Here, all of the references were pertinent to some aspect of the stated problem, but they failed the test because none was related to the problem as a whole.
Duck, Duck, Goose: The force of the opinion is severely limited by the fact that the court did not cite or consider how the Supreme Court’s decision in KSR v. Teleflex altered the scope of analogous art. Although KSR did not directly discuss the analogous art test per se, the USPTO has previously interpreted that as expanding the scope of analogous art. SeeM.P.E.P. 2141.01(a).
The New Structure for Non-Obviousness Determinations: A criticism of KSR has been that it removed almost all structural methodology from the nonobviousness analysis and left the test too loose and open to subjectivity in decision making. If it sticks, the Klein approach to the consideration analogous art has the potential reinvigorate a more rule-based analysis.
Notes:
As mentioned above, Mr. Klein’s case is interesting because he has been largely representing himself pro se during the patent prosecution process. After Klein filed his own opening brief to the Federal Circuit, Louis Tompros of WilmerHale stepped in and likely transformed the case from a Rule 36 affirmance to a major win.
Klein’s narrow “purpose” of the invention goes against common patent attorney practice because the narrow purpose can also lead courts to narrow the claim scope during claim construction and in their analysis of infringement under the doctrine of equivalents. Attorneys may want to rethink that approach in light of this case.
In a 7-2 decision, the Supreme Court has ruled that a federally funded contractor does not necessarily own the patent rights to inventions resulting from funded projects. Here, the Board of Trustees of the Leland Stanford Junior University unsuccessfully argued that such rights automatically vest under the Bayh-Dole Act of 1980.
Ownership of patent rights and inchoate pre-filing rights are somewhat confusing because they involve a mixture of federal patent law and state laws of contracts, employment, and trade secrets. Here, the majority led by Chief Justice Roberts has held that US patent rights have always (since 1790) initially vested in “the inventor” and that the non-specific language of the Bayh-Dole Act does nothing to change the original setup.
The Bayh-Dole Act has revolutionized the way that universities look at technology and innovation by allowing research institutions to “elect to retain title” to inventions generated through federal funding. 35 U.S.C. § 202(a). Today, most major research universities hold dozens if not hundreds of patents and have extensive licensing offices. The Association of University Technology Managers (AUTM) now boasts more than 3,500 members.
This case involves a Stanford researcher (Mark Holodniy) who was under a prior contractual duty to assign invention rights to Stanford but who actually assigned rights to Cetus. When Stanford sued Roche (Cetus’ successor in interest) for patent infringement, Roche’s defense was that a co-owner could not be held liable for patent infringement. The Court of Appeals for the Federal Circuit agreed with Roche — holding that Holodniy’s duty to assign rights to Stanford did not block him from actually assigning rights to Cetus and that Roche therefore held rights in the invention.
At the Supreme Court, Stanford argued that the contractual rights did not matter and instead that its statutory right to “elect to retain title. . . any invention of the contractor” conceived or reduced to practice under a federally funded agreement gave it precedence over Cetus/Roche. The court rejected Stanford’s argument as both against the tradition of patent law and not in accord with the statute.
Stanford’s reading of [the Statute] is plausible enough in the abstract; it is often the case that whatever an employee produces in the course of his employment belongs to his employer. No one would claim that an autoworker who builds a car while working in a factory owns that car. But, as noted, patent law has always been different: We have rejected the idea that mere employment is sufficient to vest title to an employee’s invention in the employer. Against this background, a contractor’s invention—an “invention of the contractor”— does not automatically include inventions made by the contractor’s employees.
This case is largely a moot point because the Federal Circuit has established a particular federal-patent-law interpretation of employment agreements that allows contracting parties to choose language that optionally includes either a promise to cooperate and assign rights or else an automatic assignment that occurs constructively at the moment of invention. If Stanford had chosen the more stringent automatic assignment language for its employment contract, then it would have automatically taken rights. The only problem, of course, is whether Universities have the bargaining power to require its employees to sign the more stringent contracts.
At the same time, however, the decision here offers some cause for caution in relying fully on the Federal Circuit’s usurpation of exclusive jurisdiction over this employment and contract law issue. In Footnote 2, the Supreme Court noted that, in this decision, the court had “no occasion to pass on the validity of the lower court’s construction of those agreements.” As discussed below, Justice Breyer explicitly criticized the Federal Circuit’s contract interpretation.
In dissent, Justice Breyer wrote:
Ultimately, the majority rejects Stanford’s reading (and the Government’s reading) of the Act because it believes that it is inconsistent with certain background norms of patent law, norms that ordinarily provide an individual inventor with full patent rights. But in my view, the competing norms governing rights in inventions for which the public has already paid, along with the Bayh-Dole Act’s objectives, suggest a different result.
Breyer also challenged the Federal Circuit rule distinguishing between a promise to transfer and an automatic transfer agreement. Relying upon history and tradition, Justice Breyer saw the initial contract as creating equitable title in the invention and then looked to old decisions historically did not enforce contracts to automatically transfer of legal title to patent rights.
Given what seem only slight linguistic differences in the contractual language, this reasoning seems to make too much of too little. Dr. Holodniy executed his agreement with Stanford in 1988. At that time, patent law appears to have long specified that a present assignment of future inventions (as in both contracts here) conveyed equitable, but not legal, title. See, e.g., G. Curtis, A Treatise on the Law of Patents for Useful Inventions §170, p. 155 (3d ed. 1867) (“A contract to convey a future invention . . . cannot alone authorize a patent to be taken by the party in whose favor such a contract was intended to operate”); Comment, Contract Rights as Commercial Security: Present and Future Intangibles, 67 Yale L. J. 847, 854, n. 27 (1958) (“The rule generally applicable grants equitable enforcement to an assignment of an expectancy but demands a further act, either reduction to possession or further assignment of the right when it comes into existence”).
Under this rule, both the initial Stanford and later Cetus agreements could have given rise only to equitable interests in Dr. Holodniy’s invention. And as between these two claims in equity, the facts that Stanford’s contract came first and that Stanford subsequently obtained a postinvention assignment as well should have meant that Stanford, not Cetus, would receive the rights its contract conveyed.
In 1991, however, the Federal Circuit, in FilmTec, adopted the new rule quoted above—a rule that distinguishes between these equitable claims and, in effect, says that Cetus must win. The Federal Circuit provided no explanation for what seems a significant change in the law. Nor did it give any explanation for that change in its opinion in this case. The Federal Circuit’s FilmTec rule undercuts the objectives of the Bayh-Dole Act. While the cognoscenti may be able to meet the FilmTec rule in future contracts simply by copying the precise words blessed by the Federal Circuit, the rule nonetheless remains a technical drafting trap for the unwary. It is unclear to me why, where the Bayh-Dole Act is at issue, we should prefer the Federal Circuit’s FilmTec rule to the rule, of apparently much longer vintage, that would treat both agreements in this case as creating merely equitable rights.
Justice Breyer realized that his argument regarding equitable title had not been briefed by the parties and therefore indicated his preference to remand for briefing of that issue.
In a 6–1–4 decision, an en banc Federal Circuit has attempted to cure the “plague” of inequitable conduct pleadings by raising the standards for proving that the alleged bad act was material to patentability and that the patentee undertook the alleged bad act with intent to deceive the USPTO. The court has also rejected the sliding scale approach that previously allowed strong evidence of materiality to compensate for weak evidence of intent to deceive (and vice-versa). Finally, the the court held that a finding of inequitable conduct should not immediately render a patent unenforceable. Rather, the court must also “weigh the equities” to determine whether the inequitable conduct warrants the unenforceability remedy.
To prevail on the defense of inequitable conduct, the accused infringer must prove that the applicant misrepresented or omitted material information with the specific intent to deceive the PTO. The accused infringer must prove both elements—intent and materiality—by clear and convincing evidence. If the accused infringer meets its burden, then the district court must weigh the equities to determine whether the applicant’s conduct before the PTO warrants rendering the entire patent unenforceable.
Intent: For the element of intent to deceive the USPTO, the Federal Circuit now demands evidence of a “deliberate decision” to deceive. Focusing on the failure to submit material prior art, the court held that the intent element requires “clear and convincing evidence that the applicant knew of the reference, knew that it was material, and made a deliberate decision to withhold it. . . . Proving that the applicant knew of a reference, should have known of its materiality, and decided not to submit it to the PTO does not prove specific intent to deceive.” When circumstantial evidence is used, intent to deceive must be the “most reasonable inference.”
Materiality: For the element of materiality, the Federal Circuit now demands evidence of “but-for materiality.” In other words, the court must find that, but for the deception, the PTO would not [should not] have allowed the claim. “In making this patentability determination, the court should apply the preponderance of the evidence standard and give claims their broadest reasonable construction.”
Exceptions: As a major exception, the court here held that in cases involving affirmative egregious misconduct, but-for material need not be proven.
Unenforceable: [UPDATED] Even when material and intent are proven, the court held that a patent should only be rendered unenforceable due to inequitable conduct “where the patentee’s misconduct resulted in the unfair benefit of receiving an unwarranted claim.” As in eBay v. MercExchange, this equitable analysis is intended to serve as a substantial requirement that limits the discretion of district courts.
Lexicon Medical v. Northgate Technologies and Smith & Nephews (Fed. Cir. 2011)
Judge Rader begins his claim construction decision with an interesting conclusion:
Because the record amply supports the trial court’s interpretation of this claim term … this court affirms.
Of course the Federal Circuit’s en banc decision in Cybor requires that claims be reviewed de novo and without deference to the lower court decision. Thus ,the proper question on appeal is not whether the evidence supports the lower court’s decision but instead whether the lower court made the correct determination. In its actual analysis of the claim construction, the appellate panel here appears to have actually performed a complete de novo review and concluded that, indeed, the trial court’s conclusions were correct. The seeming slip in the opening statement of the opinion is understandable – district court opinions on claim construction should be given some deference.
Part of the trouble with claim construction is that the analysis is rarely a binary decision for the court. Rather, there are often a large number of potential interpretations for any particular claim phrase and, courts typically construe (or refuse to construe) multiple claim phrases. Thus, the idea that a random claim construction should be correct 50% of the time is completely wrong. We also know that well informed, reasonable decision makers often disagree on the particular “best” construction of a particular claim phrase. In a recent article, Peter Menell wrote “If nothing else, the past two decades revealed the inherent difficulties of using language to define the boundaries of abstract and intangible rights.” Menell, Powers, & Carlson, Patent Claim Construction: A Modern Synthesis and Structured Framework, 25 Berkeley Tech. Law Journal 711 (2011).
District courts do make mistakes in construing claims, and those should be corrected on appeal. However, apart from clear district court errors, there is no evidence that the Federal Circuit judges do a better job of construing claims than do district court judges. Offering some deference to district court decisions would give a modicum of finality to those decisions and would give some credence to the reality that claim construction involves substantial factual analysis. In his article, Menell writes that “the Federal Circuit is likely to formally rule that there is a role for district court fact-finding in the claim construction process.” We will be waiting to see if Menell’s prediction comes true.
Tivo Inc. v. Echostar Corp. (Fed. Cir. 2011) (en banc)
At trial, Echostar was held liable as an infringer and was permanently enjoined from making or selling the infringing products as well as “all other products that are only colorably different therefrom.” Echostar then modified and continued to market its product. Rather than filing a new lawsuit, Tivo filed a contempt action arguing that Echostar’s activities violated the permanent injunction already in place. The district court held Echostar in contempt after ruling that the modified product was not colorably different from the infringing product and therefore that its sale violated the permanent injunction.
Normally, a contempt proceeding is the appropriate vehicle for judging violations of a permanent injunction. However, when a company’s new product is sufficiently different from its prior infringing product, courts instead require the patentee to pursue an entirely new case on the merits of the new product. In a rare en banc decision penned by Judge Lourie, the Court of Appeals for the Federal Circuit has provided new guidance as how courts should structure a contempt proceeding when an adjudged infringer releases a new or modified product.
The new rules of contempt proceedings for modified products following an injunction:
Good Faith Design Around: A good faith effort to modify a product in order to avoid infringement will not avoid a contempt proceeding. However, the good faith of someone held in contempt may be used in lessening the penalty for contempt.
Overrule Two-Step Process: The two-step test defined in KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1530–32 (Fed. Cir. 1985), is overruled as unworkable. That test required courts to first determine whether a contempt proceeding is appropriate based upon the colorable difference test and then determine whether contempt actually occurred. Under the new approach, courts will have broad discretion in judging whether to hold a contempt proceeding so long as the injured party offers “a detailed accusation … setting forth the alleged facts constituting the contempt.”
Appealing Decision to Hold a Contempt Proceeding: A confused aspect of the decision is whether the lower court’s decision to hold a contempt proceeding will be appealable. In one portion of the opinion, the court states that the question of whether the contempt proceeding was proper will not be directly appealable. “As with appeals from findings of civil contempt in other areas of law, we will only review whether the injunction at issue is both enforceable and violated, and whether the sanctions imposed were proper.” In the next paragraph, however, the court notes “that there may be circumstances in which the initiation of contempt proceedings would constitute an abuse of discretion by the district court.” The court then went on to hold that the decision in this particular case was not an abuse of discretion.
Colorably Different: In order win a contempt proceeding, the patentee must show that “the newly accused product is [not] so different from the product previously found to infringe that it raises ‘a fair ground of doubt as to the wrongfulness of the defendant’s conduct.'” In conducting this analysis, the court should focus on the portions of the accused product that were a basis for the prior finding of infringement and consider whether those portions have been significantly modified or removed. “If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one” and a contempt finding would be inappropriate. At that point, the patentee could still pursue a full infringement action.
Infringement and Claim Construction: Even when the new product is not colorably different from the prior infringing products, the court must also determine that the new product actually infringes the asserted patent claims. In this process, the court will be bound by its prior claim construction ruling.
In this case, the district court failed to explicitly consider whether Echostar’s modified product met each limitation of the asserted claim. On remand, the district court must make that factual determination.
The court was unanimous as to this new approach to contempt proceedings.
Dissent: The dissent filed by Judge Dyk primarily challenges whether a particular portion of the injunction can be challenged as vague and overbroad in a contempt proceeding. Judge Dyk’s dissent was joined by Chief Judge Rader and Judges Gajarsa, Linn, and Prost. Looking at the tallies, for this portion of the opinion, there were seven judges in the majority and five in dissent. [updated to fix counting error] The majority included Judges O’Malley and Reyna who were not on the bench until well after briefing and oral arguments had been complete.
Several years ago, Stuart Soffer told me about his claim construction thesaurus project. At the time, I thought that the result would be amazing, but that the project was clearly too ambitious. I was both surprised and happy when Oxford Press sent me the completed 1,000 page volume. The book, co-authored by Robert Kahrl (author of Patent Claim Construction), includes over 7,000 claim terms that have been construed by courts over the past decade. Following the introductory chapters explaining the source of definitions from the book and the process of claim construction, the book quickly jumps into the definitions. Here is an example:
Downloader: A computer that retrieves web pages and embedded objects from the internet. 6,864,904 (715/760) Filed: 2000. Girafa.com Inc. v. Amazon Web Service LLC et al. 07-00787 (D. De. September 15, 2009) Stage: Claim Construction.
I am quoted on the book cover as follows:
Claim language and claim construction are probably the most frequently debated legal issues in patent prosecution and patent litigation respectively. This book offers an invaluable resource and desk reference for parties to those debates.
Soffer maintains a database of the claim terms which he uses for his work as a technical expert.
Oxford Press has compiled an impressive group of practical patent law books. My problem with the series the cost Oxford lists the book at $295. Amazon sells them for $270.
Ed Jung is a co-founder of intellectual ventures and Dr. Lowell Wood is a world renowned technologist. In 2004, the pair filed a patent application for a photo-detector array system. The examiner rejected the claims as obvious and the BPAI affirmed. Jung appealed to the Federal Circuit arguing that “(1) the examiner failed to make a prima facie case of anticipation, and (2) the Board acted as a ‘super-examiner’ by performing independent fact-finding and applying an improperly deferential standard of review to the examiner’s rejections.”
Prima Facie Case: The patent office has the initial burden of presenting a prima facie case of invalidity. A prima facie case is adequately articulated by notifying the applicant of the reasons for its rejections so long as the explanation is not “so uninformative that it prevents the applicant from recognizing and seeking to counter the grounds for rejection.” Chester v. Miller, 906 F.2d 1574 (Fed. Cir. 1990). This requirement comes straight from Section 132 of the Patent Act. 35 U.S.C. §132(a).
Whenever, on examination, any claim for a patent is rejected, or any objection or requirement made, the Director shall notify the applicant thereof, stating the reasons for such rejection, or objection or requirement, together with such information and references as may be useful in judging of the propriety of continuing the prosecution of his application.
Once a prima facie case is presented, the burden shifts to the applicant for rebuttal.
In Jung, the Federal Circuit ruled that the examiner presented a prima facie case of invalidity based on his explanation that Jung’s broadly drafted claim encompassed the prior art.
Here, the examiner’s discussion of the theory of invalidity (anticipation), the prior art basis for the rejection (Kalnitsky), and the identification of where each limitation of the rejected claims is shown in the prior art reference by specific column and line number was more than sufficient to meet this burden.
In the appeal, Jung argued that the articulation of a prima facie case should involve more than the notice of rejection outlined in § 132. Jung asked for a claim construction of the disputed claims – similar to what would be required of a court. The Federal Circuit rejected that argument – seeing “no reason to impose a heightened burden on examiners beyond the notice requirement of § 132.”
There has never been a requirement for an examiner to make an on-the-record claim construction of every term in every rejected claim and to explain every possible difference between the prior art and the claimed invention in order to make out a prima facie rejection. This court declines to create such a burdensome and unnecessary requirement. “[Section 132] does not mandate that in order to establish prima facie anticipation, the PTO must explicitly preempt every possible response to a section 102 rejection. Section 132 merely ensures that an applicant at least be informed of the broad statutory basis for the rejection of his claims, so that he may determine what the issues are on which he can or should produce evidence.” Chester, 906 F.2d at 1578 (internal citation omitted). As discussed above, all that is required of the office to meet its prima facie burden of production is to set forth the statutory basis of the rejection and the reference or references relied upon in a sufficiently articulate and informative manner as to meet the notice requirement of § 132. As the statute itself instructs, the examiner must “notify the applicant,” “stating the reasons for such rejection,” “together with such information and references as may be useful in judging the propriety of continuing prosecution of his application.” 35 U.S.C. § 132. Here, the examiner’s discussion of the theory of invalidity (anticipation), the prior art basis for the rejection (Kalnitsky), and the identification of where each limitation of the rejected claims is shown in the prior art reference by specific column and line number was more than sufficient to meet this burden.
Jung’s argument was clearly a long-shot in this case and not well presented if the sole intent was to make sure that Jung gets this patent. Of course, Intellectual Ventures is now one of the largest patent holders in the world and its actions are almost always strategic in nature.
In re Verizon Business Network Services Inc. (Fed. Cir. 2011) Download 10-m956 order Panel: Lourie, Gajarsa, and Linn (author)
The Federal Circuit continues to grant mandamus petitions relating to venue transfer where the basis for denying the request is tenuous. In Verizon, the defendants requested a transfer from the Eastern District of Texas to the Northern District of Texas, Dallas Division. Although several party witnesses resided within 100 miles of Dallas, and no witness resided within 100 miles of Marshall, the district court declined to transfer venue on the basis that several years earlier the court had handled a lawsuit involving the same patent and had construed 25 of the patent's terms.
Given that it was clear that trial in Dallas would be more convenient for the witnesses, the crux of the writ turned on whether the district court's familiarity with the patent was a plausible basis for denying transfer. The CAFC concluded it was not. Distinguishing its recent ruling in In Re Vistaprint Ltd., 628 F.3d 1342 (Fed. Cir. 2010), the panel held that "[t]o interpret § 1404(a) to hold that any prior suit involving the same patent can override a compelling showing of transfer would be inconsistent with the policies underlying § 1404(a)." Slip Op. at 6. The court continued:
In Vistaprint, we denied mandamus to overturn a denial of transfer and determined that the district court properly considered both its previous experience construing claims of the patent at issue and co-pending litigation before the district court involving the same patent and underlying technology. In this case, there is no assertion that there is an additional pending lawsuit in the Eastern District involving the patent and technology. Absent that, we deem the Eastern District's previous claim construction in a case that settled more than five years before the filing of this lawsuit to be too tenuous a reason to support denial of transfer.
Retractable Technologies v. Becton, Dickinson and Company (BD) (
Three of the references were directed toward containers with movable dividers used to separate solid items such as screws or bolts. (See figure). In determining that those references were non-analogous, the court first considered the problem being solved by Klein and arrived upon a somewhat narrowly defined single problem of: “making a nectar feeder with a movable divider to prepare different ratios of sugar and water for different animals.” The court then quickly concluded that the three solid item separators were not pertinent to Klein’s problem “since none of these three references shows a partitioned container that is adapted to receive water or contain it long enough to be able to prepare different 
Stanford v. Roche, 
