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Patent Reform in the 112th Congress:
Innovation Issues
Wendy H. Schacht
Specialist in Science and Technology Policy
John R. Thomas
Visiting Scholar
April 7, 2011
Congressional Research Service
7-5700
www.crs.gov
R41638
CRS Report for Congress
P
repared for Members and Committees of Congress
c11173008
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Patent Reform in the 112th Congress: Innovation Issues
Summary
Congressional interest in patent reform has increased as the patent system becomes more
significant to U.S. industry. Patent ownership is perceived as an incentive to the technological
advancement that leads to economic growth. Yet, this augmented attention to patents has been
accompanied by persistent concerns about the fairness and effectiveness of the current system.
Several studies, including those by the National Academy of Sciences and the Federal Trade
Commission, recommended reform of the patent system to address perceived deficiencies in the
operation of the patent regime. Other experts maintain that major alterations in existing law are
unnecessary and that the patent process can adapt, and is adapting, to technological progress.
Two omnibus patent reform bills introduced in the 112th Congress, each titled the America
Invents Act, would make significant changes to the patent system. Both S. 23 and H.R. 1249
would adopt a first-inventor-to-file priority system, allow assignee filing, establish USPTO fee-
setting authority, provide for post-issuance review proceedings at the USPTO, and introduce
other reforms. Several of these proposals have been the subject of discussion within the patent
community for many years, but others present more novel propositions.
Although S. 23 and H.R. 1249 have many similarities, the two bills differ in some respects. For
example, S. 23 would address the residency requirement of judges serving on the U.S. Court of
Appeals for the Federal Circuit, while H.R. 1249 would not. Unlike S. 23, H.R. 1249 would
significantly broaden patent law’s first inventor defense. Other distinctions with respect to
USPTO post-issuance review proceedings and other topics exist as well.
While the provisions of the proposed legislation would arguably institute the most sweeping
reforms to the U.S. patent system since the nineteenth century, many of these proposals, such as
pre-issuance publication and prior user rights, have already been implemented in U.S. law to a
more limited extent. These and other reforms, such as the first-inventor-to-file priority system and
post-grant review proceedings, also reflect the decades-old patent practices of Europe, Japan, and
our other leading trading partners.
Some observers are nonetheless concerned that certain of these provisions would weaken patent
rights, thereby diminishing incentives for innovation. Other experts believe that changes of this
magnitude, occurring at the same time, do not present the most prudent course for the patent
system. Patent reform therefore confronts Congress with difficult legal, practical, and policy
issues, but also with apparent possibilities for altering and possibly improving the legal regime
that has long been recognized as an engine of innovation within the U.S. economy.
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Contents
Introduction ................................................................................................................................ 1
Patents and Innovation Policy ..................................................................................................... 2
The Mechanics of the Patent System ..................................................................................... 2
Innovation Policy.................................................................................................................. 3
Proposed Legislative Initiatives................................................................................................... 5
First Inventor to File ............................................................................................................. 6
Grace Period ......................................................................................................................... 8
Marking ................................................................................................................................ 9
First Inventor Defense (Prior User Rights)........................................................................... 11
Inventor’s Oath and Assignee Filing.................................................................................... 13
Willful Infringement ........................................................................................................... 14
Inter Partes and Post-Grant Reviews................................................................................... 15
Post-Grant Citation of Prior Art........................................................................................... 17
Preissuance Submissions..................................................................................................... 18
Venue ................................................................................................................................. 19
USPTO Fee-Setting Authority............................................................................................. 19
Supplemental Examination.................................................................................................. 21
Residency of Federal Circuit Judges.................................................................................... 23
Tax Strategy Patents............................................................................................................ 23
Best Mode .......................................................................................................................... 24
Clarification of Jurisdiction................................................................................................. 26
Transitional Program for Covered Business-Method Patents................................................ 26
USPTO Satellite Offices ..................................................................................................... 27
Other USPTO Programs...................................................................................................... 27
Current Issues and Concerns ..................................................................................................... 27
Patent Quality ..................................................................................................................... 28
Litigation Costs................................................................................................................... 29
International Harmonization................................................................................................ 30
Potential Abuses by Patent Speculators ............................................................................... 30
The Role of Individuals, Universities, and Small Entities .................................................... 31
Differing Patent Values in Distinct Industries ...................................................................... 33
Concluding Observations .......................................................................................................... 34
Tables
Table 1. Principal Provisions of S. 23 and H.R. 1249................................................................... 6
Contacts
Author Contact Information ...................................................................................................... 35
Acknowledgments .................................................................................................................... 35
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Patent Reform in the 112th Congress: Innovation Issues
Introduction
Congressional interest in patent reform is evidenced by sustained legislative activity over the last
four congresses.1 There is broad agreement that more patents are sought and enforced than ever
before; that the attention paid to patents in business transactions and corporate boardrooms has
dramatically increased; and that the commercial and social significance of patent grants, licenses,
judgments, and settlements are at an all-time high.2 As the United States becomes even more of a
high-technology, knowledge-based economy, the importance of patents may grow even further in
the future.
Expanded attention to patents has been accompanied by persistent concerns about the fairness and
effectiveness of the current system. The American Inventors Protection Act, passed in the 106th
Congress, mandated several changes to the patent laws, including U.S. Patent and Trademark
Office (USPTO) publication of certain patent applications prior to grant and patent term
restoration for delays caused by the USPTO during grant proceedings.3 Several studies completed
since the enactment of that legislation, including those by the National Academy of Sciences and
the Federal Trade Commission, have recommended additional legal reforms to address perceived
deficiencies in the operation of the patent regime.4 Other experts maintain that major alterations
in existing law are unnecessary and that the patent process can adapt, and is adapting, to
technological progress.
Legislation introduced in the 112th Congress attempts to respond to current concerns about the
functioning of the patent process. S. 23, originally titled the Patent Reform Act of 2011, now the
America Invents Act, was introduced on January 25, 2011. S. 23 was reported, amended, from the
Senate Committee on the Judiciary on February 3, 2011. Consideration of the bill on the Senate
floor commenced on February 28, 2011; S. 23 passed the Senate, as amended, on March 8, 2011.
H.R. 1249, also titled the American Invents Act, was introduced on March 30, 2011.
S. 23 and H.R. 1249 have many provisions that are worded similarly or identically. Both S. 23
and H.R. 1249 would adopt a first-inventor-to-file priority system, allow assignee filing, establish
USPTO fee-setting authority, provide for post-issuance review proceedings at the USPTO, and
introduce other reforms. However, the bills differ in some respects. For example, S. 23 would
address the residency requirement of judges serving on the U.S. Court of Appeals for the Federal
1 This report is based substantially on three predecessor reports on patent reform issues in the 111th, 110th, and 109th
Congresses: CRS Report R40481, Patent Reform in the 111th Congress: Innovation Issues, by Wendy H. Schacht and
John R. Thomas; CRS Report RL33996, Patent Reform in the 110th Congress: Innovation Issues, by John R. Thomas
and Wendy H. Schacht; and CRS Report RL32996, Patent Reform: Innovation Issues, by John R. Thomas and Wendy
H. Schacht.
2 Statistics from the United States Patent and Trademark Office (USPTO) support this account. In 1980, 104,329 utility
patent applications were received at the U.S. Patent and Trademark Office (USPTO); by 2009, this number had more
than quadrupled to 456,106 applications. During the same time period, the number of U.S. utility patents granted grew
from 61,819 to 167,349. U.S. Patent and Trademark Office, U.S. Patent Statistics, Calendar Years 1963-2009,
available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.pdf.
3 The American Inventors Protection Act of 1999, P.L. 106-113, was part of the Intellectual Property and
Communications Omnibus Reform Act of 1999, attached by reference to the Consolidated Appropriations Act for
Fiscal Year 2000. President Clinton signed this bill on November 29, 1999.
4 National Research Council, National Academy of Sciences, A Patent System for the 21st Century [Washington,
National Academies Press, 2004] and Federal Trade Commission, To Promote Innovation: The Proper Balance of
Competition and Patent Law and Policy, October 2003, available at http://www.ftc.gov.
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Circuit, while H.R. 1249 would not. Unlike S. 23, H.R. 1249 would significantly broaden patent
law’s first inventor defense. Other distinctions with respect to USPTO post-issuance review
proceedings and other topics exist as well.
Two additional bills in the 112th Congress are directed to a single topic that is addressed within
the more comprehensive provisions of S. 23 and H.R. 1249. The Patent Lawsuit Reform Act of
2011, H.R. 243, would also limit the currently available cause of action for false patent marking.
As well, S. 139 (not yet titled) would place restrictions upon the availability of patents on tax
strategies and is comparable to section 14 of S. 23. Appropriate sections of this report review
H.R. 243 and S. 139. In the event additional patent reform bills are introduced, this report will be
updated to address them.
This study provides an overview of current patent reform issues. It begins by offering a summary
of the structure of the current patent system and the role of patents in innovation policy. The
specific components of this legislation are then identified and reviewed in greater detail. The
report closes with a review of some of the broader issues and concerns, including patent quality,
the high costs of patent litigation, international harmonization, and speculation in patents, which
have motivated these diverse legislative reform proposals.
Patents and Innovation Policy
The Mechanics of the Patent System
The patent system is grounded in Article I, Section 8, Clause 8 of the U.S. Constitution, which
states that “The Congress Shall Have Power ... To promote the Progress of Science and useful
Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their
respective Writings and Discoveries.... ” As mandated by the Patent Act of 1952,5 U.S. patent
rights do not arise automatically. Inventors must prepare and submit applications to the U.S.
Patent and Trademark Office (USPTO) if they wish to obtain patent protection.6 USPTO officials
known as examiners then assess whether the application merits the award of a patent.7 The patent
acquisition process is commonly known as “prosecution.”8
In deciding whether to approve a patent application, a USPTO examiner will consider whether
the submitted application fully discloses and distinctly claims the invention.9 In addition, the
application must disclose the “best mode,” or preferred way, that the applicant knows to practice
the invention.10 The examiner will also determine whether the invention itself fulfills certain
substantive standards set by the patent statute. To be patentable, an invention must consist of a
process, machine, manufacture, or composition of matter that is useful, novel and nonobvious.
The requirement of usefulness, or utility, is satisfied if the invention is operable and provides a
5 P.L. 82-593, 66 Stat. 792 (codified at Title 35 United States Code).
6 35 U.S.C. § 111.
7 35 U.S.C. § 131.
8 John R. Thomas, “On Preparatory Texts and Proprietary Technologies: The Place of Prosecution Histories in Patent
Claim Interpretation,” 47 UCLA Law Review (1999), 183.
9 35 U.S.C. § 112.
10 Ibid.
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tangible benefit.11 To be judged novel, the invention must not be fully anticipated by a prior
patent, publication or other state-of-the-art knowledge that is collectively termed the “prior art.”12
A nonobvious invention must not have been readily within the ordinary skills of a competent
artisan at the time the invention was made.13
If the USPTO allows the patent to issue, the patent proprietor obtains the right to exclude others
from making, using, selling, offering to sell or importing into the United States the patented
invention.14 Those who engage in these acts without the permission of the patentee during the
term of the patent can be held liable for infringement. Adjudicated infringers may be enjoined
from further infringing acts.15 The patent statute also provides for the award of damages
“adequate to compensate for the infringement, but in no event less than a reasonable royalty for
the use made of the invention by the infringer.”16
The maximum term of patent protection is ordinarily set at 20 years from the date the application
is filed.17 At the end of that period, others may employ that invention without regard to the
expired patent.
Patent rights are not self-enforcing. Patentees who wish to compel others to observe their rights
must commence enforcement proceedings, which most commonly consist of litigation in the
federal courts. Although issued patents enjoy a presumption of validity, accused infringers may
assert that a patent is invalid or unenforceable on a number of grounds.18 The U.S. Court of
Appeals for the Federal Circuit (Federal Circuit) possesses national jurisdiction over most patent
appeals from the district courts.19 The U.S. Supreme Court enjoys discretionary authority to
review cases decided by the Federal Circuit.20
Innovation Policy
Most experts agree that patent ownership is an incentive to innovation, the basis for the
technological advancement that contributes to economic growth. It is through the
commercialization and use of new products and processes that productivity gains are made and
the scope and quality of goods and services are expanded. Award of a patent is intended to
stimulate the investment necessary to develop an idea and bring it to the marketplace embodied in
a product or process. Patent title provides the recipient with a limited-time monopoly over the use
of his discovery in exchange for the public dissemination of information contained in the patent
11 35 U.S.C. § 101.
12 35 U.S.C. § 102.
13 35 U.S.C. § 103.
14 35 U.S.C. § 271(a).
15 35 U.S.C. § 283.
16 35 U.S.C. § 284.
17 35 U.S.C. § 154(a)(2). Although patent term is based upon the filing date, the patentee gains no enforceable legal
rights until the USPTO allows the application to issue as a granted patent. A number of Patent Act provisions may
modify the basic 20-year term, including examination delays at the USPTO and delays in obtaining marketing approval
for the patented invention from other federal agencies.
18 35 U.S.C. § 282.
19 28 U.S.C. § 1295(a)(1).
20 28 U.S.C. § 1254(1).
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application. This is intended to permit the inventor to receive a return on the expenditure of
resources leading to the discovery but does not guarantee that the patent will generate commercial
benefits. The requirement for publication of the patent is expected to stimulate additional
innovation and other creative means to meet similar and expanded demands in the marketplace.
Innovation produces new knowledge. One characteristic of this knowledge is that it is a “public
good,” a good that is not consumed when it is used. This “public good” concept underlies the
U.S. patent system. Absent a patent system, “free riders” could easily duplicate and exploit the
inventions of others. Further, because they incurred no cost to develop and perfect the technology
involved, copyists could undersell the original inventor. The resulting inability of inventors to
capitalize on their inventions would lead to an environment where too few inventions are made.21
The patent system corrects this market failure problem by providing innovators with an exclusive
interest in their inventions for a period of time, thereby allowing them to capture the innovation’s
marketplace value.
The regime of patents purportedly serves other goals as well. The patent system encourages the
disclosure of products and processes, for each issued patent must include a description sufficient
to enable skilled artisans to practice the patented invention.22 At the close of the patent’s 20-year
term,23 others may practice the claimed invention without regard to the expired patent. In this
manner the patent system ultimately contributes to the growth of the public domain.
Even during their term, issued patents may also encourage others to “invent around” the
patentee’s proprietary interest. A patentee may point the way to new products, markets,
economies of production and even entire industries. Others can build upon the disclosure of a
patent instrument to produce their own technologies that fall outside the exclusive rights
associated with the patent.24
The patent system has also been identified by legal observers as a facilitator of markets. Absent
patent rights, an inventor may have scant tangible assets to sell or license. In addition, an inventor
might otherwise be unable to police the conduct of a contracting party. Any technology or know-
how that has been disclosed to a prospective licensee might be appropriated without
compensation to the inventor. The availability of patent protection decreases the ability of
contracting parties to engage in opportunistic behavior. By lowering such transaction costs, the
patent system may make technology-based transactions more feasible.25
Through these mechanisms, the patent system can provide more socially desirable results than its
chief legal alternative, trade secret protection. Trade secrecy guards against the improper
appropriation of valuable, commercially useful and secret information. In contrast to patenting,
trade secret protection does not result in the disclosure of publicly valuable information. That is
because an enterprise must take reasonable measures to keep secret the information for which
trade secret protection is sought. Taking the steps necessary to maintain secrecy, such as
21 See Rebecca S. Eisenberg, “Patents and the Progress of Science: Exclusive Rights and Experimental Use,” 56
University of Chicago Law Review 1017 (1989).
22 35 U.S.C. § 112.
23 35 U.S.C. § 154.
24 Eisenberg, supra, at 1017.
25 Robert P. Merges, “Intellectual Property and the Costs of Commercial Exchange: A Review Essay,” 93 Michigan
Law Review (1995), 1570.
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implementing physical security measures, also imposes costs that may ultimately be unproductive
for society.26
The patent system has long been subject to criticism, however. Some observers have asserted that
the patent system is unnecessary due to market forces that already suffice to create an optimal
level of innovation. From this perspective, the desire to obtain a lead time advantage over
competitors, as well as the recognition that technologically backward firms lose out to their rivals,
can provide sufficient inducement to invent without the need for further incentives.27 Other
commentators believe that the patent system encourages industry concentration and presents a
barrier to entry in some markets.28 Still other observers believe that the patent system too
frequently attracts speculators who prefer to acquire and enforce patents rather than engage in
socially productive activity.29
When analyzing the validity of these competing views, it is important to note the lack of rigorous
analytical methods available for studying the effect of the patent law upon the U.S. economy as a
whole. The relationship between innovation and patent rights remains poorly understood. As a
result, current economic and policy tools do not allow us to calibrate the patent system precisely
in order to produce an optimal level of investment in innovation. Thus, each of the arguments for
and against the patent system remains open to challenge by those who are not persuaded by their
internal logic.
Proposed Legislative Initiatives
S. 23 and H.R. 1249 include numerous substantive, procedural, and technical amendments to the
patent laws. The following table identifies and contrasts the principal provisions of the two bills.
26 David D. Friedman et al., “Some Economics of Trade Secret Law,” 5 Journal of Economic Perspectives (1991), 61.
27 See Jonathan M. Barnett, “Private Protection of Patentable Goods,” 25 Cardozo Law Review (2004), 1251.
28 See John R. Thomas, “Collusion and Collective Action in the Patent System: A Proposal for Patent Bounties,”
University of Illinois Law Review (2001), 305.
29 Ibid.
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Table 1. Principal Provisions of S. 23 and H.R. 1249
S. 23
H.R. 1249
First inventor to file, § 2
First inventor to file, § 2
False marking, § 2(k)
False marking, § 15(b)
Assignee filing, § 3
Assignee filing, § 3
First inventor defense (prior user rights), § 4(a)
First inventor defense (prior user rights), § 4
Virtual marking, § 4 (b)
Virtual making, § 15(a)
Willful infringement, § 4(c)
Willful infringement, § 16
Post-grant review proceedings, § 5
Post-grant review proceedings, § 5
Post-grant citation of prior art, § 5(g)
Post-grant citation of prior art, § 5(g)
Preissuance submissions, § 7
Preissuance submissions, § 7
Venue, § 8
Venue, § 8
USPTO fee setting authority, § 9
USPTO fee setting authority, § 9
Supplemental examination, § 10
Supplemental examination, § 11
Residency of federal circuit judges, § 11
Tax strategies, § 14
Tax strategies, § 13
Best mode requirement, § 15
Best mode requirement, § 14
Clarification of jurisdiction, § 17
Clarification of jurisdiction, § 19
Transitional business method patent program, § 18
Transitional business method patent program, § 18
USPTO funding, § 20
USPTO funding, § 22
USPTO satellite offices, § 21
USPTO satellite offices, § 23
Smal business ombudsman, § 22
Smal business ombudsman, § 24
Priority examination, § 23
Priority examination, § 25
First Inventor to File
In a significant change to the patent process, S. 23 and H.R. 1249 would shift the U.S. patent
priority rule from the current “first-to-invent” principle to the “first-inventor-to-file” principle.30
Within the patent law, the priority rule addresses the circumstance where two or more persons
independently develop the identical or similar invention at approximately the same time. In such
cases the patent law must establish a rule as to which of these inventors obtains entitlement to a
patent.31 Under current U.S. law, when more than one patent application is filed claiming the
same invention, the patent will be awarded to the applicant who was the first inventor in fact.
This conclusion holds even if the first inventor was not the first person to file a patent application
directed towards that invention.32 Within this “first-to-invent” system,33 the timing of real-world
30 S. 23 at § 2(b); H.R. 1249 at § 2(b).
31 See Roger E. Schechter & John R. Thomas, Principles of Patent Law § 1.2.5 (2d ed. 2004).
32 In addition, the party that was the first to invent must not have abandoned, suppressed or concealed the invention. 35
U.S.C. § 102(g)(2).
33 See Charles E. Gholz, “First-to-File or First-to-Invent?,” 82 Journal of the Patent and Trademark Office Society
(2000), 891.
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events, such as the date a chemist conceived of a new compound or a machinist constructed a new
engine, is of significance.
In every patent-issuing nation except the United States, priority of invention is established by the
earliest effective filing date of a patent application disclosing the claiming invention.34 Stated
differently, the inventor who first filed an application at the patent office is presumptively entitled
to the patent. Whether or not the first applicant was actually the first individual to complete the
invention in the field is irrelevant. This priority system follows the “first-inventor-to file”
principle.
A simple example illustrates the distinction between these priority rules. Suppose that Inventor A
synthesizes a new chemical compound on August 1, 2010, and files a patent application on
November 1, 2010, claiming that compound. Suppose further that Inventor B independently
invents the same compound on September 1, 2010, and files a patent application on October 1,
2010. Inventor A would be awarded the patent under the first-to-invent rule, while Inventor B
would obtain the patent under the first-inventor-to-file principle.
Under the current U.S. first-to-invent rule, priority disputes may be resolved via “interference”
proceedings conducted at the USPTO.35 An interference is a complex administrative proceeding
that may result in the award of priority to one of its participants. These proceedings are not
especially common. One estimate concludes that less than one-quarter of one percent of patents
are subject to an interference.36 This statistic may mislead, however, because the expense of
interference cases may result in their use only for the most commercially significant inventions. A
shift to a first-inventor-to-file priority rule would eliminate the need for interference proceedings.
Instead, the applicant with the earliest filing date, rather than the first individual to have created
the invention, would be eligible for the patent.
The relative merits of the first-to-invent and first-inventor-to-file priority principles have been the
subject of a lengthy debate within the patent community. Supporters of the current first-to-invent
principle in part assert that the first-inventor-to-file system would create inequities by sponsoring
a “race to the Patent Office.” They are also concerned that the first-to-file system would
encourage premature and sketchy technological disclosures in hastily-filed patent applications.37
Supporters of the first-inventor-to-file principle in part argue that it provides a definite, readily
determined and fixed date of priority of invention, which would lead to greater legal certainty
within innovative industries. They also contend that the first-inventor-to-file principle would
decrease the complexity, length, and expense associated with current USPTO interference
proceedings. Rather than being caught up in lengthy interference proceedings in an attempt to
prove dates of inventive activity that occurred many years previously, they assert, inventors could
continue to go about the process of innovation. Supporters also observe that informed U.S. firms
34 See Peter A. Jackman, “Adoption of a First-to-File System: A Proposal,” 26 University of Baltimore Law Review
(1997), 67.
35 35 U.S.C. § 135.
36 See Clifford A. Ulrich, “The Patent Systems Harmonization Act of 1992: Conformity at What Price?,” 16 New York
Law School Journal of International and Comparative Law (1996), 405.
37 See Brad Pedersen & Vadim Braginsky, “The Rush to First-to-File Patent System in the United States: Is a Globally
Standardized Patent Reward System Really Beneficial to Patent Quality and Administrative Efficiency?,” 7 Minnesota
Journal of Law, Science & Technology (2006), 757.
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already organize their affairs on a first-inventor-to-file basis in order to avoid forfeiture of patent
rights abroad.38
The debate over a shift to the first-inventor-to-file rule and its impact on individual inventors,
small firms, and universities is contentious. Some observers state that such entities often possess
fewer resources and wherewithal than their larger competitors, and thus are less able to prepare
and file patent applications quickly. Others disagree, stating that smaller concerns are more
nimble than larger ones and thus better able to submit applications promptly. They also point to
the availability of provisional applications,39 asserting that such applications allow small entities
to secure priority rights readily without a significant expenditure of resources. A quantitative
study of interference proceedings by Gerald Mossinghoff, a former Commissioner of the USPTO,
also suggested that the first-to-invent rule neither advantaged nor disadvantaged small entities
vis-à-vis larger enterprises.40
Notably, a first-inventor-to-file priority rule does not permit one individual to copy another’s
invention and then, by virtue of being the first to file a patent application, be entitled to a patent.
All patent applicants must have originated the invention themselves, rather than derived it from
another.41 In order to police this requirement, S. 23 and H.R. 1249 would provide for “derivation
proceedings” that would allow the USPTO to determine which applicant is entitled to a patent on
a particular invention.42
Grace Period
Current U.S. patent law essentially provides inventors with a one-year period to decide whether
patent protection is desirable, and, if so, to prepare an application. Specified activities that occur
before the “critical date”—patent parlance for the day one year before the application was filed—
will prevent a patent from issuing.43 If, for example, an entrepreneur first discloses an invention
by publishing an article in a scientific journal, she knows that she has one year from the
publication date in which to file a patent application. Importantly, uses, sales, and other technical
disclosures by third parties will also start the one-year clock running. As a result, inventors have a
broader range of concerns than merely their own activities.44
Suppose, for example, that an electrical engineer files a patent application claiming a new
capacitor on February 1, 2010. While reviewing the application, a USPTO examiner discovers an
October 1, 2008, journal article by any author disclosing the identical capacitor. Because the
article was published prior to the critical date of February 1, 2009, that publication will prevent or
“bar” the issuance of a patent on that capacitor.
38 See Whitney E. Fraser Tiedemann, “First-to-File: Promoting the Goals of the United States Patent System as
Demonstrated Through the Biotechnology Industry,” 41 University of San Francisco Law Review (2007), 477.
39 35 U.S.C. § 111(b).
40 Gerald J. Mossinghoff, “The U.S. First-to-Invent System Has Provided No Advantage to Small Entities,” 84 Journal
of the Patent and Trademark Office Society (2002), 425.
41 35 U.S.C. § 101.
42 S. 23 at § 2(h); H.R. 1249 at § 2(h).
43 35 U.S.C. § 102(b).
44 Schechter & Thomas, supra, at § 4.3.1.
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If a relevant reference is first publicly disclosed during the one-year grace period—that is to say,
after the critical date but prior to the filing date—the legal situation is more complex. Under
current law, patent applicants may “antedate” such a reference by demonstrating that they had
actually invented the subject matter of their application prior to the date of the reference. If the
applicant can make such a showing, then the reference cannot ordinarily be used to defeat the
patentability of the invention.
As an illustration of this procedure, suppose that an inventor files a patent application directed to
a polymer on February 1, 2008. Suppose further that the USPTO examiner discovers that a
textbook published on January 1, 2008, describes the same polymer that is claimed in the
application.45 Because the textbook was published subsequent to the critical date of February 1,
2007, it does not absolutely bar the application. In order to obtain a patent, however, the applicant
must nonetheless demonstrate that he invented the polymer prior to January 1, 2008, the date the
textbook was published. The applicant might submit copies of his laboratory notebook, for
example, or submit a sworn declaration in order to make this showing.46
S. 23 and H.R. 1249 would modify the current grace period by causing it only to apply to patent
applicants themselves.47 Under this proposal, a disclosure “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” would not be patent-defeating, provided it was made “1 year or less before the
effective filing date of a claimed invention.” In contrast, disclosures qualify as prior art, and are
therefore potentially patent-defeating, if they were made either by (1) the inventors and their
associates more than one year before the patent application’s filing date; or (2) anyone else prior
to the filing date, provided that such a disclosure occurred prior to the inventor’s own disclosure.
These amendments would, in essence, protect the patent positions of individuals who disclosed
their inventions up to one year before they filed a patent application. The grace period would no
longer shield inventors from earlier disclosures made by unrelated individuals, however.
Marking
The Patent Act encourages patent proprietors that manufacture their patented inventions to notify
the public of their patent rights.48 Section 287(a) provides that patent owners should place the
word “patent,” or the abbreviation “pat.,” along with the number of the patent, on patented goods.
If the nature of the article does not allow this notice to be placed directly upon it, then a label may
be placed on the article or its packaging. This practice is commonly termed “marking.”49
There is no absolute duty to mark. If a patent proprietor fails to mark in the specified manner,
however, then it may receive damages only for infringing acts that occur after the infringer
receives actual notice of infringement.50 Filing an infringement lawsuit is considered to provide
45 In addition, the textbook must be attributable to someone other than the patent applicant. See 35 U.S.C. § 102(a).
46 37 C.F.R. § 1.131.
47 S. 23 at § 2(b); H.R. 1249 at § 2(b).
48 For further discussion of current patent marking issues and proposed legislation, see CRS Report R41418, False
Patent Marking: Litigation and Legislation, by Brian T. Yeh.
49 See Schechter & Thomas, supra, at § 9.2.3.
50 It should be further appreciated that under 35 U.S.C. § 286, “no recovery shall be had for any infringement
committed more than six years prior to the filing of the complaint or counterclaim for infringement in the action.”
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such actual notice. Less severely, a patent owner may issue a specific charge of infringement,
commonly by sending a cease and desist letter to the infringer. The marking statute is said “to
give patentees the proper incentive to mark their products and thus place the world on notice of
the existence of the patent.”51
The marking statute does not apply in some situations. Obviously, if the patent owner does not
sell products that embody the patented invention, then there is no obligation to mark. In addition,
“[t]he law is clear that the notice provisions of section 287 do not apply where the patent is
directed to a process or method.”52 Because these types of patent concern inchoate behavior,
rather than a discrete physical product, the courts have reasoned that there is no tangible item on
which to place a patent marking.53
The Patent Act also addresses the issue of “false marking.” Section 292 prohibits marking a
product with the number of another’s patent, the name of another patent owner, or a patent or
application number where no such patent or application exists. Prohibited marks also include the
number of expired patents and patents that do not cover the marked product, provided such marks
were affixed for the “purpose of deceiving the public.”
The Patent Act mandates a maximum fine of $500 for “every such” offense. According to the
statute, “any person may sue for the penalty, in which event one-half shall go to the person suing
and the other to the use of the United States.”54 In its decision in The Forest Group, Inc. v. Bon
Tool Co.,55 the Federal Circuit construed that provision to require imposition of that fine with
respect to each item that was falsely marked. In so doing the Court of Appeals specifically
rejected an interpretation that would assess the fine on the basis of the offender’s single decision
to mark an entire line of products. A false patent marking on one million identical products would
therefore generate a maximum fine of not $500, but rather $500 million. Although the Federal
Circuit acknowledged that “interpreting the fine of § 292 to apply on a per article basis would
encourage ‘a new cottage industry’ of false marking litigation by plaintiffs who have not suffered
any direct harm,” the court explained “that in the case of inexpensive mass-produced articles, a
court has the discretion to determine that a fraction of a penny per article is a proper penalty.”56
S. 23 and H.R. 1249 propose to alter the Patent Act’s false marking provision by stipulating that
the statute may only be privately enforced by a “person who has suffered a competitive injury as
a result of the violation....”57 Damages in such cases would also be limited to those “adequate to
compensate for the injury.” This amendment would change current law, which allows any private
person to bring a civil action for false marking, whether or not they have been negatively
affected. These provisions do not apply to the U.S. government. Under the provisions of S. 23
and H.R. 1249, the U.S. government would continue to bring false marking suits without regard
to competitive injury, and also would retain the ability to recover a maximum fine of $500 per
falsely marked article.
51 Laitram Corp. v. Hewlett-Packard Co., 806 F. Supp. 1294, 1296 (E.D. La. 1992).
52 American Med. Sys., Inc. v. Medical Eng’g Corp., 6 F.3d 1523, 1538 (Fed. Cir. 1993).
53 See State Contracting & Eng’g Corp. v. Condotte Am., Inc., 346 F.3d 1057, 1074 (Fed. Cir. 2003).
54 35 U.S.C. § 292(b). This sort of proceeding is termed a qui tam action.
55 590 F.3d 1295 (Fed. Cir. 2009).
56 Ibid. at 1303-04.
57 S. 23 at § 2(k); H.R. 1249 at § 15(b).
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In addition, S. 23 and H.R. 1249 would allow for “virtual marking.” Under this proposal, the
marking standard would be fulfilled if the product or its packaging included the word “patent” or
the abbreviation “pat.,” together with an Internet address that provided the number of the patent
associated with the patented article.58
A stand-alone bill, H.R. 243, also addresses false marking. Titled the Patent Lawsuit Reform Act
of 2011, this legislation would also limit entitlement to bring suit to those who have suffered
direct economic harm as a result of the false marking.59 In addition, H.R. 243 would limit the
damages available for false marking violations to a single fine, in the aggregate, of not more than
$500.60
First Inventor Defense (Prior User Rights)
The two bills each address the “first inventor defense” established by the American Inventors
Protection Act of 1999. As currently found at 35 U.S.C. § 273, an earlier inventor of a “method of
doing or conducting business” that was later patented by another may claim a defense to patent
infringement in certain circumstances. Both S. 23 and H.R. 1249 would expand the range of
individuals who may assert the first inventor defense in court. H.R. 1249 would go further,
eliminating the current restriction of the first inventor to business method patents. Under H.R.
1249, a patent claiming any sort of invention may be subject to the first inventor defense.
The current “first inventor defense” accounts for the complex relationship between the law of
trade secrets and the patent system. Trade secrecy protects individuals from misappropriation of
valuable information that is useful in commerce. One reason an inventor might maintain the
invention as a trade secret rather than seek patent protection is that the subject matter of the
invention may not be regarded as patentable. Such inventions as customer lists or data
compilations have traditionally been regarded as amenable to trade secret protection but not to
patenting.61 Inventors might also maintain trade secret protection due to ignorance of the patent
system or because they believe they can keep their invention as a secret longer than the period of
exclusivity granted through the patent system.62
The patent law does not favor trade secret holders, however. Well-established patent law provides
that an inventor who makes a secret, commercial use of an invention for more than one year prior
to filing a patent application at the USPTO forfeits his own right to a patent.63 This policy is
based principally upon the desire to maintain the integrity of the statutorily prescribed patent
term. The patent law grants patents a term of twenty years, commencing from the date a patent
application is filed.64 If the trade secret holder could make commercial use of an invention for
many years before choosing to file a patent application, he could disrupt this regime by delaying
the expiration date of his patent.
58 S. 23 at § 4(b); H.R. 1249 at § 15(a).
59 H.R. 243, § 2(a)(2).
60 Id. at § 2(a)(1)(C).
61 Restatement of Unfair Competition § 39.
62 David D. Friedman, “Some Economics of Trade Secret Law,” 5 Journal of Economic Perspectives (1991), 61, 64.
63 35 U.S.C. § 102(b). See Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts, 153 F.2d 516 (2d Cir. 1946).
64 35 U.S.C. § 154.
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On the other hand, settled patent law principles established that prior secret uses would not defeat
the patents of later inventors.65 If an earlier inventor made secret commercial use of an invention,
and another person independently invented the same technology later and obtained patent
protection, then the trade secret holder could face liability for patent infringement. This policy is
based upon the reasoning that once issued, published patent instruments fully inform the public
about the invention, while trade secrets do not. Between a subsequent inventor who patented the
invention, and thus had disclosed the invention to the public, and an earlier trade secret holder
who had not, the law favored the patent holder.
An example may clarify this rather complex legal situation. Suppose that Inventor A develops
and makes commercial use of a new manufacturing process. Inventor A chooses not to obtain
patent protection, but rather maintains that process as a trade secret. Many years later, Inventor B
independently develops the same manufacturing process and promptly files a patent application
claiming that invention. In such circumstances, Inventor A’s earlier, trade secret use does not
prevent Inventor B from procuring a patent. Furthermore, if the USPTO approves the patent
application, then Inventor A faces infringement liability should Inventor B file suit against him.
The American Inventors Protection Act of 1999 somewhat modified this principle. That statute in
part provided an infringement defense for an earlier inventor of a “method of doing or conducting
business” that was later patented by another. By limiting this defense to patented methods of
doing business, Congress responded to the 1998 Federal Circuit opinion in State Street Bank and
Trust Co. v. Signature Financial Group.66 That judicial opinion recognized that business methods
could be subject to patenting, potentially exposing individuals who had maintained business
methods as trade secrets to liability for patent infringement.
Again, an example may aid understanding of the first inventor defense. Suppose that Inventor X
develops and exploits commercially a new method of doing business. Inventor X maintains his
business method as a trade secret. Many years later, Inventor Y independently develops the same
business method and promptly files a patent application claiming that invention. Even following
the enactment of the American Inventors Protection Act, Inventor X’s earlier, trade secret use
would not prevent Inventor Y from procuring a patent. However, should the USPTO approve
Inventor Y’s patent application, and should Inventor Y sue Inventor X for patent infringement,
then Inventor X may potentially claim the benefit of the first inventor defense. If successful,67
Inventor X would enjoy a complete defense to infringement of Inventor Y’s patent.
Under current law, the first inventor defense “may be asserted only by the person who performed
the acts necessary to establish the defense....” Both S. 23 and H.R. 1249 would also allow the
defense to be asserted by “any other entity that controls, is controlled by, or is under common
control with such person....” H.R. 1249 additionally eliminates the restriction of the first
inventor defense to business method patents. Under the House bill, any sort of patented invention
would be subject to the first inventor defense. H.R. 1249 would therefore establish a system of
“prior user rights” found in many other patent-issuing states. H.R. 1249 also stipulates that the
65 W.L. Gore & Associates v. Garlock, Inc., 721 F.2d 1540 (Fed. Cir. 1983).
66 149 F.3d 1368 (Fed. Cir. 1998).
67 As presently codified at 35 U.S.C. § 273, the first inventor defense is subject to a number of additional qualifications.
First, the defendant must have reduced the infringing subject matter to practice at least one year before the effective
filing date of the application. Second, the defendant must have commercially used the infringing subject matter prior to
the effective filing date of the patent. Finally, any reduction to practice or use must have been made in good faith,
without derivation from the patentee or persons in privity with the patentee.
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first inventor defense is not available if “the subject matter of the patent on which the defense is
based was developed pursuant to a funding agreement under chapter 18 of this title [the
University and Small Business Patent Procedures Act of 1980, commonly known as the Bayh-
Dole Act] or by a nonprofit institution of higher education, or a technology transfer organization
affiliated with such an institution, that did not receive funding from a private business enterprise
in support of that development.”
Inventor’s Oath and Assignee Filing
Under current U.S. law, a patent application must be filed by the inventor—that is, the natural
person or persons who developed the invention.68 This rule applies even where the invention was
developed by individuals in their capacity as employees. Even though rights to the invention have
usually been contractually assigned to an employer, for example, the actual inventor, rather than
the employer, must be the one that applies for the patent. In particular, Section 115 of the Patent
Act obliges each applicant must also submit an oath or declaration stating that he believes himself
to be the “original and first inventor” of the subject matter for which he seeks a patent. Section
118 of the Patent Act allows a few exceptions to this general rule. If an inventor cannot be
located, or refuses to perform his contractual obligation to assign an invention to his employer,
then the employer may file the patent application in place of the inventor.
S. 23 and H.R. 1249 would modify these rules by incorporating the exceptions found in current
Section 118 into Section 115 of the Patent Act.69 This proposal appears to be primarily technical
in nature, although a few differences between the proposed statute and present law exist. First, S.
23 and H.R. 1249 require inventors to declare only that they are the “original inventor”—rather
than the “original and first inventor”—in keeping with the proposed shift to a first-inventor-to-file
priority system. Second, S. 23 and H.R. 1249 allow an “individual who is under an obligation of
assignment for patent [to] include the required statements ... in the assignment executed by the
individual, in lieu of filing such statements separately.” This provision comports with the
allowance of the filing of patent applications by employers and other assignees of patent rights.
The two bills further stipulate that a “person to whom the inventor has assigned or is under an
obligation to assign the invention may make an application for patent.” Individuals who otherwise
make a showing of a “sufficient proprietary interest in the matter” may also apply for a patent on
behalf of the inventor upon a sufficient show of proof of the pertinent facts. Under S. 23 and H.R.
1249, if the USPTO “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.”
Legal reforms allowing assignee filing of patent applications have been discussed for many years.
Two well-known commissions encouraged this shift, albeit some years ago. A 1966 Report of the
President’s Commission on the Patent System recommended the allowance of assignee filing as a
way to simplify formalities of application filing and to avoid delays caused by the need to identify
and obtain signatures from each inventor.70 The 1992 Advisory Commission on Patent Law
68 35 U.S.C. § 111.
69 S. 23 at § 3; H.R. 1249 at § 3.
70 President’s Commission on the Patent System, “To Promote the Progress of ... Useful Arts” in an Age of Exploding
Technology (1966).
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Reform was also in favor of this change. The 1992 Commission observed that the United States
was “the only country which does not permit the assignee of an invention to file a patent
application in its own name.”71 In the opinion of the 1992 Commission, assignee filing would
appropriately accompany a U.S. shift to a first-inventor-to-file priority system, as the reduction of
formalities would allow innovative enterprises to file patent applications more promptly.
The 1992 Commission also explained that adoption of assignee filing may have some negative
consequences. The Commission noted that patent applications filed by assignees may lack the
actual inventor’s personal guarantee that the application was properly prepared. In addition,
assignee filing might derogate the right of natural persons to their inventions. In the opinion of
the Commission, however, the advantages of assignee filing outweighed the disadvantages.72
Willful Infringement
The patent statute currently provides that a court “may increase the damages up to three times the
amount found or assessed.”73 An award of enhanced damages, as well as the amount by which the
damages will be increased, is committed to the discretion of the trial court. Although the statute
does not specify the circumstances in which enhanced damages are appropriate, the Federal
Circuit recently explained that “a patentee must show by clear and convincing evidence that the
infringer acted despite an objectively high likelihood that its actions constituted infringement of a
valid patent.”74 This circumstance is termed “willful infringement.”75
Courts will not ordinarily enhance damages due to willful infringement if the adjudicated
infringer did not know of the patent until charged with infringement in court, or if the infringer
acted with the reasonable belief that the patent was not infringed or that it was invalid. Prior to
the 2007 decision in In re Seagate Technology, Federal Circuit decisions emphasized the duty of
someone with actual notice of a competitor’s patent to exercise due care in determining if his acts
will infringe that patent.76 In Seagate Technology, however, the Federal Circuit opted to “abandon
the affirmative duty of due care.”77 The court of appeals instead explained that “proof of willful
infringement permitting enhanced damages requires at least a showing of objective
recklessness.”78
Prior to 2004, the Federal Circuit held that when an accused infringer invoked the attorney-client
or work-product privilege, courts should be free to reach an adverse inference that either (1) no
opinion had been obtained or (2) an opinion had been obtained and was contrary to the infringer’s
desire to continue practicing the patented invention.79 However, in its decision in Knorr-Bremse
71 Advisory Commission on Patent Reform, A Report to the Secretary of Commerce (August 1992), 179.
72 Id.
73 35 U.S.C. § 284.
74 In re Seagate Technology, 497 F.3d 1360 (Fed. Cir. 2007) (in banc).
75 See Beatrice Foods Co. v. New England Printing & Lithographing Co., 923 F.2d 1576, 1578 (Fed. Cir. 1991).
76 See, e.g., Jon E. Wright, “Willful Patent Infringement and Enhanced Damages—Evolution and Analysis,” 10 George
Mason Law Review (2001), 97.
77 Seagate Technologies, supra.
78 Id.
79 See, e.g., Fromson v. Western Litho Plate & Supply Co., 853 F.2d 1568, 1572 (Fed. Cir. 1988).
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Systeme fuer Nutzfahrzeuge GmbH v. Dana Corp.,80 the Federal Circuit expressly overturned this
principle. The Court of Appeals further stressed that the failure to obtain legal advice did not
occasion an adverse inference with respect to willful infringement either. Following the Knorr-
Bremse opinion, willful infringement determinations are based upon “the totality of
circumstances, but without the evidentiary contribution or presumptive weight of an adverse
inference that any opinion of counsel was or would have been unfavorable.”81
Patent law’s willful infringement doctrine has proven controversial. Some observers believe that
this doctrine ensures that patent rights will be respected in the marketplace. Critics of the policy
believe that the possibility of trebled damages discourages individuals from reviewing issued
patents. Out of fear that their inquisitiveness will result in multiple damages, innovators may
simply avoid looking at patents until they are sued for infringement. To the extent this
observation is correct, the law of willful infringement discourages the dissemination of technical
knowledge, thereby thwarting one of the principal goals of the patent system. Fear of increased
liability for willful infringement may also discourage firms from challenging patents of dubious
validity. Consequently some have argued that the patent system should shift to a “no-fault”
regime of strictly compensatory damages, without regard to the state of mind of the adjudicated
infringer.82
The original version of S. 23 would have added several clarifications and changes to the law of
willful infringement. The bill stipulated that infringement was not willful unless “the claimant
proves by clear and convincing evidence that the accused infringer’s conduct with respect to the
patent was objectively reckless.” Knowledge of the patent, by itself, would not have constituted
willful infringement. Further, damages were not to be increased if there is a close case as to
infringement, validity, or enforceability. These provisions were removed in the amended version
of S. 23 reported from the Senate Committee on the Judiciary, and are not included in the bill
passed by the Senate.
However, both S. 23 (as passed by the Senate) and H.R. 1249 include language specifying that
the “failure of an infringer to obtain the advice of counsel ... may not be used to prove that the
accused infringer willfully infringed the patent....”83 This provision appears essentially to codify
the holding of Knorr-Bremse described above.
Inter Partes and Post-Grant Reviews
S. 23 and H.R. 1249 mandate changes to the options available for post-grant USPTO review
proceedings by (1) replacing the existing inter partes reexamination system with inter partes
review proceedings;84 and (2) introducing a new proceeding titled “post-grant review.”85 Both
inter partes and post-grant reviews are patent revocation proceedings administered by the
USPTO. They would operate similarly to the existing reexamination system, which has been part
80 383 F.3d 1337 (Fed. Cir. 2004).
81 Ibid at 1341.
82 See generally Schechter & Thomas, supra, at § 9.2.5.
83 S. 23 at § 4(c); H.R. 1249 at § 16.
84 S. 23 at § 5(a); H.R. 1249 at § 5(a).
85 S. 23 at § 5(d); H.R. 1249 at § 5(d).
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of U.S. law since 1981. The USPTO currently administers two types of reexamination
proceedings, termed ex parte and inter partes.
Under the reexamination statute, any individual, including the patentee, a competitor, and even
the USPTO Director, may cite a prior art patent or printed publication to the USPTO. If the
USPTO determines that this reference raises a “substantial new question of patentability” with
respect to an issued patent, then it will essentially reopen prosecution of the issued patent.
Traditional reexamination proceedings are conducted in an accelerated fashion on an ex
parte basis—that is to say, as a dialogue between applicant and examiner without extended
participation by others. Following the American Inventors Protection Act of 1999,86 an inter
partes reexamination allows the requester to participate more fully in the proceedings through the
submission of arguments and the filing of appeals. Either sort of reexamination may result in a
certificate confirming the patentability of the original claims, an amended patent with narrower
claims, or a declaration of patent invalidity.
Congress intended reexamination proceedings to serve as an inexpensive alternative to judicial
determinations of patent validity.87 Reexamination also allows further access to the legal and
technical expertise of the USPTO after a patent has issued.88 However, some commentators
believe that reexamination proceedings have been employed only sparingly and question their
effectiveness.89
Both S. 23 and H.R. 1249 would establish a new proceeding termed a “post-grant review.” Unlike
current reexamination proceedings, petitioners may challenge validity based upon on any ground
of patentability in a post-grant review. Under S. 23, a post-grant review must be filed within 9
months of the date of patent grant; that time limit is 12 months in H.R. 1249. To initiate a post-
grant review, the petitioner must present information that, if not rebutted, would demonstrate that
it is more likely than not that at least one of the claims is unpatentable. A post-grant review must
be completed within one year of its commencement, with an extension of six months possible for
good cause shown. As well, the individual who commenced the proceeding, along with his
privies, are barred in the future from raising issues that were “raised or reasonably could have
been raised” during the post-grant review.
The two bills also replace existing inter partes reexamination proceedings with a similar system
termed “inter partes review.” A notable difference between the existing and proposed
proceedings is that the USPTO would be required to complete the proceeding within one year of
its commencement, with an extension of six months possible for good cause shown. In broad
outline, the bill would allow a person who is not the patent owner to file a petition requesting
inter partes review nine months after a patent issues or reissues, or the conclusion of any post-
grant review, whichever occurs later. In contrast to the proposed post-grant review, the basis for
requesting an inter partes review is restricted to patents or printed publications. As a result, patent
challenges under inter partes review are limited to the patentability issues of novelty and
86 The American Inventors Protection Act of 1999, P.L. 106-113, was part of the Intellectual Property and
Communications Omnibus Reform Act of 1999, attached by reference to the Consolidated Appropriations Act for
Fiscal Year 2000. President Clinton signed this bill on November 29, 1999.
87 Mark D. Janis, “Inter Partes Reexamination,” 10 Fordham Intellectual Property, Media & Entertainment Law
Journal (2000), 481.
88 Craig Allen Nard, “Certainty, Fence Building and the Useful Arts,” 74 Indiana Law Journal (1999), 759.
89 See Schechter & Thomas, supra, at § 7.5.4.
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nonobviousness.90 Post-grant reviews would allow a patent challenger to raise additional
patentability issues, such as unpatentable subject matter or lack of enablement, that are not based
upon a patent or printed publication.
S. 23 and H.R. 1249 differ on the evidentiary threshold required for the USPTO to commence an
inter partes review. Under S. 23, the petitioner must demonstrate that there is a “reasonable
likelihood” that he would prevail with respect to at least one claim in order for the inter partes
proceeding to begin. H.R. 1249 requires that petitioner’s evidence and arguments raise “a
substantial new question of patentability”—the current standard for inter partes reexamination—
in order to provoke inter partes review.
Under the time frames established by S. 23, the effective result is that a patent may be challenged
at the USPTO on any basis of any patentability issue within nine months from the date it issued
(via post-grant review). Thereafter, and throughout its entire term, the patent may be challenged
at the USPTO on the grounds of novelty and nonobviousness (via inter partes review). H.R. 1249
operates similarly, except that post-grant review may be brought up to 12 months after patent
issuance.
Under S. 23 and H.R. 1249, an accused infringer may not seek inter partes review if he has
already filed a lawsuit challenging the patent or more than six months have passed since the date
the accused infringer was served with a complaint alleging infringement of that patent. The bills
afford the patent proprietor a single opportunity to amend its patent during the proceeding, with
further opportunities available with good cause shown. Should the patent survive the inter partes
review proceeding, the individual who commenced the proceeding, along with his privies, are
barred in the future from raising issues that were “raised or reasonably could have been raised.”
Many observers have called for the United States to adopt a more effective post-grant
administrative revocation system in order to provide timelier, lower cost, and more efficient
review of issued patents.91 Such a system could potentially improve the quality of issued patents
by weeding out invalid claims. It might also encourage innovative firms to review issued patents
soon after they are granted, thereby increasing the opportunity for technology spillovers.92
However, concerns have arisen over oppositions because they too may be costly, complex, and
prone to abuse as a means for harassing patent owners.93 A successful post-grant review
proceeding will require a balancing of these issues.
Post-Grant Citation of Prior Art
Under current law, any person may at any time cite to the USPTO “patents or printed
publications” believed to “have a bearing on the patentability of any claim of a particular
patent.”94 That person may also include a written statement explaining the relevance of the cited
90 Notably, the proposed restriction of inter partes review to patents and printed publications limits the grounds on
which a patent challenger may request such a review. Once a patent is subject to inter partes review, the USPTO may
potentially consider other pertinent patentability issues, such as claim definiteness.
91 See National Research Council of the National Academies, A Patent System for the 21st Century (2004), 96.
92 Ibid. at 103.
93 See Mark D. Janis, “Rethinking Reexamination: Toward a Viable Administrative Revocation System for U.S. Patent
Law,” 11 Harvard Journal of Law and Technology (1997), 1.
94 35 U.S.C. § 301.
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document to the patent. This sort of “prior art citation” does not provoke any sort of
administrative proceeding. However, the USPTO will place these submissions within the official
file of the relevant patent, where they are accessible to the public. Prior art that potentially has a
negative impact upon the patent’s validity may be of considerable interest to the patent owner, its
customers and competitors, and possibly others. The name of the person who files a prior art
citation may be kept confidential by request.
The ability of members of the public to cite to the USPTO information that may be pertinent to
the validity of a granted patent would be augmented under the provisions of S. 23 and H.R. 1249.
The bills would also allow the citation of written statements that the patent owner has filed before
a federal court or the USPTO regarding the scope of the patent’s claims. 95
Preissuance Submissions
The ability of members of the public to submit information to the USPTO that is pertinent to
pending applications would be increased under S. 23 and H.R. 1249.96 Under current law,
interested individuals may enter a protest against a patent application. The protest must
specifically identify the application and be served upon the applicant. The protest must also
include a copy and, if necessary, an English translation, of any patent, publication, or other
information relied upon. The protester also must explain the relevance of each item.97
Protest proceedings have traditionally played a small role in U.S. patent practice. Until Congress
enacted the American Inventors Protection Act of 1999, the USPTO maintained applications in
secrecy. Therefore, the circumstances in which members of the public would learn of the precise
contents of a pending patent application were relatively limited. With the USPTO commencing
publication of some pending patent applications, protests would seem far more likely. Seemingly
aware of this possibility, the 1999 Act provided that the USPTO shall “ensure that no protest or
other form of pre-issuance opposition ... may be initiated after publication of the application
without the express written consent of the applicant.”98 Of course, the effect of this provision is to
eliminate the possibility of protest in exactly that class of cases where the public is most likely to
learn of the contents of a pending application.
Through rulemaking, the USPTO has nonetheless established a limited mechanism for members
of the public to submit information they believe is pertinent to a pending, published application.
The submitted information must consist of either a patent or printed publication, and it must be
submitted within two months of the date the USPTO published the pending application.
Nondocumentary information that may be relevant to the patentability determination, such as
sales or public use of the invention, will not be considered.99 In addition, because Congress
stipulated that no protest or pre-grant opposition may occur absent the consent of the patent
holder, the USPTO has explained that it will not accept comments or explanations concerning the
95 S. 23 at § 5(g); H.R. 1249 at § 5(g)
96 S. 23 at § 7; H.R. 1249 at § 7.
97 37 C.F.R. § 1.291.
98 35 U.S.C. § 122(c).
99 37 C.F.R. § 1.99.
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submitted patents or printed publications. If such comments are attached, USPTO staff will redact
them before the submitted documents are forwarded to the examiner.100
The possibility for preissuance submissions would be expanded by S. 23 and H.R. 1249. Under
the bill, any person may submit patent documents and other printed publications to the USPTO
for review. Such prior art must be submitted within the later date of either (1) the date the USPTO
issues a notice of allowance to the patent applicant; or (2) either six months after the date of pre-
grant publication of the application, or the date of the first rejection of any claim by the USPTO
examiner. Such a submission must include “a concise description of the asserted relevance of
each submitted document.”
Most observers agree that ideally, the USPTO should have access to all pertinent information
when making patentability determinations. A more expansive pre-issuance submission policy
may allow members of the public to disclose relevant patents and other documents that the
USPTO’s own searchers may not have revealed, thereby leading to more accurate USPTO
decision making. On the other hand, lengthy pre-issuance submissions may merely be repetitive
of the USPTO’s own search results, but still require extensive periods of examiner review that
might ultimately delay examination. The proposals attempted to balance these concerns by
expanding existing opportunities for post-publication submissions, but limiting the timing and
nature of those submissions so as to prevent undue burdens upon the USPTO and patent
applicants.
Venue
Both S. 23 and H.R. 1249 alter the venue provisions that apply to suits where the USPTO is a
party—for example, appeals from inventors whose patent applications have been rejected.101 Such
cases are currently heard by the District Court for the District of Columbia. Under the bills, the
District Court for the Eastern District of Virginia would hear such cases. This change in venue
may reflect the fact that the headquarters of the USPTO is no longer located within Washington,
DC, but rather in Alexandria, VA.
In addition, H.R. 1249 requires that a lawsuit charging infringement of a “covered business
method patent” may be brought only where the defendant has its principal place of business or is
incorporated, where the defendant has committed acts of infringement and has a regular and
established place of business, or where the defendant has consented to be sued. A “covered
business method patent” is defined to include patents that claim “a method or corresponding
apparatus for performing data processing operations utilized in the practice, administration, or
management of a financial product or service, except that the term shall not include patents for
technological inventions.” S. 23 does not address this issue.
USPTO Fee-Setting Authority
The USPTO enjoys certain rulemaking authority provided by law. The USPTO may establish
regulations that “govern the conduct of proceedings” before it, for example, as well as regulations
100 U.S. Dept. of Commerce, U.S. Patent & Trademark Off., Manual of Patent Examining Procedure § 1134.01 (8th ed.
July 2008).
101 S. 23 at § 8; H.R. 1249 at § 8.
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that “govern the recognition and conduct” of patent attorneys.102 However, the fees charged by
the USTPO currently are determined by Congress.
S. 23 and H.R. 1249 propose that the USPTO be granted the additional authority “to set or adjust
by rule any fee established or charged by the Office” under certain provisions of the patent and
trademark laws.103 This proposal appears to provide the USPTO with greater flexibility to adjust
its fee schedule absent congressional intervention. S. 23 and H.R. 1249 would require that “patent
and trademark fee amounts are in the aggregate set to recover the estimated cost to the Office for
processing, activities, services and materials relating to patents and trademarks, respectively,
including proportionate shares of the administrative costs of the Office.”
H.R. 1249 additionally stipulates fees for patent services provided by the USPTO.104 In general,
the House bill raises the fees slightly. For example, the current fees for filing a patent application
and for the issuance of an approved application are $300 and $1,400 respectively; H.R. 1249
changes the fees to $330 and $1,510. As previously discussed, each of these fees would then
presumably be subject to adjustment by the USPTO. The Senate bill does not include analogous
provisions.
Both S. 23 and H.R. 1249 also establish within the Treasury of the United States a “United States
Patent and Trademark Office Public Enterprise Fund.”105 Most fees collected by the USPTO
would be placed into this Fund. The USPTO would then be allowed to access this Fund to cover
its administrative and operating expenses without fiscal year limitation. Not later than 60 days
after the end of each fiscal year, the USPTO would be required to submit a report to Congress
that summarizes previous operations and provides a detailed plan for the upcoming fiscal year.
Under current law, patent applicants that qualify as “small entities”106 are entitled to a 50%
discount of many USPTO fees. S. 23 and H.R. 1249 establish a new “micro entity” category of
applicants.107 A micro entity must make a certification that it qualifies as a small entity, has not
been named on five previously filed patent applications, does not have a gross income exceeding
three times the average gross income, and has not conveyed an interest in the application to
another entity with an income exceeding that threshold. The Senate-passed bill also includes any
employee of a “State public institution of higher education” within the definition of a micro entity
(without having to make the preceding certifications). Micro entities would be entitled to a 75%
discount of many USPTO fees. The USPTO Director is given authority to limit those who qualify
as a micro entity if such limitations “are reasonably necessary to avoid an undue impact on other
patent applicants or owners and are otherwise reasonably necessary and appropriate.” The
USPTO must inform Congress at least three months in advance of imposing such limitations.
102 35 U.S.C. § 2(b)(2). It should be appreciated that “Congress has not vested the [USPTO] with any general
substantive rulemaking power.... ” Cybor Corp. v. FAS Techs, Inc., 138 F.3d 1448, 1479 (Fed. Cir. 1998) (en banc)
(Newman, J., additional views).
103 S. 23 at § 9; H.R. 1249 at § 9.
104 H.R. 1249 at § 10.
105 S. 23 at § 20; H.R. 1249 at § 22.
106 “Small entities” consist of “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.” 35 U.S.C. § 41(h).
107 S. 23 at § 12; H.R. 1249 at § 9(g)
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Supplemental Examination
S. 23 and H.R. 1249 establish a new post-issuance administrative proceeding termed
“supplemental examination.”108 This proceeding appears to be based upon a need to address
concerns over the legal doctrine of inequitable conduct, a topic that bears some explanation. The
administrative process of obtaining a patent from the USPTO has traditionally been conducted as
an ex parte procedure. Stated differently, patent prosecution involves only the applicant and the
USPTO. Members of the public, and in particular the patent applicant’s marketplace competitors,
do not participate in patent acquisition procedures.109 As a result, the patent system relies to a
great extent upon the applicant’s observance of a duty of candor and truthfulness towards the
USPTO.
An applicant’s obligation to proceed in good faith may be undermined, however, by the great
incentive applicants might possess not to disclose, or to misrepresent, information that might
deleteriously impact their prospective patent rights. The patent law therefore penalizes those who
stray from honest and forthright dealings with the USPTO. Under the doctrine of “inequitable
conduct,” if an applicant intentionally misrepresents a material fact or fails to disclose material
information, then the resulting patent will be declared unenforceable.110 Two elements must exist
before a court will decide that the applicant has engaged in inequitable conduct. First, the
patentee must have misrepresented or failed to disclose material information to the USPTO in the
prosecution of the patent.111 Second, such nondisclosure or misrepresentation must have been
intentional.112
During patent infringement litigation, an accused infringer has the option of asserting that the
plaintiff’s patent is unenforceable because it was procured through inequitable conduct. Some
observers have expressed concerns that charges of inequitable conduct have become routine in
patent cases. As one commentator explains:
The strategic and technical advantages that the inequitable conduct defense offers the
accused infringer make it almost too attractive to ignore. In addition to the potential effect on
the outcome of the litigation, injecting the inequitable conduct issue into patent litigation
wreaks havoc in the patentee’s camp. The inequitable conduct defense places the patentee on
the defensive, subjects the motives and conduct of the patentee’s personnel to intense
scrutiny, and provides an avenue for discovery of attorney-client and work product
documents....113
The Federal Circuit has stated that “the habit of charging inequitable conduct in almost every
major patent case has become an absolute plague.”114 Other observers believe that because
inequitable conduct requires an analysis of the knowledge and intentions of the patent applicants,
108 S. 23 at § 10; H.R. 1249 at § 11.
109 35 U.S.C. § 122(a) (stating the general rule that “applications for patents shall be kept in confidence by the Patent
and Trademark Office and no information concerning the same given without authority of the applicant.... ”).
110 Glaverbel Societe Anonyme v. Northlake Mktg. & Supply Inc., 45 F.3d 1550 (Fed. Cir. 1995).
111 Heidelberger Druckmaschinen AG v. Hantscho Comm’l Prods., Inc., 21 F.3d 1068 (Fed. Cir. 1993).
112 Jazz Photo Corp. v. U.S. Int’l Trade Comm’n, 264 F.3d 1094 (Fed. Cir. 2001).
113 John F. Lynch, “An Argument for Eliminating the Defense of Patent Unenforceability Based on Inequitable
Conduct,” 16 American Intellectual Property Law Association Quarterly Journal (1988), 7.
114 Burlington Indus., Inc. v. Dayco Corp., 849 F.2d 1418 (Fed. Cir. 1988).
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the doctrine may also be contributing disproportionately to the time and expense of patent
litigation.115
Due to these perceived burdens upon patent litigation, some experts have proposed that the
inequitable conduct defense be eliminated.116 Others believe that inequitable conduct is necessary
to ensure the proper functioning of the patent system. As the Advisory Commission on Patent
Law Reform explained in its 1992 report:
Some mechanism to ensure fair dealing between the patentee, public, and the Federal
Government has been part of the patent system for over 200 years. In its modern form, the
unenforceability defense provides a necessary incentive for patent applicants to engage in
fair and open dealing with the [USPTO] during the ex parte prosecution of patent
applications, by imposing the penalty of forfeiture of patent rights for failure to so deal. The
defense is also considered to be an essential safeguard against truly fraudulent conduct
before the [USPTO]. Finally, the defense provides a means for encouraging complete
disclosure of information relevant to a particular patent application.... Thus, from a policy
perspective, the defense of unenforceability based upon inequitable conduct is desirable and
should be retained.117
S. 23 and H.R. 1249 would permit patent owners to request a “supplemental examination” in
order to “consider, reconsider, or correct information believed to be relevant to the patent.” If the
USPTO Director believes that this information raises a substantial new question of patentability,
then a reexamination will be ordered. S. 23 and H.R. 1249 provide that 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
supplemental examination request and resulting reexamination must be concluded prior to the
start of litigation for the patent to obtain this benefit.
The proposed supplemental examination serves a similar goal as the existing reissue procedure—
correction of an issued patent that may be inoperative or invalid.118 A significant distinction
between supplemental examination and reissue is that the latter proceeding only applies to patents
that are defective due to an “error without any deceptive intention.” As a result, patent proprietors
must identify an error, such as the existence of a highly relevant journal article that qualifies as
prior art, in order to reissue a patent. In addition, reissue may not be used to rehabilitate a patent
that was procured through inequitable conduct.119 In contrast, supplemental examination is not
limited to situations where an error occurred. The proposed proceeding would also allow a patent
that had been acquired through inequitable conduct to be rendered enforceable under the
stipulated conditions.
115 See, e.g., Scott D. Anderson, “Inequitable Conduct: Persistent Problems and Recommended Resolutions,” 82
Marquette Law Review (1999), 845.
116 Lynch, supra, at 7.
117 1992 Advisory Commission, supra, at 114.
118 See 35 U.S.C. §§ 251-252.
119 Aventis Pharma S.A. v. Amphastar Pharmaceuticals, Inc., 525 F.3d 1334, 1341 n.6 (Fed. Cir. 2008).
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Residency of Federal Circuit Judges
Under current law, each Federal Circuit jurist must “reside within fifty miles of the District of
Columbia” while in active service.120 S. 23 would eliminate this requirement.121 H.R. 1249 does
not address this issue.
Liberalization of the residency requirement would potentially broaden the pool of individuals
eligible for service on the Federal Circuit. This reform may also be appropriate for a court that
enjoys jurisdiction over patent appeals that arise across the United States.122 No other federal
appellate court is subject to a similar residency requirement.123 On the other hand, because the
Federal Circuit courthouse is located in Washington, DC, the current residency rule might
promote greater interaction among its jurists.
Tax Strategy Patents
In recent years, the USPTO has issued patents on financial, investment, and other methods that
individuals might use in order to minimize their tax obligations.124 The so-called “SOGRAT”
patent, U.S. Patent No. 6,567,790, has been identified as one such “tax planning method” patent.
The SOGRAT patent is titled “[e]stablishing and managing grantor retained annuity trusts funded
by nonqualified stock options.” The patent’s abstract explains that it concerns:
An estate planning method for minimizing transfer tax liability with respect to the transfer of
the value of stock options from a holder of stock options to a family member of the holder.
The method comprises establishing a Grantor Retained Annuity Trust (GRAT) funded with
nonqualified stock options. The method maximizes the transfer of wealth from the grantor of
the GRAT to a family member by minimizing the amount of estate and gift taxes paid. By
placing the options outside the grantor’s estate, the method takes advantage of the
appreciation of the options in said GRAT.
Tax planning method patents have been the subject of a spirited debate.125 Some observers
believe that such patents negatively impact social welfare. According to some experts, tax
planning method patents may limit the ability of taxpayers to utilize provisions of the tax code,
interfering with congressional intent and leading to distortions in tax obligations.126 Others assert
that tax planning method patents potentially complicate legal compliance by tax professionals and
120 28 U.S.C. § 44(c).
121 S. 23 at § 11.
122 28 U.S.C. § 1295(a)(1).
123 Marcia Coyle, “Court’s Residency Rule May Fall: Federal Circuit Rule Limits Bench Talent,” 29 National Law
Journal no. 44 (July 9, 2007), 1.
124 See CRS Report RL34221, Patents on Tax Strategies: Issues in Intellectual Property and Innovation, by John R.
Thomas.
125 See, e.g., Jo-el J. Meyer, “Proliferation of Retirement Plan Patents Poses Problems for Practitioners,” Patent,
Trademark, & Copyright Journal (BNA June 8, 2007), 186; Wealth Transfer Group LLC v. Rowe, D. Conn., No.
3:06cv00024 (AWT), filed January 6, 2006.
126 See Letter from Jeffrey R. Hoops, Chair, American Institute of Certified Public Accountants Tax Executive
Committee, to Members of Congress (February 28, 2007) (available at http://tax.aicpa.org/Resources/Tax+Patents/
AICPA+Urges+Congress+to+Address+Tax+Strategy+Patents.htm).
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taxpayers alike.127 Still others believe that the patent system should not provide incentives for
individuals to develop new ways to reduce their tax liability.128
On the other hand, some commentators explain that patents concerning the broader category of
“business methods” have been obtained and enforced for many years.129 Legislation enacted in
1999 that accounted expressly for patents claiming “a method of doing or conducting business”
arguably approved of such patents.130 Some observers believe that tax planning method patents
present a positive development offering taxpayers access to a variety of legal tax minimizing
strategies. In addition, these patents may potentially improve the public disclosure of tax shelters
for the attention of Congress and federal tax authorities.131 Other experts assert that many kinds of
patents, on subject matter ranging from automobile seat belts to airplane navigation systems,
potentially involve legal compliance.132
Under S. 23 and H.R. 1249, for purpose of evaluating whether an invention meets the
requirements of novelty and nonobviousness, “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.”133 Under this
rule, unless a tax strategy patent claimed an additional component that met the novelty and
nonobviouness requirements—such as new computer hardware—then the invention could not be
patented. S. 23 and H.R. 1249 stipulate that this provision does not apply to that part of an
invention “used solely for preparing a tax or information return or other tax filing....” A stand-
alone bill, S. 139, would act similarly.
H.R. 1249 includes additional provisions not found in the Senate bills. First, the House bill
stipulates that the tax strategy patent provision does not apply to “a method, apparatus,
technology, computer program product, or system used solely for financial management, to the
extent it is severable from any tax strategy or does not limit the use of any tax strategy by any
taxpayer or tax adviser.” H.R. 1249 also includes language stating that “[n]othing in this section
shall be construed to imply that other business methods are patentable or that other business-
method patents are valid.”
Best Mode
Currently, inventors are required to “set forth the best mode contemplated by the inventor of
carrying out his invention.”134 Failure to disclose the best mode known to the inventor is a ground
127 See Letter from Kimberly S. Blanchard, Chair, New York State Bar Association Tax Section, to Members of
Congress (August 17, 2006) (available at http://www.nysba.org/Content/ContentGroups/Section_Information1/
Tax_Section_Reports/1115rpt.PDF).
128 See William A. Drennan, “The Patented Loophole: How Should Congress Respond to This Judicial Invention?,” 59
Florida Law Review (2007), 229.
129 See Andrew F. Palmieri & Corinne Marie Pouliquen, “A Primer on Business Method Patents: What You Need to
Know for Your Real Estate Practice,” 21 Probate and Property (May/June 2007), 26.
130 First Inventor Defense Act of 1999, P.L. 106-113, § 4302, 113 Stat. 1501 (codified at 35 U.S.C. § 273 (2006)).
131 Drennan, supra, at 328 (noting this argument).
132 Stephen T. Schreiner & George Y. Wang, “Discussions on Tax Patents Have Lost Focus,” IP Law 360 (available at
http://www.hunton.com).
133 S. 23 at § 14; H.R. 1249 at § 13.
134 35 U.S.C. § 112.
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for invalidating an issued patent. The courts have established a two-part standard for analyzing
whether an inventor disclosed her best mode in a particular patent. The first inquiry was whether
the inventor knew of a way of practicing the claimed invention that she considered superior to
any other. If so, then the patent instrument must identify, and disclose sufficient information to
enable persons of skill in the art to practice that best mode.135
Proponents of the best mode requirement have asserted that it allows the public to receive the
most advantageous implementation of the technology known to the inventor. This disclosure
becomes part of the patent literature and may be freely reviewed by those who wish to design
around the patented invention. Absent a best mode requirement, some observers say, patent
proprietors may be able to maintain the preferred way of practicing their inventions as a trade
secret. Members of the public are also said to be better able to compete with the patentee on equal
footing after the patent expires.136
The best mode requirement has been the subject of ongoing discussion in recent years,
however.137 For example, a 1992 Presidential Commission recommended that Congress eliminate
the best mode requirement. The Commission reasoned that patents also are statutorily required to
disclose “the manner and process of making and using [the invention], in such full, clear, concise,
and exact terms as to enable any person skilled in the art ... to make and use the same.”138 This
“enablement” requirement was believed to provide sufficient information to achieve the patent
law’s policy goals.139
The Commission further stated that the best mode requirement leads to increases in the costs and
complexity of patent litigation. As the Commission explained:
The disturbing rise in the number of best mode challenges over the past 20 years may serve
as an indicator that the best mode defense is being used primarily as a procedural tactic. A
party currently can assert failure to satisfy the best mode requirement without any significant
burden. This assertion also entitles the party to seek discovery on the “subjective beliefs” of
the inventors prior to the filing date of the patent application. This broad authority provides
ample opportunity for discovery abuse. Given the fluidity by which the requirement is
evaluated (e.g., even accidental failure to disclose any superior element, setting, or step can
negate the validity of the patent), and the wide ranging opportunities for discovery, it is
almost certain that a best mode challenge will survive at least initial judicial scrutiny.140
The Commission further reasoned that the best mode at the time of filing is unlikely to remain the
best mode when the patent expires many years later.141 Because many foreign patent laws include
no analog to the best mode requirement, inventors based overseas have also questioned the
desirability of the best mode requirement in U.S. law.
135 See, e.g., Chemcast Corp. v. Arco Industries Corp. 913 F.2d 923 (Fed. Cir. 1990).
136 See Dale L. Carlson et al., “Patent Linchpin for the 21st Century? Best Mode Revisited,” 87 Journal of the Patent
and Trademark Office Society (2005), 89.
137 See, e.g., Steven B. Walmsley, “Best Mode: A Plea to Repair or Sacrifice This Broken Requirement of United States
Patent Law,” 9 Michigan Telecommunications and Technology Law Review (2002), 125.
138 35 U.S.C. § 101.
139 1992 Advisory Commission Report, supra, at 102-03.
140 Id. at 101.
141 Id. at 102-03.
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S. 23 and H.R. 1249 would continue to apply the best mode requirement to all patents. However,
violation of the best mode requirement would no longer form the basis for a defense to a charge
of patent infringement during enforcement litigation or post-grant review proceedings.142
Compliance with the best mode requirement would remain subject to review by USPTO
examiners during the initial prosecution of a patent, although USPTO rejection of applications
based upon failure to comply with the best mode requirement is reportedly a rare circumstance.143
Clarification of Jurisdiction
The two bills also include provisions governing which courts may hear patent cases.144 S. 23 and
H.R. 1249 confirm that state courts do not possess jurisdiction to hear claims for relief under the
patent, plant variety protection, and copyright laws. The bills further provide that the Federal
Circuit possesses jurisdiction over appeals relating to patent and plant variety protection cases. In
addition, cases are allowed to be removed from courts that do not possess jurisdiction and
transferred to those that do.
Transitional Program for Covered Business-Method Patents
S. 23 and H.R. 1249 would create a transitional post-grant review proceeding for the review of
the validity of certain business method patents.145 This transitional proceeding would be limited
to patents that claim “a method or corresponding apparatus for performing data processing
operations utilized in the practice, administration, or management of a financial product or
service, except that the term shall not include patents for technological inventions.” Only
individuals who have been either sued for infringement or charged with infringement of a
business method patent may petition the USPTO to commence such a proceeding. The
transitional program would apply to all business method patents issued before, on, or after the
date of enactment of the legislation. S. 23 and H.R. 1249 stipulate that a party may seek a stay of
litigation related to the transitional proceeding, and that the district court’s decision may be
subject to an immediate interlocutory appeal to the Federal Circuit. This transitional program is
subject to a sunset provision that would repeal the program after four years.
H.R. 1249 creates additional limitations upon enforcement of covered business method patents
through infringement litigation. First, such suits may be brought only where the defendant has its
principal place of business or is incorporated, where the defendant has committed acts of
infringement and has a regular and established place of business, or where the defendant has
consented to be sued. Second, the prevailing party in such litigation is entitled to the payment of
its reasonable attorney’s fees and costs from the losing party. Third, if a party seeks a stay of
litigation relating to the transitional proceeding, any party may take an immediate interlocutory
appeal from that decision to the Federal Circuit.
142 S. 23 at § 17; H.R. 1249 at § 19.
143 Jerry R. Selinger, “In Defense of “Best Mode”: Preserving the Benefit of the Bargain for the Public, 43 Catholic
University Law Review (1994), 1099 (“Failure to comply with best mode ... is not something an examiner normally can
evaluate when reviewing the application.... ”).
144 S. 23 at § 2(b); H.R. 1249 at § 2(b).
145 S. 23 at § 18; H.R. 1249 at § 18.
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H.R. 1249 further provides that its business method patent provisions shall not be construed as
amending or interpreting categories of patent-eligible subject matter.
USPTO Satellite Offices
Under current law, the USPTO is required to maintain its principal office in the metropolitan
Washington, DC, area. Current law further allows the USPTO to “establish satellite offices in
such other places in the United States as it considers necessary and appropriate in the conduct of
its business.”146 The USPTO recently announced it would open its first satellite office in Detroit,
Michigan.147
S. 23 and H.R. 1249 would mandate the USPTO to establish three or more satellite offices in the
United States subject to available resources.148 The bills that the satellite offices are intended to
increase inventor outreach activities, enhance patent examiner retention, improve recruitment of
patent examiners, decrease the number of unexamined patent applications, and improve the
quality of patent examination. The USPTO is required to ensure the geographic diversity of its
satellite offices. S. 23 would also designate the Detroit, Michigan satellite office as the “Elijah J.
McCoy United States Patent and Trademark Office.”149
Other USPTO Programs
S. 23 and H.R. 1249 would provide for other reforms relating to the USPTO. Among them is the
creation of a patent ombudsman program for small business concerns, subject to available
resources.150 In addition, the legislation would allow the USPTO to prioritize examination of
patent applications relating to technologies that are “important to the national economy or
national competitiveness.”151
Current Issues and Concerns
A number of changes to diverse aspects of the patent system are proposed in S. 23 and H.R. 1249.
Although these reforms were undoubtedly motivated by a range of concerns, a discrete number of
issues have been the subject of persistent discussion in the patent community over a period of
many years. Among these issues are concern for the quality of issued patents, the expense and
complexity of patent litigation, harmonization of U.S. patent law with the laws of our leading
trading partners, potential abuses committed by patent speculators, and the special needs of
individual inventors, universities, and small firms with respect to the patent system. In addition,
although the patent statute in large measure applies the same basic rules to different sorts of
inventions, regardless of the technological field of that invention, the patent system is widely
146 35 U.S.C. §1(b).
147 U.S. Patent and Trademark Office, Press Release, USPTO to Open First Ever Satellite Office in Detroit (Dec. 16,
2010), available at http://www.uspto.gov/news/pr/2010/10_65.jsp.
148 S. 23 at § 21; H.R. 1249 at § 23.
149 S. 23 at § 24; H.R. 1249 at § 26.
150 S. 23 at § 22; H.R. 1249 at § 24.
151 S. 23 at § 23; H.R. 1249 at § 25.
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believed to impact different industries in varying ways.152 As a result, different industries can be
expected to espouse dissimilar views of certain patent reform proposals. Before turning to a more
specific analysis of individual legislative proposals, this report reviews the proposed legislation’s
broader themes with regard to these issues and concerns.
Patent Quality
Government, industry, academia and the patent bar alike have long insisted that the USPTO
approve only those patent applications that describe and claim a patentable advance.153 Because
they meet all the requirements imposed by the patent laws, quality patents may be dependably
enforced in court and employed as a technology transfer tool. Such patents are said to confirm
private rights by making their proprietary uses, and therefore their value, more predictable.
Quality patents also may clarify the extent that others may approach the protected invention
without infringing. These traits in turn should strengthen the incentives of private actors to
engage in value-maximizing activities such as innovation or commercial transactions.154
In contrast, poor patent quality is said to create deleterious consequences. Large numbers of
inappropriately granted patents may negatively impact entrepreneurs. For example, innovative
firms may be approached by an individual with a low quality patent that appears to cover the
product they are marketing. The innovative firm may recognize that the cost of challenging a
patent even of dubious validity may be considerable. Therefore, the firm may choose to make
payments under licensing arrangements, or perhaps decide not to market its product at all, rather
than contest the patent proprietor’s claims.155
Poor patent quality may also encourage opportunistic behavior. Perhaps attracted by large
damages awards and a potentially porous USPTO, rent-seeking entrepreneurs may be attracted to
form speculative patent acquisition and enforcement ventures. Industry participants may also be
forced to expend considerable sums on patent acquisition and enforcement.156 The net results
would be reduced rates of innovation, decreased patent-based transactions, and higher prices for
goods and services.
Although low patent quality appears to affect both investors and competitors of a patentee, patent
proprietors themselves may also be negatively impacted. Patent owners may make managerial
decisions, such as whether to build production facilities or sell a product, based upon their
expectation of exclusive rights in a particular invention. If their patent is declared invalid by the
USPTO or a court, patentees will be stripped of exclusive rights without compensation. The
152 See Dan L. Burk & Mark A. Lemley, “Is Patent Law Technology-Specific?,” 17 Berkeley Technology Law Journal
(2002), 1155. See also CRS Report RL33367, Patent Reform: Issues in the Biomedical and Software Industries, by
Wendy H. Schacht.
153 CRS Report RL31281, Patent Quality and Public Policy: Issues for Innovative Firms in Domestic Markets, by John
R. Thomas.
154 See Joseph Farrell & Robert P. Merges, “Incentives to Challenge and Defend Patents: Why Litigation Won’t
Reliably Fix Patent Office Errors and Why Administrative Patent Review Might Help,” 19 Berkeley Technology Law
Journal (2004), 943.
155 See Bronwyn H. Hall & Dietmar Harhoff, “Post-Grant Reviews in the U.S. Patent System—Design Choices and
Expected Impact,” 19 Berkeley Technology Law Journal (2004), 989.
156 See Robert P. Merges, “As Many As Six Impossible Patents Before Breakfast: Property Rights for Business
Concepts and Patent System Reform,” 14 Berkeley Technology Law Journal (1999), 577.
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issuance of large numbers of invalid patents would increase the possibility that the investment-
backed expectations of patentees would be disappointed.157
The notion that high patent quality is socially desirable has been challenged, however. Some
commentators believe that market forces will efficiently assign patent rights no matter what their
quality. Others observe that few issued patents are the subject of litigation and further estimate
that only a minority of patents are licensed or sold. Because many patented inventions are not
used in a way that calls their validity into question, some observers maintain, society may be
better off making a detailed review into the patentability of an invention only in those few cases
where that invention is of commercial significance.158
S. 23 and H.R. 1249 address the patent quality issue in part by allowing for increased public
participation in USPTO decision-making through a pre-issuance submission procedure. This bill
also permits post-issuance review proceedings, which would potentially allow interested parties
to “weed out” invalid patents before they are the subject of licensing or infringement litigation.
Litigation Costs
Patent enforcement is often expensive. The complex legal and technological issues, extensive
discovery proceedings, expert witnesses, and specially qualified attorneys associated with patent
trials can lead to high costs.159 One study published in 2000 concluded that the average cost of
patent enforcement was $1.2 million.160 These expenses appear to be increasing, with one more
recent commentator describing an “industry rule of thumb” whereby “any patent infringement
lawsuit will easily cost $1.5 million in legal fees alone to defend.”161 Higher stakes litigation is
even more costly according to a 2008 American Intellectual Property Law Association study: for
patent suits involving damages claims of more than $25 million, expenses reportedly increased in
2007 to $5 million.162
For innovative firms that are not infrequently charged with patent infringement, or that bring
claims of patent infringement themselves, the annual expenses associated with patent litigation
can be very dear. The Microsoft Corporation reportedly defends an average of 35 to 40 patent
lawsuits annually at a cost of almost $100 million.163 The Intel Corporation has recently been
estimated to spend $20 million a year on patent litigation.164
The high costs of litigation may discourage patent proprietors from bringing meritorious claims
against infringers. They may also encourage firms to license patents of dubious merit rather than
157 See Craig Allen Nard, “Certainty, Fence Building and the Useful Arts,” 74 Indiana Law Journal (1999), 759.
158 Mark A. Lemley, “Rational Ignorance at the Patent Office,” 95 Northwestern University Law Review (2001), 1495.
159 Steven J. Elleman, “Problems in Patent Litigation: Mandatory Mediation May Provide Settlement and Solutions,”
12 Ohio State Journal on Dispute Resolution (1997), 759.
160 Dee Gill, “Defending Your Rights: Protecting Intellectual Property is Expensive,” Wall Street Journal (September
25, 2000), 6.
161 Mark H. Webbink, “A New Paradigm for Intellectual Property Rights in Software,” 2005 Duke Law and Technology
Review (May 1, 2005), 15.
162 See Bart Showalter, Cost of Patent Litigation, AIPLA Mid-Winter Conference, January 25, 2008, available at
http://www.aipla.org/Content/ContentGroups/Speaker_Papers/Mid-Winter1/20083/Showalter-slides.pdf.
163 “Microsoft Advocates for Patent Reform,” eWEEK (March 10, 2005).
164 Stirland, supra, at 613.
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contest them in court. S. 23 and H.R. 1249 endeavor to make patent litigation less costly and
complex through adoption of an administrative post-issuance review proceeding that could serve
as a less expensive alternative to litigation, the introduction of supplemental examination, and
modification of the best mode requirement.
International Harmonization
In the increasingly globalized, high-technology economy, patent protection in a single jurisdiction
is often ineffective to protect the interests of inventors. As a result, U.S. inventors commonly seek
patent protection abroad. Doing so can be a costly, time-consuming, and difficult process. There
is no global patent system. Inventors who desire intellectual property protection in a particular
country must therefore take specific steps to procure a patent within that jurisdiction.165
Differences in national laws are among the difficulties faced by U.S. inventors seeking patent
rights overseas. Although the world’s patent laws have undergone considerable harmonization in
recent years, several notable distinctions between U.S. patent law and those of our leading trading
partners persist. S. 23 and H.R. 1249 address some of these differences by modifying U.S. patent
law in order to comport with international standards. Among these proposed reforms are adoption
of a first-inventor-to-file priority system, a more robust post-issuance review system, and
assignee filing.
Potential Abuses by Patent Speculators
Some commentators believe that the patent system too frequently attracts speculators who prefer
to acquire and enforce patents rather than engage in research, development, manufacturing, or
other socially productive activity.166 Patent speculators are sometimes termed “trolls,” after
creatures from folklore that would emerge from under a bridge in order to waylay travelers.167
The late Jerome C. Lemelson, a prolific inventor who owned hundreds of patents and launched
numerous charges of patent infringement, has sometimes been mentioned in this context. The
total revenue of the Lemelson estate’s patent licensing program has been reported as in excess of
$1.5 billion.168 But as explained by journalist Michael Ravnitzky, “critics charge that many
Lemelson patents are so-called submarine patents, overly broad applications that took so long to
issue or were so general in nature that their owners could unfairly claim broad infringement
across entire industry sectors.”169 Of such patent ventures, patent attorney James Pooley observes:
Of course there is nothing inherently wrong with charging someone rent to use your
property, including intellectual property like patents. But it’s useful to keep in mind—
especially when listening to prattle about losing American jobs to foreign competition—that
165 CRS Report RL31132, Multinational Patent Acquisition and Enforcement: Public Policy Challenges and
Opportunities for Innovative Firms, by John R. Thomas.
166 See Elizabeth D. Ferrill, “Patent Investment Trusts: Let’s Build a Pit to Catch the Patent Trolls,” 6 North Carolina
Journal of Law and Technology (2005), 367.
167 See Lorraine Woellert, “A Patent War Is Breaking Out on the Hill,” BusinessWeek 45 (July 4, 2005).
168 Nicholas Varchaver, “The Patent King,” Fortune (May 14, 2001), 202.
169 Michael Ravnitzky, “More Lemelson Suits,” The National Law Journal (December 17, 2001), B9.
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these patent mills produce no products. Their only output is paper, of a highly threatening
sort.170
Patent enforcement suits brought by patent speculators appear to present special concerns for
manufacturers and service providers. If one manufacturer or service provider commences
litigation against another, the defendant can often assert its own claims of patent infringement
against the plaintiff. Because patent speculators do not otherwise participate in the marketplace,
however, the defendant is unable to counter with its own patent infringement charges. This
asymmetry in litigation positions reportedly reduces the bargaining power of manufacturers and
service providers, potentially exposing them to harassment.171
Observers hasten to note, however, that not every patent proprietor who does not commercialize
the patented invention should properly be considered an opportunistic “troll.” A
nonmanufacturing patentee may lack the expertise or resources to produce a patented product,
prefer to commit itself to further innovation, or otherwise have legitimate reasons for its
behavior.172 Universities and small biotechnology companies often fit into this category. Further,
whether classified as a “troll” or not, each patent owner has presumptively fulfilled all of the
relevant statutory requirements. Among these obligations is a thorough disclosure of a novel,
nonobvious invention to the public.173
Concerns over “trolling” are addressed in S. 23 and H.R. 1249 by the introduction of post-
issuance review procedures.
The Role of Individuals, Universities, and Small Entities
Entrepreneurs and small, innovative firms play a role in the technological advancement and
economic growth of the United States.174 Several studies commissioned by U.S. federal agencies
have concluded that individuals and small entities constitute a significant source of innovative
products and services.175 Studies have also indicated that entrepreneurs and small, innovative
firms rely more heavily upon the patent system than larger enterprises. Larger companies are said
to possess alternative means for achieving a proprietary or property-like interest in a particular
technology. For example, trade secrecy, ready access to markets, trademark rights, speed of
170 James Pooley, “Opinion: U.S. Patent Reform—A Good Invention,” Electronic Business (January 1, 2000), 72.
171 See Ronald J. Mann, “Do Patents Facilitate Financing in the Software Industry?,” 83 Texas Law Review (2005), 961.
172 See David G. Barker, “Troll or No Troll? Policing Patent Usage with An Open Post-Grant Review,” 2005 Duke Law
and Technology Review (April 15, 2005), 11.
173 35 U.S.C. § 112.
174 CHI Research Inc., Small Firms and Technology: Acquisitions, Inventor Movement, and Technology Transfer,
report for the Office of Advocacy, U.S. Small Business Administration, January 2004, 2-3, available at
http://www.sba.gov/advo/research/rs233tot.pdf. See also CRS Report RL30216, Small, High Tech Companies and
Their Role in the Economy: Issues in the Reauthorization of the Small Business Innovation Research (SBIR) Program,
by Wendy H. Schacht.
175 For example, the National Academy of Engineering concluded that “small high-tech companies play a critical and
diverse role in creating new products and services, in developing new industries, and in driving technological change
and growth in the U.S. economy.” National Academy of Engineering, Risk & Innovation: The Role and Importance of
Small High-Tech Companies in the U.S. Economy (Washington: National Academy Press, 1995), 37. This assessment
was founded on the ability of small firms to develop markets rapidly, generate new goods and services, and offer
diverse products. The study also concluded that small businesses were less risk adverse than larger, established
corporations and were often better positioned to exploit market opportunities quickly.
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development, and consumer goodwill may to some degree act as substitutes to the patent
system.176 However, individual inventors and small firms often do not have these mechanisms at
their disposal. As a result, the patent system may enjoy heightened importance with respect to
these enterprises.177
In recent years, universities have also become more full-fledged participants in the patent system.
This trend has been attributed to the Bayh-Dole Act,178 a federal statute that allowed universities
and other government contractors to retain patent title to inventions developed with the benefit of
federal funding.179 In recent years there has reportedly “been a dramatic increase in academic
institutions’ investments in technology licensing activities.”180 This increase has been reflected in
the growth in the number of patents held by universities, the number of universities with
technology transfer offices, and the amount of patent-based licensing revenues that these offices
have raised.181
The U.S. patent system has long acknowledged the role, and particular needs, of independent
inventors, small firms, and universities. For example, the patent statute calls for each of these
entities to receive a 50% discount on many USPTO fees.182 As the USPTO is currently entirely
funded by the fees it charges its users,183 this provision effectively calls for larger institutions to
subsidize the patent expenditures of their smaller competitors.
Beyond potentially diminished financial resources vis-à-vis larger concerns, however, observers
have disagreed over whether independent inventors, small firms, and universities have particular
needs with respect to the patent system, and if so whether those needs should be reflected in
patent law doctrines. For example, with respect to the proposed system of “prior user rights,”184
some observers state that such rights would particularly benefit small entities, which may often
lack a sophisticated knowledge of the patent system.185 Others disagree, stating that smaller
concerns rely heavily on the exclusivity of the patent right, and that the adoption of prior user
rights would advantage large enterprises.186 Similar debates have occurred with respect to other
176 See Barnett, supra.
177 J. Douglas Hawkins, “Importance and Access of International Patent Protection for the Independent Inventor,” 3
University of Baltimore Intellectual Property Journal (1995), 145.
178 P.L. 96-517, 94 Stat. 2311 (codified at 35 U.S.C. §§ 200-212).
179 CRS Report RL32076, The Bayh-Dole Act: Selected Issues in Patent Policy and the Commercialization
of Technology, by Wendy H. Schacht.
180 Josh Lerner, “Patent Policy Innovations: A Clinical Examination,” 53 Vanderbilt Law Review (2000), 1841.
181 See Arti K. Rai & Rebecca S. Eisenberg, “Bayh-Dole Reform and the Progress of Biomedicine,” 66 Law and
Contemporary Problems (Winter/Spring 2003), 289.
182 35 U.S.C. § 41(g).
183 CRS Report RS20906, U.S. Patent and Trademark Office Appropriations Process: A Brief Explanation, by Wendy
H. Schacht.
184 Under a rule of “prior user rights,” when a conflict exists between an issued patent and an earlier user of the
patented technology, the validity of the patent is upheld but the prior user is exempted from infringement. See Pierre
Jean Hubert, “The Prior User Right of H.R. 400: A Careful Balancing of Competing Interests,” 14 Santa Clara
Computer and High Technology Law Journal (1998), 189. Prior user rights are discussed further in this report below.
185 See Gary L. Griswold & F. Andrew Ubel, “Prior User Rights—A Necessary Part of a First-to-File System,” 26 John
Marshall Law Review (1993), 567.
186 See David H. Hollander, Jr., “The First Inventor Defense: A Limited Prior User Right Finds Its Way Into U.S.
Patent Law,” 30 American Intellectual Property Law Association Quarterly Journal (2002), 37 (noting the perception
that prior user rights favor large, well-financed corporations).
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patent reform proposals, perhaps reflecting the fact that the community of independent inventors,
small firms, and universities is itself a diverse one.
A number of provisions in S. 23 and H.R. 1249 appear to be of particular interest to independent
inventors, universities, and small businesses, including a shift to a first-inventor-to-file priority
system, post-grant review procedures, the creation of a patent ombudsman program for small
business concerns, and reduced fees for “micro entities.”
Differing Patent Values in Distinct Industries
To a large extent, the patent statute subjects all inventions to the same standards, regardless of the
field in which those inventions arose. Whether the invention is an automobile engine,
semiconductor, or a pharmaceutical, it is for the most part subject to the same patentability
requirements, scope of rights, and term of protection. Both experience and economic research
suggest that distinct industries encounter the patent system in different ways, however. As a
result, it can be expected that particular industries will react differently to the various patent
reform proposals currently before Congress.187
Studies suggest that different industries attach widely varying values to patents. For example, one
analysis of the aircraft and semiconductor industries suggested that lead time and the strength of
the learning curve were superior to patents in capturing the value of investments.188 In contrast,
members of the drug and chemical industries attach a higher value to patents where patents are
considered the most effective method to protect inventions, particularly when biotechnology is
included.189 Among the reasons for these divergent assessments are “the cost of research and
development (especially in relation to imitation costs), the technological risk associated with such
research, and the availability of effective non-patent means of protection.”190
Although broad generalizations should be drawn with care, two industries widely perceived as
using the patent system in different ways are the pharmaceutical and software sectors. Within the
pharmaceutical industry, individual patents are perceived as critical to a business model that
provides life-saving and life-enhancing medical innovations, but eventually allows members of
the public access to medicines at low cost. In particular, often only a handful, and sometimes only
one or two patents cover a particular drug product, therefore “the relative value per patent is
much higher in the life sciences.”191 Patents are also judged to be crucial to the pharmaceutical
sector because of the large R&D investments associated with bringing a drug to market, as well
as the relative ease of replicating the finished product. For example, while it is expensive,
187 For additional discussion on this issue see CRS Report RL33367, Patent Reform: Issues in the Biomedical and
Software Industries, by Wendy H. Schacht.
188 Richard C. Levin, Alvin K. Klevorick, Richard R. Nelson, and Sidney G. Winter, “Appropriating the Returns for
Industrial Research and Development,” Brookings Papers on Economic Activity, 1987, in The Economics of Technical
Change, eds. Edwin Mansfield and Elizabeth Mansfield (Vermont, Edward Elgar Publishing Co., 1993), 254.
189 Wesley M. Cohen, Richard R. Nelson, and John P. Walsh, Protecting Their Intellectual Assets: Appropriability
Conditions and Why U.S. Manufacturing Firms Patent (or Not), NBER Working Paper 7552, Cambridge, National
Bureau of Economic Research, February 2000, available at http://www.nber.org/papers/w7552.
190 See Peter S. Menell, “A Method for Reforming the Patent System,” 13 Michigan Telecommunications &
Technology Law Review (2007), 487.
191 California Healthcare Institute, Impact of Patent Law Changes on Biomedical Investment and Innovation, available
at http://www.chi.org/uploadedFiles/CHI%20Patent%20Law%20changes%20paper.pdf.
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complicated, and time consuming to duplicate an airplane, it is relatively simple to perform a
chemical analysis of a pill and reproduce it.192
In contrast to the pharmaceutical field, the nature of software development is such that
innovations are typically cumulative and new products often embody numerous patentable
inventions. This environment has led to what has been described as a
poor match between patents and products in the [software] industry: it is difficult to patent an
entire product in the software industry because any particular product is likely to include
dozens if not hundreds of separate technological ideas.193
This situation may be augmented by the multiplicity of patents often associated with a finished
computer product that uses the software. It is not uncommon for thousands of different patents
(relating to hardware and software) to be embodied in one single computer. In addition,
ownership of these patents may well be fractured among hundreds or thousands of different
individuals and firms.
In general, the patent laws provide a “one size fits all” system, where all inventions are subject to
the same requirements of patentability and scope of protection, regardless of the technical field in
which they arose. Innovators in different fields nonetheless have varying experiences with the
patent system. The differing valuation of patents among sectors leads to the expectation that
distinct industries may react differently to the various patent reform proposals presently being
considered by Congress, particularly the assessment of damages.
Concluding Observations
As introduced in the 112th Congress, S. 23 and H.R. 1249 arguably would work the most
sweeping reforms to the U.S. patent system since the nineteenth century. However, many of the
provisions in the bill, such as preissuance submissions and post-issuance proceedings, have
already been implemented in U.S. law to a more limited extent. These and other proposed
modifications, such as the first-inventor-to-file priority system and assignee filing, also reflect the
decades-old patent practices of Europe, Japan, and our other leading trading partners. As well,
many of the suggested changes enjoy the support of diverse institutions, including the Federal
Trade Commission, National Academies, economists, industry representatives, attorneys, and
legal academics.
Other knowledgeable observers are nonetheless concerned that certain of these proposals would
weaken the patent right, thereby diminishing needed incentives for innovation. Some experts also
believe that changes of this magnitude, occurring at the same time, do not present the most
prudent course for the patent system. Patent reform therefore confronts Congress with difficult
legal, practical, and policy issues, but also with the apparent possibility for altering and
potentially improving the legal regime that has long been recognized as an engine of innovation
within the U.S. economy.
192 Federic M. Scherer, “The Economics of Human Gene Patents,” 77 Academic Medicine (December 2002), 1350.
193 Mann, supra, at 979.
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Author Contact Information
Wendy H. Schacht
John R. Thomas
Specialist in Science and Technology Policy
Visiting Scholar
wschacht@crs.loc.gov, 7-7066
jrthomas@crs.loc.gov, 7-0975
Acknowledgments
This report was funded in part by a grant from the John D. and Catherine T. MacArthur Foundation.
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