Mr. GOODLATTE. I also very much appreciate this debate on the constitutionality of this issue. I had the honor of leading the reading of the Constitution on the second day of this new Congress.
I want to make it very clear because there's a lot of confusion on the part of a lot of people who think this is a first-to-file--even if you're not the inventor--gets the patent. That is most assuredly not the case. This is first-inventor-to-file. You must be a bona fide inventor to qualify for this.
Our Constitution grants exclusive rights to inventors. Now, in point of fact, when our Constitution was first adopted and our Patent Office was established, there was no interference provision, and it was 80 years later before that took place. In fact, in at least one case patents were granted to more than one inventor. So the issue here I think is not at all well-founded.
This is clearly constitutional. We have submitted and we will make part of the Record writings by 20 constitutional law professors--Attorney General Mukasey who has noted this as well. The Constitution grants Congress the authority to award inventors the exclusive rights to their inventions; however, the Constitution leaves to Congress how to settle disputes between two individuals who claim to have invented a certain idea.
Article I, section 8, of the Constitution declares that patent rights are to be granted in order to ``promote the progress of science and useful arts.'' A first-inventor-to-file system ensures this by awarding patent protections to the first actual inventor to disclose and make productive use of its patent.
Our Nation has adopted different standards for settling these issues in the past. Currently, we have a first-to-invent standard. The reality is that a first-to-invent standard subjects small businesses and individual inventors who have filed for patent protection to surprise and costly litigation in what are called interference actions to determine who invented the idea first. This is a better idea, and this is a constitutional idea.
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We can make this process much easier by awarding a patent to the first inventor to make
use of his invention by seeking patent protection. This will reward the inventor who is making productive use of his patent and will discourage individuals from sitting idly on their ideas.
Let us make clear--switching to First-Inventor-to-File does not allow a subsequent party to steal an invention. It requires that a subsequent inventor had to have come up with the idea independently and separately.
Switching to a First-Inventor-to-File system fits squarely within the plain meaning of the Constitution and will reward inventors who are working to launch our nation into the next level of innovation and job creation.
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Mr. GOODLATTE. I thank the chairman for yielding and for his leadership on this issue, and I rise in strong support of H.R. 1249.
For the better part of the past decade, Congress has been working to update our patent laws to ensure that the incentives our Framers envisioned when they wrote article I, section 8, of our Constitution remain meaningful and effective. The U.S. patent system must work efficiently if America is to remain the world leader in innovation. It is only right that as more and more inventions with increasing complexity emerge, we examine our Nation's patent laws to ensure that they still work efficiently and that they still encourage and not discourage innovation.
The core principles that have guided our efforts have been to ensure that quality patents are issued by the PTO in the first place and to ensure that our patent enforcement laws and procedures do not create incentives for opportunists with invalid claims to exploit while maintaining strong laws that allow legitimate patent owners to enforce their patents effectively. H.R. 1249 addresses these principles.
With regard to ensuring the issuance of quality patents, this legislation allows third parties to submit evidence of prior art during the examination process, which will help ensure examiners have the full record before them when making decisions. In addition, after the PTO issues a patent, this legislation creates a new post-grant opposition system in which third parties can raise objections to a patent immediately after its issuance, which will both help screen out bad patents while bolstering valid ones.
Furthermore, the bill contains a provision on fee diversion where any fees that are collected but not appropriated to the PTO will be placed in a special fund to be used only by the PTO for operations. This solves the fee diversion issue, and it assures that the problem that we have had in the past will not take place in the future; but at the same time it also assures that the Congress will continue its oversight authority because the Patent Office will have to come to the Congress, to the Appropriations Committee, to justify those expenditures. They can't be spent on anything else, but they have to be justified to the Congress before the funds are appropriated. These funds will still be subject to appropriation but will be set aside to only fund the PTO. With a backlog of almost a million patent applications and many waiting 3 years to get an initial action on their patent applications, this agreement could not come at a more crucial time. We have been trying for 10 years, by the way, and this is the closest we have ever come.
In addition to these patent quality improvements, H.R. 1249 also includes provisions to ensure that patent litigation benefits those with valid claims but not those opportunists who seek to abuse the litigation process. Many innovative companies, including those in the technology and other sectors, have been forced to defend against patent infringement lawsuits of questionable legitimacy. When such a defendant company truly believes that the patent being asserted is invalid, it is important for it to have an avenue to request the PTO to take another look at the patent in order to better inform the district court of the patent's validity. This legislation retains an inter partes re-exam process, which allows innovators to challenge the validity of a patent when they are sued for patent infringement.
In addition, the bill allows the Patent and Trademark Office to reexamine some of the most questionable business method patents, which opportunists have used for years to extort money from legitimate businesses. By allowing the PTO to take another look at
these patents, we help ensure that invalid patents will not be used by aggressive trial lawyers to game the system.
The bill also ensures that abusive false markings litigation is put to an end. Current law allows private individuals to sue companies on behalf of the government to recover statutory damages in false markings cases. After a court decision 2 years ago that liberalized the false markings damages awards, a cottage industry has sprung up, and false markings claims have risen exponentially. H.R. 1249 maintains the government's ability to bring these actions but limits private lawsuits to those who have actually suffered competitive harm. This will discourage opportunistic lawyers from pursuing these cases.
The bill also restricts joinder rules for patent litigation. Specifically, it restricts joinder of defendants to cases arising out of the same facts and transactions, which ends the abusive practice of treating as codefendants parties who make completely different products and have no relation to each other.
Furthermore, the bill addresses the problem of tax strategy patents. Unbelievably, tax strategy patents grant monopolies on particular ways that individual taxpayers can comply with the Tax Code.
The Acting CHAIR (Ms. Foxx). The time of the gentleman has expired.
Mr. SMITH of Texas. I yield the gentleman an additional 30 seconds.
Mr. GOODLATTE. Over 140 tax strategy patents have already been issued, and more applications are pending. Tax strategy patents have the potential to affect tens of millions of everyday taxpayers, many who do not even realize that these patents exist. The Tax Code is already complicated enough without also expecting taxpayers and their advisers to become ongoing experts in patent law.
Scores, hundreds of organizations in fact, support these reforms. It is important that this House supports the manager's amendment; and by the way, the United States Chamber of Commerce supports the manager's amendment and the bill.
That is why I worked to include in H.R. 1249 a provision to ban tax strategy patents. H.R. 1249 contains such a provision which deems tax strategies insufficient to differentiate a claimed invention from the prior art. This will help ensure that no more tax strategy patents are granted by the PTO.
Importantly, the House worked hard to find a compromise that will ensure Americans have equal access to the best methods of complying with the Tax Code while also preserving the ability of U.S. technology companies to develop innovative tax preparation and financial management software solutions. I believe the language in H.R. 1249 strikes the right balance.
By giving the necessary tools to the Patent Office to issue strong patents and by enacting litigation reforms, we will help to inject certainty about the patents that emerge from this process--patents rights that are more certain to attract more investment capital. This will allow independent inventors, as well as small, medium and large-sized enterprises to grow our economy and create jobs.
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Mr. GOODLATTE. Madam Chairman, it was mentioned earlier by one of those speaking in opposition to the bill that the National Association of Realtors was opposed to this legislation. And we will make available for the Record a letter that we received, dated 2 days ago, from the National Association of Realtors: ``On behalf of the 1.1 million members of the National Association of Realtors, we are pleased to support H.R. 1249, the America Invents Act.'' It goes on to explain in great detail why they, along with literally hundreds of other organizations, support this legislation. That includes the United States Chamber of Commerce, the National Association of Manufacturers, and the Retail Federation of America. There is a whole host of organizations and individual companies,
both large and small, who support the legislation because they know that this is what is vital for job creation in this country.
We need to have reform of our patent laws because, unfortunately in recent years, countries like China have overtaken us in the productivity of their patent office. And the fact of the matter is, unless we change our patent laws, we are going to continue to be at a disadvantage. And the advantages that we've had in the past are no longer available to us because, quite frankly, the complexity of inventions has increased; and more and more, we find ourselves in a situation where the laws that we operate under today, which were last updated in 1952, need to be updated to address a lot of the abuses that you've heard described here this evening.
We also need to pass this legislation to make sure that the fee diversion, that, as has been noted, has kept nearly $1 billion from going to the operation of the Patent Office to work down the 3-year 1 million patent backlog, also can be addressed. And we also need to recognize that this legislation, in addition to being a jobs bill, as recognized by all of these many, many, many companies and associations of various trade groups, it is also major litigation reform.
It cuts out the abuses with tax strategy patents and other business method types of patents, where individuals do not produce anything other than lie in wait for somebody else to come up with a similar idea and then come forward and say, Hey, that was really my idea, and now you pay me a lot of money. They aren't creating jobs. They, in fact, are causing jobs to leave this country.
So there are many reasons to support this legislation, and I would urge my colleagues to do so. We have not yet come to the manager's amendment, but it provides a critical component to making sure that fee diversion does not occur.
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Mr. GOODLATTE. Madam Chairman, the gentlewoman has expressed concern about the fee diversion provision in the manager's amendment. I think it is actually a very good provision; and it will, for the first time, end fee diversion at the Patent and Trademark Office by statute. It accomplishes both our overarching policy goals and maintains congressional oversight.
For the first time, we are establishing an exclusive PTO reserve fund that will collect all excess PTO fees and bring an end to fee diversion. It's been expressed on the other side of the aisle that maybe with the authority to set fees that is granted for a limited period of time in this bill, there will be an abuse in the Patent Office. But it can't be abused very much because the fees will still be subject to appropriations here in the Congress. They can't spend them on other things. They can't divert them, but they can put them in escrow, and they can require the PTO to come in and justify those fees before they're authorized. There will be no incentive to have excess fees if there can't be excess expenditures because of congressional oversight.
Patent reform has been a long road; and with the inclusion of this provision, we have ensured that all funds collected by the PTO will remain available to them and may not be diverted to any other use.
Ending fee diversion has been an important goal for all of us; and as we crafted legislation, our ultimate policy goal was to ensure that PTO funds are not diverted for other uses, such as earmarks or for other agencies.
Working with leadership and the Appropriations Committee, we developed a compromise provision that accomplishes our shared policy goal through a statutorily created PTO reserve fund.
This compromise was carefully brokered by leadership to ensure that it aligned with House rules and did not include mandatory spending that would have resulted in a score. Just a few months ago, including a provision like this one would have been unheard of, and no such provision has been included in patent bills considered by previous Congresses.
All excess fees that the PTO collects will be deposited into the PTO reserve fund and amounts in the fund ``shall be made available until expended only for obligation and expenditure by the Office.''
This compromise provision also ensures that the Appropriations and Judiciary Committees will continue to have oversight over the PTO. Though PTO remains within the appropriations process, the appropriators no longer have an incentive to divert fees. In other words, because excess fees are made available to the PTO, there will be no scoring advantage to the Appropriations Committee to decrease the appropriations, and this will not impact their 302(b) allocation for Commerce, Justice, State appropriations.
I urge my colleagues to support the manager's amendment.
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By creating the Reserve Fund, we have walled-off PTO funds from diversion. All the excess fees are collected and deposited into the Fund and are made available in Appropriations Acts and cannot be ``diverted'' to other non-PTO purposes.
PTO funding would still be provided in Appropriations Acts, but the language carried in those Acts will appropriate excess fee collections and provide a clear and easy mechanism for PTO to request access to those funds.
By giving USPTO access to all its funds, the Manager's Amendment supports the USPTO's efforts to improve patent quality and reduce the backlog of patent applications. To carry out the new mandates of the legislation and reduce delays in the patent application process, the USPTO must be able to use all the fees it collects.
The language in the Manager's Amendment reflects the intent of the Judiciary Committee, the Appropriations Committee and House leadership to end fee diversion. USPTO is 100% funded by fees paid by inventors and trademark filers who are entitled to receive the services they are paying for. The language makes clear the intention not only to appropriate to the USPTO at least the level requested for the fiscal year but also to appropriate to the USPTO any fees collected in excess of such appropriation.
Providing USPTO access to all fees collected means providing access at all points during that year, including in case of a continuing resolution. Access also means that reprogramming requests will be acted on within a reasonable time period and on a reasonable basis. It means that future appropriations will continue to use language that guarantees USPTO access to all of its fee collections.
Appropriations Chairman ROGERS is committed to this agreement and to ending fee diversion at the PTO, and I appreciate his efforts.
This provision represents a sea change of improvement over the current system and I urge all Members to strongly support this end to fee diversion at the PTO. This amendment, including the commitment from Chairman ROGERS to Leadership ensures that all the user fees that the PTO collects will be available to the PTO so that they can get to work to reduce patent pendency and the backlog, and issue strong patents.
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