American Invents Act

Floor Speech

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Ms. ZOE LOFGREN of California. I yield myself such time as I may consume to oppose H.R. 1249.

I have worked on the patent reform effort since 1997 and am disappointed that here today I am unable to support the bill as it exists. I did vote to report this bill out of our Judiciary Committee, but since that time we have seen two unfortunate things occur that have made this bill simply not viable. The first, and exceedingly important, is the protections for patent fees, so that all the fees would stay in the office, have been removed. The regular appropriations process will allow for fee diversions in the future.

It has been the policy of the House, for example, not to divert fees from the Office. However, fees continue to be diverted. In fact, in the CR approved by the House this year, we diverted between $85 million and $100 million in fees from the Patent Office, and that is under the existing prohibition. So that is a major reason why the bill is defective.

I would note also that if we are moving to a first-to-file system, there has to be robust protection for prior user rights, including prior user rights in the grace period that exists under current law. Sadly, those protections are missing in this bill. The manager's amendment talks about disclosures only. It is a shame that other prior art, such as trade secrets and the like, would not receive the same protection.

So I would urge that the bill, unfortunately, cannot be supported. I intend to oppose it, as well as the manager's amendment.

I yield such time as he may consume to the honorable gentleman from North Carolina (Mr. Watt), the distinguished ranking member of the Intellectual Property Subcommittee.

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Ms. ZOE LOFGREN of California. Madam Chairman, I yield myself such time as I may consume.

I want to talk a little bit about the manager's amendment under this general debate time because there is a very constrained amount of time for that discussion.

I want to touch on two things in particular. First is the fee issue. I know that there's been discussion that somehow the fees won't be diverted under
the manager's amendment, and I just think that is not a credible argument.

I remember back in the year 2000 when we were promised that the fees would not be diverted by the appropriators, but then subsequent to that, there was diversion. And the truth is that so long as this is part of the appropriations process, the fees can, and I predict will be, diverted just as they were diverted during the adoption of the CR this year. The PTO estimates an $85 million to $100 million diversion of fees in the CR that was adopted earlier this year. That conceptually is really just a special tax on innovators. If you raise the fees and you divert it for general purposes, that's just a special tax on inventors, and I just think it's wrong and I cannot support it.

I want to talk also, my colleague, Mr. Watt, said that other than the fee bill, we could resolve the issues, and I think we could have but we're not. There are two issues that I want to address and they are really closely related, and they're complicated but they're important.

Under our laws, an idea must be new, useful, and nonobvious in order to receive patent protection, and this is evaluated in comparison to what's known as prior art. That's the state of knowledge that exists prior to an invention. If an idea already exists in the prior art, you can't get a patent. Under current law, a variety of different things create prior art, such as descriptions of an idea in previous patents, printed publications, as well as public uses or sales. But current law has what's known as the grace period, which provides 1 year for an inventor to file a patent application after certain activities that would otherwise create patent-defeating prior art.

So, for example, if an inventor published an article announcing a new invention, he or she would have a year under this grace period to file a patent application for it, and this is a very important provision of patent law. It's pretty unique, actually, to the United States. The PTO director, David Kappos, referred to this grace period as ``the gold standard of best practices.''

As we move into the first-to-file system as is proposed in this bill, it is absolutely essential that the revised grace period extend to everything that is prior art under today's rules. Unfortunately, that is not the case in the manager's amendment. The grace period would protect, and this is a direct quote, ``only disclosures.'' Well, what would that not protect? Trade secrets. Offers for sale that are not public. You could have entrepreneurs who start an invention and start a small business who won't be able to get a patent for their invention under the grace period, and entrepreneurs might then be forced to delay bringing their products to market, which would slow growth. This needs to be addressed, not in a colloquy but in language, and we agreed in the committee when we stripped out language that didn't fix this that we would fix the 102(a) and (b) problem in legislation. There was a colloquy on the Senate floor similar to one that has just taken place, but we know that the language of the bill needs to reflect the intent. Judges look to the statute first and foremost to determine its meaning, and the legislative history is not always included.

So the ambiguity that's in the measure is troublesome. And although we prepared an amendment to delineate it, it has not been put in order, and, therefore, this remedy cannot be brought forth, and small inventors and even big ones may have a problem.

We now have our iPads on the floor, and while I was sitting here, I got an email from the general counsel of a technology company. I won't read the whole thing, but here is what this general counsel said:

``The prior use rights clause as written will be a direct giveaway to foreign competitors, especially those from countries where trade secret test is rampant.''

What we're saying to American companies is that if you have a trade secret that you want to protect under the grace period prior art rules, you're out of luck. You are quite potentially out of luck. You'll either have to disclose that trade secret, and we know that there are serious concerns in doing that. We don't want to get into maligning countries around the world, but there are some that do not have the respect for intellectual property that we have. Or else we will say to that inventor or company that you can't use your own invention that you have devised without being held up for licensing fees with somebody who got to the office before you did.

This is a big problem that is not resolved. Even if the manager's amendment is defeated, this problem will remain in the bill. It is an impediment to innovation and an impediment to making first-to-file work. If we're going to have first-to-file, and I can accept that, it must have robust, broad, rigorous protection under the grace period with a broad definition of a prior art that is protected. That is just deficient in this bill.

This is, I know, down in the weeds. It's a little bit nerdy. We've spent many years talking about this in the Judiciary Committee. I'm just so regretful that this bill after so many years has gone sideways in the last 2 days and is something that we cannot embrace and celebrate.

I reserve the balance of my time.

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Ms. ZOE LOFGREN of California. I yield myself such time as I may consume.

I want to get back to the original reason why we've worked so hard on this bill, only to be here at the end of this process with a bill that we can't support. We started with hearings in the 1990s with the Federal Trade Commission and the National Academy of Science. And one of the things they pointed out was that there are more patents than there are inventions. We started focusing in on the abuse of litigation that occurred as well as the needs of the office.

My colleague is correct: The Patent Office has a tremendous backlog, and that is a serious concern for inventors and really for the country. The examiners have such an enormous backlog, they can't spend sufficient time reviewing the applicants. This has led to a flood of poor-quality patents that were issued over the last decade and a half that I think--and most believe--should have been denied by the office. These dubious patents do significant damage to particular industries, like the information technology industry, as they can be used by nonpracticing entities to demand rents from legitimate businesses and to interfere with the development of legitimate products. Now, I don't blame the examiners at the PTO. They are working hard, but they don't have enough time to give each application the consideration it deserves.

A bill, as approved by the Judiciary Committee, would have helped remedy this problem by making sure--a lot of people don't realize that the Patent Office doesn't get any taxpayer money. The Patent Office is entirely supported by fees submitted by inventors. So keeping all of those fees that the inventors are paying in the office so that the patents can properly be dealt with in a timely fashion was a key component of this measure. Unfortunately, under the manager's amendment, that strong protection is simply gone.

And I know, as I said in the past, we've had unanimous votes in the Judiciary Committee. We've had promises never to do it again; but the diversions have continued, and it is clear that they will continue under the manager's amendment provision because it allows the regular process to continue as it has in the past.

I have not submitted lists of letters of who's in favor, who's opposed to this bill. It's my understanding that the Realtors Association is, in fact, opposed to the manager's amendment; but we're not going to vote on these amendments tonight. We're rolling these votes until tomorrow. So we will research that, and we will find the truth of where they are and make that information available to the Members because certainly Realtors are a very valuable part of our Nation's economy.

I want to talk a little bit as well about whether we can fix the defect on prior art by an amendment that will be offered later in the week by the gentleman from Michigan (Mr. Conyers) and the gentleman from California (Mr. Rohrabacher). They propose that the first-to-file patent system that is being promoted to harmonize our system with other countries would not go into effect until the grace period, which is the critical part of the patent system, actually is fixed and harmonized.

If the manager's amendment is passed, the fatal defect of defining the prior art is disclosures, I don't believe can be fully remedied by this amendment, although I think that this amendment is a good one, and I intend to support it. So I think it's very important that the manager's amendment be defeated. I would hope that if that happens, that we might have a chance to step back and to fully examine where we are in terms of the prior user rights and the grace period because, as the patent commissioner had said, this is the gold standard, the United States has had the gold standard in patents with this grace period. It would be a shame not just for the Congress but for our country and our future as innovators to lose this genius part of our patent system.

I reserve the balance of my time.

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