112TH CONGRESS
`1st Session
`
`"
`
`HOUSE OF REPRESENTATIVES
`
`!
`
`REPT. 112–98
`Part 1
`
`AMERICA INVENTS ACT
`
`JUNE 1, 2011.—Committed to the Committee of the Whole House on the State of
`the Union and ordered to be printed
`
`Mr. SMITH of Texas, from the Committee on the Judiciary,
`submitted the following
`
`R E P O R T
`
`together with
`
`DISSENTING VIEWS AND ADDITIONAL VIEWS
`
`[To accompany H.R. 1249]
`
`[Including cost estimate of the Congressional Budget Office]
`The Committee on the Judiciary, to whom was referred the bill
`(H.R. 1249) to amend title 35, United States Code, to provide for
`patent reform, having considered the same, reports favorably there-
`on with an amendment and recommends that the bill as amended
`do pass.
`
`CONTENTS
`
`Page
`1
`......................................................................................................
`The Amendment
`38
`Purpose and Summary ............................................................................................
`40
`Background and Need for the Legislation .............................................................
`57
`Hearings ...................................................................................................................
`58
`Committee Consideration ........................................................................................
`58
`Committee Votes ......................................................................................................
`63
`Committee Oversight Findings ...............................................................................
`63
`New Budget Authority and Tax Expenditures ......................................................
`63
`Congressional Budget Office Cost Estimate ..........................................................
`73
`Performance Goals and Objectives .........................................................................
`73
`Advisory on Earmarks .............................................................................................
`73
`Section-by-Section Analysis
`....................................................................................
`85
`Agency Views ...........................................................................................................
`89
`Changes in Existing Law Made by the Bill, as Reported .....................................
`Dissenting Views
`..................................................................................................... 162
`Additional Views ...................................................................................................... 163
`
`99–006
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`Transitional program for covered business method patents
`A number of patent observers believe the issuance of poor busi-
`ness-method patents during the late 1990’s through the early
`2000’s led to the patent ‘‘troll’’ lawsuits that compelled the Com-
`mittee to launch the patent reform project 6 years ago. At the time,
`the USPTO lacked a sufficient number of examiners with expertise
`in the relevant art area. Compounding this problem, there was a
`dearth of available prior art to assist examiners as they reviewed
`business method applications. Critics also note that most countries
`do not grant patents for business methods.
`The Act responds to the problem by creating a transitional pro-
`gram 1 year after enactment of the bill to implement a provisional
`post-grant proceeding for review of the validity of any business
`method patent. In contrast to the era of the late 1990’s-early
`2000’s, examiners will review the best prior art available. A peti-
`tion to initiate a review will not be granted unless the petitioner
`is first sued for infringement or is accused of infringement. The
`program otherwise generally functions on the same terms as other
`post-grant proceedings initiated pursuant to the bill. Any party
`may request a stay of a civil action if a related post-grant pro-
`ceeding is granted. The program sunsets after 10 years, which en-
`sures that patent holders cannot delay filing a lawsuit over a short-
`er time period to avoid reevaluation under the transitional pro-
`gram.
`Jurisdictional and procedural matters
`a) State court jurisdiction and the US Court of Appeals for
`the Federal Circuit
`The US district courts area given original jurisdiction to hear
`patent cases,57 while the US Court of Appeals for the Federal Cir-
`cuit adjudicates all patent appeals.58 The Supreme Court ruled in
`2002,59 however, that patent counterclaims do not give the Federal
`Circuit appellate jurisdiction over a case.
`The Act clarifies the jurisdiction of the US district courts and
`stipulates that the US Court of Appeals for the Federal Circuit has
`jurisdiction over appeals involving compulsory patent counter-
`claims. The legislative history of this provision, which we reaffirm
`and adopt as our own, appears in the Committee Report accom-
`panying H.R. 2955 from the 109th Congress,60 which the Com-
`mittee reported favorably to the House on April 5, 2006.
`b) Joinder
`The Act also addresses problems occasioned by the joinder of de-
`fendants (sometimes numbering in the dozens) who have tenuous
`connections to the underlying disputes in patent infringement
`suits.
`The Act amends chapter 29 of the Patent Act by creating a new
`§ 299 that addresses joinder under Rule 20 and consolidation of
`trials under Rule 42. Pursuant to the provision, parties who are ac-
`cused infringers in most patent suits may be joined as defendants
`
`57 28 USC § 1338.
`58 28 USC § 1295.
`59 Holmes Group, Inc., v. Vornado Air Circulation Systems, Inc. 535 U.S. 826 (2002).
`60 H. Rep. 109–405.
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`80
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`Section 15. Best Mode Requirement.
`This section amends § 282(b) by removing the failure to disclose
`the best mode under section 112 as a basis for canceling or holding
`either invalid or unenforceable a patent claim.
`Section 16. Marking.
`Subsection (a) addresses virtual marking. The provision allows a
`patent holder to satisfy the requirements of § 287 of the Patent Act
`by affixing to a patented article the word ‘‘patent’’ or the abbrevia-
`tion ‘‘pat.’’ together with an Internet address that the public can
`access free of charge to determine the status of the patent. The
`USPTO is also instructed to submit a report to Congress on the ef-
`fectiveness of virtual marking that is due no later than 3 years
`after the date of enactment.
`Subsection (b) addresses false marking in the following ways: (1)
`Only the United States may sue for the qui tam penalty under the
`subsection. (2) A person who has suffered a competitive injury as
`a result of a violation may still bring a civil action in US district
`court for compensatory damages. (3) Persons or companies other-
`wise liable under § 292 (the false marking statute) are protected
`during a 3-year window beginning on the date the patent at issue
`expires. Beyond the 3-year window, persons or companies are also
`protected if they place the word ‘‘patent’’ or ‘‘patented’’, the abbre-
`viation ‘‘pat.’’, or the patent number either on the article or through
`an Internet posting, consistent with the amendments in subsection
`(a).
`Section 17. Advice of Counsel.
`Section 17 creates a new § 298 of the Patent Act that states that
`the failure of an infringer to obtain the advice of counsel regarding
`any allegedly infringed patent, or the failure of the infringer to
`present such advice to the court or jury, may not be used to prove
`that the accused infringer willfully infringed the patent or that the
`infringer intended to induce infringement of the patent.
`Section 18. Transitional program for covered business method pat-
`ents.
`Section 18 creates a transitional program to allow post-grant re-
`view of the validity of business method patents.
`Under subsection (a), the Director is authorized to establish reg-
`ulations governing the use of the new proceeding, which will be
`modeled after post-grant review as set forth in Section 6 (new
`Chapter 32 of the Patent Act). The proceeding is limited in certain
`respects. A petition cannot be accepted unless the petitioner or his
`real party in interest has been sued for infringement of the patent
`or has been charged with infringement. Nor can the petitioner or
`his real party in interest later assert invalidity before the ITC or
`a Federal court on a ground that was considered and resulted in
`a written decision by the agency in the course of a transitional pro-
`ceeding.
`The program takes effect 1 year following the date of enactment
`and applies to any covered business method patent issued before,
`on, or after the effective date, with the exception of a patent that
`satisfies the requirements of § 321(c) of the Patent Act as set forth
`in Section 6 of the bill. The program sunsets after 10 years.
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`Subsection (b) addresses requests for a stay of a civil action alleg-
`ing infringement under § 281 of the Patent Act. A US district court
`shall decide to grant a stay based on prescribed criteria: (A) wheth-
`er a stay (or denial thereof) will simplify the issues in question and
`streamline the trial; (B) whether discovery is complete and whether
`a trial date has been set; (C) whether a stay (or a denial thereof)
`would unduly prejudice the non-moving party or present a clear
`tactical advantage for the moving party; and (D) whether a stay (or
`the denial thereof) will reduce the burden of litigation on the par-
`ties and on the court. A party may seek an interlocutory appeal of
`the US district court’s decision, which the Federal Circuit shall re-
`view to ensure consistent application of established precedent, and
`such review may be de novo.
`Subsection (c) deems that in an action for infringement under
`§ 281 of a covered business method patent, an automated teller ma-
`chine (‘‘ATM’’) shall not be considered a regular and established
`place of business for purposes of the patent venue statute.63
`Subsection (d) defines ‘‘covered business method patent’’ as one
`that claims a method or corresponding apparatus for performing
`data processing or other operations used in the practice, adminis-
`tration, or management of a financial product or service, except
`that it does not include patents for technological inventions.
`Finally, subsection (e) clarifies that nothing in Section 18 shall
`be construed as amending or interpreting categories of patent-eligi-
`ble subject matter under § 101 of the Patent Act.
`Section 19. Jurisdiction and procedural matters.
`Subsection (a) through (d) enact the so-called Holmes Group fix
`(H.R. 2955, 109th Congress), which the House Judiciary Committee
`reported favorably in 2006. The Committee Report accompanying
`H.R. 2955 (House Rep. 109–407), which we reaffirm, explains the
`bill’s reasons for abrogating Holmes Group, Inc. v. Vornado Air Cir-
`culation Systems, Inc., 535 U.S. 826 (2002), and more fully pre-
`cluding state court jurisdiction over patent legal claims.
`Subsection (e) creates a new § 299 of the Patent Act that address-
`es joinder of accused infringers in patent actions or trials not in-
`volving certain drugs and biologics. Parties accused as defendants
`may be joined in one action as defendants or counterclaim defend-
`ants only if: (1) any right to relief is asserted against the parties
`jointly, severally, or in the alternative with respect to or arising out
`of the same transaction, occurrence, or series of transactions or oc-
`currences relating to the making, using, importing into the United
`States, offering for sale, or selling of the same accused product or
`process; and (2) questions of fact common to all defendants or coun-
`terclaim defendants will arise in the action.
`For purposes of subsection (e), accused infringers may not be
`joined based solely on allegations that they each have infringed the
`patent or patents in suit.
`The changes set forth in Section 19 shall apply to any civil action
`commenced on or after the date of enactment of the Act.
`
`63 28 USC § 1400(b).
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