112TH CONGRESS
`13,; 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
`
`REPORT
`
`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
`38
`40
`57
`58
`58
`63
`63
`63
`73
`73
`73
`85
`89
`162
`163
`
`.................................................................................................... ..
`The Amendment
`Purpose and Summary ........................... ..
`Background and Need for the Legislation
`Hearings ...................................................... ..
`Committee Consideration ..
`Committee Votes ........................ ..
`Committee Oversight Findings ........................ ..
`New Budget Authority and Tax Expenditures .
`Congressional Budget Office Cost Estimate ..
`Performance Goals and Objectives ............... ..
`Advisory on Earmarks .................. ..
`Section-by-Section Analysis
`.
`Agency Views
`.......................................................................
`Changes in Existing Law Made by the Bill, as Reported .
`Dissenting Views
`.................................................................
`Additional Views .................................................................................................... ..
`
`
`
`99-006
`
`DMC Exhibit 2121_001
`
`

`
`
`
`47
`
`ceeding “inter partes review.” The Act also makes the following im-
`provements to this proceeding:
`
`0 “Reasonable likelihood of success” for instituting inter
`partes review. The threshold for initiating an inter partes
`review is elevated from “significant new question of patent-
`ability”—a standard that currently allows 95% of all re-
`quests to be granted—to a standard requiring petitioners to
`present information showing that their challenge has a rea-
`sonable likelihood of success. Satisfaction of the new thresh-
`old will be assessed based on the information presented both
`in the petition for the proceeding and in the patent owner’s
`response to the petition.
`
`0 “Reasonably could have raised” estoppel applied to
`subsequent administrative proceedings. A party that
`uses inter partes review is estopped from raising in a subse-
`quent PTO proceeding (such as an ex parte reexam or inter
`partes review) any issue that it raised or reasonably could
`have raised in the inter partes review.
`
`0 Repeal of the 1999 limit. The limit on challenging patents
`issued before 1999 in inter partes reexamination is elimi-
`nated; all patents can be challenged in inter partes review.
`
`0 Preponderance burden. Petitioners bear the burden of
`proving that a patent is invalid by a preponderance of the
`evidence in inter partes review.
`
`0 Time limits during litigation. Parties who want to use
`inter partes review during litigation are required to seek a
`proceeding within 12 months of being served with a com-
`plaint alleging infringement of the patent, and are barred
`from seeking or maintaining an inter partes review if they
`file ?.1’(l1 action for a declaratory judgment that the patent is
`inva 1
`.
`0 Discovery. Parties may depose witnesses submitting affida-
`vits or declarations and seek such discovery as the Patent
`Office determines is otherwise necessary in the interest of
`justice.
`
`0 12- to 18-month deadline. Inter partes review must be
`completed within 1 year of when the proceeding is instituted,
`except that the Office can extend this deadline by 6 months
`for good cause.
`
`0 Oral hearing. Each party has the right to request an oral
`hearing as part of an inter partes review.
`
`0 Three-judge panels. Inter partes reviews will be conducted
`before a panel of three APJs. Decisions will be appealed di-
`rectly to the Federal Circuit.
`
`The Act also creates a new post-grant opposition procedure that
`can be utilized during the first 12 months after the grant of a pat-
`ent or issue of a reissue patent. Unlike reexamination proceedings,
`which provide only a limited basis on which to consider whether a
`patent should have issued, the post-grant review proceeding per-
`mits a challenge on any ground related to invalidity under section
`282. The intent of the post-grant review process is to enable early
`
`DMC Exhibit 2121_002
`
`

`
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`48
`
`challenges to patents, while still protecting the rights of inventors
`and patent owners against new patent challenges unbounded in
`time and scope. The Committee believes that this new, early-stage
`process for challenging patent validity and its clear procedures for
`submission of art will make the patent system more efficient and
`improve the quality of patents and the patent system. This new,
`but time-limited, post-grant review procedure will provide a mean-
`ingful opportunity to improve patent quality and restore confidence
`in the presumption of validity that comes with issued patents in
`court.
`In utilizing the post-grant review process, petitioners, real par-
`ties in interest, and their privies are precluded from improperly
`mounting multiple challenges to a patent or initiating challenges
`after filing a civil action challenging the validity a claim in the pat-
`ent. Further, a final decision in a post-grant review process will
`prevent the petitioner, a real party in interest, or its privy from
`challenging any patent claim on a ground that was raised in the
`post-grant review process. The post-grant review procedure is not
`intended, however, to inhibit patent owners from pursuing the var-
`ious avenues of enforcement of their rights under a patent, and the
`amendment makes clear that the filing or institution of a post-
`grant review proceeding does not limit a patent owner from com-
`mencing such actions.
`The Committee recognizes the importance of quiet title to patent
`owners to ensure continued investment
`resources. While this
`amendment is intended to remove current disincentives to current
`administrative processes, the changes made by it are not to be used
`as tools for harassment or a means to prevent market entry
`through repeated litigation and administrative attacks on the va-
`lidity of a patent. Doing so would frustrate the purpose of the sec-
`tion as providing quick and cost effective alternatives to litigation.
`Further, such activity would divert resources from the research and
`development of inventions. As such, the Committee intends for the
`USPTO to address potential abuses and current
`inefficiencies
`under its expanded procedural authority.
`
`Patent Trial and Appeal Board.
`
`The Act renames the Patent Board the “Patent Trial and Appeal
`Board” and sets forth its duties, which are expanded to include ju-
`risdiction over
`the new post-grant
`review and derivation pro-
`ceedings. This section strikes references to proceedings eliminated
`by the Act,
`including interference proceedings, and updates the
`various appeals statutes.
`
`Preissuance submissions by third parties
`
`After an application is published, members of the public—most
`likely, a competitor or someone else familiar with the patented in-
`vention’s field—may realize they have information relevant to a
`pending application. The relevant information may include prior
`art that would prohibit the pending application from issuing as a
`patent. Current USPTO rules permit the submission of such prior
`art by third parties only if it is in the form of a patent or publica-
`tion,43 but the submitter is precluded from explaining why the
`
`43922 35 CPR. §1.99.
`
`DMC Exhibit 2121_003
`
`

`
`
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`76
`
`(b) Inter partes review must be sought by a party within 12
`months of the date when the party is served with a complaint
`for infringement. If a patent owner sues for infringement with-
`in 3 months of the patent’s issue, a pending petition for post-
`grant review or the institution of such a proceeding may not
`serve as a basis for staying the court’s consideration of the pat-
`ent owner’s motion for a preliminary injunction.
`(c) The Director may allow other petitioners to join an inter
`partes or post-grant review.
`(d) The Director may consolidate multiple proceedings or mat-
`ters concerning the same patent and decline requests for re-
`peated proceedings on the same question.
`(e) Inter partes and post-grant petitioners are estopped from
`raising in a subsequent Office proceeding any issue that they
`raised or reasonably could have raised in the inter partes or
`post grant review, and inter partes petitioners are also es-
`topped from raising in civil litigation or an ITC proceeding any
`issue that they raised or could have raised in the inter partes
`review. Post-grant petitioners are only estopped from raising in
`civil litigation or ITC proceedings those issues that they actu-
`ally raised in the post-grant review.
`(f) Post-grant review may not be used to challenge claims in
`a reissue patent that are the same as or narrower than claims
`in the original patent if the time for seeking review of the
`original patent has lapsed.
`
`(a) The Director shall prescribe regulations
`§§316 and 326.
`that make the file in proceedings public; define standards for
`instituting reviews; allow submission of additional information;
`establish and govern review and its relationship to other pro-
`ceedings; set a time limit for requesting joinder in inter partes
`review; set standards for discovery; prescribe sanctions for
`abuse of the proceedings; provide for protective orders for con-
`fidential information; allow the patent owner to file a response
`after an inter partes review has been instituted; allow the pat-
`ent owner to amend the patent; provide either party with the
`right to an oral hearing; and set a 1-year time limit for comple-
`tion of the proceeding, with a 6-month extension for good
`cause; and provide the petitioner with at least one opportunity
`to file written comments after the proceeding is instituted.
`(b) In prescribing regulations, the Director shall consider the
`integrity of the patent system and the efficient operation of the
`Office.
`
`(c) The Patent Trial and Appeal Board shall conduct review
`proceedings.
`(d) The patent owner may submit one amendment with a rea-
`sonable number of substitute claims, and additional amend-
`ments either as agreed to by the parties for settlement, for
`good cause shown in post-grant review, or as prescribed in reg-
`ulations by the Director in inter partes review.
`(e) The
`challenger
`shall have
`the burden of providing
`unpatentability by a preponderance of the evidence.
`
`DMC Exhibit 2121_004
`
`

`
`
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`165
`
`ing from the date on which the party is served with a complaint
`for infringement. The length of this deadline is completely arbi-
`trary, and does not account for the complexity of many patent cases
`that can encompass dozens of patents and defendants and hun-
`dreds of separate patent claims. In such complex cases, the 12-
`month period imposes an extremely compressed schedule that will
`not provide enough time for the defendants to prepare and file an
`inter partes petition. Instead, the deadline should be tied to sub-
`stantive progress in patent litigation, such as the entry of an order
`by the district court construing the relevant patent claims. This
`would ensure that defendants have an opportunity to prepare le-
`gitimate petitions for inter partes review based upon the core issues
`in a patent case.
`Second, H.R. 1249 as amended raises the threshold for initiating
`an inter partes review procedure. In order to initiate a review, the
`Director must find “a reasonable likelihood that the petitioner
`would prevail with respect to at least one of the claims challenged
`in the petition.” The existing threshold—whether a petition raises
`a “substantial new question of patentability”—should be main-
`tained instead. As noted above, the overwhelming majority of inter
`partes reexaminations that have been initiated under the current
`standard have been ultimately deemed meritorious. A stricter
`threshold is therefore unjustified. Moreover, the practical meaning
`of the new standard in H.R. 1249 is not clear and creates a risk
`that the PTO will reject legitimate petitions at the outset of the
`procedure, without further inquiry.
`Because of these provisions, we do not support Sec. 5(a) of H.R.
`1249. Several Democratic amendments designed to address these
`provisions were offered but defeated during the markup of the bill.
`We believe that, at minimum, in order to preserve the existing util-
`ity of inter partes reexaminations, current law should be main-
`tained. Ensuring the high caliber of patents circulating in the mar-
`ketplace inures to the benefit of all Americans by stimulating inno-
`vation, encouraging investment and creating jobs. We hope that as
`H.R. 1249 moves closer to the floor, needed revisions will be made
`to ensure that inter partes reexamination remains a viable, efficient
`alternative to litigation for weeding out bad patents.
`HOWARD L. BERMAN.
`MELVIN L. WATT.
`ZOE LOFGREN.
`
`Q
`
`DMC Exhibit 2121_005