[House Report 107-120]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-120
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SUBSTANTIAL NEW QUESTION OF PATENTABILITY IN REEXAMINATION PROCEEDINGS
_______
June 28, 2001.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 1866]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1866) to amend title 35, United States Code, to
clarify the basis for granting requests for reexamination of
patents, having considered the same, reports favorably thereon
with an amendment and recommends that the bill as amended do
pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 4
Committee Consideration.......................................... 5
Vote of the Committee............................................ 5
Committee Oversight Findings..................................... 5
Performance Goals and Objectives................................. 5
New Budget Authority and Tax Expenditures........................ 5
Congressional Budget Office Cost Estimate........................ 5
Constitutional Authority Statement............................... 6
Section-by-Section Analysis and Discussion....................... 6
Changes in Existing Law Made by the Bill, as Reported............ 7
Markup Transcript................................................ 8
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. DETERMINATION OF SUBSTANTIAL NEW QUESTION OF PATENTABILITY
IN REEXAMINATION PROCEEDINGS.
Sections 303(a) and 312(a) of title 35, United States Code, are
each amended by adding at the end the following: ``The existence of a
substantial new question of patentability is not precluded by the fact
that a patent or printed publication was previously cited by or to the
Office or considered by the Office.''.
SEC. 2. EFFECTIVE DATE.
The amendments made by this Act shall apply with respect to any
determination of the Director of the United States Patent and Trademark
Office that is made under section 303(a) or 312(a) of title 35, United
States Code, on or after the date of the enactment of this Act.
Purpose and Summary
H.R. 1866 clarifies the basis for the U.S. Patent and
Trademark Office (PTO) to determine whether the request for the
reexamination of a patent should be granted. As part of the
original 1980 reexamination statute, Congress struck a balance
between curing allegedly defective patents and preventing the
harassment of patentees. It adopted a standard requiring a
request for reexamination to raise a ``substantial new question
of patentability.'' \1\ The scope and meaning of this standard
have come under fire. This bill overturns the holding of In re
Portola Packaging Inc.,\2\ a 1997 Federal court decision
imposing an overly-strict limit that reaches beyond the text of
the Patent Act.
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\1\ 35 U.S.C. Sec. Sec. 301 et seq.; H.R. Rep. No. 96-1307 (1980),
reprinted in 1980 U.S.C.C.A.N. 6460.
\2\ 110 F.3d 786 (Fed. Cir. 1997).
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Background and Need for the Legislation
Many critics, including members of this Committee, believe
that in In re Portola Packaging Inc. the three judge panel of
the United States Court of Appeals for the Federal Circuit
(hereinafter ``Federal Circuit'') incorrectly interpreted
Congress' original intent underlying the reexamination statute
and limited the application of the process. The court
established a standard whereby reexamination is statutorily
barred whenever a question arose concerning previous prior art
references, notwithstanding the availability of obvious
evidence which clearly addresses the question of the patent's
validity.\3\
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\3\ Id. at 791.
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This court-imposed standard has frustrated members of the
public. It has also lead to abuse by patent agents and lawyers
who are gaming the system now in place. Earlier this Spring,
for example, the Subcommittee heard testimony that some
applications may include hundreds of prior art references,
knowing that the PTO examiner has only a few precious hours to
review the application before she is required to make a
decision on its grant.\4\ Therefore, a weak patent application
may be prepared in a fashion so that the resulting patent would
likely be insulated from subsequent review through
reexamination even if there was a ``smoking gun'' bearing on
its validity. This frustrates the goals of Congress behind the
1980 \5\ and 1999 \6\ statutes permitting the PTO to permit the
reexamination of patents under the appropriate circumstances.
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\4\ Patents: Improving Quality and Curing Defects, Before the
Subcomm. on Courts, the Internet, and Intellectual Property of the
House Comm. on the Judiciary, 107th Cong., 1st Sess. 65 (2001)
(Statement of Dr. Martin).
\5\ 35 U.S.C. Sec. Sec. 301 et seq.
\6\ 35 U.S.C. Sec. Sec. 311 et seq.
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While this bill clarifies that previously considered prior
art will not necessarily bar a request for reexamination, the
bill does not eliminate the requirement for a ``substantial new
question of patentability'' to be present for the agency to
permit reexamination. The appropriate test to determine whether
a ``substantial new question of patentability'' exists should
not merely look at the number of references or whether they
were previously considered or cited but their combination in
the appropriate context of a new light as it bears on the
question of the validity of the patent.
However, this bill is not a license to abuse patentees and
waste the life of a patent. The point must be stressed that the
past requirement of ``a substantial new question of
patentability'' has not been diminished. The issue raised must
be more that just questioning the judgment of the examiner.
There should be substantial evidence that the examiner did not
properly understand the reference, or did not consider a
portion of the reference in making his decision. That
substantial new question must be put forward clearly in the
request for reexamination. The bill preserves the necessary
safeguard in the Patent Act against harassment of patentees
with the safety-valve of a ``substantial new question of
patentability'' standard, not merely ``any sort of question.''
The agency has discretion in this determination to permit
reexamination, but it is not absolute. While the bill clarifies
the basis for a reexamination determination and removes the
overly-strict bar established by the court, which renders the
available process useless in many obvious instances such as
with previously considered prior art, the courts should
judiciously interpret the ``substantial new question'' standard
to prevent cases of abusive tactics and harassment of patentees
through reexamination.
The U.S. Patent and Trademark Office (PTO) is the agency
that examines applications for a patent, reviews the applicable
evidence (e.g., ``prior art''), and makes decisions to award
the patent grant. Since the PTO is the Federal agency with the
expertise and ``first look'' at a patent's validity and scope,
Congress decided that the PTO was the proper agency with the
necessary expertise to take a ``second look'' at a patent's
validity in certain cases when new information became
available. In 1980, Congress created an ex parte reexamination
system for this purpose.\7\
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\7\ Id. at Sec. Sec. 301, et seq.
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The 1980 reexamination statute was enacted with the intent
of achieving three principal benefits. It is noted that the
reexamination of patents by the PTO would: (i) settle validity
disputes more quickly and less expensively than litigation;
(ii) allow courts to refer patent validity questions to an
agency with expertise in both the patent law and technology;
and (iii) reinforce investor confidence in the certainty of
patent rights by affording an opportunity to review patents of
doubtful validity.\8\ More than 20 years after the original
enactment of the reexamination statute, the Committee on the
Judiciary still endorses these goals and encourages third
parties to pursue reexamination as an efficient way of settling
patent disputes.
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\8\ 126 Cong. Rec. 29, 895 (1980) (Statement of Rep. Kastenmeier).
See also H.R. Rep. No. 96-1307 (1980), reprinted in 1980 U.S.C.C.A.N.
6460; see Patlex Corp. v. Mossinghoff, 758 F.2d 594, 601; 225 U.S.P.Q.
(BNA) 243, 248 (Fed. Cir. 1985).
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According to the data produced by the PTO, the number of
requests for reexamination during the past decade has remained
relatively constant, even as the number of total number of
patent filings has increased dramatically:
This ``1980-reexamination system'' was considered useful
and efficient, but limited in several ways, including its scope
and the participation of third parties. In 1999, as part of the
American Inventors Protection Act,\9\ Congress created an
optional and expanded reexamination system which was
specifically designed to be used by third parties, known as
inter partes reexamination.
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\9\ Intellectual Property and Communications Omnibus Reform Act of
1999, Sec. Sec. 4601 et seq., Pub. L. No. 106-113 (Nov. 11, 1999).
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With inter partes reexamination, it is believed that a
better balance can be achieved toward the goal of improving
patent quality and validity. This type of reexamination is
praised because it is intended to be a cheaper and more
efficient procedure to review poor-quality or otherwise
defective patents than through the Federal courts. The
participation by third parties is considered vital because in
many circumstances they have the most relevant prior art
available and incentive to seek to invalidate an allegedly
defective patent.
Hearings
The Committee's Subcommittee on Courts, the Internet, and
Intellectual Property did not hold a legislative hearing on the
bill, H.R. 1866. However, the Subcommittee held two related
oversight hearings: (1) on ``Business Method Patents'' on April
4, 2001, and; (2) on ``Patents: Improving Quality and Curing
Defects'' on May 10, 2001. Testimony during the hearing was
received from seven witnesses, representing seven
organizations, with additional material submitted by three
individuals and organizations.
Committee Consideration
On May 22, 2001, the Subcommittee on Courts, the Internet,
and Intellectual Property met in open session and ordered
favorably reported the bill H.R. 1866 with a single amendment
in the nature of a substitute, by a voice vote, a quorum being
present. On June 20, 2001, the Committee met in open session
and ordered favorably reported the bill H.R. 1866 with a single
amendment in the nature of a substitute by voice vote, a quorum
being present.
Vote of the Committee
There were no recorded votes on the bill.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Performance Goals and Objectives
H.R. 1866 does not authorize funding. Therefore, clause
3(c) of rule XIII of the Rules of the House is inapplicable.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of House Rule XIII is inapplicable because
this legislation does not provide new budgetary authority or
increased tax expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 1866, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 27, 2001.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1866, a bill to
amend title 35, United States Code, to clarify the basis for
granting requests for reexamination of patents.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Ken Johnson
(for federal costs), who can be reached at 226-2860, Scott
Masters (for the state and local impact), who can be reached at
225-3220, and Paige Piper/Bach (for the private-sector impact),
who can be reached at 226-2940.
Sincerely,
Dan L. Crippen, Director.
Enclosure
cc:
Honorable John Conyers Jr.
Ranking Member
H.R. 1866--A bill to amend title 35, United States Code, to clarify the
basis for granting requests for reexamination of patents.
H.R. 1866 would alter the standards used by the Patent and
Trademark Office (PTO) to accept or reject requests to
reexamine a patent's validity. CBO estimates that implementing
the bill would cost the agency about $1 million a year,
assuming the appropriation of the necessary amounts. Enacting
H.R. 1866 would not affect direct spending or receipts;
therefore, pay-as-you-go procedures would not apply.
H.R. 1866 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
H.R. 1866 would address a 1997 ruling by the U.S. Court of
Appeals for the Federal Circuit that concluded the PTO may not
grant a request to reexamine a patent if that request cites the
same evidence presented in previous proceedings. Once that
ruling was issued, reexamination requests declined from an
average of about 400 a year to about 350 a year. Based on
information from the PTO, CBO expects that implementing H.R.
1866 would cause the number of requests to increase. As a
result, the agency would need to hire additional patent
examiners to review the new requests and attorneys to handle
any appeals arising from these cases. CBO estimates that adding
these new staff would cost the agency about $1 million a year,
subject the availability of appropriated funds.
The CBO staff contacts for this estimate are Ken Johnson
(for federal costs), who can be reached at 226-2860, Scott
Masters (for the state and local impact), who can be reached at
225-3220, and Paige Piper/Bach (for the private-sector impact),
who can be reached at 226-2940. The estimate was approved by
Peter H. Fontaine, Deputy Assistant Director for Budget
Analysis.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article 1, section 8, clause 8 of the
Constitution.
Section-by-Section Analysis and Discussion
Section 1. Determination of Substantial New Question of Patentability
in Reexamination Proceedings.
Section one of the bill amends sections 303(a) and 312(a)
of title 35, United States Code, by adding at the end the
following: ``The existence of a substantial new question of
patentability is not precluded by the fact that a patent or
printed publication was previously cited by or to the Office or
considered by the Office.''
Sec. 2. Effective Date.
Section two provides that amendments made by the bill apply
prospectively with respect to a determination of an issue
meriting reexamination by the Director of the United States
Patent and Trademark Office that are made under section 303(a)
or 313(a) of title 35, United States Code, on and after the
date of the enactment.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italics and existing law in which no change is
proposed is shown in roman):
TITLE 35, UNITED STATES CODE
* * * * * * *
PART III--PATENTS AND PROTECTION OF PATENT RIGHTS
* * * * * * *
CHAPTER 30--PRIOR ART CITATIONS TO OFFICE AND EX PARTE REEXAMINATION OF
PATENTS
* * * * * * *
Sec. 303. Determination of issue by Director
(a) Within three months following the filing of a request
for reexamination under the provisions of section 302 of this
title, the Director will determine whether a substantial new
question of patentability affecting any claim of the patent
concerned is raised by the request, with or without
consideration of other patents or printed publications. On his
own initiative, and any time, the Director may determine
whether a substantial new question of patentability is raised
by patents and publications discovered by him or cited under
the provisions of section 301 of this title. The existence of a
substantial new question of patentability is not precluded by
the fact that a patent or printed publication was previously
cited by or to the Office or considered by the Office.
* * * * * * *
CHAPTER 31--OPTIONAL INTER PARTES REEXAMINATION PROCEDURES
* * * * * * *
Sec. 312. Determination of issue by Director
(a) Reexamination.--Not later than 3 months after the
filing of a request for inter partes reexamination under
section 311, the Director shall determine whether a substantial
new question of patentability affecting any claim of the patent
concerned is raised by the request, with or without
consideration of other patents or printed publications. On the
Director's initiative, and at any time, the Director may
determine whether a substantial new question of patentability
is raised by patents and publications. The existence of a
substantial new question of patentability is not precluded by
the fact that a patent or printed publication was previously
cited by or to the Office or considered by the Office.
* * * * * * *
Markup Transcript
BUSINESS MEETING
WEDNESDAY, JUNE 20, 2001
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 11:07 a.m., in
Room 2141, Rayburn House Office Building, Hon. F. James
Sensenbrenner [Chairman of the Committee] presiding.
Chairman Sensenbrenner. The next item on the agenda is H.R.
1866 to amend title 35, United States code, to clarify the
basis for granting patents and for granting requests for
reexamination of patents.
[H.R. 1866 follows:]
Chairman Sensenbrenner. The Chair recognizes the gentleman
from North Carolina, Mr. Coble, Chairman of the Subcommittee on
Courts, the Internet, and Intellectual Property, for a motion.
Mr. Coble. Mr. Chairman, the Subcommittee on Courts, the
Internet, and Intellectual Property reports favorably the Bill
1866, with a single amendment in the nature of a substitute,
and moves its favorable recommendation to the full House.
Chairman Sensenbrenner. Without objection, the bill will be
considered as read and open for amendment at any point. And the
Subcommittee amendment in the nature of a substitute, which the
Members have them before them, will be considered as read and
be considered as the original text for purposes of amendment.
Without objection, so ordered.
[The amendment follows:]
Chairman Sensenbrenner. The Chair now recognizes the
gentleman from North Carolina to strike the last word and for 5
minutes.
Mr. Coble. I thank the Chairman.
Mr. Chairman and Members of the full Judiciary Committee,
the Congress established a patent reexamination system in 1980.
It has worked well until it was severely limited by a court
decision. H.R. 1866 is intended to overturn the 1997 In re:
Portola Packaging case. That decision severely impairs the
patent reexamination process. Reexamination was intended to be
an important quality check on defective patents. The Portola
case is criticized for establishing an illogical and overly
strict bar concerning the scope of reexamination request.
The bill that we consider preserves the substantial new
question standard that is an important safeguard to protect all
inventors against frivolous actions, while allowing the process
to continue, as originally intended. At Subcommittee, the bill
was amended to correct a clerical error. Since the bill's
introduction, we have heard from the public, members of the
bar, and critics of the decision who have recommended that we
make an additional change to ensure the result that we seek.
Accordingly, I will offer an amendment on this point at the
opportune time. I believe that by adding this one sentence to
the Patent Act, we help prevent the misuse of defective
patents, especially those concerning business methods.
Mr. Chairman, I don't see Mr. Berman, the Ranking Member,
here, but he concurs with the passage of this bill.
Ms. Lofgren. Mr. Chairman?
Chairman Sensenbrenner. For what purpose does the
gentlewoman from California seek recognition?
Ms. Lofgren. To quickly note that Mr. Berman did ask that
his support of the bill, as well as the amendment being
offered, be noted the whole Subcommittee was in support of both
bills, actually, before us, as well as the amendment.
Chairman Sensenbrenner. Without objection, all Members may
place opening statements in the record at this time.
Chairman Sensenbrenner. This bill and the next one are
fairly noncontroversial. I'd ask that we run them through, and
since we have a reporting quorum here, before going to lunch.
And the gentleman from North Carolina has an amendment at
the desk, and the clerk will report the amendment.
The Clerk. Amendment to the amendment in the nature of a
substitute----
Mr. Coble. Mr. Chairman, unanimous consent that the
amendment be considered as read.
The Clerk.--to H.R. 1866----
Chairman Sensenbrenner. Without objection, the objection Is
considered as read.
[The amendment follows:]
Chairman Sensenbrenner. The gentleman from North Carolina
is recognized for 5 brief minutes.
Mr. Coble. I thank the Chair.
Mr. Chairman, Mr. Berman and I have open doors on these
processes, and our office has received input from a variety of
sources who have expressed concern that while we try to
overturn the Portola case, there may be some wiggle room for
the court. This is addressed by the simple change made by the
amendment. This is what I call a belt-and-suspenders approach,
which attempts to clarify our intent. The goal is to allow
reexamination of those cases where a genuine, substantial new
question of patentability arises in light of prior art, which
was reviewed by the Patent Office. At the same time, it leaves
in place all of the protections for inventors, including the
independents, which exist under current law against frivolous
or harassing conduct.
While many believe the base text is satisfactory to meet
that goal, I hope this removes any doubt, and I urge my
colleagues to support the amendment to H.R. 1866.
Chairman Sensenbrenner. Does the gentleman yield back the
balance of his time?
Mr. Coble. I yield back the balance of my time.
Chairman Sensenbrenner. Further discussion on the
amendment?
Ms. Lofgren. Just to note that we also support the
amendment.
Chairman Sensenbrenner. The question is on adoption of the
amendment.
Those in favor will say aye.
Opposed, no.
The ayes appear to have it. The ayes have it, and the
amendment is agreed to.
Are there further amendments?
[No response.]
Chairman Sensenbrenner. Hearing none, the question occurs
on the amendment in the nature of a substitute, as amended.
All of those in favor will signify by saying aye.
Opposed, no.
The ayes appear to have it. The ayes have it, and the
amendment in the nature of a substitute is agreed to.
The question now occurs on the motion to report the Bill
H.R. 1866 favorably, as amended by the amendment in the nature
of a substitute, as amended. The Chair notes the presence of a
reporting quorum.
Those in favor will say aye.
Opposed, no.
The ayes appear to have it. The ayes have it, and the
motion to report favorably is adopted.
Without objection, the bill will be reported favorably to
the House in the form of a single amendment in the nature of a
substitute, incorporating the amendments adopted here today.
Without objection, the Chairman is authorized to move to go
to conference, pursuant to House rules.
Without objection, the staff is directed to make any
technical and conforming changes, and all Members will be given
2 days, as provided by House rules, in which to submit
additional dissenting supplemental or minority views.