[House Report 107-121]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-121
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APPEALS IN PATENT 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. 1886]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 1886) to amend title 35, United States Code, to
provide for appeals by third parties in certain patent
reexamination proceedings, having considered the same, reports
favorably thereon without amendment and recommends that the
bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for the Legislation.......................... 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Vote of the Committee............................................ 4
Committee Oversight Findings..................................... 4
Performance Goals and Objectives................................. 4
New Budget Authority and Tax Expenditures........................ 4
Congressional Budget Office Cost Estimate........................ 4
Constitutional Authority Statement............................... 5
Section-by-Section Analysis and Discussion....................... 5
Changes in Existing Law Made by the Bill, as Reported............ 6
Markup Transcript................................................ 8
Purpose and Summary
The bill, H.R.1886, repeals a prohibition which bars
judicial review of certain patent inter partes reexamination
decisions. The legislation would merely permit the third-party
requester in an inter partes reexamination to appeal the
decision by the U.S. Patent and Trademark Office (PTO) to the
U.S. Court of Appeals for the Federal Circuit (hereinafter
``Federal Circuit'').
Background and Need for the Legislation
Currently, other parties (for example, the patent owner)
are permitted to appeal an inter partes reexamination decision.
Because this type of appeal is prohibited by current law, it is
believed that the patent system is unable to fully serve the
needs of inventors and the public. Further, the asymmetry
controlling which parties may appeal the agency's inter partes
reexamination decisions to the Federal courts is considered one
of the major defects of the patent system and results in a
major disincentive to invoke reexamination as a way of curing
allegedly defective patents.
It is widely believed that the courts are an important
safeguard against any potential abuse by an agency or
administrative bureaucracies. Congress created the Federal
Circuit in 1982 with a specific goal. It was intended to be a
specialized appellate judicial forum that brings both legal and
technical expertise to bear on appeals of certain issues of
national importance, including patent issues. The overwhelming
consensus is that in the past 20 years the Federal Circuit has
proven to be a marked success. It contributes to the fairness
of the system in two ways. First, it ensures predictability and
certainty regarding legal issues within the subject matter of
its jurisdiction, and it is a check on the agencies within its
jurisdiction.
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.\1\
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\1\ 35 U.S.C. 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.\2\ 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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\2\ 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.
6400; 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 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,\3\ 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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\3\ 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. 1886. 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. 1886, 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. 1886
without amendment 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. 1886 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. 1886, 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. 1886, a bill to
amend title 35, United States Code, to provide for appeals by
third parties in certain patent reexamination proceedings.
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. 1886--A bill to amend title 35, United States Code, to provide for
appeals by third parties in certain patent reexamination
proceedings.
H.R. 1886 would allow third parties--meaning persons other
than the patent owner--to appeal patent reexamination decisions
to the U.S. Court of Appeals for the Federal Circuit. CBO
estimates that implementing the bill would cost the Patent and
Trademark Office (PTO) about $3 million a year, assuming the
appropriation of the necessary amounts. Enacting H.R. 1886
would not affect direct spending or receipts; therefore, pay-
as-you-go procedures would not apply.
H.R. 1886 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.
Under current law, third parties can file a request with
PTO to reexamine a patent's validity and can appeal the
agency's ruling to a special board. Unlike the patent owner,
however, a third party is not allowed to appeal the special
board's ruling to the U.S. Court of Appeals for the Federal
Circuit. Because H.R. 1886 would give third parties this extra
level of appeal, implementing the bill would require PTO to
hire additional attorneys to represent the agency in appeals
proceedings. Based on information from PTO, CBO also expects
that enacting H.R. 1886 would cause the total number of patent
reexamination filings to increase. As a result, PTO would need
to hire additional patent examiners to review the new requests.
CBO estimates that the added staff would cost the agency about
$3 million a year, subject to 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
Sec 1. Appeals in Inter Partes Reexamination Proceedings.
Subsection (a) amends section 315(b) of Title 35, United
States Code, to permit third-parties to appeal to the Board of
Patent Appeals and Interferences and the U.S. Court of Appeals
for the Federal Circuit pursuant to sections 141 and 144 of
title 35, United States Code.
Subsection (b) strikes the last sentence of section 134(c)
of title 35, United States Code, which prohibits the third-
party requesters from appealing the decision of the Board of
Patent Appeals and Interferences.
Subsection (c) amends section 141 of title 35, United
States Code, to specify that third-party requesters have the
right to appeal the final decision of the Board of Patent
Appeals and Interferences concerning a reexamination under
section 134 of title 35, United States Code, proceeding to the
U.S. Court of Appeals for the Federal Circuit.
Sec. 2. Effective Date.
Section 2 provides that the right for third parties to
appeal these decisions is prospective and that the right
applies to reexamination proceedings commenced on or after the
date of 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 (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
TITLE 35, UNITED STATES CODE
* * * * * * *
PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS
* * * * * * *
CHAPTER 12--EXAMINATION OF APPLICATION
* * * * * * *
Sec. 134. Appeal to the Board of Patent Appeals and Interferences
(a) * * *
* * * * * * *
(c) Third-Party.--A third-party requester in an inter
partes proceeding may appeal to the Board of Patent Appeals and
Interferences from the final decision of the administrative
patent judge favorable to the patentability of any original or
proposed amended or new claim of a patent, having once paid the
fee for such appeal. [The third-party requester may not appeal
the decision of the Board of Patent Appeals and Interferences.]
* * * * * * *
CHAPTER 13--REVIEW OF PATENT AND TRADEMARK OFFICE DECISIONS
* * * * * * *
Sec. 141. Appeal to Court of Appeals for the Federal Circuit
An applicant dissatisfied with the decision in an appeal to
the Board of Patent Appeals and Interferences under section 134
of this title may appeal the decision to the United States
Court of Appeals for the Federal Circuit. By filing such an
appeal the applicant waives his or her right to proceed under
section 145 of this title. A patent owner, or a third-party
requester in an inter partes reexamination proceeding, who is
in any reexamination proceeding dissatisfied with the final
decision in an appeal to the Board of Patent Appeals and
Interferences under section 134 may appeal the decision only to
the United States Court of Appeals for the Federal Circuit. A
party to an interference dissatisfied with the decision of the
Board of Patent Appeals and Interferences on the interference
may appeal the decision to the United States Court of Appeals
for the Federal Circuit, but such appeal shall be dismissed if
any adverse party to such interference, within twenty days
after the appellant has filed notice of appeal in accordance
with section 142 of this title, files notice with the Director
that the party elects to have all further proceedings conducted
as provided in section 146 of this title. If the appellant does
not, within thirty days after the filing of such notice by the
adverse party, file a civil action under section 146, the
decision appealed from shall govern the further proceedings in
the case.
* * * * * * *
PART II--PATENTABILITY OF INVENTIONS AND GRANT OF PATENTS
* * * * * * *
CHAPTER 31--OPTIONAL INTER PARTES REEXAMINATION PROCEDURES
* * * * * * *
Sec. 315. Appeal
(a) * * *
* * * * * * *
[(b) Third-Party Requester.--A third-party requester may--
[(1) appeal under the provisions of section 134
with respect to any final decision favorable to the
patentability of any original or proposed amended or
new claim of the patent; or
[(2) be a party to any appeal taken by the patent
owner under the provisions of section 134, subject to
subsection (c).]
(b) Third-Party Requester.--A third-party requester--
(1) may appeal under the provisions of section 134,
and may appeal under the provisions of sections 141
through 144, with respect to any final decision
favorable to the patentability of any original or
proposed amended or new claim of the patent; and
(2) may, subject to subsection (c), be a party to
any appeal taken by the patent owner under the
provisions of section 134 or sections 141 through 144.
* * * * * * *
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.
The next item on the agenda is the adoption of H.R. 1886 to
amend title 35, United States Code, to provide for appeals by
third parties in certain patent reexamination proceedings.
[H.R.1886 follows:]
Chairman Sensenbrenner. The Chair recognizes the gentleman
from North Carolina, Mr. Coble, the Chairman of the
Subcommittee on Courts, the Internet, and Intellectual
Property, for purposes of a motion.
Mr. Coble. Mr. Chairman, the Subcommittee on Courts, the
Internet, and Intellectual Property reports favorably the Bill
H.R. 1886 and moves its favorable recommendation to the full
House.
Ms. Lofgren. Mr. Chairman?
Chairman Sensenbrenner. Without objection, H.R. 1886 will
be considered as read and open for amendment at any point.
The Chair first recognizes the gentleman from North
Carolina to strike the last word, if it is the last word.
Mr. Coble. And this will not require 5 minutes, Mr.
Chairman.
This bill is another straightforward bill. It attempts to
improve the patent reexamination system. It aims at closing an
unfortunate administrative loophole and bridging legal gap in
the working of our patent system.
The reform also comes out of the two hearings that the
Subcommittee has conducted earlier this session. While I
strongly endorse the professionalism of the Patent and
Trademark Office, I also believe it is necessary to place a
check on the PTO's action by affording all participants
judicial review before a Federal Appeals Court. This check by a
higher independent authority is an important safeguard and adds
transparency to the process.
Rest assured that this appellate review will not impose
additional burdens on patent holders arising from Federal
trials. I urge the full Committee to support passage of this
overdue bill.
Chairman Sensenbrenner. The gentlewoman from California,
Ms. Lofgren?
Ms. Lofgren. I move to strike the last word.
Chairman Sensenbrenner. The gentlewoman is recognized for 5
minutes.
Ms. Lofgren. I note that Ranking Member Berman also
supports H.R. 1886 and urges the Committee to do the same. We
believe that this is a good, although small step, in approving
the reexamination procedure, and we note that--and I think the
Chairman agrees--there may be some additional measures that we
will need to take, but certainly that should not deter us from
supporting this bill today, and I yield back the balance of my
time.
Chairman Sensenbrenner. The time of the gentlewoman has
expired.
Without objection, all Members may place opening statements
in the record at this point.
Chairman Sensenbrenner. Are there any amendments?
Mr. Coble. No amendments, Mr. Chairman.
Chairman Sensenbrenner. There being no amendments, the
question now occurs on the motion to report H.R. 1886
favorably. The Chair notes the presence of a reporting quorum.
All in favor say aye.
Opposed, no.
The ayes have it, and the motion to report favorably is
adopted.
Without objection, the bill--well, without objection, the
Chairman is authorized to move to go to conference, pursuant to
House rules.
Without objection, the staff is directed to make technical
and conforming changes. All Members will be given 2 days, as
provided by House rules, in which to submit additional
dissenting supplemental or minority views.