Floor Statements

The following Senator is necessarily absent: the Senator from Arizona (Mr. McCain).

The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

The following Senator is necessarily absent: the Senator from Alaska (Ms. Murkowski).

The following Senators are necessarily absent: the Senator from Missouri (Mr. Blunt), the Senator from South Carolina (Mr. DeMint), the Senator from Illinois (Mr. Kirk), the Senator from Alaska (Ms. Murkowski), the Senator from Kentucky (Mr. Paul), the Senator from Pennsylvania (Mr. Toomey), the Senator from Louisiana (Mr. Vitter), and the Senator from Mississippi (Mr. Wicker).

The following Senators are necessarily absent: the Senator from Georgia (Mr. Isakson), the Senator from Utah (Mr. Lee), and the Senator from Idaho (Mr. Risch).

The following Senators are necessarily absent: the Senator from Georgia (Mr. Isakson), the Senator from Utah (Mr. Lee), and the Senator from Idaho (Mr. Risch).

Mr. President, I ask unanimous consent to have printed in the Record a letter concerning section 18 of the America Invents Act, sent to me and others by the chairman of the House Judiciary Committee.

House of Representatives,

Committee on the Judiciary,

Washington, DC September 8, 2011.

Hon. Jon Kyl

U.S. Senate,

Washington, D.C.

Hon. Charles E. Schumer,

U.S. Senate,

Washington, D.C.

Hon. Patrick Leahy,

U.S. Senate,

Washington, D.C.

Hon. Chuck Grassley,

U.S. Senate,

Washington, D.C.

Dear Senators Kyl, Schumer, Leahy and Grassley: I am

writing to discuss further the importance of the transitional

program for business method patents as included in H.R. 1249,

the Leahy-Smith America Invents Act. As you know, this

provision enables the U.S. Patent and Trademark Office

(`USPTO') to correct egregious errors that were made in the

granting of a wide range of business method patents.

Business methods were generally not patentable in the

United States before the late 1990s, and generally are not

patentable elsewhere in the world. The Federal Circuit,

however, created this new class of patents in its 1998 State

Street decision. In its 2010 decision in Bilski v. Kappos,

the U.S. Supreme Court clamped down on the patenting of

business methods and other patents of poor quality. It is

likely that many or most of the business method patents that

were issued after State Street are now invalid under Bilski.

There really is no sense in allowing expensive litigation

over patents that are no longer valid in light of the Supreme

Court's clarification of the law. The new transitional

program included in the House bill creates an inexpensive and

speedy alternative to litigation--allowing parties to resolve

these disputes more efficiently rather than spending millions

of dollars in litigation costs. In the process, the

proceeding will also prevent nuisance litigation settlements.

Moreover, the new administrative proceeding allows business

method patents to be reviewed by the experts at the USPTO

under the correct (Bilski) standard. To use this proceeding,

a challenger must make an up-front showing to the USPTO of

evidence that the business method patent is more likely than

not invalid. This is a high standard. Only the worst patents,

which probably never should have been issued, will be

eligible for review in this proceeding.

This program provides the Patent Office with a fast,

precise vehicle to review low-quality business method

patents, which the Supreme Court has acknowledged are often

abstract and overly broad.

Specifically, the bill's provision applies to patents that

describe a series of steps used to conduct every-day business

applications in the financial products and retail services

sectors. These are patents that can be and have been asserted

against all types of businesses--from community banks and

credit unions to retailers and businesses of all sizes and

from all industries.

The provision is, indeed, limited to patents that are non-

technological in nature (i.e., business methods) and that

involve a process or related apparatus used in the practice,

administration, or management of a financial product or

service. The program's exception for ``technological

inventions'' precludes review of patents for inventions based

on application of the natural sciences or related engineering

or inventions in computer operations. And by requiring that

the covered patents be applicable to a financial product or

service, the proceeding in the House bill ensures that the

patents eligible for review will generally include only those

that have some business or commercial orientation.

Nothing in the bill, however, limits use of the proceeding

to one industry; rather, it applies to non-technological

patents that can apply to financial products or services. Any

business that sells or purchases goods or services

``practices'' or ``administers'' a financial service by

conducting such transactions. Most business-method patents

are fairly plastic in nature and could apply to a whole host

of business activities. See 157 Cong. Rec. 1363, 1365 (daily

ed. March 8, 2011) (statement of Sen. Schumer) (``To meet

this requirement, the patent need not recite a specific

financial product or service. Rather the patent claims must

only be broad enough to cover a financial product or

service.''). To be sure, the fact that a patent has been

asserted against a financial institution with respect to

products or processes that are unique to such institutions

will be a fairly clear indicator that the patent applies to a

``financial product or service,'' and should provide guidance

to the USPTO in administering the program. See 157 Cong. Rec.

1368, 1379 (daily ed. March 8, 2011) (statement of Sen. Kyl).

The transitional program can be used to review patents for

``a method or a corresponding apparatus.'' The distinction

between a ``process'' and a ``machine'' (two of the terms

used in section 101 of the patent code to define what is

patentable) is not a firm one, and many inventions can be

characterized either way. A ``corresponding apparatus'' for a

business method would include, for example, a computer that

was programmed to carry out the business process. Wary of the

stigma that attaches to business-method patents, many

applicants try to obscure the nature of these patents by

characterizing a computer that has been programmed to execute

the process as the invention, and thus asserting that the

process is really a ``machine'' or a ``system.''

The program's definition of ``covered business-method

patent'' includes a ``corresponding apparatus'' in order to

prevent such obvious evasions. Any other approach would

elevate claim-drafting form over invention substance.

Finally, any ``apparatus'' that is subject to review under

the program would need to be used to implement or effect a

business method. Legitimate inventions in technological

fields will not be subject to review under this program.

The transitional program also extends to privies of parties

charged with infringement. This was done specifically to

prevent downstream customers or users from being dragged into

frivolous litigation over suspect or improperly granted

patents. H.R. 1249 also extends the time frame for the

transitional program. This change is important to prevent

patent trolls from waiting out the program. This issue of

folks ``lying in wait'' may actually be a significant

argument for extending or making permanent this program in

the future. Similarly, the program's definition was expanded

in H.R. 1249 so that it is not limited to class 705 patents.

This change is key to the program's success, because many

business method patents are assigned to classes other than

705, and it makes no sense to exclude them because of the

quirks of USPTO's classification regime.

This program is not tied to one industry or sector of the

economy--it affects everyone. The provision as developed in

the Senate and later perfected in the House will ensure that

the vast majority of non-technological business method

patents will be eligible for review under this program. As

the USPTO had a presumption to grant many of these erroneous

patents, they should now have a presumption to allow most

non-technological

business method patents that have a commercial nexus into

this new program for review. This program was designed to be

construed as broadly as possible and as USPTO develops

regulations to administer the program that must remain the

goal.

The strength of our patent system relies on not simply the

mechanical granting of a patent, but the granting of strong

patents, ones that are truly novel and non-obvious

inventions, that are true innovations and not the product of

legal gamesmanship. This provision is an integral component

of H.R. 1249 and will not only help correct past mistakes but

ensure a stronger U.S. patent system going forward.

Sincerely,

Lamar Smith,

Chairman, Committee on the Judiciary,

House of Representatives.

The following Senator is necessarily absent: the Senator from Arizona (Mr. McCain).

The following Senators are necessarily absent: the Senator from Arizona (Mr. McCain) and the Senator from Alabama (Mr. Sessions).

The following Senators are necessarily absent: the Senator from Arizona (Mr. McCain) and the Senator from Alabama (Mr. Sessions).

The following Senators are necessarily absent: the Senator from Arizona (Mr. McCain), the Senator from Kentucky (Mr. Paul), and the Senator from Alabama (Mr. Sessions).

The following Senators are necessarily absent: the Senator from Arizona (Mr. McCain) and the Senator from Alabama (Mr. Sessions).

The following Senators are necessarily absent: the Senator from Texas (Mrs. Hutchison), the Senator from Arizona (Mr. McCain), and the Senator from Alabama (Mr. Sessions).

Mr. President, I ask unanimous consent to have printed in the Record a letter from Attorney General Holder.

The following Senator is necessarily absent: the Senator from Alabama (Mr. Sessions).

The following Senators are necessarily absent: the Senator from Utah (Mr. Hatch), and the Senator from Utah ( Mr. Lee), the Senator from Illinois (Mr. Kirk), and the Senator from South Carolina (Mr. DeMint).

Further, if present and voting, the Senator from Utah (Mr. Hatch) would have voted ``yea.''

The following Senators are necessarily absent: the Senator from Oklahoma (Mr. Coburn) and the Senator from Nevada (Mr. Heller).

Mr. President, I ask unanimous consent to have printed in the Record a letter to Attorney General Holder.

The following Senators are necessarily absent: the Senator from Arizona (Mr. McCain) and the Senator from North Carolina (Mr. Burr).

The following Senators are necessarily absent: the Senator from Arizona (Mr. McCain) and the Senator from North Carolina (Mr. Burr).

The following Senators are necessarily absent: the Senator from North Carolina (Mr. Burr) and the Senator from Arizona (Mr. McCain).

The following Senators are necessarily absent: the Senator from North Carolina (Mr. Burr) and the Senator from Arizona (Mr. McCain).

The following Senator is necessarily absent: the Senator from Arizona (Mr. McCain).

The following Senator is necessarily absent: the Senator from Arizona (Mr. McCain).